TMI Blog2010 (3) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... is made to protect the existence in which it is absolutely necessary for the continuance of the trust. In these circumstances, respectfully following the decision in the case of Janaki Ammal Ayya Nadar Trust [ 1982 (8) TMI 4 - MADRAS HIGH COURT] and the decision of Hon'ble High Court in the case of Nizam's Supplemental Religious Endowment Trust [ 1978 (2) TMI 7 - ANDHRA PRADESH HIGH COURT] , the AO is directed to treat the payment of taxes under VDIS, as made by the assessee, to be application of income u/s 11. In these circumstances, the findings of the learned CIT(A) and the AO on this issue stand reversed and ground Nos. 2 and 2.1 of the assessee's appeal stand accepted. Expenditure on the earning from activities outside India - Whether not eligible to be treated as application of income for charitable purpose under s. 11? - HELD THAT:- Assessee is registered u/s 12A as a charitable institution. A perusal of the provisions of s. 11 (1)(a) clearly shows that the words used are is applied to such purpose in India . The words are not is applied in India . The fact that the legislature has put the words to such purpose between 'is applied' and 'in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the AO has made disallowance without any cogent reason and consequently exemption was granted u/s 11 and consequently the income of the assessee would be completely exempted. Therefore, the issue as raised by the revenue in this appeal becomes infructuous and academic in nature and consequently, the same is dismissed as infructuous. - Member(s) : G. E. VEERABHADRAPPA., A. D. JAIN. ORDER-A.D. JAIN, J.M.: ITA No. 429/Del/2005 is the appeal by the assessee against the order of learned CIT(A)-VIII, New Delhi in Appeal No. 116 of 2004-05, dt. 9th Nov., 2004 for the asst. yr. 1998-99. ITA No. 580/Del/2005 is the appeal by the Revenue against the order of learned CIT(A)-VII, New Delhi in Appeal No. 1 of 2003-04, dt. 9th Nov., 2004 for the asst. yr. 1998-99. ITA No. 2554/Del/2006 is the appeal by the Revenue against the order of learned CIT(A)-XXIX, New Delhi in Appeal No. 45 of 2006-07, dt. 31st May, 2006 for the asst. yr. 2003-04. ITA No. 172/Del/2008 and ITA No. 4564/Del/2007 is the appeal by the Revenue against the order of learned CIT(A)-XXI, New Delhi, in Appeal No. 55 of 2007-08, dt. 17th Oct., 2007 for the asst. yr. 2004-05, ITA No. 89/Del/2009 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 11 of the Act. In ITA No. 89/Del/2009, the Revenue has challenged the action of the CIT(A) in holding that the subscription income received by the assessee was not taxable under s. 28(3) of the Act and in allowing the benefit of exemption under s. 11 of the Act. The Revenue has also challenged the action of the CIT(A) in deleting the addition made by the AO as income of the corporate donations was received by the assessee. 4. Thus, it is noticed that in all the appeals of the Revenue, the Revenue has basically challenged the action of the CIT(A) in directing the AO to treat the subscription received as not taxable under s. 28(3) of the IT Act and allowing exemption under s. 11 of the Act thereon as also the action of CIT(A) in deleting the addition made by the AO by treating as income the sum received by the assessee as corpus donation. 5. In the assessee's appeal, the assessee has substantially challenged (i) the action of the CIT(A) in not treating the taxes paid in respect of the VDIS application as application of income for the purpose of s. 11 of the Act and (ii) the action of the CIT(A) in upholding the action of the AO in treating the expenditure incurred on events and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further relied upon the decision of the Hon'ble High Court of Andhra Pradesh in the case of CIT us. Trustee of H.E.H. The Nizam's Supplemental Religious Endowment Trust (1981) 127 ITR 378 (AP) in support of the same explanation. He further relied upon the decision of the Hon'ble High Court of Gujarat in the case of CIT vs. Ganga Charity Trust Fund (1986) 53 CTR (Guj) 365 : (1986) 162 ITR 612 (Guj), wherein the Hon'ble Court had held that all outgoing including outgoing by way of income-tax paid by the assessee trust must be deducted and it is only from the surplus income in the hands of the trustees that the question of application or accumulation or setting apart of income can arise. It was the submission that in view of the principles laid down by the above said decisions, the income-tax paid under the VDIS declaration made by the assessee within the financial year in which it did not have exemption under s. 12A, was liable to be treated as application of income. 7. In reply, the learned Departmental Representative submitted that the expenditure related to an earlier assessment year that the expenditure was in the form of income-tax on account of income earned in an earlier as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se circumstances, respectfully following the decision of Hon'ble High Court of Madras in the case of Janaki Ammal Ayya Nadar Trust and the decision of Hon'ble High Court of Andhra Pradesh in the case of Nizam's Supplemental Religious Endowment Trust, the AO is directed to treat the payment of taxes under VDIS, as made by the assessee, to be application of income under s. 11 of the IT Act. In these circumstances, the findings of the learned CIT(A) and the AO on this issue stand reversed and ground Nos. 2 and 2.1 of the assessee's appeal in ITA No. 429/Del/2005 stand accepted. 9. In respect of the issue in the assessee's appeal against the action of CIT(A) in upholding the view of the AO that the expenditure on the earning from activities outside India are not eligible to be treated as application of income for charitable purpose under s. 11 of the Act, it was submitted by the learned counsel for the assessee that the AO and the learned CIT(A) were of the view that the expenditure should have been incurred in India in order to Be eligible for exemption that it is not the case of the Revenue that the expenditure incurred was not for the purpose of the charitable activities of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia it would have specifically stated so, which is conspicuous by the action of the words applied. The learned counsel for the assessee further relied upon the decision of the Mumbai Bench of the Tribunal in the case of Gem Jewellery Export Promotion Council vs. ITO (1999) 68 ITD 95 (Mumbai), to support his contention that even if the expenditure is incurred outside India but the benefit of such expenditure is for attaining the purpose in India, the same has to be held to be application under s. 11(1) of the Act. He submitted that the decision of the Hon'ble High Court of Andhra Pradesh in the case of Trustees of H.E.H. The Nizam's Pilgrimage Money Trust vs. CWT/CIT (1987) 65 CTR (AP) 290 : (1988) 171 ITR 323 (AP) relied upon by the CIT(A) does not apply insofar as in that case, the funds had been applied outside India in contravention of the trust deed itself and that the Hon'ble High Court has not given any decision to hold that the expenditure for the purpose of claiming the benefit of application under s. 11 has to be incurred in India only. 10. In reply, the learned Departmental Representative submitted that the expenditure had been incurred outside India and that the inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision, the issue before the Hon'ble High Court was whether the income applied in India in contravention of the trust deed can be claimed as exemption under s. 11 of the Act even though the object of the trust mandated that the purpose of the trust was charitable activities in India. In these circumstances, we are of the view that the expenditure incurred by the assessee in Hanover, Germany for the purpose of attaining the objects of the assessee in India is eligible to be treated as application under s. 11 of the Act. In these circumstances, the findings of the learned CIT(A) on the issue stand reversed and consequently, ground Nos. 3 and 3.1 of the assessee's appeal stand accepted. 13. Apropose the issue raised in the Revenue's appeals being against the action of the learned CIT(A) in holding that the income of the assessee is not taxable under s. 28(3) of the Act, it was submitted by the learned counsel for the assessee that the AO had held that the sum received by the assessee under the non-refundable admission fee was liable to tax as income of the assessee, whereas it was claimed by the assessee that the amount was contribution towards the corpus that was not liable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be expended for charitable purpose of the donee. It is not the income of the donee trust. A perusal of the facts in the present assessee's case shows that the memorandum of association of the assessee itself clearly holds that the one-time admission fee is to be used only for acquiring capital assets. Thus, when a member makes a payment of one-time admission fee, it is clearly understood by the member that he is making the payment as a donation for the acquisition of a capital asset. Further, even otherwise, the assessee duly enjoyed the benefit of registration under s. 12A of the Act. As long as the assessee is holding registration under s. 12A the assessee is deemed to be a charitable organization. Once it is found that the assessee is a charitable organization and it is also found that the members who have paid one-time subscription fee are also well aware that the amount can be spent by the assessee only for the purpose of acquiring capital asset, the one-time subscription fee received by the assessee from the members would have to be held to be a donation to the corpus of the assessee and corpus donations are not liable to be treated as income of the assessee, as per the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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