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2012 (1) TMI 302 - AT - Income TaxContributions/donations received by the assessee - income of the assessee u/s 2(24)(iva) - Held that - Only a benefit or perquisite in kind can be treated as income. Donations in the form of cash cannot be treated as a benefit or perquisite . Therefore as rightly pointed out by the learned counsel for the assessee, the donations received by the assessee do not become income chargeable to tax. The issue of representative assessee will come only when the income is chargeable to tax. Therefore, we do not see any reason to interfere with the order of the CIT(A). The contributions are not chargeable to tax in the hands of the assessee. There is no direction by the CIT(A) to the AO to take any action on the basis of said observations. In fact, we find that the said observations are in favour of the assessee herein. In view of the same, we do not see any substance in the Cross-objection and they are also dismissed.
Issues:
1. Whether the addition of income made by the AO on account of gifts received by the private trust should be deleted? 2. Whether the gifts/donations received by the trust are taxable income under the Income-tax Act? 3. Whether the donations received in cash by the trust can be treated as a benefit or perquisite under sec. 2(24)(iva) of the Income-tax Act? 4. Whether the gifts/donations can be considered as professional receipts of the Peetadhipathi and includible in his income u/s 56(2)? Analysis: 1. The Revenue appealed against the CIT(A)'s order deleting the addition of income made by the AO on account of gifts received by the private trust. The Revenue contended that gifts received are taxable in the assessee's hands as per sec. 2(24)(iva) read with sec. 160(1)(iv). The Revenue relied on a Supreme Court decision to argue that gifts received constitute professional income due to the trust's sole beneficiary being the Peetadhipathi. The trust was not established for charitable or religious purposes, leading to the dispute. 2. The CIT(A) considered the trust deed and concluded that gifts/donations are not taxable income under any heads specified in the Income-tax Act. The CIT(A) deleted the addition, stating that for gifts/donations to be taxed, they must be shown as income taxable under the Act. The Revenue's appeal was based on the definition of 'income' under sec. 2(24), which includes the value of any benefit or perquisite obtained by a representative assessee. 3. The issue revolved around whether the contributions received in cash by the trust could be treated as a benefit or perquisite under sec. 2(24)(iva) of the Income-tax Act. The High Court and Supreme Court decisions clarified that only a benefit or perquisite in kind could be treated as income, not cash donations. The donations in cash received by the trust were not considered a benefit or perquisite, leading to the dismissal of the Revenue's appeal. 4. The CIT(A) made an observation regarding the gifts/donations being considered as professional receipts of the Peetadhipathi and includible in his income u/s 56(2). However, it was clarified that such considerations could only apply to the Peetadhipathi, not the trust itself. The observation strengthened the finding that the contributions were not taxable in the hands of the trust. The cross-objection raised by the assessee against this observation was dismissed, as it did not warrant any further action. In conclusion, the appeals filed by the Revenue and the cross-objections filed by the assessee were dismissed by the ITAT Bangalore, upholding the CIT(A)'s decision regarding the taxability of gifts/donations received by the trust.
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