VEERAVEL TRUST,,TIRUCHENGODE vs. ITO, EXEMPTION WARD, , SALEM

आदेश / O R D E R

PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against

order of the learned CIT(A), Salem dated 12.03.2019 and

pertains to assessment year 2014-15.

2 ITA No.2064/Chny/2019 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the total receipts of Rs.55,82,6001- as ‘Building Fund’ was received for a specific purpose being construction of community building. 3. For that the Commissioner of Income Tax (Appeals) failed to appreciate that funds received for construction of community building is a capital receipt and hence cannot be treated as income of the appellant. 4. For that the appellant objects to the levy of interest u/s.234A, 234B and 234C.”

that appeal filed by the assessee is time barred by 37 days for

which necessary petition for condonation of delay along with

affidavit explaining the reasons for the delay has been filed.

The AR further submitted that the assessee could not file

appeal within the time allowed under the Act, due to the fact that there was change in counsel for the assessee. Hence, the

delay in filing appeal is neither intentional nor willful, but for

unavoidable reasons, therefore, delay may be condoned in the

interest of advancement of substantial justice.

condonation of delay petition filed by the assessee submitted

3 ITA No.2064/Chny/2019 that the reasons given by the assessee do not come within the

ambit of reasonable and bonafide reasons, which can be

considered for condonation of delay and hence, appeal filed

by the assessee may be dismissed as not maintainable.

by the assessee for condonation of delay, we are of the

considered view that reasons given by the assessee for not

filing the appeal within the time allowed under the Act comes

under reasonable cause as provided under the Act for

condonation of delay and hence, delay in filing of appeal is

condoned and admitted for adjudication.

charitable and religious trust registered under the Indian Trust

Act, 1882, has filed its return of income for assessment year

2014-15 declaring total income of Rs. Nil. The return of

income filed by the assessee has been processed u/s.143(1)

of the Income Tax Act, 1961, by CPC, Bengaluru and

determined total income of Rs.55,82,600/- by making additions

towards disallowance of donations received amounting to

4 ITA No.2064/Chny/2019 Rs.55,82,600/-. The assessee has filed appeal against

intimation issued u/s.143(1) of the Act, before the first appellate

authority and contended that while processing return u/s.143(1)

of the Act, only prima-facie adjustments can be made, however,

no addition can be made for disallowance of corpus donations.

The assessee further contended that corpus donations

received by any trust or institution is excluded from the income

derived from property held under the trust u/s. 11(1)(d) of the

Act and hence, even though trust is not registered u/s.12AA of

the Act, corpus donations cannot be included in the income of

the trust. The learned CIT(A), for the reasons stated in his

appellate order dated 12.03.2019 rejected contention of the

assessee and held that conditions precedent for claiming

exemption u/s.11 of the Act is registration of trust u/s.12A of

the Act and hence, in the absence of registration of trust

u/s.12A, exemption claimed towards corpus donations cannot

be allowed . Therefore, he opined that there is no error in

adjustments made towards corpus donations while processing

return u/s.143(1) of the Act. The learned CIT(A) has taken

support from the decision of Hon'ble Supreme Court in the

case of M/s. U.P.Forest Corporation & Another vs. DCIT in Civil

5 ITA No.2064/Chny/2019 appeal No.9432 of 2003 dated 27.11.2007. Aggrieved by the

learned CIT(A) order, the assessee is in appeal before us.

learned CIT(A) has erred in confirming additions made towards

disallowance of corpus donations, without appreciating fact that

donations have been received for specific purpose and such

donations have been utilized for the purpose it was received .

He further referring to certain judicial precedents, including the

decision of ITAT., Mumbai in the case of Chandraprabhu Jain

Swetamber Mandir Vs. ACIT (2016) 50 ITR (Trib) 0355(Mum),

submitted that corpus donations received by the trust which

was not registered u/s.12A are not taxable, because they

assume nature of capital receipt and hence, it is outside scope

of income. The AR for the assessee referring to financial

statement of the assessee submitted that the assessee has

received donations to the specific purpose of construction of

building and said donation has been used for construction of

building, therefore, same is outside the scope of income of the

trust. The AR further relied on the following decisions:-

6 ITA No.2064/Chny/2019 C/o. Anoopchandji Karnava Vs. ACIT (2017) 4 TMI-765 (Mum)

order of the learned CIT(A), submitted that conditions precedent

for claiming exemption u/s.11 is registration of trust u/s.12AA of

the Act, and hence, in absence of registration of trust u/s.

12AA of the Act, no exemption could be given to corpus

donations.

available on record and gone through orders of the authorities

below. The definition of income as defined u/s.2 of sub-section (24) includes voluntary contribution received by any trust

created wholly or partly for charitable or religious purpose.

This means, for any assessee, including trust or institution

voluntary contribution is income. The provisions of section 11,

12A & 12AA, deals with taxation of trust or institution. The

7 ITA No.2064/Chny/2019 income of any trust or institution is exempt from tax with

certain conditions. The provisions of section 11(1)(d) of the Act

excludes voluntary contributions received by trust, with a

specific direction that they shall form part of corpus of trust or

institution. Similarly, provisions of section 12 also states that

any voluntary contribution received by a trust or institution,

excluding contributions with a specific direction shall for the

purpose of section 11 be deemed to be income derived from

property held under trust. Further, provisions of section 12A

states that provisions of section 11 & 12 shall not apply in

relation to income of any trust or institution, unless such trust or

institution fulfill certain conditions. As per said section one of

the conditions for claiming benefit of exemption u/s. 11 & 12 of

the Act is registration of trust under sub-section (aa) of the Act .

From conjoint reading of the above provisions, it is very clear

that income of any trust including voluntary contributions

received with a specific direction is not includable in the total

income of the trust, if such trust is registered u/s.12A / 12AA of

the Income Tax Act, 1961. In other words, conditions

precedent for claiming exemption u/s.11 including for

voluntary contributions is registration of trust u/s.12A of the

8 ITA No.2064/Chny/2019 Income Tax Act, 1961. This principle is supported by the

decision of the Hon’ble Supreme Court in the case of M/s.

U.P.Forest Corporation & Another vs. DCIT (supra), where the

Hon'ble Supreme Court has very clearly held that a conjoint

reading of section 11, 12 & 12A makes it clear that registration

u/s.12A is a condition precedent for availing benefit u/s.11 & 12

of the Act. Unless and until an institution is registered u/s.12A

of the Act, it cannot claim benefit of section 11 & 12 of 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.

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

9 ITA No.2064/Chny/2019 issue and hence, we are of the considered view that those case

laws are not applicable to the facts of the present case.

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.

Sd/- Sd/- (धु�वु� आर.एल रे�डी) (जी. मंजुनाथ) (Duvvuru RL Reddy) (G.Manjunatha) "या�यक सद$य /Judicial Member लेखा सद$य / Accountant Member चे"नई/Chennai, 'दनांक/Dated 22nd July, 2021 DS आदेश क� ��त)ल*प अ+े*षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. *वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.