TaxTMI 
TaxTMI 
2017 (2) TMI 602
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....- "Being aggrieved against order of the Commissioner of Income Tax (E), Mumbai, this appeal petition is being filed to consider the following grounds of appeal, which are independent and without prejudice to each other: 1. On the facts and circumstances of the case, the Commissioner of Income Tax (Exemptions) erred in passing an order under section 263 of the act. 2. On the facts and circumstances of the case, the Commissioner of Income Tax (Exemptions) erred in passing an order under section 263 of the act though provisions of S.263 are not applicable to the facts of the case and in law. 3. On the facts and circumstances of the case, the Commissioner of Income Tax (Exemptions) has wrongly held that order is erroneous and prejudice to the interest of the revenue though the Assessing Officer has applied his mind and passed order after considering the full facts available on records. The CIT(E) has no jurisdiction to pass an order on account of change of opinion. 4. On the facts and circumstances of the case, the Commissioner of Income Tax (Exemptions) erred in considering that the A O has held that the appellant was granted exemption S.11 of the act though the A O treated ....
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.... 4. Further, it is observed that the Trust has received interest income of Rs. 1,46,32,985/-. As against the above income, the Assessing Officer has allowed the expenses to the extent of income available. However, the Assessing Officer has also allowed expenditures which has no direct nexus to earn the Interest Income of Rs. 1,46,32,985/-. 5. I have examined the records as well as the order passed by the Assessing Officer as discussed above and I am of the opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue and therefore requires revision. 6. In view of the above facts, you are requested to explain as to why order u/ s 263 of the Act should not be passed enhancing or modifying the assessment or cancelling the assessment in your case. In this regard, you are requested to attend in person or through your Authorised Representative before the undersigned and file the written submissions and argue the matter on 19.01.2016 at 3.30 pm in my office." In response to the above show cause notice, the assessee submitted before learned CIT(E) as under:- "We are in receipt of show cause notice for revision of ....
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....omputed the income as per Computation of the income filed in the Return of Income. He has consciously not made any addition in respect of the amount received by way of the Corpus Fund during the year. The Assessing Officer having formed an opinion and applied his mind to the facts of the case, no revision of the said order can be made u/s.263 of the Act. Section 263 of the Act applies to the case where "any order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue". There is no error in passing the order by the Assessing Officer. The Assessing Officer has correctly passed the order. It may be stated that the similar case was before the Hon'ble Income Tax Appellate Tribunal Bangalore Bench in the. case of ITO v. Vokkalingera Sangha- ITA No.281 to 285/Bang/2014. Copy enclosed. The said case was decided on 14th August, 2015. In the said case, it has been clearly held that though the registration u/ s.12A has not been granted, the accounting principle in respect of the Corpus of the fund is not to be disturbed. In your notice you have cited the judgment of U.P. Forest Corporation v. DCIT-297 ITR 1 (SC)(2008). As per the ....
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.... the bag of the income-tax code. There is no exhaustive definition of the word 'income'. All receipts of an assessee cannot be deemed to be income of the assessee for the purpose of income-tax. Only those receipts which bear the nature of income can be made exigible to tax. The definition of the word 'income' as given under section 2(24) is inclusive. It is not exhaustive. Donations towards corpus are not falling within the ambit of the definition of income. This is a capital receipt and not exigible to tax. The department did not doubt the nature or veracity of the receipt. 10. CO. No. 34(Mds)/2008:- In this cross objection the assessee objected the inclusion of Rs. 9,51,818/- received towards corpus fund. We for the reasons stated above decide this issue in favour of the assessee and against the Revenue. In view of this the other grounds raised in the cross objection have become infructuous. 5. In the Income Tax Appellate Tribunal Bench'C' New Delhi ITA No.3383/Del/2009-Assistant Director Of Income Tax (E) Trust Circle II. New Delhi Vs Hologram Manufacturers Association 6. Hon'ble Delhi High Court has held in the appeal of Director Income Tax Vs. Basanti....
