1990 (11) TMI 204 - AT - Income Tax

Issues Involved:

1. Denial of exemption under Section 11 due to late filing of the audit report.
2. Treatment of donations as income instead of corpus donations.
3. Specific donations from various parties and their classification.

Detailed Analysis:

1. Denial of Exemption Under Section 11 Due to Late Filing of the Audit Report:

The assessee argued that the audit report was filed during the assessment proceedings, satisfying the requirements of clause (b) of Section 12A, and thus, they were entitled to the exemption under Section 11. The CIT(A) rejected this contention, stating that the audit report must be filed along with the return as per clause (b) of Section 12A. The Tribunal referenced the case of Shahaji Chhatrapati General Charitable Trust, which held that if the audit report is filed during the assessment proceedings before finalization, it meets the requirement of clause (b) of Section 12A. The Tribunal concluded that the requirement of Section 12A(b) was substantially complied with, and the benefit of Sections 11 and 12 cannot be denied solely because the audit report was not filed with the return.

2. Treatment of Donations as Income Instead of Corpus Donations:

a. Donation from M/s. A.M.D. Corporation:
The ITO did not treat the Rs. 1,00,000 donation from M/s. A.M.D. Corporation as a corpus donation due to lack of proper confirmation. The CIT(A) upheld this view, considering the second confirmation letter as a friendly help. However, the Tribunal found no reason to disbelieve the second confirmation letter, which clearly indicated that the donation was towards the corpus of the trust. Thus, the Rs. 1,00,000 donation was not treated as income.

b. Donation from M/s. Abaskar Construction Pvt. Ltd:
The CIT(A) accepted the confirmation letter and treated the Rs. 50,000 donation as a corpus donation.

c. Donations from S/Shri Rattan Lal Gupta and R.K. Aggarwal:
The assessee failed to prove that the Rs. 22,000 donations were towards the corpus fund. The Tribunal upheld the ITO's decision to treat these donations as income.

d. Batch of Confirmations from Twenty Donors:
The CIT(A) rejected these confirmations due to omissions and identical forms. The Tribunal held that the omissions were not valid grounds for rejecting the claim. The authorities should have given the assessee an opportunity to produce the donors. The Tribunal concluded that these donations should be treated as corpus donations and not as income.

e. Donations from Sixteen Parties:
The CIT(A) rejected these confirmations for similar reasons as the previous batch. The Tribunal held that the confirmations indicated donations towards the corpus of the trust and should not be treated as income.

f. Donation of Rs. 5,000:
The CIT(A) rejected this confirmation due to illegible signatures. The Tribunal found no justification for this rejection and treated the donation as towards the corpus of the trust.

g. Donations from Dinodia Family:
The CIT(A) set aside the matter to the ITO for further enquiry. The Tribunal found no basis for doubting the confirmation letter from Shri Pradeep Dinodia and held that the donations aggregating to Rs. 35,500 were towards the corpus of the trust and not income.

3. Charging of Interest Under Sections 139(8) and 217:

The assessee's counsel stated this ground was consequential. The Tribunal directed the Assessing Officer to recompute the interest chargeable under Sections 139(8) and 217 while giving effect to the order.

Conclusion:

The appeal was partly allowed. The Tribunal upheld the assessee's claims regarding the corpus donations and the compliance with Section 12A(b), directing the authorities to treat the specified donations as corpus donations and not as income. The interest under Sections 139(8) and 217 was to be recomputed accordingly.

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