TMI Blog2017 (2) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest of Revenue, hence, we have no hesitation in up-holding the said order dated 16-02-2016 passed by the learned CIT(E) u/s 263 of the Act as the assessment order dated 12-12-2013 passed by the AO u/s 143(3) of the Act is erroneous as far as being prejudicial to the interest of Revenue, and accordingly we uphold the order dated 16.02.2016 passed by the ld. CIT(E) u/s 263 of the Act. - Decided against assessee - I.T.A. No. 3249 / Mum/ 2016 - - - Dated:- 30-1-2017 - Shri Joginder Singh, Judicial Member And Shri Ramit Kochar, Accountant Member Assessee by : Shri Vijay Mehta Revenue by : Shri Manjunatha Swamy, CIT-DR ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee, being ITA No. 3249/Mum/2016, is directed against the order dated 16th February, 2016 passed by learned Commissioner of Income Tax (Exemptions), Mumbai (hereinafter called the CIT(E) ), for the assessment year 2011-12 u/s 263 of the Income-tax Act,1961 (Hereinafter called the Act )., arising from the assessment order dated 12th December, 2013 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Act , by holding the said assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2011-12 was completed by the AO u/s 143(3) of the Act on 12th December, 2013 wherein the income assessed of the assessee-trust was at assessed at Nil . A proposal was received by learned CIT(E) from the learned Addl. DIT (Exemptions) Range 1, Mumbai vide letter No. Addl. DIT(Exem)/Rg.1/Reopening/2014-15 dated 24th April, 2015 regarding revision of orders prejudicial to revenue u/s 263 of the Act in the case of the assessee-trust i.e. M/s Bank of India Retired Employees Medical Assistance Trust. Based on the aforesaid proposal, a show-cause notice was issued to the assessee by learned CIT(E) vide letter No. CIT(E)/263/2015-16 dated 1st January, 2016 which is reproduced as under:- In your case, the assessment was completed u/s 143(3) dated 12.12.2013 determining a total income at Rs.NIL. 3. It is observed form the records that the Assessing Officer has stated that the Trust is not duly registered u/s.12A of the I.T. Act 1961 and subsequently not liable for exemption u/s. 11 of the I.T. Act 1961 and the assessment was completed accordingly. However, the Assessing Officer has erroneously allowed the corpus donation of ₹ 1,90,00,000/- u/s 11(1)(d) of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust u/s.12A does not change the character of the receipt. The character of the receipt is Corpus and hence is a Capital receipt. These facts were available with the assessing officer and the assessing officer had after due verification and considering the nature and character of the receipts has treated the receipt as a corpus of the fund and accordingly the said amount was not treated as a income of the trust. . We are Charitable Trust though we may not have been recognized u/ s.12A due to a technical defect. It may also be stated that the Assessing Officer was aware of the fact that registration u/s.12A of the act was rejected and the assessee is not entitled to exemption u/s.11 of the Act. The Assessing Officer has stated in the last paragraph of the order as under:- the Trust is registered with the Charity Commissioner, Mumbai. Registration u/s.12A of the I.T. Act rejected to the assessee. Therefore assessee is not liable to exemption u/s.11 of the Act . During the assessment, the Balance Sheet and Profit Loss Account was available with the Assessing Officer. Details of the Corpus Fund received during the year was provided to the Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 12 of the Act, but rather whether voluntary contributions are income at all. Thus, with due respect, the aforesaid decision, in our view, would not be of any help to Revenue in the case on hand . In the said decision the detailed discussion has been carried out by the bench and has come to the conclusion that a specific purpose donation received does not fall within the ambit of the provision of S.2(24)(iia) of the Act. The principles of the capital v revenue have to be borne in mind and capital receipts cannot be treated as an income. Contribution received for specific purpose is a capital receipts and being a capital nature it cannot be considered as an income. The said judgment has relied on number of judgments which have been cited in the said case. It has been held that irrespective of the granting or non granting of registration u/ s.12A the character of the contribution received does not change. We also relied on the following judgments:- 1. ITO (Exem) v. Basanti Devi Shri ChakhanLalGard Education Trust -ITA No.5082 (Del)/2010 C.O. No.419 (Del)/2010. 2. ITO v. M/s. Gaudiya GranthAnurved Trust -ITA No.386/Agra/2012. 