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TMI Blog2018 (2) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in the preceding paragraphs above, there are multiple decisions in favour of the assessee. Corpus-specific-voluntary contributions are outside the taxations in case of an unregistered Trust u/s.12/12A/12AAA of the Act too. From this point of view, and for this reason, the decision of the CIT(A) in granting relief to assessee does not call for any interferences. Accordingly, grounds of appeal raised by the Revenue are dismissed. - ITA No.621/PUN/2016 - - - Dated:- 29-1-2018 - SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM For The Appellant : Shri T.B. Vijaya Reddy and Shri Mukesh Jha, CIT-DRs For The Respondent : Shri R.S. Abhyankar ORDER PER D. KARUNAKARA RAO, AM : This appeal is filed by the Revenue against the order of CIT(A)-10, Pune dated 19-01-2016 for the Assessment Year 2005-06. 2. Grounds raised by the Revenue are extracted as under : 1. The Ld. CIT(A) has erred in law and on facts in failing to appreciate that voluntary contributions (whether corpus donations or general donations) received by the charitable trust are income as defined vide section 2(24)(iia) of the Act and corpus donations are exempt from tax u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to the assessee. Further, the Tribunal observed that since the assessee has not been registered u/s.12A of the Act, the exemption available u/s.11 of the Act is also not available to the present assessee. In response, assessee submitted before the Tribunal in the first round of the proceedings held that the said donation of ₹ 3 crores amount to a gift to the corpus of the Research Foundation. In the light of these facts, in the absence of specific finding, on the available of exemption to the gift of ₹ 3 crores of this kind, the Tribunal directed the AO to examine the contention of the assessee that ₹ 3 crores received by the assessee trust towards corpus donation whether it amounts to a gift and not taxable in view of certain decisions relied upon by the assessee. AO was also directed to consider the outcome of the Writ Petitions, if any, at the time of passing the set aside assessment. 5. Giving effect to the said direction of the Tribunal, the AO reiterated the position and held the same is not exempt from taxation. The details of decision of the AO is given in order dated 20-02-2014 passed u/s.254 of the Act. AO extracted the findings of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Eventually, the CIT(A) allowed the assessee s grounds on this issue of claim of exemption of sum of ₹ 3 crores donation to corpus as per the discussion given in Para No.6 of his order and the same is extracted here as under : 6. I have considered the submission of the assessee and given a careful thought. Corpus donation comprises two words viz. corpus and donation. Corpus is a Latin Expression, which means a body or structure. It also means a direction to constitute a body or substance. In common parlance this term is understood as capital sum. This also includes endowment . The expression endowment means bequest, gift . It is an act of endowing which is a capital sum provided and provides for a permanent income. Endowment also means property or money bestowed as permanent fund . In terms of charity, the corpus symbolizes funds to retain it's character as a Principal amount . It also denotes the funds earmarked for a specific purpose 'The intention of the corpus is that, the funds should not be depleted and it retains it's original character of the fund i . e . principal. Further, the expression corpus is often used from the point of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ram Religious and Charitable Trust 172 ITR 373 Hon ble Bombay High Court held that even ignoring the amendments to section 12, which means that even before the words appearing to parenthesis in the present section 12, it cannot be held that voluntary contributions specifically received towards the corpus of the trust may be brought to tax. The aforesaid decision was followed by the Hon ble Bombay High Court in the case of Trustees of Kasturbai Scindia Commission Trust 189 ITR 5. In the present case, the AO. on evidence has accepted the fact that the impugned donation has been received towards the corpus of the endowment . The same is supported by appellant by filing copy of direction issued by the donor company M/s. Serum Institute of India Ltd. vide it's letter dated 22nd 25th March, 2005, containing specific directions regarding nature of donation being corpus of the Foundation. An identical findings have been given by Agra I.T.AT. also in the case of M/s Gaudiya Granth Anuved trust in I.T.A. No. 386 / 2012. Hence, after considering the position of Law as it is prevailing at present on the basis of several decisions cited (supra), the corpus donation is considered to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 11(1) of the Act is available to the registered trust u/s.12A/12AAof the Act. Revenue has objection, the way the CIT(A) relied on the Delhi High Court judgment in the case of Basantidevi and Chakan Lal Garg Education Trust (supra) and others. Regarding the jurisdictional High Court judgment in the cases of R.B. Shriram Religious and Charitable Trust (supra) the Trustees of Kasturbai Scindia Commission Trust (supra), Ld. DR for the Revenue submitted that these are the Trusts with registration u/s.12 of the Act. The assessment years involves in these cases are prior to A.Y. 1972- 1973 and earlier. 9. Further, Ld. DR for the Revenue submitted that the order of CIT(A) is required to be reversed as the CIT(A) ignored the fact of absence of any such exemption-providing-provisions like clause (d) of section 11 of the Act in the definition of 2(24)(iia) of the Act for the cases like the present assessee. Ld. DR for the Revenue reasoned that if voluntary contributions to contributions of the trust are not to be taxed as income, the definition of income would have been accordingly worded on par with the section 11(1)(d) of the Act. He also filed the written submissions in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under the I. T.Act w.e.f. 1/4/2003. The assessee received certain donations towards its corpus which had been deposited in the bank and the money was admittedly spent for acquiring land for construction of a college. In these circumstances, we are of the opinion that the CIT(A) as well as ITAT rightly concluded that the donations received towards corpus of the trust would be capital receipt and not revenue receipt chargeable to tax. No question of law arises. Dismissed . 7 . 3.1 . It is clear that the High Court has not dealt the question of law holding that it does not arise . The High Court apparently was carried away by the fact that the trust was registered subsequently under the IT.Act and also the sum received was spent for the construction of college. In view of these specific circumstances of the case, the court has not dealt with the basic legal premise as to whether the charitable trust not registered under the IT.Act is entitled in not treating in the corpus donation as income in spite of the provisions of sec . 2 (24)(iia) which defines income to include voluntary contributions. This case has not enunciated any clear principle, as there is no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he voluntary contributions which are of the capital nature should be excluded from the taxation considering the meaning provided in the context of provisions of clause (d) of section 11(1) of the Act. Relevant submissions of the assessee provided before us are extracted as under: As stated i n relevant para of our submissions the institute was never granted nor claimed exemption u/s 11 but exemption was always granted u/s 10(21) . Copy of Assessment order for AY 2003-04 is attached herewith for your ready reference. After analysing the definition of income u/s 2(24(iia) you may observe that the definit i on itself makes distinction between charitable trust institution referred i nto Sec. 10(21) by using the word or . (Emphasis supplied) [( iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes or by an association or institution referred to in clause (21) or ------ We have been approved as a Scientific Research Organisation all along and also always received approval u/s. 35 (1)(ii) upto A.Y. 2004-05. Latest approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic Research Institution which is 'for the time being approved u/s. 35(1) (ii).'If it is not so approved, as is the present case, neither Section 2(24 )(iia) nor S.1 0(21) can apply. 5. In such a case the assessee stands at PAR with any other normal assessee in whose case, admittedly a gift cannot be taxed as income. 6. A reference is also drawn to the decision of the Supreme Govt. in CIT vs. Groz Beckert Saboo Ltd.116 ITR 125. The Supreme Court, in the above case has held that a gift even of raw material subsequently used in the business of the assessee is not a revenue receipt, when it is received but it is only a capital receipt as it is a gift. 7. Reliance was placed on the Circular No.158 [F.No.173/2/73- IT(A)(A-I)] dated 27-12-1974 issued by CBDT wherein the CBDT has clarified that a gift does not constitute income receipt at all, but is a capital receipt wherein it is held that Receipts which are of a casual and non-recurring nature will be liable to income- tax only if they can properly be characterized as 'income' either in its general connotation or within the extended meaning given to the term by the Income-tax Act 8. In fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income of the trust being capital receipt. We would like to draw your kind attention on page No. 424 of the commentary of the learned author Chaturvedi Pithisaria in their Book Income Tax Laws under the heading observed as under: Income, when falls into the tax net . - Although section 14 of the 1961 Act classifies income under six heads, the main charging provision is section 4(1) which levies income-tax, as only one tax, on the total income of the assessee as defined in section 2(45) of that Act. An income in order to come within the purview of that definition must satisfy two conditions. Firstly, it must comprise the total amount of income referred to in section 5 . Secondly, it must be computed in the manner laid down in this Act . If either of these conditions fails, the income will not be a part of the total income that can be brought to charge [CIT v. Harprasad Co. Pvt. Ltd., (1975) 991TR 118,125 (SC)] In Short first the receipt should be Income. Then only it will be taxed. 13. We are not disputing that fact that revenue receipt are taxable our dispute is only towards Donations towards corpus as capital receipt. 14. In support our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Research Foundation, i.e. Trust under the Bombay Public Trust Act. Further, it is the case of the Revenue that the case laws cited by the Ld. AR for the assessee either belong to the period prior to the above said amendments or distinguishable on facts. 14. So far as the judgment of Hon ble Bombay High Court in the case of R.B. Shriram Religious and Charitable Trust (supra), it is a case where Voluntary Contributions are made to the Trust without any specific direction by the donor that it should become part of the Corpus of the Trust. In this case, the Hon ble High Court held that in the absence of any such specific direction, the Contribution becomes taxable for the A.Y. 1966-67. Referring to the other jurisdictional High Court judgment in the case of Trustees of Kasturbai Scindia Commission Trust (supra), it is a case relating to A.Y. 1969-70 to 1972- 73. On facts, it is a case of donation by one Trust to the other, unlike to the case of the present assessee where donation received by Group concern of the assessee towards the Corpus of the trust which is not registered u/s.12A/12AA or u/s.35(1)(ii) of the Act. 15. Referring to the other decisions of Hon ble Delhi High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust created wholly for charitable or religious purposes or by an institution established wholly for such purposes ( not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly. (c). Further, bringing our attention to the provisions of section 11(1)(d) of the Act, Ld. DR argued that it provides for exemption from including the Corpus specific Voluntary Contributions from the purview of total income of the assessee. The said clause (d) reads as under : ( d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. From the above, Ld. DR summed up by stating that it is easy to infer that the Voluntary Contributions forms part of the total income ; whereas Voluntary Contributions made with specific directions to become part of the Corpus of the Trust are outside the scope of total income of the Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to the Corpus of the Trust assumes Capital nature and therefore they are not required to be included in the total income of the assessee. Referring to the provisions of section 12(1), assessee submits that the Corpus donations were deemed as income includible in the total income of the assessee and such deemed provisions cannot be extended to understand the provisions of section 2(24)(iia) of the Act relating to the definition of income. He also relied on the written submissions made by the assessee before us. 18. We have heard the parties and perused the details/facts, submissions and case laws furnished by the Assessee and the Revenue. There is no dispute on the basic facts that the assessee is registered Trust under the Bombay Public Trust Act, 1950 and however, it is unapproved by the CBDT as required u/s.35(1)(ii) of the Act. Further, it is also not registered u/s.12A/12AA of the Act and therefore, the immunity provided under section 11(1)(d) of the Act or the exemption and 10(21) of the Act is not available to the assessee Trust. The fact relating to Corpus-specific- donations of ₹ 3 crores is also undisputed. 19. Considering the above, we need to examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be brought to tax in view of their capital nature. 21. For the sake of completeness of the order, we proceed to extract the operational paragraphs of the order of the Tribunal here as under : 9. We have considered the rival contentions and also perused the material available on record including the case laws relied on. We have observed that the assessee is a religious charitable trust duly registered under the Bombay Public Trust Act,1950. The assessee could not produce registration u/s12A/12AA of the Act and hence it could be presumed that the assessee is not registered u/s 12A/12AA of the Act as the onus was on the assessee to bring on record the evidences to prove its contentions which it want court to believe and consequently to seek immunities and protections granted to a registered trust. The assessee has received corpus donations to the tune of ₹ 4,55,446/- during previous year relevant to the assessment year which are being given with specific directions by the donors to be applied towards specific purpose for which the respective funds were created . This is an admitted position between the parties and there is no dispute with respect to this proposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by ITAT, Agra in the case of ITO v. Gaudiya Granth Anuved Trust reported in (2014) 48 taxmann.com 348 (Agra-Trib) whereby Tribunal held as under: This is an appeal filed by the Revenue against the order dated February 24, 2012 passed by the learned Commissioner of Income-tax (Appeals)-I, Agra for the assessment year 2007-08. 