INCOME-TAX APPELLATE TRIBUNAL - AGRA BENCH

I. T. A. No. 386/ Agra/2012 (assessment year 2007-08).

BHAVNESH SAINI (Judicial Member) and
A.L. GEHLOT (Accountant Member)

The order of the Bench was delivered by

1 A. L. GEHLOT (Accountant Member).-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 12Al12AA 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 LT.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.

3. The order of the Commissioner of Income-tax (Appeals)-l, Agra being erroneous in law and on facts be set aside and the order of the Assessing Officer be restored.

4. The appellant craves to amend the grounds of the appeal stated above and when need for doing so may arise."

The brief facts of the case are that the assessee-trust has shown donation of Rs. 68,50,000 from BBT, Mumbai. The Assessing Officer computed the assessment on total income of Rs. 68,70,000 rejecting the assessee's contention that donation received towards the corpus of the trust. The Commissioner of Income-tax (Appeals) deleted the addition of Rs. 68,50,000 out of the addition of Rs. 68,70,000 made by the Assessing Officer as under:

"1 have also examine a the term corpus fund and corpus donation as it is being generally used with respect to a trust. A corpus fund denotes a permanent fund kept for the basic expenditures needed for the administration ?nq survival of the orgamsation. The corpus fund is generally not allowed to be utilised for the attainment of the pur­poses, but the interest/dividend accused on such fund can be utilised as well as accumulated. Such fund can also be used for creation of capital asset or property of the trust from which income can be generated. Corpus fund are generally created out of corpus donation. A donation Will be treated as corpus donation only if it is accompa­nied by a specific written direction of the donor. In the absence of any written direction of the donor, a contribution of grant cannot be transferred to corpus fund. In the present case, the donor, the Bhak­tivedanta Book Trust has very categorically in his letter, while providing money to the appellant trust, has mentioned the amount of Rs. 68,50,000 as corpus donation and such amount has been used by the trust for purchasing the land and giving money on interest as loan. Therefore, the amount of Rs. 68,50,000 shown by the appellant trust has been found to be in the nature of corpus donation.

Now, the question arises whether such corpus donation is taxable as income or not even in the cases in which the trust is not registered under section 12AA because for those trusts which are registered under section 12AA, exemption to corpus donation has been provided as per provision of section 11(1)(0.). For such trust to which registration under section 12M 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 2003-04 are annexed with this order as annexure A-l 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 dated January 13, 1997 reported in [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)(iia) is concerned, this section has to be read in the context of the introduction of the present section 12 it is significant that section 2(24)(iia) was inserted with effect from April 1, 1973 simultaneously with the present section 12, both of which were introduced from the said date by the Finance Act, 1972. Section 12 makes it clear by the words appearing in parenthesis that contribu­tions made with a specific direction that they shall form part of the corpus of the trust or institution shall not be considered as income of the trust. The Board's Circular No. 108 dated March 20, 1973 is extracted at page 1277 of Volume I of Sampath Iyengar's Law of Income-tax, 9th edn. In which the inter-relation between section 12 and section 2(24) has been brought out. Gifts made with clear directions that they shall form part of the corpus of the religious endowment can never be considered as income. In the case of R. B. Shreeram Religious and Charitable Trust v. CIT [1988] 172 ITR 373 (SC) it was held by the Bombay High Court that even ignoring the amendment to section 12, which means that even before the words appearing to parenthesis in the present section 12, it cannot be held that voluntary contributors specifically received towards the corpus of the trust may be brought to tax. The aforesaid decision was followed by the Bombay High Court in the case of eIT v. Trustees of Kasturbai Scindia Commission Trust [1991] 189 ITR 5 (Born). The position after the amendment is a fortiori. In' the present cases the Assessing Officer on evidence has accepted the facts that all the donations have been received towards the corpus of the endowments. In view of this clear finding, it is not possible to hold that they are to be assessed as income of the assessees. We,.therefore, hold that the assessment of the corpus donations cannot be supported.

12. For the above reasons, we hold as under :
1. The religious endowments are not invalid on the ground that neither the temple nor the image had been consecrated at the time of creating the endowments.
2. The assessees have to be assessed in the status of "individual" since they are artificial juridical entities and
3. The voluntary contributions received by the assessee towards the corpus cannot be brought to tax.'

6.5 Even after considering the definition of section 2(24)(iia) read with section 12, 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, Le., Income­tax 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 Rs. 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, the addition of Rs. 68,50,000 made by the Assessing Officer towards the taxable income of the assessee is hereby deleted and accordingly, Ground No.2 is allowed."

The learned Departmental representative relied upon the order of the Assessing Officer, whereas the learned authorised representative relied upon the order of the Commissioner of Income-tax (Appeals) and submitted that the Commissioner of Income-tax (Appeals) has followed the orders of the Income-tax Appellate Tribunal, Delhi Bench, which has been confirmed by the hon'ble Delhi High Court, thus, the issue is covered in favour of the assessee.

5 The learned authorised representative has submitted that the issue is covered by various orders of the Income-tax Appellate Tribunal in the cases of Shri Shankar Bhagwan Estate v. ITO [1997] 61 ITD 196 (Cal), Society for Integrated Development in Urban and Rural Areas v. Deputy CIT [2004] 90 ITD 493 (Hyd), Sri Dwarkadheesh Charitable Trust v. ITO [1975] 98 ITR 557 (All) and Deputy CIT v. Nasik Gymkhana [2001] 77 ITD 500 (Pune).

6 We have heard the learned representatives of the parties and records perused. The grievance of the Revenue is that the Commissioner of Income-tax (Appeals) has wrongly followed the judgment of the hon'ble Delhi High Court in 1. T. A. No. 5082/Del./2010, whereas that order has been challenged before the hon'ble Supreme Court. The Revenue did not dispute the facts. We noticed that the Commissioner of Income-tax (Appeals) after considering the decision of three Tribunals, Le., Income-tax Appellate Tribunal, Delhi in the case of Smt. Basanti Devi and Shri Chakhan Lal Garg Education Trust, the Revenue filed appeal before the hon'ble Delhi High Court. The hon'ble Delhi High Court confirmed the order of the Income-tax Appellate Tribunal, the Revenue filed appeal before the hon'ble Supreme Court, which has been dismissed for non-prosecution vide judgment Civil Appeal Nos. 7036 of 2011, judgment dated January 28, 2013, Income-tax Appellate Tribunal Chennai Bench in the case of Penta­four Software Employees Welfare Foundation v. Asst. CIT in LT.A. Nos. 751 and 752 /Mds/2007 and others and Income-tax Appellate Tribunal, Kolkata Bench in the case of Shri Shankar Bhagwan Estate v. ITO dated January 13, 1997 reported in [1997] 61 ITD 196 (Cal) decided the issue in favour of the assessee. We find that the facts of the case under consider­ation are identical to the facts of the case decided by the Income-tax 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 Income-tax (Appeals). The order of the Commissioner of Income-tax (Appeals) is confirmed.

7 In the result, the appeal of the Revenue is dismissed.

8 The order pronounced in the open court.