Income Tax Appellate Tribunal - Indore
The Acit, 2(1), Ujjain vs M/S. Ujjain Shikshan Shodh Samiti, ... on 30 May, 2017
ACIT vs.Ujjain Shikshan Sangh Samiti
ITA No. 22/Ind/2015
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL,
INDORE BENCH, INDORE
BEFORE SHRI C.M. GARG, JUDICIAL MEMBER
AND SHRI O.P. MEENA, ACCOUNTANT MEMBER
आ.अ.सं./ITA. No. 22/Ind/2015
नधा रण वष /Assessment Year: 2009-10
Asstt. Commr. of Income tax 2(1)
Ujjain :: अपीलाथ /Appellant
Vs
M/s Ujjain Shikshan Shodh Samiti
Ujjain
PAN - AAAJU - 0245M :: !यथ /Respondent
राज#व क$ ओर से/Revenue by Shri Mohd. Javed
नधा 'रती क$ ओर से/Assessee by Shri S.S. Deshpande
सन
ु वाई क$ तार ख 26.5.2017
Date of hearing
उ-घोषणा क$ तार ख 30.5.2017
Date of pronouncement
आदे श /O R D E R
PER SHRI C.M. GARG, JM
This appeal has been filed by the Revenue against the order of the learned CIT(A), Ujjain, dated 30.10.2014 in First Appeal No. U- 551/2011-12 for the assessment years 2009-10. 1 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015
2. The revenue has raised as many as 8 grounds of appeal but except main ground nos. 1 and 2 other grounds are argumentative and supportive to the main substantial grounds which 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 donations received.
(ii) Holding that the donation of Rs. 40 lacs constituted 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 record of the Tribunal, inter alia, impugned assessment order, first appellate order and decisions relied upon and cited at bar during the course of arguments.
4. The learned DR supporting the action of the Assessing Officer submitted that since the assessee has not included the donation received of Rs. 40 lacs during the period, 2 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 under consideration, as income in the income and expenditure account, nor it was shown in the computation of income, which constitutes income of the assessee. Therefore, the Assessing Officer was right and justified 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 vehemently contended that section 2(24)(iia) of the Act mandates that income includes any voluntary contribution received by the institution like the present assessee, therefore, the 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 the assessee strongly supported the first appellate order and 3 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 submitted that as per the decision of the ITAT, Indore Bench, dated 16.2.006 in the case of ITO vs. Narmidiya Brahmin Samaj; ITA Nos. 925 to 928/Ind/05, the donation received towards corpus is not income chargeable to tax even if the trust is not registered u/s 12A of the Act. The learned counsel for the assessee further submitted that 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. The 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 institution is income subject to exception i.e. contribution received towards corpus which is not taxable even if the assessee does not have registration u/s 12A of the Act. Therefore, 4 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 the order of the Commissioner of Income Tax (Appeals) may kindly be upheld by dismissing the appeal of the revenue.
6. On careful consideration of the above rival submissions, from the relevant part of the first appellate 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 treated as a corpus donation only if it is accompanied by a specific written direction of the donor. In the absence of the any written direction of the donor a contribution or grant cannot be transferred to corpus fund. In the appellant's case the donor's have given the donation for building construction. Since the donation for building 5 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 construction is donation for specific purpose, hence, the same cannot be treated as a part of income.
Contributions made with a specific direction that they shall form part of the purpose of the trust or institution 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 fund 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 the 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 6 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 the donor, a contribution of grant cannot be transferred to corpus fund. In the present case, the donors has very categorically in their receipts, while providing the money to the appellant trust, has mentioned 7 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 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 Employees Welfare Foundation v. Asstt. CIT (supra). In the case of Pentafour 8 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 with effect from April 1, 1973 simultaneously with the 9 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 Board's Circular No. 108 dated March 20, 1973 is extracted at page 1277 of Volume I of Sampath Iyengar's Law of Income-tax, 9th 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 10 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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.
11
ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 the 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 addition 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 12 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 the 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 issued in this case on rejection of registration application u/s 12AA by the CIT Ujjain, as per the order dated 28th October, 2002. Such notice was severed upon the assessee on 24th March,2004 but as per the AO return was filled by the assessee trust beyond the prescribed period on 10.02.2005 declaring total income at Rs.52,310/-. The AO has further held that since registration has not been granted, the assessee would not be entitled to benefit of exemption u/s 11 to 13 of the Act and the assessment has 13 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 been completed in the status of unregistered Trust(AOP). Thereafter, he has noted that compliance made by the assessee Trust in pursuance with the statutory notices issued u/s 143(2) by several AR's.
