IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4305/Del/2024 (ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

(ASSESSMENT YEAR 2016-17)

O R D E R

PER MANISH AGARWAL, AM:

This appeal is filed by Revenue against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [‘Ld. CIT(A)’ in short] dated 25.07.2024 in Appeal No.40/10204/2018-19 for Assessment Year 2016-17 arising out of the order passed by AO u/s 143(3) of the Act (‘the Act’

for short) dated 30.12.2018.

2. Briefly stated the facts are that assessee is a charitable trust registered u/s 12A of the Act and filed its return of income on 13.10.2018 declaring Nil income. The case was selected for scrutiny under CASS and after considering the submissions made by assessee, the AO held that the assessee is not eligible for claiming exemption u/s 11 & 12 of the Act and the gross receipts from sale of land was held taxable as AOP.

3. Against the said order, assessee filed appeal before the Ld. CIT(A) who vide impugned order dated 25.07.2024 had allowed the appeal of the assessee and held that the assessee is eligible for exemption u/s 11 & 12 of the Act.

4. Against the said order, Revenue is in appeal before the Tribunal by taking following grounds of appeal:

“1. The Ld. CIT(A) has failed to appreciate that the issue is not of break in charitable activities but is that the assessee has donated the entire sales proceed to other trust who are not entitled for receiving donation.

2. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing.”

5. Before us, ld. CIT-DR drew our attention to page 2, para-3 of the assessment order wherein it is observed by AO that assessee has not expended even single rupee on charitable activities for last several years and sold the land owned by it for Rs.2,60,00,000/- which is the minimum price permissible under prevailing stamp duty law. The AO further observed that the entire sale consideration was given to other entity as donation. Accordingly, ld. CIT DR submits that assessee is not carried out any charitable activity nor any income was ever derived from such land which was sold during the year and further entire consideration was transferred as donation, therefore, it is clear misuse of exemption provisions and accordingly, the Ld. CIT- DR requested to restore the order of AO. He further filed detailed written submissions which read as under:

“In this regard, it is submitted that as per the factual record, the registration under section 12A/12AA of the Act granted to the assessee trust, continues to remain in force and has not been cancelled by the office of the Commissioner of Income Tax (Exemption) Delhi. However, the non-cancellation of the registration should not in any manner affect or nullify the merits of the assessment order passed by the Assessing Officer (AO), which is based on concrete facts and material evidence, and with due application of mind.

In this case the Ld. CIT(A) held that the exemption u/s 11 cannot be denied to a charitable trust registered u/s 12A of the Act. However in this case, the exemption was denied by the assessing officer only on the ground that there was no charitable activity carried out by the assessee trust for last 4 years. The core issue is that the assessee trust has donated the entire sale proceed of the land property to the other trust, who are not entitle to received donation from the assessee trust. It is crucial to note that the mere act of donating funds to another trust does not satisfy the conditions for exemption under Section 11, as the trust itself must be actively engaged in charitable activities