TMI Blog2017 (5) TMI 1671X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Rajiv Khandelwal Shri Neelkanth Khandelwal ORDER Per Bench: The cross appeals have been filed against the order of the CIT(A) dated 29.10.2010 for A.Y. 2005-06. 2. ITA No. 200/Mum/2011 The Revenue has taken the following effective ground of appeal: a. On facts and in the circumstances of the case and in law, the CIT(A) erred in holding that assessee trust has applied income to the extent of ₹ 1,02,00,000/- for charitable purposes by giving these amounts as corpus donations to another trust, when there is no obligation on donee trust to apply the amount for charitable purposes. b. On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that by giving corpus donations of ₹ 1,02,00,0007-, assessee trust has applied this amount for charitable purposes ignoring the fact that such amount will never be applied for charitable purposes, as donation given are corpus donations and hence no satisfaction as mentioned in Instruction No. 1582 dated 19/10/1884 exist. The only issue involved in this appeal relates to treating the corpus donation amounting to Rs..1,02,00,000/- given by the assessee to Tolani Edu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the case, the assessment order and submissions of the appellant. The appellant ha;; made donation of ₹ 1,02,00,000/- to M/s. Tolani Education Society. The A.O. has considered these two trusts as persons covered u/s 13(3) of the Act and in view of this, the A.O. has concluded that ₹ 1,02,00,000/- was not applied for the purposes mentioned in section ll(l)(a) of the Act. In this regard, the appellant has furnished the detailed submissions. From this, it is clear that Tolani Education Society will not come under the purview of section 13(3)(a), (b), (c), (cc) and (d) of the Act. So, only clause to be examined is section 13(3)(e) of the I.T. Act-However, explanation 3 to section 13 of the Act makes it very clear that section 13(3)(e) is not applicable in this case. 5.25 In view of this, I hold that donations made to Tolani Education Society is not hit by section 13 of the I.T. Act. I direct the A.O. to treat the donation of ₹ 1,02,00,000/- as application of income for charitable purposes u/s 11(1)(a) 4. The learned AR drew our attention towards the order of this Tribunal in assessee s own case in ITA Nos.6970 199/Mum/2011 ITA No. 1111/Mum/2011 for ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not sums applied for charitable purposes during the relevant year, including by way of donation to any other charitable trust with similar objects; the relevant part of the said note reading as under: ...... Thus, the payment to the other trust or institution out of income from property held under trust in the year of receipt will continue to be treated as an application of income. However, any such payment out of the accumulated income shall not be treated as an application of income, and shall be taxed accordingly. In fact, consequential amendments stand also made to the Act by way of insertion of clause (d) to s. 11(3) and proviso to s. 11(3A), all to the same effect and purport. The said provision/s would have no application in the instant case as, without doubt, each of the three sums comprising the total amount of ₹ 60 lacs paid by the assesse to TEF stand paid during the relevant year. We may now discuss each of the three sums separately. The sum of ₹ 24 lacs is admittedly a corpus donation (also refer ledger accounts in the books of the donor and the donee pages 24, 26 / PB 2). The law in the matter is by now well settled, so that donation b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue s objections was of the same being toward the corpus of the donee. The same would, therefore, without doubt, qualify for exemption u/s. 11(1)(a). As regards the amount of ₹ 15.20 lacs, the same is again by way of corpus donation toward funding the capital expenditure of TEF on construction of Executive Residency and hostel building. There is no question of TEF having spent the money on assessee s behalf, since reimbursed by the assessee, which would be so where the buildings under reference either belong to the assessee or are being constructed by it. As such, as far as the assesse-trust is concerned, it is donation to another trust and, thus, only an application of income (refer pgs. 22, 23 27/PB2). So, however, we are unable to find any reflection of the same in the assessee s annual accounts (pgs. 37 43/PB 1), including the income and expenditure account (pg. 39), showing the sources and application of, including the expenditure incurred on administration or otherwise for generating, the revenue. The assessee s claim, therefore, though acceptable in principle, would be required to be shown with reference to its accounts. The AO shall verify the incurring of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew must satisfy the definition of total income u/s. 2(15) (of the Income-tax Act, 1922, which is para material with section 2(45) of the Act), prescribing two conditions. Firstly, it must comprise the total amount of income, profits and gains referred to in section4(1) and, two, must be computed in the manner laid down under the Act. The capital gain being not chargeable u/s.12B of the 1922 Act during the relevant period, the same would not enter the computation mechanism of the total income. This is as the capital gain or loss (which is only negative income) did not form part of the total income of the assessee which could be brought to charge, so that it was not required to be computed. Reference in this context may also be made to the following observation by the tribunal in the case of Pravin Shah Trust vs. Dy. CIT(in ITA No. 4782/Mum/2010 dated 05.07.2013): 3.3 . That is, an income exempt u/c. III of the Act, not forming part of the total income, would not enter the computation process to determine the quantum of income under the relevant head of income, each of which has its own computation provisions. To the same effect and purport are its observationsin the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act, even as pointed out by the hon ble court in Rao Bahadur Calavala Cunnan Chetty Charities (supra). The Special Bench of the tribunal in Scientific Atlanta India Technology (P.) Ltd. vs. ACIT [2010] 2 ITR 66 (Trib) (Chennai) (SB) held that the profits of a unit eligible for deduction u/s.10A of the Act, i.e., to the extent not covered by the deduction there-under, would stand to be taxed directly and not enter the computation mechanism inasmuch as the same do not form part of the gross total income, as section 10A falls under Chapter III of the Act, so that the provisions of Chapter VI-A and, consequently, s. 80AB would not be applicable thereto. Before parting with the matter, we may also add that the assessee has been allowed all the expenditure on repairs and maintenance as debited in its accounts, i.e., on actual basis (Rs. 11.97 lacs/PB 1 pg. 39), even as directed by the ld. CIT(A), and which fact was also clarified by us during hearing. Accordingly, the assessee s ground/s for the claim of the standard deduction u/s.24 fail. We decide accordingly. Finally, the reliance by the assessee on the decision in the case of IAC, Mumbai vs. Saurashtra Trust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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