RAMSAHAIMALSAHUWALA AND SONS CHARITABLE TRUST,CHENNAI vs. ACIT CENTRAL CIRCLE 2(3), CHENNAI

आदेश / O R D E R

PER MANJUNATHA.G, ACCOUNTANT MEMBER:

This bunch of ‘nine’ appeals filed by the assessee are directed against the order of the Commissioner of Income Tax (Appeals)-19, Chennai, dated 16.11.2022,and pertains to assessment years 2013-14 to 2019-20. Since, facts are identical and issues are common, for the sake of convenience, these appeals were heard together and are being disposed off, by this consolidated order.

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for both the assessment years. Therefore, for the sake of brevity, grounds

of appeal filed for the AY 2013-14, are re-produced as under:

Reopening of Assessment

Provision of Section 13(1)(c) not invocable

Denial of Depreciation

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PRAYER

For these grounds and such other grounds that may be raised, may be altered, amended or modified, with the leave of this respected authority before or during the hearing of the appeal, it is most humbly prayed that this respected authority may be pleased to

a. Quash the order of reassessment.

b. Allow the exemption u/s.11 as claimed by the appellant.

c. Delete the addition made u/s.13(1)(c).

d. Allow the depreciation claimed by the appellant.

e. Pass such other orders as this respected authority may deem fit.

registered u/s.12AA of the Income Tax Act, 1961 (in short “the Act").

The assessee has filed its return of income for AYs 2013-14 to 2019-20

u/s.139 of the Act, and admitted ‘nil’ total income after claiming

exemption u/s.11 of the Act. A survey u/s.133A of the Act, was conducted

in the business premise of the assessee on 23.01.2020. During the

course of survey, it was noticed that the assessee’s Trust is running

Kalyan Mandapam in Chennai & Coimbatore, and charging rent on par

with the market rates. The predominant activity of the assessee’s Trust is

running marriage hall and also major income comes from running of

marriage hall and interest income, etc. The major expenses incurred by

the assessee pertain to the activity of running of marriage hall only. It

was further observed that the Trust is managing a temple called Bhawan

at Kulod exclusively for the benefit of Sahuwala family. A statement on

oath was recorded from Shri. Rajavel, Manager (Accounts) of the Trust

and Shri Ashok Kumar Gupta, Chairman of the Trust, and in response to

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the specific questions, they have stated that the Trust is running Kalyan

Mandapam at Chennai & Coimbatore, and charging rent.

been re-opened u/s.147 of the Act. During the course of assessment

proceedings, the AO noticed that the objects of the assessee’s Trust and

activities carried out during these assessment years predominantly

running of marriage hall. Further, Trust is not running any Educational

Institution or Old Age Home as per the objects of the Trust. The AO has

discussed the issue at length in light of certain observations made during

the course of survey, including certain bills from the Graphic Systems,

Coimbatore, which was on account of printing of Sahuwala Pariwar

Directory-2019 which contains the details of family tree of Sahuwala

Pariwar and the payments made out of the Trust funds. The AO had also

discussed the bills received from M/s Ratna Café, Chennai, and accounted

under the head ‘other expenses’. The Trust funds were used for the

benefit of the trustees in violation of provisions of Sec.13 (1)(c) of the

Act. Therefore, the AO opined that the activity of running of Kalyan

Mandapam by charging fees on par with commercial rates charged by any

other private Kalyan Mandapam operator is in the nature of trade,

commerce or business which comes under the last limb of definition of

charitable purpose, i.e. any other object of General Public Utility (in short

“GPU") as defined u/s.2(15) of the Act, and thus, as per proviso to

sec.2(15) of the Act, the advancement of any other object of GPU shall

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not be a charitable purpose, if it involves the carrying of any activity in

