THE ACIT, 2(1), Ujjain V. M/S. UJJAIN SHIKSHAN SHODH SAMITI, Ujjain

ITA 22/IND/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2204 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 08-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: S S DESH
• Keywords: Capital asset; Gift; Charitable institution; Deemed to accrue or arise in india; Capital receipt; Benefit of exemption
• Section: 12A; 12AA; 148; 12; 10; 11

Judgement Text

ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 1 , , IN THE INCOME TAX APPELLATE TRIB UNAL, INDORE BENCH, INDORE BEFORE SHRI C.M. GARG, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER .../ ITA. NO. 22/IND/2015 / ASSESSMENT YEAR: 2009-10 ASSTT. COMMR. OF INCOME TAX 2(1) UJJAIN :: / APPELLANT VS M/S UJJAIN SHIKSHAN SHODH SAMITI UJJAIN PAN AAAJU 0245M :: ! / RESPONDENT '# $ % & / REVENUE BY SHRI MOHD. JAVED '( $ % & / ASSESSEE BY SHRI S.S. DESHPANDE ) * $ (+ DATE OF HEARING 26.5.2017 ,-./ $ (+ DATE OF PRONOUNCEMENT 3 0 . 5.2017 / O R D E R PER SHRI C.M. GARG, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE LEARNED CIT(A), UJJAIN, DATED 30.10.2014 IN FIR ST APPEAL NO. U- 551/2011-12 FOR THE ASSESSMENT YEARS 2009-10. ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 2 2. THE REVENUE HAS RAISED AS MANY AS 8 GROUNDS OF A PPEAL BUT EXCEPT MAIN GROUND NOS. 1 AND 2 OTHER GROUNDS ARE A RGUMENTATIVE AND SUPPORTIVE TO THE MAIN SUBSTANTIAL GROUNDS WHIC H READ AS FOLLOWS :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN (I) DELETING THE ADDITION OF RS. 40 LACS BEING DONATION S RECEIVED. (II) HOLDING THAT THE DONATION OF RS. 40 LACS CONSTITUTE D CORPUS DONATION AND HENCE WAS NOT INCOME U/S 2(24)(IIA). 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND CAREFULLY CONSIDERED THE RELEVANT MATERIAL PLACED ON REC ORD OF THE TRIBUNAL, INTER ALIA, IMPUGNED ASSESSMENT ORDER , FIRST APPELLATE ORDER AND DECISIONS RELIED UPON AND CIT ED AT BAR DURING THE COURSE OF ARGUMENTS. 4. THE LEARNED DR SUPPORTING THE ACTION OF THE ASSES SING OFFICER SUBMITTED THAT SINCE THE ASSESSEE HAS NOT INCL UDED THE DONATION RECEIVED OF RS. 40 LACS DURING THE PERIO D, ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 3 UNDER CONSIDERATION, AS INCOME IN THE INCOME AND EXPENDITURE ACCOUNT, NOR IT WAS SHOWN IN THE COMPUTATI ON OF INCOME, WHICH CONSTITUTES INCOME OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER WAS RIGHT AND JUSTI FIED IN MAKING THE ADDITION. THE LEARNED DR FURTHER SUBMITTED THAT SINCE THE ASSESSEE INSTITUTION IS NOT REGISTERED U/S 12A OF THE ACT, THEREFORE, PROVISIONS OF SECTIONS 11 AND 12 OF THE DOES NOT APPLY TO THE SOCIETY. THE LEARNED DR VEHEMEN TLY CONTENDED THAT SECTION 2(24)(IIA) OF THE ACT MANDATES T HAT INCOME INCLUDES ANY VOLUNTARY CONTRIBUTION RECEIVED B Y THE INSTITUTION LIKE THE PRESENT ASSESSEE, THEREFORE, TH E ADDITION MADE BY THE ASSESSING OFFICER MAY KINDLY BE RESTORED AS THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE WITHOUT ANY BASIS AND JUSTIFIED REASONING. 