AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1840
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....oluntary corpus donations are exempt from taxation; by claiming application towards charitable towards purposes for furtherance of its objects by purchase of lands. On the basis of information received, that the assessee trust has received corpus donations amounting to Rs. 1,00,005/- and Rs. 53,68,855/- from various donors for purchase of lands in the period relevant to Assessment Years 2011-12 and 2012-13 respectively, and since the assessee trust, being granted registration under section 12A of the Income Tax Act, 1961 (in short 'the Act'), only on 8.11.2013, was not eligible for exemption in these two Assessment Years under consideration, the Assessing Officer ('AO') initiated proceedings u/s 147 of the Act and after recording that he had reason to believe that income of the assessee exigible to tax had escaped assessment, issued notices under section 148 of the Act. In response thereto, the assessee submitted that the returns of income filed for Assessment Year 2011-12 and 2012-18 be treated as returns filed in response to notices issued under section 148 of the Act. The AO did not accept the assessee's contentions that the corpus donations are in the nature of capital receipts....
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.... claim of the appellant and consequently the denial of benefit of exemption u/s.11 and including the corpus donation as part of the income of the appellant for the relevant year was opposed to law and the impugned addition as made is liable to be deleted in toto. 5. Without prejudice, the addition is excessive, arbitrary and unreasonable and liable to be deleted in toto. 6. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed. 3.2 The learned AR for the assessee was heard in support of the grounds raised. The learned AR also field paper books containing copy of Registration Certificate under section 12A r.w.s. 12AA(1)(b)(ii) of the Act dated 8.11.2013, copy of Trust Deed dated 22.01.2011 and other details; including copies of certain judicial pronouncements. It was submitted that the genuineness of the voluntary corpus donations received by the assessee during the period relevant to Assessment Years 2011-12 and 2012-13 (i.e., the period under consideration), for the specific purpose of purchase of land for the purpose of furtherance of its objects, were never doubted by the authori....
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....nt received by the assessee was a tied up grant or an amount received for a specific purpose as being capital in nature. In support of this proposition, the assessee has cited / placed reliance on several decisions of various benches of the ITAT and specifically in the case of ITO Vs. Vokkaligara Sangha of the Bangalore Bench of ITAT (supra), wherein it has been held that voluntary contributions / corpus donations received for specific purposes cannot be considered as income. 3.4.2 We find that in similar factual circumstances as the case on hand, a Co-ordinate Bench of this Tribunal in the case of ITO Vs. Vokkaligara Sangha in its order in ITA No.281 to 285/Bang/2014 dated 14.08.2015 has held that voluntary contributions received for a specific purpose cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts to be utilised for specific purpose; and in this context at paras 5.3.1 to 5.3.5 of the aforesaid order, the Co-ordinate Bench has held as under: "5.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited and placed reliance upon. ....
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.... regular activities. Houses were built on the land of poor agriculturists. The assessee-society had no legal title or right over the land or houses of those villagers/ agriculturists who were the beneficiaries. The purpose and activity of the assessee-society was to engage in such charitable activities. Whatever amount had been spent on those programmes/projects, 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 amounts spent by the assessee in constructing houses or reclaiming land were capital expenditure. As far as the assessee was concerned, those expenses were revenue expenses. The assessee had no right or title over those properties. Those expenses were incurred as part of its normal activities for which the society was formed. Therefore, the money spent by the assessee- society in constructing houses, reclaiming the land, for non-formal education, etc., had to be allowed as deduction in the computation of income. The grants received from foreign donor were for specific purposes. The grants which were for specific purposes did not belong to the assessee-society; such gra....
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....ty Estate (supra) held as follows (as per head note):- "It was for the specific purpose of implementation of the water supply scheme that the request for contribution had been made by the assessee-trust and it was in response to that request that the amount had been given by the Calcutta trust. It was clear that the intention of the donor and the donee was to treat the money as capital to be spent for the water supply scheme. The fact that the amount had not been paid over to the State Government and was kept unutilised in the account of the assessee-trust was not relevant. The amount could not be said to be "income" and could not be included as part of the assessable income of the trust under the provisions of Section 12(2)." In Yet another judgment in the case of Sukhdeo Charity Estate (supra), the Honourable Rajasthan High Court held as follows (as per head note):- "The intention of the donor-trust as well as the donee-trust was to treat the money as capital to be spent for the Ladnu Water Supply Scheme. It was of no significance whether the amount had since been paid to the State Government or kept in the account of the said scheme by the assessee-tru....