nature of trade, commerce or business or any activity of running any

services in relation to trade, commerce or business for a cess, fees or any

other consideration irrespective of the nature of use or application or

retention of income from such activity. Since, the receipts from the

activity is in excess of the prescribed limit provided under the proviso, the

assessee is not entitled for the benefit of exemption u/s.11 of the Act,

and thus, rejected exemption claimed by the assessee and computed the

income on commercial principle and taxed excess of income over

expenditure. Similarly, the AO has disallowed donations paid to other

charitable trust or institutions on the ground that the said expenditure has

not been incurred for charitable purpose. The AO had also disallowed

depreciation claimed on fixed assets, the cost of which has already been

allowed as application of income in the year of purchase of said fixed

assets. Similarly, the AO has disallowed expenses incurred for Bhawan at

Kulod, a community temple on the ground that said expenditure has been

utilized for the benefit of trustees and their family members alone and not

for the purpose of charity, and thus, not allowable as deduction.

an appeal before the Ld. CIT(A). Before the Ld.CIT(A), the assessee has

reiterated its arguments made before the AO and submitted that the Trust

was formed in the year 1972 and registered u/s.12AA of the Act, as a

charitable institution. The main object of the Trust is relief to the poor,

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education and medical relief and to achieve its objects, the Trust has

constructed and maintained a Kalyan Mandapam in Chennai &

Coimbatore, to generate income for the purpose of achieving its objects.

Therefore, the AO is incorrect in stating that the predominant activity of

the Trust is running Kalyan Mandapam and not charity. The assessee had

also challenged the re-opening of assessment u/s.147 of the Act, for AYs

2013-14 to 2015-16 on the ground that re-opening of assessment was a

change of opinion.

assessee and also taken note of reasons recorded for re-opening of

assessment opined that the AO has formed reasonable belief of

escapement of income on the basis of tangible materials which came to

the knowledge of the AO during the course of survey and without survey

there may not have any occasion on the part of the AO to examine the

activities of the Trust and application of income. The books of accounts

maintained and submitted by the assessee may not reveal the original

affairs and activities of the Trust. Therefore, the opined that there is live

link between reasons recorded for re-opening of assessment and

escapement of income, and thus, rejected arguments of the assessee and

upheld re-opening of assessment.

excess income over expenditure under normal commercial principles, the

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Ld.CIT(A) observed that on going through the objects of the Trust and

predominant activity carried out during these assessment years, it is

abundantly clear that the Trust is carrying out predominantly GPU

activities by running a marriage hall in commercial lines and such activity

can only be falls under the last limb of any other object of general public

utility (GPU) as per sec.2(15) of the Act. Since, the Trust is a GPU Trust,

the entitlement of exemption needs to be examined as per proviso to

sec.2(15) of the Act, where it has been clearly laid down that the

advancement of any other object GPU shall not be a charitable purpose,

if it involves carrying any activity in the nature of trade, commerce or

business or any activity of running a service in relation to any trade,

commerce or business for a fees or cess irrespective of the nature of use

or application of the income of such activity. Since, the predominant

activity of the assessee’s Trust is in the nature of trade and commerce,

the activity of the Trust comes under GPU, and thus, the proviso to

sec.2(15) of the Act, clearly attracts in the given facts and circumstances

of the case. Since, the receipts from the activity of GPU is in excess of

the prescribed profit as per proviso to sec.2(15) of the Act, the benefit of

exemption u/s.11 of the Act, cannot be allowed. Therefore, the CIT(A),

by following the decision of the Hon’ble Supreme Court in the case of

ACIT(Exemptions) v. Ahmadabad Urban Development Authority

(2023)290 Taxman 137, rejected arguments of the assessee and upheld

the reasons given by the AO to reject exemption u/s.11 of the Act. The

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Ld.CIT(A) had also discussed the issue in light of gross receipts from the

assessee and application of income and opined that the assessee has

applied a meniscal income for charitable purpose which is evident from

expenses incurred by the assessee. The Ld.CIT(A) had also discussed the

issue of violation of provisions of Sec.13(1)(c) of the Act, in light of

certain evidences found during the course of survey, including bills from

Graphic Systems, Coimbatore, with regard to printing of Sahuwala

Pariwar Directory-2019 and observed that the benefit of the Trust is

limited to a particular community or family but not for general public.

The Ld.CIT(A) had also discussed the issue in light of bills received from

Ratna Café, Chennai, with regard to amounts spent for Diwali get

together of the Trust and family members and observed that the benefit

of the Trust has been extended to Trust and their family members.

Therefore, rejected the arguments of the assessee and upheld additions

made by the AO towards excess of income over expenditure. Aggrieved

by the order of the Ld.CIT(A), the assessee is in appeal before us.

Yeshwanth kumar, CA, submitted that the Ld.CIT(A) erred in upholding

the denial of exemption u/s.11 of the Act. The Ld. Counsel for the

assessee referring to Deed of Trust dated 22.06.1972 submitted that the

objects of the Trust is to fund and maintain or aid educational institutions,

which comes under the definition of education. If you see other objects,

the Trust is providing medical relief and relief to the poor. The running of

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Kalyanamandapam is to aid and achieve the main objects of the Trust like

imparting education, relief of the poor and medical relief. The AO and the

Ld.CIT(A) grossly erred in holding that the predominant object and

activity of the Trust is running of Kalyan Mandapam in commercial lines,

but not charity as per the objects of the Trust. The Ld. Counsel for the

assessee further submitted that the Trust is having composite objects

which include education, relief of the poor and medical relief and

advancement of any other object of GPU. The gross receipt from Kalyan

Mandapam is applied for education and medical relief purpose. Therefore,

the objects and activity of the assessee’s Trust comes under the main

limb of education and relief of the poor, but not advancement of any

other objects of GPU. Since, the object and activity of the Trust does not

come under GPU category, the proviso to Sec.2(15) of the Act, does not

come into play and question of denial of exemption u/s.11 of the Act,

does not arise. The Ld. Counsel for the assessee further submitted that

the AO and the Ld.CIT(A) failed to appreciate the fact that provisions of

Sec.13(1)(c) of the Act, are not invocable in the facts and circumstances

of the present case, because, reference made by the AO to a particular

bill paid for printing of diary of members of the Trust, does not per se

lead to conclusion that funds of the Trust are used for the benefit of the

Trustees. The Ld. Counsel for the assessee further submitted that even a

solitary reference to bill of a restaurant to allege that the funds of the

Trust has been diverted for the trustees, is incorrect, because, the Trust

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has utilized the services of the Restaurant in the course of running of its

activities and same cannot be treated as benefit to the trustees and their

family members. Therefore, he submitted that the observations of the AO

& the Ld.CIT(A) with regard to violation of provisions of Sec.13(1)(c) of

the Act, are not correct.

Ld.CIT(A) erred in denying depreciation on assets without appreciating

the fact that when assessee’s trust is claiming exemption u/s.11 of the

Act, depreciation on fixed assets is allowable even in a case where entire

cost of asset has been allowed as application of income in the year

acquisition of said fixed assets as held by various courts and the Hon’ble

Supreme Court and this issue is settled before the law has been amended

from the AY 2015-16 . The Ld. Counsel for the assessee further submitted

that the AO & the Ld. CIT(A) erred in treating ‘corpus donations’ as

income of the Trust without appreciating the fact that the ‘corpus

donations’ forming part of corpus of the Trust, is capital receipt which

cannot be included in the income of the Trust’ whether the trust is

claiming exemption or not? The AO and the Ld.CIT(A) without

appreciating the relevant facts simply treated ‘corpus donations’ as

income of the Trust. In this regard, the counsel for the assessee has

relied upon the decision of ITAT, Mumbai benches in the case of

Chandraprabhu Jain Swetamber Mandir vs. ACIT (2016) 50 ITR (Trib) 355

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CIT (A) submitted that in order to consider any Trust or institution for the

benefit of exemption u/s.11 of the Act, irrespective of what is written in

the objects of the Trust, the activity carried out by the Trust or Institution

during relevant period has to be seen. In the present case, although the

assessee has composite objects, but if you go by the activities carried out

by the Trust for these assessment years, it is predominantly engaged in

the activity of a running of Kalyan Mandapam at Chennai & Coimbatore, in

commercial lines for fees or cess like any other private service provider

and thus, the activity of the Trust comes under the last limb of definition

of charitable purpose, the advancement of any other object of GPU.

