Sri Ramakrishna Seva Ashram, Pavagada V. DIT(Exemptions), Bangalore

ITA 937/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 6249 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2009
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 22-09-2009
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 11

Judgement Text

ITA.937/BANG/2009 PAG E - 1 IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B' BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI. SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER I.T.A.NO.937/BANG/2009 (ASSESSMENT YEAR : NA ) SRI RAMAKRISHNA SEVA ASHRAMA, PAVAGADA .. APPELLANT V. DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. H. V. GOUTHAMA, CHARTERED ACCO UNTANT RESPONDENT BY : SMT. SWATHI S. PATIL, COMMISSIONER OF INCOME-TAX O R D E R PER DR. O. K. NARAYANAN, VICE PRESIDENT : THIS IS AN APPEAL FILED BY THE ASSESSEE. THE APPE AL IS DIRECTED AGAINST THE ORDER OF THE DIRECTOR OF INCOME-TAX (EX EMPTIONS), AT BANGALORE, DT.30.7.2009. THE SUBJECT MATTER OF THE APPEAL IS THE ORDER OF THE SAID AUTHORITY IN REJECTING THE APPLICATION OF THE ASSESSEE FILED SEEKING APPROVAL U/S.80G OF THE INCOME-TAX ACT, 196 1. 2. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS REJE CTED THE APPLICATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE TRUST HAS ITA.937/BANG/2009 PAG E - 2 NOT APPLIED 85% OF ITS INCOME FOR CHARITABLE PURPOS ES DURING THE FINANCIAL YEARS 2005-06 AND 2006-07. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS OBSERVED THAT THE ASSESSEE HAS ACC UMULATED HUGE INCOME IN AN IMPROPER MANNER AND THE INCOME IS NOT ACCUMULATED IN THE MANNER PRESCRIBED U/S.11(2) OF THE ACT. HE HEL D THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF TH E ACT AND, THEREFORE, ITS CLAIM FOR THE BENEFIT OF SECTION U/S.80G CANNOT BE ACCEPTED. 3. WE HEARD SHRI. H. V. GOUTHAMA, THE LEARNED CHART ERED ACCOUNTANT, APPEARING FOR THE ASSESSEE AND SMT. SWA THI S. PATIL, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR TH E REVENUE. ON GOING THROUGH THE DETAILED ORDER PASSED BY THE DIRE CTOR OF INCOME-TAX (EXEMPTIONS), WE FIND THAT HE HAS MADE A MISTAKE IN COMPUTING THE QUANTUM OF 85% OF THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS COLLECTED AMOUNTS BY WAY OF DONATIONS DIRECTLY TO I TS FUND KNOWN AS 'RURAL PROJECT FUND'. THE SAID 'RURAL PROJECT FUND ' IS A CAPITAL FUND FORMULATED BY THE ASSESSEE AND EARMARKED FOR SPECIF IC RURAL PROJECTS. THEREFORE, ALL THE DONATIONS ACCOUNTED UNDER THAT H EAD WERE IN THE NATURE OF CORPUS DONATIONS. SUCH CORPUS DONATIONS DO NOT FORM PART OF THE DISPOSABLE INCOME OF A CHARITABLE TRUST. TH EREFORE, NON- SPENDING OF 85% OF SUCH CAPITAL FUND CANNOT BE SAID TO BE NON- SPENDING OF 85% OF THE INCOME OF THE TRUST. IN OTH ER WORDS, THE FUNDS ITA.937/BANG/2009 PAG E - 3 COLLECTED UNDER THAT CAPITAL ACCOUNT CANNOT BE EQUA TED TO THE INCOME OF THE ASSESSEE TRUST. BUT THE DIRECTOR OF INCOME- TAX (EXEMPTIONS) HAS TREATED SUCH CORPUS DONATIONS AS EXPENDABLE INC OME OF THE TRUST. HE HAS GONE WRONG IN THAT FINDING. IF THE SAID COR PUS FUND COLLECTIONS ARE EXCLUDED FROM THE EXPENDABLE INCOME OF THE ASSE SSEE, THERE IS NO CASE THAT THE ASSESSEE HAS NOT SPENT 85% OF ITS INC OME. 4. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS GROS SLY ERRED IN NOT TREATING THE DONATIONS TO THE RURAL PROJECT FUN D AS CORPUS DONATIONS, ONLY FOR THE REASON THAT THE CAPITAL FUN D HAS BEEN DESIGNATED AS A SPECIAL FUND IN THE NAME OF 'RURAL PROJECT FUND'. IT DOES NOT CEASE TO BE A CAPITAL FUND OF THE ASSESSEE TRUST, JUST FOR THE REASON OF THE NAME GIVEN TO THAT PARTICULAR CAPITAL FUND. 5. FURTHER, ON EXAMINING THE DETAILS OF THE ACTIVIT IES CARRIED ON BY THE ASSESSEE TRUST, IT IS PROVED BEYOND DOUBT THAT THE ASSESSEE IS CARRYING ON EXEMPLARY CHARITABLE WORKS IN RURAL ARE AS ESPECIALLY IN THE FIELD OF MEDICAL CARE AND ERADICATION OF LEPROS Y. BY VIRTUE OF THE CHARITABLE ACTIVITIES CARRIED ON, IT IS WELL ENTITL ED FOR THE BENEFITS OF SECTION 11 AS WELL. ITA.937/BANG/2009 PAG E - 4 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE S ET ASIDE THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) AN D DIRECT HIM TO PASS AN ORDER GIVING RECOGNITION TO THE ASSESSEE FO R THE PURPOSE OF SECTION 80G OF THE ACT. 7. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 16TH FEBRUARY, 2010, AT BANGALORE. SD/- SD/- (SHAILENDRA KUMAR YADAV) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, NEW DELHI 7. GF, ITAT, BANGALORE