2014 (4) TMI 784 - AT - Income Tax

Addition made u/s 68 of the Act Genuineness of the donations Benefit of exemption u/s 11 and 12 of the Act Applicability of section 115BBC of the Act - Held that - The decision in SUNDER DEEP EDUCATION SOCIETY C/O M/S RRA TAXINDIA, VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-2, GHAZIABAD 2014 (4) TMI 523 - ITAT DELHI followed - The receipts are to be governed by sec. 11 and 12 of the Act - The moment assessee has treated the donations as its income and it is deemed to be an income derived from the property held under the trust as per sec. 12(1) then, the only aspect remained is to verify whether such amounts have been applied for the objects of the society to the extent of 85% or not. The donations cannot be termed as anonymous since list of the donors were filed and payments have been made through banking channel - the benefit of sections 11 & 12 in computing the income received on account of donations from identified donors cannot be denied thus, the AO is directed to verify the facts that assessee has applied 85% of its income during the year including these donations on its objects Decided in favour of Assessee.

Summary

Issues Involved:
1. Sustaining the addition made under Section 68 of the Income Tax Act.
2. Denial of exemption under Sections 11 and 12 of the Income Tax Act.
3. Applicability of Section 115BBC regarding anonymous donations.

Detailed Analysis:

1. Sustaining the Addition Made Under Section 68 of the Income Tax Act:
The primary issue in both appeals was the addition made under Section 68 of the Income Tax Act, treating the donations received by the assessee as non-genuine. The assessee society, registered under Section 12AA, received donations which were questioned by the Assessing Officer (AO). The AO made an addition of Rs.6,50,000/- for the assessment year 2006-07 and Rs.63,52,600/- for the assessment year 2008-09, treating these donations as income from unexplained sources. The CIT (A) upheld these additions.

2. Denial of Exemption Under Sections 11 and 12 of the Income Tax Act:
The assessee argued that even if the donations were considered non-genuine, the society, being registered under Section 12AA, should be eligible for exemptions under Sections 11 and 12. The Tribunal, in a previous decision for the assessment year 2007-08, had deleted similar additions, holding that Section 68 does not apply when the assessee maintains complete records of donors and the donations are made through banking channels. The Tribunal emphasized that the donations should be treated as income derived from property held under trust for charitable purposes as per Section 12(1) of the Act.

3. Applicability of Section 115BBC Regarding Anonymous Donations:
The Tribunal addressed the applicability of Section 115BBC, which deals with anonymous donations. It was held that the donations in question could not be termed anonymous since the assessee had provided a list of donors and the payments were made through banking channels. The Tribunal noted that the CIT (A) had not treated these donations as anonymous, and this finding was not challenged by the revenue.

Tribunal's Decision:
The Tribunal followed its previous decision for the assessment year 2007-08, where it had deleted the addition made under Section 68, holding that the provision does not apply when the assessee provides supporting evidence for the donations and the payments are made through banking channels. The Tribunal directed the AO to verify whether the assessee had applied 85% of its income, including the donations, towards its charitable objects. If verified, the income would be assessed as 'nil' due to the expenditure incurred for charitable purposes.

Conclusion:
The appeals were allowed for statistical purposes, with the Tribunal setting aside the matter to the AO to verify the application of 85% of the income towards the assessee's charitable objects. If the AO finds the claim correct, the income would be assessable at 'nil', thus taking care of the additions in question. The order was pronounced in the open court on 01.04.2014.