Since, the assessee is a GPU Trust, the proviso to sec.2(15) of the Act,

comes into operation and as per said proviso, gross receipts from the

activity is exceeds the specified sum, the Trust or Institution cannot claim

the benefit of exemption u/s.11 of the Act. Since, the AO and the

Ld.CIT(A) brought out clear facts to the effect that gross receipts from the

activity of the assessee’s Trust exceeds the specified limits for all these

assessment years, the AO has rightly denied exemption u/s.11 of the Act,

and their orders should be upheld.

facts to the effect that the assessee’s Trust has violated provisions of

Sec.13(1)(c) of the Act, by allowing benefit to the Trustees and their

family members which is evident from facts gathered during the course of

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survey, where the assessee’s Trust has incurred the cost of printing

Sahuwala Pariwar Directory-2019 and also Diwali celebrations in a

Restaurant which clearly indicates violation of provisions of Sec.13(1)(c)

of the Act. Further, the AO has rightly treated and disallowed depreciation

claimed by the assessee on fixed assets, because, once the income of the

Trust has been computed under normal commercial principles, the

assessee cannot claim double deduction. Therefore, there is no error in

the findings of the AO in disallowing the depreciation on fixed assets.

Similarly, the AO has rightly treated ‘corpus donations’ as income of the

Trust, because, once the Trust loses the benefit of exemption u/s.11 of

the Act, the ‘corpus donations’ becomes income of the Trust in light of

provisions of Sec.2(24) of the Act, and thus, the AO and the Ld.CIT(A)

has rightly treated ‘corpus donations’ as income of the Trust, and their

orders should be upheld.

record and gone through orders of the authorities below. The AO rejected

exemption u/s.11 of the Act, for these assessment years on the ground

that the objects and activity of the assessee’s Trust comes under the last

limb of the definition of charitable purpose u/s.2(15) of the Act i.e. the

advancement of any other object of GPU and activities carried out by the

assessee for these assessment years, is in the nature of trade, commerce

and business and hit by proviso to s.2(15) of the Act. Since, the assessee

is a GPU Trust and hit by proviso to s.2(15) of the Act, and further, the

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gross-receipts from the activity is exceeded the prescribed limit, the

assessee is not entitled for exemption u/s.11 of the Act. The AO has

arrived at a conclusion on the basis of objects of the Trust as per their

deed of Trust dated 22.06.1972 and the activities carried out during these

assessment years. According to the AO, although the assessee’ Trust is

having composite object which may be falls under other limbs of the

definition of the charitable purpose, but the Trust has carried out only the

object of advancement of any other object of GPU which is evident from

the activities of the Trust for these assessment years. The Trust is only

running Kalyan Mandapam at Chennai & Coimbatore on commercial lines

by charging fees and cess. The AO took support from materials gathered

during the course of survey conducted u/s.133A of the Act, coupled with

statement recorded from trustees to arrive at a conclusion that except

carrying out the object of GPU, the assessee is not carrying out any

charitable objects as defined u/s.2(15) of the Act. The AO had also

discussed certain violations referred to u/s.13(1)(c) of the Act with regard

to payment made for certain expenses and opined that the income of the

Trust has been diverted for the benefit of trustees and their family

members in contravention of s.13(1)(c) of the Act.

