Commissioner Of Income Tax (Exemptions) & Another v. Akshaya Patra Foundation

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 11 DAY OF JUNE 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A.No.315/2016 c/w I.T.A.No.309/2016 IN I.T.A.No.315/2016:BETWEEN: 1.|COMMISISONBR OF INCOMB TAX(EXEMPTIONS)(EXEMPTIONS) UNITY BUILDING ANNEXE, | MISSION ROAD, BANGALORE «|ASSISTANT COMMISSIONEROF INCOME TAX, (EXEMPTIONS)OF INCOME TAX, (EXEMPTIONS) CIRCLE-I, BANGALORE .. APPELLANTS (BY SRI E.I.SANMATHI, ADV.) AND: AKSHAYA PATRA FOUNDATION H.K. HILLS, CHORD ROAD, RAJAJINAGAR, BANGALORE - 560010.PAN: AAATTO6468P. _. RESPONDENT. THIS INCOMB TAX APPBAL IS FILED UNDER SECTION|260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER|DATED 27.11.2015 PASSED IN ITA NO.993/BANG/2015, FOR:THE ASSHSSMENT YEAR JOOQ6-2ZO0O ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 2/8 IN I.T.A.No.3O9/2016: BETWEEN: 1.COMMISISONER OF INCOME TAX (EXEMPTIONS) UNITY BUILDING ANNEXE, | MISSION ROAD, BANGALORE 2.ASSISTANT COMMISSIONER OF INCOME TAX, (EXEMPTIONS) CIRCLE-I, BANGALORE .. APPELLANT (BY SRI E.L.SANMATHI, ADV.) AND: AKSHAYA PATRA FOUNDATION H.K. HILLS, CHORD ROAD, RAJAJINAGAR, BANGALORE - 560010.PAN: AAATITO468P. .. RESPONDENT (BY SRI V.SRINIVASAN, ADV.) THIS INCOME TAX APPEAL IS FILED UNDER SECTION|2600-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDERDATED 27.11.2015 PASSED IN ITA NO.994/BANG/2015, FOR:THE ASSHSSMENT YEAR 2JO0O7/-200 THESE APPEALS COMING ON FOR ADMISSION, THIS|DAY,Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING: Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 3/8 JU DBiGMENT Mr. E.I.Sanmathi,Adv. for Appellants © Mr. V.Srinivasan,Adv.{OrRespondent1nNI.T.A.No.309/2016. The Revenue has filed these appeals under.Section 260-Aof the Act purporting to raise substantial|question of law as to whether donations received by therespondent-Assessee, Akshaya Patra Foundation in themid of the Financial Year with the stipulation from thedonors that part of the said money may be utilized forthe specified charitable purpose in the next financialyear can be treated as the income for year of receipt ofthe donation or not? 2.The learned Tribunal in its order dated| 27.11.2015for assessment year2006-07and.2007-08 has assigned the following reasons for holding in favourof the respondent-assessee and upholding the order ofthe First Appellate Authority namely, CIT |Appeals| in Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 4/8 the following manner- (paragraph 5 from the Tribunal’sorder is quoted below for ready reference): 2.The learned Tribunal in its order dated| 27.11.2015for assessment year2006-07and.2007-08 has assigned the following reasons for holding in favourof the respondent-assessee and upholding the order ofthe First Appellate Authority namely, CIT |Appeals| in Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 4/8 the following manner- (paragraph 5 from the Tribunal’sorder is quoted below for ready reference): 6DWe|have|consideredtherivalSubmissions as well as relevant the material|on record. The Assessing Officer has not|disputed the fact that to the extent of|donation amount which has been shown by|the assessee as unearned income for these|two assessment years is the proportionate|amount to be utilized in the subsequent year|becausethedonorshave|specificallyStipulated the donations regarding its use.over a period of time which spread over to|more than one year. Accordingly the assessee|has treated the income of the year only to the|extent which pertains to the time periodduring the year under consideration. The|Assessing Officer has denied the claim of the.assessee without disputing the fact that the|donations in question were received with|Stipulation regarding its use over a period oftime. Thus if the donations is received in the|mid of the F.Y. and the same was to be used|over a further period of 12 months then only| Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 5/8 half of the donations to be used for the year|under consideration and the balance half of|the donation to be used in the next financial|year. Therefore, the donation received with aStipulation to be used for the mid day mealOVECTFTperiodof|timeextendingintosucceeding year cannot be treated the income.of the year under consideration alonebut ithas to be divided in proportion as per its useover the period of time spreading over theyear under consideration and _subsequentyear- Hence this donation which was treatedas income by the assessee in the year in|which the obligation to spend the amount has|been conditioned by the donor with a|stipulation regarding the use over a period oftime. When the assessee is complying with|the specific condition of utilizing the amount ofdonation for a particular purpose and for a|particular period of time, then it cannot be.given a different treatment which is contraryto the conditions of donation. Therefore the|treatment of the assessee only a portion of|the donation which has to be spent and used|for a particular period and for a specified Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 6/8 purposeas income of the year underconsideration iS proper and as_ per_ thconservative accounting policy. The donation|which pertains and to be used and spentduring the next F.Y. cannot be treated as the|income of the year under consideration when|there is a specific condition as desired by the|donor. Therefore in view of the facts and|circumstances of the case, we do not find any|reason to interfere with the impugned order ofthe CIT (Appeals). Accordingly, we uphold thefinding of the CIT (Appeals) on this issue anddismiss the appeals of revenue.” 3.Learned counsel for the appellant-Revenue|submitted that the Assessee has erred in showing partof the donations under the head ‘current liabilities’ in itsbooks of accounts at the end of the Financial Year to theextent of the donations to be utilized by the respondent-Assessee for the specified charitable purpose in the nextfinancial|year.Accordingly,|learnedcounselfor. Date of Order 11-06-2018, ITA No.315/2016 c/w 3.Learned counsel for the appellant-Revenue|submitted that the Assessee has erred in showing partof the donations under the head ‘current liabilities’ in itsbooks of accounts at the end of the Financial Year to theextent of the donations to be utilized by the respondent-Assessee for the specified charitable purpose in the nextfinancial|year.Accordingly,|learnedcounselfor. Date of Order 11-06-2018, ITA No.315/2016 c/w ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 7/8 Revenue, the same could not have been so shown as.“current liabilities”. 4Boththe.AppellateAuthoritieshaveconcurrently held in favour of the respondent-Assesseethat the unspent amount of donations to be spent in thenext financial year have been rightly described as“current liabilities” at the end of Financial Year and/therefore, the same cannot be treated as income of the)respondent-Charitable Trust for the year in question. 5.Having heard the learned counsel for theappellant-Revenue, we are satisfied that no substantialquestion of law arises in these present appeals filed bythe Revenue and the findings and reasons assigned bythe two Appellate Authorities below in this regard arejustifiedand1Naccordancewiththeconsistentaccounting practice followed by the assessee andtherefore, the present appeals are liable to be dismissedand the same are accordingly dismissed. ITA No.309/2016 Commissioner of Income Tax (Exemptions) & another Vs. Akshaya Patra Foundation 8/8 Copy of the order be sent to the respondent — ASS@ESSEE. In. Sd/-.JUDGE. Sd/-.JU DGE