TaxTMI 
TaxTMI 
2013 (10) TMI 875
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....objects, as promotion of education, medical relief, and for other objects of general public nature. It filed its return of income for the year on 01.11.2004, claiming exemption u/s. 11(1)(a) of the Income Tax Act, 1961('the Act' hereinafter) at Rs.67,87,249/-, though restricted to the extent of available income, i.e., Rs.57,30,186/-. The assessee had claimed deduction u/s. 24(a) of the Act in the sum of Rs.20,54,703/- at the rate of 30% of the rental income. On being questioned in its respect, it was explained by the assesse that it had taken the annual value of the house property on the basis of rent received (Rs.6950568 / page 36 of PB 1) as provided u/s. 22 of the Act, and after deducting municipal tax (Rs.101558/-), arrived at the annual value of Rs.68.49 lacs, on which the statutory deduction u/s. 24(a) was claimed to arrive at the property income. The same did not find acceptance by the Assessing Officer (AO), in whose view the income of a charitable institution or trust from any source is to be computed not under any head of income but as per its regular accounts. The same found confirmation by the ld. CIT(A). With reference to the decisions in the case CIT vs. Programme for....
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.... Rs.22,70,000/- ii) Tolani Education Foundation conducting Nautical Science and Maritime Engineering Colleges at Pune Rs.24,00,000/- iii) Other Sundry donations Rs. 35,691/- With reference to the decisions in the case of CIT v. Sarladevi Sarabhai Trust (No. 2) [1988] 172 ITR 698 (Guj.) and CIT vs. Shri Ram Memorial Foundation [2004] 269 ITR 36 (Del), it was submitted that when one charitable trust donates a sum to another toward the latter's charitable objects, it is proper application of income in the hands of the donor- trust. Merely because the donee-trust does not spend it in the year of receipt itself would not operate to disentitle the donor-trust to exemption u/s. 11(1). Also, the position would not alter when the donation, as in the instant case, is towards the donee's corpus, so that it can utilize only the income from the said corpus donation (which is to be invested in specified securities) for charitable purposes. In view thereof, the ld. CIT(A) deleted the addition of Rs.24 lakhs, so that, aggrieved, the Revenue is in appeal. Subsequent to the assessment on 15.12.2006, it was found by the Revenue that the assessee had in fact given donation for Rs.60 lakhs, and n....
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....h the total addition made and being contested by the Revenue qua donations is Rs.60 lacs, in effect the same has been made only for Rs.44,94,470/-, assessing the income at the said figure, as against the net loss (or excess of expenditure over income) as per the income and expenditure account at Rs.15,05,526. This is for the simple reason that the excess of expenditure over income, as claimed and allowed, includes or is only after including sums, in value higher than the said excess, which are admittedly claimed as or qualify as an application of income, claimed exempt u/s.11(1)(a). That is, the sums debited by the assessee to the income and expenditure account include donations for Rs.47.06 lacs, including corpus donation of Rs.24 lacs disallowed, which are admittedly an application of income. Even otherwise, it is nobody's case that the trust is required to spend on its objects for charitable purposes more than its income, being, rather, unfeasible. 3.2 The first issue arising in the instant appeals is the validity in law of the assessee's claim toward repairs and maintenance u/s. 24 of the Act in computing the income from house property let out by the assesse, and toward which ....
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.... purport are its observations in the case of LKP Securities Ltd. (in ITA Nos. 638 & 1093/Mum/2012 dated 17.05.2013): Rs. 14 ....... The income (and loss, which is only negative income) falling under Chapter III of the Act and, thus, exempt from the levy of the tax, would not form part of the computation of the income under Chapter IV of the Act. That in fact is a fundamental premise; the basis of sec. 14A of the Act. The Revenue's case in this regard is unexceptional, and we confirm the same.' In both the decisions, the tribunal relied on the decision in the case of Harprasad & Co. (P.) Ltd. (supra). The reliance by the ld. CIT(A) on the Circular issued by the Board (No.5P(LXX6) dated 19.06.1968), explaining the position in the matter, is also apposite. It stands explained that only the income as reflected in the accounts of the trust/institution that is to be applied or deemed to have been applied for charitable purposes, and which, therefore, has to be computed in the commercial sense. The said Circular has been found by the hon'ble courts of law as representing the correct interpretation of the relevant provisions and the requirement of the law, as in the case of CIT vs. Progr....
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....he case of IAC, Mumbai vs. Saurashtra Trust [2007] 106 ITD 1 (Mum) (SB) is, under the circumstances, misplaced. The said decision is, firstly, sans any reference to any precedents; nay, even without a discussion of the law in the matter. This aspect would in fact become clear in view of the questions referred to and answered by the tribunal. As a reading of its order would show (refer para 1), the same are not directly connected with the issue before us. The said decision, thus, would be of no assistance to the assessee, with we having even otherwise decided the matter following the binding precedents in the matter, so that the decision in the case of Bank of Baroda v. H.C. Shrivastava [2002] 256 ITR 385 (Bom), advocating judicial discipline with reference to the decision by the apex court in CCE v. Dunlop India Ltd. AIR 1985 SC 330, only supports the same. The decision in the case of Al Ameen Educational Society v. DIT (Exemption) (in ITA No. 575/Bang./2011 dated 28/9/2012, also at [2012] 26 taxmann.com 250 (Bang.)) is again only in respect of the specific provision of sec. 11(1A) of the Act, i.e., qua capital gain, and, thus, not applicable. We have already clarified that our dec....
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....f the accumulated income shall not be treated as an application of income, and shall be taxed accordingly.' In fact, consequential amendments stand also made to the Act by way of insertion of clause (d) to s. 11(3) and proviso to s. 11(3A), all to the same effect and purport. The said provision/s would have no application in the instant case as, without doubt, each of the three sums comprising the total amount of Rs. 60 lacs paid by the assesse to TEF stand paid during the relevant year. We may now discuss each of the three sums separately. The sum of Rs. 24 lacs is admittedly a corpus donation (also refer ledger accounts in the books of the donor and the donee - pages 24, 26 / PB 2). The law in the matter is by now well settled, so that donation by one charitable trust to another would entitle the donor fund to claim exemption qua application of income u/s. 11(1). As pointed out by the hon'ble court in Sarladevi Sarabhai Trust (No. 2) (supra), it would make no difference if the donation is toward the corpus of the donee-fund, so that it is only the income therefrom, and not the donation sum itself, that is liable to be spent for or utilized for the charitable purposes of the rec....