Funds Received By Charitable Trust Under Swachh Bharat Abhiyan In Fiduciary Capacity Is Not Their Income: New Delhi ITAT

On finding that the assessee society is not the owner of the funds but holding the same in fiduciary capacity, the New Delhi ITAT upheld the CIT(A)'s decision in deleting the addition made by AO of the funds received by assessee under “Swach Bharat Abhiyan”.

The Bench comprising of Challa Nagendra Prasad (Judicial Member) and B.R.R. Kumar (Accountant Member) referred to CIT(A)'s observation that, “the assessee has to return these funds to the agency/PSU/Department who have contributed to the funds. The letters from the Chairman DVC and minutes of meetings for implementing reconstruction and rehabilitation (R&R) efforts by PSUs shows clearly that the assessee merely holds these funds on behalf of these participating agencies and can spend these funds only as per the mandate provided to it. It was held that the assessee does not even spend these funds on its own but passed it to the designated state agency who will in turn spend these funds.” (Para 18)

As per the brief facts of the case, the assessee society is registered u/s 12AA and 80G and enjoying exemption under the I.T Act, 1961. On being enquired about the funds, the assessee submitted that they have accumulated certain amount u/s 11(2) till the previous year for carrying out the construction of Public Toilets under the Central Government Scheme “Swach Bharat Abhiyan'. Thus, the fund so accumulated is not incorporated to income & Expenditure and directly transferred to balance sheet is EARMARKED FUND. It was submitted that the certain amount was directly controlled by Ministry of power, thus all the expenses as well as accrued from the fund had not been incorporated to the income & Expenditure account. The AO added the fund received under “Swach Bharat Abhiyan” to the income of assessee.

The Bench referred to the action of the CIT(A) in deleting the addition made by AO after examine the accounts of the assessee wherein CIT(A) found that there is no doubt that the sum has been routed through the income & expenditure account.

The Bench also noted that CIT(A) had correctly observed that the amount that the THDCIL received as a nodal agency for rebuilding of the State of Uttarakhand for the calamitous floods.

The Bench found that the AO does not appear to have appreciated this point and made this addition stating that these funds should have been transferred to the income & expenditure account and accounts should have been maintained separately.

The Bench opined that since the assessee is not allowed to use these funds for its own aims and objectives, it is not reasonable to expect it to route through its income & expenditure account. Therefore, the assessee's action of taking this amount directly to its balance sheet is correct.

The Bench further observed that the assessee does not even spend these funds on its own but passed it to the designated state agency who will in turn spend these funds.

Therefore, on finding that the assessee has passed the fund to the designated state agency, the ITAT dismissed the Revenue's appeal.

Counsel for Appellant: Vivek Kumar Upadhyay

Counsel for Respondent: Swarn Singh

Case Title: DCIT verses M/s. Sewa-THDC

Case Number: ITA No. 3425/Del/2018

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