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TMI Blog2017 (8) TMI 1245X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on account of corpus donations received in the form of building fund treated by the AO as revenue receipts. (a) building fund received by the assessee is part of fee receipt and it is not voluntary. Any non-voluntary contribution cannot be held as donation and never be covered u/s 11(1)(d). (b) the fee receipts does not have word corpus mentioned there in thus it cannot be treated as corpus donation. (c) funds received for specific purposes (i.e. building fund are for the application for specific purposes. It is not the capital of the society thereby not the corpus of the society. 2. Deleting the taxing of surplus amount to Rs. 11,95,189/- by holding that the provisions of Sec. 11 &12 will apply to any pending assessment as on date of such registration without appreciating the facts that the assessee has claimed exemption neither in original return of income nor any revised return was filed. The CIT(A) has erred by not applying the decision of Hon'ble Supreme Court in Goetze (India) Ltd. Vs CIT 284 ITR 323 (SC) in the assessee's case. 3. deleting the addition made on account of disallowance of depreciation amounting to Rs. 1,89,57,668/- without appreciating the fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund, the AO issued a show cause as under: "The details filed and records produced have revealed that the building fund is received from students as a part of regular fees. Copies of the receipts issued to these students have also been gone through wherein it is clearly mentioned that the building fund is received as part and parcel of the regular fees as any other fees under the head admission fees, tuition fees and caution money. Furthermore the building fund is fixed by the management of University. Prima facie these receipts of building fund is not a voluntary contribution but the students were bound to pay as a part of regular fees. Similar issue was also dealt with by the AO while completing the assessment for A.Y. 2011-12 wherein the AO has held that the building fund was a part of revenue receipts. In view of the aforementioned facts you are required to furnish your explanation as to why the building fund should not be treated as revenue receipts as a part of the fees received from the students." 2.1 The ld CIT DR took us through the findings of the AO which are as under: "5.2 The material available on record as well as the assessee's above mentioned submission has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that it is a receipt of revenue nature as such it has to be rounded through the Income and Expenditure account. Accordingly in view of aforementioned discussion the building fund of Rs. 5,29,48,789/- is held to be a revenue receipts for the year under consideration." 3. Per contra, the ld AR submitted that during the year, the assessee trust has received voluntary donation of Rs. 5,29,48,789/- from students/parents toward building fund from the students/parents which was one time donation. The building fund so received is neither fixed nor identical amount in all cases of donors, since it is voluntary.No donation toward building fund was received from more than 35% of the students.The amount so received was property accounted for and credited directly to Building fund account of the assessee (in balance sheet).The building fund donations were applied in construction of buildings for educational purposes in subsequent period whereas out of tuition fee, the major part was spent in imparting education. Assessee Trust was granted registration u/s 12AA of IT Act on 08.08.2014 (Paper book page 83), after considering the Trust deed dated 24th November 2001 meaning thereby, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ashram (2013) 357 ITR 731 (Karn):Voluntary contributions for specific purpose constitute Corpus fund. 85% of amount is not utilized for charitable purpose, not relevant. The word 'Corpus' used in context of Income Tax Act is to be understood in context of capital as opposed to an expenditure. If a voluntary contribution is made with a specific direction, it shall be treated as the capital of the Trust for carrying on its charitable or religious activities. Then such income falls under section 11(1)(d) and is not liable to tax. (4) Director of Income tax (Exemption) vs. National Association of Software & Services Companies (2012) 345 ITR 362 (Del): Corpus Donation" is one time admission fee paid by members who are aware that it could be spent by assessee only for acquiring capital asset is Corpus Donation, not taxable income. (5) CIT vs. Children's Education Society (2014) 264 CTR (Kar) 389: If the donations are received by assessee from students who are studying in the School run by it and the same are properly accounted for in the Building fund/Infrastructure fund and said amount is utilized for construction of building which is used for imparting education, it would