CHANDRAPRABHU SWETAMBER JAIN MANDIR UPSHRAYA, DHANU V. ASST CIT PALGHAR CIRCLE, PALGHAR, PALGHAR

ITA 230/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3758 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 05-04-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 14-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS S JADHAVSR
• Assessee Lawyers: RAHUL R HAKANI
• Keywords: Capital asset; Gift; Charitable institution; Maximum Marginal Rate; Corroborative evidences; Capital receipt
• Section: 143(3); 12A; 12AA; 11

Judgement Text

D IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 230 /MUM/2016 ( / ASSESSMENT YEAR : 2011-12) CHANDRAPRABHU JAIN SWETAMBER MANDIR, 1, JAIN MANDIR, MAIN ROAD, DHANU 401601. / V. ASSISTANT COMMISSIONER OF INCOME TAX, PALGHAR CIRCLE, PALGHAR. ./ PAN : AAATS8782R ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI RAHUL R. HAKANI REVENUE BY : SHRI VISHWAS S. JADHAV,SR. AR / DATE OF HEARING : 23-05-2016 / DATE OF PRONOUNCEMENT : 12-08-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE-TRUST , BEING IT A NO. 230/MUM/2016, IS DIRECTED AGAINST APPELLATE ORDER DATED 21 ST OCTOBER, 2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 3, THANE (HER EINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2011-12 , THE APP ELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSMENT ORDE R DATED 31 ST JANUARY, 2014 PASSED BY THE LEARNED ASSESSING OFFICER (HEREI NAFTER CALLED THE AO) U/S 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTER CALL ED THE ACT). ITA 230/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE-TR UST IN THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL , MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READS AS UNDER:- I. TREATING CORPUS DONATION OF RS. 4,55,446/- AS INC OME 1. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT THE AP PELLANT IS A DULY REGISTERED TRUST, AND HENCE, CORPUS DONATION OF R S. 4,55,446/- WAS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST, AND HENCE, ENTITLED TO EXEMPTION. 2. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT (A) F AILED TO APPRECIATE THAT RS. 4,55,466/- IS CAPITAL RECEIPT, AND HENCE, NOT TAXABLE. 3. WITHOUT PREJUDICE TO THE ABOVE, EVEN IF RS. 4,55,446 /- IS HELD LIABLE TO TAX, THE DEFICIT OF RS. 2,00,897/- IN RECEIPT & EXPENDITURE ACCOUNT SHOULD HAVE BEEN DEDUCTED FROM THE SAME, AN D ONLY BALANCE SHOULD HAVE BEEN-TAXED. ILL. INVOKING SECTION 164(2) 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT ALL SU RPLUS CORPUS DONATION OF THE APPELLANT WAS EXEMPT U/S 11. HENCE, THE PROVISIONS OF SECTION 164(2) OF THE ACT ARE NOT APPLICABLE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A RELIGIOUS CHARITABLE TRUST REGISTERED UNDER BOMBAY PUBLIC TRUST ACT, 195 0 ENGAGED IN PROVIDING STAY FACILITIES TO SADHUS AND SADHVIS , AND POOJA FACILITIES TO SWETAMBER JAINS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) READ WITH SECTION 143(2) OF THE ACT, THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED COPY OF REGISTRATION U/S 12AA OR U/S 10(2 3C) OF THE ACT. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE TRUST S HOULD NOT BE ASSESSED AS ASSOCIATION OF PERSON (AOP) AND ALSO TO TAX CORPUS DONATIONS RECEIVED BY THE TRUST. IN REPLY, THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS MISPLACED THE COPY OF APPLICATION SUBMITTED TO THE COMMISSIONER O F INCOME TAX, THANE (CIT). THE A.O. OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTED THE COPY OF REGISTRATION U/S. 12AA OF THE ACT GRANTED IN FAVOUR OF THE ASSESSEE OR THE ITA 230/MUM/2016 3 APPLICATION MADE TO THE CIT FOR GRANTING OF REGISTR ATION AND MADE THE CLAIM WITHOUT ANY SUPPORTING EVIDENCE, THEREFORE, THE TRU ST WAS ASSESSED AS AOP AND ALSO TAXED AT MARGINAL MAXIMUM RATE U/S 167B(1) OF THE ACT. ON PERUSAL OF THE BALANCE SHEET OF THE ASSESSEE, THE A.O. NOTE D THAT THE ASSESSEE HAS RECEIVED A CORPUS DONATIONS, THE DETAILS OF WHICH A RE AS UNDER:- 1. BUILDING FUND - RS. 50,000/- 2. DEV DRAVYA FUND - RS. 2,92,066/- 3. GYAN FUND - RS. 41,541/- 4. VEYA VACHA FUND - RS. 1,809/- 5. AKHAND DEEPAK FUND - RS. 12,951/- 6. DADAWADI FUND - RS. 25,020/- 7. JIV DAYA FUND - RS. 18,063/- 8. AYAMBIL FUND - RS. 13,996/- TOTAL - RS. 4,55,446/- ========== THE A.O. ASKED THE ASSESSEE TO EXPLAIN WHY CORPUS F UND DONATIONS RECEIVED OF RS.4,55,446/- SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE AND TAXED AS DEDUCTION U/S 11 IS NOT AVAILABLE TO THE TRUST. THE ASSESSEE SUBMITTED THAT ANY RECEIPT CANNOT BE TAXED UNLESS IT IS AN IN COME WITHIN THE MEANING OF SECTION 2(24)(IIA) R.W.S. 12 OF THE ACT. IT IS SUBM ITTED BY THE ASSESSEE THAT CONTRIBUTION MADE WITH A SPECIFIC DIRECTION THAT TH EY SHALL FORM PART OF THE CORPUS OF THE TRUST WOULD NOT BE CONSIDERED AS INCO ME OF THE TRUST. THE A.O. REJECTED THE CONTENTIONS OF THE ASSESSEE AS THE ASS ESSEE IS NOT HAVING REGISTRATION U/S 12A/12AA OF THE ACT AND THE BENEFI T GIVEN BY SECTION 2(24)(IIA) R.W.S. 12 OF THE ACT IS NOT AVAILABLE TO THE ASSESSEE. THE A.O. HELD THAT THE PROVISIONS OF SECTION 11 & 12 ARE NOT APPL ICABLE TO THE ASSESSEE AS THE ASSESSEE IS NOT A REGISTERED TRUST U/S 12A/12AA OF THE ACT. THE AO OBSERVED THAT AS PER THE PROVISIONS OF SECTION 11(1 )(D) OF THE ACT INCOME IN THE ITA 230/MUM/2016 4 FORM OF VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFI C DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST SHALL NOT BE I NCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE TRUST IN RECEIPT OF THE INCOME. IN THE ABSENCE OF REGISTRATION U/S 12A OR 12AA OF THE ACT THE IMMUNIT Y GRANTED BY SECTION 11(1)(D) IS NOT AVAILABLE TO THE ASSESSEE FOR CORPU S DONATION AS SECTION 11 OF THE ACT IS NOT APPLICABLE FOR AOP. THUS , THE A.O . ADDED AN AMOUNT OF RS. 4,55,446/- TO THE TOTAL INCOME OF THE ASSESSEE BEI NG CORPUS DONATION RECEIVED BY THE ASSESSEE, VIDE ASSESSMENT ORDER DAT ED 31.01.2014 PASSED U/S 143(3) OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 31.01.20 14 PASSED BY THE A.O. U/S. 143(3) OF THE ACT, THE ASSESSEE FILED ITS FIR ST APPEAL BEFORE LEARNED CIT(A). 5. BEFORE THE LD. CIT(A), THE ASSESSEE TRUST SUBMIT TED THAT ASSESSEE IS CHARITABLE TRUST FORMED FOR RELIGIOUS AND CHARITABL E PURPOSES AND IS DULY REGISTERED WITH THE CHARITY COMMISSIONER UNDER THE BOMBAY PUBLIC TRUST ACT,1950 VIDE REGISTRATION CERTIFICATE DATED 5 TH SEPTEMBER, 1953 AND WAS ALSO REGISTERED WITH THE CIT. THE ASSESSEE SUBMITTED TH AT THE ASSESSEE HAS RECEIVED CORPUS DONATION TO THE TUNE OF RS. 4,55,44 6/- AND FILED ITS RETURN OF INCOME DECLARING NIL INCOME. THE ASSESSEE SUBMITTED THAT THE CERTIFICATE U/S 12A OF THE ACT GRANTED IN FAVOUR OF THE ASSESSEE-TR UST WAS NOT TRACEABLE AND THE ASSESSEE FILED ANOTHER APPLICATION FOR OBTAININ G COPY OF THE CERTIFICATE OF REGISTRATION U/S 12A/12AA OF THE ACT WITH CIT LONG BACK BUT NO REPLY HAS BEEN RECEIVED AND HENCE IT SHALL BE DEEMED THAT REG ISTRATION HAS BEEN GRANTED. THE ASSESSEE SUBMITTED THAT THE CORPUS FUN D OF RS.4,55,446/- RECEIVED