TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 1840
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....ion; 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 and are not exigible to tax, irrespective of w....
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.....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 authorities below. According to the learned AR, the AO disallowed the same only on the ground that sin....
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.... 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. Firstly, we would like to consider the legal position with regard to the voluntary contributions urged by the parti....
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..../ 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 grants did not form corpus of the assessee or its income. Those grants were not donations to the assessee so as to bring them under the purview of Section 12. Voluntary contrib....
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....o 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-trust. The amount of Rs. 70,000/- did not constitute income of the petitioner. The reassessment proceedings were not valid and were liable to be quashed." This Bench of the Tribunal in the case of Arya Vysya Abhyudaya Sangham (supra) for asst. year 19....
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....lows: "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 amount of income referred to in Section 5". Secondly, it must be "computed in the manner laid down in this Act". If either of these conditions fails, the income will not be a part of the total income that can be brought to charge [CIT v. Harprasad & Co. P. Ltd., (1975) 99 ITR 118, 125 (SC)]". 28. As argued by the Revenue, though by v....
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..... (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 of present section 12. In the instant case the Assessing Officer on evidence had accepted the fact that all the donations had been received towards the corpus of the endowments. In view of this clear finding, they could not be assessed as income of the assessees. Therefore, the voluntary contributions received by the assessees towards the corpus could not be brought to tax." 59. Now the issue for our consideration is w....
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....y 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 before the words appearing in parenthesis in the present section 12, it cannot be held that voluntary contributions specifically received towards corpus of the trust may be brought to tax. The aforesaid decision was followed by the Bombay High Court in the case of CIT vs. Trustees of Kasturbai Scindia Commission Trust (189 ITR 5) (Bom). In the present case donations being received for specific purpose, towards corpus of the trust, cannot be assessed as ....
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.... 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 acting as an independent trustee for that grant, just as same trustee can act as a trustee of more than one trust. Tiedup amounts need not, therefore, be treated as amounts which are required to be considered for assessment, for ascertaining the amount expended or the amount to be accumulated. 11. The assessee should have actually credited that grant in the personal account of the donor, Bread for the World and any amount spent against that grant should have been debited to that separate account of the donor. That incoming a....