TMI Blog2023 (1) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... chairman can use the fund for trust activities. Hence, it cannot be said that it is a clear direction that the donation will form part of the corpus fund, rather, a liberty has been given to use it for trust activities in consultation with the chairman. Under such circumstances, even otherwise, the said donation, in our view, does not strictly conform as the donation towards corpus fund. Even, for the sake of arguments, if it is taken that the said fund was for infrastructural development or to say it was towards corpus fund of the trust, still as per the amended provisions of section 2(24)(iia) as amended vide Finance Act 1987 and further amended vide Amendment Act 1989, the trust being not registered u/s. 12A for the year under consideration, the corpus donation will form part of the taxable income of the assessee trust. In view of the above decision, Ground Nos. 1 to 7 of the assessee's appeal are hereby dismissed. Disallowance @ 20% out of expenditure incurred under the head 'food and beverages' - HELD THAT:-Assessee has pleaded that the Assessing Officer has not made any query with regard to the aforesaid expenses. However, no bills and vouchers have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act. 8. For that the Ld. CIT(A) has erred in upholding disallowance @ 20% amounting to Rs. 89,598/- out of expenditure incurred under the head food beverages. 9. For that the addition/disallowance sustained are wrong, illegal and unjustified on the facts and in the circumstances of the appellant case. 10. For that the whole order is bad in fact and law of the case and is fit to be modified. 11. For that the other grounds, if any, shall be urged at the time of hearing of the appeal. 2. Ground Nos. 1 to 7 - The assessee vide Ground Nos. 1 to 7 has agitated the action of the CIT(A) in sustaining the addition of Rs. 57,25,000/- being the amount of donation received from Association Akshy Patriarca, San Jose, CA, US. 3. The brief facts of the case are that the assessee trust has been established for charitable purposes. The main aim and objectives of the trust is to help the weaker section of the society, children, women and old people who are in very bad economical conditions, mainly through education and other development projects. The assessee trust for the year under consideration i.e. A.Y. 2011-12 was not registered u/s. 12A of the Act. 4. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A), the assessee has come in appeal before us. 7. We have heard rival contentions and gone through the record. The Ld. counsel for the assessee has made the following submissions in this respect: The issue whether the sum of Rs. 57,25,000/- received by the assessee trust from ASOCIACION AKSHY', Patriarca, San Jose, 2 bis-1 D 28200, San Lorenzo de El Escorial, Madrid for infrastructural development and other development work in the hands of a trust not registered under Section 12A of the I.T. Act is capital in nature or revenue has been set at rest by the order of the Hon'ble 'B' Bench of ITAT, Mumbai in the case of Bank of India Retired Employees Medical Assistance Trust Vs. ITO (Exemption) reported in 172 ITD 78 (copy enclosed at page 5-12 of the PB) wherein the Hon'ble Tribunal relying on the judgment of coordinate bench of Tribunal and Delhi High Court has held that corpus fund is in the nature of capital receipt and therefore the same cannot be brought to tax under section 2(24)(iia) of the Act even in absence of registration under the Income Tax Act. The relevant para from the said judgment is reproduced hereunder:- We have deliberated at len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration. There is no requirement under law to utilize the corpus fund and/or donation for specific purpose in the year of receipt and the fact of non-utilization in the year of receipt will not convert a capital receipt/corpus fund/donation received for specific purpose into a revenue receipt so as to attract taxation. The Ld. CIT has noticed the fact of utilization of the fund in A.Y. 2012-13 to the extent of Rs. 36,42,963/- and utilization of the remaining in subsequent year for infrastructure development i.e. construction of the building in para 3.4 page-3 of its order. It is further submitted that the very perusal of confirmation of the said organization it is clear that the sum so given is not in the nature of any income accruing or arising to the appellant and hence it is earnestly prayed that the addition made by the Assessing Officer and sustained by the Ld. CIT(A) may kindly be ordered to be deleted. 8. The Ld. counsel has further relied upon the following decisions of the Coordinate Benches of the ITAT: i. ACIT vs. M/s. A. Shama Rao Foundation in ITA No. 1464/Bang/2018 (Bengaluru Tribunal) ii. Chandraprabhu Jain Swetamber Mandir vs. ACIT in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11(1)(d):- 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-- **************** (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution [subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus]. Section 12A:- 12A. [(1)] 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 receipt 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 [***] [Principal Commissioner or] Commissioner before the 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 and such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bank and the money was admittedly spent for acquiring land for construction of a college. In these circumstances, we are of the opinion that the CIT(A) as well as ITAT rightly concluded that the donations received towards corpus of the trust would be capital receipt and not revenue receipt chargeable to tax. No question of law arises. Dismissed. 