2022 (10) TMI 567 - AT - Income Tax

Tribunal affirms donation classification and allows carry forward of expenses and depreciation

The Tribunal upheld the decision of the Ld. Commissioner of Income Tax (Appeals) in treating a donation as a corpus fund for a charitable institution, ... Exemption u/s 11 - corpus donation receipts - whether the donation received by the assessee from SVVFUIP, USA is general donation or a corpus donation with a specific direction? - HELD THAT:- We see from the letter submitted by the Ld. AR there is a clear direction from the donor to treat the amount donated as a specific direction towards corpus donation in order to build the corpus fund for the running of VMSS activities in the long run. It is clear from the letter that the intention of the donor is to set up a corpus fund in long run. - Decided against revenue. Claim of carry forward of unabsorbed excess of expenditure over income and unabsorbed depreciation - CIT(A) placing reliance on the decision of FramjeeCawasjee Institute [1992 (7) TMI 331 - BOMBAY HIGH COURT] wherein it was held that “the Tribunal, however, took the view that when the ITO stated that full expenditure had been allowed in the year of acquisition of assets, what he really meant was that the amounts spent on acquiring those assets had been treated as application of income of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing the income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. This view was confirmed by case of CIT vs. Rajasthan and Gujarathi Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT]. The Hon’ble Supreme Court in the referred case held that “also follows that once assessee is allowed depreciation he shall be entitled to carry forward the depreciation as well”. The facts of the present case are similar to the facts of the above referred case. Respectfully following the judicial discipline, the Ld. CIT(A) directed the AO to allow claim of unabsorbed depreciation of earlier years. Allowance of excess of expenditure over income in earlier years as carry forward loss - CIT (A) relying on the decision of Maharana of Mewar Charitable Foundation [1986 (7) TMI 56 - RAJASTHAN HIGH COURT], case of CIT vs. Sri Plot Swetamber Murthy Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT], case of CIT vs. Institute of Banking Personal Selection [2003 (7) TMI 52 - BOMBAY HIGH COURT] has concluded that the assessee is eligible for claiming excess expenditure over income of earlier assessment years. We therefore are of the view that there is no error in the order of Ld CIT(A) - Decided against revenue. Issues:1. Treatment of donation as corpus fund.2. Allowance of carry forward of unabsorbed expenditure and depreciation.Analysis:1. The appeal concerned the Revenue challenging the order of the Ld. Commissioner of Income Tax (Appeals) regarding the treatment of a donation received by a charitable institution as corpus fund. The assessee, a charitable institution, claimed exemption of Rs. 3,96,45,981/- towards corpus donation under section 11(1)(d) of the Income Tax Act, 1961. The Revenue contended that the donation should be treated as a general donation due to lack of specific directions from the donor. However, the Ld. CIT(A) allowed the claim based on a letter from the donor clearly stating the intention of the donation towards corpus fund for specific activities. The Tribunal upheld the decision, emphasizing the importance of the donor's intention and specific directions in determining the nature of the donation.2. Regarding the allowance of carry forward of unabsorbed expenditure and depreciation, the Revenue raised concerns about the claim made by the assessee. The Ld. CIT(A) admitted additional grounds raised by the assessee and allowed the claim based on relevant legal precedents and judicial decisions. The Tribunal, after considering the facts and legal aspects, found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's grounds challenging the allowance of carry forward of unabsorbed expenditure and depreciation. The Tribunal's decision was based on the principles of judicial discipline and adherence to legal precedents.In conclusion, the Tribunal dismissed the Revenue's appeal and the Cross Objection filed by the assessee as infructuous, upholding the decisions made by the Ld. CIT(A) regarding the treatment of donation as corpus fund and the allowance of carry forward of unabsorbed expenditure and depreciation. The judgment emphasized the importance of specific directions from donors in determining the nature of donations and highlighted the significance of legal precedents in decision-making.