DR ARDESHIR JEHANGIRSHAW KOHIYAR MEMORIAL TRUST,MUMBAI vs. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI

The appellant-assessee is a Trust. The appellant had filed its Return of Income (RoI) for A.Y.2017-18 on 06/09/2017 declaring total income of Rs.2,33,020/-. The case was selected for scru ny. During the assessment proceedings, the Assessing Officer vide no ce dated 09/10/2019 issued u/s.142(1) of the Act had called upon the appellant

The ld. CIT(A) has confirmed the same vide his order dated 13/08/2024 which is subject maCer of challenge in this appeal.

We have heard Shri P J Pardiwala, ld. Senior Counsel for the appellant and Shri Suresh Periasamy, ld. DR for the respondent. With the assistance of the par es, we have gone through the record.

It is submiCed by Shri P J Pardiwala, ld. Senior Counsel for the appellant that the fact that the amount was part of the endowment in favour of the Trust would itself indicate that it was intended to be of a capital nature as it was by way of a benefit of enduring nature. It is submiCed that ‘corpus’ is not defined in the Act and therefore, the nature of any such endowment in favour of a Trust has to be considered based on the inten on of the par es. The ld. Senior Counsel has referred to the defini on of the word “endowment” in various dic onaries including Cambridge Dic onary, Oxford Dic onary, Collins Dic onary, BriCanica Encyclopaedia and Merriam Webster in order to submit that an endowment would be a dona on to an ins tu on or an organisa on in order to provide it with an income. Reliance on behalf of the appellant is placed on the decision of the Hon’ble Karnataka High Court in the case of DIT vs. Shri Ramakrishna Seva Ashram (2013) 357 ITR 731 (Kar) and that of Hon’ble Rajasthan High Court in the case of Sukhdeo Charity Estate vs. Commissioner of Income Tax (1984) ITR 470 (Raj). It is submiCed that the relevant test is (i) the inten on of the donor and (ii) how the 3 & SA No.105/Mum/2024 Dr. Ardeshir Jehangishaw Kohiyar Memorial Trust recipient-assessee treats the said income. The ld. Senior Counsel has pointed out that all along, the endowment has been treated as a capital receipt by the Trust. He therefore, submiCed that the disallowance deserves to be deleted.

The ld. DR has submiCed that the Will dated 01/10/2010 does not indicate any specific inten on by the testator, late Dr. (Ms.) Gool Ardeshir Kohiyar as to the treatment of the dona on. He therefore, submiCed that the dona on has rightly been treated as income and not a capital receipt.

We have carefully considered the rival circumstances and submissions made. Paragraph 7 of the Will dated 01/10/2010 which is relevant for the purpose reads thus: -

It can thus be seen that Dr. (Ms.) Gool Ardeshir Kohiyar has endowed 40% of the remainder of her investments in favour of the appellant-Trust. The gist of the various defini ons as referred to on behalf of the appellant would indicate that:

The word ‘corpus’ is not defined in the Act. The ques on whether a par cular giD or dona on can be treated as a corpus dona on (therefore a capital receipt) or as income fell for the considera on of the Hon’ble Karnataka High Court in the case of Shri Ramakrishna Seva Ashram (supra). The Hon’ble Karnataka High Court referring to the decision of the Hon’ble Bombay High Court in the case of Kilachand Devchand Founda on vs. CIT (1988) 172 ITR 382 and that of the Hon’ble Rajasthan High Court in the case of Sukhdeo Charity Estate vs. ITO (1991) 192 ITR 615 (Raj) has interalia held that the nature of any such dona ons as giD has to be decided on the test of (i) the inten on of the donor and (ii) how the recipient-assessee has treated the said dona ons / income. This is what is held in the case of Shri Ramakrishna Seva Ashram (supra):-

In the Law Lexicon of P. Ramanatha Aiyar, 2nd Edi4on reprint-208 the meaning of the word 'Corpus' is given as under:

The word 'Corpus' is used in the context of Income Tax Act. We have to understand the same in the context of a capital, opposed to an expenditure. It is a capital of an assessee; a capital of an estate; capital of a trust; a capital of an ins4tu4on. Therefore, if any voluntary contribu4on is made with a specific direc4on, then it shall be treated as the capital of the trust for carrying on its charitable or religious ac4vi4es. Then such an income falls under Sec4on 11(d) of the I.T. Act and is not liable to tax. Therefore, it is not necessary that a voluntary contribu4on should be made with a specific direc4on to treat it as 'corpus', If the inten4on of the donor is to give that money to a trust which they will keep it in trust account in deposit and the income from the same is u4lised for carrying on a par4cular ac4vity, it sa4sfies the defini4on part, of the corpus. The assessee would be en4tled to the benefit of exemp4ons from payment of tax levied.”

A Co-ordinate Bench of this Tribunal in Dorabji Tata Trust, Mumbai vs Deputy Commissioner of Income Tax Exemp on Circle 2(1), Mumbai in ITA No.3909 of 2019 decided on 28/12/2020 (A.Y.2014-15) aDer referring to the decision in the case of Ramakrishna Seva Ashram (supra) had held thus in paragraph 41 (on pg.57) of the judgment.

It can thus clearly be seen that the issue essen ally turns upon the inten on of the par es which can either be explicit or can be gathered as a necessary implica on from the conduct of the par es and aCending circumstances. Coming to the present case the Will does make a reference to the bequest being an endowment. The record discloses that the appellant has treated the same as a corpus dona on. In that view of the maCer, following the decision of the Hon’ble Karnataka High Court in the case of Ramakrishna Seva Ashram(supra) we find that the endowment deserves to be accepted as a corpus dona on eligible for exemp on u/s.11(1)(d) of the Act.

Before par ng with the final order, it may not be out of place to note that there is no appropriate considera on of the rival circumstances in the order of the ld. CIT(A). The material reasoning can be found on page 8 of the order of the ld.CIT(A) as under:-

We are unable to approve the reasoning as ar culated. In the result, the appeal is allowed. The Assessing Officer is directed to delete the impugned addi on made.

This is an applica on for stay. The appeal itself has been disposed of as allowed. Hence, nothing survives in the applica on. The applica on is accordingly, disposed of as infructuous.

The Appellant 2. The Respondent 3. The CIT(Judicial) 4. PCIT 5. DR, ITAT, Mumbai 6. Guard File.