Tarakeswar Vivekananda Pally Seva Kendra, Hooghly V. ITO, Ward-24(3), Hooghly, Kolkata

ITA 1819/KOL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1185 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 14-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SK ZAFARUL HAQUE TANWEER JCIT
• Assessee Lawyers: M C GOPE
• Keywords: Gift; Charitable institution; Question of law; Capital receipt; Reassessment proceedings; Capital expenditure
• Section: 142(1); 12A

Judgement Text

ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM] ITA NO.1819//KOL/2016 ASSESSMENT YEAR : 2010-11 TARAKESHWAR VIVEKANANDA PALLY VERSUS- I.T.O. , WARD-24(3) SEVA KENDRA, HOOGHLY. HOOGHLY. (PAN: AAAAT 8935 E) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI M.C.GOPE, ADVOCATE FOR THE RESPONDENT: SK. ZAFARUL HAQUE TANWEER, JCIT /ADDL.CIT DATE OF HEARING : 13.09.2017. DATE OF PRONOUNCEMENT : 31.10.2017. ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-(A)-6, KOLKATA RELATING TO A.Y. 2010-11 ON THE FOLLOWING GROUNDS :- 1) THAT THE LD. A.O. AND THE HON 'BLE C.1.T. (A) HA VE WRONGLY CONSIDERED THE OUTSTANDING UN-EXPENSED PORTION OF THE GOVERNMENT'S GRANT AS INCOME OF THE ASSESSEE WHICH IS UNJUSTIFIED AND AGAINST THE PRINC IPLE OF GOVERNMENT'S GRANT. 2) THAT THE LD. A.O. AND THE HONBLE C.1.T. (A) IS NOT JUSTIFIED IN TREATING THE OUTSTANDING EXPENSES OF THE RELEVANT YEAR AS INCOME OF THE G.N.M. TRAINING CENTRE UNIT. 3) THAT THE HON'BLE C.I.T.(A) IS NOT JUSTIFIED IN C ONFIRMING THE ADDITION MADE BY THE LD. A.O. WITHOUT ANY FINDINGS IN RESPECT OF. IN COME FROM A.N.M. AND C.N.M. TRAINING CENTRES. 4) THAT THE HON'BLE C.I.T. (A) IS NOT JUSTIFIED AND WRONG IN TREATING THE GOVERNMENT'S GRANT AS INCOME OF THE SPORT COMPLEX U NIT, WHICH IS EXCLUSIVELY FOR CONSTRUCTION OF MINI INDOOR GAMES COMPLEX TO PR OMOTE THE GAMES & SPORTS. 5) THAT THE HON'BLE C.I.T.(A) HAS WRONGLY ENHANCED THE ASSESSED INCOME BY MAKING FURTHER ADDITION OF THE AMOUNT OF REPAYMENT OF LOAN UNDER WRONG FINDINGS. ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 2 6) THAT THE APPELLANT CRAVE LEAVE TO ADDUCE FURTHER GROUND OR GROUNDS AN) TIME BEFORE OR AT THE TIME OF HEARING. 2. THE ASSESSEE IS A SOCIETY. IT FILED RETURN O F INCOME ON 13.10.2010 FOR THE ASSESSMENT YEAR 2010-11 DECLARING INCOME OF RS.14,0 1,904/-. THE ASSESSEE WAS NOT REGISTERED U/S 12A OF THE INCOME TAX ACT, 1961 (ACT ). HENCE IT WAS ASSESSED AS AN AOP. THE AO DETERMINED THE INCOME OF THE ASSESSEE A T R.S.25,85,045/- U/S 145(3) OF THE ACT. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER ON APPEAL. THE FIRST APPELLATE AUTHORITY ENHANCED THE ASSESSMENT AND DISMISSED THE CASE OF THE ASSESSEE. