Case Law Details
Kakatiya Sangham Vs ITO (ITAT Visakhapatnam)
ITAT Visakhapatnam held that contributions received for charitable purpose cannot be treated as income u/s 2(24)(iia) of the Act and hence, the provision of section 2(15) do not apply to the corpus fund donations of a charitable institution.
Facts- The assessee society was registered u/s 12A of the Act. The assessee receives voluntary contributions and fee for maintaining marriage halls. AO noticed that the assessee is in receipt of marriage hall maintenance charges of Rs.31,26,141/-, which is in excess of Rs.25,00,000/-. AO held that running a marriage hall is in the nature of advancement of any other object of general public utility, but, as per the proviso to section 2(15), the receipts are to be taxed as per the ceiling limits automatically, once the total receipts exceed Rs.25,00,000/-, irrespective of the fact whether they are received for specific purpose.
CIT(A) dismissed the appeal. Being aggrieved, assessee has preferred the present appeal.
Conclusion- The Tribunal in the case of Sri Satya Sai Educational and Service Society vide I.T.A.No.5/Viz/2022 dated 23.08.2022 has observed that contributions received for a specific purpose cannot be regarded as income u/s 2(24)(iia) of the Act and the provisions of section 2(15) do not apply to the corpus fund donations of a charitable institution.
Hold that contributions received for charitable purpose cannot be treated as income u/s 2(24)(iia) of the Act and hence, the provision of section 2(15) do not apply to the instant case.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
This appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi in DIN & Order No.ITBA/NFAC/S/250/2022-23/1043166326(1) dated 25.05.2022 for the Assessment Year (A.Y.) 2012-13, arising out of the order passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 23.09.2014 with the delay of 183 days. The assessee filed petition for condonation of delay, submitting that the order of the Ld.CIT(A), NFAC, Delhi was passed on 25.05.2022, as such the appeal against the said order ought to have been filed on or before 24.06.2022. However, the apepal was filed with the delay of 183 days. The assessee submitted that Sri M.Ramachandra Rao , Secretary of the assessee Trust, aged 88 years old, looks after the affairs of the Trust. He is not much educated and has no knowledge in operating a computer. The order of the Ld.CIT(A) issued electronically and mailed to his login id created by his Chartered Accountant, was not noticed by him due to his lack of knowledge in operating the computer. The Ld.CIT(A), NFAC confirmed the addiiton of Rs.24,55,696/- made by the assessing officer towards disallowance of corpus donations. The matter came to his notice in the process of recovery of the outstanding demand, when the income tax officer called his Chartered Accountant in the second week of January 2023. Without any further loss of time, the assessee took necessary steps for filing of the appeal. The appeal fee was paid and the appeal papers were prepared by 12.01.2023. In the meanwhile, Sri M.Ramachandra Rao slipped while climbing the steps and his left foot got twisted. Therefore, he could not move out of the house for enarly 10 days, but took necessary steps as soon as he recovered and filed appeal on 23.01.2023. Thus, the delay of 183 days was due to the reasons beyond the control of the assessee, which was neither interntional nor deliberate. He, therefore, prayed that the delay may be condoned in the interest of rendering substantial justice.
I have gone through the condonation petition filed by the assessee. I find reasonable cause in filing the appeal belatedly, thus, I condone the delay and admit the appeal for adjudication.
2. Brief facts of the case are that the assessee society was registered u/s 12A of the Act w.e.f.26.05.2003, The assessee receives voluntary contributions and fee for maintaining marriage halls. For the A.Y.2012-13, the assessee filed it’s return of income, declaring Nil income, against which, the AO completed the assessment on a total income of Rs.22,81,028/- by bringing to charge the corpus fund donations of Rs.24,55,696/- u/s 2(15) of the Act. The AO noticed that the assessee is in receipt of marriage hall maintenance charges of Rs.31,26,141/-, which is in excess of Rs.25,00,000/-. The AO held that running a marriage hall is in the nature of advancement of any other object of general public utility, but, as per the proviso to section 2(15), the receipts are to be taxed as per the ceiling limits automatically, once the total receipts exceed Rs.25,00,000/-, irrespective of the fact whether they are received for specific purpose.
3. On being aggrieved, the assessee preferred an appeal before the CIT(A) and the Ld.CIT(A) dismissed the appeal of the assessee.
4. On being aggrieved, the assessee preferred an appeal before the Tribunal by raising the following grounds :
1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.24,55,696/- made by the assessing officer towards disallowance of exemption claimed in respect of corpus donations.
3. Any other grounds may be urged at the time of hearing.
5. Ground No.1 and 3 are general in nature, which do not require specific adjudication.
6. Ground No.2 is related to disallowance of exemption claimed of Rs.24,55,696/-. The assessee filed paper book and reiterated the submissions made before the lower authorities. The assessee submitted that the first proviso to section 2(15) comes into play only when they are received for a cess or fee which are revenue in nature and routed through Profit and Loss Account and not for the corpus donations which are capital receipts in nature and reflected only in the Balance Sheet. Thus, the AO erred in law holding that the first proviso to section 2(15) of the Act is attracted to corpus donations received by the assessee by simply extracting the provisions without appreciating the fact that the corpus donations are contributed by people for not a cess or fee, which was erroneously upheld by the Ld.CIT(A). The assessee relied on the decision of the coordinate bench of the Tribunal in the case of Sri Satya Sai Educational and Service Society Vs. ITO in I.T.A. No.5/Viz/2022 dated 23.08.2022 and pleaded to set aside the order passed by the Ld.CIT(A) and allow the appeal of the assessee.