the AO to reject exemption u/s.11 of the Act, in light of various

averments made by the Ld. Counsel for the assessee and we ourselves

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subscribe to the reasons given by the AO to deny the benefit of

exemption u/s.11 of the Act, for the simple reason that although, the

assessee is having composite objects which can be considered under

other limb of the definition of charitable purpose u/s.2(15) of the Act, but

the assessee has only carried out advancement of any other object of

GPU which is clearly evident from the activities carried out by the

assessee’s Trust for these assessment years. The facts brought on record

by the AO in light of survey conducted u/s.133A of the Act, clearly shows

that the assessee is running Kalyan Mandapam at Chennai & Coimbatore

in commercial lines for fees and cess like any other persons carrying out

business operations. Further, although the assessee claims to have spent

the income generated from GPU activity for education and relief of the

poor, but on perusal of financial statement filed by the assessee for these

assessment years, it is abundantly clear that except a minimum amount

of donations, the assessee has not spent any amount for charitable

purpose as per their objects specified in the deed of Trust. Therefore, we

are of the considered view that there is no merit in the arguments of the

assessee that the assessee’s Trust is a charitable Trust and carrying out

charitable activities as defined u/s.2(15) of the Act, and further, the

activities of the assessee’s Trust comes under the definition of ‘education’.

Further, the definition of “education” has been defined by the Hon’ble

Supreme Court in the case of CIT v. Lok Shikshana Trust reported in

[1970] 77 ITR 61 (Mys.) and as per the judgment of the Hon’ble Supreme

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Court, a systematic instruction, schooling or training given to the young in

preparation for the work of life and the process of training and developing

the knowledge, skill mind, and character of students by normal schooling.

In other words, ‘education’ means educational institutions imparting

education to students and award a formal degree, diploma etc., In the

present case, none of the objects specified in the Trust Deed and

activities carried out by the Trust, does come under the definition of

‘education’, and thus, there is no merit in the arguments of the assessee

that its objects and activities are come under the definition of ‘education’.

tax excess of income over expenditure under normal provisions of the Act

by denying exemption u/s.11 of the Act. Admittedly, the assessee is a

GPU Trust which is evident from the activities carried out during these

assessment years. In order to ascertain the nature of a Trust, it is not

necessary to consider only the objects specified in the deed of Trust, but

it is necessary to consider the activities carried out by the Trust. If you

consider the activities carried out by the Trust for these assessment

years, there is no dispute whatsoever with regard to the fact that the

assessee is only a GPU Trust and carried out the advancement of any

other object of GPU only. Since, the assessee’s Trust is a GPU Trust, the

taxability of income derived from property held under Trust has to be

examined in light of proviso to s.2(15) of the Act. The proviso to

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Sec.2(15) of the Act provides that the advancement of any other object of

GPU, shall not be a charitable purpose if it involves carrying of any

activity in the nature of trade, commerce, or business or any activity of

rendering of any services in relation to any trade, commerce or business

for a cess or fees or any other consideration irrespective of the nature of

use or application or retention of the income from such activity. The

proviso further provides that the first proviso shall not apply to the

aggregate value of the receipts from the activity referred to therein is

within the specified limit in the previous year. In the present case, there

is no dispute with regard to the fact that receipts from the marriage hall

related to activities of the assessee’s Trust are more than the specified

limit as per proviso to s.2(15) of the Act. Since, a gross receipt from the

activities of running marriage hall is in excess of prescribed limit, the AO

has rightly rejected exemption u/s.11 of the Act, and taxed excess of

income over expenditure under normal provisions of the Income Tax Act,

1961. This legal principle is supported by the decision of the Hon’ble

Supreme Court in the case of ACIT (Exemptions) v. Ahmadabad Urban

Development Authority (supra), where it has been clearly explained the

provisions of Sec.2(15) of the Act, and proviso provided thereto and held

that if the activity of the Trust is in the nature of GPU, then, carrying out

such activity for a fees or cess in line with trade and commerce, then,

such Trust cannot be considered as charitable trust for the purpose of

exemption u/s.11 of the Act. In the present case, the assessee is running

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a Kalyan Mandapam charging significant amount and thus, activities of

the assessee’s Trust is nothing but carrying out activities in the nature of

trade, commerce, business or service in relation to such activities.

Hence, we are of the considered view that the AO has rightly rejected

exemption u/s.11 of the Act, to the assessee’s Trust.

