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Facts
The appellant-trust received an endowment of Rs. 4,30,54,711/- from a Will dated 01/10/2010. The Assessing Officer treated this endowment as a capital receipt and made a disallowance. The CIT(A) confirmed this order.
Held
The Tribunal held that the intention of the donor, as evidenced by the Will and the conduct of the assessee in treating it as a corpus donation, indicates that the endowment is of a capital nature. Therefore, it is eligible for exemption under Section 11(1)(d) of the Income Tax Act.
Key Issues
Whether the endowment received by the trust from a Will is a corpus donation eligible for exemption under Section 11(1)(d) of the Income Tax Act, 1961.
Sections Cited
11(1)(d), 142(1)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: JUSTICE (RETD.) C.V. BHADANG & SHRI B R BASKARAN
PER JUSTICE (RETD.) C.V. BHADANG, PRESIDENT :
Whether the endowment of Rs.4,30,54,711/- made in favour of the appellant- trust by a Will dated 01/10/2010 of late Dr.(Ms.) Gool Ardeshir Kohiyar can be considered as a ‘corpus dona�on’ eligible for exemp�on u/s.11(1)(d) of the Income Tax Act, 1961 (‘Act’ for short) is the ques�on which falls for determina�on in this appeal.
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 SA No.105/Mum/2024 Dr. Ardeshir Jehangishaw Kohiyar Memorial Trust interalia to furnish a copy of the Will of Dr.(Ms.) Gool Ardeshir Kohiyar dated 01/10/2010. The appellant vide le�er dated 09/12/2019 furnished the copy of the Will by virtue of which the amount of Rs.4,30,54,711/- was gi�ed in favour of the appellant- Trust. The Assessing Officer however, came to the conclusion that the said endowment, cannot be treated as a capital receipt and by an order dated 13/12/2009 made a disallowance of the aforesaid amount.
The ld. CIT(A) has confirmed the same vide his order dated 13/08/2024 which is subject ma�er 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 submi�ed 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 submi�ed 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, Bri�anica 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 submi�ed that the relevant test is (i) the inten�on of the donor and (ii) how the 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, submi�ed that the disallowance deserves to be deleted.
The ld. DR has submi�ed 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, submi�ed 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: -
“7. The rest of my investments (other than the sale proceeds of my flat in Rick- Ashe and the capital of Rs.2,60,00,000/- (Rupees two crore sixty lakh only) currently invested in mutual funds, bonds, fixed deposits, other securi�es arid savings bank accounts shall be dealt with as follows a�er payment thereout of all expenses for my funeral and obsequial ceremonies and all taxes, du�es, charges and debts, if any, pertaining to my estate:-
(a) Rs. 15,00,000/- (Rupees fi�een lakh only) to Mr. Kaikaus Behram Mistry and if he has predeceased me then to his wife and children in equal shares, absolutely. (b) The remainder of the said investments shall be dealt with as follows:- (a) 60% shall be added to the bequest in favour of the Masina Hospital specified in sub-clause (a) of clause 6 above; and (b) 40% shall be endowed to Dr. A.J. Kohiyar Memorial Trust.”
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:
• An endowment is a dona�on of money or property to a not for profit organiza�on, which is to be invested and which uses the resul�ng investment income for a specific purpose.
SA No.105/Mum/2024 Dr. Ardeshir Jehangishaw Kohiyar Memorial Trust • An endowment can also refer to the total of a non-profit ins�tu�on's investable assets, also known as principal or corpus, which is meant to be used for opera�ons or programs that are consistent with the wishes of the donor • In other words, an endowment is nothing but a dona�on of a capital nature, where the fund and proper�es received are to be invested or put to use in a manner to provide an enduring benefit such as a stream of income to support the receiving en�ty's objects and programs. • The endowment is to be treated as a corpus fund, the property and funds received to be invested, and the income received applied to the objects of the en�ty.
The word ‘corpus’ is not defined in the Act. The ques�on whether a par�cular gi� 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 gi� 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):-
“11. The word 'corpus' is not defined under the Act. We do not find any judgment explaining the meaning of 'corpus'. In the Chambers 21st Century Dic�onary, the meaning of the word 'corpus' has been given as under:
(i) body of wri�ngs, eg: by a par�cular author, on a par�cular topic, etc.; (ii) a body of wri�en and/or spoken material for language research; (iii) anatomy any dis�nct mass of body �ssue that may be dis�nguished from its surroundings.
La�n: meaning 'body'.
In the Law Lexicon of P. Ramanatha Aiyar, 2nd Edi�on reprint-208 the meaning of the word 'Corpus' is given as under:
"A Body; human body; an ar�ficial body created by law; as a corpora�on; a body or collec�on of laws; a material substance; something visible and tangible; as the subject of a right; something having legal posi�on as dis�nguished from an incorporeal physical substance as dis�nguished from intellectual concep�on; the body of estate; or a capital of on estate".
13. 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 ins�tu�on. Therefore, if any voluntary contribu�on is made with a specific direc�on, then it shall be treated as the capital of the trust for carrying on its charitable or religious ac�vi�es. Then such an income falls under Sec�on 11(d) of the I.T. Act and is not liable to tax. Therefore, it is not necessary that a voluntary contribu�on should be made with a specific direc�on to treat it as 'corpus', If the inten�on 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 u�lised for carrying on a par�cular ac�vity, it sa�sfies the defini�on part, of the corpus. The assessee would be en�tled to the benefit of exemp�ons 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 of 2019 decided on 28/12/2020 (A.Y.2014-15) a�er referring to the decision in the case of Ramakrishna Seva Ashram (supra) had held thus in paragraph 41 (on pg.57) of the judgment.
“41. What essen�ally follows is that it's not the declara�on of an investment being a corpus investment but the fact of its being treated as capital and rather than using the investment for the purposes of the trust, using the income from investment for the purposes of the trust, which is determina�ve of its being in the nature of corpus investment. How the trust is trea�ng the investment, i.e., in the capital field or not, is thus truly determina�ve of the investment being part of the corpus. Viewed thus, the mere fact of these investments being held as capital for at least more than four decades- as conclusively established by the material before the Assessing Officer, and only income from these investments being applied for the purposes of the trust, clearly establishes the fact of these investments being part of the corpus of the trust.”
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 a�ending 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 ma�er, 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.
12. 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:-
“Endowment means property or pecuniary means bestowed as a permanent fund, as endowment of a college, hospital or library, and is understood in common acceptance as a fund yielding income for support of an ins�tu�on It is also se�led, once an endowment, it never reverts even to the donor But in the instant case, as per will dated 01.10.2010 the donor has given the amount to the trust but he has not men�oned any specific direc�ons or terms and condi�ons. In this regard, appellant has not furnished any submission during appellant proceedings. Further, case laws relied by the appellant is not substan�ate the facts and circumstances of the appellant case. Thus, as per the documents submi�ed by the appellant it is not substan�ate that this transac�ons (Endowed) is nothing but dona�on. Hence, ac�on taken by the AO on this issue is hereby upheld and accordingly grounds of appeal no. 1,2 & 3 raised by the appellant is hereby dismissed.”
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.
Order pronounced in the open court on 7/02/2025.