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE M E. 5. AFTER HEARING THE RIVAL CONTENTIONS AND PER USING THE PAPERS ON RECORD I NOTE THE FOLLOWING FACTS : 5.1. THE ASSESSEE IS A REGISTERED SOCIETY, DULY REGISTERED UNDER WEST BENGAL SOCIETIES REGISTRATION ACT, 1961 AND IS ENGAGED IN, INFER ALIA, RUNNING OF INSTITUTIONS LIKE -AN ANM TRAINING CENTRE, A GNM TRAINING CENTRE , AN XRAY/ECG & USG CLINIC UNIT, A HOSPITAL UNIT, SOCIETY GENERAL FUND, SEVA PHARMACY AND SPORTS COMPLEX PRIMARILY GUIDED BY PHILANTHROPIC MOTIVE. 5.2. THE ASSESSEE-FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010- 11 ON. 13TH OCTOBER, 2010 AND DECLARED AN INCOME OF RS. 14 ,01,904/-. THE RETURN WAS PROCESSED UNDER SECTION 143( 1) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT) ' SUBSEQUENTLY, NOTICES UNDER SECTIONS 143(2) AND 142(1) WERE SERVED ON THE ASSESSEE. 5.3. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, WHILE TREATING THE ASSESSEE AS AN ASSOCIATION OF PERSONS, ASSESSED THE TOTAL INCOME OF THE ASSESSEE FROM DIFFERENT UNITS RUN BY THE ASSESSEE A T, RS. 25, 85,.045/-. THE ASSESSEE MAINTAINS THAT THE FACTUAL SCENARIO IS DIFFERENT. THIS SUBMISSION WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER. ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 3 5.4. THE ASSESSEE WAS ALLOTTED TWO FINANCIAL SAN CTIONS UNDER NATIONAL RURAL HEALTH MISSION FROM THE DEPARTMENT OF HEALTH & FAMILY WELF ARE, GOVERNMENT OF WEST BENGAL DURING THE FINANCIAL YEAR 2009-10.' THE ASSE SSEE HAD RECEIVED THE FINANCIAL SANCTIONS AS A COST TOWARDS THE RUNNING OF THE NURS ING TRAINING SCHOOLS FOR A TEMPORAL FRAME OF SIX MONTHS AT A TIME. THE FIRST ASSISTANCE RECEIVED FOR EXPENSE, COVERING A PERIOD FROM 12TH MARCH, 2009 TO 12 TH SEPTEMBER, 2009 (HEREINAFTER REFERRED TO AS 'THE FIRST PERIOD') AMOUNTED TO RS. 10,31,750/-. THE AS SESSEE SUBMITS THAT THE ASSISTANCE RECEIVED FOR EXPENSE OVER A FURTHER PERIOD OF SIX M ONTHS, FROM SO' OCTOBER. 2009 TO 30 TH APRIL. 2010. (HEREINAFTER REFERRED TO AS 'THE SECO ND PERIOD') AMOUNTED TO RS. 15,16,000/-. THE ASSESSEE STATES THAT THE ASSISTANC E ALLOTTED FOR THE SECOND PERIOD AMOUNTING TO RS. 15,16,000/- SHOULD EXCLUDE A SUM O F RS. 2 ,52.667/ .APPROX). BEING THE ALLOTMENT, PRO RATA, FOR THE PERIOD FROM MARCH. 2010, TO APRIL, 2010. AS IT IS OUTSIDE THE PERIOD OF THE ABOVE MENTIONED FINANCIAL YEAR. 5.5. THE ASSESSEE HAD TREATED THE SUM OF RS. 24, 00,000/- (BEING THE SUM OF ASSISTANCE RECEIVED AFTER ADJUSTING THE EXCESS AMOUNT PAID EAR LIER) AS RECEIPT OF FINANCIAL ASSISTANCE FOR EXPENDITURE OVER A PERIOD OF SIX MON THS THE ASSESSING OFFICER, HOWEVER, TREATED THE SUM OF RS. 24,00,000/- AS GROS S RECEIPT AND THUS CALCULATED INCOME OF THE ASSESSEE FROM THE ANM TRAINING AT RS . 2 ,82.488/-, DISREGARDING THE FACT THAT THE AMOUNT SHOULD EXCLUDE ONE MONTH OF AP RIL, 2010-11. IMPROPER ACCOUNTING TREATMENT BY THE ASSESSEE SHOULD NOT BE FATAL TO THE CASE OF THE ASSESSEE. 