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Chandraprabhu Jain Swetamber Mandir Versus Assistant Commissioner of Income-Tax

2016 (11) TMI 1041 - ITAT MUMBAI

Taxability of Corpus donations receipt - scope of total income u/s 2(24)(iia) - unregistered trust u/s 12AA - Entitlement to exemption u/s 11 - Held that:- The Income-tax Appellate Tribunal, Chennai in Indian Society of Anaesthesiologists v. ITO in decision reported in [2014 (5) TMI 1031 - ITAT CHENNAI] held that specific funds created for fulfilling specific objectives for which these separate funds are constituted remain as capital funds as the funds can be used for fulfilling specific objecti .....

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pecific purposes - Corpus donations received by the assessee-trust cannot be brought to tax despite the fact that the assessee-trust was not registered under section 12A/12AA of the Act. - I. T. A. No. 230/Mum/2016 - Dated:- 12-8-2016 - Saktijit Dey (Judicial Member) And Ramit Kochar (Accountant Member) For the Appellant : Rahul R. Hakani For the Respondent : Vishwas S. Jadhav, Senior Authorised Representative ORDER Ramit Kochar (Accountant Member) 1. This appeal, filed by the assessee-trust .....

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, 1961 (hereinafter called "the Act"). 2. The grounds of appeal raised by the assessee-trust in the memo of appeal filed with the Income-tax Appellate Tribunal, Mumbai (hereinafter called "the Tribunal") reads as under : "I. Treating corpus donation of ₹ 4,55,446 as income 1. The learned Commissioner of Income-tax (Appeals) failed to appreciate that the appellant is a duly registered trust, and hence, corpus donation of ₹ 4,55,446 was income derived from prop .....

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ned Commissioner of Income-tax (Appeals) failed to appreciate that all surplus corpus donation of the appellant was exempt under section 11. Hence, the provisions of section 164(2) of the Act are not applicable." 3. The brief facts of the case are that the assessee is a religious charitable trust registered under the Bombay Public Trusts Act, 1950 engaged in providing stay facilities to sadhus and sadhvis, and pooja facilities to Swetamber Jains. During the course of assessment proceedings .....

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Thane (CIT). The Assessing Officer observed that the assessee has not submitted the copy of registration under section 12AA of the Act granted in favour of the assessee or the application made to the Commissioner of Income-tax for granting of registration and made the claim without any supporting evidence, therefore, the trust was assessed as association of persons and also taxed at maximum marginal rate under section 167B(1) of the Act. On perusal of the balance-sheet of the assessee, the Asse .....

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tion under section 11 is not available to the trust. The assessee submitted that any receipt cannot be taxed unless it is an income within the meaning of section 2(24)(iia) read with section 12 of the Act. It is submitted by the assessee that contribution made with a specific direction that they shall form part of the corpus of the trust would not be considered as income of the trust. The Assessing Officer rejected the contentions of the assessee as the assessee is not having registration under .....

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l form part of the corpus of the trust shall not be included in the total income of the previous year of the trust in receipt of the income. In the absence of registration under section 12A or 12AA of the Act the immunity granted by section 11(1)(d) is not available to the assessee for corpus donation as section 11 of the Act is not applicable for association of persons. Thus, the Assessing Officer added an amount of ₹ 4,55,446 to the total income of the assessee being corpus donation rece .....

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d is duly registered with the Charity Commissioner under the Bombay Public Trusts Act, 1950 vide registration certificate dated September 5, 1953 and was also registered with the Commissioner of Income-tax. The assessee submitted that the assessee has received corpus donation to the tune of ₹ 4,55,446 and filed its return of income declaring nil income. The assessee submitted that the certificate under section 12A of the Act granted in favour of the assessee-trust was not traceable and the .....

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sed for any other purposes as per religious customs and thus being capital receipts cannot be taxed. Thus, it was submitted that by virtue of provisions of section 11(1)(d) and section 12(1) of the Act, donations received towards corpus of the trust/various funds shall not be deemed to be income derived from property held under trust wholly for charitable or religious purposes. It was submitted that receipt cannot be taxed as income unless it is an income within meaning of section 2(24)(iia) of .....

