COUNCIL OF ARCHITECTURE,NEW DELHI V. ITO (EXEMPTION), WARD-1(3) , NEW DELHI

ITA 955/DEL/2019

AI Insights

The case involves the Council of Architecture appealing against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax Appeals (CIT(A)), which had assessed the Council's income for the Assessment Years 2012-13 and 2014-15, including one-time life membership fees as revenue receipts. The primary legal issue was whether these membership fees, classified as non-corpus funds, qualify for exemption under section 11(1)(d) of the Income Tax Act. The CIT(A) and the Tribunal both found that these fees are not voluntary contributions but are revenue in nature, thus not exempt under the specified section.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 42165 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: CIT vs Divine Light Mission, Trustees of Shri Kot Hindu Stree Mandal v. CIT, CIT v. Madhya Pradesh Anaj Tilhan Vyapari Mahasangh, Society of Writers to the Signet v. IRC, Cotton Textiles Export Promotion Council
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANISTA
• Keywords: Gift
• Section: 11; 12

Judgement Text

" 1 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 955/Del/2019 (A.Y. 2012-13) ITA No. 952/Del/2019 (A.Y. 2014-15) Council of Architecture C/o. S. N. Panda, Advocate, I-109, 1st Floor, Lajpat Nagar-1, New Delhi PAN: AAATC3616N Vs. ITO Exemption, Ward-1(3) Room No. 2419, 24th Floor, E- 2, Pratykash Kar Bhawan, Civic Centre, New Delhi Appellant Respondent Assessee by None Revenue by Sh. Rajesh Kumar Dhanista, Sr. DR Date of Hearing 29/01/2025 Date of Pronouncement 12/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: Both the above appeals are filed by the Assessee against the order of the Commissioner of Income Tax Appeals-40, Delhi (‘Ld. CIT(A)’ for short) dated 22/11/2018 for the Assessment Year 2012-13 and 2014- 15 respectively. 2. Brief facts of the case are that, the assessment orders have been passed for Assessment Year 2012-13 and 2014-15 on 31/12/2014 and 29/11/2016 by computing the income at Rs. 91,42,842/- and Rs. 2 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO 1,49,63,082/- respectively as against the ‘NIL’ income declared by the Assessee. Aggrieved by the respective assessment orders, the Assessee preferred the Appeals before the Ld. CIT (A). The Ld. CIT(A) vide order dated 22/11/2018 held that one time life membership fee received by the Assessee are not voluntarily contributions and the same is revenue receipt and upheld the disallowance made by the A.O.Aggrieved by the order of the Ld. CIT(A), the Assessee preferred the present Appeals. 3. None appeared for the Assessee, the registry sent several notices which are gone in vain. Though the Vakalatnama has been filed by the Ld. Assessee's Representative, however, failed to appear before the Tribunal and madeany submission even on a single occasion.Considering the above facts and circumstances, we deem it fit to hear the Ld. Departmental Representative and decide the Appeal on verifying the material available on record. 4. The Ld. Departmental Representative submitted that the membership fees or the subscription are not voluntarily contributions and are revenue receipts which are rightly added to the income of the Assessee of the Assessee. The Ld. Departmental Representative relying on the orders of the Ld. Lower Authorities, sought for dismissal of the Appeal. 3 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO 5. We have heard both the parties and perused the material available on record. In boththe above Appeals the only question arose for consideration as to whether one time membership fees as non corpus funds is eligible for exemption u/s 11 (1)(d) of the Act or not. The Ld. CIT(A) decided the issue against the Assessee in both the Appeals and upheld the Assessment Orders, for the sake of convenience, the findings of the Ld. CIT(A) for Assessment Year 2012-13 are reproduced as under:- “4. Determination 4.1 The only ground of appeal challenges the addition of one time life membership fees as non-corpus fund and not eligible for exemption under section 11(1)(d). 4.2 I have considered the assessment order and the submissions of the appellant. The issue for consideration is whether the one time life membership fees received by the appellant can be treated as corpus donation or is revenue in nature and is to be added to the income. 4.3 With regard to membership fees or subscription, the issue is not whether such receipts would be revenue or capital in nature to decide whether these can be considered as part of the corpus donations which are exempt under section 11(1)(d). What is exempt under section 11(1)(d) is income in the form of voluntary contributions made with a specific direction that they shall form a part of the corpus. Hence what is to be decided is whether receipts on account of membership fees are voluntary or not and not whether such receipts are revenue or capital in nature. 4.4 In the case of CIT vs Divine Light Mission (supra) relied upon by the Assessing Officer, the Hon'ble Delhi High Court have held that membership fees and subscription amounts received by a trust/society from its members cannot be characterized as voluntary contribution within the meaning of \"fund\" in section 12. The Hon'ble Court held as under:- 4 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO 13. The amount received by way considered of subscription as well as voluntary contributions came to be in the case of Trustees of Shri Kot Hindu StreeMandal v. CIT [1994] 209 ITR 3961 and in the case of CIT v. Madhya Pradesh AnajTilhanVyapariMahasangh[1988] 171 ITR 6772. 