6. THE GNM TRAINING UNIT RUN BY THE ASSESSEE RECE IVED A SUM OF RS. 5,47,525/-, ON ACCOUNT OF, INTER ALIA, ADMISSION FEES, TUITION FEE S AND SESSION FEES. THE AMOUNT WAS COLLECTED FOR THE ACADEMIC YEAR COMMENCING JANUARY, 2010 AND CONTINUING TILL DECEMBER, 2010. THE ADMISSION FEE IS ONE TIME COLL ECTION WHICH IS TO BE USED OVER A PERIOD OF THREE AND HALF YEARS. THUS, TILL 31ST MAR CH, 2010, THE AMOUNT TO BE UTILISED WAS RS. 13,571/-. TUITION FEES, ON THE OTHER HAND, ARE COLLECTED FOR USE OVER A PERIOD OF FOUR MONTHS WHICH COMES TO AN AMOUNT OF RS. 75,000/ - FOR THE FINANCIAL YEAR IN QUESTION. THE SESSION FEES ARE COLLECTED FOR SIX MO NTHS AND AMOUNTS TO RS, 85,000/- FOR THE FINANCIAL YEAR 2009-10. THUS, THE AMOUNT TO BE USED FOR EXPENDITURE IN' THE ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 4 FINANCIAL YEAR 2009-10, CONTINUING TILL 31ST MARCH, 2010, AMOUNTS TO RS. 2,61,096/- (APPROX). THE ASSESSING OFFICER TREATED THE ENTIRE SUM OF RS. 5,47,525/- AS GROSS RECEIPT AND THEREBY CALCULATED THE INCOME OF THE' ASSESSEE FOR THE FINANCIAL YEAR 2009-10 AT RS. 4,01,324/- . 7. THE SEVA PHARMACY RUN BY THE ASSESSEE, WAS THE S UBJECT OF THEFT ON THE NIGHT OF 14/15TH MARCH, 2010. THE ASSESSEE HAD CLAIMED A STO CK LOSS OF RS. 1,73,071/- AND HAD THUS CALCULATED THE NET PROFIT AT RS. 19,544/-. THE ASSESSING OFFICER WHILE CONSIDERING THE VALUATION CERTIFICATE AS ISSUED BY THE NATIONAL INSURANCE COMPANY LTD. HELD THAT THE VALUATION OF STOCK LOSS WAS RS. 73,742/- AND AD DED BACK A SUM OF RS. 99,329/- TO THE INCOME OF THE ASSESSEE. THE ASSESSEE STATES THA T THE VALUATION CERTIFICATE OF THE NATIONAL INSURANCE COMPANY LTD. IS NOT CONCLUSIVE A ND THAT THE AMOUNT AS ASCERTAINED BY THE SURVEYOR WAS RS. 1,22,333/-. IN THE ALTERNATE AND WITHOUT PREJUDICE TO THE AFOR ESAID, THE ASSESSEE STATES THAT EVEN THE AMOUNT ASCERTAINED BY THE SURVEYOR IS TAKEN AS THE LOSS OF STOCK, THE DIFFERENCE IN THE AMOUNT CLAIMED AS STOCK LOSS BY THE ASSESSEE AN D THE AMOUNT ASCERTAINED BY THE SURVEYOR IS RS. 50,738/- AND NOT RS. 99,329/- AS AD DED BACK BY THE ASSESSING OFFICER. 8. THE ASSESSEE GOT AN APPROVAL OF A SUM OF RS. 9,00,000/- , BY THE DEPARTMENT OF SPORTS AND YOUTH SERVICES (YOUTH SERVICES BRANCH), FOR CONSTRUCTION OF A MINI INDOOR GAMES COMPLEX AT TARAKESWAR, HOOGHLY, THE FIRST INS TALMENT OF WHICH AMOUNTING TO RS. 4,00,000/- ALLOTTED TO THE ASSESSEE ON 19TH JAN UARY, 2010. THE RECEIPT WAS IN THE NATURE OF CAPITAL RECEIPT FOR CONSTRUCTION OF THE A BOVE MENTIONED GAMES COMPLEX. THE ASSESSING OFFICER WHILE ADDING THE SUM OF RS.4,00,0 00/- AS INCOME OF THE ASSESSEE REASONED THAT, ALTHOUGH THE SAME HAS BEEN SHOWN AS LIABILITIES IN THE BALANCE SHEET OF THE SOCIETY GENERAL FUND, IT HAS NOT BEEN ACCOUNTED FOR IN THE INCOME SIDE OF THE INCOME AND EXPENDITURE ACCOUNT FOR THE SOCIETY AS G ENERAL FUND. THE ASSESSEE STATES THAT THE ACCOUNTING TREATMENT CANNOT JEOPARDISE SUB STANTIVE JUSTICE . IT CLAIMS THAT THE RECEIPT IS IN THE NATURE OF CAPITAL RECEIPTS. ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 5 9. AFTER PERUSING THE ORDERS OF THE AUTHORITIES BELOW AND CONSIDERING THE ARGUMENTS OF BOTH SIDES, I AM OF THE VIEW THAT THE LOWER AUTH ORITIES HAVE COMMITTED AN ERROR IN NOT FOLLOWING THE PRINCIPLES AND LAW IN DETERMINING THE INCOME OF THE ASSESSEE. 10. THE HYDERABAD BENCH OF THE TRIBUNAL IN THE C ASE OF SOCIETY FOR INTEGRATED VS DCIT 90 ITD 493 HELD AS FOLLOWS AT PARAS 24 TO 29 : - 24. COMING TO THE SECOND LIMB OF THE ARGUMENT OF T HE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ENTIRE RECEIPTS CANNOT BE TAX ED, WE FIND THAT THE ISSUE IS COVERED BY THE JUDGMENT OF THIS BENCH IN NIRMAL AGRICULTURAL SOCIETY V. ITO , 71 ITD 152. IN THAT CASE, IT HAS BEEN HELD (AS PE R HEAD NOTE) AS UNDER:- 'THE ASSESSEE HAD NOT BEEN GRANTED REGISTRATION UND ER SECTION 12A , AS THE COMMISSIONER THOUGHT IT FIT TO REFUSE TO CONDONE TH E LONG DELAY CAUSED BY THE ASSESSEE IN APPLYING FOR THE REGISTRATION. THER EFORE, THE ASSESSING OFFICER HAD NO OTHER OPTION BUT TO COMPLETE THE ASS ESSMENTS IN THE STATUS OF AOP ALSO CLOSING HIS EYES TOWARDS SECTION 11 AND SECTION 13 . TO THAT EXTENT, THE ASSESSING OFFICER WAS RIGHT AS HE HAD A CTED ONLY ACCORDING TO WILL OF LAW. BUT AS FAR AS THE CONTENTS OF THE ASSESSMENTS WERE CONCERNED, EVEN WHEN THE ASSESSEE HAD BEEN ASSESSED AS AOP AND DEPRIVED OF SECTION 11 BENEFITS, THE ASSESSING OFFICER COULD ASSESS ONLY NET INCOME OF THE ASSESSEE AND NOT GROSS RECEIPTS. AS FAR AS THE ASSESSEE WAS CONCERNE D, CONSTRUCTION OF HOUSES, RECLAMATION OF LAND, ETC., WERE PART OF ITS REGULAR ACTIVITIES. HOUSES WERE BUILT ON THE LAND OF POOR AGRICULTURIST S. THE ASSESSEE-SOCIETY HAD NO LEGAL TITLE OR RIGHT OVER THE LAND OR HOUSES OF THOSE VILLAGERS/AGRICULTURISTS WHO WERE THE BENEFICIARIES . THE PURPOSE AND ACTIVITY OF THE ASSESSEE-SOCIETY WAS TO ENGAGE IN S UCH CHARITABLE ACTIVITIES. WHATEVER AMOUNT HAD BEEN SPENT ON THOSE PROGRAMMES/ PROJECTS, IT WAS SPENT IN THE USUAL COURSE OF CARRYING ON ITS ACCLAI MED OBJECTS. THEREFORE, THERE WAS NO BASIS WHATSOEVER, FACTUAL OR LEGAL, TO HOLD THAT THE AMOUNTS SPENT BY THE ASSESSEE IN CONSTRUCTING HOUSES OR REC LAIMING LAND WERE CAPITAL EXPENDITURE. AS FAR AS THE ASSESSEE WAS CON CERNED, THOSE EXPENSES WERE REVENUE EXPENSES. THE ASSESSEE HAD NO RIGHT OR TITLE OVER THOSE PROPERTIES. THOSE EXPENSES WERE INCURRED AS PART OF ITS NORMAL ACTIVITIES FOR WHICH THE SOCIETY WAS FORMED. THEREFORE, THE MO NEY SPENT BY THE ASSESSEE-SOCIETY IN CONSTRUCTING HOUSES, RECLAIMING THE LAND, FOR NON- FORMAL EDUCATION, ETC., HAD TO BE ALLOWED AS DEDUCT ION IN THE COMPUTATION OF INCOME. THE GRANTS RECEIVED FROM FOREIGN DONOR WERE FOR SPE CIFIC PURPOSES. THE GRANTS WHICH WERE FOR SPECIFIC PURPOSES DID