TMI Blog2011 (10) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... social service. Public money and the time of this Court is also wasted. This attitude on the part of the department cannot be countenanced. Therefore, we feel it appropriate to impose cost incurred by the assessee for fighting litigation so that the department would be more careful in future in taking decision to file appeal in such frivolous cases by ignoring the policy of the Government, viz., National Litigation Policy, 2011. - Cost of Rs. 1,00,000/- - Department to deposit the amount in favour of the Rural Project Fund of the assessee-trust. - IT Appeal No. 248 of 2010 - - - Dated:- 17-10-2011 - N. Kumar and Ravi Malimath, JJ. K.V. Aravind and M.V. Seshachala for the Appellant. S. Parthasarathi for the Respondent. JUDGMENT N. Kumar, J. The revenue has preferred this appeal challenging the order dated 16.02.2010 passed by the Tribunal in ITA No.937/Bang./2009 setting aside the order of the Director of Income-tax (Exemptions), who had rejected the application of the assessee for approval under section 80-G of the Income Tax Act (for short I.T. Act.) and directed him to pass an order giving recognition to the assessee for the purpose of Section 80-G of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(d) would constitute income irrespective of use of the same for different purposes. There is no distinction between the specific and non-specific fund in law. The assessee has not clarified the project for which the fund is intended to be used, except calling it as specific fund and no specific purpose is mentioned. The assessee has accumulated Rs. 1,47,64,078/- for a period of more than four years. During these years, no expenditure was incurred for so-called rural project. The assessee has not applied 85% of this income for charitable purposes, as intended to be under Section 11(2) of the Act. Unless the authority is satisfied, registration or renewal is not permissible. Therefore, he refused to grant approval under Section 80-G(5) of the Act. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. 3. The Tribunal held, the Director of Income Tax made a mistake in computing quantum of 85% of the income of the assessee. The assessee collected the amounts by way of donations directly towards funds, known as Rural Project Fund. It is a capital fund formulated by the assessee and earmarked for specific rural projects. Therefore, all donations collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come has to be utilised for charitable purposes. If for any reason, that amount is not used for the said purpose, then it is the requirement of law that they should file an application under Section 11(2) in Form No. 10 furnishing the particulars mentioned therein, Admittedly, if 85% of the amount collected as rural fund is not spent, then no such declaration in Form No. 10 is filed and therefore, in either event the assessee is not entitled to the benefit of exemption and therefore, he submits that the assessee is not entitled to the said benefit. 5. Per contra , the learned counsel appearing for the assessee has supported the impugned order. 6. in the light of the above facts and submissions, the following substantial question of law arises for our consideration: "If the assesses receives contributions for charitable purposes and do not show in the statement of account as the 'corpus fund', but, shows the said amount under a different specific head, does it cease to be a corpus fund to be eligible for the benefit under Section 11(1)(d) of the Act." 7. Section 2(24) of the Income Tax Act defines 'income'. (24) "income includes ( i ) profits and gains; ( i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder clause ( ii ) and ( iii ) of Section 28 or Section 41 or Section 59; ( va ) any sum chargeable to income-tax under clause ( iiia ) of Section 28; ( vb ) any sum chargeable to income-tax under clause ( iiib ) of Section 28; ( vc ) any sum chargeable to income-tax under clause (iiic) of Section 28; ( vd ) the value of any benefit or perquisite taxable under clause (iv) of Section 28; ( ve ) any sum chargeable to income-tax under clause (v) of Section 28; ( vi ) any capital gains chargeable under Section 45; ( vii ) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with Section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the first Schedule: 8. From the aforesaid definition clauses it is clear that the voluntary contribution received by a trust and credited wholly or partly for charitable or religious purposes or by the institution established wholly or partly for the said purposes would constitute income within the aforesaid definition. 9. Section 11 deals with income from property held for charitable or religious purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is utilised for carrying on a particular activity, it satisfies the definition part, of the corpus. The assessee would be entitled to the benefit of exemptions from payment of tax levied. 14. In fact the Bombay High Court in the case of Trustees of Kilachand Devchand Foundation v. CIT [1988] 172 ITR 382/[1987] 32 Taxman 393 dealing with the said voluntary contribution made for a charitable purpose, held that for being eligible for exemption, the donations must be voluntary and of a capital nature. That cannot be applied to charitable or religious purposes if the income thereof they must be so applied. The contribution made expressly to the capital or corpus of trust fall within the purview of sub-section (2) of Section 12. Therefore, such contributions cannot be be deemed to be the income derived from the property for the purpose of Section 11 of the said Act and provisions of Section 11 will not apply. 15. The Rajasthan High Court in the ease of Sukhdeo Charity Estate v. ITO [1991] 192 ITR 615 (Raj.) dealing with such contributions held that, the principles enunciated in various cases when applied to the present case, leave no room for debate that the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected is not towards the corpus of the trust. It is not in dispute that they have collected the amount for three years by way of voluntary contributions. The assessee is a charitable and religious trust. The documents furnished by them to the department, particularly, a report regarding Swamy Vivekananda Integrated Rural Health Center and Shree Sharadadevi Eye Hospital and Research Center (Units of Sri Ramakrishna Sevashrama), it is clear that the said center was started in the year 1992 with due registration and it has been working since then for the welfare of the needy people and the first project of it is Leprosy Eradication Project. Likewise, they have set out 14 projects, which are started in the rural areas and in particular in the border districts of Karnataka -Andhra Pradesh. The further particulars given in the report shows that the main unit of the hospital at Pavagada is having T.B. and Leprosy Hospital consisting of 30 beds for inpatients, a fully equipped operation theatre, X-Ray Unit, ECG, Physiotherapy, Laboratory and there is also Ambulance facility and the patients who approaches for treatment and if admitted as in-patients, are also provided food through Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of Section 11 is complied with. Therefore, we do not see any substance in the said contention. 18. In fact, the assessee has filed returns. In the returns, he has specifically mentioned that these contributions are received for the aforesaid purpose and claimed exemptions. Assessing Authority being satisfied with the requirements of Section 11(1)(b) is being fully complied with, has accepted the same and granted exemption under the aforesaid provision. It is too late in the day for the Commissioner for Directorate of Income Tax (exemptions) to ignore all these undisputed facts which are available in the record and to refuse to renew the registration, if is unfortunate that the higher authority has not applied its mind in proper perspective to these provisions. The parliament intended to pass on the benefit of exemption of payment of income tax to the charitable and religious institutions. We are really surprised at the attitudes of these authorities who are over-technical in denying the benefit to the deserving institutions, which are rendering laudable services to the rural masses. By not granting tax exemptions, which they deserve, the authorities have hamper ..... X X X X Extracts X X X X X X X X Extracts X X X X
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