TMI Blog2024 (3) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... herein. The amount fixed may, further, vary from (say) lower to middle to senior school students. Further, they do this religiously each year, without fail, and irrespective of financial standing of the recipient-society, their individual financial position at the relevant time, the number of their school/college going wards and the need for the funds by the assessee for these two avenues of investment. This becomes all the more quizzical, considering that the contributions are stopped immediately on a student graduating from the school, the same is constant across years and irrespective of the number of students studying (during the relevant period) in the assessee s school and the need for funds by the school for these two avenues of investment. This is as bizarre as it can get, and the assessee s case, clearly a make-believe, only needs to be stated to be rejected. There is nothing voluntary about the said contributions, and there is quid pro quo; the students paying the same as a part of their annual charge to the assessee, which allocates the same to different heads of account or, rather, specifies the same, as it does the other elements of the school fee, viz. tuition fee, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us purposes. 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 (a) ------------------------ (b) ------------------------ (c) ------------------------- (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 The same is received from the students of the school toward, as claimed, development fund (DF) and employee s welfare fund (EWF), i.e., funds maintained for the development of the school buildings and running employee welfare schemes for it s employees, respectively. The relevant part of the order by the ld. CIT(A), confirming the impugned disallowance, reads as under: 4.1 Ground No.1 related to addition of Corpus fund consists of School Development Fund Rs. 70,80,700/- and Welfare Fund Rs. 31,31,850/-. The AO in his/her assessment order made this addition due to non-furnishing of written direction from the donors/contributors specifying the utilization of such fund. The appellant has not furnished any documentary evidence to controvert the AO's objection a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant's contention is not supported by any independent evidence to show that it was collected voluntarily for a specific purpose. In view of these factual and legal positions, I am not inclined to interfere in the order of the AO on this issue. Thus, this ground of appeal is dismissed. (emphasis, supplied) It s claim for exemption being denied, which stands confirmed in first appeal, aggrieved, the assessee is in second appeal. 3. We have heard the parties, and perused the material on record. 3.1 The basis of the Revenue s denial of the assessee s claim, as a perusal of the impugned order shows, is: (a) the contributions received from the students or, for that matter, their parents, cannot be regarded as voluntary; and (b) there is no written direction from the donees for the same to be regarded as corpus donation. 3.2 There is, to begin with, no conflict between a receipt being capital in nature and, by fiction of law, being an income chargeable to tax under the Act: Punjab Distilling Industries Ltd. v. CIT [1965] 57 ITR 1 (SC). The assessee claiming exemption u/s. 11(1)(d), the burden to though prove that the receipt is on capital account a matter of fact, is on it, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise need to be shown, as indeed the manner of collection of the contributions annually from the students, that they are called upon, at the beginning of the academic session, to contribute mandatorily, i.e., as a part of the fee-structure, to the various funds maintained by the school, and which therefore these students have necessarily to. That is, there is nothing voluntary about the said contributions, and there is quid pro quo; the students paying the same as a part of their annual charge to the assessee, which allocates the same to different heads of account or, rather, specifies the same, as it does the other elements of the school fee, viz. tuition fee, laboratory fee, sports fee, extra-curriculum activity fee, etc. As regards the assessee s claim of the law not contemplating a written direction, the same, to be valid, must therefore also show as to how the direction stands communicated to the assessee. The said direction is a positive action by or on behalf of the contributor, which has to be strictly adhered to, forming a part of the terms and conditions where-under, and subject to which, the contribution/s is given. The burden in law to prove his return, or the claims pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of application of income, accordingly, at Rs. 54.22 lakhs. The assessee, before the ld. CIT(A) objects thereto, stating as: (a) though depreciation (Rs.24.47 lakhs) has rightly not been taken into account in computing the income (s. 11(6)); the same having not been in fact claimed by it, the AO ought to have taken into account the fact of addition to fixed assets at Rs. 17.13 lakhs, deductible u/s. 11(1)(a); (b) it having incurred an excess expenditure over income in the past (at Rs. 1842.42 lakhs), which therefore ought to have been taken into account by the AO in computing income (Ground E before us); (c) addition on application of s. 2(24)(x) r/ws. 36(1)(va) of the Act. (Gd. D). The ld. CIT(A) mistook the assessee s grievance (a) before him to imply non-grant of depreciation allowance (at Rs. 24.47 lakhs) and allowed the same. Item (b) being not raised before him per a specific ground, but only by way of an alternate claim on being denied the claim u/s. 11(1)(d) (for Rs. 102.13 lacs), which he confirms, was accordingly not considered by him. Item (c) was decided by him, confirming the addition. While adjustment qua the employee s contribution is an independent one, the former t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance). Two, an excess of expenditure is unfeasible except through borrowings, financing expenditure or, as the case may be, application of income. Repayment of borrowings would, in such a case, as is well settled, qualify as an application of income, except where the same is itself through borrowings. Financing through borrowings, it may be appreciated, cannot be regarded as an application of income. This would equally apply to capital expenditure incurred during the year. Without doubt, where financed by own funds, capital expenditure, as indeed revenue, would be an application of income S.RM.M.CT.M Tiruppani Trust v. CIT[1998] 230 ITR 636 (SC). (b) The set aside of current income for future application, which can be at a maximum of 15% thereof, is only for computing the total income for the year. It does not imply that the assessee is not obliged to apply the same in future. As such, a claim of excess application (?) is inconsistent with reserving 15% for future application; again, a contradiction in terms. The same may have to be recomputed for the earlier period/s as well inasmuch as the computation of Rs. 1842.42 lakhs being not on record. (c) How, we wonder, could the inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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