Indian Society of Anaesthesiologists, Erode V. ITO, Salem

ITA 507/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6153 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T B BETGERI IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital receipt
• Section: 143(3); 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . . !' , # '$ % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI S.S. GODARA, JUDICIAL MEMBER ./ ITA NO. 507/MDS/2014 # & '& / ASSESSMENT YEAR : 2007-08 M/S INDIAN SOCIETY OF ANAESTHESIOLOGISTS, C/O SHRI S. SRIDHAR, ADVOCATE, 112/1, PERIYAR STREET, ERODE. PAN : AAATI 3385 A V. THE INCOME TAX OFFICER, WARD I(4), INCOME-TAX OFFICE, NO.3, GANDHI ROAD, SALEM 7. ()*/ APPELLANT) (,-)*/ RESPONDENT) )* . / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ,-)* . / RESPONDENT BY : SHRI T.B. BETGERI, IRS, JCIT / . 01 / DATE OF HEARING : 7 TH MAY, 2014 2!' . 01 / DATE OF PRONOUNCEMENT : 12 TH MAY, 2014 / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL FILED BY THE ASSESSEE RELATES TO ASSE SSMENT YEAR 2007-08. THE APPEAL IS DIRECTED AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AT SALEM, PASS ED ON - - I.T.A. NO. 507/MDS/14 2 31.12.2013 AND ARISES OUT OF THE ASSESSMENT COMPLET ED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE S OCIETIES REGISTRATION ACT. THE ASSESSEE-SOCIETY IS ALSO REG ISTERED UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961. THE REGI STRATIONS ARE STILL IN FORCE. 3. IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS RECEIVED THE FOLLOWI NG SPECIFIC FUNDS:- (A) AMOUNT RECEIVED TOWARDS AWARD FUND ` 5,28,000 (B) AMOUNT RECEIVED TOWARDS IJA FUND ` 13,32,000 (C) AMOUNT RECEIVED TOWARDS WSJA FUND ` 2,45,184 (D) LIFE MEMBERSHIP FEES ` 22,38,587 ` 43,43,771 4. IN THE COMPUTATION OF INCOME FILED BY THE ASSESS EE- SOCIETY, THE ABOVE STATED RECEIPTS HAVE BEEN TREATE D AS CAPITAL RECEIPTS FORMING PART OF THE CORPUS FUND OF THE ASS ESSEE-SOCIETY. BUT, THE ASSESSING OFFICER HELD THAT THESE RECEIPTS ARE GENERAL IN NATURE AND WITHOUT ANY SPECIFIC DIRECTIONS AS PROVI DED UNDER SECTION 11(1)(D). HE HELD THAT THESE RECEIPTS CANN OT BE TREATED AS CAPITAL IN NATURE. THEREFORE, HE TREATED THESE RECEIPTS AS - - I.T.A. NO. 507/MDS/14 3 INCOME IN THE NATURE OF VOLUNTARY CONTRIBUTIONS FAL LING UNDER SECTION 12. 5. IN FIRST APPEAL, THIS POSITION WAS CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE, T HE SECOND APPEAL BEFORE US. 6. WE HEARD BOTH SIDES IN DETAIL. THE TERM CORPUS FUND HAS NOT BEEN DEFINED IN THE INCOME-TAX ACT, 1961. SECTION 12(1) PROVIDES THAT DONATIONS TOWARDS CORPUS FUND OF A CH ARITABLE INSTITUTION SHALL BE EXCLUDED FROM THE VOLUNTARY CO NTRIBUTIONS CONSIDERED UNDER SECTION 12 AND THEREFORE, SUCH COR PUS DONATIONS WOULD NOT FORM PART OF THE INCOME OF A CH ARITABLE SOCIETY. 7. THE TERM CORPUS IS ESSENTIALLY A TERM RELATING TO MEDICAL SCIENCE. THE MEANING OF THE TERM IS HUMAN BODY. THE TERM IS ALSO GENERALLY USED TO EXPRESS THE WHOLE BODY OF A SUBJECT FOR A THOUGHT OR A FUND. THAT IS WHY THE TERM CORPUS J URIS IS IN FORCE TO MEAN THE BODY OF LAW. - - I.T.A. NO. 507/MDS/14 4 8. IN THE CONTEXT OF SECTIONS 11 AND 12 OF THE INCO ME-TAX ACT, 1961, THE TERM CORPUS FUND HAS NECESSARILY T O BE CONSIDERED AS THE CAPITAL FUND OF A CHARITABLE SOC IETY. THE CAPITAL FUND OF THE SOCIETY CANNOT BE A REVENUE FUN D IN NATURE. THAT IS WHY THE LAW HAS SPECIFICALLY EXCLUDED CORPU S DONATIONS FROM THE INCOME OF CHARITABLE SOCIETIES. 