2000 (3) TMI 202 - AT - Income Tax

Summary

Issues Involved:
1. Taxability of Rs. 9,33,202 received by the assessee Trust and credited to the Building Reserve and General Maintenance Fund Account.
2. Nature of donations received from tenants and their tax implications.
3. Applicability of section 13(i)(c) of the Income-tax Act.

Summary:

Issue 1: Taxability of Rs. 9,33,202 received by the assessee Trust
The primary issue in this appeal is whether the sum of Rs. 9,33,202 received by the assessee Trust and credited to the Building Reserve and General Maintenance Fund Account can be charged to tax by denying exemption u/s 11. The assessee, a charitable trust, claimed that the donations were towards the corpus of the Trust and thus not taxable. The Assessing Officer (AO) disagreed, noting a direct nexus between the donations and the allotment of shops to tenants, and added Rs. 5,22,563 to the income of the assessee.

Issue 2: Nature of donations received from tenants and their tax implications
The CIT(A) initially remanded the case to the AO to record statements from donors to determine if there was a direct nexus between donations and shop allotments. The AO's remand report indicated that donations were not voluntary and were linked to shop allotments. However, upon cross-examination, the CIT(A) concluded that the donations were voluntary and towards the corpus of the Trust, thus not taxable. The Tribunal upheld this view, noting that donations from tenants were not voluntary but were capital receipts, not income. The Tribunal also held that donations towards the Building Reserve and General Maintenance Fund were towards the corpus of the Trust and thus not taxable.

Issue 3: Applicability of section 13(i)(c) of the Income-tax Act
The Revenue raised an additional ground that the donations were governed by section 13(i)(c) and thus not exempt u/s 11. However, since the Tribunal held that the donations were outside the provisions of sections 11, 12, and 2(24)(iia), this ground was rejected.

Conclusion:
The Tribunal partly allowed the appeal, holding that the sum of Rs. 1,00,301 received from unknown donors was taxable, while the remaining amounts were not taxable as they were either capital receipts or donations towards the corpus of the Trust.