3. Pentafour Software Employees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The change of an opinion is out of the purview of Section 263 of the Act. 2. The assessee would also like to object to the direction as to the allowability or not of expenditure incurred for the object of the Trust. Irrespective of the registration of the Trust u/ s.12A, the assessee trust is registered for the benefit of the medical assistance to the retired employees. The object of the trust is to pay and administer payment of medical assistance to the retired employees of the bank. Hence any expenditure incurred by the trust for the medical assistance of the retired employees of the Bank of India is for the object of the trust and the same is an expenditure which is required to be reduced from the income earned under whatever source by the Trust. These facts were also verified by the assessing officer during the assessment proceedings and accordingly the expenditure has been correctly allowed from the interest income earned by the trust. In the case of charitable trust, the income of the trust is required to be utilized for the objects of the Trust only. The assessing officer has not doubted the purpose for which the expenditure has been incurred. In fact, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O. u/s 143(3) of the Act, for framing fresh assessment after providing proper opportunity of being heard to the assessee . The assessee had argued before the learned CIT(E) that an amount of ₹ 1.9 crores was received by the assessee-trust towards Corpus Fund which cannot be used by the trust and only income derived from this corpus fund thereon can be used for the benefit of the members. The registration of the Trust u/s 12A of the Act does not change the character of the receipt, hence, the same is capital receipt. The assessee- trust also acknowledged that the registration u/s 12A of the Act was rejected by the Revenue and therefore the assessee is not liable to claim exemption u/s 11 of the Act. The assessee submitted before the learned CIT(E) that the A.O. formed an opinion and applied his mind to the facts of the assesse s case and allowed exemption u/s 11 of the Act. It was submitted by the assessee that change of an opinion is out of the purview of section 263 of the Act. The ld. CIT (E) observed that the A.O. should have disallowed the claim of the assessee-trust for exemption of ₹ 1.90 crores while completing the assessment for the assessment year 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act was rejected by the Revenue . It is submitted that while framing the assessment order dated 12.12.2013 u/s 143(3) of the Act the corpus fund was not taxed by the AO keeping in view that the same is capital receipt . It was submitted by learned counsel for the assessee that it is the contention of the ld. CIT(E) that corpus funds received by the assessee is chargeable to tax as revenue receipt. It is submitted that show cause notice dated 01.01.2016 was issued by learned CIT(E) on two grounds , of which one ground was with respect to the interest income of ₹ 1.46 crores as against which expenditure has been incurred and allowed by the AO while the learned CIT(E) challenged the allowability of expenditure having no nexus with interest income in the afore- stated SCN, but said second issue was finally dropped by the ld. CIT(E) while framing order dated 16.02.2016 passed u/s 263 of the Act, and the assessment order dated 12.12.2013 passed by the AO u/s 143(3) of the Act was finally set aside by learned CIT(E) vide orders dated 16.02.2016 passed u/s 263 of the Act only on one ground of taxability of corpus fund to the tune of ₹ 1.90 crores received by the assessee fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia is placed on record vide paper book page No. 29 , of which relevant portion reads as under : - CERTIFICATE This is to certify that as per the decision of Bank s Central Welfare Committee, for the purpose of allocation of funds for different welfare activities, an amount of ₹ 150.00 lakhs and ₹ 40 lakhs has been debited to the Bank s P L Staff Welfare Expenses Account on 04.03.20111 and 29.03.2011 respectively and paid accordingly to the credit of Retired Employees Medical Assistance Scheme s Account towards Corpus Fund of the Scheme. The assessee had also submitted copies of audited Balance Sheet and Profit and Loss Account before the AO during the course of assessment proceedings u/s. 143(3) of the Act read with Section 143(2) of the Act. The details of the corpus fund was duly furnished to the AO by the assessee during assessment proceedings u/s 143(3) of the Act read with Section 143(2) of the Act. The AO was aware that registration u/s 12A of the Act of the assessee-trust was rejected by the Revenue. The AO accepted the contentions of the assessee without analyzing the provisions of Section 11(1)(d) r.w.s. 2(24(iia) and Section12 A of the Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant spouse. The Trust is governed by and administered under the Bank of India Retired Employees Medical Assistance Scheme Rules formulated by the Bank. The trust is registered with the Charity Commissioner, Mumbai, registration u/s 12A of the I.T. Act rejected to the assessee. Therefore assessee is not liable to exemption u/s 11 of the I.T. Act. We have observed that the Mumbai Bench of this Tribunal in the case of Chandraprabhu Jain Swetamber Mandir v. ACIT in ITA No. 230/Mum/2016 vide orders dated 12-08-2016 wherein it has been held that the corpus donations received by the assessee trust for utilization for specific purposes cannot be brought to tax despite the fact that the tax-payer trust in that case was not registered u/s 12AA of the Act. The afore-stated order of the tribunal is reproduced below in which one of us (Accountant Member) is signatory of the said order of the tribunal:- 9. We have considered the rival contentions and also perused the material available on record including the case laws relied on. We have observed that the assessee is a religious charitable trust duly registered under the Bombay Public Trust Act, 1950. The assessee could not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount received by the tax-payer trust from its settler, towards infrastructure fund, was not taxable in the hands of the tax- payer trust, despite the fact that the tax-payer trust is not registered u/s 12A of the Act, and consequently the Tribunal dismissed the Revenue appeal. The revenue went in appeal and the Hon ble Delhi High Court dismissed the appeal of the Revenue against the Tribunals order for assessment year 2003-04 in ITA no. 927/2009 vide orders dated 23-09-2009 in Basanti Devi Shri Chakhan Lal Garg Education Trust. Similar view was taken by ITAT, Agra in the case of ITO v. Gaudiya Granth Anuved Trust reported in (2014) 48 taxmann.com 348(Agra-Trib) whereby Tribunal held as under: This is an appeal filed by the Revenue against the order dated February 24, 2012 passed by the learned Commissioner of Income-tax (Appeals)-I, Agra for the assessment year 2007-08. 2. The Revenue has raised the following grounds of appeal : 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st for purchasing the land and giving money on interest as loan. Therefore, the amount of ₹ 68,50,000 shown by the appellant trust has been found to be in the nature of corpus donation. Now, the question arises whether such corpus donation is taxable as income or not even in the cases in which the trust is not registered under section 12AA because for those trusts which are registered under section 12AA, exemption to corpus donation has been provided as per 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 Foundation v. Asst. CIT, it has been held that corpus donation being in the nature of capital receipt are not chargeable to income-tax. The decision of the Income-tax Appellate Tribunal, Delhi in the case of Basanti Devi and Sri Chakhan Lal Garg Education Trust for both assessment years 2002-03 and 2003A-04 are annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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 assessed in the status of individual since they are artificial juridical entities and 3. The voluntary contributions received by the assessee towards the corpus cannot be brought to tax.' 6.5 Even after considering the definition of section 2(24)(iia) read with section 12, the hon'ble Income-tax Appellate Tribunal, Kolkata arrived to the conclusion that the voluntary contribution in the nature of corpus donation raised by the appellant cannot be brought to tax. In this case also, 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for non- prosecution vide judgment Civil Appeal Nos. 7036 of 2011, judgment dated January 28, 2013, Income-tax Appellate Tribunal Chennai Bench in the case of Pentafour Software Employees Welfare Foundation v. Asstt. CIT [I.T. Appeal Nos. 751 752 (Mds.) of 2007] and others and Income- tax Appellate Tribunal, Kolkata Bench in the case of Shri Shankar Bhagwan Estate (supra) 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-tax Appellate Tribunal. Since facts are identical, therefore, to maintain consistency, we follow the above orders of the Income-tax Appellate Tribunal and the light of facts we do not find any infirmity in the order of the Commissioner of Income- tax (Appeals). The order of the Commissioner of Income-tax (Appeals) is confirmed. 7. In the result, the appeal of the Revenue is dismissed. The ITAT, Chennai in Indian Society of Anaesthesiologists v. ITO in decision reported in (2014) 47 taxmann.com 183 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of an Explanation of section 11. Section 12A provides that provisions of sections 11 and 12 shall not apply in relation to income of any trust or institution unless certain conditions are satisfied, one of which is clause (a), the same is reproduced as under: 12A. Conditions as to registration of trusts, etc.-The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :- (a)the person in respect of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Chief Commissioner or Commissioner before 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later : Provided that the Chief Commissioner or Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the period aforesaid; 12. Application for registration under section 12A has to be made in Form 10A prescribed by Rule 17-A of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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