Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income-Tax vs Nasik Gymkhana on 22 March, 2000
Equivalent citations: [2001]77ITD500(PUNE)
ORDER
Singhal, Judicial Member.
1. The only issue arising out of this appeal is whether the sum of Rs. 9,33,202 received by the assessee Trust and credited to the Building Reserve and General Maintenance Fund Account can be charged to tax denying exemption under section 11.
2. The assessee is admittedly a charitable trust entitled to exemption under section 11 of the I.T. Act 1961. The return of income of assessment year 1984-85 was filed by the assessee showing deficit of Rs. 10,640. In the course of assessment proceedings, it was noticed by the Assessing Officer that assessee had received donations of Rs. 11,66,902 from 16-10-1982 to 31-10-1983, out of which Rs. 9,33,202 pertained to assessment year 1984-85. Out of the aforesaid sum of Rs. 9,33,202 the assessee had received the sum of Rs. 1,00,301 in cash for which names of donors were not available. With reference to the balance amount, it was the case of the assessee that such donations were received towards corpus of the Trust and therefore, the same could not be considered as income. The Assessing Officer did not accept the stand of the assessee by observing that majority of the donations were received against the allotment of shops to the existing tenants.
According to the Assessing Officer, there was direct nexus between the donations received by the assessee and allotment of extended area to the existing tenants. Accordingly, such donations could not be considered as voluntary contributions. Further, it was observed by him that no notice under section 11(2) had been given by the assessee. He found that a sum of Rs. 4,10,639 was spent during the year on the construction out of the sum of Rs. 9,33,202. Consequently, the balance amount of Rs. 5,22,563 was added to the income of the assessee.
3. The matter was carried before the CIT(A). In the course of appellate proceedings, the CIT(A) passed a remand order on 29th September, 1987 directing the Assessing Officer to record the sworn statements from each of the donors to whom shops had been allotted and to find out whether infact there was any direct nexus between these donations and allotment of shops. In response to this order, the Assessing Officer recorded the statements of the donors and submitted the remand report dated 2nd December, 1987. It was reported that there were 33 shops, but the summons could be served on the donors occupying 27 shops, out of which 24 persons attended. It was further reported by him that two shops were not allotted and 20 shops were allotted on the basis of payment of Rs. 32,500 per shop of the area of 120 sq. ft. In respect of remaining shops, donations varying from Rs. 5,000 to Rs. 20,000 were admittedly paid by 11 tenants. Only one person had not admitted payment of donation. In respect of the aforesaid balance shops it was admitted by the deponents that donation of Rs. 32,500 per shop was demanded by some members of the assessee Trust. It was further found by the Assessing Officer that almost every shop occupants were life members of the assessee Trust and they were forced to accept the extended shop against the donation fixed at Rs. 32,500 per shop. The other persons had not admitted direct connection between donation and allotment of shops. Two persons had not paid any donation and they were not allowed the extended shops. Accordingly, in the remand report, it was opined by the Assessing Officer that contributions from the shop-holders were not voluntary and even assuming that these were voluntary contributions, such donations were not given towards corpus of the Trust.
4. On receipt of such remand report, the assessee was confronted with the same. It was contended on behalf of assessee that such statements were taken at the back of the assessee and therefore, in the interest of justice, the assessee should be allowed an opportunity to cross-examine them. Accordingly, the CIT(A) directed the Assessing Officer to allow cross-examination as prayed by the assessee. In pursuance to the same, the Assessing Officer allowed the assessee an opportunity to cross-examine the deponents. However, the assessee chose to cross-examine 9 witnesses only. These witnesses had confirmed all other facts of their statements except that the donations were involuntary. The report regarding cross-examination was also sent by the Assessing Officer to CIT(A). After considering all the materials on the record and the arguments of the assessee, the CIT(A) held that the donations were voluntary donations by the shop-holders. Further, these donations were given towards corpus of the Trust. Accordingly, it was held that sum of Rs. 5,25,563 could not be assessed as income of the assessee, Aggrieved by the same, the Revenue is in appeal before the Tribunal.
