1998 (3) TMI 171 - AT - Income Tax

Summary

Issues:
Appeals against common order for assessment years 1980-81 to 1983-84 regarding treatment of corpus donations and administrative expenses.

Analysis:
The judgment involves four appeals filed by a religious institution against a common order passed by the DCIT(Appeals) for the assessment years 1980-81 to 1983-84. The main issue revolves around the treatment of "corpus" donations received by the institution. The Assessing Officer observed that the donations credited as "corpus" donations in the Balance Sheet cannot be treated as such and should be included in the total income. The assessee contended that the corpus donations are exempted under section 12 of the Act, supported by the DCIT(Appeals) allowing corpus donation for a subsequent assessment year. The department argued that both types of donations are indistinguishable for ordinary devotees, and the institution segregated income to avoid tax liability.

The Tribunal delved into the concept of "corpus" donations and the distinction between corpus and non-corpus funds. It highlighted that voluntary contributions on capital account can be retained as corpus without tax liability if specific directions are given. The judgment emphasized the need for strict separation and maintenance of corpus funds, citing precedents requiring separate bank accounts for corpus funds. The Tribunal found that the assessee failed to demonstrate donors' ability to give directions for corpus funds, as evidenced by the lack of additional records supporting separate maintenance. Consequently, the Tribunal upheld the DCIT(Appeals) order regarding corpus donations.

Regarding administrative expenses, the Tribunal noted that deductions were already granted in the assessment orders. The assessee sought additional deductions without providing sufficient reasons, leading to the rejection of the request. The Tribunal affirmed the DCIT(Appeals) decision on administrative expenses as well. Ultimately, all appeals were dismissed based on the above analysis and reasoning, upholding the orders of the authorities below.

This judgment clarifies the treatment of corpus donations for religious institutions, emphasizing the importance of specific directions and strict separation of corpus funds. It underscores the necessity for maintaining distinct records to differentiate between corpus and non-corpus funds. The decision provides guidance on assessing tax liability for donations based on the nature and intended use of the funds, ensuring compliance with relevant legal provisions and precedents.