2009 (8) TMI 103 - HC - Income Tax

Assessee is a charitable society claimed exemption under section 11(1)(a) and section 12(1). The same was declined by the Assessing Officer on the ground that the assessee was a society and not a trust. The Assessing Officer also made additions in respect of rental income foreign contributions registration charges building funds and expenditure out of earmarked funds. The Assessing Officer also raised objection that revised Form No. 10 was not furnished with the return. while dismissing the revenue s appeal We hold that Commissioner of Income-tax (Appeals) had rightly observed that appellant has modified Form No.10 in the course of assessment proceedings. The modified Form No. 10 has also been rejected by the Assessing Officer on the ground that there is no provision in the Act for revising Form No. 10. It was submitted that there is no specific bar prohibiting the appellant from modifying the figure of accumulation. In the light of the ratio laid down by the Supreme Court in the case of CIT v. Nagpur Hotel Owners Association Form 10 may be furnished before the assessing authority completes the concerned assessment. - regards the question of additions made on account of interest earned on deposit out of unutilized foreign contributions Form No. 10 having been held to be valid the additions were not called for. The claim for exemption falls under section 11(1) (a); as income has been derived from property further it is held that assessee could not be denied exemption u/s 11 on ground that it was not a trust but a society

Issues:
1. Eligibility for exemption under section 11(1)(a) of the Income-tax Act, 1961.
2. Validity of filing revised Form No. 10.
3. Additions made on interest earned from unutilized foreign contributions.
4. Interpretation of 'trust' in the context of the assessee.
5. Acceptance of revised Form No. 10 by the Tribunal.
6. Classification of 'interest income' as not 'income from other sources'.

Eligibility for Exemption under Section 11(1)(a):
The appellant, a charitable society, sought exemption under section 11(1)(a) and section 12(1) of the Income-tax Act, which was initially denied by the Assessing Officer on the basis that the appellant was a society and not a trust. However, the Commissioner of Income-tax (Appeals) and the Tribunal upheld the appellant's claim, emphasizing that the nature of the entity does not preclude eligibility for exemption under section 11(1)(a). The High Court, referring to a separate order in a related case, concluded that the issue did not constitute a substantial question of law.

Validity of Filing Revised Form No. 10:
The Commissioner of Income-tax (Appeals) acknowledged the appellant's modification of Form No. 10 during assessment proceedings, despite the Assessing Officer's objection that there was no provision for revising the form. Citing the Supreme Court's decision in CIT v. Nagpur Hotel Owners' Association [2001] 247 ITR 201, the Commissioner held that Form 10 could be submitted before the completion of assessment. The High Court, finding the matter settled by the Supreme Court's ruling, determined that this issue did not raise a substantial question of law.

Additions on Interest Earned from Unutilized Foreign Contributions:
The High Court held that since Form No. 10 was deemed valid, the additions made on interest earned from unutilized foreign contributions were unwarranted. The Court affirmed that the appellant's claim for exemption under section 11(1)(a) was justified as the income was derived from property, which also applied to other additions as upheld by the Commissioner of Income-tax (Appeals) and the Tribunal.

Interpretation of 'Trust' in the Context of the Assessee:
One of the issues raised was whether 'trust' in the context of the assessee referred to faith or status. The High Court opined that the Tribunal's interpretation that 'trust' meant faith and not status was appropriate in the circumstances of the case.

Acceptance of Revised Form No. 10 by the Tribunal:
The Tribunal's decision to accept the revised Form No. 10 submitted by the appellant was challenged, arguing that there was no provision for filing a revised form under the Income-tax Act, 1961. However, the High Court, guided by the Supreme Court's precedent, found the Tribunal's decision consistent with legal principles and not constituting a substantial question of law.

Classification of 'Interest Income' as Not 'Income from Other Sources':
The issue of whether 'interest income' should be classified as 'income from other sources' or considered part of accumulated funds was raised. The High Court concurred with the Tribunal's determination that 'interest income' is not 'income from other sources' but rather income derived from funds until their utilization, thus aligning with the Tribunal's legal interpretation.

In conclusion, the High Court dismissed the appeal, finding no substantial questions of law arising from the issues raised by the Revenue against the Tribunal's order.

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