NOT BEL ONG TO THE ASSESSEE- SOCIETY; SUCH GRANTS DID NOT FORM CORPUS OF THE ASS ESSEE OR ITS INCOME. THOSE GRANTS WERE NOT DONATIONS TO THE ASSESSEE SO AS TO BRING THEM UNDER ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 6 THE PURVIEW OF SECTION 12 . VOLUNTARY CONTRIBUTIONS COVERED BY SECTION 12 ARE THOSE CONTRIBUTIONS FREELY AVAILABLE TO THE AS SESSEE WITHOUT ANY STIPULATION, WHICH THE ASSESSEE CAN UTILISE TOWARDS ITS OBJECTIVES ACCORDING TO ITS OWN DISCRETION AND JUDGMENT. TIED-UP GRANTS FOR A SPECIFIED PURPOSE WOULD ONLY MEAN THAT THE ASSESSEE WHICH WAS A VOLUNTARY ORGANISATION, HAD AGREED TO ACT AS A TRUSTEE OF A S PECIAL FUND GRANTED BY DONOR WITH THE RESULT THAT IT NEED NOT BE POOLED OR INTEGRATED WITH THE ASSESSEE'S NORMAL INCOME OR CORPUS. IN THE INSTANT CASE, THE ASSESSEE WAS ACTING AS AN INDEPENDENT TRUSTEE FOR THAT GRANT, JU ST AS SAME TRUSTEE COULD ACT AS A TRUSTEE OF MORE THAN ONE TRUST. TIED-UP AM OUNT NEED NOT, THEREFORE, BE TREATED AS AMOUNTS WHICH WERE REQUIRE D TO BE CONSIDERED FOR ASSESSMENT FOR ASCERTAINING THE AMOUNT EXPENDED OR THE AMOUNT TO BE ACCUMULATED. THE ASSESSEE SHOULD HAVE ACTUALLY CREDITED THE GRAN T IN THE PERSONAL ACCOUNT OF THE DONOR AND ANY AMOUNT SPENT AGAINST T HAT GRANT SHOULD HAVE BEEN DEBITED TO THAT SEPARATE ACCOUNT OF THE D ONOR. THAT INCOMING AND OUTGOING NEED NOT BE REFLECTED IN THE INCOME AN D EXPENDITURE ACCOUNT OF THE ASSESSEE. AT THE END OF THE PROJECT, THE BAL ANCE, IF ANY, AVAILABLE TO THE CREDIT OF THE DONOR, COULD BE TREATED AS INCOME OF THE ASSESSEE, IF THE DONOR DID NOT INSIST FOR THE REPAYMENT OF THE BALAN CE AMOUNT. THEREFORE, THE ASSESSING OFFICER WAS TO BE DIRECTED TO REDO THE ASSESSMENT ON THE FOLLOWING LINES. (1) THE TIED-UP GRANTS RECEIVED FROM THE DONOR, BRE AD FOR THE WORLD, WILL BE TAKEN OUT OF THE COMPUTATION OF INCOME FROM THE INCOME-SIDE. (2) ALL THE MONEY SPENT UNDER THE TIED-UP PROGRAMME S DIRECTED BY THE DONOR ALSO WILL BE TAKEN OUT OF THE COMPUTATION OF INCOME FROM THE EXPENSES-SIDE. (3) ANY NON-REFUNDABLE CREDIT BALANCE IN THE PERSON AL ACCOUNT OF BREAD FOR THE WORLD WILL BE TREATED AS INCOME IN THE YEAR IN WHICH SUCH NON- REFUNDABLE BALANCE WAS ASCERTAINED. (4) THE EXPENSES INCURRED BY THE ASSESSEE FOR HOUSE CONSTRUCTION, RECLAMATION OF LAND, NON-FORMAL EDUCATION PROGRAMME (OTHER THAN COVERED BY THE TIED-UP GRANTS) WILL BE DEDUCTED AS REVENUE EXPENSES.' 25. HONOURABLE RAJASTHAN HIGH COURT IN THE CASE OF SUKHDEO CHARITY ESTATE, LADNU V. CIT , 149 ITR 470, HELD AS FOLLOWS (AS PER HEAD NOTE):- 'IT WAS FOR THE SPECIFIC PURPOSE OF IMPLEMENTATION OF THE WATER SUPPLY SCHEME THAT THE REQUEST FOR CONTRIBUTION HAD BEEN M ADE BY THE ASSESSEE- TRUST AND IT WAS IN RESPONSE TO THAT REQUEST THAT T HE AMOUNT HAD BEEN GIVEN BY THE CALCUTTA TRUST. IT WAS CLEAR THAT THE INTENTION OF THE DONOR AND THE DONEE