constitute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er at length and after referring to the contention of both the parties, have set-aside the matter to the file of the AO to examine the matter afresh. For the year under consideration, our findings and directions given for AY 2011-12 shall apply mutatis-mutandis to this appeal as well. For sake of convenience, the said findings are reproduced as under: "3.6 If we were to read the ratio emerging out of the above two judgements, what clearly emerges is to determine the intention of the donor and the treatment of the receipts by the donee trust. Where the intention of the donor is that the amount/donation given is to be treated as capital and the income from that capital has to be utilized for the charitable purposes, then the said voluntary contribution is towards the part of the corpus of the assessee trust. It is not necessary that the persons who made these contributions specifically direct that they shall form part of the corpus of the trust. Similarly, the assessee trust after receiving the amount, keeps the amount in deposit and only utilise the income from the deposit to carry out the educational activities, then also the said amount would be a contribution to the corpus of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement involved in it rather it is compulsory for them to pay fees for these courses. Further, the question of giving specific direction does not arise as this is not the "donation' but the fees received for acquiring educational qualifications. Mere assigning the name of "Building Fund" to receipts of "revenue nature" does not warrant that these receipts will be considered as capital receipts. Students do not have choice to donate the amount for "building fund with specific directions". There is no donor/donee relationship which is perquisite for "donation" but in the instant case the students are getting their educational qualification in lieu of payment made to institution and the amount in question is nothing but the fees received from students in the name of "building fund". It was further submitted that no separate books of accounts are being maintained for the use of this fund i.e. no separate account in the form of building fund is being maintained in any bank so that its use can be ascertained. Assessee has failed to establish that these funds are being utilized for the specific purpose and the management is free to use this fund as per their own suitability. A donation wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion granted u/s 12AA of the Act. The assessee's claim cannot be entertained. The only available ground for claiming the exemption is by way of either making a claim in the original return of income or to file a revised return but this is not so in the assessee's case. Therefore, in view of the Hon'ble Apex Court's decision in the case of Goetze (India) Ltd. Vs. CIT 284 ITR 323 (SC), the assessee's claim was not accepted by the AO. However, the ld CIT(A) accepted the said claim and now, the Revenue is in appeal before us and the ld CIT DR relied on the findings of the AO. 6. In this regard, the ld AR submitted that the original return of income was submitted on 06.05.2013. On 07.04.2014 when request was made to AO, the first proviso to section 12A(2) was not in statute book, nor the assessee could file revised return for a belated return, therefore, there was no occasion to file any revised return of income for claiming deduction u/s 11 and 12 of IT Act. The assessee had claimed the exemption which has also been admitted by ld. AO at para 1.8 of order appealed against. It was requested to the ld. AO that after insertion of first proviso to section 12A(2) of IT Act by Finance (No.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted on 08.08.2014. On this date assessment for A.Y. 12-13 was pending & therefore benefit of section 11 &12 is available to the assessee. So far as AO's observation that assessee has not claimed deduction in return of Income, therefore the same is not allowable in view of Supreme Court decision in 284 ITR 323 (Goetze India), is concerned the same has no relevance as this decision is not applicable to appellant authorities. Considering all these facts the AO is directed to allow the benefit of sec. 11 to the assessee. 8. We have heard the rival submissions and pursued the material available on record. Similar issue has come up in assessee's own case for AY 2011-12 where we have taken a view that where during pendency of appeal before the ld CIT(A), the assessee was granted registration under section 12AA, it would be a case of pendency of assessment proceedings and the assessee would be eligible to claim benefits of section 11 and 12 of the Act. In the instant case, the facts are on a better footing as registration was granted during the pendency of assessment proceedings before the AO itself. Further, we agree with the view of the ld CIT(A) that the decision of Hon'ble Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in computing the income of a charitable trust/institution, depreciation of assets owned by such institution is a necessary deduction on commercial principles, hence, the amount of depreciation has to be deducted to arrive at the income available even though that capital expenditure has already been allowed in the year under consideration. Respectfully following the decision of Hon'ble Jurisdictional High Court, the disallowance of depreciation of Rs. 18957668/- made by the AO is deleted." 