2019 (8) TMI 645 - AT - Income Tax

Anonymous donation - membership fees and receipt for carnival expenses - carnival was organized for old Xavierians and present Xavierians students only - assessment of trust - assessee trust has been provided registration u/s.12A and 80G - HELD THAT - Audit report, balance sheet, income and expenditure account and receipt and payment account clearly reveal the bifurcation of impugned amount of ₹ 12,74,744/-. From these account statement, as clearly observe that in the receipt and payment account, the assessee has shown receipt of ₹ 2,46,540/- as membership fees, receipt of inter-school cocurricular of ₹ 50,300/-, carnival expenses of ₹ 9,72,934/- and donation of ₹ 5,000/-. From the above payments, it is revealed that the assessee has incurred expenditure towards fooding expenses, printing and stationery, xerox courier, prize distribution, bank charges, even expenses, security expenses, promotional expenses, books and periodicals, carnival expenses and misc. expenses and remaining part of utilized funds/receipts has been deposited with the bank as fixed deposit. From receipt and payment account, we are not in agreement with the allegation of the AO that the impugned amounts are anonymous donation. As the assessee has received these amounts for specific purposes and out of these receipts, the assessee has incurred expenses for prize distribution, carnival expenses and other office establishment expenses, which are necessary for maintaining the office trust. When the assessee is showing that impugned amount was received under said four heads for specific purposes then the same cannot be treated as anonymous donation. The major receipt are carnival receipts and the assessee also incurred expenses for organizing the carnival, and, therefore, we are in agreement with the contention of ld A.R. that carnival was organized for old Xavierians and present Xavierians students only and no other person was allowed to participate thereon. The gathering of old and new students of an educational institution is a necessary event to strengthen relationship among them and for proper utilization of their knowledge for achieving the charitable objects of the trust and this carnival cannot be held as an event beyond the objectives of the trust. The membership fees are also from members and it cannot be treated as anonymous donation. Finally, hold that the authorities below are not correct in treating the amount as anonymous donation and taxing the same in the hands of the assessee. However, as clarify that ₹ 5000/- has been shown as donation but unable to understand that who gave this donation to the assessee trust and on being asked by the Bench, ld A.R. was unable to explain the name of the donor of this amount Therefore, this amount deserves to be treated as anonymous donation and the findings of the authorities below to this extent are confirmed. Accordingly, the AO is directed to delete the addition of ₹ 12,69,744/- and balance addition of ₹ 5000/- is upheld.

Summary

Issues Involved:
Confirmation of addition as anonymous donation by Commissioner of Income Tax(Appeals) - Ranchi.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax(Appeals) for the assessment year 2014-15, focusing on the addition of ?12,74,744 treated as anonymous donation.

2. The appellant argued that the amounts in question were not anonymous donations but membership fees, inter-school carnival receipts, and donations disclosed in the trust's financial records. The appellant highlighted the trust's charitable objectives, registration under sections 12A and 80G, and detailed the specific purposes for which the amounts were received and utilized.

3. The appellant emphasized that the trust's activities, including the carnival, were within the ambit of the trust deed's objectives for socio-economic upliftment and public utility, refuting the CIT(A)'s characterization of the amounts as anonymous donations. The appellant provided a breakdown of the amounts received and spent, demonstrating the non-anonymous nature of the funds.

4. The Departmental Representative supported the initial assessment, arguing that the amounts constituted anonymous donations under the Income Tax Act, and pointed out the lack of substantiating evidence for certain expenses claimed by the appellant.

5. The Tribunal analyzed the trust's financial documents, noting the specific purposes for which the funds were received and spent. It concluded that the amounts were not anonymous donations but related to legitimate activities of the trust, such as membership fees and carnival expenses. The Tribunal upheld a small portion as anonymous donation due to lack of donor identification.

6. Ultimately, the Tribunal partially allowed the appeal, directing the deletion of the majority of the addition while upholding a small portion as an anonymous donation. The judgment clarified the nature of the funds received and the permissible activities of the trust, providing a detailed rationale for its decision.

7. The judgment highlighted the importance of maintaining accurate records and demonstrating the non-anonymous nature of funds received by charitable trusts to avoid mischaracterization under tax laws.