2017 (12) TMI 118 - AT - Income Tax

Denial of exemption u/s 11, 12 and 10(23BBA) - proof of certificate of registration - Held that - At the time of making the assessment for allowing exemption u/s 11 and 12, the assessee should furnish the proof of certificate of registration being granted by the Ld.CIT. In the absence of furnishing details sought by the CIT and thereafter no correspondence with the income tax authorities demonstrates that the assessee has not shown any interest in pursuing the registration further, hence, we are inclined to believe that the assessee has not submitted the clarifications and did not prosecute the assessee s case for granting registration u/s 12AA. The assessee failed to establish that the Registration was granted in its case or complied with the requirement for granting the Registration. The Ld.AR referred the assessment order for the assessment year 2006-07 wherein the AO has allowed the exemption without verifying the status of registration and committed an error and we do not incline to continue the same mistake. Accordingly we uphold the order of the Ld.CIT(A) and dismiss the appeal of the assessee on this ground. Granting of exemption u/s 10(23BBA) - Held that - The assessee stated that the temple trust was taken over by the endowments department and requested for granting exemption u/s 10(23BBA), but the assessee did not place any evidence to show that the temple trust was constituted by any of the central /state provincial act as required under section 10(23BBA) of the act. Therefore we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. Corpus funds required to be excluded even if the assessee trust is treated as AOP from the purview of the income - Held that - The resolution passed by the trust is for application of it s receipts in the manner in which the collection required to be utilized but not the mandate of donors as rightly observed by the Ld.CIT(A). Further the hundi collections are voluntary contributions which cannot be excluded from the definition of income u/s 2(24)(iia) of the Act. The specific purpose donations are excluded by the amendment made in the Finance Act, 1987 w.e.f. 1.4.1989. Therefore, all the voluntary contributions received by the assessee are taxable within the meaning of section 2(24)(iia) of the I.T.Act if the registration u/s 12A is not available to the assesse. The courts have held that the specific purpose or tied up grants are excludible but the assessee has not placed any evidence to show that the hundi collections are received for specific purpose. In addition to the above as held by CIT(A), the hundi collections are also included in the receipts and payments account. The assessee has not produced the balance sheet and demonstrated that the corpus funds are tied up grants and received for capital purpose.

Summary

Issues Involved:
1. Denial of exemption under sections 11, 12, and 10(23BBA) of the Income Tax Act.
2. Status of the trust's registration under section 12AA.
3. Classification of Hundi collections as corpus donations.
4. Applicability of interest under sections 234A, 234B, and 234C.

Detailed Analysis:

1. Denial of Exemption under Sections 11, 12, and 10(23BBA):
The primary issue was the denial of exemptions claimed by the assessee under sections 11, 12, and 10(23BBA) of the Income Tax Act. The assessee trust, registered in 1975, claimed exemptions for various assessment years. The Assessing Officer (AO) denied these exemptions due to the trust's failure to produce a copy of the registration under section 12AA. The AO also determined that the trust did not qualify for exemption under section 10(23BBA) as it was not established under any Central or State Act. Consequently, the AO computed the taxable income for the relevant years without granting the exemptions.

2. Status of Trust's Registration under Section 12AA:
The assessee argued that it had submitted all necessary documents for registration under section 12AA and assumed it was granted due to the absence of any rejection communication from the Commissioner of Income Tax (CIT). However, the AO and the CIT(A) found no evidence of such registration being granted. The Tribunal upheld this view, noting that the assessee failed to follow up on its application and did not furnish the required clarifications. The Tribunal concluded that the assessee did not demonstrate that the registration was granted, and therefore, the denial of exemptions under sections 11 and 12 was justified.

3. Classification of Hundi Collections as Corpus Donations:
The assessee contended that Hundi collections should be treated as corpus donations and thus excluded from taxable income. The CIT(A) and the Tribunal rejected this argument, stating that there was no evidence to show that these collections were made with a specific direction from donors to form part of the corpus. The resolution passed by the trust regarding the utilization of these funds did not alter the nature of the contributions. The Tribunal emphasized that voluntary contributions, including Hundi collections, are taxable under section 2(24)(iia) unless they are explicitly directed by the donor to be corpus donations.

4. Applicability of Interest under Sections 234A, 234B, and 234C:
The Tribunal also addressed the issue of interest charged under sections 234A, 234B, and 234C. The assessee did not present any arguments against these charges, and the Tribunal upheld the AO's decision, noting that the imposition of interest under these sections is mandatory.

Conclusion:
The Tribunal dismissed the appeals for the assessment years 2008-09 to 2012-13, upholding the AO's denial of exemptions under sections 11, 12, and 10(23BBA) due to the lack of registration under section 12AA and the failure to demonstrate that Hundi collections were corpus donations. The Tribunal also confirmed the applicability of interest under sections 234A, 234B, and 234C.