TMI Blog2022 (3) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out other activities. In section 11(6), it is specifically provided that In this section, where any income is required to be applied or accumulated or set apart does not make any distinction as to whether such income should be only revenue receipts and not capital receipts in the form of corpus donation with specific directions for construction of the hospital building and other infrastructural facilities as brought on record by the assessee. The legal position as existing at the relevant of point, we find no infirmity in the order passed by the ld.CIT(A) in allowing the claim of the assessee. - ITA No.1224/Ahd/2019 - - - Dated:- 25-2-2022 - S/Shri Waseem Ahmed, Accountant Member And T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Ketan Jagirdar, AR For the Revenue : Shri Urjit Shah, Sr.DR ORDER PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This appeal is filed by the Revenue against order dated 7.6.2019 in appeal no. CIT(A)-9/10321/DCIT(E), Cir.2-/17-18passed by the Ld.Commissioner of Income-tax (Appeals)-9, Ahmedabad [for short Ld.CIT(A)] relating to the assessment year 2015-16. 2. Revenue has raised the following grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of ₹ 2,51,85,640/- was utilized for the objects of hospital construction, equipments and other capital expenditure. According to the AO, as per the provision of the Act, an expenditure made out of corpus fund would not be considered as application of income. The AO held that as per the provision of the Act, corpus fund received by the assessee-trust is exempt under section 11(1)(d) of the Act and it is not considered as part of income of the trust. In other words, since the corpus fund is already exempt under the Act, expenditure made out from such corpus fund will not be qualified for further deduction under section 11(1)(a) of the Act, which would otherwise amount to double deduction. Thus, the claim of the assessee to allow capital expenditure incurred out of corpus fund, as application of income was rejected. However, the claim of the assessee to allow set off of part of 15% of gross-receipt was found to be acceptable, hence, the AO allowed that part of the claim. The assessee aggrieved by the action of the AO in not allowing deduction under section 11(1)(a) of the Act, the assessee filed an appeal before the ld.CIT(A), Ahmedabad. 4. Before the ld.CIT(A) the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the corpus donation as referred to in section 11(1)(d) of the Act does not require any application of income as it has to be received with specific direction that the said income would be forming part of the corpus of the trust or institution as expenditure out of corpus fund, if read with inserted provisions of section 11(6) of the Act has to be allowed. 3.6 I have on hand a relatable decision rendered by the Hon'ble High Court of Orissa in the case of CIT Vs. Silicon Institute of Technology reported at (2015) 56 taxmann.com 189(0rissa HC) wherein it has been held that:- Section 11, read with section 12A, of the Income-tax Act, 1961 - Charitable or religion.'; trust - Exemption of income from property held tinder (Capital expenditure) - Assessment year 2007-08 Assessee-trust claimed exemption under section 11 -It was observed that assessee was registered under section 12A and was running educational institution - Amount received by it by way of collection of tuition fees and hostel fees was being spent for building necessary infrastructure for imparting education in various field which was charitable purpose for which trust was established - Mielher s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure if incurred by an Educational Institution for attainment of The object of the society, it would be entitled to exemption under section 11. [Para 25] 3.7 In view of the above-mentioned provisions of the Act coupled with the available decision of Hon'ble Orissa High Court on the issue of allowing of capital expenditure as application of income, irrespective of the fact as to whether it was the income held under the property by the trust (as contemplated u/s 11(1 )(a) or the corpus donation with specific direction(as contemplated in section 11(1)(d) of the Act read with inserted provisions of section 11 (6) of the Act, the action of the A.O. to exclude the corpus donation from the income of the appellant trust and not allowing the capital expenditure as deduction, resulting into NIL income is not justified and as per the provisions of .the section 11(1) read with 11(6) of the Act. The A.O. is accordingly directed to re-compute the income by including the corpus fund as income and allowing the capital expenditure treating the same as applied for the objects of the trust in other words, to accept the returned income as such. Accordingly, the sole ground of appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Trust. Further, only condition that, claim of deduction of capital expenditure of the trust is that it should be for object of the trust. In this case, the assessee used corpus donation for the purpose of construction of hospital building such as eye-care hospital and other medical facilities for catering the need of the people in remote tribal areas. Thus, the core issue before us is that whether provisions of section 11(1)(a) and 11(1)(d) of the Act have overriding effect or have to be interpreted independently to each other. We also find that the ld.CIT(A) has made a detailed discussion of the issue on hand both factually as well as from legal point of view. 9. On legal aspects, he has recorded a finding that Section 11(1)(d) was introduced w.e.f 01.04.1989 and simultaneously, section 2(24)(iia) which defines the term 'income ' was amended and corpus donations were within the ambit of the taxable income on which a charitable organization can claim exemption. As far as exemption is concerned it was available even prior to 01.04.1989. But with this amendment corpus donation which was not a part of taxable income has now become a part of the taxable income but en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent to which such income is applied...... . Thus, the provisions of section 11(1)(a) of the Act refer to the applied income out of income derived from the properties held under the trust and not any or whole income. Therefore, the provisions of section 11(1)(d) specifying the income in the form of voluntary contributions made with a specific direction are independent of section 11(1)(a) of the Act. Further, the corpus donation as referred to in section 11(1)(d) of the Act does not require any application of income as it has to be received with specific direction that the said income would be forming part of the corpus of the trust or institution as contemplated in section 11(1)(a) of the Act. Therefore, incurring of capital expenditure out of corpus fund, if read with inserted provisions of section 11(6) of the Act, has to be allowed. The amendment brought in the Statute book by inserting the provisions of sub-section (6) and (7) w.e.f.1.04.2015 to redress the controversy over allowing the depreciation on the capital assets generated by spending the corpus donation or revenue receipts generated by carrying out other activities. 11. In section 11(6), it is specifically p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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