TaxTMI 
TaxTMI 
2020 (1) TMI 559
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....urther disallowed the benefit u/s. 11 of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). 3. Brief facts of the case, as discussed by the AO, is that the assessee society is for education and scientific advancement and filed its return of income for AY 2010-11 declaring nil income which was processed u/s. 143(1) of the Act on 01.08.2011 raising a refund of Rs. 7,14,660/-. The case was selected for scrutiny vide CASS and thereafter the AO records that the Ld. AR of the assessee appeared from time to time and furnished details and documents as per requisitions made by him. According to AO, the assessee is a society registered u/s. 12A of the Act vide order dated 06.08.1999. The AO noted that the assessee had claimed exemption u/s. 11 and had furnished audit report in Form 10B dated 19.01.2011 along with the return of income. On examination of accounts, the AO observed that the assessee had received "development fees" for Rs. 19,39,000/- which the assessee had capitalized in the development fund account. According to AO, since the development fee was received from students, it was revenue in nature and therefore formed part of the income of the assessee Society for ....
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....ction that such donation shall form part of the corpus of the trust i.e. it will remain outside the ambit of the chargeable income. The AO observed that corpus denotes "principal or capital sum" and not 'interest' or 'recurring receipts' or 'income'. Referring to the definition of 'corpus' set out in Black's Law dictionary, the AO observed that 'corpus' is a capital amount in the form of money, moveable or immovable property or the donation received by a charitable trust for specific purpose, which may be said to be corpus and remains as capital in a fund in contrast to income. According to AO therefore, whether a donation would constitute corpus or capital of the receiving trust or would fall within the ambit of its income depends upon given circumstances of the case, having regard to the motive, intention and nature of the voluntary contribution. The AO observed that the characteristics of income are that, it is a periodical monetary return coming in with regularity or at least expected regularity. Whereas, the corpus donation is a bilateral contract where the donor expresses the intention that donation will form part of the corpus or capital of the trust and the donee accepts it....
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....upon the students and ensure a regular source of income for the school. With these findings, the Ld. CIT(A) was pleased to dismiss the appeal of the assessee. Being aggrieved, the assessee is now in appeal before us. 6 Assailing the action of the Ld. CIT(A), the Ld. AR submitted that though the voluntary contribution constitutes 'income' under section 11(1)(a) but such contribution shall not be included in the total income of the trust or institutions which is towards the corpus fund in terms of section 11(1)(d) r.w.s. 12 of the Act, which states that the contribution made with a specific direction will not form part of the income but shall form corpus of the trust. Relying on the decision of Hon'ble Rajasthan High Court in case of Sukhdeo Charity Estate v. ITO [1991] 192 ITR 615, he submitted that when the amount was contributed to the corpus of the institution and the same is kept as capital by the assessee society, then it cannot be treated as income or revenue receipt for the purpose of section 11 of the Act. Drawing our attention to the resolution dated 03.01.2000, the ld. AR contended that the amount collected from the students were only for the purpose of the development ....
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.... the nature of other fees collected under the nomenclature 'tuition', 'computer' etc. She further contended that such development fee was received against services rendered by the assessee society to its students and therefore there was no element of voluntariness in the impugned receipt. According to her, payment of development fee was a pre-requisite for the student to get admission in the school and therefore this receipt cannot be treated as the voluntary contribution. She thus contended that the receipt in question cannot be classified as donation or contribution for specific projects and therefore, was rightly assessed as revenue receipt by the lower authorities. She further pointed out that upon considering the development fee as revenue receipt, since the surplus of the assessee society went beyond the prescribed limit of 15% cap provided under section 11(1)(a) of the Act, the excess surplus over and above the 15% cap is liable to income-tax. 8. We have heard the rival submissions and gone through the facts and circumstances of the case. From the material placed before us, we note that the assessee society has been collecting the development funds contribution from the s....
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....'Development Fund' were not collected on monthly basis along with tuition fees for the month but the students paid contributions to Development Fund at their own volition at any time during the year. We therefore find that the basic premise on which the lower authorities proceeded i.e. the development fund contributions were compulsorily collected by the assessee society from each student along with monthly tuition fees on monthly basis being factually wrong, the conclusions drawn based on assumption of wrong facts is therefore unsustainable. 10. We also find merit in the ld. AR's argument that merely because the contributions from students were collected under the nomenclature of development fee cannot ipso facto lead to conclusion that it cannot be considered to be corpus contribution. It is true that in terms of Section 12(1) read with Section 11(1)(d) of the Act, what is not includible in the total income of a charitable institution is the receipt by way of corpus donation. However the Act nowhere defines the expression or term 'corpus' donation. However this term has been judicially interpreted by the Courts. We note that the Hon'ble Karnataka High Court in the case of DIT ....
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....med part of the corpus. In this regard, we may gainfully refer to the decision of the Hon'ble Rajasthan High Court in case of Sukhdeo Charity Estate v. ITO [1991] 192 ITR 615 wherein it was held that when the amount was contributed to the corpus of the institution and is kept as capital in the books, then it cannot be treated as income or revenue receipt for the purpose of section 11 of the Act. 11. In the orders of the lower authorities, much emphasis has been placed on the fact that the development fees were received by the assessee society along with tuition fees and therefore the nature of receipt was akin to fees collected for rendering of educational services to students. On this premise, the lower authorities treated the collections made by way of development fees to be revenue receipt. We however note that the premise on which the lower authorities proceeded were factually wrong. We find that the development fees was collected from the students once in a year and no material has been brought on record by the lower authorities to establish that the amount was received in consideration of any service being rendered or provided to the students in lieu thereof. As such, we d....
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....al facts Ld. CIT(A) in the case of appellant itself for the assessment year 2009-10 had held that the development funds were capital in nature and could not be added to the income of the assessee society and the CIT(A) erred in not referring to the same in the appeal order- decision portion, although noted in appeal order _. appellant's submission portion. 4. For that the AO and CIT(A) both had ignored assessee society's resolution, its explanation and copy of sample fees book under the facts and circumstances of the case. 5. For that Ld. AO & Ld. CIT(A) both had erred in not allowing deduction for depreciation for Rs. 25,40,795/-. 6. For that Ld. CIT(A) had ignored the appeal order of the jurisdictional Calcutta High Court on identical facts CIT vs. Siliguri Regulated Market Committee [2014] 51 Taxmann.com 455 and followed the decision of Hon'ble ITAT Chennai, drawing reference to Section 32 of the Act in the case of charitable Trusts are highly misplaced. 7. For that your appellant assessee society craves leave to add or alter and modify the grounds of appeal before or at the time of appeal hearing." 14. Ground nos. 1 to 4 [supra....
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....Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents-assessees. It is a matter of record that all the assessees are charitable institutions registered under Section 12A of the Income Tax Act (hereinafter referred to as 'Act'). For this reason, in the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable puruposes under Section 11(1)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. Though it appears that in most of these cases, the CIT (Appeals) had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT thereby dismiss....
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....Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income Tax Act The Court rejected the argument on behalf of the revenue that section 32 of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived form building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforestated judgment of the Bombay High Curt, we answer question No. 1 in t....