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Income Tax Appellate Tribunal, COCHIN “SMC” BENCH, COCHIN
Before: Shri Chandra Poojari
This appeal at the instance of the assessee is directed against the order of the CIT(A), dated 02.08.2010. The relevant assessment year is 2006-2007.
The assessee has raised the following grounds:-
The order of the Commissioner of Income Tax (Appeals), Trivandrum dated 02/08/2019 in ITA No.611KLM/CIT(A)/TVM/2008-09 for the income tax assessment year 2006-07, in the case of your appellant, illegal and not based on the facts of the case. 2. The learned Commissioner of Income Tax (Appeals), Trivandrum has held that corpus donation of Rs. 3,14,222/- received by your appellant from Adoration Congregation, Changanacherry for addition to building, purchase of land, Land Development and other assets is not corpus donation and it is taxable. The finding of Commissioner of Income Tax (Appeals) that donor did not specify that the said amount was a corpus donation at the time of payment is not correct. Letter from Provincial
ITA No.562/Coch/2019 2 M/s.Adoration Convent (Holy Family) Superior, Adoration Congregation, Changanachei to the Commissioner of Income tax (Appeals), Trivandrum dated 09/03/2011 specified that it is a corpus donation for acquisition of assets. Your appellant has utilized Rs. 2,55,046/- for purchase of land, addition to building and acquisition of other assets. Utilization itself proved that it is a corpus donation received by your appellant.
Out of corpus donation Rs. 3,14,222/- your appellant has applied for the acquisition of assets as under:
Addition to Building Rs. 70,583 2. Purchase of land Rs.1,16,022 3. Land Development Rs. 19,911 4. Purchase of Machineries Rs. 5,904 5. Purchase of Furniture Rs. 42,626 ------------------ Total Rs.2,55,046 ==========
Corpus donation is not taxable even the institution is not registered u/s 12AA of the Income Tax Act, 1961. This finds support from the decisions.
(i) Income Tax Officer (Exemptions) Vs. Serum Institute of India Research Foundation [2018] 90 taxmann.com 229/169 ITD 271 (Pune) (Trib).
(ii) Income Tax Officer Vs. Gaudiya Granth Anuved Trust [2013] 28 ITR (Trib) 161 (Agra).
(iii) J.B. Educational Society Vs. Asst. Commissioner of Income Tax (2013) 28 ITR (Trib) 284 (Hyderabad).
The learned Commissioner of Income Tax (Appeals), Trivandrum has not considered letter dated 23/06/2015 by your appellant to Commissioner of Income Tax (Appeals), Trivandrum. Also Commissioner of Income Tax (Appeals), Trivandrum has not considered your appellant's
ITA No.562/Coch/2019 3 M/s.Adoration Convent (Holy Family) argument notes dated 17/07/2019.
On these grounds and any other grounds urged at the time of hearing, it is prayed that the Hon 'ble Income Tax Appellate Tribunal, Cochin Bench, Cochin may kind enough to direct the Commissioner of Income Tax (Appeals), Trivandrum to order that
(i) Rs. 3,14,222/- received by your appellant from Adoration Congregation, Changanacherry is corpus donation.
and
(ii) To accept the returned income for the income tax assessment year 2006-07.”
Facts of the case in brief are that the assessee is not registered u/s 12AA of the I.T.Act as on date. The learned AR stated before us that the assessee has applied for registration u/s 12AA of the Act, which was rejected by the CIT. In support of his contention, an argument note was filed before us, which reads as under :-
(1) Adoration convent (holy Family), Alayamon, Anchal, Kollam is an assessee to income tax in the file of Income Tax Officer, Ward-I, Kollam in the file No. AABTA 0100 E. Your appellant has filed return of income for the assessment year 2006-2007 @ Rs. NIL as per acknowledgement No. 5811005600 on 29/03/2007. Your appellant is a religious institution i.e one of the convent of adoration congregation. Total income as per the income and expenditure account was Rs.4,82,591/-out of which Rs. 3,14,222/- was corpus contribution from Adoration Congregation (St. Thomas Province), Changanacherry for purchase of fixed assets. (2) Total application in capital assets was Rs. 2,55,046/-. Total application towards other religious charitable purpose was Rs.2,25,841/-. Total application
ITA No.562/Coch/2019 4 M/s.Adoration Convent (Holy Family) was Rs. 4,80,887/-. Your appellant has set apart Rs.11,228/- U/S 11(i)(a) of the income tax Act, 1961. (3) As per the income and expenditure filed before the assessing officer excess of income over expenditure is Rs.1,49,502/-. This is because of corpus contribution from province Rs.3,14,222/- in credited in the income and expenditure account instead of capital fund account. (4) If the corpus contribution Rs.3,14,222/- is credited in capital fund account the net result is in excess of expenditure over income Rs.1,64,7201-. In fact, there was no taxable income to be assessed in the case of the institution. (5) The Commissioner of Income Tax, Trivandrum has rejected the application for registration vide is order C.No.301lADIT(E)/5/QLN/06-07 dated 12110/2006 only because of mandatory clauses are not included in the constitution of Adoration Congregation (St. Thomas Province). Your appellant went up before the Hon'ble Income Tax Appellate Tribunal, Cochin Bench against the order of the Commissioner of Income Tax, Trivandrum in appeal. The Hon'ble Income tax Appellate Tribunal, Cochin Bench vide its order dated ITA No. 733/coch/2006 has directed the Commissioner of Income Tax to make and speaking order after giving effective opportunity of caring appellant. But, the Commissioner of Income Tax, Trivandrum not given a speaking order based order of the Income Tax Appellate Tribunal, Cochin Bench till date. (6) In the mean time, the assessing officer has issued notice u/s 148 of the Income Tax Act, 1961 to re-opened the assessment. Your appellant replied that the income tax return filed on 29/03/2007 may be treated as the return filed in response to the notice u/s 148 of the Income tax Act, 1961. (7) The Assessing Officer determined income at Rs.1,49,500/- and demanded tax payable Rs. 63,299/- as her order u/s 143(3) R.W. 147 of the Income Tax Act, 1961 dated 08/0812008 for the assessment year 2006-07 (8) Your appellant had filed appeal against assessment order u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 for
ITA No.562/Coch/2019 5 M/s.Adoration Convent (Holy Family) the income tax assessment year 2006-07 before the Commissioner of Income Tax (Appeals), Trivandrum on 06/10/2008. (9) Commissioner of Income Tax (Appeals), Trivandrum has dismissed the appeal filed by your appellant in ITA No.61/CIT(A)/TVM/2008-09 on 02/08/2019. (10) This appeal is filed against the order of Commissioner of Income Tax (Appeals) Trivandrum in ITA No.61/CIT(A)/TVM/2008-09 dated 02/08/2019.”
On the other hand, the learned Departmental Representative submitted that the letter relied on by the assessee is dated 09.03.2011 in which the relevant financial year in which this amount was received is 2005-06. Therefore, the donor did not specify that the said amount was a corpus donation at the time of payment. Therefore, the learned DR submitted that the amount of Rs.3,14,222 cannot be treated as corpus donation for the assessment year 2006-2007.
I have heard the rival submissions and perused the material on record. Admittedly in this case, the assessee is not registered u/s 12AA of the Act as on date. As per the argument of the learned AR, the assessee’s application for approval u/s 12AA of the Act was rejected by the CIT (Exemption). On appeal before the Tribunal it was remitted back to the CIT (Exemption) for reconsideration, which is pending as on date before him. The learned AR made a plea before us that even the assessee was not registered u/s 12AA of the Act, the donation received towards corpus specific voluntary contributions being in nature of `capital receipt’ are outside the scope of income u/s 2(24)(iia) of the Act and the
ITA No.562/Coch/2019 6 M/s.Adoration Convent (Holy Family) same cannot be brought to tax. This view is fortified by the order of the Tribunal in the case of ITO (Exemption) Ward-2, Pune v. Serum Institute of India Research Foundation [(2018) 169 ITD 271 (Pune –Trib.)], wherein it has been held that in various cases decided earlier that the corpus donation received by the trust, which is not registered under section 12A / 12AA, is not taxable as it assumes the nature of `capital receipt’ the moment the donation is given to the “Corpus of the Trust”. The CIT(A) in this case was of the view that since the letter issued by the donor was dated 09.03.2011 and it was not received in the relevant financial year 2005-2006 and also the donor did not specified that the said amount was given towards corpus donation at the time of payment. Hence, he denied exemption of corpus fund from levying of tax. I have gone through the letter issued by the donor with regard to this donation given to the assessee, which reads as below:-
“From The Provincial Superior Adoration Congregation (St.Thomas Province) Rita Bhavan Koothrappally Changanacherry.
To Commissioner of Income Tax (Appeals)-I Office of the Commissioner of Income tax (A) Aayakar Bhava, Kawdiar Trivandrum – 695 003.
Respected Sir,
ITA No.562/Coch/2019 7 M/s.Adoration Convent (Holy Family) Sub : Appeal No.ITA No.61/KLM/08-09 in the case of Adoration Convent (Holy Family) Alayamon, Anchal, Kollam District, PIN – 691 306. Reg.
Ref : Notice dated 18/01/2011
We have given corpus donation of Rs.3,14,222/- to Adoration Convent (Holy Family), Alayamon, Anchal, Kollam District, Pin 691 306 during the financial year 2005-06 relevant to the income tax assessment year 2006-07 mainly for purchase of land, land developments and purchase of other assets.
Thanking you,
Yours faithfully,
Sd/- Provincial Superior Adoration Congregation
Changanacherry, dated 09/03/2011.”
5.1 On going through the above letter addressed to the CIT(A)-I, I observe that the donor specified that he has given the sum of Rs.3,14,222 to the assessee during the financial year 2005-2006 relevant to the assessment year 2006-2007 for purchase of land, land development and purchase of other assets. If the CIT(A) has any doubt regarding the genuineness of this letter, he ought to have examined the same with the donor by summoning the parties. However, he failed to do so. In my opinion, it is appropriate to remit the issue to the file of the Assessing Officer to examine the issue afresh by verifying with the donor the purpose for which the amount has been given. If it is given towards specific corpus fund and the same cannot be treated as income in the hands of the assessee.
ITA No.562/Coch/2019 8 M/s.Adoration Convent (Holy Family) With these observations, I remit the issue to the A.O. for fresh consideration. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced on this 20th day of December, 2019.
Sd/- (Chandra Poojari) ACCOUNTANT MEMBER
Cochin ; Dated : 20th December, 2019. Devadas G*
Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), Thiruvananthapuram. 4. The Pr.CIT, Thiruvananthapuram. 5. The DR, ITAT, Cochin 6. Guard file. BY ORDER,
(Asstt. Registrar) ITAT, Cochin