TMI Blog2018 (8) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust as contemplated under Sec.2(15) of the Act. As the amount of ₹ 2,30,00,000/- received by the assessee trust from Bank of India towards corpus fund is in the nature of a ‘capital receipt’, therefore, the same could not have been brought to tax as the income of the assessee under Sec. 2(24)(iia) of the Act. - Decided in favor of assessee. Claim of expenditure against interest income u/s 57 - Held that:- in case of interest income earned by an assessee, only the expenditure (not being in the nature of a capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is to be allowed as a deduction under Sec. 57(iii) of the Act. - as the expenditure of 3,09,78,345.30, viz. (i) D-mat charges of ₹ 386/- ; (ii) Legal expenses of ₹ 11,236/-; and (iii) Medical Relief Expenses ₹ 3,09,66,723/- incurred by the assessee cannot be construed as having been laid out or expended wholly and exclusively for the purpose of making or earning of the interest income on the aforesaid FDR’s and bank account of the assessee, therefore, the same cannot be allowed as a deduction as against the interest income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have decided the matter since all the details were before him. 5. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in not allowing the following expenses incurred for the objects and administration of the Trust:- Demat Charges 386 Legal Expenses 11,236 Medical Relief 3,09,66,723 The expenses were incurred for objects of the trust. 2. Briefly stated, the assessee is a trust governed by and administered under the Bank of India Retired Employees Medical Assistance Scheme Rules (for short Scheme ) formulated by the bank. The assessee trust is registered with the Charity Commissioner, Mumbai. The application filed by the assessee seeking registration under Sec. 12A of the Act was denied/rejected by the DIT(Exemptions), Mumbai by his order passed under Sec. 12AA(3), dated 22.02.2011. The assessee trust had filed its return of income for A.Y. 2012-13 on 28.09.2012 along with the Income Expenditure A/c, Balance Sheet and Audit Report in Form No. 10B, declaring total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by a trust was to be taken as its income. Further, it was observed by him that as per Sec. 12(1) any voluntary contribution received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of the Sec. 11 be deemed to be the income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly. It was further observed by the A.O that in a case where voluntary contribution would be received by a trust registered under Sec. 12A with a specific direction that the same shall form part of the corpus of the trust or institution, the same would be exempt under Sec. 11(1)(d) of the Act. On the basis of his aforesaid deliberations, it was observed by the A.O that as the assessee trust was not registered under Sec. 12A, thus, it would not be eligible for claim of exemption under Sec. 11 of the Act. In the backdrop of the aforesaid observations, it was concluded by the A.O that as the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Sec. 12A of the Act was rejected by the DIT (Exemptions), Mumbai, vide his order dated 22.02.2011, therefore, the A.O had rightly added the sum of ₹ 2,30,00,000/- received by the assessee as corpus fund from Bank of India to the total income of the assessee. The CIT(A) further deliberating on the claim of the assessee that the A.O while assessing the gross receipts of the assessee under Sec. 56 of the Act had erred in not allowing the deduction contemplated under Sec. 57(iii), did not find merit in the same. The CIT(A) observed that the assessee had neither during the course of the assessment proceedings or before him had explained as to how the said expenditure was to be held as having been incurred by the assessee wholly and exclusively for the purpose of earning the income on account of interest or donations. On the basis of the aforesaid observations the CIT(A) partly allowed the appeal of the assessee. 7. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The Learned Authorized Representative (for short A.R ) for the assessee at the very outset of the hearing of the appeal submitted that as the voluntary contrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Sec. 12A of the Act, therefore, the corpus receipts had rightly been brought to tax by the lower authorities as the income of the assessee under Sec. 2(24)(iia) of the Act. It was further averred by the Ld. D.R that as the assessee had failed to establish that the expenses incurred by it were wholly and exclusively incurred for the purpose of earning the income on account of interest or donations, therefore, the CIT(A) had rightly declined such claim of the assessee. 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the validity of the orders of the lower authorities which had brought to tax an amount of ₹ 2,30,00,000/- received by the assessee trust from Bank of India. We find from a perusal of the lower authorities that it remains as a matter of fact that the aforesaid amount was admittedly received by the assessee towards corpus fund with a specific purpose of allocating such funds for different welfare activities. We find from the facts as emerges from the assessment order, that as per the decision of Bank of India Central Welfare Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee trust, would thus not be liable for being taxed as the income of the trust. We have perused the orders of the lower authorities and the material available on record and find that undisputedly the amount of ₹ 2,30,00,000/- was received by the assessee trust from Bank of India towards corpus fund. The said amount was specifically directed to be kept as a tied-up fund and only interest earned from the same was to be utilised for the furtherance of the objects of the trust. We have deliberated on the issue under consideration and are of the considered view that a corpus fund denotes a permanent fund kept for the basic expenditures needed for the administration and survival of an organization. The corpus fund is generally not to be utilized for the attainment of the objects of the trust, however the interest/dividend generated from such fund can either be utilized or accumulated. We have perused the objects of the assessee trust and find that it was established for providing medical assistance to the retired employees of Bank of India. The assessee trust as observed by us hereinabove, was duly registered with the Charity Commissioner, Mumbai. On a perusal of the trust deed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar view was also arrived at by the ITAT, Delhi in the case of ITO (Exemption) Vs. Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust (ITA No. 5082/Del/2010, dated 19.01.20110. In the aforementioned case the Tribunal had concluded that the amount received by the assessee trust from its settlor towards infrastructure fund was not liable to be brought to tax as its income, despite the fact that the trust was not registered under Sec.12A of the Act. We further find that the revenue being aggrieved with the aforesaid order of the Tribunal had carried the matter in appeal before the Hon ble High Court of Delhi, which had vide its order passed in DIT (Exemption) Vs. Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust [ITA No. 927 of 2009, dated 23.09.2009] had dismissed the appeal of the revenue and upheld the aforesaid view of the Tribunal. We further find that a similar view had also been taken by a coordinate bench of the Tribunal i.e ITAT, Agra in the case of ITO Vs. Gaudiya Granth Anuved Trust (2013) 28 ITR (Trib) 161 (Agra). Still further, the ITAT, Chennai B bench had also in the case of Pentafour Software Employees Welfare Foundation Vs. ACIT (ITA No. 751 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us the order of the CIT(A) on the ground that he had erred in not deleting the addition of interest income of ₹ 28,03,868/- that was wrongly made by the A.O. The ld. A.R taking us through the income and expenditure account of the assessee trust for the year under consideration viz. A.Y 2012-13, had drawn our attention to the fact that the assessee during the year under consideration was in receipt of total interest income of ₹ 2,03,19,218/- [interest on bank account ₹ 8,51,776/- (+) interest on FDR: ₹ 1,91,85,184/- (+) Accrued interest :Rs.2,82,258/-]. It was averred by the ld. A.R that the A.O while framing the assessment had wrongly made an addition of the bank interest by taking the same at ₹ 2,31,23,886/-. It was submitted by the ld. A.R that pursuant to the aforesaid mistake on the part of the A.O the assessee had suffered an excess addition of ₹ 28,03,868/-. The grievance of the assessee before us is that despite the fact that the entire facts and figures were available before the CIT(A), but the latter despite specific ground of appeal No.6 raised by the assessee before him had failed to adjudicate the same by way of a speaking order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O, the assessee had in its Income Expenditure a/c for the year under consideration viz. A.Y 2012-13 credited interest income of ₹ 2,31,23,086/- on the FDR s and bank accounts. As against the said interest income, the assessee had debited expenses aggregating to ₹ 3,09,78,345.30 ,viz. (i) Dmat charges of ₹ 386/-; (ii) Legal expenses of ₹ 11,236/-; and (iii) Medical Relief Expenses ₹ 3,09,66,723/-. We find that the lower authorities had declined to allow the expenses claimed by the assessee for the reason that the assessee could neither during the course of the assessment or the appellate proceedings establish that the aforesaid expenditure was wholly and exclusively incurred by it for the purpose of earning of the interest income. 15. We have deliberated on the issue under consideration and find that the deductions allowed against the income chargeable under the head Income from other sources are circumscribed in Sec. 57 of the Act. Still further, in case of interest income earned by an assessee, only the expenditure (not being in the nature of a capital expenditure) laid out or expended wholly and exclusively for the purpose of making or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of the expense of ₹ 3,09,78,345.30. The order of the CIT(A) in context of the issue under consideration is upheld. The Ground of appeal No. 5 raised by the assessee is dismissed. 16. The ld. A.R had further submitted that directions may be issued to the A.O that in case if the registration of the assessee trust is restored under Sec. 12A of the Act, then the consequential effect to such restoration of the registration of the assessee trust be given. We may herein observe that as the scope of our indulgence in the present appeal is restricted to the grounds of appeal on the basis of which the order of the CIT(A) has been assailed before us by the assessee appellant, therefore, in the absence of any such specific ground of appeal having been raised before us by the assessee trust, we decline to issue any such direction to the lower authorities. However, we may herein clarify that our aforesaid observations would not come in the way of giving consequential effect in case of restoration of the registration of the assessee trust under Sec.12A of the Act. 17. The appeal of the assessee is partly allowed in terms of our aforesaid observations. Order pronou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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