Sec.13(1)(c) of the Act. The AO has also considered violations of section

13(1)(c) to reject the exemption u/s.11 of the Act, on the ground that

there is a violation referred to u/s.13(1)(c) of the Act, and thus, the

assessee’s Trust is not entitled for exemption u/s.11 of the Act.

According to the AO, the assessee has allowed the funds for the benefit of

the trustees and their family members and for this purpose; the AO has

considered two solitary instances of expenses incurred by the assessee.

According to the AO, the assessee has paid a bill pertains to printing of

Sahuwala Pariwar Directory-2019 for exclusive benefit of trustees and

their family members, which amounts to allowing the benefit of trust

funds for the trustees and their family members in violation of provisions

of Sec.13(1)(c) of the Act. The AO had also considered a bill payment to

Ratna Café, a Restaurant, at Chennai, towards amounts spent for Diwali

get-together of the trustee’s families at Chennai. The Ld. Counsel for the

assessee has explained the purpose of spending amounts out of trust

funds. We find that payment for printing a diary of trustees and their

family members does not per se amounts to diversion of trust funds for

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the benefit of trustees, because, diary printing by the Trust may be useful

for the general public in many ways. Therefore, we cannot appreciate the

observations of the AO on this issue. Similarly, amounts spent for the

Diwali get-together of the trustees in the course of carrying on activities

of the Trust, cannot be considered as diversion of Trust funds for the

benefit of trustees, because, in many times, it is necessary to incur

certain expenses for day to day activities of the Trust, which may also

cover entertainment expenditure of the trustees. Therefore, we are of the

considered view that observations of the Assessing Officer with regard to

violations referred to under provisions of Sec.13(1)(c) of the Act, is

devoid of merits, and thus, rejected.

circumstances of the case and also by following the decision of the

Hon’ble Supreme Court in the case of ACIT vs. Ahmadabad Urban

Development Authorities (supra), we are of the considered view that the

objects and activities of the Trust are GPU in nature and thus, proviso to

Sec.2(15) of the Act is applicable for the assessee’s Trust. Since, the

assessee is a GPU Trust and gross receipts from said activities is in excess

of prescribed limit provided under proviso of Sec.2(15) of the Act, for

these assessment years, in our considered view, the AO has rightly

rejected exemption u/s.11 of the Act, for these assessment years. The

Ld.CIT(A) after considering relevant facts rightly upheld the reasons given

by the AO to reject exemption u/s.11 of the Act, and thus, we are inclined

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to uphold the findings of the Ld.CIT(A) and reject the ground taken by the

assessee for all assessment years.

14 to 2019-20 is additions towards depreciation on fixed assets. The AO

has disallowed depreciation on fixed assets on the ground that the cost of

assets purchased during the relevant previous year has already been

allowed as application of income u/s.11 of the Act, and thus, further

claiming depreciation on said assets amounts to double deduction.

Accordingly, the AO disallowed depreciation on fixed assets and added

back to the total income of the assessee.

record and gone through orders of the authorities below. Since, the

assessee’s Trust has been denied exemption u/s.11 of the Act, income of

the Trust needs to be computed under normal commercial accounting

principles and further, depreciation, if any, needs to be allowed as per the

provisions of the Act. Further, before amendment, depreciation is an

allowable deduction even if the cost of asset acquired during the relevant

previous year, has been allowed as application of income u/s.11 of the

Act. Therefore, we are of the considered view that the AO needs to verify

these facts and consider the issue of allowability of depreciation in

accordance with law.

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appeal of the assessee’s for AYs 2015-16, 2016-17 & 2019-20 is

assessment of ‘corpus donations’ as income of the assessee. The assessee

has claimed exemption for ‘corpus donations’ on the ground that the

assessee is eligible for exemption u/s.11 of the Act. The AO has made

addition towards ‘corpus donations’ as income of the assessee on the

ground that when sec.11 of the Act, is inoperative and exemption is

denied, ‘corpus donations’, and other capital receipts should be treated as

income of the assessee.

ITAT Mumbai in the case of Chandraprabhu Jain Swetamber Mandir v.

