The Visakhapatnam bench of the Income Tax Appellate Tribunal (ITAT) held that the contributions received for any charitable purposes cannot be treated as income under Section 2(24) (iia) of the Income Tax Act, 1961.
The assessee society was registered under Section 12A of the Income Tax Act and receives voluntary contributions and fees for maintaining marriage halls. The assessee filed its return of income declaring Nil income against which the Assessing Officer completed the assessment on a total income of Rs.22,81,028/- by bringing to charge the corpus fund donations of Rs.24,55,696/- under Section 2(15) of the Income Tax Act.
The Assessing Officer noticed that the assessee is in receipt of marriage hall maintenance charges of Rs.31,26,141/-, which is in excess of Rs.25,00,000/-.
The assessing officer held that running a marriage hall is in the nature of advancement of any other object of general public utility, but, as per the proviso to Section 2(15) of the Income Tax Act, the receipts are to be taxed as per the ceiling limits automatically, once the total receipts exceed Rs.25,00,000/-, irrespective of the fact whether they are received for a specific purpose.
The assessee submitted that the first proviso to Section 2(15) of the Income Tax Act comes into play only when they are received for a cess or fee which is revenue in nature and routed through a Profit and Loss Account and not for the corpus donations which are capital receipts in nature and reflected only in the Balance Sheet.
The assessee relied on the decision of the coordinate bench of the Tribunal in the case of Sri Satya Sai Educational and Service Society Vs. ITO in I.T.A. No.5/Viz/2022 and pleaded to set aside the order passed by the Commissioner of Income Tax (Appeal) [CIT(A)] and allow the appeal of the assessee.
The Departmental Representative argued that the Commissioner of Income Tax (Appeal) has rightly upheld the assessment made by the assessing officer since the immunity granted by the statute ceases, once the total receipts from the advancement of any other object of general public utility exceed Rs.25,00,000/- and the nature of the activity can no more be treated as a charity as per the proviso.
A Single-bench member consisting of Duvvuru RL Reddy held that contributions received for charitable purposes cannot be treated as income under Section 2(24)(iia) of the Income Tax Act and hence, the provision of Section 2(15) of the Income Tax Act does not apply to the instant case.
Therefore, the appeal filed by the assessee is allowed.
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