ITO, Trichy V. The Activists for Social Alternatives Trust, Trichy

ITA 395/CHNY/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6037 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Revenue expenditure
• Section: 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . , , BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER ./I.T.A. NO.395/MDS/2015 / ASSESSMENT YEAR : 2011-2012. THE INCOME TAX OFFICER, EXEMPTIONS WARD, TRICHY VS. M/S. THE ACTIVISTS FOR SOCIAL ALTERNATIVES TRUST, NO.2-A, SATHIYAM ILLAM, ALLI STREET, ANNAMALAI NAGAR, TRICHY 620 018. [PAN AAATT 0717F ] ( / APPELLANT) ( /RESPONDENT) ! ' # / APPELLANT BY : SHRI. PALANICHAMY, JCIT. $%! ' # /RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE & ' ' () /DATE OF HEARING : 11-10-2017 *+ ' () /DATE OF PRONOUNCEMENT : 13-10-2017 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER: IN THIS APPEAL FILED BY THE REVENUE, WHICH IS DIR ECTED AGAINST AN ORDER DATED 03.11.2014 OF THE LD. COMMISSIONER O F INCOME TAX (APPEALS), TIRUCHIRAPALLI, IT HAS RAISED THE FOLLO WING GROUNDS. ITA NO.395/MDS/2015. :- 2 -: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. GROUND NO.2: 2.1 THE ID. CIT (A) ERRED IN ALLOWING THE ASSESSE E'S CLAIM OF RS.5,77,86,018/- AS 'CORPUS DONATION', WHEREAS THE ASSESSEE TRUST HAD COLLECTED IT FROM ITS MEMBERS AS 'FEDERATION SU BSCRIPTION', WHICH IS EVIDENT FROM THE COPIES OF THE SAMPLE RECE IPTS ENCLOSED AS ANNEXURE 'A'; 2.2 THE ID. CIT (A) ERRED IN LAW AND ON FACTS BY HO LDING IN PAGE 6 & 7 OF HIS ORDER THAT, 'BEING A SPECIFIC DONATION COL LECTED DIRECTLY TOWARDS A SPECIFIC FUND IS IN THE NATURE OF CORPUS FUND AND THEREFORE DOES NOT FORM PART OF TOTAL INCOME OF THE ASSESSEE', WITHOUT REGARD TO THE FACT THAT THE AMOUNT HAD BEEN COLLECTED AS 'FEDERATION SUBSCRIPTION'; GROUND NO.3: 3.1 THE ID. CIT (A) ERRED IN LAW IN NOT APPRECIATIN G THAT THERE IS NO SPECIFIC DIRECTION FROM THE MEMBERS, IN THE DECL ARATION GIVEN ON THE BACK SIDE OF THE RECEIPTS, ABOUT WHAT PORTION O F THE AMOUNT WOULD BE TAKEN AS 'CORPUS DONATION'; 3.2 THE ID. CIT (A) FAILED TO TAKE NOTE THAT THE AM OUNT COLLECTED FROM MEMBERS WOULD PARTAKE THE CHARACTER OF 'VOLUNT ARY CONTRIBUTION' OF THE TRUST AND THE TRUST CANNOT ON ITS OWN ALLOCATE A SPECIFIC PERCENTAGE TOWARDS 'CORPUS' FUND WITHOUT A SPECIFIC DIRECTION TO THAT EFFECT. GROUND NO.4: 4.1 THE ID. CIT (A) FAILED TO TAKE NOTE THAT THE ST EREO-TYPED DECLARATION GIVEN ON THE BACKSIDE OF THE RECEIPTS I SSUED TO THE MEMBERS BY THE TRUST DOES NOT AMOUNT TO A SPECIFIC DIRECTION' WITHIN THE MEANING OF SECTION 11 (1 )(D) AS HELD IN KAMMA SANGHAM VS. OIT (EXEMPTION) 362 ITR (2014) 30 (AP) IN THE FOLLOWING MANNER: 'THERE IS NO CLEAR MENTIONING OF ANY DESIRE FOR MAK ING THE SAID DONATION TOWARDS CORPUS FUND. THERE IS NO SPEC IFIC DIRECTION IN WRITING THAT THE DONATION HAS BEEN MAD E FOR THE SPECIFIC PURPOSE OF CONSTRUCTION OF COMMERCIAL COMP LEX. IN VIEW OF THIS, THE DONATION SO RECEIVED ARE TO BE CONSIDERED ITA NO.395/MDS/2015. :- 3 -: AS NORMAL DONATION AND CAN NOT BE CONSIDERED AS DONATION TOWARDS CORPUS FUND'. 