2020 (6) TMI 129 - AT - Income Tax

Exemption u/s 11/12 - corpus donations - exemption to incomes of charitable trust - findings of the AO that the activities of the assessee were not charitable - HELD THAT - CIT(A) has noted the fact that the assessee had been incurring expenditure on running of school which being for the purpose of education qualified as charitable activities u/s 2(15) and has spent on the activities of running medical camps and old age homes which also qualified as charitable activities in the nature of medical relief to the poor u/s 2(15). Also noted that the lungar expenses are merely provision of food to the attendees of medical camps,in old age homes and Manav Seva Kender. The aforesaid facts have remained uncontroverted before us. Moreover, the Ld.DR has been unable to point out any infirmity in the same. In view of the same and on considering the factual findings of the Ld.CIT(A), we hold that there is no infirmity in the order of the Ld.CIT(A) holding the assessee as carrying out charitable activities within the definition of the same u/s 2(15) of the Act and eligible for exemption u/s 11/12 of the Act. Ground No.1 raised by the Revenue is, therefore dismissed. Corpus donation - There were separate receipt books for collecting the corpus donations which was marked with the stamp Bhumi Kharidane Hetu Dhan Seva and all donations collected under these receipts had been categorized as corpus donations by the assessee, which amount was kept in a separate bank account, separate from the general donation and also that FDRs had been made from the same which were subsequently used in subsequent years for purchase of land through issuance of cheques and drafts. The Ld.CIT(A) has also noted the fact that the assessee had maintained separate record of general donation and corpus donation and that its accounts were duly audited. CIT(A), we find, has further noted that the observation of the AO that there were no specific directions by the donor for treating the donation as corpus donation, was based on mis-appreciation of facts since the receipts referred to by the AO for basing his observation were relating to general donations and not corpus and donations. DR has been unable to controvert any of the above factual findings of the Ld.CIT(A).Since we find that the Ld.CIT(A) has given a categorical finding of fact, based on evidences produced before him, that the donations shown by the assessee as corpus donations were given with the directions that they qualified as such and which was the sole reason for the Revenue denying the claim, we do not see any reason to interfere in the order of the CIT(A) treating the corpus donations as such. The ground of appeal No.2 raised by the Revenue is, therefore, dismissed. Allowance of the claim of the assessee as expense incurred for purchase of land as utilization/application as per the provisions of section 11/12 - HELD THAT - CIT(A) has noted from the documents and evidences and books of accounts of the assessee produced before him that the utilization by the assessee for purchase of land was out of general donation received and not out of corpus donation and that the AO had mis-appreciated the facts in this regard while not allowing the claim of the assessee. The said factual findings of the Ld.CIT(A) have not been controverted before us, nor has the Ld.DR made any arguments before us as to why the disallowance be upheld. AO, we have noted had made the disallowance noting that the same had been made out of corpus donation which did not qualify as such, but since the Ld.CIT(A) has given a finding of fact that the investment in land had been made out of general donations, which fact has remained uncontroverted before us, We see no reason to interfere in the order of the Ld.CIT(A) allowing the claim of the assessee of utilization of amount incurred for purchase of land for the purposes of claiming exemption u/s 11/12. - Decided against revenue.

Summary

Issues Involved:
1. Eligibility for exemption under Sections 11/12 of the Income Tax Act.
2. Qualification of donations as corpus donations.
3. Allowance of capital expenditure incurred on the purchase of land under Sections 11/12 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Eligibility for exemption under Sections 11/12 of the Income Tax Act:
The Revenue challenged the allowance of exemption under Sections 11/12, arguing that the assessee's activities were not charitable as per Section 2(15) of the Act. The CIT(A) found that the assessee society, registered under Section 12AA since AY 2006-07, had consistently been granted exemption in previous and subsequent years under scrutiny assessments. The society’s activities, including running schools and conducting medical camps, qualified as charitable under Section 2(15). The CIT(A) noted that the AO's denial was inconsistent with past assessments and found no violation of the society's aims and objectives. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee's activities were charitable and eligible for exemption.

2. Qualification of donations as corpus donations:
The Revenue contended that donations amounting to ?13,18,82,040/- were not corpus donations as they lacked specific directions from donors. The CIT(A) reviewed the evidence, including separate receipt books marked for corpus donations and separate bank accounts for these funds. It was found that the AO had misapprehended the facts by considering general donation receipts instead of corpus donation receipts. The CIT(A) concluded that the donations met the requirements under Section 11(1)(d) and qualified as corpus donations. The Tribunal agreed with the CIT(A), noting the detailed records and specific directions for the donations, thus dismissing the Revenue's ground.

3. Allowance of capital expenditure incurred on the purchase of land under Sections 11/12 of the Income Tax Act:
The Revenue argued that the capital expenditure for land purchase did not qualify for exemption as it was allegedly made from corpus donations. The CIT(A) clarified that the expenditure was from general donations, not corpus donations, and that the AO had misunderstood the facts. The CIT(A) noted that the society maintained separate accounts for general and corpus donations, and the capital expenditure was consistent with the society's charitable activities. The Tribunal upheld the CIT(A)'s findings, confirming that the capital expenditure was appropriately utilized under Sections 11/12, and dismissed the Revenue's ground.

General Ground:
The fourth ground raised by the Revenue was general and required no adjudication.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order that allowed the assessee's claims for exemption under Sections 11/12, recognized the corpus donations, and accepted the capital expenditure for land purchase as valid utilization under the Act. The order was pronounced on 21/05/2020.