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....is a precedent for laying down a proposition of allowability of expenditure for computation of income of a charitable institution which is denied benefit Under Section 11. Honourable Supreme Court in the case of Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402 (SC), as per head note, held as follows: "Precedent -- Authority only for what it decides - Not for what may remotely or even logically follows - Decision on question not argued cannot be treated as precedent." Thus, the judgment of Honourable Andhra Pradesh High Court (supra) does not help the case of the Revenue. 27. On other hand, learned authors Chaturvedi and Pithisaria in their book Income Tax Law, Fifth edition, Vol.1, at page 424, under the heading "Income, when falls into the tax net", observed as follows:- "Although Section 14 of the 1961 Act classifies income under six heads, the main charging provision is Section 4(1) which levies income-tax, as only one tax, on the "total income" of the assessee as defined in Section 2(45) of that Act. AO income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the "total amo....
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....ons stand on the same footing as gifts and are therefore not taxable. (See under Section 10(3), "Voluntarypayments ..."p.320.) (c) Section 12 goes one step further and deems such revenue contributions to be income derived from property held under trust. It thereby makes applicable to such contributions all the conditions and restrictions under Sections 11 and 13 for claiming exemptions. (See also Expln. (1) to Section 11(1).] (d) Section 11(1)(d) specifically grants exemption to capital contributions to make the fact of non-taxability clear beyond doubt. But it proceeds on the erroneous assumptions that such contributions are of income nature - "income in the form of voluntary contributions". This assumption should be disregarded." 5.3.3 After, relying on the observations from the decision of the co-ordinate bench (supra), the Hyderabad Bench in the case of J.B. Educational Society (supra) observes as under :- 58. Further, in the case of Shri Shankar Bhagwan Estate vs. ITO (61 ITD 196) wherein even after considering section 2(24)(iia) of the Act it was held as follows: "Section 2(24)(iia) has to be read in the context of the introduction....
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....ust and their associated companies/persons towards "building construction" and the same were expended for that purpose. So far as section 2(24)(iia) is concerned, this section has to be read in the context of introduction of section 12. It is significant that section 2(24)(iia) was inserted with effect from 1.4.1973 simultaneously with the present section 12, both of which were introduced from the said date by Finance Act, 1972. Section 12 makes it clear by the words appearing in parenthesis that contributions made with 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 circular No. 108 dated 20.3.1973 is extracted at page 1754 of Volume I of Sampath Iyengar Law of Income-tax (10th Edition), in which the interrelation between sections 12 and 2(24) has been brought out. Gifts made with clear direction 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 and Charitable Trust v. CIT (172 ITR 373) (Bom) the Hon'ble High Court held that even ignoring the amendment to section 12, which means that even b....
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..... Those expenses were incurred as part of its normal activities for which the society was formed. Therefore, the money spent by the assessee-society in constructing houses, reclaiming the land, for non-formal education, etc., has to be allowed as deduction in the computation of income. 10. The grants received from Bread for the World were for specific purposes. The grants which are for specific purposes do not belong to the assesseesociety. Such grants do not form corpus of the assessee or its income. Those grants are not donations to the assessee so as to bring them under the purview of s. 12 of the Act. Voluntary contributions covered by s. 12 are those contributions freely available to the assessee without any stipulation which the assessee could utilise towards its objectives according to its own discretion and judgment. Tied-up grants for a specified purpose would only mean that the assessee, which is a voluntary organisation, has agreed to act as a trustee of a special fund granted by Bread for the World with the result that it need not be pooled or integrated with the assessee's normal income or corpus. In this case, the assessee is ac....
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....ved from donors for a specific purpose cannot form part of assessee's income. 64. In view of the above discussion, we are of the opinion that voluntary contributions in the nature of tied up grant received by the assessee cannot be brought to tax even the trust is not registered u/s. 12AA of the Act. The tied up donations received by the assessee should not be taxable as income of the assessee, if it is used for specific purpose for which it has been given and it cannot be considered as revenue receipts so as to tax the same......." 5.3.4 In coming to the aforesaid conclusion the Hyderabad Bench of the ITAT has also relied upon the decisions of the ITAT, Delhi Bench in the case of Smt. Basanthi Devi (supra) and Sri Chakhan Lal Garg Education Trust (supra) and in the case of Gaudiya Granth Anved Trust (supra) wherein similar issue raised has been considered by both the Delhi and Agra Benches of the ITAT. We also find that the Hon'ble Delhi High Court in the case of Basanti Devi & Sri Chakhan Lal Garg Education Trust vide its order in ITA No.927/09 dt.23.9.2009 has also affirmed the view taken by the Hon'ble ITAT in holding that corpus donations....