7. Per contra, the Ld.DR argued that the Ld.CIT(A) has rightly upheld the assessment made by the AO, since the immunity granted by the statute ceases, once the total receipts from the advancement of any other object of general public utility exceeds Rs.25,00,000/- and the nature of the activity can no more be treated as chartity as per the proviso. Since, the receipts of the assessee Trust exceeded the threshold limit of Rs.25,00,000/- he, pleaded to uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee.
8. I have heard both the parties and perused the material placed on record. It is undisputed fact that the assessee society was registered u/s 12A of the Act w.e.f.26.05.2003, The assessee receives voluntary contributions and fee for maintaining marriage halls, in the nature of advancement of any other object of general public utility. It is the contention of the revenue that though running a marriage hall is in the nature of advancement of any other object of general public utility, as per the proviso to section 2(15), the receipts are to be taxed as per the ceiling limits automatically, once the total receipts exceed Rs.25,00,000/-, irrespective of the fact whether they are received for specific purpose. The Ld.AR relied on the decision of the Tribunal in the case of Sri Satya Sai Educational and Service Society vide I.T.A.No.5/Viz/2022 dated 23.08.2022 and submitted that contributions received for a specific purpose cannot be regarded as income u/s 2(24)(iia) of the Act and the provisions of section 2(15) do not apply to the corpus fund donations of a charitable institution. The assessee filed paper book and furnished the detailed list of corpus donations for construction of a mini hall and confirmation letters from the donors, which establishes the fact that the assessee is not carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, but for constution of a hall, which is in the nature of advancement of any other object of general public utility. Similar issue was adjudicated in the case of Sri Balaji Temple Trust vide I.T.A.No.204/Viz/2022 dated 23.05.2023, relying on the decision of the Tribunal in the case of Sri Satya Sai Educational and Service Society (supra). For the sake of clarity and convenience, relevant part of the order is extraced as under :
“8. I have heard both the parties and perused the material placed on record. The coordinate bench of this Tribunal, relying on the decision in the case of Touching Heart Ministries Vs. ITO, vide ITA No.101/Viz/2015 dated 22.11.2017 for the A.Y.2010-11, has already decided the similar issue in the case of Sri Satya Sai Educational and Service Society (supra) and allowed the appeal filed by the assessee. Relevant part of the order of this tribunal is extracted for the sake of clarity and convenience as under:
“5. We have heard both the sides and perused the material available on record and also the orders of the Ld. Revenue Authorities. The admitted facts are that the assessee has received voluntary contribution towards corpus for the construction of building for Rs. 47,20,000/- and for plantation expenses Rs. 5,50,000/-. Disclosure was also rightly made while filing the return of income for the AY 2019-20. However, while processing the return summarily, due to non-availability of Registration u/s. 12A of the Act, these contributions were treated as income of the assessee. Reliance placed by the Ld. AR on the jurisdictional coordinate Bench in ITA No. 101/Viz/2015 (supra) wherein vide para 6.2 of the order the Tribunal has held as follows:
“6.2. In the instant case, the donations were received for specific purpose for acquiring fixed assets. This is evidenced by the letters placed before us from the donors. The funds are not freely available to the assessee society, for utilizing its objectives other than acquiring specified assets. The entire amount received for acquiring the fixed assets was utilized by the assessee and there are no surplus funds available to the assessee. The above facts are not disputed by the Ld. DR. the fact that the amount was utilized was evidenced by the Balance Sheet, thus the facts of the case is squarely covered by the decision of the Coordinate Bench of Bangalore in the case of Vokkalingara Sangha Cited supra, wherein the coordinate Bench held that contributions received for specific purpose cannot be regarded as income U/s. 2(24)(iia) of the Act.
Respectfully following the view taken by the ITAT, Bangalore, we hold that the donations received for specific purpose of acquiring the capital assets are tied up grants and cannot be treated as income U/s. 2(24)(iia) of the IT Act. Accordingly, we set aside the orders of the lower authorities and allow the appeal of the assessee.” 6. Further, it is also observed that the Ld. Revenue Authorities have not disputed the contributions received but denied the exemption only due to the fact that the assessee is not registered u/s. 12A of the Act. The observation of the Ld. CIT(A) in para 4.21 of his order that the assessee is not registered under any Law either as a Society or as a Trust is not factually correct. The Ld. AR has produced a copy of the Registration Certificate duly registering the assessee-society under the Societies Registration Act vide Registration No.464 of 1995. Respectfully following the decision of the jurisdictional Coordinate Bench of the Tribunal, we hold that contributions received for a specific purpose cannot be treated as income u/s. 2(24)(iia) of the Act. Accordingly, we set-aside the order of the Ld. CIT(A) on Grounds no.3 and 4 raised by the assessee and these grounds raised by the assessee are allowed.”
Respectfully following the decision of the coordinate bench of the Tribunal, I hold that contributions received for a specific purpose cannot be treated as income u/s 2(24)(iia) of the Act. Accordingly, I set aside the order of the Ld.CIT(A) and direct the AO to delete the additions made.
Hence, respectfully following the decision of the coordinate bench, I hold that contributions received for charitable purpose cannot be treated as income u/s 2(24)(iia) of the Act and hence, the provision of section 2(15) do not apply to the instant case.
9. In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th June 2023.
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