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....e is allowable as a deduction from the income. In view of the above facts, the assessing officer has rightly allowed the expenditure incurred for the object of the trust. We would once again draw your attention to the judgment of ITO v. Vokkalingera Sangha- ITA No.281 to 285/Bang/2014 in particular para no. 5.3.2 in the case of NinnalAgricultuaral Society 71 ITD 152. It was held that the assessee had not granted registration u/s.12A but it has been held in the said case that the purpose and the activity of the assessee was to engage in charitable activities. The Trust is registered under the Bombay Public Trust. Whatever amount has been spent on those programmes/projects/objects, it was spent in the usual course of carrying on its acclaimed objects. Therefore, there was no basis whatsoever, factual or legal to hold that the amount spent by the assessee was not incurred as a part of the normal activities for which the Trust was formed. Therefore, money spent by trust for the purpose of objects of the trust has to be allowed as a deduction in computation of income. The Assessing Officer has therefore rightly allowed the deduction from the interest income earned by the Trust. ....
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....Act. Hence, the said order is erroneous in so far as prejudicial to the interest of the Revenue as the A.O. allowed the claim of exemption even when the Trust was doing activities which were commercial in nature. The ld. CIT (E) held that the Hon'ble Supreme Court in the case of U.P. Forest Corporation v. Dy. CIT (2008) 297 ITR 1 (SC) held that registration u/s 12A of the Act is a condition precedent for availing the benefit of section 11 and 12 of the Act. In nutshell, the ld. CIT(E) relying on the Explanation 2 to section 263 of the Act which has been inserted by Finance Act 2015 w.e.f. 1st June, 2015 held that the assessment order dated 12.12.2013 passed by the A.O. u/s 143(3) of the Act in this case is erroneous so far as it prejudicial to the interests of revenue and accordingly set aside the same to the file of A.O. for assessment to be framed afresh de- novo on merits after giving opportunity of being heard , vide orders dated 16.02.2016 passed by learned CIT(E) u/s 263 of the Act. It is pertinent to mention here that the learned CIT(E) dropped the second issue raised in the show cause notice dated 01-01-2016 w.r.t. interest income of Rs. 1,46,32,985/- , wherein the AO allow....
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....ia which is placed on record whereby Rs. 1.9 crores was given by Bank of India to the assessee towards corpus fund of the scheme . The assessee relied on the decision of the Mumbai-tribunal in the case of Chandraprabhu Jain Swetamber Mandir v. ACIT in ITA No. 230/Mum/2016 for the assessment year 2011-12 dated 12th August, 2016 in which one of us being Accountant Member is one of the signatory to the said order , and also the learned counsel for the assessee relied upon the decision of Bangalore Bench of the Tribunal in the case of ITO v. Vokkaligara Sangha in ITA No. 281 to 285/Bang/2014 vide orders dated 14th August, 2015. 6. The ld. D.R., on the other hand relied on the decision of Hon'ble Supreme Court in the case of U.P. Forest Corporation v. Dy. CIT (2008) 297 ITR 1 (SC) and submitted that no registration u/s 12A of the Act was obtained by the assessee and hence the corpus fund is also taxable being voluntary donation chargeable to tax u/s 2(24(iia) of the Act. 7. We have considered the rival contentions and also perused the material available on record including the case laws relied on by both the sides. We have observed that the assessee is a trust namely Bank of India Ret....
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.... The perusal of the letter dated 19-09-2011 issued by AGM(IR) of the Bank of India stipulates merely that Rs. 1.90 crores are 'corpus donations' which are voluntary in nature without specifying the specific purposes for which these corpus donations are to be applied as these are not specific pass through donations which are to be applied for the specific purposes, rather as stated by the assessee these corpus donations are to be kept in-tact and income accrued thereon is to be utilized for meeting medical expenses of the employees and dependent spouses of Bank of India who are beneficiaries of these medical scheme. Thus , the assessment order dated 12-12-2013 passed by the AO u/s 143(3) of the Act is clearly erroneous so far as is prejudicial to the interest of Revenue. The AO has not made the required enquiries as he should have made to see whether these corpus donation are entitled for exemption u/s 11(1)(d) of the Act if read in conjunction with Section 2(24)(iia) and 12A of the Act. There is no estoppel against law and the assessment order of the AO dated 12-12-2013 passed u/s 143(3) of the Act not bringing to tax as income corpus donation of Rs. 1.90 crores u/s 2(24)(iia) of t....
