Ita/180/2019 Of The Commissioner Of Income-Tax(Exemptions) v. M/S Choice Foundation

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI THURSDAY, THE 11 DAY OF NOVEMBER 2021 / 20TH KARTHIKA, 1943 ITA NO. 180 OF 2019 AGAINST THE ORDER/JUDGMENT IN ITA 20/2017 OF I.T.A.TRIBUNAL,COCHIN BENCH, ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME-TAX(EXEMPTIONS)KOCHI BY ADVS.SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENTSRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT RESPONDENT/S: M/S CHOICE FOUNDATIONC/O. M/S KURUVILLA AND JOSE, CHARTERED ACCOUNTANTS, 41/695, CHITTOOR ROAD, KOCHI - 682018. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 11.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -2- JUDGMENT S.V.Bhatti,J. Heard Mr.Christopher Abraham, the learned Standing Counsel forappellant. 2.The Commissioner of Income Tax (Exemptions), Kochi/Revenue is the appellant. M/s. Choice Foundation, C/o.M/s.Kuruvilla &Jose/assessee is the appellant. The Revenue being aggrieved by the orderdated 29.01.2018 in I.T.A No.20/Coch/2017 has filed the instant appealunder Sec.260A of the Income Tax Act, 1961 (for short, 'the Act'). Thesubject matter of the appeal relates to the issues arising out of the returnfiled by the assessee for the assessment year 2010-11. 3.The circumstances surrounding the controversy in the appealare summarily stated thus: 3.1On 18.10.2010 the assessee filed the return of income for theassessment year 2010-11. On 21.01.2014 notice under Sec.148 was issuedto the assessee on the ground that the assessee violated the provisions ofSection 11(5) of the Act and in substance, the nature of activityundertaken by the assessee is in the nature of business. 4.The Assessing Officer made the assessment order throughAnnexure-A dated 10.03.2015 rejecting the explanation offered by theassessee. By order dated 06.08.2015 made under Sec.154 of the Act thetotal income of the assessee has been reduced to Rs.1,60,56,579/-. TheCommissioner of the Income Tax (Exemptions) had taken up proceedingsunder Sec.263 of the Act. In the proceedings initiated under Sec.263, theCommissioner noted the details concerning Rs.2,08,91,000/- which wasreduced from the total income of the assessee vide order dated 06.08.2015and which constituted building fund stated to have been collected by theassessee from the donors. The consideration before the Commissionerwas whether the receipt of the amount shown as building fund represents income and/or a donation given for establishment of thecapital asset by the assessee. Through order in Annexure-B order22.12.2016, the Commissioner held as follows: “4. I have gone through the submissions made by the assesseeduring the course of the proceedings u/s 263 of the Income TaxAct and I find that the assessee has not adduced any convincingreply to the proposed revision under section 263 of the IncomeTax Act. As already mentioned, It is a voluntary contribution and,therefore, income of the assessee within the meaning of section2(24)(iia) of the Income Tax Act, 1961. If it is to be treated as acorpus donation, the same can only be excluded in computingthe total income under the provisions of section 11 & 12 of theIncome Tax Act, 1961. By virtue of section 13(8) of the IncomeTax Act, the Assessing Officer had held that nothing contained insection 11 or section 12 shall operate so as to exclude any incomefrom the total income of the assessee for the assessment year2010-11. Accordingly, I am of the opinion that the incomeassessed for the assessment year 2010-11 is short byRs.2,08,91,000/-. 5.In the light of the above discussion, I find that theassessment order passed by the Assessing Officer u/s 143(3) ofthe Income Tax Act dated 10/03/2015 for the assessment year2010-11 is erroneous in so far as it is prejudicial to the interestsof revenue. Accordingly, invoking the provisions of section 263 ofthe Income Tax Act, 1961, the assessment order dated10/03/2015 is set aside with a direction to the Assessing Officerto redo the same afresh after considering all issues raised hereinabove and after affording an opportunity of being heard to theassessee.” questioning the directions issued by the Commissioner of Income Tax(Exemptions) under Sec.263 of the Act, directing reopening of assessmentand redoing the assessment for the assessment year 2010-11 afresh. TheTribunal through the order in Annexure-C allowed the appeal filed by theassessee. The Tribunal on the consideration of building fund by theassessee whether constitutes corpus donation, has recorded the followingfindings: “5.5 In view of the judgment of the Hon'ble Apex Court in thecase of Alagendian Finance Limited (supra), since the revisionaljurisdiction to reopen the order of assessment was exercised inrespect of corpus donation received, which was not subjectmatter of reassessment proceedings u/s 147 r.w.s. 148 of theI.T.Act, the period of limitation provided u/s 263(2) of the I.T.Actwould begin to run from the date of intimation u/s 143(1) of theI.T.Act and not from the date of order of reassessment. Asmentioned earlier, if the period of limitation is to be reckonedfrom the date of intimation u/s 143(1) of the I.T.Act, theCommissioner ought to have initiated revisionary proceedings onor before 31.03.2014. In the instant case the notice u/s 263 of theI.T.Act was issued much subsequently, i.e., on 02.05.2016 andorder u/s 263 of the I.T.Act was completed on 22.12.2016. Hencethe revisional jurisdiction is beyond the period of limitation u/s263 of the I.T.Act and is a nullity. 