5. REPLYING TO THE ABOVE, THE LEARNED COUNSEL FOR TH E ASSESSEE STRONGLY SUPPORTED THE FIRST APPELLATE ORDER AND ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 4 SUBMITTED THAT AS PER THE DECISION OF THE ITAT, INDOR E BENCH, DATED 16.2.006 IN THE CASE OF ITO VS. NARMIDIYA BRAHMIN SAMAJ; ITA NOS. 925 TO 928/IND/05, THE DONATIO N RECEIVED TOWARDS CORPUS IS NOT INCOME CHARGEABLE TO TA X EVEN IF THE TRUST IS NOT REGISTERED U/S 12A OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED TH AT AS PER THE PROVISIONS OF SECTION 2(24)(IIA) OF THE ACT, WHILE TAKING SUCH A VIEW IN THE MATTER, THE AFORESAID SECTION WAS AMENDED SUBSEQUENTLY AND BOTH THE AMENDED PROVISIONS HAVE BEEN TAKEN INTO CONSIDERATION BY THE TRIBUNAL. TH E LEARNED COUNSEL FOR THE ASSESSEE LASTLY SUBMITTED THAT FROM THE ORDER OF ITAT, INDORE BENCH (SUPRA), IT IS CLEAR THAT VOLUNTARY CONTRIBUTION RECEIVED BY THE TRUST OR INST ITUTION IS INCOME SUBJECT TO EXCEPTION I.E. CONTRIBUTION RE CEIVED TOWARDS CORPUS WHICH IS NOT TAXABLE EVEN IF THE ASSES SEE DOES NOT HAVE REGISTRATION U/S 12A OF THE ACT. THEREF ORE, ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 5 THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS ) MAY KINDLY BE UPHELD BY DISMISSING THE APPEAL OF THE REVE NUE. 6. ON CAREFUL CONSIDERATION OF THE ABOVE RIVAL SUBMISSIONS, FROM THE RELEVANT PART OF THE FIRST APPE LLATE ORDER WE OBSERVE THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS :- THE APPELLANT HAS RECEIVED CORPUS FUND DONATION OF RS.40,00,000/- FROM VARIOUS PERSONS DURING THE YEAR UNDER CONSIDERATION. THE CORPUS FUNDS ARE GENERALLY MADE OUT OF CORPUS DONATION. A DONATION WILL BE TRE ATED AS A CORPUS DONATION ONLY IF IT IS ACCOMPANIED BY A SPECIFIC WRITTEN DIRECTION OF THE DONOR. IN THE ABS ENCE OF THE ANY WRITTEN DIRECTION OF THE DONOR A CONTRIBUTI ON OR GRANT CANNOT BE TRANSFERRED TO CORPUS FUND. IN THE APPELLANTS CASE THE DONORS HAVE GIVEN THE DONATIO N FOR BUILDING CONSTRUCTION. SINCE THE DONATION FOR BUILD ING ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 6 CONSTRUCTION IS DONATION FOR SPECIFIC PURPOSE, HENC E, THE SAME CANNOT BE TREATED AS A PART OF INCOME. CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT T HEY SHALL FORM PART OF THE PURPOSE OF THE TRUST OR INST ITUTION CANNOT BE TERMS AS DEEMED INCOME. THE APPELLANT HAS RECEIVED DONATION FOR SPECIFIC PURPOSE FOR BUILDING CONSTRUCTION AND THE RECEIPT TO THE DONOR MENTIONS THAT THE SAME DONATION WILL GO TO THE CORPUS FUND. THE INTENTION OF THE SOCIETY THAT THEY ARE IN NEED OF F UND FOR CONSTRUCTION OF BUILDING & FOR OTHER INFRASTRUCTURE DEVELOPMENT WAS DEPICTED IN THE APPEAL LETTER GIVEN TO THEM. EVEN ON THE FACE OF THE DONATION RECEIPTS IT IS SHOWN THAT THIS DONATION WILL GO TO THE CORPUS OF T HE SOCIETY FOR CONSTRUCTION OF BUILDING. I HAVE ALSO EXAMINED THE TERM CORPUS FUND AND CORPUS DONATION AS IT IS BEING GENERALLY USED WITH RESPECT TO A TRUST. A CORPUS FUND DENOTES A ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 7 PERMANENT FUND KEPT FOR THE BASIC EXPENDITURE NEEDED FOR THE ADMINISTRATION AND SURVIVAL OF THE ORGANISATION. THE CORPUS FUND IS GENERALLY NOT ALLOWED TO BE UTILISED FOR THE ATTAINMENT OF THE PURPOSES, BUT THE INTEREST/DIVIDEND ACCRUED ON SUCH FUND CAN BE UTILISED AS WELL AS ACCUMULATE. SUCH FUND CAN ALSO BE USED FOR CREATION OF CAPITAL ASSET OR PROPERTY OF THE TRUST FROM WHICH INCOME CAN BE GENERATED. CORPUS