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TMI Blog2022 (1) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the addition made by the Assessing officer of Rs. 31,90,180/- made by the Assessing Officer treating the amount received towards Corpus Fund as income assessable for the assessment year 2014-15. 4. The learned Commissioner of Income-Tax (Appeals) ought to have considered the fact that the said receipt represents capital receipt and is exempt from tax. 5. Any other ground that may be urged at the time of hearing." 2. Briefly the facts of the case are that the assessee filed its return of income for the impugned AY 2014-15 on 11/12/2014 admitting a total income of Rs. 2,28,290/-, which was processed u/s 143(1) of the Act by the AO at Central Processing Centre (CPC) vide order/information on 16/03/2016 and determined the total income of the assessee at Rs. 44,48,201/- by making the following additions/disallowances to the returned income of the assessee: 1. Addition on account of treating the corpus fund receipts/donations as income - Rs. 31,90,180/- 2. Disallowance of expenditure - Rs. 8,41,028/- 2.1 Against the above additions, the assessee filed a rectification application u/s 154 of the Act and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 12,58,021/, and, after claiming certain expenses, the net profit is disclosed at Rs. 4,16,993/-. Further, it is observed from the return of income that the assessee has claimed a sum of Rs. 1,88,703/- u/s. 11(l)(a) of the Act towards accumulated or set-apart purportedly for application to charitable or religious purposes. Thus, after excluding Rs. 1,88,703/- from the net profit of Rs. 4,16,993/-, the assessee has finally arrived at the total income of Rs. 2,28,290/-. 7.4 Also, it is observed from the return of income filed that the assessee has disclosed a sum of Rs. 31,90,180/- towards corpus fund receipts and the same was disclosed in the balance sheet under the head capital account. As such, the corpus fund receipts have not been disclosed under profit and loss account. In view of this, while processing the return of income, the AO at CPC had rejected the assessee's claim of exemption u/s. 11 of the Act and considered the gross receipts of Rs. 12,58,021/- and corpus fund receipts of Rs. 31,90,180/-, aggregating to Rs. 48,201/-, as income of the assessee and brought the same to tax. 7.5 On the other hand, it is the contention of the assessee that though it is not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnished in the return, the assessee has not claimed exemption of its income u/s. 10(23C) (iii ad) of the Act. To be precise, as per the return format i.e., OTHER DETAllS-B, itis imperative on the part of the assessee to provide the details of eligibility for exemption u/s. 10(23C) (iii ad) and u/s. 10(23C) (iii ae) of the Act. The relevant portion of the return format is reproduced below for ready reference: This space is left blank intentionally. 7.8 In the instant case, it is clearly evident that the assessee has not chosen either of this columns implying that the assessee did not opt for exemption '" of its income either u/s. 10(23C) (iii ad) or u/s. 10(23C) (iii ae) of the Act, as the case may be. Further, in the same return format, the assessee has categorically stated that it has not been registered u/s.12A/12AA of the Act. Accordingly, it is mentioned that it is not entitled to claim exemption of its income u/s.11 of the Act. However, in the statement of income i.e. Part B-TI, the assessee has claimed exemption of its corpus fund receipts/donations u/s.11(1)(d) of the Act. Similarly, it has claimed accumulation/ set-apart of its income to the extent of 15% of gross re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has not disclosed any transactions relating to educational activities. For example, in the income side, the assessee has disclosed receipts under three heads Le., building rent, SML Town Bank FD interest and SML Town Bank SB interest. On the other hand, under the expenses, the assessee has claimed various expenses which are in the nature of general administrative and ~sta6Hsr.nJ1,ent expenses, apart from depreciation allowance, but there is no expenditure towards imparting education. For the sake of ready reference, a scanned copy of the profit and loss account is given below: 7.14 As seen from the above, it is quite clear that the assessee has not engaged in educational activities during the FY 2013-14 relevant to impugned A Y 2014-15, let alone existing solely for educational purposes and not for purposes of profit. The assessee has actually earned income in the shape of interest on Fixed Deposits and 5B Accounts, apart from rental income. As such, has not fulfilled the basic requirements as envisaged u/s.10{23C) (iii ad) of the Act. Under the circumstances, merely because of the fact that the gross annual receipts of the assessee are less than the threshold limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is liable to pay tax on the entire amount of corpus fund receipts/donations of Rs. 31,90,180/- without any deduction. Thus, the grounds of appeal raised by the assessee are treated as partly allowed." 4. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT. 5. Before us, the ld. AR of the assessee reiterated the submissions made before the lower authorities and submitted that the assessee is a society registered under the Societies Registration Act. He submitted that the society received corpus fund which is exempt from the tax and the interest received on the investment of corpus fund is also exempt from tax. He submitted that while processing the return u/s 143(1) of the Act, the AO/CPC has made adjustments, which he could not have done. Referring to the provisions of section 143(1) of the Act, he submitted that only adjustments can be made to the income admitted in the return of income and the corpus fund is a specific designated fund, which could be utilized for the designated purpose and, therefore, it is not part of the income of the assessee. Further, he submitted that the assessee filed an application in form No. 10A seeking registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(1) is not as per the provisions of the Act, in this connection, we refer to section 143(1) of the Act, which is as under: "(1) Where a return has been made under section 139, or in response to a notice under sub-section (1) of section 142, such return shall be processed in the following manner, namely: (a) the total income or loss shall be computed after making the following adjustments, namely: (i) any arithmetical error in the return; 3 *** (ii) an incorrect claim, if such incorrect claim is apparent from any information