5. The learned Senior D.R. has vehemently assailed the order of CIT(A) by raising various submissions. Initially, it was contended by him that the amount received by the assessee from the shop-holders was not in the nature of donation, but it represented the premium in respect of the extended area of the shop. He drew our attention to various statements of the tenants in this regard. According to him, the sum of Rs. 32,500 had been received by the assessee from the tenants of the shops in most of the cases against the allotment of extended area. At this stage of hearing, a query was raised from the Bench as to what would be the nature of such receipts if the amount given by the tenants were not donations. If such amount was premium, could it be considered as capital receipt or income chargeable to tax. Faced with such query from the Bench, the learned Senior D.R. gave up his arguments and proceeded on the basis that amounts received from the tenants of the shops were in the nature of donations. He, then argued that these donations were not voluntary donations since the tenants were bound to pay such amounts for getting extended facility to them. Alternatively, it was argued by him that these donations could not be said to have given towards corpus of the Trust, since there were no specific directions from the donors. He also raised legal contention that provisions of section 11(1)(d) were not on the statute in the assessment year 1984-85 since such provision was inserted w.e.f. 1-4-1989. He also drew our attention to various receipts issued by the assessee Trust to point out that there were no specific directions from the donors. No doubt, these receipts showed that donations were received towards Gymkhana Building Reserve and General Maintenance Fund. According to him, the donors never knew about such directions and signatures of the donors were obtained on the receipts without their knowledge to the purpose of such donations.
6. On the other hand, the ld. counsel for the assessee fairly conceded that the sum of Rs. 1,00,301 as noted by Assessing Officer in para 4 of the assessment order, was received from unknown donors and therefore, to that extent, it cannot be said that these amounts were towards corpus. Accordingly, the same may be considered as general donations. However, in respect to the balance amount, it was submitted by him that the entire amount was not from the tenants of the shops. According to him, the sum of Rs. 1,90,451 was received from the donors other than the tenants. The assessee was asked to furnish the details of such donations, which had been filed later on. According to this list, the sum of Rs. 1,85,451 was received from outsiders during the year under consideration. Thus, only the sum of Rs. 6,47,450 was received from the tenants of the shops. It was further submitted by the ld. counsel for the assessee that these donations from the tenants were voluntary donations and without any force. There was no obligation to pay such amount. There was no enforceable contract in this regard. He also drew our attention to the receipts issued by the assessee Trust and contended that all these donations were given towards Building Reserve and General Maintenance Fund as is apparent from the receipts issued by the assessee. This fact has been confirmed by the donors at the time of issue of receipt as well as later on, when confirmations were issued by them. In this connection, he relied on the decision of Rajasthan High Court as Sukhdeo Charity Estate v. CIT [1984] 149 ITR 470, the decision of the Tribunal Madras Bench as NA. Ramachandra Raja Charily Trustv. First ITO [1985] 14 ITD 230 and the decision of Pune Bench in I.T.A. No. 1669/PN/91. Regarding the legal contention raised by Senior D.R,, it was contended by him that prior to 1-4-1989, the definition clause of income in Sec. 2 itself excluded the amount received towards the corpus of the Trust. Therefore, the claim of the assessee cannot be denied.
7. After considering the rival submissions of the parties and the material placed before us, we do not find much force in the contentions raised on behalf of the Revenue. The issue for consideration is whether the amounts received by assessee Trust were in the nature of voluntary donations. If yes, whether the same could be considered towards corpus of the Trust. Alternatively, if donations are not voluntarily made, then whether such donations could be considered as income chargeable to tax.
8. The amounts received by the assessee Trust are of three categories namely - (1) the sum of Rs. 1,00,301 received from general public where names of the donors were not known, (2) the sum of Rs. 6,47,450 received from tenants of the shops owned by the assessee and (3) the sum of Rs. 1,85,451 received from persons other than tenants. At the outset, it is clarified that we are proceeding on the assumption that all these amounts were in the nature of donations inasmuch as the learned Senior D.R. has finally agreed to this factual position though initially this factual position was disputed by him. As far as the sum of Rs. 1,00,301 is concerned, it has been agreed by the learned counsel for the assessee that these donations cannot be attributed towards corpus of the Trust since the names and addresses of the donors are not available and there is no confirmation in this regard. Accordingly, it is held that the aforesaid sum received by the assessee was income of the assessee. The order of the CIT(A) is, therefore, modified to that extent and the Assessing Officer is directed to consider the same as income while computing the assessable income under section 11(2).