12. The subject issue is no more res integra. As per Hon'ble Karnataka High Court in the case of DIT Vs. Al-Ameen Charitable Fund Trust (ITA No. 62 and 414 of 2010 vide order dated 22.02.2016), the plain language of the amendment by way of insertion of sub-section 6 to section 11 establishes the intent of the legislature in denying the depreciation deduction in computing the income of Charitable Trust is prospective in nature with effective from 1.4.2015. This view is further supported by the Notes on Clauses in Finance [No.2] Bill, 2014, memo explaining provisions and circulars issued by the Central Board of Direct Taxes in this regard. 13. As rightly held by the ld CIT(A), the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as rejected. 16. It was submitted by the ld AR that in addition to the education, charity and donations is also object of the assessee Trust. Books of accounts of the assessee Trust are audited u/s 44AB of IT Act and the issue was also examined by the Auditors. Otherwise also, the same is within limit of 15% of gross receipts of Rs. 10,10,74,418/- as provided under section 11(1) of IT Act, not liable to tax. 17. As we have held above, the assessee is eligible for claim of benefit under section 11 and 12 of the Act. We accordingly set aside this matter to the file of the AO to examine the claim of the assessee that it is within limits of 15%. The assessee is also directed to submit the necessary evidence in support of the said claim to the satisfaction of the AO. In the result, ground no. 4 of revenue's appeal is allowed for statistical purposes. 18. In respect of ground No. 5 of the Revenue's appeal and assessee's ground of appeal no. 3(ii), it was submitted by the ld AR that the AO made addition of Rs. 20,00,000/- on account of defect in vouchers under the head building construction account which was not claimed as revenue expenses but capital expenses. Even before applying pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vances to majority of the same debtors b/f. in year under appeal, considering nature of advances not covered u/s 13(3) of IT Act and interest free funds available with assessee Trust. However, in the year under appeal, in avoidance of the fact that major advances are b/f balances of preceding year and assessee Trust had interest free unsecured loans of Rs. 49,69,466/-, ld. AO made addition of Rs. 42,13,821/- equal to 12% as presumed interest. Such addition is inclusive of Rs. 34,76,129/- for advance to Prime Location Dev. Pvt. Ltd. for purchase of land for expansion of educational building. 21. The relevant findings of the ld CIT(A) are as under: "6.3 I have carefully considered the facts of the case, findings of the AO and submission of the appellant. Regarding addition made in respect of ground 3 (a to e), it is seen that the assessee during assessment proceedings has not given any justification supported by evidence to prove that the advance given to various persons are for the benefit of the trust. Therefore the action of AO in assessing notional interest income is confirmed. Accordingly addition of (68692+84000+3476129+84000+501000) Rs. 4213871/- is confirmed. Further no ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld AR has submitted that no payment has been made during the year. In view of the conflicting facts and no further material available on record, we are unable to take a view in the matter. Further, there is no finding as to how the provisions of section 11(5) are attracted in the instant case. The matter is accordingly set-aside to the file of the AO to examine the same afresh taking into consideration the discussion in para 23 above. 25. In respect of Embassy Tourism Developers Pvt Ltd, the AO has invoked the provisions of 13(1)(d)(i), 13(1)(d)(iii) read with section 13(2)(g) of the Act. The ld AR has submitted that only an amount of Rs. 8,00,000 has been paid during the year towards share application money in M/s Embassy Tourism Development Pvt Ltd and no income has accrued during the year which call for disallowance. Further, the shares have been allotted in FY 2014-15. In our view, similar analogy will apply in respect of these provisions as we have discussed in respect of section 13(1)(c)(ii) in paragraph 23 above. What is relevant to examine is the year in which the money has been invested or shares have been brought otherwise than in the prescribed mode and income arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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