9. WHEN THE ISSUE RAISED IN THE PRESENT APPEAL IS E XAMINED IN THE ABOVE LINE OF DISCUSSION, IT IS TO BE SEEN T HAT LIFE MEMBERSHIP FEE IS DEFINITELY A CORPUS DONATION. TH E CAPITAL FUND OF A CHARITABLE SOCIETY IS BUILT-UP MAINLY BY THE LIFE MEMBERSHIP FEE. THIS IS MORE TRUE IN RESPECT OF AS SOCIATIONS LIKE ASSESSEE. THE ASSESSEE IS A SOCIETY OF PRACTI SING ANAESTHESIOLOGISTS. THEREFORE, AMONG OTHER ITEMS, THE LIFE MEMBERSHIP FEE CONTRIBUTED BY THE MEMBERS IS ALSO C APITAL FUND OF THE SOCIETY. THERE SHOULD NOT BE ANY DOUBT THAT LIFE MEMBERSHIP FEE ALWAYS REMAINS AS CONTRIBUTION TO TH E CORPUS FUND OF THE SOCIETY. THE AMOUNT RECEIVED BY THE SO CIETY TOWARDS AWARD FUND IS A SPECIFIC FUND. THE CONTRIBUTION RE CEIVED TO THAT SPECIFIC FUND IS ACCUMULATED AS CAPITAL FUND IN THE ACCOUNTS OF THE ASSESSEE-SOCIETY AND INTEREST INCOME ARISING OU T OF THAT FUND - - I.T.A. NO. 507/MDS/14 5 IS USED BY THE SOCIETY FOR GIVING AWARDS. THEREFOR E, IT IS TO BE SEEN THAT CONTRIBUTION MADE TOWARDS AWARD FUND IS N OT A VOLUNTARY DONATION CONCEIVED UNDER SECTION 12, BUT, CORPUS DONATION EXPLAINED IN SECTION 12(1) OF THE INCOME-T AX ACT, 1961. THE SAID AWARD FUND STANDS SEPARATE AND EVEN THOUGH TECHNICALLY NOT TERMED AS CORPUS FUND, IT IS IN THE NATURE OF CAPITAL FUND AND BY VIRTUE OF THAT NATURE, IT ALWAYS STANDS IN PARI PASSU WITH CAPITAL FUND OF THE ASSESSEE-SOCIETY. 10. THIS IS THE SAME CASE WITH THE AMOUNTS RECEIVED TOWARDS IJA FUND AND WSJA FUND. THOSE FUNDS ARE SPECIFICAL LY CREATED FOR PROCURING JOURNALS, BOOKS AND OTHER PROFESSIONA L MATERIALS FOR THE DEVELOPMENT OF PRACTISING ANAESTHESIOLOGISTS. L IKE THE AWARD FUND ALREADY DISCUSSED IN PARAGRAPH ABOVE, THESE AR E SPECIFIC FUNDS CONSTITUTED TO FULFIL SPECIFIC OBJECTIVES. I N THE CASE OF THESE FUNDS ALSO, THE CONTRIBUTIONS ARE ACCUMULATED UNDER A SEPARATE FUND AND TREATED AS CAPITAL FUND AND THE OBJECTIVES ARE SATISFIED BY UTILIZING SUCH FUNDS. 11. WHEN WE EXAMINE THE CASE AS A WHOLE, WE FIND TH AT ALL THE FOUR ITEMS OBJECTED TO BY THE ASSESSING OFFICER ARE - - I.T.A. NO. 507/MDS/14 6 ESSENTIALLY PART OF CAPITAL FUND AND THEREFORE, HAV E TO BE CONSIDERED AS CORPUS OF THE ASSESSEE-SOCIETY. THES E ARE ALL SPECIFIC FUNDS FOR FULFILLING SPECIFIC OBJECTIVES. FURTHER, ALL THOSE FUNDS ALWAYS REMAIN AS CAPITAL FUNDS AND THOSE FUND S ARE USED ONLY FOR THE PURPOSE OF FULFILLING THE OBJECTIVES F OR WHICH THOSE SEPARATE FUNDS ARE CONSTITUTED. 12. IN THE FACTS AND CIRCUMSTANCES, THE LOWER AUTHO RITIES HAVE GROSSLY ERRED IN TREATING THE ABOVE STATED FOUR FUN DS AS VOLUNTARY CONTRIBUTIONS IN THE NATURE OF INCOME AS PROVIDED U NDER SECTION 12 OF THE INCOME-TAX ACT, 1961. WE SET ASIDE THE F INDINGS OF THE LOWER AUTHORITIES. WE DIRECT THE ASSESSING OFFICER TO TREAT THE FOUR FUNDS AS CAPITAL FUNDS AND EXCLUDE THEM FROM T HE COMPUTATION OF INCOME FOR THE IMPUGNED ASSESSMENT Y EAR. 13. WHEN THE GROUNDS RAISED IN THE PRESENT APPEAL A RE DETERMINED ON THE MERITS OF THE ISSUES, THE OTHER G ROUNDS RAISED BY THE ASSESSEE IN THE APPEAL BECOME OTIOSE AND THE Y NEED NOT BE CONSIDERED. 14. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. - - I.T.A. NO. 507/MDS/14 7 ORDER PRONOUNCED ON MONDAY, THE 12 TH OF MAY, 2014 AT CHENNAI. SD/- SD/- (S.S. GODARA) (DR. O.K. NARAYANAN) ( . . !') ( . . . ) # '$ /JUDICIAL MEMBER /VICE-PRESIDENT /CHENNAI, 4' /DATED, THE 12 TH MAY, 2014. KRI. '5 . ,#067 87'0 /COPY TO: 1. )* /APPELLANT 2. ,-)* /RESPONDENT 3. / 90 () /CIT(A), SALEM 4. / 90 /CIT, SALEM 5. 7: ,#0# /DR 6. & ; /GF.