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TMI Blog2019 (2) TMI 1986X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2013-2014, the assessee had utilized corpus donation received as application for charitable purposes. It was noticed by the CIT that the assessee had received Rs. 2,38,15,619 as foreign contribution out of which Rs. 1,82,93,750 was received as corpus donation u/s 11(1)(d) of the I.T.Act. The CIT was of the view that the voluntary contribution apart from the corpus donation was only Rs. 55,21,860 (Rs. 2,38,15,619 - 1,82,93,750). It was further noticed by the CIT that the assessee had utilized Rs. 1,12,03,845 as application of income, and therefore, according to the CIT a sum of Rs. 56,81,961 was utilized as application for charitable purpose out of corpus donation (Rs. 1,12,03,845 - 55,21,860) which is in violation of section 11(1)(d) of the I.T.Act. 3. The case was posted for hearing on 09.03.2018. On the date of hearing none was present nor was any written submission filed on behalf of the assessee. Therefore, the CIT passed revisionary order u/s 263 of the I.T.Act vide order dated 19.03.2018. The CIT set aside the assessment order and directed the A.O. to examine whether a sum of Rs. 56,81,961 being part of Corpus donation was utilized in violation of section 11(1)(d) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isionary jurisdiction. According to the learned AR, the contentions precedent for invoking revisionary jurisdiction u/s 263 of the I.T.Act is absent in this case. It was submitted that there was no loss of revenue since the corpus donation if at all has been utilized, it was utilized only for the charitable purposes and the Department does not have a case otherwise, and this fact is admitted by the Assessing Officer in the assessment completed u/s 143(3) of the I.T.Act. Further, it was contended that since the corpus donation was utilized for charitable purposes, it forms the character of a voluntary contribution and subject to section 11 of the I.T.Act, the assessee is exempt for application of its income for charitable purposes. 6. The learned Departmental Representative strongly supported the order of the CIT. 7. We have heard the rival submissions and perused record. The CIT(A), in his order has held the order of the ld. A.O to be erroneous and prejudicial to the interest of revenue. The said observations have been made for foreign contributions of Rs. 2,38,15,619 received during the year under consideration. It was mentioned that out of the above sum of Rs. 2,38,15,619, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for invoking the revisionary jurisdiction u/s 263 of the I.T.Act is that order sought to be revised must be erroneous and prejudicial to the interest of the revenue. 7.2 In the instant case, the setting aside of assessment order by ld. CIT(E) with the direction to ld. A.O to reconsider the corpus donation of Rs. 56,81,976 by treating them in violation of sec 11 (1 ) (d), will not result to fulfillment of dual statutory condition of AO's order being "erroneous" and ''prejudicial to the interest of the revenue". For an order to be prejudicial to the interest of revenue, some loss must have occurred to the revenue. Whereas in the present case, if at all, corpus donation worth Rs. 56,81,976 is considered as violating the provisions of section 11(1)(d), even then, the said donation remains to be voluntary contribution and in accordance with the provisions of section 12(1) read with section 11(1)(a), are utilized for charitable purpose as the same is evident from the deficit of Rs. 50,08,844 (i.e excess of expenditure over income). Adjustment of Rs. 56,81,976 with the deficit of Rs. 50,08,844 will result to surplus of Rs. 6,73,132 which is within the 15% stipulated amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law." 7.5 The provisions of section 11 (1)( d) stipulate that the income in form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall not be included in the total income of the previous year. Accordingly, corpus donations amounting to Rs. 1,82,93,750 received by the assessee during the year under consideration, with the specific direction to be treated as corpus donation are eligible to be excluded from the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sec 11 (1) and should be transferred to separate account to be spent for its predetermined purposes. Any surplus remaining should revert back to the donor or should be treated as income after obtaining approval from the donor. 7.6 We have gone through the letter of donor for the corpus funds. During the year under consideration, assessee has not received any project grants nor restrictive contributions. Whatever has been received is voluntary contribution. Now Voluntary contributions as received by the assessee are of two types; i.e. "voluntary contributions in the nature of corpus donations" as provided in section 11 (1 ) (d) read with section 12(1) and "voluntary contributions" per se as stipulated in section 2(24)(iia) subject to section 11. 7.7 The observation of the ld. CIT to treat an amount of Rs. 56,81,976 (out of the total deficit for the year of Rs. 1,12,03,845 after reducing foreign donation of Rs. 55,21,860 for other than corpus) is against the spirit of the statute. Provisions of section 11(1)(d) in no way have been violated by the assessee. There has been excess of expenditure over income for the year under consideration and the same has been carried forward t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contain a stipulation that it shall form part of corpus. The trustee cannot possibly influence the donor at that time, except that the trustee should act in accordance with the confidence reposed in him by the donor. Take an example, where A makes a voluntary contribution of Rs. 1 lakh to a trust created wholly for charitable or religious purposes and it has no other income. The object of the trust is to promote education or relief of poor. How can the trustee utilise this money without buying the books, if it is for the purpose of education, or necessary utensils or provisions, if it is for providing relief to the poor by way of providing food and if the money is spent out of the donation of Rs. 1 lakh for the purchase of books, utensils, etc. Would it mean that the sum of Rs. 1 lakh would become taxable as income of the trust? We do not think that this is the object of the legislation. In any case, this is contrary to what is recommended by the Direct Taxes Enquiry Committee, which was accepted by the Government. What is earmarked for corpus is not to be treated as income not because it is spent for the purpose of the trust but because that forms the fund of the trust. It is nowh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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