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2018 (9) TMI 1625 - AT - Income TaxAddition on account of corpus fund received front Director Sports, Govt, of Uttarakhand - assessee is not registered under section 12 A/12 AA - Held that:- It is observed from communication between assessee and Government of Uttarakhand Department of Culture, Tourism and Games, Dehradun, dated 01/12/14, that funds were released, as ‘corpus fund’ for operation of Civil Services Institute construction at Dehradun. It is also observed that only reason for disallowance of claim of assessee is because, phrase “Corpus Fund” has not been mentioned in letter dated 23/03/11, issued by Principal Secretary, Government of Uttarakhand to Director of Sports, Uttarakhand Culture, Tourism and Games. However it is observed that in Minutes of meeting by Government of Uttarakhand Department of Culture, Tourism and Games, dated 31/05/13 presided over by Chief Secretary, there is a specific reference regarding budget allocation of ₹ 5 crore as “corpus fund” from Sports Department to assessee, for its daily functioning in clause (vii). No doubt on nature of funds to be towards ‘corpus’. Further assessee has been able to prove that corpus fund was received for meeting out capital expenditure which according to explanation of assessee have been used actually to meet the capital expenditure. Thus, in our considered opinion, corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of the Society, even if no registration u/s 12AA has been granted. Disallowance of depreciation claimed - Held that:- As observed that Principal Secretary, Uttarakhand on 29/03/11 directed Sports Department, Uttarakhand to bring assessee into existence. He nominated budget fund to meet planned cost for construction of building for assessee. It is observed that Ld. A.O. relied upon the view that the building owned by assessee has been constructed by the grant sanctioned by Government of Uttarakhand and, therefore, in view of Explanation 10 to Section 43(1), depreciation could not be allowed on such construction. As we have already held in preceding paragraphs that the money received by assessee from Government of Uttarakhand was in the nature of corpus which was to be utilised for capital expenditure of assessee, we differ to follow the view taken by Ld.CIT(A). Further it is observed that objects of society works on principle of mutuality and has been created for benefit of its members. We therefore direct Ld. AO to allow the depreciation on such building as claimed by assessee. Treatment of interest earned by assessee as “Income from Other Sources” - Held that:- Amount on which interest has been earned by assessee, itself is exempt from tax under ‘doctrine of mutuality’. Further it has been observed from objects of the society that treatment of excess funds must be in furtherance of objects of society. In the instant case, surplus funds were to be used for any specific service, infrastructure, maintenance or for any other direct benefit for members. Further from submissions of assessee before Ld. CIT (A) it is observed that bank with whom fixed deposits are maintained are not its members and assessee did not claim for any exemption of interest income on the basis of ‘doctrine of mutuality’, instead has considered for taxability under head ‘Income from Business’. We therefore do not find any reason to change the head of interest income to “income from other sources”. - Assessee appeal allowed.
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