DIRECTOR OF INCOME TAX Vs. BAGRI FOUNDATION

JUDGEMENT

(1.) This appeal has been preferred against the order dated 27th February, 2009 of the Income Tax Appellate Tribunal (ITAT) dismissing the appeal of the Revenue against the order dated 18th June, 2007 of the Commissioner of Income Tax (Appeals) [CIT(A)] allowing the appeal of the Assessee against the order dated 23rd March, 2006 of the Income Tax Officer (ITO) assessing the income of the Assessee, a Trust duly registered under Section 12AA and duly recognized under Section 80G(5)(vi) of the Income Tax Act, 1961 for the Assessment Year 2003-04 at Rs.31,38,840/- and initiating penalty proceedings against the Assessee for furnishing inaccurate particulars of its income.

(2.) The Assessee for the relevant year filed return declaring 'Nil' income. The case though processed under Section 143(1) was selected for scrutiny. The Assessee had shown the gross total income for the relevant year as Rs.6,92,453/- and deducted therefrom the amount applied for charitable purposes to the extent of Rs.27,28,001/-. The Assessee had made application of income by donation of Rs.26,66,000/- comprising of donation of Rs.25 lacs to BLB Trust as corpus donation and Rs.1,66,000/- to others. The source of the balance amount over and above the income of Rs.6,92,453/- was from FDR encashment, MIP units and MIP-97 encashment which was the accumulation of income of the past and encashment made out of these accumulations/funds.

(3.) The ITO found that that donation of Rs.25 lacs as corpus donation to BLB Trust was not from current year's income but out of accumulations from the income of earlier years. The ITO, being of the opinion that owing to the explanation appended to Section 11(2) w.e.f. the Assessment Year 2003-04, any donation made out of income accumulation or set apart during the period of accumulation or thereafter to any trust or institution registered under Section 12AA, as BLB Trust was, was liable to be added in the income of the donor trust, accordingly computed the income as aforesaid of the Assessee.