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cer also erred in taxing the assessee's income at maximum marginal rate in the status of association of persons. It was submitted that no part of the assessee's income is liable to be charged at maximum marginal rates since no part of the income of the assessee enures or is used or applied directly or indirectly for the benefit of specified category of persons referred to in section 13(3) of the Act, that no part of the trust funds are invested in contravention of the investment pattern .....

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(Agra) ITA No. 386/Agra/2012. 4. Shri Shankar Bhagwan Estate v. Income-tax Officer, [1997] 61 ITD 196 (Cal). 5. Society for the promotion of Education, Adventure Sport and Conservation of Environment v. CIT [2015] 372 ITR 222 (All) (Appnx.) ; [2008] 171 Taxman 113 (All). 6. Rev Father Trust Oscar Colasco Memorial Medical Association v. CIT [2009] 31 SOT 1 (Mum). 7. R. B. Shreeram Religious and Charitable Trust v. CIT [1988] 172 ITR 373 (Bom). The assessee submitted that the Assessing Officer has .....

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ing for registration was produced before the Assessing Officer, hence, exemption claimed under section 11 of the Act was rightly rejected by the Assessing Officer. The learned Commissioner of Income-tax (Appeals) further held that the assessee is not entitled to exemption under section 11 of the Act being unregistered trust, therefore, the assessee's status had to be treated as association of persons and the corpus fund donation receipt is liable to be taxed. However, in the absence of elabo .....

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rned Commissioner of Income-tax (Appeals), the assessee is in second appeal before the Tribunal. 7. The learned counsel for the assessee submitted that the assessee is religious charitable trust duly registered under the Bombay Public Trusts Act, 1950. It is submitted that the assessee has received corpus donations of ₹ 4,55,446 during the previous year relevant to the assessment year. The learned counsel submitted that the assessee is not registered under section 12AA of the Act. The asse .....

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t to tax corpus donation at maximum marginal rate of tax. It is submitted that there is corpus donations of ₹ 4,55,446 which is not taxable even if the trust is not registered under section 12A/ 12AA of the Act. It is submitted that the donors have donated the corpus donations with specific directions about its application towards specific purpose for which the respective funds were created and it cannot be used for any other purposes. The learned counsel relied upon the following decision .....

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Shankar Bhagwan Estate v. ITO [1997] 61 ITD 196 (Cal). The assessee contended that the corpus donations cannot be brought to tax and also the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to bring these income to tax at the normal rate and not maximum marginal rate as held by the Assessing Officer and in view of the relief granted by the learned Commissioner of Income-tax (Appeals) to the extent of charging corpus donation at normal rates, ground No. III(4) has bec .....

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ld be presumed that the assessee is not registered under section 12A/12AA of the Act as the onus was on the assessee to bring on record the evidences to prove its contentions which it want court to believe and consequently to seek immunities and protections granted to a registered trust. The assessee has received corpus donations to the tune of ₹ 4,55,446 during previous year relevant to the assessment year which are being given with specific directions by the donors to be applied towards .....

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e utilised for specific purposes cannot be diverted for any other purposes by the assessee and are credited to the respective funds in the balance-sheet, and utilisation thereof is also reflected from these specific funds. We have gone through the case law relied upon by the assessee as set out above and have observed that the courts/Tribunals have taken a consistent view that these corpus donations are held to be capital receipts being capital in nature and are not taxable despite the fact that .....

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ure fund, was not taxable in the hands of the taxpayer trust, despite the fact that the taxpayer trust is not registered under section 12A of the Act, and consequently the Tribunal dismissed the Revenue's appeal. The Revenue went in appeal and the hon'ble Delhi High Court dismissed the appeal of the Revenue against the Tribunals order for the assessment year 2003-04 in ITA No. 927 of 2009 vide orders dated September 23, 2009 in Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust. .....

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'1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in failing to appreciate that voluntary contributions (whether corpus donations or general donations) received by a charitable trust are income as defined vide section 2(24)(iia) of the Act and corpus donations are exempt from tax under section 11(1)(d) only if assessee is registered under section 12A/12AA of the Act. 2. The learned Commissioner of Income-tax (Appeals) has erred in placing reliance upon the a .....

