Case Number: ITA 1488/DEL/2020
Appellant: GD Education Society, New Delhi
Respondent: DCIT Exemption Circle, Ghaziabad
Assessment Year: 2015-16
Result: 2015-16
Case Filed on: 2020-08-11
Order Type: Final Tribunal Order
Date of Order: 2023-03-02
Pronounced on: 2023-03-02
The case revolves around the appeal filed by GD Education Society against the order of the Commissioner of Income Tax (Appeals)-1, New Delhi, dated 19.03.2020 for the assessment year 2015-16. The primary issue in the appeal was the treatment of Rs. 1,10,00,000/- received as corpus donations by the society. The Assessing Officer (AO) had treated this amount as revenue receipts instead of capital receipts.
GD Education Society is registered under the Societies Act with the Registrar of Societies, Uttar Pradesh, and has been granted registration under section 12A of the Income Tax Act. The society runs three schools: Kangaroo Kids (for classes up to KG), Billabong High (for classes above KG), and Sanchetna for handicapped children.
In the assessment order, the AO concluded that the nature of the society’s activities did not qualify as charity, thereby denying the exemption claimed by the society under section 11 of the Income Tax Act. Additionally, the AO treated the corpus donation of Rs. 1,10,00,000/- as general receipts.
The grounds of appeal filed by GD Education Society were as follows:
During the proceedings, the Ld. Counsel for the assessee argued that the society’s activities qualified as education under section 2(15) of the Income Tax Act and any surplus generated was utilized for charitable purposes. It was also argued that the AO and CIT(A) ignored the primary objective of the society, which had remained unchanged.
The CIT(A) noted that the society was running educational institutions and the nature of its activities fell within the definition of ‘charitable purpose’ under section 2(15) of the Income Tax Act. The CIT(A) further elaborated that the benefit of section 11 and 12 should be granted as the society was registered under section 12A and the nature of its activities had not changed.
However, the CIT(A) upheld the AO’s decision to treat the corpus donation as revenue receipts, citing a lack of detailed submissions from the appellant regarding the nature of the donations and the absence of a list of donors or their declarations.
The Income Tax Appellate Tribunal (ITAT) heard both parties and reviewed the records. The Tribunal observed that the CIT(A) did not have the power to remand matters to the AO, but this did not prevent the ITAT from exercising such power. The Tribunal decided to remit the issue back to the file of the AO for fresh adjudication.
The AO was directed to consider the issue afresh, taking into account the principles of natural justice and providing the assessee with an opportunity to be heard. The ITAT emphasized the need for a proper order to be passed after giving due consideration to all facts and circumstances.
In conclusion, the appeal filed by GD Education Society was allowed for statistical purposes. The case was remanded back to the Assessing Officer for fresh consideration, with instructions to take into account the educational and charitable nature of the society’s activities, as well as the nature of the corpus donations received.
This case highlights the complexities involved in determining the nature of donations received by charitable institutions and the importance of adhering to the principles of natural justice in tax assessments and appeals.
Order pronounced in the open court on 02nd March, 2023 by the Judicial Member, Shri Chandra Mohan Garg, and the Accountant Member, Shri Shamim Yahya.
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