FUND ARE GENERALLY CREATED OUT OF CORPUS DONATION. A DONATION WILL BE TREATED AS CORPUS DONATION ONLY IF IT IS ACCOMPANIED BY A SPECIFIC WRITTEN DIRECTION OF THE DONOR. IN THE ABSENCE OF ANY WRITTEN DIRECTION OF T HE DONOR, A CONTRIBUTION OF GRANT CANNOT BE TRANSFERRE D TO CORPUS FUND. IN THE PRESENT CASE, THE DONORS HAS VERY CATEGORICALLY IN THEIR RECEIPTS, WHILE PROVIDI NG THE MONEY TO THE APPELLANT TRUST, HAS MENTIONED ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 8 THE AMOUNT OF RS. 40,00,000/- AS CORPUS DONATION AND SUCH AMOUNT HAS BEEN USED BY THE TRUST FOR BUILDING CONSTRUCTION. THEREFORE, THE AMOUNT OF RS.40,00,000/- SHOWN BY THE APPELLANT TRUST HAS BEEN FOUND TO BE IN THE NATURE OF CORPUS DONATION. NOW THE QUESTION ARISES WHETHER SUCH CORPUS DONATION IS TAXABLE AS INCOME OR NOT EVEN IN THE CASE IN WHICH THE TRUST IS NOT REGISTERED UNDER SECTION 12AA BECAUSE FOR THOSE TRUSTS WHICH ARE REGISTERED UNDER SECTION 12AA, EXEMPTION TO CORPUS DONATION HAS BEEN PROVIDED AS PER PROVISION OF SECTION 11(1)(D). FOR SUCH TRUST TO WHICH REGISTRAT ION UNDER SECTION 12AA HAS NOT BEEN PROVIDED, ITS TAXABILITY IS REQUIRED TO BE DECIDED WITH REFERENCE TO THE SCHEME OF THE ACT AS HELD IN THE DECISION OF PENTAFOUR SOFTWARE EMPLOYEES WELFARE FOUNDATION V. ASSTT. CIT (SUPRA). IN THE CASE OF PENTAFOUR ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 9 SOFTWARE EMPLOYEES WELFARE FOUNDATION VS. ASSTT. CIT, IT HAS BEEN HELD THAT CORPUS DONATION BEING IN THE NATURE OF CAPITAL RECEIPT IS NOT CHARGEABLE TO INCOME TAX. I HAVE ALSO COME ACROSS ANOTHER DECISION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, KOLKATA IN THE CASE OF SHRI SHANKAR BHAGWAN ESTATE VS. ITO (1997) 61 ITD 196 (CAL) IN WHICH THE TAXABILITY OF CORPUS DONATION HAS BEEN EXAMINED IN THE LIGHT OF SECTION 12 READ SECTION 2(24)(IIA) OF THE INCOME TAX ACT AND IN THIS DECISION, IT HAS BEEN HELD AS UNDER :- SO FAR AS SECTION 2(24)(IIA) IS CONCERNED, THIS SECTION HAS TO BE READ IN THE CONTEXT OF THE INTRODUCTION OF THE PRESENT SECTION 12 IT IS SIGNIFICANT THAT SECTION 2(24)(IIA) WAS INSERTED WI TH EFFECT FROM APRIL 1, 1973 SIMULTANEOUSLY WITH THE ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 10 PRESENT SECTION 12, BOTH OF WHICH WERE INTRODUCED FROM THE SAID DATE BY THE FINANCE ACT, 1972. SECTION 12 MAKES IT CLEAR BY THE WORDS APPEARING IN PARENTHESIS THAT CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION SHALL NOT BE CONSIDERED AS INCOME OF THE TRUST. THE BOARDS CIRCULAR NO. 108 DATED MARCH 20, 1973 IS EXTRACTED AT PAGE 1277 OF VOLUME I OF SAMPATH IYENGARS LAW OF INCOME-TAX, 9 TH EDN. IN WHICH THE INTER- RELATION BETWEEN SECTION 12 AND SECTION 2(24) HAS BEEN BROUGHT OUT. GIFTS MADE WITH CLEAR DIRECTIONS THAT THEY SHALL FORM PART OF THE CORPUS OF THE RELIGIOUS ENDOWMENT CAN NEVER BE CONSIDERED AS INCOME. IN THE CASE OF R.B. SHREERAM RELIGIOUS & CHARITABLE TRUST VS. CIT (1988) 172 ITR 373 (SC) IT WAS HELD BY THE BOMBAY HIGH COURT THAT EVEN ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 11 IGNORING THE AMENDMENT TO SECTION 12, WHICH MEANS THAT EVEN BEFORE THE WORD APPEARING TO PARENTHESIS IN THE PRESENT SECTION 12, IT CANNOT BE HELD THAT VOLUNTARY CONTRIBUTORS