It was pleaded before him that in view of the decision of the Appellate Tribunal, Delhi Bench, In the case of M/s Mahila Sidh Nirman Yojna v. IAC 50TTJ (Del) 494, even if the Trust was not registered u/s 12A, contribution towards Corpus fund was not liable to tax because such receipt was not income. The AO, however, distinguished the aforesaid decision on the ground that in that case the registration 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 Audited Balance Sheet for the year under consideration as well for earlier years to support the contention that the opening balance of Building Fund stood at Rs.2,92,126/- and hence the AO committed grave error on facts as well in law to bring the entire Building Fund to tax in the year under consideration. The assessee in the written submissions submitted that the assessee maintained regular books of accounts and 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 Corpus Fund from various persons and spent the money so raised towards Dharamshala fund on construction of Dharamshala Bhavan. It was submitted that without prejudice to the above the AO erred by adding 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 matter in appeal before us. It was also stated that AO has erred in taxing building funds received as income. The corpus fund is capital receipt and is not covered by the definition of income as given in section 2(24). The 14 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 decision of the Appellate Tribunal, Hyderabad bench "B" in the case of Society for integrated development in urban & rural 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 virtue of section 2(24)(iia) voluntary contribution are income this by itself does not entitle the tax gatherer to ignore all other well settled principles of taxation and general law and levy tax on gross receipts without considering the claim for deduction. Only the surplus or profit can be brought to tax and the same has to be computed in the manner laid down in the Act applying the normal principles of accountancy & taxation laws. Matter reminded for fresh assessment. Following decisions were relied on by the Hon'ble 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 dated 25th June 2002.
5. Mahila Siddh Nirman Yojna v/s IAC; 50TTJ (Del) 494 The detail submission of the assessee has been recorded 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 entire amount of building fund as added by him. His findings from Para 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 position 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 and 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 fund were examined in 15 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 detail in the case of Kalyan Aasharam Trust in appeal no U-349/04-05 decided on 27/08/2005. The relevant findings are extracted hereunder.
4.5 However coming to the main contentions about the corpus donation being not liable to be treated as a revenue income there as a prima facie sufficient merit in the contentions of the Appellant 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 specific provision in this behalf. The various decisions cited by the appellants 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 account 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 the 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 Hon'ble 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 income subject to exemption i.e. contributions received towards corpus. To put it differently all voluntary contributions received by trust, other than contributions towards corpus, are income in the hands of recipients. Even if the trust is not registered u/s 12(A), contributions towards 16 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 '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 detailed & elaborate decision of Hon'ble ITAT, Hyderabad bench in the case of Society 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, 8th edition vol.I as appering on page 387 as well the views of Ld. Authors Chaturvedi & Pithisaria ( referred in 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 itself does not entitle the tax gatherer to ignore all other well settled principles of taxation and general law and levy tax on gross receipts without considering the claim for deductions. Principles such as capital versus revenue, doctrine of overriding title, form versus substance, interpretation of "deeming" provisions, etc. have to be applied wherever necessary. Only the surplus of profit can be brought to tax and the same has to be computed in the manner laid down in the act applying the normal principles of accountancy and taxation law".
(Emphasis applied) 4.8 Lastly, it may be added that the issue of 'corpus donation' was not involved in the decision of Hon'ble ITAT, Indore bench in the case of Shri. Mankalal Dhanraj Chordia (supra) and hence such 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.
17 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015
4. The Ld. DR during the course of arguments very fairly conceded that the point in issue is already covered by the decisions referred to above by the CIT(A) in his order. On going through the above submissions and the findings of the Ld CIT(A), we are of the view that though no further reasons are required in the matter because the issue is covered by the earlier order of the Appellate Tribunal, Delhi Bench in the case of Mahila Sidh Nirman Yojna v. IAC (supra) as well as 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 reproduced by the CIT(A) in the impugned order but we are of the view that some more points could be recorded in the order. The Appellate Tribunal, 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 income chargeable to tax even if trust is not registered u/s 12A of the 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 aforesaid section was amended subsequently and both the amended provisions have been taken into consideration by the Appellant Tribunal, Hyderabad branch, In the case of society for integrated development in urban & rural areas v/s DCIT, 90ITD 493 & in Para 28 and 29 the point in issue was also decided in favour of assessee. Earlier the following expression was substituted-
"Not being contribution made with a specific direction shall form part of corpus of the trust or institution" by Direct tax law Amendment Act, 1987 from section 2(24)(iii) of the Act.
However the same language was incorporated & inserted in section 12(1) of the Act which reads that the income of the trust or the institution from contributions:-
18
ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 "12(1) any voluntary contributions received by a trust created wholly for such purposes (not being contribution made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from the property held under trust wholly for charitable or religious purposes & provisions of that 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 exception to the point of earning of the income by the trust or institution from 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 considered by the Appellant Tribunal, Hyderabad Bench in the subsequent decision in the matter of Society for Integrated Development in Urban & Rural Areas vs DCIT 90 ITD 493. In the view of the matter, it is clear that the issue is covered against the revenue by the aforesaid decisions.
5. Considering the above provisions, it would be clear that the voluntary contributions received enquiry by the trust or institution are income subject to exception i.e. contribution received 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 19 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 lacs as corpus donation for building construction which 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 (supra), after considering the order of ITAT, Calcutta, in the case 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 addition made by the Assessing Officer towards taxable income of the assessee is not sustainable. In the present case, we hold that the proposition laid down by the ITAT, Indore Bench, in the case of Narmidiya 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 reasonable and we are unable to see any valid reason to interfere with the findings of the Commissioner of Income Tax (Appeals) and, hence, we uphold the 20 ACIT vs.Ujjain Shikshan Sangh Samiti ITA No. 22/Ind/2015 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 30th May, 2017.
Sd/- sd/-
लेखा सद#य या यक सद#य
(O.P.Meena) (C.M. Garg)
Accountant Member Judicial Member
May 30, 2017.
Dn/
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