2020 (4) TMI 613 - AT - Income Tax

Addition u/s 68 - Exemption u/s 11 - voluntary donation received by the assessee-trust towards corpus fund - HELD THAT - As held in the case of S.RM.M.CT.M.Tiruppani Trust v. CIT 1998 (2) TMI 3 - SUPREME COURT under section 11(1) of the Act, every charitable or religious trust is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its charitable or religious purposes in India. This is, of course, subject to accumulation up to a specified maximum which, in the present case, was 25%. To obtain the benefit of the exemption u/s 11 assessee is required to show that the donations were voluntary. In the present case, the assessee had only disclosed its donation, but failed to submit a list of donors. Complete list of donors was not filed or that the donors were not produced, does not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. Section 68 have no application to the facts of the case if the assessee furnishes the name and address of the donors to the Assessing Officer. In the present case, the assessee has received ₹ 33.80lakh in three assessment years as stated in the earlier paragraph that out of this, ₹ 11.90 lakh was relating to assessment year 2008- 2009. The Assessing Officer, out of this amount, considered ₹ 8.80 lakh as unaccounted income of the assessee - assessee has not filed the confirmation letters from the two donors. If the assessee is able to file the confirmation letters stating that it was received the amount as donation towards corpus fund of the assessee-trust, then there cannot be any application of section 68 of the Act. Being so, if there is a disclosure of this income in the hands of the assessee as corpus fund and applied the same is for charitable purposes for which the assessee-trust is created, and also the assessee-trust is having due registration u/s 12A AO cannot invoke the provisions of section 68 so as to sustain the addition - remit the entire issue under dispute to the files of the Assessing Officer with a direction to the assessee to prove that it was received the amount as donation towards corpus fund of the assessee-trust. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Challenge to addition of unexplained income under section 68 of the Income Tax Act based on voluntary donations received by the assessee-trust towards corpus fund.

Analysis:
1. The assessee contested the addition of ?8,80,000 by the Assessing Officer under section 68 of the Income Tax Act for the assessment year 2008-2009. The CIT(A) upheld the addition citing lack of proof regarding the identity and creditworthiness of the donors, genuineness of the transaction, and non-production of PAN details. The appeal before the Tribunal focused on this disputed addition.

2. The assessee received total donations of ?33,80,000 in different assessment years. The Assessing Officer considered ?8,80,000 as unexplained income for the year under consideration. However, the assessee argued that the corpus donations were made by trustees with proper explanations and sources, supported by confirmation letters. The AR emphasized that the corpus donations were exempt under section 10(23C)(iiiad) due to the trust's gross income being below ?100 lakh.

3. The AR further contended that the Assessing Officer's treatment of ?25 lakh as explained source out of the total corpus fund was unjustified. The AR also highlighted that the trustees had no taxable income and provided their PAN details. Referring to legal precedents, the AR argued that corpus donations should not be separately assessed as income, especially when exempted under section 10(23C)(iiiad).

4. The Departmental Representative supported the authorities' orders, alleging the assessee attempted to convert unaccounted income into donations. However, the Tribunal noted that for exemption under section 11, the assessee needed to demonstrate voluntary donations, which could be achieved by disclosing donor details to the Assessing Officer. The Tribunal found that if the confirmation letters from donors were provided, the application of section 68 would be unwarranted.

5. Consequently, the Tribunal remitted the issue back to the Assessing Officer for fresh consideration, directing the assessee to substantiate the donations towards the corpus fund. The Tribunal emphasized that if the donations were received for charitable purposes by a registered trust, and proper documentation was provided, section 68 would not apply. The appeal was allowed for statistical purposes.

This detailed analysis of the judgment highlights the core issues, arguments presented, legal interpretations, and the Tribunal's decision, providing a comprehensive understanding of the case.