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TMI Blog2021 (9) TMI 883X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount spent on construction of the capital funds claimed to be application of receipts which was not allowed - HELD THAT:- In the present case it is an admitted fact that the assessee reduced the amount of the assessee's paper book and if the assessee had not reduced the said amount then it could have been shown separately on the asset side and the capital funds was to be increased by the same amount. Objection of the Department that the assessee was not having any land, the Ld. CIT(A) mentioned that the assessee has filed a copy of certificate mentioning therein that the land being used by school belonged to the society Hindu Shiksha Samiti, Haryana and the land and building thereon will devolve to the Hindu Shiksha Samiti without any payment on closure of the school which clearly shows that the assessee was the owner of the building till the closure of the school and the said building would be handed over to Hindu Shiksha Samiti without any payment only on closure of school. This fact was not appreciated either by the A.O. or by the Ld. CIT(A) - We deem it appropriate to set aside this issue back to the file of the A.O. for proper verification. Appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration: PARTICULARS AMOUNT Amalgamated Fund 230095.00 Red Cross Fund 19893.25 Child Welfare Fund 11670.00 Exam Fund 90.00 Sports Fund 90.00 TOTAL 261838.25 Sir, it is submitted that the above said funds are specified funds as per directions from the Managing Body i.e. Hindu Shiksha Samiti, Kurukshetra, these funds are to be separately maintained and expenses on account of these funds are to be debited to the specified fund accounts, bank accounts of these funds are separately maintained. Since these are specified funds to be spent on specified purposes only, therefore, neither the collection on account of such funds nor expenses from such funds are accounted for in the income expenditure account . 4.1. However, the A.O. was of the view that the said funds were recurring in nature and were regularly received from the students every year so those were in the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore your good self as appellate proceedings are continuation of assessment proceedings. Your kind attention is further drawn to appellant ground No. 1 and ground No. 3 which are reproduced as below:- The Ld. AO has erred in law and facts in denying exemption u/s. 10(23C)(iiiad) of the IT Act on the ground that revenue receipts were more than ₹ 1 Crore by treating Corpus receipts of ₹ 1757737/- and specified funds of ₹ 261838/- as revenue receipts. The Ld. AO was not justified in treating Corpus receipts of ₹ 757737/- as revenue receipts within the meaning of section 2(24)((iia) of IT Act and thus coming to conclusion that Gross Receipts are exceeding ₹ 1 Crore and hence assessee is not entitled to exemption u/s. 10(23C)(iiiad) of the IT Act, particularly when the same was received from Donors with specific recital that same forms part of Corpus and same shall be used for basic and enduring expenditure like construction etc. The Ld. AO has not offered any comment on Appellant submissions in this regard. During the course of assessment proceedings, it was brought on record that assessee has received Corpus donations of ₹ 17,57, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,76,539/- on account of corpus donation and has further erred in treating the same as part of total receipts and that too by recording incorrect facts and findings and without observing the principles of natural justice. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and facts in not reversing the action of Ld. AO in holding that assessee society is not eligible for exemption u/s. 10(23C)(iiiad) of the Act. And the Hon'ble ITAT has held as under:- I have considered rival submission? and material on record. It is not in dispute that assessee is an educational institution existing solely for education purposes. The assessee has revenue receipts of ₹ 96,36,555/- from running of educational institution. Assessee explained the ₹ 22 lacs have been received as corpus fund for meeting out capital expenditure from founder member. This fact is not disputed by the authorities below. Therefore the question is whether the corpus fund would be part of aggregate annual receipt of educational institution. In the case of HO (E) vs. Smt. Basanti Devi Shri Chakhan Lal Garg Education Trust (Supra), It was held that the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts claimed as Funds and Corpus donations be not considered as a part of its Revenue receipt and passed/routed through its income and expenditure account, thereby denying exemption u/s. 10(23C)(iiiad). This objection/query stands meted in view of aforementioned judgments and AO remand report. The list of corpus donations was placed on the file during the course of assessment proceedings and confirmation and identity