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TMI Blog2019 (2) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 (4) TMI 1622 - SUPREME COURT OF INDIA]. Therefore, when carry forward of deficit is allowed, it implies that the said excess utilization has been spent out from sources other than the voluntary contributions received during the year and should be out of Corpus only. For the aforesaid reasons and the judicial precedents cited supra, we are of the view that the CIT order passed u/s 263 of the I.T.Act is without jurisdiction and we quash the same. - Decided in favour of assessee. - ITA No.459/Coch/2018 - - - Dated:- 4-2-2019 - Shri Chandra Poojari, AM And Shri George George K, JM For the Appellant : Sri.Sameer Kapoor, CA For the Respondent : Sri.Sudhansu Shekhar Jha, DR ORDER PER GEORGE GEORGE K. (JM) This appeal at the instance of the assessee is directed against CIT s order passed u/s 263 of the I.T.Act. The relevant assessment year is 2013-2014. 2. The brief facts of the case are as follows:- The assessee is a charitable society registered u/s 12AA of the I.T.Act. For the assessment year 2013-2014, the return of income was filed on 07.10.2013 declaring deficit of ₹ 50,08,845. The assessment u/s 143(3) of the I.T.Act was completed vide ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, while completing the scrutiny assessment, failed to consider this issue. In view of the above, I am of the opinion that the impugned order u/s 143(3) dated 29/03/2016 is erroneous and prejudicial to the interests of revenue. I set aside the assessment order u/s 263 of the Income Tax Act for reconsideration of the issue by the Assessing Officer, as delineated above, after giving full opportunity of being heard to the assessee. 4. Aggrieved by the order of the CIT passed u/s 263 of the I.T.Act, the assessee has filed the present appeal before the Tribunal raising the following grounds:- Ground No.1 Whether the ld.CIT(E) has erred in law and circumstances of the case in invoking the provisions of sec 2363 and setting aside the assessment u/s 263 for reconsideration by the ld.AO. Ground No.2 Whether the ld.CIT(E) has erred in law and circumstances of the case in holding that provisions of sec 11(1)(d) have been violated by utilizing corpus donations towards the total application made during the year resulting to deficit for the year. Ground No.3 The assessee may please be allowed the right to add / delete / modify any of the above grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding under this Act, and if he considers that any order passed therein fry the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or can ceiling the assessment and directing a fresh assessment. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed ry the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction by the CIT suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to s. 263(1) of the Act. 7. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscretion of the giver then it cannot be treated as income. Thus voluntary contributions in reality is not income but deemed to be so, on account of the legal fiction created by section 2(24) (iia). These contributions are exempt subject to provisions of sec. 11. (b) The term 'corpus' has not been defined in the Act. In a broader sense, a corpus is the capital of an organisation and, therefore, such receipt shall be added directly to the corpus. It has been held in various cases that contribution towards capital purposes shall be considered as corpus donations. But in the absence of any clear cut definition or guidelines with regard to its meaning and scope, corpus has to be understood in the light of various allied provisions and case laws. According to sec. 11(1)(d), any voluntary contributions received by a trust or an institution created wholly for charitable or religious purposes with a specific direction that they shall form part of the corpus of the trust or institution and shall not be included in the total income. (c) Project grants or restrictive contributions are to be spent as per the terms and conditions of project grant. These contributions are not vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Delhi Bench of the Tribunal reads as follows:- 8. That leaves us with the question whether any amount received towards corpus can be spent for running expenses and if so spent, whether it loses the exemption from the levy of tax. We have read the relevant sections carefully and we find nothing in those sections even remotely suggesting the above view. Sec. 2(24)(iia) when it provided that the voluntary contributions should be made with a specific direction that they shall form part of the corpus of the trust or institution, in order that it is not to be treated as income, it was laying emphasis on the wish, will and desire of the donor. The donor must grant it with a direction that it shall form part of the corpus. The section did not either by implication, or overtly or otherwise, enjoin upon the trust that the trustee shall retain it for ever as corpus, even if when an occasion arises that in order to keep the trust alive and to prevent it from failure, it should not spend any amount out of it. If a donor donates money with a specific direction that it shall form part of the corpus, the trustee is expected to honour the wish of the donor. But if the trustee utilises it fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal, a similar view was held in the following cases: (i) Dy.DIT Vs Suman Ramesh Tulsiani Charitable Trust [ITA No 4683/Mum/20l0 4684/Mum/20l0 order dated 20th January, 2012] (ii) Thermax Social Initiative Foundation Vs ITA (Exemptions), Ward-l, Pune [ITA No.1959/PUN/2016 order dated 22nd December, 2016] in para 12 has held that: In our considered view, voluntary contribution if Thermax Ltd towards corpus if the trust cannot be included in the income if the assessee in clear terms of section 11 (1)(d). Our view is fortified by Vishakapatnam ITAT judgment in the case if Nagarjuna Educational Society (supra) and by Delhi ITAT, in the case if Dharma Pratishthanam (supra) 7.9 The assessee is also entitled to carry forward the deficit for the year and set off the same in the next year(s), in the view of dictum laid down by the Hon ble Apex Court in as held in the case of CIT (E) Vs. Subros Educational Society [(2018) 101 CCH 0264 ISCC]. Therefore, when carry forward of deficit is allowed, it implies that the said excess utilization has been spent out from sources other than the voluntary contributions received during the year and should be out of Corpus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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