4.2 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THE F ACT THAT IN THE ABSENCE OF 'SPECIFIC DIRECTION' CHARACTERISING THE AMOUNT AS 'CORPUS DONATION' IT SHOULD BE TREATED AS A 'VOLUNTARY CONT RIBUTION', WHICH THE AO HAD CORRECTLY TREATED SO; 4.3 THE ID. CIT (A) FAILED TO NOTE THAT THE MEMBERS HAVE NOT GIVEN ANY 'LETTER' GIVING ANY SPECIFIC DIRECTION THAT A S PECIFIC AMOUNT WOULD BE ALLOCATED TOWARDS 'CORPUS DONATION' BUT ONLY SIG NED IN THE STEREOTYPED DECLARATION PRINTED ON THE BACKSIDE OF THE RECEIPT; GROUND NO.5: (UNUTILIZED SILVER JUBILEE PROGRAMME FUND) 5.1 ON THE FACTS AND CIRCUMSTANCE OF THE CASE, THE ID. CIT (A) ERRED IN ALLOWING THE ASSESSEE'S CLAIM NOT TO INCLUDE AN AMOUNT OF RS.42,25,283/- BEING THE UNSPENT 'SILVER JUBILEE PR OGRAMME FUND' IN THE 'INCOME & EXPENDITURE STATEMENT' AND SHOWING IT DIRECTLY IN T HE BALANCE SHEET IN COMPLETE DISREGARD OF THE ESTABLIS HED ACCOUNTING PRINCIPLES. 5.2 THE ID. CIT (A) ERRED IN GIVING RELIEF ON THE G ROUNDS THAT EVEN IF THE SILVER JUBILEE PROGRAMME FUND IS TAKEN INTO ACC OUNT THE ASSESSEE TRUST'S EXPENDITURE EXCEED 85% OF THE INCOME IN DIS REGARD OF THE FACT THAT IF THE CLAIM OF THE ASSESSEE OF RS.5,77,86,018 /- TOWARDS CORPUS DONATION IS ALSO DISALLOWED, THE AMOUNT APPLIED BY THE ASSESSEE WOULD BE FAR LESS THAN 85% OF ITS RECEIPTS, THEREBY MAKING IT TAXABLE. 5.3 THE ID. CIT (A) OUGHT TO HAVE APPRECIATED THAT ALL REVENUE RECEIPTS NEED TO BE AGGREGATED FOR COMPUTATION OF I NCOME AND ANY SHORTFALL IS TO BE BROUGHT TO TAX AS IT WAS RIGHTLY DONE BY THE AO IN THIS CASE. GROUND NO.6: 6.1 FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE AND THAT OF THE A SSESSING OFFICER BE RESTORED. 2. GROUNDS 1 & 6 ARE GENERAL IN NATURE NEEDING NO SPEC IFIC ADJUDICATION. ITA NO.395/MDS/2015. :- 4 -: 3. GROUNDS 2 TO 4 DEALS WITH AN ISSUE REGARDING TREAT MENT OF A SUM OF I5,77,86,018/-, CLAIMED BY THE ASSESSEE AS CORPUS DONATION. THIS CLAIM WHICH WAS DISALLOWED BY LD. ASSESSING OF FICER WAS ALLOWED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 4. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ASSESSE E WAS A CHARITABLE TRUST REGISTERED U/S. 12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). AS PER THE LD. DEPARTMENTAL RE PRESENTATIVE ASSESSEE HAD RECEIVED I100/- EACH FROM ITS 11,55,720 MEMBER S. SUBMISSION OF THE LD. DEPARTMENTAL REPRESENTATIVE WAS THAT OUT O F THIS, A SUM OF I5,77,86,017/- WAS TREATED BY THE ASSESSEE AS CORP US FUND. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, OUT OF I100/- CONTRIBUTED BY EACH MEMBER, ASSESSEE HAD TREATED I50/- AS CORPUS CONTRIBUTION FOR SILVER JUBILEE CORPUS FUND. CONTENTION OF THE LD. D EPARTMENTAL REPRESENTATIVE WAS THAT ASSESSEE WAS ONLY DIVERTIN G ITS SUBSCRIPTION INCOME. AS PER THE LD. DEPARTMENTAL REPRESENTATIV E, THE RECEIPTS ISSUED BY THE ASSESSEE TO ITS MEMBERS CARRIED ONLY A THUMB IMPRESSION OF THE MEMBERS. THEREFORE, AS PER THE LD. DEPARTME NTAL REPRESENTATIVE ITS MEMBERS HAD NO IDEA THAT A PART OF THE AMOUNT GIVEN BY THEM WAS BEING TAKEN TO CORPUS. AS PER TH E LD. DEPARTMENTAL REPRESENTATIVE, ASSESSEE HAD NOT OBTAINED A SPECIFI C DIRECTION FROM EACH OF THE DONOR REGARDING THE QUANTUM OF SUBSCRI PTION THAT WAS TO BE TREATED AS CORPUS. THUS, ACCORDING TO LD. DEPAR TMENTAL ITA NO.395/MDS/2015. :- 5 -: REPRESENTATIVE, LD. COMMISSIONER OF INCOME TAX (APP EALS) FELL IN ERROR WHEN HE HELD THAT ASSESSEE TRUST HAD COMPLIED WITH SEC.11 (1) (D) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). AC CORDING TO HIM THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS WRONG IN LAW IN HOLDING THAT SPECIFIC A DIRECTION FROM THE DONOR W AS NOT NECESSARY FOR TREATING A CONTRIBUTION AS CORPUS 5. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. RECEIPT ISSUED BY THE ASSESSEE ON RECEIPT OF CONTRIBUTION FROM ITS MEMBERS HAS BEEN R EPRODUCED AS SUCH BY THE LD. ASSESSING OFFICER AT PAGES 3 & 4 OF HIS ORDER. THE NARRATION IN THE SAID RECEIPT CLEARLY STATE THAT A PART OF T HE CONTRIBUTION WAS TO BE USED TOWARDS BUILDING UP A CORPUS FOR THE TRUS T. THE RECEIPTS WERE IN REGIONAL LANGUAGE. THEREFORE IN OUR OPINION , THE VIEW TAKEN BY THE LD. ASSESSING OFFICER THAT DONOR HAD NO IDEA RE GARDING DESTINATION OF THEIR DONATIONS CANNOT BE ACCEPTED. PART OF THE FUNDS EARMARKED TOWARDS CORPUS WAS DULY RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. ONCE THE DONOR HAD GIVEN ASSENT TO THE A SSESSEE TO TREAT A PART OF HIS DONATION TOWARDS CORPUS, WE CANNOT SAY THAT ASSESSEE VIOLATED ANY PROVISION OF THE ACT, WHEN DOING SO. ASSESSEE HAD EARMARKED I50/- OUT OF EVERY I100/- RECEIVED BY IT FROM ITS MEMBERS ITA NO.395/MDS/2015. :- 6 -: TOWARDS ITS CORPUS CONSISTENTLY. IN OUR OPINION SP ECIFIC DIRECTION MENTIONED IN SECTION 11(1) (D) OF THE ACT MEANS ON LY A DIRECTION FOR TREATMENT AS CORPUS, AND NOT THE QUANTUM THAT IS TO TREATED AS CORPUS. LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS IN OU R OPINION JUSTIFIED IN HOLDING THAT CORPUS DONATION COULD NO T BE TREATED AS PART OF THE INCOME OF THE ASSESSEE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS). GROUND NOS. 2 TO 4 OF THE REVENUE ARE DISMISSED. 7. GRIEVANCE RAISED BY THE REVENUE IN ITS GROUND NO. 5 IS ON DIRECTION OF THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) NOT TO INCLUDE I42,25,283/- BEING PART OF UNSPENT SILVER JUBILEE PROGRAMME FUND AS INCOME OF THE ASSESSEE. 8. LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT ASS ESSEE TRUST HAD NOT SHOWN THE SUM OF I2,88,93,008/- RECE IVED UNDER THE HEAD SILVER JUBILEE PROGRAMME FUND AS INCOME IN ITS INCOME AND EXPENDITURE ACCOUNT. ACCORDING TO LD. DEPARTMENTA L REPRESENTATIVE, ASSESSEE HAD INCURRED AN EXPENDITURE OF I2,46,67,72 5/-, OUT OF THESE RECEIPTS WHICH WAS ALSO NOT SHOWN IN THE INCOME A ND EXPENDITURE ACCOUNT. CONTENTION OF THE LD. DEPARTMENTAL REPRESE NTATIVE WAS THAT THESE FIGURES APPEARED ONLY IN RECEIPTS AND PAYMENT S ACCOUNT. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE WHEN BOTH RECE IPTS AND EXPENDITURE WERE CONSIDERED, THERE WAS AN EXCESS IN COME OF ITA NO.395/MDS/2015. :- 7 -: I42,25,283/-. CONTENTION OF THE LD. DEPARTMENTAL R EPRESENTATIVE WAS THAT SUCH EXCESS AMOUNT WAS RIGHTLY CONSIDERED BY LD. ASSESSING OFFICER AS INCOME OF THE ASSESSEE. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE, LD. COMMISSIONER OF INCOME TAX (APP EALS) FELL IN ERROR WHEN HE DELETED SUCH ADDITION. 9. PER CONTRA, LD. AUTHORISED REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD FILED A REVISED COMPUTATION OF INCOME INCLUDING SILVER JUBILEE PROG RAMME RECEIPTS AS A PART OF ITS GROSS RECEIPTS BEFORE THE LD. COMMISS IONER OF INCOME TAX (APPEALS). THE SAID STATEMENT READ AS UNDER:- GROSS RECEIPTS (EXCLUDING SILVER JUBILEE PROGRAMME FUND) : 4,92,10,464 ADD : SILVER JUBILEE PROGRAMME FUND - RECEIPTS : 2,88,93,008 GROSS TOTAL INCOME 85% ON I7,81,03,472/- : : 7,81,03,472 6,63,87,951 REVENUE EXPENDITURE (EXCLUDING SILVER JUBILEE PROGRAMME FUND) ADD: SILVER JUBILEE PROGAMME FUND EXPENSES : : 4,44,92,376 2,46,67,726/- 6,91,60,102 ----------------- CONTENTION OF THE ASSESSEE BEFORE THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) WAS THAT EVEN IF RECEIPTS OF SILVER JUBIL EE PROGRAMME FUND ITA NO.395/MDS/2015. :- 8 -: WAS TAKEN ACCOUNT, ITS SPENDINGS EXCEEDED 85% OF T HE GROSS RECEIPTS AND THEREFORE EXEMPTION U/S. 11 OF THE ACT COULD NO T BE DENIED. THIS HAS NOT BEEN DISPUTED BY THE REVENUE. IN OTHER WO RDS EVEN IF WE INCLUDE THE SUM OF I42,25,283/- BEING THE UNUTILIZ ED SILVER JUBILEE PROGRAMME FUND, AS A PART OF THE INCOME OF THE ASS ESSEE, STILL ITS UTILIZATION WAS MORE THAT 85% OF ITS GROSS RECEIPT S. THIS BEING THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN TAKING A VIEW THAT THERE COULD NOT BE AN ADDITION OF I42,25,283/-. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). GROUND NO.5 O F THE REVENUE STANDS DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED ON FRIDAY, THE 13TH OF OCTOBER, 2 017, AT CHENNAI. SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER SD/- ( . ! ' ) (ABRAHAM P. GEORGE) $ %& / ACCOUNTANT MEMBER - ' / CHENNAI . / DATED: 13TH OCTOBER, 2017. KV / ' $(0 1 2 1 ( / COPY TO: 1 . ! / APPELLANT 3. & 3( ( ) / CIT(A) 5. 167 $(8 / DR 2. $%! / RESPONDENT 4. & 3( / CIT 6. 79 :' / GF