of Donors was produced which was not accepted by the AO on the ground that the society is not registered u/s. 12AA of the IT Act. Even otherwise, as per calculations already placed on your file, the appellant has utilized more than 85% of receipts and thus the appellant is fully entitled for benefit of section 11/12 of IT Act. The Ld. AO has try to distinguish case of Divine Education Institution and Social development society and that of Smt. Basanti Devi and Sh. Chakhan Lal Garg (supra) merely on the ground that in that case the corpus fund was received from Settler of trust. This is no condition for not allowing exemption u/s. 10(2SC)(iiiad) and 12AA of IT Act. In this regard, your kind attention is drawn to the judgment of ITAT, Hyderabad B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enclosed herewith. Your kind attention is drawn to judgment of ITAT, Agra Bench in the case of ITO Vs. Gaudiya Granth Anuved Trust cited as [2013] 28 ITR 161, wherein the ITAT has held as under:- Held, dismissing the appeal, that the Commissioner (Appeals), after considering the position of law, prevailing on the basis of three decisions of the tribunal and the High court, held that the corpus donations was in the nature of a capital receipt and not taxable, irrespective of whether trust was registered under section 12AA or not. Since the facts of the case were identical to the facts of those cases, the orders were to be followed. The order of the Commissioner (Appeals) was confirmed. The voluntary donations towards corpus of trust only supported by the confirmation of the Donors with specific recital that these donations are towards the corpus of the trust straightway deposited in bank and not routed through profit loss a/c and to be utilized for the construction or pending for utilization and hence allegation of AO that it is an afterthought to escape the addition is totally incorrect and uncalled for as any plea taken during the course of assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rore. There is no reference to capital fund or revenue receipts. Since the total receipts of the assessee exceeded ₹ 1 Crore, therefore the assessee is not eligible for exemption u/s. 10(23C)(iiiad) of the Income Tax Act, 1961. These grounds of appeal are thus dismissed. 6. Now the assessee is in appeal. 7. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the A.O. disallowed the claim of the assessee since the registration under section 12A was not available at the time of assessment proceedings. However, the Ld. CIT(A) accepted that the assessee got the registration under section 12AA of the Act. The reference was made to page No. 19 of the impugned order wherein the Ld. CIT(A) mentioned that the ground of appeal No. 5 regarding registration under section 12A is allowed. 8. In her rival submissions the Ld. DR strongly supported the orders of the authorities below and reiterated the observations made therein. She further submitted that the assessee did not file the details either before the A.O. or before the Ld. CIT(A) and that the assessee was not having any land so it was not clear how t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Audit:- AMG+CCWF** Red Cross C.W. Exam Sports **Kindly see Annexure 'A' and Page 8 of Audit report given by Deputy Director, Local Audit Haryana. 230095.00 19893.00 11670.00 90.00 90.00 261838.00 Balance 11410617.00 Less: 15% set apart for future u/s ll(l)(a) 1711592.00 85% of balance Balance 9699025.00 Less: Expenses debited to profit loss a/c as mentioned by AO Less: Depreciation debited to P L A/c 7475672.00 536079.00 6939593.00 Balance 2759432.00 Less: Amount appropriated towards construction as mention in balance sheet 1829342.00 Balance 930090.00 Less: Amt. spent for acquisition o f fixed assets:- Furniture Computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the reserve and surplus and that had it not been reduced and shown separately, it could have been mentioned in the fixed assets. It was further submitted that the land was given to the assessee by Hindu Shiksha Samiti for construction of the school building and it was to be handed over back only after closure of the school, so the assessee was entitled to make the construction of building for running the school, as such, it was utilization of the funds. However neither the A.O. nor the Ld. CIT(A) appreciated the facts in right perspective. 15. In her rival submissions the Ld. DR supported the impugned order passed by the Ld. CIT(A) and reiterated the observations made therein, she further submitted that the assessee was not having any land, so it was not clear how the building was constructed on the land when the assessee was not the owner of the said land. 16. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is an admitted fact that the assessee reduced the amount of ₹ 18,29,342/- out of the capital funds which is evident from the balance sheet placed at page No. 49 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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