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TMI Blog2015 (8) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... e case, the Ld. CIT (A) has erred in law by holding that provisions of Sec. 68 of the LT. Act have no application on corpus donations of Rs. 75 lacs which were disclosed as part of income by the assessee, whereas, these donations were accounted as capital receipts and the same were neither reflected in the Income & Exp. A/c. nor shown in the statement of income by the assessee". 3. Briefly stated the facts giving rise to this appeal are that the AO made an addition of Rs. 75 lakh by observing that the creditworthiness of the donors could not be established in absence of profit and loss account and balance sheet of the donors for the relevant accounting period i.e. FY 2002-03 along with income tax return acknowledgement for the AY 2003-04. The AO further observed that simply furnishing of confirmation with PAN and addresses of the donors do not suffice to satisfy the rigors of the provisions contained in section 68 of the Income Tax Act. 4. The aggrieved assessee carried the matter before the CIT(A) and the first appellate authority upheld the addition of Rs. 75 lakh u/s 68 of the Act. However, the CIT(A) while dealing ground no. 3, 4 and 5 of the assessee in the first appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of funds towards charitable objects. Ld. Counsel of the assessee vehemently contended that the provisions of section 115BBC are applicable w.e.f. 1.4.07 and the same is not applicable to the relevant AY 2003-04 in the present case. 6. Ld. DR placed a rejoinder to the above submission of the assessee and submitted that while the impugned donations have not been considered as genuine and capacity and creditworthiness of the said donors are also in clouds, therefore, the CIT(A) upheld the addition of Rs. 75 lakh made u/s 68 of the Act and in this factual matrix, the said amount of impugned donations cannot be included for the purpose of application of funds as required u/s 11 of the Act. However, ld. DR fairly accepted that the amended provisions of section 115BBC of the Act are applicable w.e.f. 1.4.2007 and the present case pertains to AY 2003-04. 7. On careful consideration of above submissions of both the sides, at the very outset, we note that the addition made by the AO u/s 68 of the Act was upheld by the CIT(A) with following observations:- "6.4 The submission given by the appellant and the objections of the Assessing Officer have been considered. It is seen that despite re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n DIT(Exemption) Vs Keshav Social and Charitable Foundation [2005] 278 ITR 152 held that anonymity of the donors cannot lead to the inference that unaccounted money has been introduced. Section 68 had no application to the facts of the case because the assessee had disclosed the donations as a part of its income. Therefore, there was full disclosure of income and its application by the assessee. 7.4 In the light of the above case law and the legal interpretations made therein the possibility of invoking sections 68, 69, 68 to 69C does not seem feasible. Here it is worthwhile to note that the Select Committee of Parliament had rejected the recommendation of Wanchoo Committee in 1973 which wanted to tax anonymous donations at the rate of 65%. The Select Committee was of the opinion that as long as the money was spent for charitable or religious purposes it did not matter whether the source was anonymous or determined. 7.5 This, position has only been altered w.e.f. 01104/2007 with the introduction of section 115BBC. Since this pertained to assessment year 2003-04 section 115BBC is not applicable. 7.6 Section 11 requires compulsory application of income on charitable purposes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain the benefit of the exemption u/s 11of the Act, the assessee is required to show that the donations were voluntary. Their lordships further held that the fact that the complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. It was also held by Hon'ble Jurisdictional High Court that it is not in dispute that the objects and activities of the assessee were charitable in nature and it was duly registered u/s 12A of the Act, then in the situation of full disclosure of income by the assessee and also application of the donations for charitable purposes entitles the assessee to obtain benefit of exemption u/s 11 of the Act. 11. In the present case, the assessee had not only disclosed the donations but also submitted names, confirmations along with PAN No., address of the donors before the AO during the assessment proceedings. However, the AO and the CIT(A) concluded that the creditworthiness of the donation could not be established, therefore, the impugned amount was added u/s 68 of the Act. At the same time, it cannot be ignored that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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