2021 (2) TMI 326 - AT - Income Tax

Exemption u/s 11 denied - hundi receipts embedded with specific purpose of corpus donation u/s. 11(1)(d) - HELD THAT - None of the lower authorities have disbelieved or rebutted the assessee's plea that the impugned sums are in the nature of a 'hundi receipts' being donors' donations in cash or kind only; as per the state endowment law. There can be no dispute in principle that in case of a general vis- -vis specific provisions, the latter prevails over the former as per maxim 'Generalia Specialibus Non Derogant'. We, however, do not find the facts of the case attracting 'repugnancy' qua the above state law vis- -vis tax law as per Article 251 of the Constitution of India. The foregoing legal maxim also does not apply here. The clinching fact that emerges here is that assessee's 'hundi' receipts in cash from donors are not revenue items but capital receipts only. The relevant provisions of the 'Endowment Act' duly makes it clear that they are corpus donations which nowhere go against the provisions of tax law. We therefore see no reason to sustain the learned lower authorities' action treating the assessee's hundi receipts embedded with specific purpose of corpus donation u/s. 11(1)(d) of the Act are not entitled for exemption being revenue receipts. We thus direct the Assessing Officer to delete the impugned addition. - Decided in favour of assessee.

Summary

Issues:
1. Appeal against CIT(A)'s order for A.Y. 2013-14 under Income Tax Act, 1961.
2. Treatment of corpus fund donations for day-to-day expenses.
3. Taxability of corpus donations under different statutes.
4. Plea to file Form 10 for accumulation at the appellate stage.

Analysis:
1. The appellant challenged the CIT(A)'s order for A.Y. 2013-14, citing errors in factual basis. The CIT(A) upheld the AO's decision regarding corpus fund donations utilized for day-to-day expenses. The appellant argued that the financial statements were not considered, but failed to provide evidence on corpus fund purpose or utilization. The CIT(A) rejected the appellant's plea to file Form 10 at the appellate stage, citing legal precedents and independent assessment proceedings each year. The Tribunal heard both parties and analyzed the facts presented.

2. The dispute centered around the treatment of corpus fund donations for day-to-day expenses. The AO considered all Hundi receipts and donations as regular income, disputing the appellant's claim of maintaining a public Hundi for corpus donations. The AR failed to provide evidence on the purpose or utilization of corpus funds, leading to the rejection of the appellant's contentions. The Tribunal noted the absence of separate Hundies for specific purposes, unlike precedents cited by the appellant. The CIT(A) confirmed the AO's action, treating Hundi receipts as regular income.

3. The issue of taxability of corpus donations under different statutes arose, with the appellant contesting the impact of the AP Charitable and Hindu Religious Institutions Act, 1987 on Income Tax Act, 1961. The Tribunal examined the legislative relations between Union and States, emphasizing that specific tax laws prevail. However, the Tribunal found that the corpus donations under the Endowment Act were capital receipts, not revenue items, aligning with tax law provisions. The Tribunal concluded that the corpus donations did not contradict tax laws, directing the AO to delete the addition.

4. The plea to file Form 10 for accumulation at the appellate stage was not allowed by the CIT(A), leading to the appellant's appeal. The Tribunal considered the legal position and factual circumstances, ultimately allowing the appeal and directing the AO to delete the impugned addition. The judgment highlighted the nature of Hundi receipts as capital donations under the Endowment Act, exempt from tax under the Income Tax Act. The decision was pronounced in favor of the appellant on 29th January 2021.