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....be applied towards specific purpose for which the respective funds were created . This is an admitted position between the parties and there is no dispute with respect to this proposition. The details of the corpus donations are as under : 1. Building fund - Rs. 50,000/- 2. Dev Dravya fund - Rs. 2,92,066/- 3. Gyan Fund - Rs. 41,541/- 4. Veya Vacha fund - Rs. 1,809/- 5. Akhand Deepak fund - Rs. 12,951/- 6. Dadawadi fund - Rs. 25,020/- 7. Jiv Daya fund - Rs. 18,063/- 8. Ayambil fund - Rs. 13,996/- Total - Rs. 4,55,446/- These above stated specific donations given by the donors to be utilized for specific purposes cannot be diverted for any other purposes by the assessee and are credited to the respective funds in the Balance Sheet , and utilization thereof is also reflected from these specific funds. We have gone through the case laws relied upon by the assesse as set out above and have observed that the Courts/Tribunals have taken a consistent view that these corpus donations are held to be capital receipts being capital in nature and are not taxable despite the fact that trust is not registe....
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....ation of Rs. 68,50,000 from BBT, Mumbai. The Assessing Officer computed the assessment on total income of Rs. 68,70,000 rejecting the assessee's contention that donation received towards the corpus of the trust. The Commissioner of Income-tax (Appeals) deleted the addition of Rs. 68,50,000 out of the addition of Rs. 68,70,000 made by the Assessing Officer as under: "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 permanent fund kept for the basic expenditures 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 accumulated. 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 ....
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....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 v. CIT [1988] 172 ITR 373 (SC) it was held by the Bombay High Court that even ignoring the amendment to section 12, which means that even before the words 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 v. Trustees of Kasturbai Scindia Commission Trust[1991] 189 ITR 5 (Bom). The position after the amendment is a fortiori. In the present cases the Assessing Officer on evidence has accepted the facts that all the donations have ....
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.... Court, thus, the issue is covered in favour of the assessee. 5. The learned authorised representative has submitted that the issue is covered by various orders of the Income-tax Appellate Tribunal in the cases of Shri Shankar Bhagwan Estate v. ITO [1997] 61 ITD 196 (Cal), Society for Integrated Development in Urban & Rural Areas v. Dy. CIT [2004] 90 ITD 493 (Hyd), Sri Dwarkadheesh Charitable Trust v. ITO [1975] 98 ITR 557 (All) and Dy. CIT v. Nasik Gymkhana [2001] 77 ITD 500 (Pune). 6. We have heard the learned representatives of the parties and records perused. The grievance of the Revenue is that the Commissioner of Income-tax (Appeals) has wrongly followed the judgment of the hon'ble Delhi High Court in I. T. A. No. 5082/Del./2010, whereas that order has been challenged before the hon'ble Supreme Court. The Revenue did not dispute the facts. We noticed that the Commissioner of Income-tax (Appeals) after considering the decision of three Tribunals, i.e., Income- tax Appellate Tribunal, Delhi in the case of ITO (Exemption) v. Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust [IT Appeal No. 5082 (Delhi) of 2010, dated 30-1-2009] the Revenue filed appeal before....
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.... 10. In the result, assessee's appeal in ITA No 230/Mum/2016 for assessment year 2011-12 is allowed ." In the aforesaid order of the tribunal in Chandraprabhu Jain Swetambar Mandir(supra) and other judgment(s) relied upon by the assessee, the donations were pass-through donations with specific purposes for which the said voluntary donations can be utilized and the tax-payer has no choice but to spend these donations for specific purposes for which they were granted to the tax-payer trusts. We are of the considered view that the assessment order of the A.O. dated 12-12-2013 passed u/s 143(3) of the Act in the instant appeal is erroneous so far as it is prejudicial to the interest of Revenue which cannot be sustained in law as it is against the provisions of law as discussed above . The Revenue has rightly relied upon the judgment of the Hon'ble Supreme Court in the case of UP Forest Corporation (supra) which has clearly held that for availing exemption under the provisions of Section 11 and 12 of the Act, the Registration u/s 12A of the Act is essential. The order of the Hon'ble Supreme Court is reproduced hereunder: "11. We are of the considered view that for claiming benefit ....