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Income Tax Appellate Tribunal, “SMC” “B’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI
This appeal by the assessee is directed against order of the NFAC, Delhi dated 24.01.2023 for the assessment year 2017-18.
The assessee has raised following constructive grounds:
1. 1. On the facts and in the circumstances of the case, the authorities below erred in upholding that the Appellant had failed to provide written proof for specific directions from donors towards the corpus fund of Rs. 15,60,000/- in accordance with sec. 11(1)(d) of the Act.
2. For these and such other grounds that may be urged at the time of hearing of the Appeal the Appellant prays that the appeal may be allowed.
Dakshina Kannada Sanathan Dharma Sangha, Bangalore
The facts of the case are that during the assessment proceedings, the ld. AO found that assessee has received donation to the tune of Rs.15.60 lakhs and it was claimed to be exemption u/s 11(1)(d) of the Income-tax Act,1961 ['the Act' for short]. The assessee was asked by the AO to provide specific directions from the donors to the corpus fund of the Trust in writing. The assessee failed to do so. Rs.15.60 lakhs was treated as voluntary contribution and taxed the same. Before NFAC, the assessee submitted that it was received towards corpus fund as recorded in the receipts issued by the assessee while renting of Kalyana Mantapa and separately shown in the books of accounts as corpus fund. It was also mentioned by the assessee before NFAC that in the impugned Receipt issued by the assessee, the signature of the parties has been obtained and that itself shows the confirmation from parties that it has been donated towards corpus fund and it has nothing to do with the letting of Kalyana Mantapa. However, NFAC observed that the income in the form of voluntary contribution made with specific direction that only shall form part of the corpus fund and it is only exempt. In this case, there is no specific letter from the donors in writing with regard to specific direction from the donors that it has been donated towards corpus fund. Accordingly, the NFAC concurred with the view of the AO. Against this assessee is in appeal before me.
The ld. A.R. submitted that the assessee was collecting donation towards corpus fund from the donors and the same have been recorded in the receipts. The Donors have also signed the receipts and this itself is a confirmation to show that the donations were given towards "corpus fund". The Assessee has also provided list of the donors along with their full address. The ld. A.R. submitted that it is nearly 8 years now and now to produce all confirmations is very difficult since post Covid-19 they are not Dakshina Kannada Sanathan Dharma Sangha, Bangalore
Page 3 of 7 aware as to current know abouts of the parties. The ld. A.R. further submitted that the decision of the ITAT Bangalore Bench in the case of ITO Vs. Vokkaligara sangha in Bang/ 2014 is squarely applicable to the facts of the assessee’s case in so far as to whether Corpus fund/ Building fund cannot be taxed. Further he placed reliance on the judgment of the Hon'ble High Court of Karnataka in the case of DIT, Bangalore Vs. Sri Ramakrishna Seva Ashrama reported in 357 ITR 731, wherein para 17 of the said judgment is very clear, and it supports the stand of the assessee.
On the other hand, the ld. D.R. strongly opposed the arguments of the ld. A.R. and submitted that this issue came for consideration before Ahmedabad bench of Tribunal in dated 6.5.2011, wherein held as under:
“5. We have heard both the parties and gone through the facts of the case as also the aforecited decisions. The first issue that arises for our consideration is whether the donations received by the Suvarna Jayanti Mahotsav Samiti on behalf of the Trust can be treated to be exempt under Section 11(1)(d) of the Act, inserted by the Direct Tax Laws (Amendment) Act, 1989, with effect from 1- 4-1989. Here we may have a look at the relevant provisions, which read as under:
“11(1) Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a)... (b)... (c)...
(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.”
5.1 Indisputably, the aforesaid Samiti was constituted by the management of the trust for a specific purpose in order to celebrate 50 years of Shri Panchasara Parshawnath Temple. The said Samiti was authorized to collect the funds in terms of various resolutions passed by the management of the trust. The issue before us is as to whether such donations collected by the Samiti were towards corpus of the trust? The term "Corpus " has not been defined in the Act. The corpus is generally considered to be the capital of the trust or institution which should be kept intact. It
Dakshina Kannada Sanathan Dharma Sangha, Bangalore
Page 4 of 7 may be utilised for the purchase of assets such as land, buildings, furniture, fittings, equipment etc. or it may be invested or deposited as per Section 11(5) of the Act, and the income arising therefrom may be utilised for the objects specified by the donor to the Corpus Fund. The provisions of the Act require the donor to give a direction for treating the donation as corpus. There is no stipulation in the above section that the specific directions should be in writing. Therefore, it has to be ascertained from the facts and circumstances of the case as to whether or not a specific direction of the donor was there, even where there were no written directions accompanying the donations. The specific direction has to be that of the donor and not of the donee. In other words, it will not be sufficient for the donee alone to declare that the voluntary contributions were being allocated to the corpus. There should be evidence to show that the direction came from the donor. In the case of N.A. Ramachandra Raja Charity Trust v. First ITO [1985] 14 ITD 230 (Mad.), the assessee-trust received donations and on the counter-foils of the receipts the words "towards corpus only" were rubber stamped. At the same time, certificates were produced from the donors corroborating the statements in the receipts. It was in these circumstances that the Tribunal held that it had to be construed that the donations were made with the specific direction that they shall form part of the corpus of the trust. However, in the present case, there were no such corroborations from the donors in respect of the voluntary contributions comprised in the disputed sum. In the assessment proceedings before the AO, the assessee did not produce any evidence that these donations were towards corpus of the trust. On appeal, during remand proceedings, the AO recorded statements of four donors –one donated an amount of Rs.2,500/- & and the other three Rs.5,100/- each. Thus, In the present case, there are no affidavits or even letters from the donors, confirming that donations collected by aforesaid Samiti were towards corpus of the trust while the ld. the CIT(A) observed in respect of copy of receipts produced before him that these were not contemporaneous evidence.
5.2 In view of the foregoing, especially when the assessee trust did not produce any evidence before the AO in the assessment proceedings that voluntary contributions of Rs.15,59,858/- collected by Samiti from various donors were towards corpus of the trust while the ld. CIT(A) did not record his specific findings as to whether or not the assessee placed any material before him, revealing specific direction of each of the donors that the voluntary contributions made by them were towards corpus of the trust, apparently, the order passed by the ld. CIT(A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Income Tax Act ,1961 mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity,
Dakshina Kannada Sanathan Dharma Sangha, Bangalore
Page 5 of 7 checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. We may reiterate that a ‘decision’ does not merely mean the ‘conclusion’. It embraces within its fold the reasons forming basis for the conclusion.[Mukhtiar Singh Vs. State of Punjab,(1995)1SCC 760(SC)]. As is apparent, the impugned order suffers from lack of reasoning and is not a speaking order. In view of the foregoing, especially when the ld. CIT(A) has not passed a speaking order on the issue raised in ground no.1 in the appeal of the assessee, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issue afresh in accordance with law, after allowing sufficient opportunity to both the parties. Needless to say that while redeciding the appeal, the learned CIT(A) shall pass a speaking order, keeping in mind, inter alia, the mandate of provisions of sec. 250(6) of the Act, bringing out clearly as to whether or not there was any material, revealing specific direction of each of the donors that the voluntary contributions made by them were towards corpus of the trust . With these observations, ground no. 1 in the appeal of the assessee is disposed of.”
5.1 Accordingly, the ld. D.R. submitted that the issue may be remitted to AO for re-examination and the assessee has to furnish the confirmation letter from the donors stating that the amount has been donated towards corpus fund and it should be voluntary donation.
I heard the rival submissions and perused the materials available on record. Admittedly, similar issue came for consideration before this coordinate bench of Bangalore in the case of ITO Vs. Vokkaligara Sangha reported in 44 CCH 509, wherein held as under: “The case of the assessee before the authorities below was that the voluntary contributions received by it was for the specific purpose of construction of a 'Kalyan Mantap'. In short, the assessee had pleaded that the amount received by the assessee was a tied up grant or an amount received for a specific purpose as being capital in nature. In support of this proposition, the assessee had cited / placed reliance on several decisions of various benches of the ITAT, wherein it has been held that voluntary contributions received for specific purposes cannot be considered as income.
(Para 5.3.1)
After, relying on the observations from the decision of the co-ordinate bench, the Hyderabad Bench in the case of J.B. Educational Society observed that voluntary contributions in the nature of tied up grant received by the Dakshina Kannada Sanathan Dharma Sangha, Bangalore
Page 6 of 7 assessee cannot be brought to tax even if the trust was not registered u/s. 12AA. The tied up donations received by the assessee should not be taxable as income of the assessee, if it was used for specific purpose for which it had been given and it cannot be considered as revenue receipts so as to tax the same.
(Para 5.3.3)
It was found that the Delhi High Court in the case of Basanti Devi & Sri Chakhan Lal Garg Education Trust had also affirmed the view taken by the ITAT in holding that corpus donations cannot be regarded as income under Section 2(24)(iia) of the Act.
(Para5.3.4)
Following the above decisions of the Tribunal, relied upon by the assessee, it was held that voluntary contributions received for a specific purpose cannot be regarded as income under Section 2(24)(iia) since they were capital receipts and tied up grants for specific purpose.
(Para 5.3.5)
From a plain reading of the same, it can be seen that the assessee society had solicited donations for the specific purpose of construction of a 'Kalyana Mantap' building. For this purpose, it had established a building corpus fund and donations received had been credited to the said fund. The list of Donors had been filed in the assessee's paper book for the five years under consideration; viz. for the years ending 31.3.2005 to 31.3.2009; along with a sample receipt and an English translation thereof. From a perusal of the orders of the authorities below, it appeared that the list of donors filed by the assessee had not been examined by the authorities below, since the Assessing Officer had extensively considered the legal issue in the order of assessment. It was opined that, in the interest of justice it was necessary to direct the Assessing Officer to examine and verify the donation receipts maintained by the assessee, to come to the conclusion as to whether the amounts credited as building fund corpus in the accounts were supported by donation receipts issued. In the result, Revenue’s appeals for Assessment years 2005-06 to 2009-10 were treated as partly allowed for statistical purposes.
(Paras 6.1, 7)
6.1 In view of the above order of the Tribunal, taking a consistent view, I remit the issue in dispute to the file of the AO/NFAC with a direction to assessee to prove that the amount has been donated voluntarily by the donors towards the corpus fund, by furnishing requisite evidence. Ordered accordingly.
Dakshina Kannada Sanathan Dharma Sangha, Bangalore Page 7 of 7
In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 19th Apr, 2023