N. Kumar, J. - The revenue has preferred these appeals challenging the common order passed by the Tribunal holding that the donations collected was towards a specific fund and for a specific purpose, i.e., corpus fund and therefore, the assessee is entitled to claim exemption as a charitable institution under Section 11 of the Income Tax Act, 1961.
2. The assessee is a public charitable trust, registered under Section 12AA of the Income-tax Act, 1961 (hereinafter referred to as 'the Act' for brevity) and it is also recognized under Section 80G of the Act. The assessee trust allowed its assets, vehicles and buildings etc. to be used by Bharatiya Samskriti Vidyapith, free of consideration and the said association is running an educational institution in the premises which is owned by the assessee trust. It is also making use of the assets of the trust for the purpose of education.
3. The assessee has collected donations from various persons and also issued receipts showing that the said amounts were received towards building fund. Therefore, they claimed exemption under Section 11 of the Act. The Assessing Officer denied the exemption on various grounds. He treated the said income from donations as taxable income and added under Section 68 of the Act on the ground that the assessee was not able to give the particulars of the persons, who donated the amounts and brought the said donations to tax.
4. In appeal by the assessee, the First Appellate Authority held that the assessee is a public charitable trust and is entitled to the exemption under Section 11 of the Act and there is no violation of conditions under Sections 12 and 13 of the Act. Accordingly, the said additions were deleted. Aggrieved by the said order, the revenue preferred appeals to the Tribunal. The Tribunal after considering the rival contentions and after going through entire material on record, recorded a finding that the very purpose of enquiry under Section 68 of the Act is to establish that, any sum not found credited in the books of the account as income. When the assessee himself declares all the credits as its income, the enquiry by the Assessing Officer under Section 68 of the. Act is futile. The receipts are admitted as income and thus the question whether this income, because it is unproved and because it was a voluntary contribution would become academic. Further, it accepted the assesse's contention with regard to the corpus receipts and held that the amounts received as donations are for a specific fund for a specific purpose that is, corpus fund. When once the institution in question is eligible for exemption as a charitable institution under Section 11 and when it is also not disputed that the donors in question have received the receipts from the donee against their voluntary contribution so made, only for the building fund and the donation may be treated as corpus fund. Therefore it dismissed the appeals. Aggrieved by the said order of the Tribunal, the Revenue has filed these appeals for five different years.
5. Learned Counsel for the revenue assailing the impugned order contended that to get an order of exemption under Section 11 as a corpus fund, the assessee has to establish that the said voluntary contributions are made with a specific direction that they shall form part of the corpus fund of the trust or institution and then only the assessee is entitled to the benefit thereof. The material on record discloses that though donations are received by the assessee and receipts are issued, the assessee is not able to demonstrate who those donors are and what is the direction they have given and in the absence of these material particulars, merely because a receipt was issued showing that the amount was received towards building fund would not enable the assessee to claim exemption under Section 11 of the Act and therefore, he submits that a case for interference is made out.
6. Per contra, learned Counsel for the assessee submitted that the material on record discloses that these donations are received from the inception of the institution. It was agreed between the assessee and department that receipts may be issued against the donations exceeding Rs. 1,000/- and subsequently, it was enhanced to Rs.5,000/-. Thus, receipts for less than Rs.5,000/- are not issued and amounts in excess of Rs.5,000/- are issued and the receipts shows the purpose for which the said donation is made. Once the receipt is issued showing the purpose for which it is received, it means the donor has issued a direction to utilize the said fund for the said purpose and the law does not contemplate that the direction of the donor should be in writing. Under these circumstances taking into consideration, the course of events for more than 10 years, the appellate authorities rightly held that Section 68 of the Act is not attracted as the amounts are accounted for and shown as income and as the said income is shown as having been paid towards the corpus fund of the trust and the assessee is entitled to the said benefit. At the time of admission of these appeals, the following substantial questions of law were raised:—
| "a. |
|
Whether the Appellate Authorities were right in holding the donations of Rs.21,46,033/- received by the assessee would not be brought to tax under Section 68 of the IT. Act as the assessee failed to disclose the names of the donors and further held that the said donations are utilized as corpus towards building fund? |
b. |
|
Whether the Appellate Authorities were right in not taking into consideration the fact that the building had not been utilized by the assessee for running the school but the same has been let out for other society and thereby charitable activity being not conducted by the assessee to claim exemption in respect of the donations of Rs.21,46,033/-?" |
7. Learned Counsel for the Revenue fairly submitted that it requires refraining and accordingly, the only substantial question of law that arise for consideration in the appeal is as under:—
"In the absence of the particulars of the donors and in the absence of specific direction by the donors, whether the donations given by them would form part of the corpus fund of the trust or the institution and thus eligible for exemption from payment of tax under Section 11 of the Act"
8. The material on record discloses that assessee is a Charitable Trust running educational institution. It is registered under Section 12 AA of the Act and is also recognized under Section 80G of the Act. They have received donations from various persons. For the amounts received they have issued receipts and the amounts are duly credited in their accounts and remitted in the bank accounts. In the receipts issued, it shows that the donations are paid towards building fund. It is a voluntary contribution as the assessee is running educational institution. Probably these donations are received for the purpose of putting up buildings to carry out the purpose of the trust.
