TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1443
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..../12AA as such the assessee was not eligible to claim of deduction u/s 11(1)(d) of the IT Act. (ii) building fund received by the assessee is part of fee receipt and it is not voluntary . Any non voluntary contribution cannot be held as donation and never be covered u/s 11(1)(d). (iii) The fee receipts does not have word corpus mentioned there in thus it cannot be treated as corpus donation. (iv) Funds received for specific purposes (i.e. building fund) are for the application for specific purposes. It is not the capital of the society thereby not the corpus of the society. (2) On the facts and in the circumstances of the case and in law the ld. CIT(A)-I, Jaipur has erred in deleting the addition made on account of disallowance u/s 40(a)(ia) of Rs. 11,06,513/-. (3) On the facts and in the circumstances of the case and in law the ld. CIT(A)-I, Jaipur has erred in deleting the addition made on account of disallowance of TDS amounting to Rs. 13862/-. Assessee's grounds of appeal in its cross objection: (1) That the ld. CIT(A) was legally correct in treating the assessee Trust being entitled for benefit of registration under section 12AA of the IT Act after considering var....
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.... purposes. Consequently, these donations amounted to corpus fund of the assessee trust and constituted its capital receipts. It may be noted that the funds so received were being utilized for development of building infrastructure. (iii) Treatment of amount received towards building fund: It has been held in various judicial pronouncements that voluntary contributions in the nature of tied up grant received by the Trust/institution or society towards capital fund i.e. building construction (in assessee's case) cannot be brought to tax in other words, any amount received by the charitable trust for any specific purposes is the capital receipts and cannot be treated as revenue receipt even though the trust is not registered u/s 12A of the Act. (iv) As per accounting standard having recognition under the Income Tax Act and supported by various judicial pronouncements, there are two types of receipts in such trusts. One is revenue receipt and other is capital receipt. The revenue receipts are part of income and expenditure account whereas capital receipts are directly transferred to corpus and termed as corpus donations. (v) Discretion of the assessee to treat the receipts as per....
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.... received from students in the name of "building fund". (ii) No other parties are giving any voluntary contribution to the assessee as he himself admitted in his reply dated on 18.10.2013 at point No.7. Only the students have made payments in the form of fees. It is neither in the nature of grant which is being given for development of infrastructure nor the students are capable of giving such grants so the contention of the assessee on this point is also not acceptable. (iii) It has also been observed that no separate books of account are being maintained for the use of this fund i.e. no separate account in the form of building fund is being maintained in any bank so that its use can be ascertained. Assessee has failed to establish that these funds are being utilized for the specific purpose. Management is free to use this fund as per his own suitability. Assessee can use these funds in any form either for construction of building or for purchase of vehicles or for acquisition of any capital assets or can use it for day to day affairs. There is no bar for using it as revenue expenditure. Even there is no distinction of fees receipts itself. On close scrutiny of fees receipt, i....
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....constitute religious or charitable purposes within the meaning of section 2(15). Further one of the key condition for charitable trust and institutions seeking to claim exemption u/s 11 & 12 of the IT Act, 1961 is registration under the Act. Section 12A enacts that the provisions of section 11 and section 12 which provide for exemption of income to such trusts and institutions, will not be applicable unless such trust or institution has made an application in the prescribed firm for registration to the Commissioner or Director of Income Tax (exemption) and present case has been registered by the Commissioner-I, Jaipur vide certificate dated 08.08.2014 (effective date of registration from 26.03.2014). Further on perusal of certificate issued by the Asst. Commissioner, Devsthan Vibhag, Jaipur, it is also seen that the appellant trust has got its registration w.e.f. 24.11.2003. Income in the form of voluntary contributions made with a specific direction from the donor that they shall form part of the corpus of the trust or institution, are generally referred to as "corpus donations". Further the IT Act, 1961 is not concerned with form of organization. The same treatment is provided ....