ARE IN THE NATURE OF DONATIONS WITH SPECI FIC DIRECTIONS AS TO ITS APPLICATION TOWARDS SPECIFIC PURPOSES FOR WHICH RES PECTIVE FUNDS WERE CREATED WHICH CANNOT BE USED FOR ANY OTHER PURPOSES AS PER RELIGIOUS CUSTOMS AND THUS BEING CAPITAL RECEIPTS CANNOT BE TAXED. THUS, IT WAS SUBMITTED THAT BY VIRTUE OF PROVISIONS OF SECTION 11(1)(D) AND SECTI ON 12(1) OF THE ACT , ITA 230/MUM/2016 5 DONATIONS RECEIVED TOWARDS CORPUS OF THE TRUST/VARI OUS FUNDS SHALL NOT BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDE R TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. IT WAS SUBMITTED THAT RECEIPT CANNOT BE TAXED AS INCOME UNLESS IT IS AN INCOME WITHIN MEAN ING OF SECTION 2(24)(IIA) OF THE ACT READ WITH SECTION 12 OF THE ACT. SECTION 12 OF THE ACT MAKES IT CLEAR THAT CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTIONS THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION SHALL NOT BE CONSIDERED AS INCOME OF THE TRUST. THE ASSESSEE ALSO SUBMITTED THAT BEING AOP, BY VIRTUE OF PROVISIONS OF SECTION 56(2)(VII) OF THE ACT, SUCH RECEIPTS ARE NO T TAXABLE IN THE HANDS OF THE ASSESSE AS INCOME FROM OTHER SOURCES. IT WAS ALSO S UBMITTED THAT THE AO ALSO ERRED IN TAXING THE ASSESSEES INCOME AT MAXIMUM MA RGINAL RATE IN THE STATUS OF AOP. IT WAS SUBMITTED THAT NO PART OF THE ASSESS E INCOME IS LIABLE TO BE CHARGED AT MAXIMUM MARGINAL RATES SINCE NO PART OF THE INCOME OF THE ASSESSEE ENURES OR IS USED OR APPLIED DIRECTLY OR I NDIRECTLY FOR THE BENEFIT OF SPECIFIED CATEGORY OF PERSONS REFERRED TO IN SECTIO N 13(3) OF THE ACT, THAT NO PART OF THE TRUST FUNDS ARE INVESTED IN CONTRAVENTI ON OF THE INVESTMENT PATTERN PRESCRIBED U/S 13(5) OF THE ACT, THE ASSESSEE TRUST IS NOT ENGAGED IN THE ANY BUSINESS AND THE OBJECTS OF TRUST IS NOT TO EARN PR OFIT AND TO SHARE AMONG THE MEMBERS . THE ASSESSEE RELIED UPON THE FOLLOWING CASE LAWS:- 1. PEETADHIPATHI TRUST, MYSORE V. DEPARTMENT OF INCOME TAX, BANGALORE ITAT ITA NO. 1382 & 1535/BANG/2010. 2. SREE RAMKRISHNA SAMITY V. DCIT CIR. 2, SILIGIRI, IT A NO. 1680 TO 1685/2012 DATED 9-10-2015. 3. GAUDIYA GRANTH ANUVED TRUST V. DEPARTMENT OF INCOME TAX, ITA NO. 386/AGRA/2012. 4. SHRI SHANKAR BHAGWAN ESTATE V. INCOME TAX OFFICER ( CALCUTTA), [1997] 061 ITD 0196(CAL). 5. SOCIETY FOR THE PROMOTION OF EDUCATION, ADVENTURE,S PORTS AND CONSERVATION OF ENVIRONMENT V. CIT (2008) 171 TAXMA NN 113(ALL.) ITA 230/MUM/2016 6 6. REV. FATHER TRUST OSCAR COLASO MEMORIAL MEDICAL ASS OCIATION V. CIT (2009) 31 SOT 1(MUM.) 7. R.B.SHREERAM RELIGIOUS & CHARITABLE TRUST V. CIT (1 988) 172 ITR 373(BOM) THE ASSESSEE SUBMITTED THAT THE A.O. HAS ERRED IN B RINGING TO TAX THE INCOME OF THE ASSESSEE AT MAXIMUM MARGINAL RATE IN THE STA TUS OF AOP. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE REJECTED THE CONTENTION OF THE ASSESSEE. THE LD. CIT(A) HELD TH AT THE ASSESSEE FAILED TO SUBMIT THE COPY OF REGISTRATION U/S 12AA OR U/S 10( 23C) OF THE ACT NOR COPY OF APPLICATION MADE TO CIT FOR APPLYING FOR REGISTR ATION WAS PRODUCED BEFORE THE AO, HENCE, EXEMPTION CLAIMED U/S 11 OF THE ACT WAS RIGHTLY REJECTED BY THE A.O.. THE LD. CIT(A) FURTHER HELD THAT THE ASS ESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 OF THE ACT BEING UNREGISTERED TRUS T, THEREFORE, THE ASSESSEES STATUS HAD TO BE TREATED AS AOP AND THE CORPUS FUND DONATION RECEIPT IS LIABLE TO BE TAXED. HOWEVER, IN THE ABS ENCE OF ELABORATE DISCUSSION BY THE A.O. AS TO WHETHER THE AOP HAS TO BE TAXED U /S 167B(1) OR U/S 164(2), AND THE OBJECTS OF THE SETTING UP OF THE TRUST IS F OR PUBLIC TRUST, THEREFORE THE PROVISIONS OF SECTION 164(2) OF THE ACT ARE APPLICA BLE AND THE ASSESSEE INCOME SHALL BE TAXED AT NORMAL RATES INSTEAD OF MAXIMUM M ARGINAL RATES, VIDE APPELLATE ORDERS DATED 21-10-2015. 