2. The Revenue has raised the following grounds of appeal : 1. The learned Commissioner of Income-tax (Appeals) has erred in law and on facts in failing to appreciate that voluntary contributions (whether corpus donations or general donations) received by a charitable trust are income as defined vide section 2(24)(iia) of the Act and corpus donations are exempt from tax under section 11(1)(d) only if assessee is registered under section 12A/12AA of the Act. 2. The learned Commissioner of Income-tax (Appeals) has erred in placing reliance upon the appellate decision of the hon'ble Delhi High Court in I.T.A. No. 5082/Del/2010 in the case of ITO (Exemption) v Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust for the assessment year 2003-04, which in turn is now under challenge in the hon'ble Supreme Court. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12AA has not been provided, its taxability is required to be decided with reference to the scheme of the Act as held in the decision of Pentafour Software Employees Welfare Foundation v. Asst. CIT (supra). In both the decisions referred by the learned authorised representative, in case of Pentafour Software Employees Welfare Foundation v. Asst. CIT, it has been held that corpus donation being in the nature of capital receipt are not chargeable to income-tax. The decision of the Income-tax Appellate Tribunal, Delhi in the case of Basanti Devi and Sri Chakhan Lal Garg Education Trust for both assessment years 2002-03 and 2003A-04 are annexed with this order as annexure A-1 in which reference to the decision in the case of Pentafour Software Employees Welfare Foundation is also given. I have also come across another decision of the hon'ble Income-tax Appellate Tribunal, Kolkata in the case of Shri Shankar Bhagwan Estate v. ITO [1997] 61 ITD 196 (Cal) in which, the taxability of corpus donation has been examined in the light of section 12 read section 2(24)(iia) of the Income-tax Act and in this decision, it has been held as under : 'So far as section 2(24)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, the hon'ble Income-tax Appellate Tribunal, Kolkata arrived to the conclusion that the voluntary contribution in the nature of corpus donation raised by the appellant cannot be brought to tax. In this case also, the trust under appeal was a private religious trust not registered under section 12AA and hence, corpus donation received by it should not be taxable as its income. 6.6 After considering the position of law as it is prevailing at present on the basis of the decision of three Tribunals, i.e., Income-tax Appellate Tribunal, Chennai, Income-tax Appellate Tribunal, Delhi and Income-tax Appellate Tribunal, Kolkata and further confirmed by the Delhi High Court, the corpus donation is in the nature of a capital receipt and are not taxable, irrespective of the fact whether the trust is registered under section 12AA or not. Therefore, I agree with the learned authorised representative that the amount of ₹ 68,50,000 being in the nature of corpus donation is not taxable under the Income-tax Act being in the nature of capital receipt and therefore, addition of ₹ 68,50,000 made by the Assessing Officer towards the taxable income of the assessee is hereby delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal, Delhi Bench in the case of Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust and other orders of the Income-tax Appellate Tribunal. Since facts are identical, therefore, to maintain consistency, we follow the above orders of the Income-tax Appellate Tribunal and the light of facts we do not find any infirmity in the order of the Commissioner of Incometax (Appeals). The order of the Commissioner of Income-tax (Appeals) is confirmed. 7. In the result, the appeal of the Revenue is dismissed. The ITAT, Chennai in Indian Society of Anaesthesiologists v. ITO in decision reported in (2014) 47 taxmann.com 183(Chennai-Trib.) held that specific funds created for fulfilling specific objectives for which these separate funds are constituted remain as capital funds as the funds can be used for fulfilling specific objectives for which these funds are constituted and hence to be treated as corpus funds and to be excluded from computation of Income. The ITAT , Bangalore in ITO v. Vokkaligara Sangha in a decision reported in (2015) 44 CCH 0509 (Bang. Trib.) whereby the Tribunal held that voluntary contributions received for a specific purposes cann ..... X X X X Extracts X X X X X X X X Extracts X X X X
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