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....nce sheet item i.e. "building fund" as "income" cannot be justified. This shows lack of basis accountancy knowledge and Income Tax Act, 1961 on the part of AO. On the facts and circumstances as narrated above, addition of Rs. 5,30,09,085/- of Building fund forming a part of corpus fund of the appellant trust, cannot be justified and sustained, therefore AO is a directed to delete the same. Appellant gets relief of Rs. 5,30,09,085/-." 2.4 We know refer to the submissions of the ld AR. The ld. AR of the assessee submitted that during the year, the assessee trust has received voluntary donation of Rs. 5,30,09,085/- from students/parents toward building fund and this was one time donation. The building fund so received is neither fixed nor identical amount in all cases of donors, since it is voluntary. No donation towards building fund was received at all from 269 students. The amount so received was properly accounted for and credited directly to Building Fund account of the assessee. The building fund donations were applied in construction of buildings for educational purposes after receipt whereas the other receipt-tuition fee, charged separately was utilized for imparting educatio....
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..... National Association of Software & Service Companies (2012) 253 CTR (Del) 331. 3. Director of IT(Exemption) vs. Shri Ramkrishna Seva Asharam (2013) 357 ITR 731 (Karn.) 4. Director of IT(Exemption) vs. National Association of Software & Service Companies (2012) 345 ITR 362(Del) 5. CIT vs. Children's Education Society (2014) 264 CTR 389(Karn) 6. Sukhdeo Charity Estate vs. ITO (1984)149 ITR 470 (Raj.) 7. Sukhdeo Charity Estate vs. ITO (1991)192 ITR 61(Raj.) 2.5 Now, coming to each of the specific grounds of appeal in revenue's appeal, the ld AR submitted as under: (i) Deduction u/s 11(1)(d) without registration u/s 12AA. - Though the assessee trust was qualifying for registration but it was not properly guided by earlier consultant therefore registration was applied late in March 2014. The registration was granted by CIT on the basis of original Trust deed dated 24.11.2001. Moreover we rely on decision in the case of JB Educational Society. (ii) Building fund received as part of fees: - It was voluntary donation. Had it been part of fee, it would have been of equal amount in all cases and would have been charged from all students whereas as per para 3 at page No.2 it ....
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....erived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA." 2.8 In the instant case, there is no dispute as to the fact that the assessee trust was granted registration u/s 12AA of the Act on 8.8.2014 by CIT-I, Jaipur w.e.f. 26.03.2014. As on the date of grant of registration, the assessment order u/s 143(3) was passed by the AO and the appeal against such assessment order was pending before the ld CIT(A)-I, Jaipur.....
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....ertion of first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in operation with effect from the date when the condition of eligibility for exemption under section 11 & 12 as mentioned in section 12A provided for registration u/s 12AA as a precondition for applicability of section 12A." 2.11 It is noted that the Coordinate Bench while holding that first proviso to section 12A(2) of the Act with effect from 1.10.2014 should be read as retrospective in above referred case has relied upon the legal proposition laid down by the Hon'ble Supreme Court in case of CIT Vs. Vatika Township Pvt. Ltd. 367 ITR 466(SC) and Allied Motors Pvt. Ltd. Vs. CIT 224 ITR 677 (SC) that any amendment made in the Act which is intended to remove unintended and undue hardship should be given retrospective effect. 2.12 The next question that arises for consideration is where the assessment order has been passed and the appeal against the said assessment order is pending before the ld CIT(A), can it be said that the assessment proceedings are pending as on the date of the registration. This issue has been dealt with by the Coordinate Bench in case of Shree Bhan....
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....he assessee was granted registration under section 12AA of the Act and assessment was not pending before the AO but appeal against the order of AO was pending before ld. CIT (A). It is a settled position of law that ld. CIT (A) has coterminous power with the AO. The benefit of exemption has been denied solely on the ground that assessee was not registered u/s 12AA of the Act. After considering the facts of the present case and in view of the binding precedents, we set aside the order of ld. CIT (A) and direct the AO to grant the benefit of exemption under section 11 of the Act. This ground of the assessee is allowed." 2.14 In the present case, when the amendment was made in section 12A of the Act by the FA, 2014, the appeal was pending before the ld CIT(A). During such pendency, the assessee was granted registration u/s 12AA of the Act on 8.8.2014 by CIT-I, Jaipur w.e.f. 26.03.2014. Thus, in view of the above discussions, ld CIT(A) has rightly exercised his power whereby he has considered and taken into consideration the grant of registration to assessee u/s 12AA for the impunged assessment year as appeal was pending before him and an assessment proceeding which is pending in ap....
