TaxTMI 
TaxTMI 
2008 (4) TMI 351
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....he balance amount was shown as advance received from the Ford Foundation. However, the Assessing Officer treated the grant received by assessee from the Ford Foundation as voluntary contributions and treated the amount of Rs. 68,19,000 as income of the year under section 2(24)(iia) of the Income-tax Act, 1961. The Assessing Officer while rejecting the contention of the assessee observed that the grants were made available byFortFoundationto the assessee-trust to carryon charitable activities as specified in the proposal made by the assessee in accordance with its aims and objects. It was within the discretion of the donor to sanction and make available the grants to the assessee-trust for charitable purposes. The Ford Foundation did not expect anything in return in lieu of the grants given to the assessee. The conditions as reflected in the sanction letter by the Ford Foundation were merely intended to ensure that the amounts were utilized for the purpose for which they were given. These conditions did not change the voluntary nature of the grants and were intended to ensure that the funds were properly applied and accounted for. He placed reliance on the decision of Hon'ble Bombay....
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....nderstood that these grants funds will be used for such purposes substantially in accordance with the attached approved budget. It has been further mentioned that any grant funds nor expended or committed for the purposes of the grant, or within the period stated above, will be returned to the Foundation. From this letter is clear that the full amount of the grant has been released to the appellant for doing the activities which were mentioned in the proposal submitted by the appellant. Therefore, this was a grant given to the appellant for carrying out charitable activities as outlined in the proposal of the appellant. The Assessing Officer has given detailed reason for treating this amount as voluntary contribution within the meaning of section 2(24)(iia) and has treated it as an income. The appellant is a trust and the income of the appellant has to be computed in view of the provisions of sections 11, 12 and 13 of the Income-tax Act only. As the amount which has been received from the Ford Foundation is voluntary contribution, the same will have to be treated as income for the current year and if any income remains unutilized the same will have to be accumulated in view of sect....
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....over the grant funds. He further submitted that the voluntary contributions are to be governed by the provisions of the Income-tax Act and not by the us Regulations. The approved budget by the foundation does not provide for the break-up of the expenditure in two years. Therefore, the amount received by the assessee as a grant from the Ford Foundation was voluntary contribution and was assessable in the previous year relevant to assessment year in which it was received. 6. We have heard both the parties. The Ford Foundation vide grant No. 1000-1299, dated 11-8-2000 approved a grant of us $ 1,50,000 to the assessee for support for initiative to strengthen the role of media as an instrument of public service in promoting social change and awareness. The grant was sanctioned in response to the proposal submitted by the assessee vide letter dated11-4-2000addressed to Shri Gawher Rizvi, the foundation's representative inDelhi. The approved budget provides the break-up of grant funds to be utilized by the assessee. It does not speak about the period in which the funds were to be spent for the objects. As regards the period of the grant the conditions stipulated reads as under:- "Gr....
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....hri Kot Hindu Stree Mandal v. CIT [1994] 209 ITR 396 has held the membership fee or subscription paid by a member can never be considered as gratuitous payments by the member to the society or as a payment without any consideration. Such payments cannot be characterized as 'voluntary contributions' within the meaning of that expression in section 12. 8.4 In the case of Gem & Jewellery Export Promotion Council where grants in aid were made by the Government to provide certain institutions with sufficient funds to carryon their charitable activities. The institutions or associations to which the grant was made have no right to ask for the grant. It was solely within the discretion of the Government to make grants to the institutions of charitable in nature. The Government did not expect any return for the grants given by it to such institutions. There was nothing which was required to be done by the institution for the Government which could be considered as a consideration for the grant. Under such conditions Hon'ble High Court held that conditions imposed by the Government to the grants were merely intended to see that the amounts were properly utilized and did not detract from ....
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....so not specified or stipulated any condition according to which the funds were to be utilized proportionately in the period of 24 months. It is the assessee who has according to its convenience allotted funds in the period of two years. Therefore, the funds were granted voluntarily for carrying out charitable objects of the assessee. Under these circumstances and in view of various judicial pronouncement regarding the meaning of terms 'voluntary contributions'; and 'corpus' the grants given by the Ford Foundation were voluntary contribution given for the charitable objects of the assessee. Accordingly the authorities below were justified in treating the funds as voluntary contributions. 11. The voluntary contributions are chargeable to tax as income of the assessee within the meaning of section 2(24)(iia) of the Act. Under section 11 the assessee is required to apply the income to the extent of 75 per cent for the objects of the trust. In a case where income is not applied, the income can be accumulated or set apart in excess of 25 per cent of the income to be utilized subsequently. For this purpose the assessee has to exercise option in writing before the expiry of time allowed....
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....2000, not much activity had taken place in that company and only three issues of magazines were brought out. In the current year the company got support from the assessee. It was found by the Assessing Officer that out of 2,000 copies, which were printed for each issue only 540 copies per issue were made available to the assessee by M/s. Indigo Publishing Pvt. Ltd. and the remaining copies were either sold or supplied on subscription or handed out as complementary copies by M/s. Indigo Publishing Pvt. Ltd. The total value of magazines received by the assessee worked out to Rs. 3,69,360 whereas for the same the assessee had made a payment of Rs. 11,00,000. In view of these facts the Assessing Officer came to the conclusion that the income of the assessee was utilized for the benefit of M/s. Indigo Publishing Pvt. Ltd. Wherein the members of the assessee-society had substantial interest. The Assessing Officer accordingly denied the exemption under section 11 in view of provisions of section 13(1)(c) of the Act. 14. Before the ld. CIT (Appeals) it was pleaded that the Little Magazine was identified as an active institution whose objectives were very similar to those of society. The....
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.... derived by the two members of the assessee. In view of these facts the provisions of section 13(1)(c) were not applicable. On the other hand, the ld. DR relied on the orders of the ld. CIT (Appeals) and the Assessing Officer. 16. We have heard the parties. In case of a charitable institution, the income derived from the property held under trust wholly for charitable or religious purposes shall be applied for the objects for which the institution was created. It is a settled law that income can be applied by way of donations to other charitable institutions having similar objects. In the instant case, the amount of Rs. 11,00,000 was paid to a Private Limited, company engaged in the business of publishing of magazines etc. The company is not a company incorporated under section 25 of Companies Act, 1956 having charitable objects. Every company whether a private Ltd. company or a public limited company produce articles or things or provide services which are in nature of general public utility. They cannot be called as charitable institution simply for the reasons that they were incorporated for commercial purposes. Therefore it cannot be treated as charitable institution as it i....
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....ed as security with bank enabling one of members of the assessee, to avail loan without adequate security and consideration, and certain transaction of purchase of lands was routed through an Assessing Officer in which all members were directors and employees of assessee. The misutilization was glaring. Hon'ble Andhra Pradesh High Court held that the assessee could not escape the clutches of law, nor any sympathy or equities could be extended, particularly for an organization, which received donations purely for the welfare of the under-privileged and needy class of the society. In view of the fact that entire transaction was within personal knowledge of trustees, it could be said that the funds of assessee were diverted and misutilised. On fact, the assessee had violated provisions of section 13(1)(c)(ii) read with section 13(2)(b) and, thus, was not entitled for exemption. 18. In the case of CIT v. Chandrika Educational Trust [1994] 207 ITR 108 (Ker.), Hon'ble Kerala High Court has held that the words 'any concern' are comprehensive and embrace every concern which satisfies the qualification of being one in which any person referred to in sub-section (3) has a substantial inte....