2020 (1) TMI 1432 - AT - Income Tax

Exemption u/s 11 - grant of registration u/s 12AA - whether the donation collected has been utilized for the purpose of construction of temple specifically and as to whether the assessee has been doing any other activity against the aims and objects of the society and as to whether there is any receipt in the hands of the society in the nature of income? - HELD THAT - As the amount of donation has been spent towards the construction of temple for achieving the aims and objects of the society, therefore the addition qua donations is unsustainable - Assessee further claimed that the Revenue department would have sought the clarification from the appellant society to the effect as to whether the donation collected has been utilized for the purpose of construction of temple specifically and as to whether the assessee has been doing any other activity against the aims and objects of the society and as to whether there is any receipt in the hands of the society in the nature of income. Authorities below failed to exercise on the aforesaid situations and passed the order on conjectures and surmises and hence in the interest of justice we are inclined to partly set aside orders passed by the authorities below and to remand back the issue qua addition to the file of the AO for decision afresh while taking into consideration the amount received by the assessee and its utilization as to whether the same and upto what extent has been utilized by the assessee for the construction of temple and/for achieving the aims and objects of the society. Whether the assessee has earned any income in its hand. Further as to whether the society has changed its aims and objects at any point of time at the time of filing the return for the relevant AY 2014-15 and before declining and grant of registration u/s 12AA of the Act. If the AO will find that the amount of donation has been spent for the construction of temple, then the Assessee shall be entitled to claim the amount to that extent as capital receipts in nature. Consequently the issue qua addition is remanded to the file of the assessing Officer for decision afresh on the basis of observations and analyzations made above and in the light of decision of tribunal in the case of Income Tax Officer, Dharamshala v. Chime Gatsal Ling Monastery 2014 (10) TMI 1033 - ITAT, CHANDIGARH - Appeal filed by the assessee stand allowed for statistical purposes.

Summary

Issues:
Assessment order upheld by CIT(A) - Registration u/s 12AA denied - Addition of donation and surplus income challenged - Appellant society not registered u/s 12AA during assessment year - Appeal restricted to addition of donation.

Analysis:
The appeal was filed against the CIT(A)'s order upholding the assessment order passed under section 143(3) of the Income Tax Act, 1961. The appellant society, formed in 2013, applied for registration under section 12AA, which was declined. The Assessing Officer added the corpus donation as income due to lack of registration. The society's aims seemed to benefit a specific community, and it was not entitled to exemption without registration. The CIT(A) upheld the additions, treating the society as an AOP. The appellant challenged the addition of donation before the ITAT, emphasizing this issue.

The ITAT considered a similar case and the order by the CIT(E) approving the society's registration under section 12AA. The CIT-DR defended the CIT(E)'s order, arguing against interference. The ITAT referred to the co-ordinate bench's decision in a related case, emphasizing the need for registration under section 12AA for exemptions under sections 11 and 12. The bench concluded in favor of the assessee, citing the society's charitable and religious purposes and the specific use of donations for temple construction.

The ITAT found that the society maintained its aims and objects, utilizing donations for temple construction as claimed. The lower authorities failed to consider these aspects, leading to a remand for fresh assessment. The ITAT directed the AO to examine the donation utilization, income generation, and any changes in aims and objects. If the donation was used for temple construction, it should be treated as capital receipts. The appeal was allowed for statistical purposes, emphasizing the need for a thorough assessment based on the facts presented.

In conclusion, the ITAT's decision highlighted the importance of registration under section 12AA for claiming exemptions and the necessity of proper assessment based on the utilization of donations and adherence to the society's aims and objects. The judgment focused on ensuring a fair evaluation of the appellant's case, emphasizing the specific use of donations for charitable purposes and the need for a detailed examination by the Assessing Officer.