2024 (6) TMI 337 - AT - Income Tax

Applicability of section 11(1)(d) - retrospective nature of the amendment introduced by the Finance Act, 2021 - treatment of corpus donation received by the assessee as income from other sources - HELD THAT - Amended provisions of section 11(1)(d) were not applicable. The amended provisions of section 11(1)(d) were introduced by Finance Act, 2021 and made applicable from 01.04.2022. Thus, the amendment to section 11(1)(d) which makes it mandatory to assessee to invest or deposit voluntary contribution received during the year in one or more forms specified in section 11(5) of the Act is not applicable to AY 2018-19 i.e. AY under consideration. Therefore, it is abundantly clear that authorities below are erred in invoking the provisions of section 11(1)(d) which is not legally sustainable. Accordingly, we hold that authorities below have erred and the orders of the authorities below are set aside. Hence, the issue is decided in favour of the assessee.

Summary

Issues involved:
The issues involved in this judgment are the incorrect treatment of corpus donation received by the assessee as income from other sources, the application of section 11(1)(d) of the Income Tax Act, and the retrospective nature of the amendment introduced by the Finance Act, 2021.

Issue 1: Treatment of corpus donation as income from other sources
The assessee, a registered trust, received a corpus fund of Rs. 1 crore during the assessment year. The Assessing Officer (AO) treated this corpus fund as income from other sources. The Commissioner of Income Tax (Appeals) upheld this treatment based on the amended provisions of section 11(1)(d) of the Act. The assessee contended that the voluntary contribution received was genuine and was disclosed as part of the corpus fund in compliance with section 11(1)(d) of the Act. The Tribunal found that the authorities erred in invoking the provisions of section 11(1)(d) as the amendment, which mandates investment or deposit of voluntary contributions, was not applicable to the assessment year 2018-19. Consequently, the Tribunal held in favor of the assessee, setting aside the orders of the authorities.

Issue 2: Application of section 11(1)(d) of the Income Tax Act
The amended provisions of section 11(1)(d) of the Act were introduced by the Finance Act, 2021, and made applicable from 01.04.2022. The Tribunal noted that the amendment, which requires the investment or deposit of voluntary contributions in specified forms, was not applicable to the assessment year under consideration (AY 2018-19). The Tribunal emphasized that the authorities erred in applying the amended provisions retrospectively and held that such application was not legally sustainable. Consequently, the Tribunal set aside the orders of the authorities, deciding the issue in favor of the assessee.

Issue 3: Retrospective nature of the amendment
The Tribunal highlighted that the amendment to section 11(1)(d) of the Act, mandating the investment or deposit of voluntary contributions, was not applicable to the assessment year 2018-19. The Tribunal referred to the pre-amendment and post-amendment provisions of section 11(1)(d) to demonstrate the change brought about by the Finance Act, 2021. By analyzing the legislative intent and the timing of the amendment, the Tribunal concluded that the authorities erred in applying the amended provisions retrospectively. Consequently, the Tribunal ruled in favor of the assessee, allowing the appeal and setting aside the orders of the authorities.