ACIT Vs K.C. Social Welfare Trust (ITAT Chandigarh)
ITAT Chandigarh held that surplus funds of a charitable institution are being held in a fiduciary capacity hence can never be used for any other purpose except for charitable activity. Accordingly, matter remanded back to AO for fresh adjudication.
Facts- The assessee is a charitable institution imparting educations in the faculties of Engineering, Management and computer applications. AO concluded that a sum of Rs.37,57,15,731/- is not covered under the objects of the assessee because it was advanced without charging interest. The AO calculated notional interest at Rs.4,50,85,887/- and made addition of this amount.
Further, AO also made addition of Rs.12,79,427/-. This addition was made by the AO after analyzing the cost receipts vis-à-vis application of funds towards charitable activities. It reveals that assessee has surplus of Rs.12,79,427/-. According to the AO, since assessee has violated 13(1)(d) r.w.s 11(5) and 13(1)(c) r.w.s. 13(3) of the Income Tax Act, therefore, it is not entitled for benefit of 12A and Section 11(5), hence, it is to be assessed in the status of an AOP and surplus over and above the expenditure of the activities of Trust deserves to be assessed as an income.
CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
