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2015 (8) TMI 881 - ITAT DELHI

2015 (8) TMI 881 - ITAT DELHI - TMI - Addition u/s 68 - whether donations cannot be included for the purpose of application of funds as required u/s 11? - CIT(A) deleted additions - Held that:- The assessee received donation of ₹ 75 lakh which were added by the AO to the returned income of the assessee u/s 68 of the Act and the said addition has also been upheld by the first appellate authority while passing the impugned order and with the conclusion as reproduced hereinabove. Turning to t .....

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sessee 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.

In the pr .....

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ct to controvert that the objects of the assessee charitable trust are charitable in nature and the assessee applied more than 85% of its income including impugned donations towards charitable purposes during the financial period under consideration. In this situation, the CIT(A) was right in following the ratio laid down in the case of DIT(E) vs Keshav Social and Charitable Foundation (2005 (2) TMI 84 - DELHI High Court) and we are unable to see any ambiguity, perversity or any other valid reas .....

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l No. 90/10-11 for AY 2003-04. Revenue s appeal in ITA No. 3295/Del/11 2. The revenue has raised the following grounds in this appeal:- "1. On the facts & in the circumstances of the case, the Ld. CIT (A) has erred in directing that provisions of Sec. 68 of the Act could not be applied to anonymous donations of ₹ 75 lacs received by the assessee and these donations be considered as part of total income for application of charitable objects, since these directions are in contrast t .....

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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 ₹ 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 .....

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the extent of 85% of total income and the application by the assessee exceeds 85% of the total income of the assessee, therefore, assessee s claim is justified and allowable. The CIT(A) finally directed the AO to consider the amount of impugned addition as a part of total income applied towards charitable objects. Now, the aggrieved revenue is before this Tribunal in this second appeal with the sole ground as reproduced hereinabove. 5. We have heard arguments of both the sides and carefully peru .....

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/s 68 of the Act stood upheld by him. Ld. DR fairly contended that the ld. CIT(A) has erred in law and also on the facts by holding that the provisions of section 68 of the Act have no application on corpus donation of ₹ 75 lakh which were disclosed as a part of income by the assessee, whereas, these donations were accounted as capital receipts and the same were neither reflected in the income and expenditure account of the assessee nor shown in the statement of income by the assessee for .....

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o the extent of 85% of the total income and receipts and the assessee applied more than 85% of income for charitable purpose during the relevant financial period, therefore, first appellate authority was right in directing the AO to consider the said amount as a part of total income for application 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 .....

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wever, 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 rep .....

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ive ground no. 3, 4 and 5 of the assessee allowed the same and granted relief to the assessee with following observations and conclusion:- 7. Grounds No. three, Four and Five are taken together. These are the alternative grounds to the effect that even assuming that the addition of ₹ 75 lacs is upheld, the application of income during the year far exceeded 85% of the statutory limit required to be applied for charitable purposes. According to the impugned assessment order, the total income .....

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ve gone through the submission of the appellant and reliance is placed on the following decisions of the Hon'ble Delhi High Court in Director of Income-tax (exemption) Vs Raunaq Education Foundation [2007] 294 ITR 76 (del.). In this case, it has been held that where the assessee is entitled to exemption u/s 10(22), he can claim the benefit thereof for the purpose of income deemed to be chargeable u/s 68. 7.3 Under the sections 68 to 69D, unexplained cash credits, money; investments, expendit .....

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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 .....

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n 115BBC is not applicable. 7.6 Section 11 requires compulsory application of income on charitable purposes to the extent of 85% of the total income. The application by the appellant of the income far exceeds 85% of the total income of the appellant as recomputed in the impugned assessment order. I find that the appellant's claim is justified and accordingly the Assessing Officer is directed to consider the addition of ₹ 75 lacs as part of the total income for application of charitable .....

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t of donors. 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. This is more particularly so in the facts of the case where admittedly more than 75 per cent of the donations were applied for charitable purposes. Section 68 has no application to the facts of the case because the assessee had in fact disclosed the donations o .....

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ircumstances of the present case, at the very outset, admittedly and undisputedly, the assessee received donation of ₹ 75 lakh which were added by the AO to the returned income of the assessee u/s 68 of the Act and the said addition has also been upheld by the first appellate authority while passing the impugned order and with the conclusion as reproduced hereinabove. Turning to the issue of requirement of section 11 of the Act, we note that the Hon ble High Court of Delhi explicitly held .....

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s 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. Ho .....

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