2017 (4) TMI 1147 - AT - Income Tax

Claim of receipt of corpus donations - whether the said anonymous donations are liable to be taxed u/s 115 BBC of the Act? - accumulation u/s 11(2) - Held that - We have observed that the assessee-trust is registered u/s 12A of 1961 Act with DIT(E) , Mumbai bearing No. TR/25225 and also registered with Charity Commissioner , Mumbai. The assessee in the instant case could not provide addresses, father s name and PAN of the donors and the assessee is also not a religious trust to be covered under exception. The assessee has come forward with a request that if an opportunity is given to the assessee, the assessee can produce the donors before the AO as directed by the AO. It is also submitted that PAN and addresses of all the donors for verification by the A.O. will also be furnished for verification by the AO. Considering the factual matrix of the case , keeping in view the provisions of Section 115BBC of 1961 Act and in the interest of justice and fair play, we are of considered view that this matter needs to be set aside and restored to the file of the A.O for necessary enquiry and verification of the said donations so received by the assessee as to genuineness and also for verifying compliance of the relevant section 115BBC of 1961 Act.

Issues Involved:
1. Disallowance of the assessee's claim of receipt of corpus donations.
2. Treatment of corpus donations as anonymous donations taxable under Section 115BBC.
3. Invocation of provisions of Section 115BBC without appreciating the facts and circumstances.
4. Non-appreciation of facts and explanations offered in support of the assessee's claim of corpus donations.
5. Non-conformity of the option exercised in respect of unspent income with the provisions of Explanation 2 below Section 11(1).
6. Non-appreciation of facts and explanations regarding the option exercised under Section 11(1) for unspent income.

Detailed Analysis:

1. Disallowance of Corpus Donations:
The assessee, a charitable trust registered under Section 12A, claimed receipt of corpus donations amounting to ?2,42,26,508. The Assessing Officer (AO) disallowed this claim, treating the donations as anonymous under Section 115BBC due to the lack of complete addresses and PAN details of the donors. The AO observed that the direction letters from donors were in the same format and lacked sufficient details to verify the donors' identities.

2. Treatment as Anonymous Donations:
The AO treated the corpus donations as anonymous donations taxable under Section 115BBC, as the assessee failed to provide adequate information to verify the donors' identities and addresses. The AO noted that the assessee trust is not a religious trust, which would have exempted it from Section 115BBC. The AO's decision was based on the observation that the direction letters did not bear PAN details and provided incomplete addresses.

3. Invocation of Section 115BBC:
The AO invoked Section 115BBC, which taxes anonymous donations at 30%, arguing that the assessee did not maintain a record of the identity of the donors, which includes the name and address as prescribed. The assessee contended that the donations were accompanied by direction letters specifying they were for the corpus fund and requested another opportunity to provide the PAN and addresses of the donors.

4. Non-Appreciation of Facts and Explanations:
The CIT(A) upheld the AO's decision, stating that the third-party verification of donors was not possible due to incomplete information. The CIT(A) held that the corpus donations could not be considered as such in the absence of verifiable identity and address details, thus confirming the AO's treatment of the donations as anonymous under Section 115BBC.

5. Non-Conformity with Section 11(1) Explanation 2:
The AO also denied the exemption for an unspent income amount of ?1,35,70,000, which the assessee claimed to accumulate for future charitable projects. The AO argued that the assessee did not specify any 'reason' for the accumulation, which is mandatory under Explanation 2 to Section 11(1). The CIT(A) agreed, stating that the reasons provided by the assessee were general and not specific, thus not fulfilling the requirements of the notice in Form No. 10.

6. Non-Appreciation of Facts Regarding Unspent Income:
The assessee argued that the unspent amount was accumulated for launching projects in the next financial year, which required more planning and funds. The CIT(A) rejected this explanation, stating that the plans were not finalized and the accumulation was unspecified and uncertain.

Tribunal's Decision:
The Tribunal observed that the assessee failed to provide complete details of the donors, such as addresses and PAN, and thus did not comply with Section 115BBC. However, in the interest of justice, the Tribunal set aside the matter to the AO for re-verification. The AO was directed to allow the assessee to provide the required details and produce donors for verification. Similarly, the Tribunal remanded the issue of unspent income to the AO for verification of the assessee's claim that the amount was accumulated for future projects and spent in the next year. The AO was instructed to provide a proper hearing and consider the assessee's evidence and contentions.

Conclusion:
The appeal was allowed for statistical purposes, with directions for the AO to re-examine the issues of corpus donations and unspent income in accordance with the law and after providing adequate opportunity for the assessee to present its case.

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