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....us trust or institution with a specific direction that it shall form part of the corpus of the trust or institution was not included in the income of such trust or institution. Since this provision was being widely used for tax avoidance by giving donations to a trust in the form of corpus donations so as to keep this amount out of the regulatory provisions of sections 11 to 13, the Amending Act, 1987 amended the said sub-clause (iia) of clause (24) of section 2 to secure that all donations received by a charitable or religious trust or institution, including corpus donations, were treated as income of such trust or institution. However, under the provisions of the new section 80F, also introduced by the Amending Act, 1987, such corpus donations, along with other income of the trust or institution would have been exempt if spent for charitable purposes or invested in specified assets mentioned in section 80F. 4.4 As already pointed out, the Amending Act, 1989 omitted the new section 80F introduced by the Amending Act, 1987 and revived the old section 11. Consequently, corpus donations to trusts, etc., would also be governed by the provisions of section 11. Since stipulations in c....
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....2014) 264 CTR 389 which inter-alia includes the following questions: "Whether on the facts, the Tribunal is correct in holding that the funds collected towards construction of building as donation is allowable and cannot be treated as income of assessee under the provisions of the Income-tax Act, 1961? Whether the Tribunal was correct in holding that Building Fund of Rs. 28,04,505/-, Infrastructure Development Fund Rs. 16,39,73,678/- should be treated as the corpus fund of the assessee even though the donors had not been identified and was contrary to section 11(1)(d) of the I.T. Act?" In context of above two questions, the Hon'ble Karnataka High Court has held as under: "27. This addition relates to assessment year 2001 to 2003. This addition is under the head of Building Fund. The Assessing Authority treated the Building Fund as revenue receipt. According to the society even if the addition is considered as income, that sum being an income of the society they can claim for exemption under Section 10(23C) of the Act. Therefore the society sought for exemption. The Tribunal held that the Building Fund are received specifically towards the corpus of the assessee-society for b....
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....come-tax, Bangalore Vs. Sri Ramakrishna Seva Ashrama [2012] 18 taxmann.com 37 (Kar.) wherein it was held as under (head notes): "The word 'Corpus' is used in the context of the Act. One has to understand the same in the context of a capital, opposed to an expenditure. It is a capital of an assessee; a capital of an estate; capital of a trust; a capital of an institution. Therefore, if any voluntary contribution is made with a specific direction, it shall be treated as the capital of the trust for carrying on its charitable or religious activities, then, such an income falls under section 11(1)(d) and is not liable to tax. Therefore, it is not necessary that a voluntary contribution should be made with a specific direction to treat it as corpus. If the intention of the donor is to give that money to a trust which they will keep it in trust account in deposit and the income from the same is utilized for carrying on a particular activity, it satisfies the definition part of the corpus. The assessee would be entitled to the benefit of exemptions from payment of tax levied. [Para 13] Therefore, what ultimately reveals that, - (i) the intention of the donor and (ii) how the r....
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.... necessary that the persons who made these contributions specifically direct that they shall form part of the corpus of the trust. Similarly, the assessee trust after receiving the amount, keeps the amount in deposit and only utilise the income from the deposit to carry out the educational activities, then also the said amount would be a contribution to the corpus of the trust and the nomenclature in which the amount is kept in deposit is of no relevance as long as the contribution received are kept in deposit as capital and only the income from the said capital is utilized for carrying on educational activities of the assessee trust. Further, the voluntary contribution/donation, can be made by the parents of the students studying in the education institutions, with a specific direction towards the building fund. The directions could be in writing or oral. Where the directions are oral, what is essential is that the contributions are properly accounted for and income from such contributions are utilized for construction of the building. In light of these discussions, ground no. 1(iii) and 1(iv) taken by the Revenue are dismissed. 3.7 In the instant case, the ld AR has submitted th....
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....te books of accounts are being maintained for the use of this fund i.e. no separate account in the form of building fund is being maintained in any bank so that its use can be ascertained. Assessee has failed to establish that these funds are being utilized for the specific purpose and the management is free to use this fund as per their own suitability. 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 to corpus fund. 3.8 In our view, what is relevant to determine is whether there is a voluntary contribution/donations by the students/parents with a direction to utilise the same towards construction of the building infrastructure and secondly, how the same has been accounted for and utilised by the assessee trust. However, given the contradictory position taken by the assessee and the Revenue and in absence of any tangible material on record produced by either of the two parties, it would be in interest of justice and fair play that the matter is remanded back to the Assessing officer who shall taking into considera....