ACIT reported in [2016] 50 ITR (Trib.) 355 submitted that ‘corpus

donations’ received by any Trust is capital receipt which is outside the

scope of income and cannot be taxed, even if exemption u/s.11 of the

Act, is denied.

Chennai Benches in the case of Veeravel Trust in ITA No.2064/Chny/2019

submitted that sec.11 of the Act, is inoperative and exemption is denied,

then, ‘corpus donations’ received by any Trust falls within the ambit of

income of the Trust and includable in the total income of the Trust.

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record and gone through orders of the authorities below. We find that an

identical issue has been considered by the decision of co-ordinate Bench

in the case of Veeravel Trust(supra) wherein, the issue has been

considered in light of provisions of Sec.11, 12 & 12A of the Act, and after

considering relevant facts and also by following the decision of the

Hon’ble Supreme Court in the case of M/s. U.P. Forest Corporation & Anr.

v. DCIT in Civil Appeal No.9432 of 2003 dated 27.11.2007 held that

voluntary contribution received by a Trust with a specific direction that

forming part of corpus of the Trust is income of the trust, when the Trust

is not entitled for exemption u/s.11 of the Act. The relevant findings of

the Tribunal are as under:

ITA Nos.53 to 61/Chny/2023 Ramshaimal Sahuwala & Sons Charitable Trust :: 22 ::

the Act. In this case, trust is not registered u/s.12A / 12AA of the Income Tax Act, 1961. Therefore, we are of the considered view that corpus donations received by the trust with a specific direction that they form part of corpus of the trust falls within ambit of income of a trust derived from property held under trust and hence, includable in total income of the trust. 10. Insofar as various case laws relied upon by the assessee, we find that although the assessee has relied upon four case laws of various benches of this Tribunal, we find that none of the Tribunal has considered the ratio laid down by the Hon'ble Supreme Court in the case of M/s. U.P.Forest Corporation & Another vs. DCIT(supra), while deciding the issue and hence, we are of the considered view that those case laws are not applicable to the facts of the present case. 11. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that voluntary contribution received by the trust with a specific direction that they form part of corpus of the trust is income of the trust within the meaning of section 11 & 12 of the Income Tax Act, 1961. Therefore, we are of the considered view that there is no error in the findings recorded by the learned CIT(A) to confirm additions made by the Assessing Officer towards disallowance of corpus donations. Hence, we are inclined to uphold findings of the learned CIT(A) and dismiss appeal filed by the assessee.

Chennai benches in the case of Veeravel Trust, we are of the considered

view that ‘corpus donations’ received by the assessee’s Trust would fall

under the definition of income and includable in the total income of the

Trust. In so far as case relied upon by the counsel for the assessee,

although ITAT Mumbai has taken view and held that corpus donation is

capital receipt and not taxable, but fact remains that the ITAT Chennai

Bench after considering ITAT Mumbai bench decision has taken a view

and held that corpus donation is income when section 11 benefit is not

applicable, we prefer to follow jurisdictional ITAT decision and thus, we

are inclined to uphold the findings of the AO and the Ld.CIT(A) and reject

the ground taken by the assessee for these assessment years.

appeal of the assessee’s for AYs 2017-18 & 2019-20 is additions towards

ITA Nos.53 to 61/Chny/2023 Ramshaimal Sahuwala & Sons Charitable Trust :: 23 ::

donations paid. The assessee has claimed exemption towards donations

paid to other Trust as application of income u/s.11 of the Act. Since, the

AO has denied exemption u/s.11 of the Act, and taxed excess of income

over expenditure, he has disallowed donation paid for charitable purpose

on the ground that said expenditure has not been incurred for earning

income.

record and gone through orders of the authorities below. Since, the AO

has denied exemption u/s.11 of the Act, and computed income as per

provisions of Sec.2(15) of the Act, and proviso provided therein, in

commercial lines after denying exemption, any expenditure incurred

towards earning of income including donations, if any, paid in the course

of carrying on activities needs, to be allowed as deduction. Since, the

assessee has incurred expenditure in the course of carrying out its trade

or commerce, the AO is directed to delete additions made towards

disallowance of donations for both assessment years.