5.6 The learned Departmental Representative had submitted thatthe issue of limitation was not raised before the CIT, hencecannot be raised before the Tribunal. This contention of the learned DR cannot be entertained since the issue of limitation isa pure legal issue going into the root of the case and does notrequire examination of fresh fact. Therefore, going by the dictumlaid down by the judgment of the Hon'ble Apex Court in the caseof National Thermal Power Company Ltd. Vs. CIT [(1998) 229 ITR383 (SC)], the Tribunal is duty bound to consider the legal issuethough raised before it for the first time. 5.7 Even on merits, we find that the amount received by theassessee was voluntary in nature and the donors had specificallymentioned that their donations are towards infrastructuredevelopment. A copy of the specimen letters from the donorsconfirming their voluntary contribution and partaking thenature of corpus of the trust, is enclosed at page 65 of the paperbook filed by the assessee. A copy of the receipt issued by theassessee is also enclosed at page 66 of the paper book filed by theassessee. The building fund is capital in nature and forming partof corpus of the trust. The words "Corpus Fund" are not definedin the Income-tax Act. Normally, "Corpus Fund" denotes apermanent fund separately accounted and capital in nature.Therefore, the receipt of voluntary contributions towards"infrastructure fund" is a voluntary contribution towards thecorpus fund and is therefore exempted u/s 11(1)(d) of the I.T.Act.The Mumbai Bench of the Tribunal in Chandraprabhu Jain v.ACIT [(2016) 50 ITR (Trib.) 355 (Mum-Tri.)] had held that thebuilding fund is forming part of the corpus fund eligible fordeduction u/s 11(1)(d) of the I.T.Act. Therefore, the initiation ofthe proceedings u/s 263 of the I.T.Act for disallowing the claimu/s 11(1)(d) of the corpus donation on the ground that it is notvoluntary and not capital in nature is not in accordance with lawand hence void. It is ordered accordingly.” 6.The above findings are under challenge in this appeal. Thesubstantial questions of law framed by the Revenue reads thus: “1. Whether on the facts and circumstances of the case andparticularly in the context of the Supreme Court decision in thecase of ACIT VS.M/s Rajesh Jhaveri Stock Brokers Pvt.Limitedholding that the intimation under section 143(1)(a) is not anorder of assessment ,is the ITAT right in holding that the orderpassed by the Commissioner of Income Tax(Exemptions)undersection 263 of the IT Act is barred by limitation? 2.Whether on the facts and circumstances of the case and inlaw, the ITAT is right in treating the order of the Commissioner ofIncome Tax (Exemptions) passed under section 263 of the IT Act asnot in accordance with law and hence invalid by holding thatcontributions to the building fund amounting to Rs.20891000 arein the nature of corpus donations especially when there are nospecific directions from the donors regarding the quantum ofcontributions to be part of the corpus of the trust or institution asrequired u/s 11(1)(d) of the IT Act ?” 7.Mr. Christopher Abraham argued substantially on the very lines which found favour with the Commissioner of Income Tax(Exemptions) for setting aside the assessment order dated 10.03.2015 and directing reassessment by the Assessing Officer. 8.We are of the view that the grounds canvassed in support of the substantial questions are not touching upon the reasons weighed with the Tribunal for interdicting the order in Anneuxre-B dated 22.12.2016. In other words, this Court examines the order of the Tribunal and whether a ground is made out warranting interference under Sec.260A ofthe Act. Briefly stated, the Tribunal found that the order in Annexure-Bis barred by limitation, secondly, the nature of receipt amounting toRs.2,08,91,000/- is found as building donation fund/corpus fund receivedby the assessee for the purpose of building fund. 9.The findings recorded by the Tribunal firstly are findings offact, the Tribunal being final authority on an issue of fact, a few groundsare available to challenge even the findings of fact recorded by theTribunal. The question that falls thereafter for our consideration iswhether any of the exceptional grounds available in this behalf are putforward to assail the findings of the Tribunal. For convenience, we haveexcerpted the findings recorded by the Tribunal. This Court since is inagreement with the findings recorded both in law and fact of theTribunal, is also not pursuaded to restate the same conclusion in adifferent way. We accept the findings recorded by the Tribunal andfurther hold that the no substantial question of law arises for consideration. The questions are answered against the Revenue and infavour of the assessee. The appeal fails, dismissed accordingly. No order as to costs. Sd/-S.V.BHATTIJUDGE Sd/-BASANT BALAJIJUDGE APPENDIX OF ITA 180/2019 PETITIONER ANNEXURE ANNEXURE ATRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S 143(3) R.W.S.147 OF THE INCOME TAX ACT DATED 10.03.2015 ANNEXURE BTRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) U/S 263 OF THE IT.ACT. DATED 22.12.2016 ANNEXURE CCOPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH IN ITA 20/COCH/2017 DATED 29.01.2018.