in the return;4 (iii) disallowance of loss claimed, if return of the previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139; (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return; (v) disallowance of deduction claimed under sections 10AA, 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID or section 80-IE, if the return is furnished beyond the due date specified under sub-section (1) of section 139; or (vi) addition of income appearing in Form 26AS or Form 16A or Form 16 which has not been included in comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,- (i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied: Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007; (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; 25[(ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA. 7.2.1 The submission of the ld. AR is that the application in form No. 10A seeking registration u/s 12AA was pending before the CIT(E) and the same was granted by the CIT(E) on 01/08/2019 and the CIT(A) passed his order dated 09/01/2020, which was instituted by the assessee on 27th October, 2016, it means that assessment was pending before the CIT(A) and the CIT(A) has coterminous powers with that of AO. In line of this argument of the ld. AR, we refer to the judgment of the Hon'ble Madras High Court in the case of Soundaram Chokkanthan Educational & Charitable Trust Vs. ITO, [2021] 125 Taxmann.com 340 (Madras) wherein the Hon'ble Court has observed as under: "7. At the outset, we need to point out certain factual aspects before we examine as to the applicability of the decisions cited. Admittedly, the application for registration was filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entirely a different issue pertaining to a case arising under section 269C, read with section 269-1 of the Act, pertaining to acquisition of immovable properties and initiation of proceedings. 9. Therefore, we find both the decisions cannot be applied to the assessee's case. The decision in the case of Shiv Kumar Sumitra Devi Smarak Shikshan Sansthan (supra), in our opinion, would be applicable to the case on hand. The Substantial Questions of Law which fell for consideration in the said case was: (i) Whether the Income-tax Appellate Tribunal was justified in allowing retrospective coverage to the assessee under sections 11 and 12 of the Act, by holding that the appellate proceedings can be regarded as assessment proceeding?; (ii) Whether the Income-tax Appellate Tribunal has rightly applied the proviso of section l2A(2) for the Assessment Year 2011-12 in the case of assessee therein when admittedly the assessee got registration under section 12AA from Assessment Year 15-16 ?; and (iii) Whether the Income-tax Appellate Tribunal was justified in holding that the assessee is eligible for exemption under section 11 of the Act even when the assessee was not registered under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orance of the main provision of section l2A(2) of the Act, 1961. Whenever interpretation of the statutes has to be given it should be after making harmonious construction of the statute. For the purpose of proper interpretation of Section l2A of the Act, 1961, the Tribunal was required to make interpretation after taking into consideration the main provision along with the proviso and not by giving meaning to the proviso in ignorance of substantive provision. 16. The Tribunal has even ignored the basic principle of law in giving interpretation in charging provisions, the benefit is to be given to the assessee but same principle is not applicable for an exemption notification or exemption clause, where the benefit of ambiguity must be given to the Revenue/State. It is also that burden to prove applicability of exemption would be on the assessee that it comes squarely within the parameters of the exemption notification or exemption clause. The Tribunal was required to make distinction between charging provision where benefit of ambiguity is given to the assessee and the exemption notification or clause where interpretation is to be given in the form of Revenue. The issue aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal the main provision has been made redundant on the facts of the case, though not permissible. The proviso has to be read along with main proviso and not in isolation and contradiction. 19. The Tribunal even ignored the fact that proviso not only require registration of the Trust or the Institution while the assessment proceedings are pending, but it refers to assessment proceedings before the assessing authority and not elsewhere. In a common parlance, whenever matter is pending before the Tribunal in appeal, considered to be pendency of the assessment proceedings. The aforesaid principle would be applicable in the instant case is another question because proviso qualifies not only pendency of the assessment proceedings, but should before the Assessing Officer not else where, if in the proviso words "pendency of the assessment proceedings", would have been used then pendency of the appeal against the assessment could have been considered to be pendency of the assessment proceedings, but in the instant case the words used are "pendency of the assessment proceedings before the Assessing Officer". The assessment proceedings of the year 2011-12 was not pending before the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust or the Institution even for the year 1998-99, though the legislatures have not provided such arrangement or to extend the benefit in such cases. The provision is candid to govern only those cases where the application for registration is submitted followed by registration, to extend the benefit to the assessee from the following financial year of the date of application. Taking aforesaid into mind, we find reasons to allow the appeal preferred by the revenue and the substantial questions of law framed herein above are answered in favour of the Revenue and thereby we set-aside the order passed by the Tribuna1." 11. The Hon'ble Division Bench rightly took note of the decision of the Hon'ble Supreme Court in the case of Commissioner of Customs (Import) v. Dilip Kumar & Co. [2018] 9 SCC 1, in which the Hon'ble Supreme Court has explained as to how the exemption provisions have to be interpreted and such interpretation to lean in favour of the Revenue. Further, we also agreed with the view expressed in Paragraph 20 of the aforementioned judgment, wherein it has been held that the instruction issued by the CBDT cannot be forfeited as it is against the statutory provis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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