SPECIFICALLY RECEIVED TOWARDS THE CORPUS OF THE TRUST MAY BE BROUGHT TO TAX. THE AFORESAID DECISION WAS FOLLOWED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. TRUSTEES OF KASTURBAI SCINDIA COMMISSION TRUST (1991) 189 ITR 5 (BOM). THE POSITION AFTER THE AMENDMENT IS A FORTIORIRI. IN THE PRESENT CASE THE ASSESSING OFFICER ON EVIDENCE HAS ACCEPTED THE FACTS THAT ALL THE DONATIONS HAVE BEEN RECEIVED TOWARDS THE CORPUS OF THE ENDOWMENTS. IN VIEW OF THIS CLEAR FINDING IT IS NOT POSSIBLE TO HOLD THAT THEY ARE TO BE ASSESSED AS INCOME OF THE ASSESSEES. WE, THEREFORE, HOLD THAT THE ASSESSMENT OF THE CORPUS DONATIONS CANNOT BE SUPPORTED. ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 12 AFTER CONSIDERING THE POSITION OF LAW AS IT IS PREVAILING AT PRESENT ON THE BASIS OF THE DECISION OF THREE TRIBUNALS, I.E. INCOME-TAX APPELLATE TRIBUNAL , CHENNAI, INCOME TAX APPELLATE TRIBUNAL, DELHI AND INCOME TAX APPELLATE TRIBUNAL, KOLKATA AND FURTHER CONFIRMED BY THE DELHI HIGH COURT, THE CORPUS DONATION IS IN THE NATURE OF A CAPITAL RECEIPT AND ARE NOT TAXABLE, IRRESPECTIVE OF THE FACT WHETHER T HE TRUST IS REGISTERED UNDER SECTION 12AA OR NOT. THEREFORE, I AGREE WITH THE LEARNED AUTHORISED REPRESENTATIVE THAT THE AMOUNT OF RS.68,50,000/- BEING IN THE NATURE OF CORPUS DONATION IS NOT TAXABLE UNDER THE INCOME TAX ACT BEING IN THE NATURE OF CAPITAL RECEIPT AND THEREFORE THE ADDITIO N OF RS.68,50,000 MADE BY THE ASSESSING OFFICER TOWARDS THE TAXABLE INCOME OF THE ASSESSEE IS HEREBY DELETED AND ACCORDINGLY GROUND NO. 2 IS ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 13 ALLOWED. THE HON'BLE ITAT, INDORE IN THE ORDER NO. ITA NO. 925 TO 928 DATED 16.02.2006 IN THE CASE OF NARMADEYA BRAHMIN SAMAJ, UJJAIN VS. CIT HELD THAT ANY CONTRIBUTION TO THE CORPUS DONATION IS NOT LIABLE TO BE TREATED AS REVENUE INCOME. THEREFORE A.O. IS DIRECTED TO TREAT THE AMOUNT OF RS.40,00,000/- AS CORPUS DONATION AND THE ADDITION MADE ON THIS ACCOUNT IS DELETED. FURTHER, FROM THE ORDER OF ITAT, INDORE BENCH, IN T HE CASE OF ITO VS.NARMIDIYA BRAHMIN SAMAJ (SUPRA) WE OBSERVE THAT UNDER SIMILAR FACTS AND CIRCUMSTANCES THE TRIBUNAL CONCLUDED AS FOLLOWS :- 3. BRIEF FACTS ARE THAT THE NOTICE U/S 148 WAS ISS UED IN THIS CASE ON REJECTION OF REGISTRATION APPLICATION U/S 12AA BY TH E CIT UJJAIN, AS PER THE ORDER DATED 28 TH OCTOBER, 2002. SUCH NOTICE WAS SEVERED UPON THE ASSESSEE ON 24 TH MARCH,2004 BUT AS PER THE AO RETURN WAS FILLED BY THE ASSESSEE TRUST BEYOND THE PRESCRIBED PERIOD ON 10.0 2.2005 DECLARING TOTAL INCOME AT RS.52,310/-. THE AO HAS FURTHER HE LD THAT SINCE REGISTRATION HAS NOT BEEN GRANTED, THE ASSESSEE WOU LD NOT BE ENTITLED TO BENEFIT OF EXEMPTION U/S 11 TO 13 OF THE ACT AND THE ASSESSMENT HAS ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 14 BEEN COMPLETED IN THE STATUS OF UNREGISTERED TRUST( AOP). THEREAFTER, HE HAS NOTED THAT COMPLIANCE MADE BY THE ASSESSEE T RUST IN PURSUANCE WITH THE STATUTORY NOTICES ISSUED U/S 143 (2) BY SEVERAL ARS. IT WAS PLEADED BEFORE HIM THAT IN VIEW OF THE DECIS ION OF THE APPELLATE TRIBUNAL, DELHI BENCH, IN THE CASE OF M/S MAHILA SI DH NIRMAN YOJNA V. IAC 50TTJ (DEL) 494, EVEN IF THE TRUST WAS NOT REGI STERED U/S 