WAS TO TREAT THE MONEY AS CAPITAL TO BE SPENT FOR THE WATER SUPPLY SCHEME. THE FACT THAT THE AMOUNT HAD NOT BEE N PAID OVER TO THE STATE GOVERNMENT AND WAS KEPT UNUTILISED IN THE ACC OUNT OF THE ASSESSEE- TRUST WAS NOT RELEVANT. THE AMOUNT COULD NOT BE SAI D TO BE 'INCOME' AND ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 7 COULD NOT BE INCLUDED AS PART OF THE ASSESSABLE INC OME OF THE TRUST UNDER THE PROVISIONS OF SECTION 12(2) .' IN YET ANOTHER JUDGMENT IN THE CASE OF SUKHDEO CHARITY ESTATE V. ITO , 192 ITR 615, HONOURABLE RAJASTHAN HIGH COURT HELD AS FO LLOWS (AS PER HEAD NOTE):- 'THE INTENTION OF THE DONOR-TRUST AS WELL AS THE DO NEE-TRUST WAS TO TREAT THE MONEY AS CAPITAL TO BE SPENT FOR THE LADNU WATE R SUPPLY SCHEME. IT WAS OF NO SIGNIFICANCE WHETHER THE AMOUNT HAD SINCE BEEN PAID TO THE STATE GOVERNMENT OR KEPT IN THE ACCOUNT OF THE SAID SCHEME BY THE ASSESSEE-TRUST. THE AMOUNT OF RS. 70,000/- DID NOT CONSTITUTE INCOME OF THE PETITIONER. THE REASSESSMENT PROCEEDINGS WERE N OT VALID AND WERE LIABLE TO BE QUASHED.' THIS BENCH OF THE TRIBUNAL IN THE CASE OF ARYA VYSY A ABHYUDAYA SANGHAM V. DCIT, I.T.A.NO. 77/HYD/2002 FOR ASST. YEAR 1998- 99, IN ITS ORDER DATED 25-6-2002 TO WHICH ONE OF US WAS A PARTY, WAS INCLI NED TO UPHOLD THE VIEW OF THE COMMISSIONER (APPEALS) IN THAT CASE BY HOLDI NG IN PARA 15 OF THAT ORDER AS FOLLOWS: 'THOUGH WE FIND CONSIDERABLE FORCE IN THE OTHER ARG UMENT OF THE ASSESSEE'S COUNSEL I.E. THE INCOME SHOULD BE COMPUT ED ON COMMERCIAL PRINCIPLES, AS WE HAVE HELD THAT THE ASSESSEE-SOCIE TY IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT AND AS WE HAVE ALSO HELD THAT THE OBJECTS OF THE SOCIETY WERE OF CHARITABLE NATURE WI THIN THE MEANING OF SECTION 2(15) OF THE ACT, AND AS WE HAVE FURTHER HELD THAT THERE IS NO VIOLATION, WHATSOEVER OF THE PROVISIONS OF SECTION 13(1)(C) AND (D) OF THE I.T.ACT, 1961, THE OTHER GROUNDS OF THE ASSESSEE NE ED NOT BE GONE INTO, AS IT WOULD BE OF ACADEMIC INTEREST ONLY.' THE REVENUE HAS NOT BROUGHT TO OUR NOTICE ANY JUDGM ENT FROM ANY HIGH COURT WHICH HAS DEALT AT LENGTH ON THIS ISSUE AND W HICH IS IN ITS FAVOUR. IT IS ALSO NOT CLEAR WHETHER THE REVENUE HAS ACCEPTED OR GONE ON APPEAL AGAINST THE JUDGMENT OF THIS BENCH IN THE CASE OF NIRMAL AG RICULTURAL SOCIETY (SUPRA). 26. HONOURABLE ANDHRA PRADESH HIGH COURT IN THE CAS E OF CHAIRMAN, ANDHRA PRADESH WELFARE FUND V. CIT , AS PER HEAD NOTE, HELD AS FOLLOWS:- '(I) THAT THE FINDING OF THE TRIBUNAL, THAT THE ASS ESSEE COULD NOT BE REGARDED AS A BRANCH OR AS A PART OF THE PARENT BOD Y, WAS A FINDING OF FACT AND NO QUESTION OF LAW AROSE FOR REFERENCE. (II) THAT THE MERE FACT THAT THE RICE MILLERS PAID CONTRIBUTIONS WITH AN OBLIQUE MOTIVE WOULD NOT AFFECT THE CHARACTER OF TH E CONTRIBUTIONS, AS VOLUNTARY CONTRIBUTIONS. ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 8 (III) THAT THE FINDING OF THE TRIBUNAL, THAT THE AS SESSEE WAS NOT ENTITLED TO EXEMPTION AS A TRUST UNDER SECTION 12 BECAUSE SOME OF THE FUNDS WERE BEING UTILISED FOR PURPOSES OTHER THAN CHARITABLE A ND RELIGIOUS WAS A FINDING OF FACT AND NO QUESTION OF LAW AROSE FOR RE FERENCE.' THIS JUDGMENT WAS RELIED UPON BY THE REFERENCE. A C AREFUL READING OF THIS JUDGMENT DOES NOT INDICATE THAT THE QUESTION RAISED BY THE ASSESSEE BEFORE US WAS POSED TO THE COURT. WE DO NOT FEEL THAT THIS IS A PRECEDENT FOR LAYING DOWN A PROPOSITION OF ALLOWABILITY OF EXPENDITURE F OR COMPUTATION OF INCOME OF A CHARITABLE INSTITUTION WHICH IS DENIED BENEFIT UNDER SECTION 11 . HONOURABLE SUPREME COURT IN THE CASE OF GOODYEAR INDIA LTD. V. STATE OF HARYANA (1991) 188 ITR 402 (SC), AS PER HEAD NOTE, HELD AS FOLLOWS: 'PRECEDENT -- AUTHORITY ONLY FOR WHAT IT DECIDES - NOT FOR WHAT MAY REMOTELY OR EVEN LOGICALLY FOLLOWS - DECISION ON QU ESTION NOT ARGUED CANNOT BE TREATED AS PRECEDENT.' THUS, THE JUDGMENT OF HONOURABLE ANDHRA PRADESH HIG H COURT (SUPRA) DOES NOT HELP THE CASE OF THE REVENUE. 27. ON OTHER HAND, LEARNED AUTHORS CHATURVEDI AND P ITHISARIA IN THEIR BOOK INCOME TAX LAW, FIFTH EDITION, VOL.1, AT PAGE 424, UNDER THE HEADING 'INCOME, WHEN FALLS INTO THE TAX NET', OBSERVED AS FOLLOWS:- 'ALTHOUGH SECTION 14 OF THE 1961 ACT CLASSIFIES INCOME UNDER SIX HEADS, THE MAIN CHARGING PROVISION IS SECTION 4(1) WHICH LEVIES INCOME-TAX, AS ONLY ONE TAX, ON THE 'TOTAL INCOME' OF THE ASSESSEE AS D EFINED IN SECTION 2(45) OF THAT ACT. AO INCOME IN ORDER TO COME WITHIN THE PUR VIEW OF THAT DEFINITION MUST SATISFY TWO CONDITIONS. FIRSTLY, IT MUST COMPR ISE THE 'TOTAL AMOUNT OF INCOME REFERRED TO IN SECTION 5 '. SECONDLY, IT MUST BE 'COMPUTED IN THE MANNER LAID DOWN IN THIS ACT'. IF EITHER OF THESE C ONDITIONS FAILS, THE INCOME WILL NOT BE A PART OF THE TOTAL INCOME THAT CAN BE BROUGHT TO CHARGE [ CIT V. HARPRASAD & CO. P. LTD ., (1975) 99 ITR 118, 125 (SC)]. 28. AS ARGUED BY THE REVENUE, THOUGH BY VIRTUE OF SECTION 2(24)(IIA) VOLUNTARY CONTRIBUTIONS ARE INCOME, TO OUR MIND TH IS BY ITSELF DOES NOT ENTITLE THE TAX GATHERER TO IGNORE ALL OTH ER WELL SETTLED PRINCIPLES OF TAXATION AND GENERAL LAW AND LEVY TAX ON GROSS RECE IPTS WITHOUT CONSIDERING THE CLAIM FOR DEDUCTIONS. PRINCIPLES SU CH AS CAPITAL VERSUS REVENUE, DOCTRINES OF OVERRIDING TITLE, FORM VERSUS SUBSTANCE, INTERPRETATION OF 'DEEMING' PROVISIONS ETC., HAVE TO BE APPLIED WH EREVER NECESSARY. ONLY THE SURPLUS OR PROFIT CAN BE BROUGHT TO TAX AND THE SAME HAS TO BE COMPUTED IN THE MANNER LAID DOWN IN THE ACT APPLYING THE NOR MAL PRINCIPLES OF ACCOUNTANCY AND TAXATION LAWS. 29. THE LEARNED AUTHORS KANGA AND PALKHIVALA IN THE BOOK THE LAW AND PRACTICE OF INCOME TAX, EIGHTH EDITION, VOL.I, AT P AGE 387, STATE THE LEGAL POSITION AS FOLLOWS:- ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 9 'VOLUNTARY CONTRIBUTIONS TOWARDS CORPUS OF RECIPIEN T TRUST.-- THE PRESENT SECTION 12 IS EXPRESSLY MADE APPLICABLE TO VOLUNTARY CONTRIBUTIONS WHICH ARE MADE WITH A SPECIFIC DIRECT ION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST [ORIGINAL IN I TALICS]. THEREFORE, SUCH CONTRIBUTIONS ON CAPITAL ACCOUNT DO NOT HAVE TO BE APPLIED TO CHARITABLE PURPOSES BUT CAN BE RETAINED AS THE CORPUS OF THE R ECIPIENT TRUST WITHOUT ATTRACTING ANY TAX LIABILITY. ALTHOUGH THE ITALICIZ ED WORDS HAVE NOW BEEN OMITTED FROM SECTION 2(24) (II-A), THE EXCLUSION OF SUCH CAPITAL DONATIONS FROM THE DEFINITION OF 'INCOME' IMPLICIT IN THAT SE CTION. THE CORRECT LEGAL POSITION IS AS UNDER: (A) ALL CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTIO N THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST ARE CAPITAL RECEIPT S IN THE HANDS OF THE TRUST. THEY ARE NOT INCOME EITHER UNDER THE GENERAL LAW OR UNDER SECTION 2(24) (II-A) RIGHTLY CONSTRUED. (SEE UNDER SECTION 2(24) (II-A), 'VOLUNTARY CONTRIBUTIONS RECEIVED BY CHARITY'.) (B) SECTION 2(24) (II-A) DEEMS REVENUE CONTRIBUTIONS TO BE INCOME OF THE TRUST. IT THEREBY PREVENTS THE TRUST FROM CLAIMING EXEMPTION UNDER GENERAL LAW ON THE GROUND THAT SUCH CONTRIBUTIONS S TAND ON THE SAME FOOTING AS GIFTS AND ARE THEREFORE NOT TAXABLE. (SE E UNDER SECTION 10(3) , 'VOLUNTARY PAYMENTS ...' P.320.) (C) SECTION 12 GOES ONE STEP FURTHER AND DEEMS SUCH REVENUE CONTR IBUTIONS TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST . IT THEREBY MAKES APPLICABLE TO SUCH CONTRIBUTIONS ALL THE CONDITIONS AND RESTRICTIONS UNDER SECTIONS 11 AND 13 FOR CLAIMING EXEMPTIONS. (SEE ALSO EXPLN. (1) TO SECTION 11(1) .] (D) SECTION 11(1)(D) SPECIFICALLY GRANTS EXEMPTION TO CAPITAL CONTRIBUT IONS TO MAKE THE FACT OF NON-TAXABILITY CLEAR BEYOND DOU BT. BUT IT PROCEEDS ON THE ERRONEOUS ASSUMPTIONS THAT SUCH CONTRIBUTIONS A RE OF INCOME NATURE - 'INCOME IN THE FORM OF VOLUNTARY CONTRIBUTIONS'. TH IS ASSUMPTION SHOULD BE DISREGARDED.' 11. THE PROPOSITIONS OF LAW LAID DOWN IN THE ABO VE CASE ARE APPLICABLE TO THE CASE ON HAND. HENCE I SET ASIDE THIS ASSESSMENT TO THE FILE OF THE AO WITH THE DIRECTION THAT THE PRINCIPLE LAID DOWN IN THE ABOVE CASE LAW BE APPLIE D TO THE FACTS OF THE CASE AND DE NOVO ASSESSMENT BE FRAMED IN ACCORDANCE WITH LAW. ITA NO.1819/KOL/2016-TARAKESWAR VIVEKANANDA PALLY S EVA KENDRA A.Y.2010-11 10 12. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 31.10.2017. SD/- [ J.SUDHAKAR REDDY ] ACCOUNTANT MEMBER DATED : 31.10.2017. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.TARAKESHWAR VIVEKANANDA PALLY SEVA KENDRA, P.O.TA RAKESWAR, DT.HOOGHLY- 712410. 2. I.T.O., WARD-24(3), HOOGHLY, CHINSURAH. 3. C.I.T.(A)- 6, KOLKATA 4. C.I.T-8, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES