TMI Blog2020 (1) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the assessee is not to earn the profit in relation to trade, commerce and business, therefore, the exemption u/s.11 12 is not liable to be declined. Accordingly, we set aside the finding of the CIT(A) in this issue and allowed the claim of the assessee. Corpus contribution received by the assessee - HELD THAT:- Upon perusal of stated terms conditions, it could not be said that the funds received by the assessee were not in the nature of voluntary contributions rather they were more in the nature of specific grants on certain terms and conditions and liable to be refunded, in case the same were not utilized for specific purposes. It is trite law that entries in the books of accounts would not be determinative of the true nature / character of the transactions and the same could not be held to be conclusive. Therefore, the mere fact that the assessee credited the receipts as corpus contribution, in our considered opinion, would not make much difference and would not alter the true nature of the stated receipts. The said funds / receipts, as stated earlier, were more in the nature of specific grants and represent liability for the assessee and liable to be refunded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant have to be considered as Charitable Purposes and the provisions of Section 11 of the Act have to be applied in assessment of its income. 2. Re. ₹ 150 Crores received during the year from the Central Government of India accounted inadvertently as Corpus Contribution: The Ld. C.I.T. (Appeals) in the facts and circumstances of the case of the appellant and in law ought to have held that- (a) ₹ 150 Crores received from the Government of India as per the terms stipulated vide letter dated 18th June, 2010 bearing No.6/51/2009-E MDA for release of the said amount does not represent contribution towards corpus, but represents grant-in-aid refundable to the extent of unspent balance for the objects of the Trust and hence is to be treated as liability and accordingly ought to have held that the said amount cannot be assessed as income for the year under any of the applicable provisions of the Income Tax Act, 1961. Without prejudice to the above and in the alternate (b) ₹ 150 crores received from the Government of India cannot be assessed as Income by resorting to the definit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edium and long term exports and considering the limitations of Export Credit Guarantee Corporation (ECGC) in providing adequate cover on its own and non-availability of reinsurance cover to such exports, the Government of India, Ministry of Commerce and Industry, Department of Commerce vide resolution dated 07/03/2008 established National Export Insurance Account (NEIA) Scheme, to be maintained and operated by a Public Trust. The assessee was thus set up in terms of this Government Resolution vide Trust Deed dated 21/03/2006 settled by President of India, acting through the Joint Secretary, Department of Commerce, Ministry of Commerce and Industry, Government of India. 2.2 The prime objects of the trust are to implement the NEIA scheme through ECGC for the benefit of medium and long-term exports. The assessee endeavor to promote exports from India and to protect the payment risks for transactions for which ECGC is unable to provide cover owing to lack of capacity or commercial consideration. In other words, the assessee is to provide insurance cover to promote exports from India and to protect payments risks. The assessee also aim at meeting the cost of insurance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs, it was also noted that the assessee was in receipt of ₹ 150 Crores as Corpus Contribution during the year which was claimed to be exempt u/s 11(1)(d) of the Act. However, as per Ld.AO, the assessee could claim this exemption only if it was eligible for exemption u/s 11 of the Act otherwise all contributions including corpus contributions would form part of total income of the assessee as per Section 2(24)((iia). 2.6 The assessee defended its stand by drawing attention to its main objectives and submitted that since the objects were charitable in nature, the assessee was eligible to claim the said exemption which was further supported by the fact that the assessee was holding valid certificate of registration u/s 12AA of the Act. 2.7 The assessee also contested the stand of Ld. AO in invoking the provisions of Sec. 2(24)(iia) with respect to corpus contributions. For the same, the attention was drawn to terms of sanction letter dated 18/06/2010 bearing no. 6/51/2009-E MDA to submit that the grant of ₹ 150 Crores was to be used only for sanctioned purposes and any unspent amount was to be surrendered to the governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim of the assessee u/s 11/12 of the Act. The object of the assessee has been given in para no. 5 of the trust deed at page no. 11 which is hereby mentioned below:- (i) To implement the NEIA Scheme through ECGC (Export Credit Guarantee Corporation of India) for the benefit of medium and long term exporters (b) To implement such other schemes and programmes for the benefit of medium and long term exporters as the Government of India mainframe from time to time and direct the trust implement. 5. The assessee trust received policy premium payments from the following parties (i) Apar Industries Ltd. ₹ 1,86,12,015/- (ii) ONGC Videsh Ltd ₹ 2,06,32,870/- (iii) Hindustan Aeronautics Ltd. Bangalore ₹ 17,34,159/- total to the tune of ₹ 4,09,79,044/-. The assessee also paid the claim of various exporters under the scheme in sum of ₹ 32,12,724/- during the year. The claim of the assessee was declined in view of the exception of provision u/s 2(15) of the Act specifically on the grounds of that the object of the assessee is in nature of business, trade and commerce. No doubt, the said provision was introduced. The assessee tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provide credit insurance cover to Indian Exporters keeping in view the national interest. The Trust is sponsored and the nature of activities of the trust is to provide credit insurance cover to Indian Exporters keeping in view of the national interest. The Trust is sponsored by Govt. of India with the objective to promote exports, improve competitiveness of Indian exports and to implement schemes formulated by the Govt. of India for the benefits of medium and long term exporters in national interest. Certainly, none of the above objectives are tainted with motive of trade, commerce or business as Govt. of India is not into business of providing Credit Insurance. Wherever, it has intended to do so, it has been done through Corporate structure e.g. ECGC of India Ltd. (Export Credit Guarantee Corporation) which does the credit insurance activity on commercial basis with Govt. of India as the sole shareholder with a premium and other income of ₹ 1020 crores (appx) and a net surplus of ₹ 171 (approx) for FY 2012-13. On the basis of the above, NEIA s activity cannot and should not be considered to be in nature of trade, commerce or business. 7. The Trust sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption is limited to activities in the nature of trade, commerce or business or the activity of rendering any service in relation to any trade, commerce or business, the dominant and the prime objective has to be seen. If the dominant and prime objective of the institution, which claims to have been established for charitable purpose, is profit making, whether its activities are directly in the nature of trade, commerce or business or indirectly in the rendering of any service in relation to any trade, commerce or business, then it would not be entitled to claim its object to be a charitable purpose. On the flip side, where an institution is not driven primarily by a desire or motive to earn profits, but to do charity through the advancement of an object of general public utility, it cannot but be regarded as an institution established for charitable purposes. 9. The facts of the present case is quite similar to the facts of the case titled as India Trade Promotion Orgaization (supra). Therefore, finding of the said cases is quite applicable to the facts of the present case. Since the dominant and prime object of the assessee is not to earn the profit in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not alter the true nature of the stated receipts. The said funds / receipts, as stated earlier, were more in the nature of specific grants and represent liability for the assessee and liable to be refunded in case of non-utilization. Therefore, the same being capital in nature, could not be even otherwise brought to tax. For the said proposition, strength could be drawn from the decision of Hon ble Gujarat High Court rendered in Pr.CIT V/s State Fisheries Development Corporation Ltd. (94 Taxmann.com 466) wherein similar receipts were held to be capital in nature. This decision has already attained finality by way of dismissal of revenue s Special Leave Petition (SLP) which is reported at 102 Taxmann.com 221. Similar proposition has been laid down by Chandigarh bench of Tribunal in the case of Haryana Rural Development Authority V/s DCIT (162 TTJ 749 22/01/2014) wherein it has been held that grants-in-aid received by assessee from government for promotion of government s scheme could not be termed as income of the assessee. Similar view has been expressed by Hon ble Gujarat High Court in DIT V/s Gujarat State Council for blood transfusion (41 Taxmann.com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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