12A, CONTRIBUTION TOWARDS CORPUS FUND WAS NOT LIABLE TO TAX BECAUSE SUCH RECEIPT WAS NOT INCOME. THE AO, HOWEVER, DISTINGUIS HED THE AFORESAID DECISION ON THE GROUND THAT IN THAT CASE THE REGIST RATION U/S 12A WAS PENDING FOR DECISION WHEREAS IT HAS BEEN REJECTED IN THE CASE OF THE ASSESSEE. THE AMOUNT STANDING IN BUILDING FUND OVER AND ABOVE THE INCOME DECLARED WAS BROUGHT TO TAX. THE ASSESSMENT WAS CHALLENGED BEFORE THE CIT (A) AND DETAILED WRITTEN SUBMISSIONS TOGETHER WITH COPY OF VARIOUS DECISIONS RELIED UPON, THE COPY OF AUDIT ED BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION AS WELL FOR EARLIER YE ARS TO SUPPORT THE CONTENTION THAT THE OPENING BALANCE OF BUILDING FUN D STOOD AT RS.2,92,126/- AND HENCE THE AO COMMITTED GRAVE ERRO R ON FACTS AS WELL IN LAW TO BRING THE ENTIRE BUILDING FUND TO TA X IN THE YEAR UNDER CONSIDERATION. THE ASSESSEE IN THE WRITTEN SUBMISSI ONS SUBMITTED THAT THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNTS A ND BALANCE SHEET HAVE BEEN FILED IN RESPONSE TO NOTICE U/S 148. THE ASSESSEE RAISED CORPUS FUND FOR CONSTRUCTING DHARAMSHALA BHAVAN TO FULFIL THE OBJECTIVES. FOR THE PURPOSE OF COLLECTED MONEY AS CO RPUS FUND FROM VARIOUS PERSONS AND SPENT THE MONEY SO RAISED TOWAR DS DHARAMSHALA FUND ON CONSTRUCTION OF DHARAMSHALA BHAVAN. IT WAS SUBMITTED THAT WITHOUT PREJUDICE TO THE ABOVE THE AO ERRED BY ADDIN G THE AMOUNTS TO THE TOTAL INCOME AS BUILDING FUNDS RECEIVED THOUGH THE MONEY RECEIVED DURING THE PERIOD WAS VERY SMALL. THE ASSESSEE ALSO CHALLENGED THE STATUS DECLARED BY THE AO WHICH IS NOT SUBJECT MATTE R IN APPEAL BEFORE US. IT WAS ALSO STATED THAT AO HAS ERRED IN TAXING BUILDING FUNDS RECEIVED AS INCOME. THE CORPUS FUND IS CAPITAL RECE IPT AND IS NOT COVERED BY THE DEFINITION OF INCOME AS GIVEN IN SEC TION 2(24). THE ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 15 DECISION OF THE APPELLATE TRIBUNAL, HYDERABAD BENCH B IN THE CASE OF SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN & RURA L AREAS VS. DCIT; 90ITD 493 WAS RELIED UPON IN WHICH AT PAGES 6 TO 13 IT WAS HELD ASSESSMENT ON DENIAL OF EXEMPTION - THOUGH BY VIR TUE OF SECTION 2(24)(IIA) VOLUNTARY CONTRIBUTION ARE INCOME THIS B Y ITSELF DOES NOT ENTITLE THE TAX GATHERER TO IGNORE ALL OTHER WELL SETTLED PRINCIPLES OF TAXATION AND GENERAL LAW AND LEVY TAX ON GROSS RECE IPTS WITHOUT CONSIDERING THE CLAIM FOR DEDUCTION. ONLY THE SURPL US OR PROFIT CAN BE BROUGHT TO TAX AND THE SAME HAS TO BE COMPUTED IN T HE MANNER LAID DOWN IN THE ACT APPLYING THE NORMAL PRINCIPLES OF A CCOUNTANCY & TAXATION LAWS. MATTER REMINDED FOR FRESH ASSESSMENT . FOLLOWING DECISIONS WERE RELIED ON BY THE HONBLE INCOME TAX APPELLATE TRIBUNAL. 1. SUKHDEO CHARITY ESTATE V. CIT 424 ITR (RAJ.) 218 2. SUKHDEO CHARITY ESTATE V. ITO 192 ITR 613 (RAJ.) 3. NIRMAL AGRICULTURAL SOCIETY V. ITO 94 ITD 152 4. ARYA VYUYA ABHYUDAYA SANGU V. IT ITA NO.77/HYD/02 D ATED 25 TH JUNE 2002. 5. MAHILA SIDDH NIRMAN YOJNA V/S IAC; 50TTJ (DEL) 494 THE DETAIL SUBMISSION OF THE ASSESSEE HAS BEEN RECO RDED BY THE CIT (A) IN THE APPELLATE ORDER. THE CIT (A) CONSIDERING THE SUBMISSIONS AND THE MATERIAL ON RECORD DIRECTED THE AO TO DELETE THE EN TIRE AMOUNT OF BUILDING FUND AS ADDED BY HIM. HIS FINDINGS FROM PA RA 4.2 TO 4.2.1 ARE REPRODUCED HEREUNDER- 4.2 THE ISSUE TO BE DECIDED NOW REMAINS IS ABOUT TAXABILITY OF CONTRIBUTION OF BUILDING FUND (CORPUS FUND). THE FACTUAL POSITIO N IS THAT THE ACTUAL AMOUNT AS PER AUDITED ACCOUNT ADDED IN THE BUILDING FIND DURING THE YEAR UNDER CONSIDERATION STOOD AT RS.2,329/- ONLY A ND THE BALANCE AMOUNT REPRESENT THE OPENING BALANCE AND HENCE THE AO ACTION IN TAXING THE ENTIRE AMOUNT OF RS.2,94,655/- FOR THE YEAR UNDER CONSIDERATION IS NOT FOUND TO BE AT ALL JUSTIFIED. FURTHER THE ISSUE REGARDING TAXABILITY OF CONTRIBUTION TO CAPITAL FUN D WERE EXAMINED IN ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 16 DETAIL IN THE CASE OF KALYAN AASHARAM TRUST IN AP PEAL NO U-349/04-05 DECIDED ON 27/08/2005. THE RELEVANT FINDINGS ARE EX TRACTED HEREUNDER. 4.5 HOWEVER COMING TO THE MAIN CONTENTIONS ABOUT T HE CORPUS DONATION BEING NOT LIABLE TO BE TREATED AS A REVENUE INCOME THERE AS A PRIMA FACIE SUFFICIENT MERIT IN THE CONTENTIONS OF THE AP PELLANT ADVANCE IN THIS BEHALF AS THE PROVISION OF SECTION 12(1) & 11( D) ALSO LAY DOWN THAT THESE ARE TO BE TREATED SEPARATELY AND NOT LIKE ALL OTHER REGULAR VOLUNTARY CONTRIBUTIONS. SECONDLY, ONCE COMMERCIAL PRINCIPLE ARE APPLIED FOR DETERMINATION OF INCOME IN THE CASE OF TRUST ALSO, THE AMOUNT RECEIVED BEING ADMITTEDLY ON FACTS BEING IN CAPITAL FIELD CAN NOT BE TREATED AS REVENUE IN ABSENCE OF CLEAR AND S PECIFIC PROVISION IN THIS BEHALF. THE VARIOUS DECISIONS CITED BY THE APP ELLANTS REFERRED BEFORE THE AO AND AGAIN PRESSED IN COURSE OF APPEAL PROCEEDINGS ALSO SUPPORT THE APPELLANTS CASE. THE AO APART FROM THE BRIEF OBSERVATION ABOUT SUCH DECISIONS BEING NOT APPLICABLE ON THE AC COUNT OF DISTINGUISHABLE FACTS HAS NOT RECORDED ANY DETAILED AND PROPER FINDINGS AS BASIS AS TO WHY SUCH DONATION RECEIPTS TOWARDS SPECIFIC CORPUS FUND WERE LIABLE TO BE TAXED AS INCOME OF TH E TRUST FOR THE YEARS UNDER CONSIDERATION EVEN DESPITE THE FACT THAT SUCH DECISION WERE CITED BEFORE HIM. 4.6 THE AFORESAID VIEW IS SUPPORTED IN THE HONBLE ITAT, DELHI BENCH IN THE CASE OF MAHILA SIDDH NIRMAN YOJNA V. IAC 58 ITD 472( DEL) WHEREIN IT WAS CATEGORICALLY HELD THAT VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST ARE IN COME SUBJECT TO EXEMPTION I.E. CONTRIBUTIONS RECEIVED TOWARDS CORPU S. TO PUT IT DIFFERENTLY ALL VOLUNTARY CONTRIBUTIONS RECEIVED BY TRUST, OTHER THAN CONTRIBUTIONS TOWARDS CORPUS, ARE INCOME IN THE HAN DS OF RECIPIENTS. EVEN IF THE TRUST IS NOT REGISTERED U/S 12(A), CONT RIBUTIONS TOWARDS ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 17 CORPUS IS NOT LIABLE TO TAX BECAUSE THE RECEIPT ( I.E. DONATION TOWARDS CORPUS) ITSELF IS NOT INCOME. 4.7 FURTHER, REFERENCE CAN BE MADE TO VERY DETAILE D & ELABORATE DECISION OF HONBLE ITAT, HYDERABAD BENCH IN THE CASE OF SOC IETY FOR INTEGRATED DEVELOPMENT IN URBAN & RURAL AREA V/S DCIT, 90 ITD 493 (HYD) WHEREIN REFERENCE WAS MADE TO THE EARLIER TRIBUNAL DECISION AND VIEW OF THE LD. AUTHORS KANGA AND PALKIWALA IN THE BOOK LAW & PRACTICE OF INCOME TAX, 8 TH EDITION VOL.I AS APPERING ON PAGE 387 AS WELL THE VIEWS OF LD. AUTHORS CHATURVEDI & PITHISARIA ( REFERRED I N PARA.27 OF THE ORDER ) & IT WAS HELD AS ARGUED BY