Commissioner Of Income Tax-I, Chandigarh v. M/S Simla Chandigarh Diocese Society

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 566 of 2008 (O&M) DATE OF DECISION: 19.8.2009 Commissioner of Income Tax-I, Chandigarh ..........Appellant Versus M/s Simla Chandigarh Diocese Society,..........RespondentCatholic Church, Sector 19-A, Chandigarh. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Urvashi Dhugga, Advocatefor the appellant. **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section 260-A ofthe Income Tax Act, 1961 (for short, “the Act”) against the order of IncomeTax Appellate Tribunal, Chandigarh Bench 'B' dated 29.1.2008 passed inITA No. 888/Chandi/2006 for the assessment year 2003-04, proposing toraise following substantial questions of law:- “(i)Whether in the facts and circumstances of thecase, the Hon'ble ITAT is right in law in holding that theassessee is entitled for exemption u/s 11(1)(a) of theIncome Tax Act, 1961? (ii)Whether in view of the above observations, theHon'ble ITAT is justified in deleting the followingadditions and disallowances”- (a)Addition of Rs.50,39,288/- made on account ofinterest earned from deposits/investments out ofunutilized foreign contributions relating to the current assessment year as well as earlier assessment year(s). (b)Addition of Rs.23,76,417/- made on account ofinterest earned from funds earmarked for specificprojects, interest earned on saving bank accounts andinterest earned from FDRs. (c)Addition of Rs.27,30,000/- made on account ofrental income under the head “Income from HouseProperty” (d)Addition of Rs. 25,12,438/- made on account offoreign contributions received. (e)Addition of Rs.18,99,300/- made on account ofregistration charges and buildings funds. (f)Disallowance of Rs. 67,42,583/- being expenditureout of earmarked funds/current liabilities. (iii)Whether in the facts and in the circumstances ofthe case, the Hon'ble ITAT is right in holding that trustmeans faith and not status in the context of theassessee. (iv)Whether in the facts and circumstances of thecase the Hon'ble ITAT order is perverse in accepting thedecision of Ld. CIT (A) on the issue of considering'Revised Form No.10' furnished by the assessee whenthere is no provision for filing a revised Form No. 10under the Income Tax Act, 1961.' (v)Whether the Hon'ble ITAT was correct in law incoming to the conclusion that 'interest income' is not'Income from other Sources' and therefore part & parcelof accumulated funds, especially when the 'interestincome' is Income from Other Sources' and the same is not applied for fund purpose but for profit on funds till thesame are utilized.” 2.The assessee is a charitable society and is engaged in variousactivities including running of Church and Schools. It claimed exemptionunder Section 11(1)(a) and Section 12 (1) of the Act. The same wasdeclined by the Assessing Officer on the ground that the assessee was aSociety and not a Trust. The Assessing Officer also made additions inrespect of rental income, foreign contributions, registration charges,building funds and expenditure out of earmarked funds. The AssessingOfficer also raised objection that revised Form No.10 was not furnishedwith the return. The CIT(A) upheld the claim of the assessee, which viewhas been affirmed by the Tribunal. 3.We have heard learned counsel for the appellant. 4.As regards, question of assessee being eligible for exemptionunder Section 11(1)(a), irrespective of its constitution, we have dealt withthe matter in our separate order passed today in ITA No. 939 of 2008(Commissioner of Income Tax-II, Chandigarh Versus M/s SarvhitkariEducation Society). The question raised, thus, cannot be held to besubstantial question of law. 5.As regards filing of Form No.10 after the return but before theassessment, the CIT(A) observed as under:- 3.We have heard learned counsel for the appellant. 4.As regards, question of assessee being eligible for exemptionunder Section 11(1)(a), irrespective of its constitution, we have dealt withthe matter in our separate order passed today in ITA No. 939 of 2008(Commissioner of Income Tax-II, Chandigarh Versus M/s SarvhitkariEducation Society). The question raised, thus, cannot be held to besubstantial question of law. 5.As regards filing of Form No.10 after the return but before theassessment, the CIT(A) observed as under:- “It was pointed out that the appellant has accordinglymodified Form No. 10 in the course of assessmentproceedings. The modified Form No.10 has also beenrejected by the AO on the ground that there is noprovision in the Act for revising Form No.10. It wassubmitted that there is no specific bar prohibiting theappellant from modifying the figure of accumulation. Inthe light of the ration laid down by the Supreme Court in the case of CIT Vs. Nagpur Hotel Owners' Association,247 ITR 201, 205, Form 10 may be furnished before theassessing authority completes the concernedassessment.” 6.The matter being fully covered by the judgment of the Hon'bleSupreme Court in Nagpur Hotel Owners' Association (supra), thequestion cannot be held to be substantial question of law. 7.As regards question of additions made on account of interestearned on deposit out of unutilized foreign contributions, Form No.10having been held to be valid, the additions were not called for. The claimfor exemption falls under Section 11 (1) (a), as income has been derivedfrom property. This reason also applies to other additions rightly, as heldby the CIT(A) as well as the Tribunal. 9.In view of above, we are of the view that no substantialquestion of law arises. 10.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 19, 2009pooja (DAYA CHAUDHARY)JUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No