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2010 (9) TMI 447 - AT - Income TaxAddition u/s 11(3)(d) - The assessee-society is a Sports Association working for the advancement and promotion of games and sports particularly cricket in the State of U.P - The AO further observed that as per provisions of section 11(3)(d) of the Act any income referred to in section 11(1) credited or paid to any other charitable institution was deemed to be the income of the assessee of the previous year in which the amount was credited or paid - Since the accumulated funds have been transferred in accordance with the second proviso to section 11(3A) - The Revenue has not placed any material before us to prove that other conditions were not fulfilled - The appeal of the Revenue is therefore rejected
Issues Involved:
1. Deletion of addition under section 11(3)(d) on account of deemed income. 2. Deemed addition under section 11(3)(b) of the Income Tax Act. Detailed Analysis: Issue 1: Deletion of Addition under Section 11(3)(d) on Account of Deemed Income The Department's appeal contested the CIT(A)'s decision to delete the addition of Rs. 5,48,45,373 made by the AO under section 11(3)(d) on account of deemed income. The AO argued that the transfer of funds from the assessee-society to the Uttar Pradesh Cricket Association (UPCA) was not an application of income for charitable purposes. The AO cited section 11(3)(d) which deems any income credited or paid to another charitable institution as the income of the assessee in the year of transfer. The AO referenced CBDT Circular No. 8 of 2002 to support this view. The assessee countered this by arguing that the funds were transferred to UPCA, which had similar objectives and was also registered under section 12A. The assessee relied on the Supreme Court decision in Aditanar Educational Institution v. Addl. CIT, advocating for a liberal interpretation of the provisions. The CIT(A) upheld the assessee's position, noting that UPCA was registered under section 12A and the funds were invested in specified securities as required by section 11(2)(b) read with section 11(5). Therefore, the transfer was covered by the second proviso to section 11(3A), which allows such transfers when a trust or institution is dissolved. During the hearing, the Department's representative argued that the assessee did not follow the proper procedure for dissolution and transfer of assets, as required by the Societies Registration Act. The representative cited the case of Bihari Lal Jaiswal v. CIT and Maddi Venkataraman and Co. (P.) Ltd. v. CIT to argue that the transfer was in violation of another statute and should not be recognized. The Tribunal, however, found that the transfer was in accordance with the second proviso to section 11(3A), which allows for the transfer of accumulated funds to another charitable institution. The Tribunal noted that the Income-tax Act takes precedence in this matter and the transfer was not in contravention of public policy. The Tribunal also found no evidence that the transfer violated the Societies Registration Act or that any action was taken against the society for the transfer. Therefore, the Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 5,48,45,373, rejecting the Department's appeal. Issue 2: Deemed Addition under Section 11(3)(b) of the Income Tax Act The second issue involved the deemed addition of Rs. 6,80,781 under section 11(3)(b) of the Income Tax Act. The assessee's cross-objection argued that this addition was not justified either on facts or in law. The Tribunal observed that the CIT(A) had not adjudicated this issue. The assessee had specifically challenged the assessment on an income of Rs. 5,55,26,150, but the CIT(A) only addressed the taxability of Rs. 5,48,45,373. Therefore, the Tribunal restored this issue to the file of the CIT(A) for proper adjudication, ensuring that both sides are given an opportunity to present their case. Conclusion: The Tribunal dismissed the Department's appeal and upheld the CIT(A)'s decision regarding the deletion of the addition under section 11(3)(d). The cross-objection filed by the assessee was allowed for statistical purposes, with the issue of the deemed addition under section 11(3)(b) being remanded to the CIT(A) for further consideration. The order was pronounced in the open Court on 24.09.10.
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