9. As far as the sum of Rs. 6,47,450 received from tenants of the shops is concerned, we are of the considered view that the same cannot be taxed as income of the assessee for the reasons given hereinafter.
Sections 11,12 and 2(24) (iia) speak of voluntary contribution. Therefore, firstly it has to be seen whether such donations were voluntary donations. According to the dictionary meaning, an act can be said to be voluntary if it is done by free choice, of one's own accord, without compulsion or obligation, without valuable consideration, gratuitous etc. Reference can be made to Black's Law Dictionary and Webster's Unabridged Dictionary. There is no material on the record to suggest that such donations were given against the Will of the donors or by any compulsion or under any obligation. In that sense, it can be said that donations were voluntary. However, still such donations cannot be said to be voluntarily made if these are given against valuable consideration. There is material on the record that donations by the tenants of the shops were made against allotment of extended area of shops. There is material on the record to suggest that extended area of shops was not allotted to two tenants, who had not given such donations. So, Revenue has been able to establish nexus between the donations and allotment of extended area of shops. Therefore, such donations cannot be considered as voluntary donations.
10. But, that is not the end of the matter. Despite the above finding, we are of the view that the same cannot be considered as income of the assessee. Once it is held that such donations were not voluntarily made, the same fell outside the ambit of sections 11, 12 as well as 2(24)(iia). Consequently, the general provisions of Income-tax Act would become applicable. According to the general provisions, all receipts are not income. Donations are generally considered as capital receipts. In the present case, the donations were against valuable consideration i.e. allotment of tenancy right with reference to extended area of the shops. The Bombay High Court in the case of CIT v. Ratilal Tarachand Mehta [1977] 110 ITR 71 has held that premium paid by the tenant would be capital receipt not liable to tax. Accordingly, such donations, though not voluntarily made, are held as capital receipts and consequently, cannot be considered as income of the Trust.
11. Even assuming for the sake of convenience that such donations were made voluntarily, as contended by the ld. counsel for the assessee, the same cannot be held as income since such donations were, in our opinion, given towards corpus of the Trust. The receipts issued by the Trust clearly show that donations were received towards Building Reserve and General Maintenance Fund. The receipts are duly signed by the donors. All the donations received were transferred to this fund. Further, there is nothing on the record to suggest that this fund was not used for construction of building. Later on, all the donors have certified that such donations were given towards corpus of the Trust. In our opinion, no adverse inference can be drawn from the fact that receipts were issued by one person or the fact that the amount was given towards building fund was printed on the receipts. In our opinion, there is sufficient material to hold that donations were towards corpus of the Trust. Hence, such donation cannot be considered as income of the assessee.
12. The legal contention of the Senior D.R. that prior to 1-4-1989, donations towards corpus were not exempt is without force. Prior to 1-4-1989, the donations towards corpus were exempt under section 2(24)(iia) itself. Therefore, this contention of the Revenue is rejected. The order of CIT(A) is therefore upheld in respect of the above donations.
13. As far as the sum of Rs. 1,85,451 is concerned, the same is also held to be exempt from taxation for the reasons mentioned above since such donations were towards corpus of the Trust. The order of CIT(A) is, therefore, upheld in respect of the aforesaid donations also.
14. Before parting with our order, we would like to mention that the Revenue had raised an additional ground as under.
" 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in not appreciating the fact that the donations amounting to Rs. 5,22,563 are in fact governed by the provisions of section 13(i)(c) of the Income-tax Act and hence not liable for exemption under section 11 of the said Act."
Since we have held that the donations received by the assessee except the sum of Rs. 1,00,301 are outside the provisions of sections 11, 12 and 2(24) (iia), this additional ground does not survive with reference to such contention. Accordingly, this ground is therefore rejected.
15. In the result, appeal of the Revenue is partly allowed.