THE REVENUE, THOUGH BY VIRTUE OF US 2(24)(IIA) VOLUNTARY CONTRIBUTION ARE INCOME, TO OUR MIND, THIS BY ITSEL F DOES NOT ENTITLE THE TAX GATHERER TO IGNORE ALL OTHER WELL SETTLED PRINC IPLES OF TAXATION AND GENERAL LAW AND LEVY TAX ON GROSS RECEIPTS WITHOUT CONSIDERING THE CLAIM FOR DEDUCTIONS. PRINCIPLES SUCH AS CAPITAL VE RSUS REVENUE, DOCTRINE OF OVERRIDING TITLE, FORM VERSUS SUBSTANCE , INTERPRETATION OF DEEMING PROVISIONS, ETC. HAVE TO BE APPLIED WHERE VER NECESSARY. ONLY THE SURPLUS OF PROFIT CAN BE BROUGHT TO TAX AN D THE SAME HAS TO BE COMPUTED IN THE MANNER LAID DOWN IN THE ACT APPL YING THE NORMAL PRINCIPLES OF ACCOUNTANCY AND TAXATION LAW. (EMPHASIS APPLIED) 4.8 LASTLY, IT MAY BE ADDED THAT THE ISSUE OF CORP US DONATION WAS NOT INVOLVED IN THE DECISION OF HONBLE ITAT, INDORE BE NCH IN THE CASE OF SHRI. MANKALAL DHANRAJ CHORDIA (SUPRA) AND HENCE SUC H DECISION WILL NOT BE APPLICABLE TO THE ISSUE ON HAND. 4.2.1 ACCORDINGLY THE A.O IS DIRECTED TO DELETE THE ENTIRE AMOUNT OF BUILDING FUND AS ADDED BY HIM. THE REVENUE IS IN APPEAL. ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 18 4. THE LD. DR DURING THE COURSE OF ARGUMENTS VERY F AIRLY CONCEDED THAT THE POINT IN ISSUE IS ALREADY COVERED BY THE DECISI ONS REFERRED TO ABOVE BY THE CIT(A) IN HIS ORDER. ON GOING THROUGH THE AB OVE SUBMISSIONS AND THE FINDINGS OF THE LD CIT(A), WE ARE OF THE VI EW THAT THOUGH NO FURTHER REASONS ARE REQUIRED IN THE MATTER BECAUSE THE ISSUE IS COVERED BY THE EARLIER ORDER OF THE APPELLATE TRIBUNAL, DEL HI BENCH IN THE CASE OF MAHILA SIDH NIRMAN YOJNA V. IAC (SUPRA) AS WELL A S THE ORDER OF THE APPELLATE TRIBUNAL, HYDERABAD BENCH IN THE CASE OF SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN AND RURAL AREAS V. DCIT, 90 ITD 493 AND THE RELEVANT PORTIONS HAVE ALREADY BEEN REPRODU CED BY THE CIT(A) IN THE IMPUGNED ORDER BUT WE ARE OF THE VIEW THAT S OME MORE POINTS COULD BE RECORDED IN THE ORDER. THE APPELLATE TRIBU NAL, DELHI BENCH IN THE CASE OF MAHILA SIDH NIRMAN YOJNA V/S IAC, 50 TTJ (DEL) 494 HELD THAT THE DONATION RECEIVED TOWARDS CORPUS IS NOT IN COME CHARGEABLE TO TAX EVEN IF TRUST IS NOT REGISTERED U/S 12A OF T HE ACT. THE APPELLANT TRIBUNAL HAS CONSIDERED THE PROVISIONS OF SECTION 2 (24)(IIA) OF THE ACT WHILE TAKING SUCH A VIEW IN THE MATTER THE AFORESAI D SECTION WAS AMENDED SUBSEQUENTLY AND BOTH THE AMENDED PROVISION S HAVE BEEN TAKEN INTO CONSIDERATION BY THE APPELLANT TRIBUNAL, HYDERABAD BRANCH, IN THE CASE OF SOCIETY FOR INTEGRATED DEVELOPMENT I N URBAN & RURAL AREAS V/S DCIT, 90ITD 493 & IN PARA 28 AND 29 THE P OINT IN ISSUE WAS ALSO DECIDED IN FAVOUR OF ASSESSEE. EARLIER THE FOL LOWING EXPRESSION WAS SUBSTITUTED- NOT BEING CONTRIBUTION MADE WITH A SPECIFIC DIRECT ION SHALL FORM PART OF CORPUS OF THE TRUST OR INSTITUTION BY DIRECT TA X LAW AMENDMENT ACT, 1987 FROM SECTION 2(24)(III) OF THE ACT. HOWEVER THE SAME LANGUAGE WAS INCORPORATED & INSERT ED IN SECTION 12(1) OF THE ACT WHICH READS THAT THE INCOME OF THE TRUST OR THE INSTITUTION FROM CONTRIBUTIONS: ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 19 12(1) ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY A TR UST CREATED WHOLLY FOR SUCH PURPOSES (NOT BEING