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peal stated above and when need for doing so may arise.' The brief facts of the case are that the assessee-trust has shown donation of ₹ 68,50,000 from BBT, Mumbai. The Assessing Officer computed the assessment on total income of ₹ 68,70,000 rejecting the assessee's contention that donation received towards the corpus of the trust. The Commissioner of Income-tax (Appeals) deleted the addition of ₹ 68,50,000 out of the addition of ₹ 68,70,000 made by the Assessing .....

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pital asset or property of the trust from which income can be generated. Corpus fund are generally created out of corpus donation. A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the donor. In the absence of any written direction of the donor, a contribution of grant cannot be transferred to corpus fund. In the present case, the donor, the Bhaktivedanta Book Trust has very categorically in his letter, while providing money to the appella .....

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gistered under section 12AA, exemption to corpus donation has been provided as per the provision of section 11(1)(d). For such trust to which registration under section 12AA has not been provided, its taxability is required to be decided with reference to the scheme of the Act as held in the decision of Pentafour Software Employees Welfare Foundation v. Asst. CIT (supra). In both the decisions referred by the learned authorised representative, in case of Pentafour Software Employees Welfare Foun .....

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her decision of the hon'ble Income-tax Appellate Tribunal, Kolkata in the case of Shri Shankar Bhagwan Estate v. ITO, dated January 13, 1997, reported in [1997] 61 ITD 196 (Cal) in which, the taxability of corpus donation has been examined in the light of section 12 read with section 2(24)(iia) of the Income-tax Act and in this decision, it has been held as under : "So far as section 2(24)(iia) is concerned, this section has to be read in the context of the introduction of the present s .....

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s extracted at page 1277 of Volume I of Sampath Iyengar's Law of Income-tax, 9th edition. In which the inter-relation between sections 12 and section 2(24) has been brought out. Gifts made with clear directions that they shall form part of the corpus of the religious endowment can never be considered as income. In the case of R. B. Shreeram Religious and Charitable Trust v. CIT [1988] 172 ITR 373 (Bom) it was held by the Bombay High Court that even ignoring the amendment to section 12, which .....

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e donations have been received towards the corpus of the endowments. In view of this clear finding, it is not possible to hold that they are to be assessed as income of the assessees. We, therefore, hold that the assessment of the corpus donations cannot be supported. 12. For the above reasons, we hold as under : 1. The religious endowments are not invalid on the ground that neither the temple nor the image had been consecrated at the time of creating the endowments. 2. The assessees have to be .....

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so, the trust under appeal was a private religious trust not registered under section 12AA and hence, corpus donation received by it should not be taxable as its income. 6.6 After considering the position of law as it is prevailing at present on the basis of the decision of three Tribunals, i.e., Income- tax Appellate Tribunal, Chennai, Income-tax Appellate Tribunal, Delhi and Income-tax Appellate Tribunal, Kolkata and further confirmed by the Delhi High Court, the corpus donation is in the natu .....

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y, Ground No. 2 is allowed.' The learned Departmental representative relied upon the order of the Assessing Officer, whereas the learned authorised representative relied upon the order of the Commissioner of Income-tax (Appeals) and submitted that the Commissioner of Income-tax (Appeals) has followed the orders of the Income-tax Appellate Tribunal, Delhi Bench, which has been confirmed by the hon'ble Delhi High Court, thus, the issue is covered in favour of the assessee. The learned auth .....

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. The grievance of the Revenue is that the Commissioner of Income-tax (Appeals) has wrongly followed the judgment of the hon'ble Delhi High Court in I. T. A. No. 5082/Delhi/2010, whereas that order has been challenged before the hon'ble Supreme Court. The Revenue did not dispute the facts. We noticed that the Commissioner of Income-tax (Appeals) after considering the decision of three Tribunals, i.e., Income-tax Appellate Tribunal, Delhi in the case of Smt. Basanti Devi and Shri Chakhan .....

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al Nos. 751 and 752 (Mds.) of 2007) and others and Income-tax Appellate Tribunal, Kolkata Bench in the case of Shri Shankar Bhag wan Estate v. ITO, dated January 13, 1997, [1997] 61 ITD 196 (Cal) decided the issue in favour of the assessee. We find that the facts of the case under consideration are identical to the facts of the case decided by the Income-tax Appellate Tribunal, Delhi Bench in the case of Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust and other orders of the Income-t .....

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