6. AGGRIEVED BY THE APPELLATE ORDER DATED 21-10-201 5 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNA L. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS RELIGIOUS CHARITABLE TRUST DULY REGISTERED UNDER TH E BOMBAY PUBLIC TRUST ACT,1950. IT IS SUBMITTED THAT THE ASSESSEE HAS RE CEIVED CORPUS DONATIONS OF RS. 4,55,446/- DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. THE ITA 230/MUM/2016 7 LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE IS NOT REGISTERED U/S 12AA OF THE ACT. THE ASSESSEE HAS RECEIVED CORPUS DONATIONS OF RS.4,55,466/- WHICH CANNOT BE CHARGED TO TAX UNDER THE ACT. THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEE COULD NOT TRACE THE APPLICATION MADE T O THE CIT FOR APPLYING FOR COPY OF CERTIFICATE OF REGISTRATION U/S 12A/ 12AA O F THE ACT , WHICH WAS NOT REJECTED BY THE CIT AND THE SAME SHALL BE DEEMED TO BE GRANTED. IT WAS SUBMITTED THAT THE A.O. DENIED THE EXEMPTION TO THE ASSESSEE AND BROUGHT TO TAX CORPUS DONATION AT MAXIMUM MARGINAL RATE OF TAX . IT IS SUBMITTED THAT THERE IS CORPUS DONATIONS OF RS. 4,55,446/- WHICH I S NOT TAXABLE EVEN IF THE TRUST IS NOT REGISTERED UNDER 12A/12AA OF THE ACT. IT IS SUBMITTED THAT THE DONORS HAVE DONATED THE CORPUS DONATIONS WITH SPECI FIC DIRECTIONS ABOUT ITS APPLICATION TOWARDS SPECIFIC PURPOSE FOR WHICH THE RESPECTIVE FUNDS WERE CREATED AND IT CANNOT BE USED FOR ANY OTHER PURPOSE S. THE LD. COUNSEL RELIED UPON THE FOLLOWING DECISIONS:- 1. ITO V. SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG ED UCATION TRUST, ITA NO. 5082/DEL./2010 DATE 19.1.2011, DELHI TRIBUN AL. 2. DIRECTOR INCOME TAX V. SMT. BASANTI DEVI & SHRI CHA KHAN LAL GARG EDUCATION TRUST, ITA NO. 927/2009 DATE 23.9.2009, D ELHI TRIBUNAL. 3. ITO V. GUDIYA GRANTH ANUVED TRUST (2013) 28 ITR (TR IB) 161 (AGRA) (TRIB). 4. INDIAN SOCIETY OF ANAESTHESIOLOGISTS V. ITO (2014) 32 ITR (TRIB) 152 (CHENNAI TRIB). 5. ITO V. VOKKALIGARA SANGHA (2015) 44 CCH 509 (BANG) (TRIB) 6. SHRI SHANKAR BHAGWAN ESTATE V. ITO (1997) 61 ITD 19 6 (CAL. TRIB). THE ASSESSEE CONTENDED THAT THE CORPUS DONATIONS CA NNOT BE BROUGHT TO TAX AND ALSO THE LD. CIT(A) DIRECTED THE A.O. TO BRING THESE INCOME TO TAX AT THE NORMAL RATE AND NOT MAXIMUM MARGINAL RATE AS HELD B Y THE AO AND IN VIEW OF THE RELIEF GRANTED BY THE LEARNED CIT(A) TO THE EXT ENT OF CHARGING CORPUS DONATION AT NORMAL RATES, GROUND NO. III(4) HAS BEC OME INFRUCTUOUS. 8. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF THE LEARNED CIT(A) ITA 230/MUM/2016 8 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED ON. WE HAVE OBSERVED THAT THE ASSESSEE IS A RELIGIOUS CHARITABLE TRUST DULY R EGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT,1950. THE ASSESSEE COULD NOT PRODU CE REGISTRATION U/S 12A/12AA OF THE ACT AND HENCE IT COULD BE PRESUMED THAT THE ASSESSEE IS NOT REGISTERED U/S 12A/12AA OF THE ACT AS THE ONUS WAS ON THE ASSESSEE TO BRING ON RECORD THE EVIDENCES TO PROVE ITS CONTENTIONS WH ICH IT WANT COURT TO BELIEVE AND CONSEQUENTLY TO SEEK IMMUNITIES AND PROTECTIONS GRANTED TO A REGISTERED TRUST. THE ASSESSEE HAS RECEIVED CORPUS DONATIONS TO THE TUNE OF RS. 4,55,446/- DURING PREVIOUS YEAR RELEVANT TO THE ASS ESSMENT YEAR WHICH ARE BEING GIVEN WITH SPECIFIC