CONTRIBUTION MADE WI TH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS O F THE TRUST OR INSTITUTION) SHALL FOR THE PURPOSES OF SECTION 11 B E DEEMED TO BE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST W HOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES & PROVISIONS OF TH AT SECTION & SECTION 13 SHALL APPLY ACCORDINGLY THEREFORE IT IS CLEAR THAT THE PROVISIONS WHICH ARE NOW THOUGH NOT FORM OF SECTION 2(24) OF THE ACT HAVE BEEN INCORPORATED IN SECTION 12(1) OF THE ACT THROUGH WHICH THE CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTIONS THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION HAVE BEEN CONSIDERED TO BE THE EXCEPTIO N TO THE POINT OF EARNING OF THE INCOME BY THE TRUST OR INSTITUTION F ROM THEIR CONTRIBUTIONS. THEREFORE THE SAME MATTERS IN ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL DELHI BENCH IN THE CASE OF MAHILA SIDDH NIRMAN YOJNA V/S IAC. THE SAME POINT HAS BEEN CONSID ERED BY THE APPELLANT TRIBUNAL, HYDERABAD BENCH IN THE SUBSEQUE NT DECISION IN THE MATTER OF SOCIETY FOR INTEGRATED DEVELOPMENT IN URB AN & RURAL AREAS VS DCIT 90 ITD 493. IN THE VIEW OF THE MATTER, IT I S CLEAR THAT THE ISSUE IS COVERED AGAINST THE REVENUE BY THE AFORESAID DEC ISIONS. 5. CONSIDERING THE ABOVE PROVISIONS, IT WOULD BE C LEAR THAT THE VOLUNTARY CONTRIBUTIONS RECEIVED ENQUIRY BY THE TRU ST OR INSTITUTION ARE INCOME SUBJECT TO EXCEPTION I.E. CONTRIBUTION RECEIV ED TOWARDS CORPUS. THEREFORE THE CIT (A) WAS JUSTIFIED IN ALLOWING THE APPEAL OF THE ASSESSEE. 6. AS A RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. 7. IN VIEW OF THE ABOVE, WHEN WE ANALYSE THE FACTS OF THE PRESENT CASE THEN ADMITTEDLY AND UNDISPUTEDLY THE ASSESSEE RECEIVED RS.40 ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 20 LACS AS CORPUS DONATION FOR BUILDING CONSTRUCTION W HICH WAS FOR SPECIFIC PURPOSE, HENCE, THE SAME CANNOT BE TREATED AS PART OF INCOME EVEN THOUGH THE ASSESSEE IS NOT REGISTERED U /S 12A OF THE ACT. AS WE HAVE NOTED ABOVE THAT THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. NARMIDIYA BRAHMIN SAMAJ (SUP RA), AFTER CONSIDERING THE ORDER OF ITAT, CALCUTTA, IN THE CAS E OF SHRI SHANKAR BHAGWAN ESTATE (SUPRA) HELD THAT THE AMOUNT BEING IN THE NATURE OF CORPUS FUND IS NOT TAXABLE UNDER THE INCOME TAX ACT BEING IN THE NATURE OF CAPITAL RECEIPT AND, THEREFORE, THE ADDIT ION MADE BY THE ASSESSING OFFICER TOWARDS TAXABLE INCOME OF THE ASS ESSEE IS NOT SUSTAINABLE. IN THE PRESENT CASE, WE HOLD THAT THE PROPOSITION LAID DOWN BY THE ITAT, INDORE BENCH, IN THE CASE OF NARM IDIYA BRAHMIN SAMAJ (SUPRA) IS SQUARELY APPLICABLE TO THE PRESENT CASE. THEREFORE, THE CONCLUSION DRAWN BY THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE ADDITION IS QUITE JUSTIFIED AND REA SONABLE AND WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH TH E FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND, HENCE, WE UPHOLD THE ACIT VS.UJJAIN SHIKSHAN SANGH SAMITI ITA NO. 22/IND/2015 21 SAME. CONSEQUENTLY, EFFECTIVE GROUND NOS. 1 AND 2, BEING DE VOID OF MERIT, ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON 30 TH MAY, 2017. SD/- SD/- &+ # # (O.P.MEENA) (C.M. GARG) ACCOUNTANT MEMBER J UDICIAL MEMBER MAY 30, 2017. DN/