2013 (11) TMI 680 - AT - Income Tax

Benefit of exemption u/s 11 and 12 of the Income tax act - Urged that Ld. CIT(A) erred in allowing the claim of expenditure of Rs. 184,77,745/- when the assessee has failed to furnish complete documentary evidence to substantiate the claim to fulfill its objective Held that - Complete details of the donations received is not on record. The donations and the income so generated has been held by the Ld. CIT(A) to have not been applied for charitable purposes. In these circumstances, it is contradictory on the part of the Ld. CIT(A) to hold that the donations are disclosed and exempt and at the same time hold that assessee is not entitled for exemption u/s. 11 & 12 of the Act in as much as it is not engaged in any charitable activity. Ld. CIT(A) has held that the assessee should be allowed the claim of expenditure of Rs. 18477745/-. This is quite contradictory approach as when it has been held by the Ld. CIT(A) that assessee is not engaged in any charitable activity, there is no question of allowing any expenditure incurred in this regard - It is clear that the ld. CIT(A) has passed a contradictory order Reliance has been placed on the Apex court judgment in the case of Kapurchand Shrimal Vs. CIT, 1981 (8) TMI 2 - SUPREME Court , wherein it was held that it is the duty of the Appellate Authority to correct the lacunae in the order of the authorities below and if needed remand the matter - Remitted the issue raised in the Cross Appeals to the file of the Ld. CIT(A) to consider the issue afresh.

Issues Involved:

1. Denial of exemption under sections 11 and 12 of the Income Tax Act.
2. Deletion of addition of Rs. 1,82,14,817/- shown by the assessee in its Income and Expenditure Account.
3. Allowance of claim of expenditure of Rs. 1,84,77,745/- without complete documentary evidence.
4. Validity of the assessment order and proper opportunity given to the assessee.
5. Treatment of donations received as income from undisclosed sources under section 68 of the Income Tax Act.
6. Disallowance of various expenses claimed by the assessee.

Detailed Analysis:

1. Denial of Exemption under Sections 11 and 12:

The Assessing Officer (AO) denied the exemption under sections 11 and 12 of the Income Tax Act, asserting that the activities of the trust were not for charitable purposes but were commercial in nature. The AO referenced the trust's production of films and the lack of evidence showing these films were used for charitable purposes. The AO's findings were supported by statements from the trust's employees and the managing trustee, indicating the films were intended for commercial exploitation. The CIT(A) upheld the AO's decision, concluding that the trust's activities did not qualify as charitable and referenced judicial precedents such as Aman Shiv Mandir Trust vs. CIT and CIT vs. National Institute of Aeronautical Society to support this stance.

2. Deletion of Addition of Rs. 1,82,14,817/-:

The AO treated the donation amount of Rs. 1,82,14,817/- as income from undisclosed sources under section 68 of the Income Tax Act, due to the lack of satisfactory evidence regarding the donors' identities and creditworthiness. The CIT(A), however, deleted this addition, relying on the judgment in DIT(E) vs. Keshav Social and Charitable Foundation, which held that section 68 does not apply if the donations are disclosed and applied for charitable purposes. The CIT(A) noted that the provision for taxing anonymous donations under section 115BBC was applicable only from assessment year 2007-08, thus not relevant for the assessment year in question.

3. Allowance of Claim of Expenditure of Rs. 1,84,77,745/-:

The AO disallowed the expenditure claim of Rs. 1,84,77,745/- due to insufficient documentary evidence. The CIT(A) reversed this decision, stating that the assessee had produced various details during the assessment proceedings, and payments were made by account payee cheques. The CIT(A) found no basis for the disallowance and allowed the claim.

4. Validity of the Assessment Order and Proper Opportunity:

The assessee contended that the assessment order was invalid due to the lack of proper opportunity to present its case. The CIT(A) dismissed this claim, affirming that the assessee was given adequate opportunities to be heard during the assessment proceedings.

5. Treatment of Donations as Income from Undisclosed Sources:

The AO treated the donations as income from undisclosed sources under section 68, citing the lack of evidence regarding the donors' identities. The CIT(A) deleted this addition, referencing the judgment in DIT(E) vs. Keshav Social and Charitable Foundation, which held that disclosed donations applied for charitable purposes are exempt from section 68. The CIT(A) also noted that the provision for taxing anonymous donations was not applicable for the assessment year in question.

6. Disallowance of Various Expenses:

The AO disallowed various expenses claimed by the assessee due to the lack of supporting evidence. The CIT(A) allowed these expenses, noting that the assessee had provided sufficient details and evidence during the assessment proceedings.

Conclusion:

The ITAT found the CIT(A)'s order contradictory, as it simultaneously upheld the denial of exemption under sections 11 and 12 while deleting the addition of donations and allowing the expenditure claims. The ITAT remitted the issues back to the CIT(A) for fresh consideration and to pass a cogent order, emphasizing the need for consistency in the findings. Both the Revenue's and the Assessee's cross appeals were allowed for statistical purposes.

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