TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 890
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....(A) has erred in holding that though the contribution in question has been received towards infrastructure development, no activity on this account has been carried out. 4. For that the Ld. CIT(A) has erred in holding that provision of section 11, 12 & 13 are applicable even in cases where the institution is not registered u/s. 12A of the Income Tax Act. 5. For that the Ld. CIT(A) has erred in holding that the appellant trust though not having benefit of registration u/s. 12A of the Act, it is registered with Ministry of Home Affairs as charitable for seeking permission under FCRA. 6. For that the Ld. CIT(A) has erred in holding that registration with Ministry of Home Affairs for FCRA makes the appellant trust in existence for religious and charitable purposes and the income including contribution or donation received will form part of total income for the Income Tax purposes. 7. For that the Ld. CIT(A) has erred in accordingly upholding the taxation of Rs. 57,25,000/- even though the appellant trust was not registered u/s. 12A of the Income Tax Act. 8. For that the Ld. CIT(A) has erred in upholding disallowance @ 20% amounting to Rs. 89,598/- out of expenditure incurred ....
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....nsideration i.e. A.Y. 2011-12; (ii) contribution has been received towards infrastructure development however no activity has been carried out during the year under consideration; (iii) as per judgment of Apex Court in the case of UP Forest Corporation Vs. DCIT reported in 165 ITR 533 the society cannot claim benefit of section 11(1)(a) unless and until institution is registered u/s. 12A of the Act; (iv) the appellant trust though not having benefit of registration u/s. 12A is registered with Ministry of Home Affairs as a Charitable Trust for which permission under FCRA has been account; (v) since the trust is in existence for religious and charitable purpose, the income from property held in India including contribution or donation received by it would form part of total income for the purposes of IT Act; & (vi) the foreign contribution has not been utilized and the same has been given without any specific direction or instruction will definitely form part of total income." 6. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us. 7. We have heard rival contentions and gone through the record. The Ld. counsel for the assessee has made the fol....
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....ition of Rs. 2,30,00,000/- sustained by the CIT(A) in respect of the corpus donations received by the assessee trust from Bank of India". The above said order of the Hon'ble Tribunal is squarely applicable to the facts of the appellant's case. The donation has been received for a specific purpose as would be evident from the confirmation of the donor i.e. for "infrastructural development and other development work" and thus forms part of corpus. The CIT(A) has also accepted the fact that the contribution was received towards infrastructure development as would be evident from findings at page-4 (just above para 3.7) of the order wherein it has been held that "the facts remain that though the contribution in question has been received towards infrastructure development no activity on this account whatsoever has been carried out though the fund was received well before the closure of the financial year." However, adverse inference was drawn merely on the ground of non-utilization of fund in the year under consideration. There is no requirement under law to utilize the corpus fund and/or donation for specific purpose in the year of receipt and the fact of non-utilization in ....
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....d Section 12A of the Act, have a direct bearing on the controversy. Therefore, it is necessary to take note of these clauses. The same are reproduced below for ready reference:- Section 2(24)(iia):- "(24) "income" includes (i) ************** (ii) *************** [(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes [or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) [or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10[or by an electoral trust]]. Explanation.--For the purposes of this sub-clause, "trust" includes any other legal obligation;] Section 11(1)(d):- "11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-- *************....
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....dispute, therefore, there is no necessity to make reference to Section 12AA of the Act. As far as the reliance placed by the Ld. Counsel for the assessee on the order of the Delhi Bench of the ITAT in the case of Smt. Basanti Devi and Shri Chakhan Lal Garg Educational Trust (supra) is concerned, the ITAT Delhi Bench had given its finding relying upon the order of the Hon'ble Delhi High Court. The finding of the Tribunal reads as under:- "11. The Hon'ble Delhi High Court, vide its order dated 23.9.2009, in ITA No. 927/09 (supra), have dismissed the Department's appeal against the aforesaid Tribunal order, by observing as follows:- "The respondent/assessee is admittedly a Charitable Organization which is a trust registered under the Indian Trust Act which has also been granted registration under the Income Tax Act w.e.f. 1.4.2003. The assessee received certain donations towards its corpus which had been deposited in the bank and the money was admittedly spent for acquiring land for construction of a college. In these circumstances, we are of the opinion that the CIT(A) as well as ITAT rightly concluded that the donations received towards corpus of the trust would be c....
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....case of "Shri Shankar Bhagwan Estate v. ITO [1997] 61 ITD 196(Cal)", which interpretation has been further relied upon in the subsequent decisions of the Tribunal as referred to above. The relevant part of the said observations of the Kolkata Bench of Tribunal is reproduced as under: "So far as section 2(24)(iia) is concerned, this section has to be read in the context of the introduction of the present 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 the 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's Circular No. 108 dated 20-3-1973 is extracted at page 1277 of Vol. I of Sampat Iyengar's Law of Income-tax, 9th Edn. in which the inter-relation between section 12 and section 2(24)(iia) has been brought out. Gifts made with clear directions that they shall form part of the corpus of the religious endowment can never be conside....
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....t' includes any other legal obligation;" 13. Thus in section 2(24)(iia), as inserted vide Finance Act 1972 w.e.f. 01.04.1973, it was specifically provided that though voluntary contribution received by charitable trust will be part of the income but not being the contribution made with a specific directions that they shall form part of the corpus of the trust or institution. Thus, in view of the said provisions, the CBDT Circular No. 108 dated 20.3.1973 was issued stating that any voluntary contribution received by charitable or religious trust or institution with a specific direction that it shall form part of the corpus of trust or institution was not includible as income of such trust or institution. However, a very important development, which the Ld. counsel missed and failed to bring before this Tribunal is that section 2(24(iia) has been further amended vide Direct Tax Laws (Amendment) Act 1987 further as amended by Direct Tax Laws (Amendment) Act, 1989, whereby, the words "not being contributions made with a specific direction that they shall form part of corpus of the trust or institution" were substituted/omitted. The CBDT Circular No. 551 dated 23.01.1990 explains ....
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....nded section 11 to exclude corpus donations from the total income of the trust, as explained in para 4.2 above. 4.5 The effect of the amendment of definition of 'income' contained in section 2(24) by the Amending Act, 1987 and the amendment of sub-section (1) of section 11 by the Amending Act, 1989 is that although corpus donations would be treated as income in the hands of the recipient, in the case of trusts or institutions, which comply with the requirements for exemption under section 11, these will be excluded from their income. However, in case the trust or institution loses the exemption under section 11, either by not complying with the conditions laid down in section 12A or by falling within the mischief of section 13, corpus donations will be included in its income and taxed. 14. As reproduced above, the present definition of income as provided u/s. 2(24(iia), in no manner exclude voluntary contribution received with a specific direction that they shall form part of the corpus of the trust, rather the same are liable to be included into the income of the assessee, however, subject to the provisions of section 11 and 12 as quoted and discussed by Coordinate Patn....
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.... inclined to accept the contention that the donation received by the assessee trust was with a specific direction that the same will form part of the corpus of the trust. The assessee, in this respect, has placed on file the copy of confirmation letter from the donor, which read as under: "This is to certify that ASOCIACIÔN AKSHY, with address main office at Patriarca San Jose, 2 bis-1°D, 28200 San Lorenzo de El Escorial, Madrid, Spain, with Registration Number 588315 in Association Register belonging to Home Affair Ministry in Spain Asociación Akshy after being satisfied with the object of the Akshay Educational and Social Welfare Charitable Trust-Bodhgaya, has agreed to extend financial support and sponsor the program and Project of the AECT-Bodhgaya and utilized exclusively for the purpose of the Trust activities and its development of the poor children and students in that area be done in the best manner. This further certified 80,000 Euros (equivalent to Rs. 57,25,000) sent by way of donation during the year 10-11 for infrastructural development and other development work, and in case of other necessity the Trustee in consultation with the Chairman can u....