2023 (12) TMI 932 - AT - Income Tax

Exemption u/s 11(1)(d) - misutilization of receipts of earmarked funds as corpus donation - assessee-trust had taken loan- from bank for purchasing land from UIT but had repaid loan interest by utilising the donation amount but not for construction of hospitals - HELD THAT - The foreign donation was received as a corpus donation and within the meaning of section 11(1)(d). The fund was duly delayed for delay in approval from FCRA, where it is mentioned that the funds is for construction/running of hospital/dispensary and clinic . The assessee had utilized this donation for repayment of loan which is not at all violation section 11(1)(d) and duly covered with consent of the donor. Further the donor agreed to donate amount to Rs. 20 crores to the assessee in next two years for carrying out the activities of the assessee trust in Udaipur. The donor, Dr. Kirti Jain has also submitted the letter for the purpose of donation on dated 06.01.2014. The fund was donated by founder member of the trust. The source is well explained. There is no deviation in activities of trust as per the stated main object. Expenses were incurred for charitable activities. The delay in project was due to stuck up of construction as per order of Hon ble Jurisdictional High Court. In our considered view, there is no violation of section 11(1)(d) r.w.s. 11(1). We find that there is no valid reason to interfere in the impugned appeal order. Therefore, the ground nos. 1, 2 3 of the revenue are dismissed.

Summary

Issues Involved:
1. Treatment of receipts as corpus donation and exemption under Section 11(1)(d) of the Income Tax Act.
2. Qualification for exemption under Section 11 of the Income Tax Act.
3. Alleged violation of Section 13(3) of the Income Tax Act.

Summary:

Issue 1: Treatment of Receipts as Corpus Donation and Exemption under Section 11(1)(d)
The revenue contended that the Ld. CIT (Appeals) erred in treating Rs. 7,43,95,029/- as corpus donation and allowing exemption under Section 11(1)(d) without specific directions from the donor. The assessee, a trust registered under Section 12A, received the donation from Dr. Kirti Jain Family Foundation Inc. for the construction and running of a hospital. The AO disallowed the exemption, arguing the funds were used for loan repayment and not for construction. The CIT(A) dismissed this, stating the donation was for the trust's corpus, and the delay in construction was due to a stay order by the High Court. The Tribunal upheld CIT(A)'s decision, noting no violation of Section 11(1)(d) as the donor's intent and the utilization of funds were clear.

Issue 2: Qualification for Exemption under Section 11
The revenue argued that the assessee did not qualify for exemption under Section 11 due to the alleged non-charitable nature of its activities, which were conducted under GBH American Hospital. The AO claimed the activities were not for public benefit and were profit-oriented. The CIT(A) found that the trust's activities were charitable, and the delay in construction was due to legal issues. The Tribunal agreed, stating the trust's expenses were for charitable purposes, and the delay was justified.

Issue 3: Alleged Violation of Section 13(3)
The AO alleged a violation of Section 13(3) as Dr. Kirti Kumar Jain, founder of the trust, was also the managing director of GBH American Hospital. The Tribunal found no evidence of personal benefit to Dr. Jain and no violation of Section 13(3).

Conclusion:
The Tribunal dismissed the revenue's appeals, upholding the CIT(A)'s order that the donation was a corpus fund exempt under Section 11(1)(d), the trust's activities were charitable, and there was no violation of Section 13(3). The appeals were dismissed in entirety.