14. The contributions are voluntary and are made willingly and without compulsion. Money is to be gifted or is given gratuitously without consideration. These tests should be satisfied for contribution. However, when a person pays membership fee or subscription to a society or a trust, he does not make a gift of the membership fee or subscription amount to the society. The amount of subscription paid by a member to the society can never be considered as gratuitous payment made by the member to the society or as a payment without consideration. 15. In the case of Trustees of Shri Kot Hindu StreeMandal's case (supra), High Court of Bombay examined a similar question. Voluntary contributions do not mean annual subscriptions. It amounts to gift made from disinterested motives for benefit of others. In Society of Writers to the Signet v. IRC [1886] 2 TC 257 (C Sess), the Court held that the entrance fees and subscriptions paid by entrants to a society or institution as a condition precedent to their membership and as the price of admission to the privileges and benefits of the society or institution are given under a contract and are not voluntary. In view of the Bombay High Court, membership and subscription amounts received by the assessee-trust/society from its members cannot be characterized as voluntary contribution within the meaning of the expression \"fund\" in section 12 of the Income-tax Act, 1961. 16. Thus there is a distinction between voluntary contribution and subscription. When a sum is paid in the nature of gift or a gratuitous payment to the trust without any consideration it would be considered as voluntary contribution. Subscription is not to be treated as voluntary contribution. 5 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO 17. Voluntary contribution is an act not coupled with compulsion. One may contribute or one may not contribute. Therefore, it is rightly said that it is in the nature of a gift. But so far as subscription is concerned, it is with some compulsion. If one wants to become a member of a trust and if he is required to pay subscription, as in the instant case, then, it amounts to compulsion. Sometimes it becomes a question of prestige i.e., to say that a person is a member of a charitable institution. If a person had made voluntary contribution to the said trust, then on payment of such contribution he does not become a member. The membership may be coupled with benefits or duties and that all depends on the nature of the trust and terms and conditions of the contract. 18. Sometimes members are getting certain privileges or rights. Therefore, such subscription fee has been considered as income of institutions.\" 4.5 The Hon'ble Court in the case of CIT vs Divine Light Mission (supra) have further held that the membership fees have to considered as income derived from property held under trust and, therefore, is exempt under section 11. The relevant extract of the judgement is reproduced below: \"25. In view of the judgment of the Division Bench of the Bombay High Court in the case of Cotton Textiles Export Promotion Council (supra), we are of the view that the property held under trust was the organization itself and the source of money, that is to say, the subscriptions from its members arose directly and substantially from that of organization. In the absence of organization, there would have been no question of subscriptions and following the Division Bench judgment of the Bombay High Court in the case of Cotton Textiles Export Promotion Council (supra), we are of the opinion that the subscription is to be considered as income derived from property held under trust. 26. Hence it is clear that the subscription is to be treated as income and exempted under section 11 of the Act.\" 6 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO 4.6 In view of the discussion above it is held that the life and institutional membership fees received are not voluntary contributions. Hence whether or not they have been given with a specific direction to form a part of the corpus fund or not is not material as is the issue whether such receipts are revenue or capital in nature. Hence, there is no infirmity in the order of the Assessing Officer to add these such fees to the income of the assessee. However, as has been held by the Hon'ble Delhi High Court in the case of CIT vs Divine Light Mission (supra), such receipts are income from property held under trust which the Assessing Officer has considered and has allowed set apart of income upto 15%. The only ground of appeal raised is dismissed. 5. In the end result, the appeal is DISMISSED.” 6. The Ld. CIT(A) has followed the Judgment of the Jurisdictional High Court in the case of CIT Vs. Divine Light Mission (278 ITR 659) and confirmed the disallowance made by the A.O. In the absence of any submission made by the Assessee or producing any contrary Judgments, we find no reason to interfere with the findings and conclusion of the Ld. CIT(A). Accordingly, the Appeal of the Assessee in ITA Nos. 955/Del/2019 and 952/Del/2019 are dismissed. Order pronounced in the open court on 12th February, 2025 Sd/- Sd/- (AVDHESH KUMAR MISHRA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 12.02.2025 R.N, Sr.P.S* 7 ITA No. 955 & 952/Del/2019 Council of Architecture Vs. ITO Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "