TMI Blog2008 (4) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Under these circumstances and in view of various judicial pronouncement regarding the meaning of terms 'voluntary contributions'; and 'corpus' the grants given by the Ford Foundation were voluntary contribution given for the charitable objects of the assessee. Accordingly the authorities below were justified in treating the funds as voluntary contributions. The voluntary contributions are chargeable to tax as income of the assessee within the meaning of section 2(24)(iia) of the Act. Under section 11 the assessee is required to apply the income to the extent of 75 per cent for the objects of the trust. In a case where income is not applied, the income can be accumulated or set apart in excess of 25 per cent of the income to be utilized subsequently. In the instant case, the entire income from funds granted was not utilized in the year under consideration. Therefore, the assessee was required to exercise option to accumulate the excess income for the purpose of applying the same in the subsequent year. No such option was exercised. Therefore, the entire income will be assessable in the year under consideration. Invoked provisions of section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of US $ 1,50,000 equivalent to Rs. 68,19,000 from "the Ford Foundation". Out of this the assessee admitted Rs. 19,88,875 as income of the year and the balance amount of Rs. 48,30,125 was treated as liability. During the course of assessment proceedings, it was explained to the Assessing Officer that the amount of grant was for a project, which was for two years and since during the relevant assessment year only seven months were covered, the proportionate amount of Rs. 19,88,750 was treated as income and the balance amount was shown as advance received from the Ford Foundation. However, the Assessing Officer treated the grant received by assessee from the Ford Foundation as voluntary contributions and treated the amount of Rs. 68,19,000 as income of the year under section 2(24)(iia) of the Income-tax Act, 1961. The Assessing Officer while rejecting the contention of the assessee observed that the grants were made available byFortFoundationto the assessee-trust to carryon charitable activities as specified in the proposal made by the assessee in accordance with its aims and objects. It was within the discretion of the donor to sanction and make available the grants to the assessee-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven the grant of $ 1,50,000 to the appellant vide their letter dated11-8-2000. It has been clearly mentioned in the captioned letter that the payment of grant funds will be made in full after receipt by the Foundation's Representative inNew Delhiof the enclosed countersigned copy of this letter and a completed copy of the attached Electronic Payment Instruction Form. It has also been mentioned that this grant is made only for the purpose stated in this letter and the documents referred above and it is understood that these grants funds will be used for such purposes substantially in accordance with the attached approved budget. It has been further mentioned that any grant funds nor expended or committed for the purposes of the grant, or within the period stated above, will be returned to the Foundation. From this letter is clear that the full amount of the grant has been released to the appellant for doing the activities which were mentioned in the proposal submitted by the appellant. Therefore, this was a grant given to the appellant for carrying out charitable activities as outlined in the proposal of the appellant. The Assessing Officer has given detailed reason for treating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the funds were to be utilized in two years. Once grant funds were available it could be utilized any time. He further submitted that the sanction letter only makes it clear that the amount could be obtained within the period of two years otherwise, the grants would have expired. Once the amount was released it was in the nature of voluntary contribution. He also submitted that there is no stipulation in the sanction letter issued by the Ford Foundation for refund of grants or overriding title over the grant funds. He further submitted that the voluntary contributions are to be governed by the provisions of the Income-tax Act and not by the us Regulations. The approved budget by the foundation does not provide for the break-up of the expenditure in two years. Therefore, the amount received by the assessee as a grant from the Ford Foundation was voluntary contribution and was assessable in the previous year relevant to assessment year in which it was received. 6. We have heard both the parties. The Ford Foundation vide grant No. 1000-1299, dated 11-8-2000 approved a grant of us $ 1,50,000 to the assessee for support for initiative to strengthen the role of media as an instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion' mean money gifted, given gratuitously without consideration and do not mean money paid willingly without any compulsion." 8.2 In Russel Institution v. Vestry of St. Giles 3 E. B. 416, it was said: "Voluntary contribution does not mean annual subscription (or entrance fees) paid for values received or expected to be received by the party paying, but means a gift made from disinterested motives for the benefit of others." 8.3 Hon'ble Bombay High Court in the case of Trustees of Shri Kot Hindu Stree Mandal v. CIT [1994] 209 ITR 396 has held the membership fee or subscription paid by a member can never be considered as gratuitous payments by the member to the society or as a payment without any consideration. Such payments cannot be characterized as 'voluntary contributions' within the meaning of that expression in section 12. 8.4 In the case of Gem Jewellery Export Promotion Council where grants in aid were made by the Government to provide certain institutions with sufficient funds to carryon their charitable activities. The institutions or associations to which the grant was made have no right to ask for the grant. It was solely within the discretion of the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour in return for the grants provided by it to the assessee. The conditions stipulated in the letter were to see and ensure that the funds were utilized by the assessee for the purposes for which the funds were sanctioned. The contention of the assessee that the funds were not voluntary contribution is not supported by any evidence. The letter of sanction of grant issued by the Ford Foundation does not specify anywhere that the funds were given as corpus funds. The sanction letter has also not specified or stipulated any condition according to which the funds were to be utilized proportionately in the period of 24 months. It is the assessee who has according to its convenience allotted funds in the period of two years. Therefore, the funds were granted voluntarily for carrying out charitable objects of the assessee. Under these circumstances and in view of various judicial pronouncement regarding the meaning of terms 'voluntary contributions'; and 'corpus' the grants given by the Ford Foundation were voluntary contribution given for the charitable objects of the assessee. Accordingly the authorities below were justified in treating the funds as voluntary contributions. 11. The v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seven issues were brought out during the year under consideration. M/s. Indigo Publishing Pvt. Ltd. was incorporated as a Pvt. Ltd. company on4-5-1998with the main object of undertaking business of publishing books and magazines to undertake business as publisher and promoters, to carry out business as printers etc. The company derives income from sponsorship advertisement charges besides receipts of subscription and sales of magazines. In the financial year ending on31-3-1999and31-3-2000, not much activity had taken place in that company and only three issues of magazines were brought out. In the current year the company got support from the assessee. It was found by the Assessing Officer that out of 2,000 copies, which were printed for each issue only 540 copies per issue were made available to the assessee by M/s. Indigo Publishing Pvt. Ltd. and the remaining copies were either sold or supplied on subscription or handed out as complementary copies by M/s. Indigo Publishing Pvt. Ltd. The total value of magazines received by the assessee worked out to Rs. 3,69,360 whereas for the same the assessee had made a payment of Rs. 11,00,000. In view of these facts the Assessing Officer ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing heard to the assessee. Referring to the expenditure incurred by M/s. Indigo Publishing Pvt. Ltd., he submitted that the company incurred Rs. 8,51,805 on account of magazine printing charges and salary of Rs. 1,31,000 was paid. A nominal income of Rs. 16,219 was earned by the company. Therefore, the amount of Rs. 11,00,000 given to M/s. Indigo Publishing Pvt. Ltd. was for the object of the assessee. The objects of the Little Magazine were identical and, therefore, no benefit was derived by the two members of the assessee. In view of these facts the provisions of section 13(1)(c) were not applicable. On the other hand, the ld. DR relied on the orders of the ld. CIT (Appeals) and the Assessing Officer. 16. We have heard the parties. In case of a charitable institution, the income derived from the property held under trust wholly for charitable or religious purposes shall be applied for the objects for which the institution was created. It is a settled law that income can be applied by way of donations to other charitable institutions having similar objects. In the instant case, the amount of Rs. 11,00,000 was paid to a Private Limited, company engaged in the business of publish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch two members of the assessee-society are substantially interested. In fact entire share capital of M/s. Indigo Publishing Pvt. Ltd. is owned by these two members. Therefore, the funds of the assessee had been utilized for the benefit of persons specified under section 13(1)(c) of the Act. 17. In the case of Action for Welfare Awakening in Rural Environment (AWARE) v. Dy. CIT [2003] 263 ITR 13 (AP), the fixed deposits in name of assessee-trust worth Rs. 16 lakhs were pleaded as security with bank enabling one of members of the assessee, to avail loan without adequate security and consideration, and certain transaction of purchase of lands was routed through an Assessing Officer in which all members were directors and employees of assessee. The misutilization was glaring. Hon'ble Andhra Pradesh High Court held that the assessee could not escape the clutches of law, nor any sympathy or equities could be extended, particularly for an organization, which received donations purely for the welfare of the under-privileged and needy class of the society. In view of the fact that entire transaction was within personal knowledge of trustees, it could be said that the funds of assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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