DIRECTIONS BY THE DONORS TO BE APPLIED TOWARDS SPECIFIC PURPOSE FOR WHICH THE RESPECTIVE FUNDS WER E CREATED . THIS IS AN ADMITTED POSITION BETWEEN THE PARTIES AND THERE IS NO DISPUTE WITH RESPECT TO THIS PROPOSITION. THE DETAILS OF THE CORPUS DONATIO NS ARE AS UNDER : 1. BUILDING FUND - RS. 50,000/- 2. DEV DRAVYA FUND - RS. 2,92,066/- 3. GYAN FUND - RS. 41,541/- 4. VEYA VACHA FUND - RS. 1,809/- 5. AKHAND DEEPAK FUND - RS. 12,951/- 6. DADAWADI FUND - RS. 25,020/- 7. JIV DAYA FUND - RS. 18,063/- 8. AYAMBIL FUND - RS. 13,996/- TOTAL - RS. 4,55,446/- ========== THESE ABOVE STATED SPECIFIC DONATIONS GIVEN BY THE DONORS TO BE UTILIZED FOR SPECIFIC PURPOSES CANNOT BE DIVERTED FOR ANY OTHER PURPOSES BY THE ASSESSEE ITA 230/MUM/2016 9 AND ARE CREDITED TO THE RESPECTIVE FUNDS IN THE BAL ANCE SHEET , AND UTILIZATION THEREOF IS ALSO REFLECTED FROM THESE SPECIFIC FUNDS . WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE ASSESSE AS SET OUT ABO VE AND HAVE OBSERVED THAT THE COURTS/TRIBUNALS HAVE TAKEN A CONSISTENT VIEW T HAT THESE CORPUS DONATIONS ARE HELD TO BE CAPITAL RECEIPTS BEING CAP ITAL IN NATURE AND ARE NOT TAXABLE DESPITE THE FACT THAT TRUST IS NOT REGISTER ED U/S 12A/12AA OF THE ACT. IN ITO(E) V. BASANTI DEVI & SHRI CHAKHAN LAL GARG E DUCATION TRUST IN ITA NO. 5082(DEL.) 2010 FOR ASSESSMENT YEAR 2002-03 VIDE OR DERS DATED 19-01-2011, ITAT, DELHI RELYING ON ITAT, DELHI DECISION IN THE TAXPAYERS OWN CASE FOR ASSESSMENT YEAR 2003-04 WHEREBY THE TRIBUNAL HELD T HAT THE AMOUNT RECEIVED BY THE TAX-PAYER TRUST FROM ITS SETTLER, T OWARDS INFRASTRUCTURE FUND, WAS NOT TAXABLE IN THE HANDS OF THE TAX-PAYER TRUST , DESPITE THE FACT THAT THE TAX-PAYER TRUST IS NOT REGISTERED U/S 12A OF THE AC T, AND CONSEQUENTLY THE TRIBUNAL DISMISSED THE REVENUE APPEAL. THE REVENUE WENT IN APPEAL AND THE HONBLE DELHI HIGH COURT DISMISSED THE APPEAL OF TH E REVENUE AGAINST THE TRIBUNALS ORDER FOR ASSESSMENT YEAR 2003-04 IN ITA NO. 927/2009 VIDE ORDERS DATED 23-09-2009 IN BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUST. SIMILAR VIEW WAS TAKEN BY ITAT, AGRA IN THE CASE OF ITO V. GAUDIYA GRANTH ANUVED TRUST REPORTED IN (2014) 48 TAXMANN.COM 348( AGRA-TRIB) WHEREBY TRIBUNAL HELD AS UNDER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED FEBRUARY 24, 2012 PASSED BY THE LEARNED COMMISSIONER OF INCO ME-TAX (APPEALS)-I, AGRA FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL : '1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN LAW AND ON FACTS IN FAILING TO APPRECIATE THAT VOLUNTARY CO NTRIBUTIONS (WHETHER ITA 230/MUM/2016 10 CORPUS DONATIONS OR GENERAL DONATIONS) RECEIVED BY A CHARITABLE TRUST ARE INCOME AS DEFINED VIDE SECTION 2(24)(IIA) OF TH E ACT AND CORPUS DONATIONS ARE EXEMPT FROM TAX UNDER SECTION 11(1)(D ) ONLY IF ASSESSEE IS REGISTERED UNDER SECTION 12A/12AA OF THE ACT. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HA S ERRED IN PLACING RELIANCE UPON THE APPELLATE DECISION OF THE HON'BLE DELHI HIGH COURT IN I.T.A. NO. 5082/DEL/2010 IN THE CASE OF IT O (EXEMPTION) V SMT. BASANTI DEVI AND SHRI CHAKHAN LAL GARG EDUCATI ON TRUST FOR THE ASSESSMENT YEAR 2003-04, WHICH IN TURN IS NOW U NDER CHALLENGE IN THE HON'BLE SUPREME COURT. 3. THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-1, AGRA BEING ERRONEOUS IN LAW AND ON FACTS BE SET ASIDE AN D THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 4. THE APPELLANT CRAVES TO AMEND THE GROUNDS OF THE AP PEAL STATED ABOVE AND WHEN NEED FOR DOING SO MAY ARISE.' 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE- TRUST HAS SHOWN DONATION OF RS. 68,50,000 FROM BBT, MUMBAI. THE ASS ESSING OFFICER COMPUTED THE ASSESSMENT ON TOTAL INCOME OF RS. 68,7 0,000 REJECTING THE ASSESSEE'S CONTENTION THAT DONATION RECEIVED TOWARD S THE CORPUS OF THE TRUST. THE COMMISSIONER OF INCOME-TAX (APPEALS) DEL ETED THE ADDITION OF RS. 68,50,000 OUT OF THE ADDITION OF RS. 68,70,000 MADE BY THE ASSESSING OFFICER AS UNDER: 'I HAVE ALSO EXAMINED THE TERM CORPUS FUND AND CORP US DONATION AS IT IS BEING GENERALLY USED WITH RESPECT TO A TRUST. A COR PUS FUND DENOTES A PERMANENT FUND KEPT FOR THE BASIC EXPENDITURES NEED ED FOR THE ADMINISTRATION AND SURVIVAL OF THE ORGANISATION. TH E CORPUS FUND IS GENERALLY NOT ALLOWED TO BE UTILISED FOR THE ATTAIN MENT OF THE PURPOSES, ITA 230/MUM/2016 11 BUT THE INTEREST/DIVIDEND ACCUSED ON SUCH FUND CAN BE UTILISED AS WELL AS ACCUMULATED. SUCH FUND CAN ALSO BE USED FOR CREATIO N OF CAPITAL ASSET OR PROPERTY OF THE TRUST FROM WHICH INCOME CAN BE GENE RATED. CORPUS FUND ARE GENERALLY CREATED OUT OF CORPUS DONATION. A DON ATION WILL BE TREATED AS CORPUS DONATION ONLY IF IT IS ACCOMPANIED BY A S PECIFIC WRITTEN DIRECTION OF THE DONOR. IN THE ABSENCE OF ANY WRITT EN DIRECTION OF THE DONOR, A CONTRIBUTION OF GRANT CANNOT BE TRANSFERRE D TO CORPUS FUND. IN THE PRESENT CASE, THE DONOR, THE BHAKTIVEDANTA BOOK TRU ST HAS VERY CATEGORICALLY IN HIS LETTER, WHILE PROVIDING MONEY TO THE APPELLANT TRUST, HAS MENTIONED THE AMOUNT OF RS. 68,50,000 AS CORPUS DONATION AND SUCH AMOUNT HAS BEEN USED BY THE TRUST FOR PURCHASING TH E LAND AND GIVING MONEY ON INTEREST AS LOAN. THEREFORE, THE AMOUNT OF RS. 68,50,000 SHOWN BY THE APPELLANT TRUST HAS BEEN FOUND TO BE IN THE NATURE OF CORPUS DONATION. NOW, THE QUESTION ARISES WHETHER SUCH CORPUS DONATI ON IS TAXABLE AS INCOME OR NOT EVEN IN THE CASES IN WHICH THE TRUST IS NOT REG ISTERED 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 REGISTRATION 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 EMPLOYEE S WELFARE FOUNDATION V. ASST. CIT (SUPRA). IN BOTH THE DECISI ONS REFERRED BY THE LEARNED AUTHORISED REPRESENTATIVE, IN CASE OF PENTAFOUR SOF TWARE EMPLOYEES WELFARE FOUNDATION V. ASST. CIT, IT HAS BEEN HELD THAT CORP US DONATION BEING IN THE NATURE OF CAPITAL RECEIPT ARE NOT CHARGEABLE TO INC OME-TAX. THE DECISION OF THE INCOME-TAX APPELLATE TRIBUNAL, DELHI IN THE CASE OF BASANTI DEVI AND SRI CHAKHAN LAL GARG EDUCATION TRUST FOR BOTH ASSESSMEN T YEARS 2002-03 AND 2003A-04 ARE ANNEXED WITH THIS ORDER AS ANNEXURE A- 1 IN WHICH REFERENCE TO ITA 230/MUM/2016 12 THE DECISION IN THE CASE OF PENTAFOUR SOFTWARE EMPL OYEES WELFARE FOUNDATION IS ALSO GIVEN. I HAVE ALSO COME ACROSS ANOTHER DECISION OF THE HON 'BLE INCOME-TAX APPELLATE TRIBUNAL, KOLKATA IN THE CASE OF SHRI SHANKAR BHAGW AN ESTATE V. ITO [1997] 61 ITD 196 (CAL) IN WHICH, THE TAXABILITY OF CORPUS DONATION HAS BE EN 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 SE CTION 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 WITH EFFECT FROM AP RIL 1, 1973 SIMULTANEOUSLY WITH THE PRESENT SECTION 12, BOTH OF WHICH WERE INT RODUCED 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 SPECI FIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTI TUTION SHALL NOT BE CONSIDERED AS INCOME OF THE TRUST. THE BOARD'S CIRCULAR NO. 10 8 DATED MARCH 20, 1973 IS EXTRACTED AT PAGE 1277 OF VOLUME I OF SAMPATH IYENG AR'S LAW OF INCOME-TAX, 9TH EDN. IN WHICH THE INTER-RELATION BETWEEN SECTIO N 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 T RUST V. CIT [1988] 172 ITR 373 (SC) IT WAS HELD BY THE BOMBAY HIGH COURT THAT EVEN IGN ORING THE AMENDMENT TO SECTION 12, WHICH MEANS THAT EVEN BEFO RE THE WORDS APPEARING TO PARENTHESIS IN THE PRESENT SECTION 12, IT CANNOT BE HELD THAT VOLUNTARY CONTRIBUTORS SPECIFICALLY RECEIVED TOWARD S THE CORPUS OF THE TRUST MAY BE BROUGHT TO TAX. THE AFORESAID DECISION WAS F OLLOWED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. TRUSTEES OF KASTUR BAI SCINDIA COMMISSION TRUST [1991] 189 ITR 5 (BOM) . THE POSITION AFTER THE AMENDMENT IS A FORTIORI. IN THE PRESENT CASES THE ASSESSING OFFICER ON EVIDE NCE HAS ACCEPTED THE FACTS THAT ALL THE DONATIONS HAVE BEEN RECEIVED TOWARDS T HE CORPUS OF THE ITA 230/MUM/2016 13 ENDOWMENTS. IN VIEW OF THIS CLEAR FINDING, IT IS NO T 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 SUPPOR TED. 12. FOR THE ABOVE REASONS, WE HOLD AS UNDER : 1. THE RELIGIOUS ENDOWMENTS ARE NOT INVALID ON THE GRO UND THAT NEITHER THE TEMPLE NOR THE IMAGE HAD BEEN CONSECRATED AT T HE TIME OF CREATING THE ENDOWMENTS. 2. THE ASSESSEES HAVE TO BE ASSESSED IN THE STATUS OF 'INDIVIDUAL' SINCE THEY ARE ARTIFICIAL JURIDICAL ENTITIES AND 3. THE VOLUNTARY CONTRIBUTIONS RECEIVED BY THE ASSESSE E TOWARDS THE CORPUS CANNOT BE BROUGHT TO TAX.' 6.5 EVEN AFTER CONSIDERING THE DEFINITION OF SECTIO N 2(24)(IIA) READ WITH SECTION 12, THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL, KOLK ATA ARRIVED TO THE CONCLUSION THAT THE VOLUNTARY CONTRIBUTION IN THE N ATURE OF CORPUS DONATION RAISED BY THE APPELLANT CANNOT BE BROUGHT TO TAX. I N THIS CASE ALSO, THE TRUST UNDER APPEAL WAS A PRIVATE RELIGIOUS TRUST NOT REGI STERED UNDER SECTION 12AA AND HENCE, CORPUS DONATION RECEIVED BY IT SHOULD NO T BE TAXABLE AS ITS INCOME. 6.6 AFTER CONSIDERING THE POSITION OF LAW AS IT IS PREVAILING AT PRESENT ON THE BASIS OF THE DECISION OF THREE TRIBUNALS, I.E., INC OME-TAX APPELLATE TRIBUNAL, CHENNAI, INCOME-TAX APPELLATE TRIBUNAL, DELHI AND I NCOME-TAX APPELLATE TRIBUNAL, KOLKATA AND FURTHER CONFIRMED BY THE DELH I HIGH COURT, THE CORPUS DONATION IS IN THE NATURE OF A CAPITAL RECEIPT AND ARE NOT TAXABLE, IRRESPECTIVE OF THE FACT WHETHER THE TRUST IS REGISTERED UNDER S ECTION 12AA OR NOT. THEREFORE, I AGREE WITH THE LEARNED AUTHORISED REPR ESENTATIVE THAT THE AMOUNT OF RS. 68,50,000 BEING IN THE NATURE OF CORPUS DONA TION IS NOT TAXABLE UNDER THE INCOME-TAX ACT BEING IN THE NATURE OF CAPITAL R ECEIPT AND THEREFORE, THE ITA 230/MUM/2016 14 ADDITION OF RS. 68,50,000 MADE BY THE ASSESSING OFF ICER TOWARDS THE TAXABLE INCOME OF THE ASSESSEE IS HEREBY DELETED AND ACCORD INGLY, GROUND NO. 2 IS ALLOWED.' 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPO N THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE LEARNED AUTHORISED R EPRESENTATIVE RELIED UPON THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S) AND SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS FOLLOWED T HE ORDERS OF THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH, WHICH HAS BEEN CON FIRMED BY THE HON'BLE DELHI HIGH COURT, THUS, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 5. THE LEARNED AUTHORISED REPRESENTATIVE HAS SUBMITTE D THAT THE ISSUE IS COVERED BY VARIOUS ORDERS OF THE INCOME-TAX APPELLA TE TRIBUNAL IN THE CASES OF SHRI SHANKAR BHAGWAN ESTATE V. ITO [1997] 61 ITD 196 (CAL) , SOCIETY FOR INTEGRATED DEVELOPMENT IN URBAN & RURAL AREAS V. DY . CIT [2004] 90 ITD 493 (HYD) , SRI DWARKADHEESH CHARITABLE TRUST V. ITO [1975] 98 ITR 557 (ALL) AND DY. CIT V. NASIK GYMKHANA [2001] 77 ITD 500 (PUNE) . 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE P ARTIES AND RECORDS PERUSED. THE GRIEVANCE OF THE REVENUE IS THAT THE C OMMISSIONER OF INCOME-TAX (APPEALS) HAS WRONGLY FOLLOWED THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN I. T. A. NO. 5082/DEL./2010, WHEREAS THAT ORDER HAS BEEN CHALLENGED BEFORE THE HON'BLE SUPREME COURT. THE REVENUE DID NOT DISPUTE THE FACTS. WE NOTICED THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) AFTER CONS IDERING THE DECISION OF THREE TRIBUNALS, I.E., INCOME-TAX APPELLATE TRIBUNAL, DEL HI IN THE CASE OF ITO (EXEMPTION) V. SMT. BASANTI DEVI & SHRI CHAKHAN LAL GARG EDUCATION TRUST [IT APPEAL NO. 5082 (DELHI) OF 2010, DATED 30-1-2009] T HE REVENUE FILED APPEAL BEFORE THE HON'BLE DELHI HIGH COURT. THE HON'BLE DE LHI HIGH COURT CONFIRMED THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL, THE REV ENUE FILED APPEAL BEFORE THE HON'BLE SUPREME COURT, WHICH HAS BEEN DISMISSED FOR NON-PROSECUTION VIDE JUDGMENT CIVIL APPEAL NOS. 7036 OF 2011, JUDGMENT D ATED JANUARY 28, 2013, INCOME-TAX APPELLATE TRIBUNAL CHENNAI BENCH IN THE CASE OF PENTAFOUR SOFTWARE ITA 230/MUM/2016 15 EMPLOYEES WELFARE FOUNDATION V. ASSTT. CIT [I.T. AP PEAL NOS. 751 & 752 (MDS.) OF 2007] AND OTHERS AND INCOME-TAX APPELLATE TRIBUN AL, KOLKATA BENCH IN THE CASE OF SHRI SHANKAR BHAGWAN ESTATE (SUPRA) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. WE FIND THAT THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE INCOME-TAX APP ELLATE TRIBUNAL, DELHI BENCH IN THE CASE OF SMT. BASANTI DEVI AND SHRI CHAKHAN L AL GARG EDUCATION TRUST AND OTHER ORDERS OF THE INCOME-TAX APPELLATE TRIBUN AL. SINCE FACTS ARE IDENTICAL, THEREFORE, TO MAINTAIN CONSISTENCY, WE FOLLOW THE A BOVE ORDERS OF THE INCOME-TAX APPELLATE TRIBUNAL AND THE LIGHT OF FACTS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. THE ITAT, CHENNAI IN INDIAN SOCIETY OF ANAESTHESIOL OGISTS V. ITO IN DECISION REPORTED IN (2014) 47 TAXMANN.COM 183(CHENNAI-TRIB. ) HELD THAT SPECIFIC FUNDS CREATED FOR FULFILLING SPECIFIC OBJECTIVES FO R WHICH THESE SEPARATE FUNDS ARE CONSTITUTED REMAIN AS CAPITAL FUNDS AS THE FUN DS CAN BE USED FOR FULFILLING SPECIFIC OBJECTIVES FOR WHICH THESE FUNDS ARE CONST ITUTED AND HENCE TO BE TREATED AS CORPUS FUNDS AND TO BE EXCLUDED FROM COM PUTATION OF INCOME. THE ITAT , BANGALORE IN ITO V. VOKKALIGARA SNGHA IN A DECISION REPORTED IN (2015) 44CCH 0509(BANG. TRIB.) WHEREBY THE TRIBUNAL HELD THAT VOLUNTARY CONTRIBUTIONS RECEIVED FOR A SPECIFIC PURPOSES CANN OT BE REGARDED AS INCOME U/S 2(24)(IIA) OF THE ACT SINCE THEY WERE CAPITAL R ECEIPTS BEING CORPUS FUND AND TIED UP GRANTS FOR SPECIFIC PURPOSES. IN OUR CONSIDERED VIEW KEEPING IN VIEW OUR DETAILED DISCUSSIONS ABOVE AND THE CASE LAWS CITED BEFORE US, THESE CORPUS DONATIONS O F RS.4,55,446/- RECEIVED BY THE ASSESSEE TRUST CANNOT BE BROUGHT TO TAX DESP ITE THE FACT THAT THE ITA 230/MUM/2016 16 ASSESSEE-TRUST WAS NOT REGISTERED U/S 12A/12AA OF T HE ACT. WE ORDER ACCORDINGLY. 10. IN THE RESULT, ASSESSEES APPEAL IN ITA NO 230 /MUM/2016 FOR ASSESSMENT YEAR 2011-12 IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 2016. # $% &' 12-08-2016 ( ) SD/- SD/- (SAKTIJIT DEY) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 12-08-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI SMC BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI