TaxTMI 
TaxTMI 
2024 (3) TMI 425
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....emption. Section 11(1)(d), reading as under, exempts income received by way of voluntary contributions toward corpus of the trust/institution: Income from property held for charitable or religious purposes. 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- (a) ------------------------ (b) ------------------------ (c) ------------------------- (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution The same is received from the students of the school toward, as claimed, development fund (DF) and employee's welfare fund (EWF), i.e., funds maintained for the development of the school buildings and running employee welfare schemes for it's employees, respectively. The relevant part of the order by the ld. CIT(A), confirming the impugned disallowance, reads as under: 4.1 Ground No.1 related to addition of Corpus fund consists of School Development Fund Rs. 70,80,700/- and Welfare Fund Rs. 31,31,850/-. The AO in his/her assessment order made this additio....
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....to voluntary nature as section 11(1)(d) of the Act clearly provides that the receipts should be in the form of voluntary contributions with a specific direction to become a part of the corpus of the trust. Therefore, the appellant's contention is not supported by any independent evidence to show that it was collected voluntarily for a specific purpose. In view of these factual and legal positions, I am not inclined to interfere in the order of the AO on this issue. Thus, this ground of appeal is dismissed. (emphasis, supplied) It's claim for exemption being denied, which stands confirmed in first appeal, aggrieved, the assessee is in second appeal. 3. We have heard the parties, and perused the material on record. 3.1 The basis of the Revenue's denial of the assessee's claim, as a perusal of the impugned order shows, is: (a) the contributions received from the students or, for that matter, their parents, cannot be regarded as voluntary; and (b) there is no written direction from the donees for the same to be regarded as corpus donation. 3.2 There is, to begin with, no conflict between a receipt being capital in nature and, by fiction of law, being an income chargeable to....
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....school for these two avenues of investment. This is as bizarre as it can get, and the assessee's case, clearly a make-believe, only needs to be stated to be rejected. It is apparent - from the various unproved incidences afore-noted, that would otherwise need to be shown, as indeed the manner of collection of the 'contributions' annually from the students, that they are called upon, at the beginning of the academic session, to contribute mandatorily, i.e., as a part of the fee-structure, to the various funds maintained by the school, and which therefore these students have necessarily to. That is, there is nothing voluntary about the said contributions, and there is quid pro quo; the students paying the same as a part of their annual charge to the assessee, which allocates the same to different heads of account or, rather, specifies the same, as it does the other elements of the school fee, viz. tuition fee, laboratory fee, sports fee, extra-curriculum activity fee, etc. As regards the assessee's claim of the law not contemplating a written direction, the same, to be valid, must therefore also show as to how the direction stands communicated to the assessee. The said direction is....
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.... u/s. 11(1)(a), i.e., if otherwise exigible, in accordance with law. Toward this, we find the AO has considered the same, including the impugned sum as part of income derived from property held under trust. He computes exemption u/s. 11(1)(a), i.e., on account of application of income, accordingly, at Rs. 54.22 lakhs. The assessee, before the ld. CIT(A) objects thereto, stating as: (a) though depreciation (Rs.24.47 lakhs) has rightly not been taken into account in computing the income (s. 11(6)); the same having not been in fact claimed by it, the AO ought to have taken into account the fact of addition to fixed assets at Rs. 17.13 lakhs, deductible u/s. 11(1)(a); (b) it having incurred an excess expenditure over income in the past (at Rs. 1842.42 lakhs), which therefore ought to have been taken into account by the AO in computing income (Ground E before us); (c) addition on application of s. 2(24)(x) r/ws. 36(1)(va) of the Act. (Gd. D). The ld. CIT(A) mistook the assessee's grievance (a) before him to imply non-grant of depreciation allowance (at Rs. 24.47 lakhs) and allowed the same. Item (b) being not raised before him per a specific ground, but only by way of an alternat....
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....come), at Rs. 1842.42 lakhs, also describing it as excess application of income - which is a contradiction in terms. As it appears to us, the assessee, as for the current year, presumes exemption u/s. 11(1)(d), while yet claiming capital expenditure/depreciation (a capital allowance). Two, an excess of expenditure is unfeasible except through borrowings, financing expenditure or, as the case may be, application of income. Repayment of borrowings would, in such a case, as is well settled, qualify as an application of income, except where the same is itself through borrowings. Financing through borrowings, it may be appreciated, cannot be regarded as an application of income. This would equally apply to capital expenditure incurred during the year. Without doubt, where financed by own funds, capital expenditure, as indeed revenue, would be an application of income S.RM.M.CT.M Tiruppani Trust v. CIT[1998] 230 ITR 636 (SC). (b) The set aside of current income for future application, which can be at a maximum of 15% thereof, is only for computing the total income for the year. It does not imply that the assessee is not obliged to apply the same in future. As such, a claim of excess ap....