9. The order of the Tribunal discloses that, earlier the assessee was issuing receipts for the donations received in excess of Rs. 1,000/- and subsequently, they are issuing receipts for the amounts received above Rs.5,000/-. This procedure has been accepted by the department. Now in the order of the assessment, the Assessing Officer has denied exemption on the ground that there is no specific direction from the donor to the donee to utilize the amounts given for the building purpose, i.e., it. was given towards the corpus of the trust. The reasons given are that the particulars of the donors are not mentioned and hence, the assessee is not able to give the full particulars of the donors. There is nothing to show that these donors have given any specific directions to utilize the fund as a part of the corpus of the trust. The amount involved is few lakh for each year. The assessee is running an educational institution and if philanthropic persons voluntarily donate funds for educational purpose and they have paid it by way of cash, the assessee has received the same and issued a receipt acknowledging the said amount. After receipt of the said amount, an entry is made in the account books of the trust. Thereafter, the amount is deposited in the Bank. Therefore, it; is not a case where the amounts received are not accounted for or there is any attempt not to disclose the income. The receipts issued clearly demonstrates that it is received for the purpose of building fund. Clause (d) of Sub-section (1) of Section 11 of the Act provides that income in the form of voluntary contribution 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 for the previous year of the person. Therefore, to be eligible for that exemption, the said contribution should be towards a part of the corpus. Though the words 'specific direction' is used in the said provision, the legislature consciously has not used the word 'in writing'. In the absence of any writing, only means to find out as to what is the specific direction can be gathered by considering how the recipient of the amount has accounted for it. The recipient has accounted the receipt as the amount received towards building funds and thereafter, a separate account is maintained for the said amount. From this, it could be inferred that there is a 'specific direction by the donor'. The said amount is used as part of the corpus. It may be possible that, in a given case, the provision may be abused and unaccounted monies could be converted into corpus fund without furnishing the particulars of the persons who are contributing and to avoid tax liability to have benefit of exemption, but that is a question of fact. The Court has to decide on the material available on record, whether the said provision is abused in the aforesaid manner or not. In the absence of any material to show that the said provision is abused and if it is demonstrated that the educational institution has collected money in the form of voluntary contributions from public and may be from the parents of the students who are studying in the institution and when they have issued receipts acknowledging the said amount towards building fund and made requisite entries in the books and deposited the same in the bank, if the court is satisfied with the genuineness of the transaction, it is well within the power of judicial authority to hold that the requirement of Section 11(1)(d) of the Act is fulfilled and the assessee is entitled to be exempted.
10. Thus, the two appellate authorities have taken this view in the present case. No hard and fast rule can be laid down. The legal position cannot be expressed in a straightjacket form. In the facts of the case, we are satisfied from the material on record that these voluntary contribution made by the public to the assessee was with a specific direction to use the same for building purpose and therefore, the said donations shall form part of the corpus of the trust and assessee is entitled to the benefit under Section 11 of the Act. That is, precisely what both the appellate authorities have concurrently held and it being a pure question of fact, we do not see any justification to interfere in the said question of fact. In the light of the aforesaid discussions, we do not find any error committed by the authorities. Thus, the substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed.