2017 (5) TMI 248 - AT - Income Tax

Non charitable activities - assessee failure to prove the donations received are corpus donations - not having registration u/s 12A - Held that - The assessee is not able to file any books of account to show that the purpose for which donations are received. The ld. CIT(A) has given a categorical finding that assessee could not produce any evidence to show that the donar had sent the donations for specific purpose. The ld. CIT(A) has also considered the form FC-3 filed under the Foreign Contribution Act and gave a finding that there is no information in these reports that the contribution was received for the purposes specified by the donar. Even before us, the assessee is not able to file any evidence to show that the contributions received by the assessee are corpus in nature and also he is not able to file any evidence to show that he has incurred some expenditure for the purpose of running assessee-society. The ld. CIT(A) by considering all the submissions of the assessee, passed a detailed order. - Decided against assessee.

Issues Involved:
1. Legitimacy of treating corpus donations as taxable income.
2. Failure to produce books of account and evidence of expenses.
3. Applicability of the decision in the case of M/s. Nirmal Agricultural Society Vs. ITO.
4. Assessment of income without registration under section 12A.
5. Condonation of delay in filing for registration under section 12A.

Issue-wise Detailed Analysis:

1. Legitimacy of Treating Corpus Donations as Taxable Income:
The assessee, a society registered under the Societies Registration Act, claimed that the donations received were corpus donations and thus, should not be treated as taxable income. However, the Assessing Officer (AO) treated the entire donation amount of ?5,62,420/- as income due to the failure of the assessee to provide books of account and evidence to substantiate the claim that the donations were for specific purposes. The CIT(A) upheld this view, noting that there was no documentation proving that the donations were tied up funds or corpus donations. The Tribunal concurred with the CIT(A), stating that without evidence, the entire receipt would take the character of income under section 12 of the Income Tax Act.

2. Failure to Produce Books of Account and Evidence of Expenses:
The assessee could not produce books of account, bills, and vouchers due to the death of the founder member, Mr. K. David Raju. The AO, therefore, rejected the claim for corpus donations and treated the entire amount as income. The CIT(A) also noted the lack of evidence for expenses claimed by the assessee and directed the AO to assess the income at 75% of the gross receipts. The Tribunal found no infirmity in this order, as the assessee failed to provide any substantial evidence during the appellate proceedings.

3. Applicability of the Decision in the Case of M/s. Nirmal Agricultural Society Vs. ITO:
The assessee argued that the decision in the case of M/s. Nirmal Agricultural Society was applicable to their situation. However, both the AO and CIT(A) found the facts to be different. The Tribunal also agreed, stating that in the present case, there was no evidence to show that the donations were received with specific directions from the donor. The decision in M/s. Nirmal Agricultural Society involved specific directions for the use of funds, which was not the case here.

4. Assessment of Income Without Registration Under Section 12A:
For the assessment years in question, the assessee did not have registration under section 12A, which is necessary for claiming exemption under sections 11 to 13 of the Act. The Tribunal noted that the AO correctly assessed the income as an Association of Persons (AOP) due to the lack of registration. The CIT(A) had also directed the AO to assess the income at 75% of the gross receipts, considering the totality of facts and circumstances.

5. Condonation of Delay in Filing for Registration Under Section 12A:
In ITA No. 88/VIZ/2014, the assessee's application for registration under section 12A was rejected due to the failure to justify the delay. The Tribunal noted that the assessee did not file an application for condonation of delay before them, rendering the appeal not maintainable. Consequently, this appeal was also dismissed.

Conclusion:
The Tribunal dismissed all the appeals filed by the assessee, upholding the orders of the lower authorities. The assessee failed to provide necessary evidence to substantiate their claims, and the arguments presented did not hold under scrutiny. The decision in M/s. Nirmal Agricultural Society was found inapplicable, and the lack of registration under section 12A justified the assessment of income as an AOP. The appeal for condonation of delay in filing for registration under section 12A was also dismissed due to procedural lapses.

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