appeal of the assessee’s for AYs 2016-17 & 2017-18 is additions towards

accumulation of income u/s.11(2) of the Act, for earlier assessment

years. The AO has made addition of Rs.1,32,53,185/- towards

accumulations of income for AY 2015-16 u/s.11(2) of the Act. Similarly,

ITA Nos.53 to 61/Chny/2023 Ramshaimal Sahuwala & Sons Charitable Trust :: 24 ::

the AO has made additions of Rs.2,15,92,541/- towards accumulation of

income for AY 2016-17 u/s.11(2) of the Act. Since, the AO has rejected

exemption u/s.11 of the Act and taxed excess of income over expenditure

as per income and expenditure account for relevant assessment year, in

our considered view, accumulation of income u/s.11(2) of the Act, by

filing form No.10 and set off of said income to subsequent years to be

applied for charitable purpose becomes academic in nature. Therefore,

we direct the AO to delete separate additions made towards accumulation

of income for AYs 2015-16 to 2016-17& 2017-18.

appeal of the assessee’s for AYs 2013-14 to 2017-18 & 2019-20 is validity

of re-opening of assessment. The Ld.Counsel for the assessee at the time

of hearing submitted that the assessee does not want to press grounds

taken for challenging validity of re-opening of assessment, and thus,

grounds of appeal taken by the assessee for these assessment years

challenging validity of re-opening of assessment proceedings, is

dismissed as withdrawn.

appeal of the assessee’s for AYs 2016-17 & 2017-18 is additions towards

disallowance of expenses incurred for maintaining Kulod Bhawan. During

the course of survey, it was found that the Bhawan at Kulod was given at

ITA Nos.53 to 61/Chny/2023 Ramshaimal Sahuwala & Sons Charitable Trust :: 25 ::

free of cost to Sahuwala family members. Further, assessee’s Trust has

spent amounts towards maintaining Kulod Bhawan out of income of the

Trust. The AO made additions towards expenses incurred for maintaining

Kulod Bhawan for both assessment years on the ground that said

expenditure has not been incurred in connection with earning of income.

record and gone through orders of the authorities below. The assessee’s

Trust has been denied the benefit of exemption u/s.11 of the Act, in

accordance with provisions of Sec.2(15) of the Act, and proviso provided

therein and income of the assessee has been computed under normal

provisions of the Act. In addition to taxation of excess of income over

expenditure, the AO has disallowed expenses incurred for maintaining

Kulod Bhawan on the ground that said expenditure is in the nature of

personal expenses. Since, the assessee’s Trust is maintaining Kulod

Bhawan exclusively for the benefit of Sahuwala family members, said

expenditure cannot be considered as expenditure incurred wholly and

exclusively for the purpose of earning of income and further said

expenditure is in the nature of personal expenses. Therefore, we are of

the considered view that there is no error in the reasons given by the AO

and the Ld.CIT(A) to disallow expenses incurred for maintaining Kulod

Bhawan for both assessment years and thus, we are inclined to uphold

ITA Nos.53 to 61/Chny/2023 Ramshaimal Sahuwala & Sons Charitable Trust :: 26 :: the findings of the Ld.CIT(A) and reject the ground taken by the assessee.

Order pronounced on the 18th day of October, 2023, in Chennai.

Sd/- Sd/- (महावीर िसंह) (मंजूनाथा.जी) (MANJUNATHA.G) (MAHAVIR SINGH) लेखा सद)/ACCOUNTANT MEMBER उपा��/VICE PRESIDENT चे%ई/Chennai, िदनांक/Dated: 18th October, 2023. TLN आदेश की �ितिलिप अ*ेिषत/Copy to: 1. अपीलाथ�/Appellant 3. आयकरआयु+/CIT 5. गाड� फाईल/GF 2. ��थ�/Respondent 4. िवभागीय�ितिनिध/DR