11. A perusal of this finding would indicate that the Hon'ble High Court was dealing with an issue on 23/09/2009. The assessment order is not discernible from it but it revealed that the trust was registered with the Income Tax Department w.e.f. 1st April, 2003. Therefore, there was a registration in favour of the trust. In other two decisions, this aspect has not been categorically examined and if we accept the proposition as canvassed by the Ld. Counsel for the assessee, then the whole scheme of assessment of charitable institution/trust contemplated in Section 11 to 13 of the Act would become redundant. The arguments of the Ld. Counsel for the assessee is that, it is not necessary that a trust/institution should be registered for availing benefit of Section 11(1)(d) of the Act. If an institution has demonstrated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Vol. I of Sampat Iyengar's Law of Income-tax, 9th Edn. in which the inter-relation between section 12 and section 2(24)(iia) has been brought out. Gifts made with clear directions that they shall form part of the corpus of the religious endowment can never be considered as income. In the case of R.B. Shreeram Religious Charitable Trust v. CIT [1988] 172 ITR 373/39 Taxman 28 it was held by the Bombay High Court that even ignoring the amendment to section 12, which means that even before the words appearing in parenthesis in the present section 12, it cannot be held that voluntary contributions specifically received towards the corpus of the trust may be brought to tax. The aforesaid decision was followed by the Bombay High Court in the case CIT v. Trustees of Kasturbai Scindia Commission Trust [1991] 189 ITR 5/57 Taxman 38. The position after the amendment is a fortiori. In the present cases the Assessing Officer on evidence has accepted the facts that all the donations have been received towards the corpus of the endowments. In view of this clear finding, it is not possible to hold that they are to be assessed as income of the assessees. We, therefore, hold that the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment) Act 1987 further as amended by Direct Tax Laws (Amendment) Act, 1989, whereby, the words not being contributions made with a specific direction that they shall form part of corpus of the trust or institution were substituted/omitted. The CBDT Circular No. 551 dated 23.01.1990 explains the position as under: Amendment to sub-section (1) of section 11 by the Amending Act, 1989 to exclude corpus donations from the total income of the trust or institution and amendment of definition of income contained in section 2(24) by the Amending Act, 1987 4.2 The Amending Act, 1989 has inserted a new clause (d) in sub-section (1) of section 11 to provide that income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall be excluded from the total income of the trust or institution. For understanding the background of this amendment, it will be relevant to discuss the amendment made to the definition of the term income in section 2(24) by the Amending Act, 1987. 4.3 Under the old provisions of sub-clause (iia) of clause (24) of section 2, any voluntary contribution received by a char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24(iia), in no manner exclude voluntary contribution received with a specific direction that they shall form part of the corpus of the trust, rather the same are liable to be included into the income of the assessee, however, subject to the provisions of section 11 and 12 as quoted and discussed by Coordinate Patna Bench of the Tribunal in the case of 'Gurukul vs. ITO' (supra). Thus, all type of voluntary contributions received by a trust created wholly or partly for charitable or religious purpose or an institution established wholly or partly for such purposes are included in the income of such trust or institution. However, as per the provisions of section 11(1)(d) of the Act, if any, voluntary contribution is received by a trust or institution with a specific direction that such contribution will be part of the corpus then it will be invested or deposited as per the prescribed modes maintained specifically for such corpus fund then it will not be treated as income but capital contribution. However, subject to the conditions as prescribed u/s. 12A that before claiming any exemption from taxability of income u/s. 11 or 12 of the Act, the assessee should be registered with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tudents in that area be done in the best manner. This further certified 80,000 Euros (equivalent to Rs. 57,25,000) sent by way of donation during the year 10-11 for infrastructural development and other development work, and in case of other necessity the Trustee in consultation with the Chairman can use the fund for the development of Trust activities. 16. A perusal of the aforesaid confirmation reveals that firstly it has been mentioned that the said donor has agreed to extend financial support and sponsor the program and project of the assessee and to be utilized exclusively for the purpose of the trust activities. However, in the second part, it has been mentioned that 80,000 euros (equivalent to Rs. 57,25,000) were sent by way of donation for infrastructural development and other development work and in case of other necessity, the trustee in consultation with the Chairman can use the fund for the development of trust activities. Therefore, it has been provided that the trustees in consultation with the chairman can use the fund for trust activities. Hence, it cannot be said that it is a clear direction that the donation will form part of the corpus fund, rather, a l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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