2019 (6) TMI 1476 - AT - Income Tax

Exemption u/s 11 - assessee trust had received towards Girls Chhatralaya Construction Fund which the assessee had treated as corpus donation - intention of the donor while giving the donation was not a specific - AO took the view that there were no specific directions from the donor to apply the donation towards a particular cause and, therefore, the donation could not be treated as corpus donation - main object of the trust is to provide building for post funeral activity and also provide accommodation to persons coming to Ahmedabad for medical treatment - HELD THAT - Although, the assessee could not furnish required evidences before the AO, evidences in the in the form of E-mails were filed before the Ld. CIT (A) and these E-mails are dated December 2011 onwards. Copies of these E-mails have been placed in the Paper Book filed by the assessee and it has been mentioned in these E-mails that the donor Mr. Natubhai Bhavsar and his wife Janet have, through the good offices of M/s Helena Kaushik Women s College, transferred the amount for the purpose of furtherance of construction of Girls Hostel by the assessee trust that is Shri Gujarat Bhavsar Samaj. Most of the E-mails have jointly been sent by Mr. Natubhai Bhavsar and his wife Janet. It is also undisputed that the amount of deduction had been transferred by M/s Helena Kaushik Women s College to the assessee trust through banking channels. We have also perused the remand report of the AO which also states that no further verification was required in this regard. Therefore, in substance the requirement for a specific direction with regard to the corpus donation stands fulfilled by the various E-mails emanating from Mr. Natubhai Bhavsar and Mrs. Janet and, therefore, the assessee should be granted the benefit of the impugned amount being treated as corpus donation. Accordingly, accepting the contentions of the Ld. AR, we allow the grounds raised by the assessee

Summary

Issues:
- Classification of donation as corpus donation
- Admissibility of additional evidence
- Interpretation of specific directions for corpus donation

Classification of donation as corpus donation:
The case involved an appeal by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad regarding the treatment of a donation received by the trust as corpus donation. The assessee trust had received a donation of ?47,50,000 towards "Girls Chhatralaya Construction Fund," which the assessee treated as corpus donation. However, the AO treated it as regular income due to the absence of specific directions from the donor. The dispute centered around whether the donation could be classified as corpus donation. The assessee provided evidence, including emails, to establish that the donation was intended for a specific purpose, namely the construction of a girls' hostel. The ITAT, after considering the evidence and correspondence, concluded that the requirement for specific directions regarding the corpus donation was fulfilled by the emails from the donor and his wife. Therefore, the ITAT allowed the appeal and directed the AO to treat the donation as corpus donation.

Admissibility of additional evidence:
During the proceedings, the assessee requested the Ld. CIT (A) to admit additional evidence to support the claim that the donation was a corpus donation. The additional evidence included emails demonstrating the purpose of the donation and the involvement of the donor and his wife in facilitating the transfer of funds for the construction of a girls' hostel. Despite the submission of additional evidence, the Ld. CIT (A) dismissed the appeal, upholding the AO's decision to treat the donation as regular income. The ITAT, however, considered the additional evidence, particularly the emails, as crucial in establishing the specific directions for the corpus donation, leading to a different conclusion than the lower authorities.

Interpretation of specific directions for corpus donation:
The main issue for consideration was whether the donation received by the assessee trust could be deemed as corpus donation. The AO had contended that without specific directions from the donor, the donation could not be classified as corpus donation. The ITAT analyzed the evidence, particularly the emails exchanged between the donor, his wife, and the trust, to determine the intention behind the donation. The emails indicated a clear purpose for the donation, specifically for the construction of a girls' hostel, and detailed the involvement of intermediary entities in facilitating the transfer of funds. Based on the correspondence and the established link between the donor's intention and the trust's activities, the ITAT concluded that the donation should be treated as corpus donation, granting the assessee the benefit sought.

In conclusion, the ITAT allowed the appeal, directing the AO to treat the donation as corpus donation based on the specific directions evidenced in the emails and the established purpose for the funds.