2011 (9) TMI 369 - AT - Income Tax

Anonymous donations - name and address have been maintained, which can be seen from the donation receipts - assessee was not able to secure confirmation from all parties - AO has taxed the amount by mentioning that confirmation letters from the donors have not been filed. - Held that - Such confirmations are not required to be filed for coming to the conclusion as to whether the donation was anonymous or not. Therefore, the case of the revenue regarding taxation of this amount under sub-section (2) fails on this ground itself - Further, the assessee had shown the amount under the building fund, but at the time of filing the return, this amount was added to the income. In the case of DIT (Exemption) v. Keshav Social & Charitable Foundation 2005 (2) TMI 84 - DELHI High Court , it has been held that section 68 has no application because the assessee had disclosed the donation of ₹ 18,24,000/- as its income and it cannot be disputed that all receipts other than corpus donation would be the income in the hands of the n assessee. There was, therefore, full disclosure of income and its application for charitable purposes. Accumalation of income under 11(2) - Time limit for giving information of accumalation - form no. 10 - If during the assessment proceedings the Assessing Officer does not have the necessary information, question of excluding such income from assessment does not arise at all. - Intimation in form no. 10, under Rule 17, setting out the prescribed particulars has to be furnished before the completion of the assessment because it is necessary that AO must have this information at that time so as to enable him to compute the total income. In absence of such information, he will not be in a position to grant the benefit. Once the assessment is completed, it would be futile to find fault with the Assessing Officer for having included such income in the total income. Contents of form no. 10, which contains stipulation regarding the amount of income to be set apart, the period of accumulation and the purpose for which the income is accumulated or set apart. Filing of the form before assessment is not an empty formality because it is necessary to take into account its contents for computing the income. - the lower authorities rightly refused the benefit of accumulation of income in absence of the filing of form no. 10 before completion of assessment.

Issues Involved:
1. Addition of Rs. 19,25,047/- as anonymous donations taxable under Section 115BBC.
2. Addition of Rs. 3,37,841/- as unexplained cash credit under Section 68.
3. Denial of accumulation of income under Section 11(2).
4. Deduction of Rs. 14,53,112/- for capital expenditure under Section 11(1).

Detailed Analysis:

1. Addition of Rs. 19,25,047/- as Anonymous Donations Taxable under Section 115BBC:
The AO added Rs. 19,25,047/- to the assessee's income, treating it as anonymous donations under Section 115BBC since the assessee failed to maintain records of the donors' identities. The assessee argued that the donations were recorded with names and addresses in the donation receipts, which were impounded during a survey. The Tribunal noted that the definition of "anonymous donation" under Section 115BBC(3) requires maintaining records of the donor's name and address, which the assessee had done. Therefore, the Tribunal concluded that the donations were not anonymous, and the addition under Section 115BBC was not justified. The Tribunal also referenced the case of DIT (Exemption) v. Keshav Social & Charitable Foundation, which held that Section 68 does not apply if the donation is disclosed as income.

2. Addition of Rs. 3,37,841/- as Unexplained Cash Credit under Section 68:
The AO added Rs. 3,37,841/- as unexplained cash credit, noting discrepancies in the donation receipt book. The assessee attributed the discrepancies to a computer virus and malfunction. The Tribunal found that Rs. 88,841/- was already included in the total income, and only Rs. 2,49,000/- remained unexplained due to the computer snag. The Tribunal held that the provisions of Section 68 were not applicable to the Rs. 88,841/- already included and that the Rs. 2,49,000/- should be treated as income from property held for charitable purposes, following the Delhi High Court's decision in Keshav Social & Charitable Foundation.

3. Denial of Accumulation of Income under Section 11(2):
The AO denied the benefit of accumulation under Section 11(2) due to the absence of Form No. 10 and an undated resolution. The Tribunal referred to the Supreme Court's decision in CIT v. Nagpur Hotel Owners' Association, which mandates that Form No. 10 must be filed before the completion of the assessment. Since the assessee did not file Form No. 10 before the assessment was completed, the Tribunal upheld the denial of the benefit.

4. Deduction of Rs. 14,53,112/- for Capital Expenditure under Section 11(1):
The AO denied the deduction for capital expenditure, arguing that it was funded by anonymous donations. The CIT(A) allowed the deduction, stating that the tax on anonymous donations is separate and does not affect the application of income for charitable purposes. The Tribunal agreed, noting that the donations were not anonymous and that the details were available in the donation receipts. Thus, the Tribunal upheld the CIT(A)'s decision to allow the deduction.

Conclusion:
(i) The appeal of the assessee was partly allowed, confirming that the donations were not anonymous and adjusting the unexplained cash credit.
(ii) The appeal of the revenue was dismissed, upholding the deduction for capital expenditure.
(iii) The cross objection of the assessee was allowed, supporting the CIT(A)'s decision on the capital expenditure deduction.

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