FUTURE HOPE INDIA,KOLKATA vs. I.T.O(EXEMPTION)-WARD-1(2), KOLKATA

Ground No. 2 and 3 of the assessee are against the action of Ld. CIT(A) in confirming the disallowance of the exclusion of corpus donation of Rs.67,36,518/- from the total income and in confirming the disallowance of the exclusion of interest earned of the amount of Rs.6,79,329/- on investment of the corpus donation from the total income. Briefly stated facts are that during the previous year relevant to the assessment year under consideration, the assessee has received foreign donations aggregating to Rs. 67,36,518/- with a specific direction that the same shall form part of corpus of the assessee. Out of the said amount Rs. 23,75,340/- was received towards Katie Baddeley Fund for Arts and Rs.43,61,178/-was received towards corpus from France (St. Gobain). In the return of income, applying the provision of section 11(1)(d) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), the assessee claimed the same as non-taxable receipt. During the course of assessment proceedings, the assessee was asked to file the details of Corpus donation which had been claimed as tax-exempt in the return of income. The assessee submitted copies of letters and documents evidencing that the donations were received with specific directions that they shall form part of the corpus and this was duly noted during the Future Hope India, AY- 2012-13 course of hearing. However, in the assessment order, the AO considered such amount of Rs.67,36,5187- (being corpus donations) as part of the total income and made the additions. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who held as under: “Perusal of submission shows that the appellant has not been able to specify the purpose of the contribution. I have gone through the confirmation or so called declaration submitted by the appellant from the donors. It is seen that no specific direction is given. Specific direction means to utilise the fund for the purposes and the purposes are also mentioned in the directions. The confirmation simply says that "it is corpus donation". Simply saying that it is for "corpus donation" does not qualify as a specific direction therefore it will form part of its total income. Subsequent assessment order relied by the appellant will not help much as the issue has not come to the test of appeal and every assessment year has different facts therefore the action taken by the AO towards donations that it not specific, the action is upheld. The ground of appeal is dismissed.”

We have heard rival submissions and gone through the facts and circumstances of the case. The assessee is a charitable organization enjoying section 12A of the Act registration from year 1993 and is engaged in many philanthropic activities. The main grievance of the assessee is that the AO did not apply the provisions of section 11(1)(d) of the Act which specifically excludes voluntary contributions, which have been made with a specific direction that the contribution/donation shall form part of the corpus of the Trust or Institution, from the ambit of taxable income treating it as an exempt receipt. According to Ld. AR, the Corpus funds are generally created out of corpus donations. And donation need to be treated as a corpus donation when it is accompanied by a specific written direction of the donor. According to Ld. AR, in the absence of any written direction of the donor, the contribution or grant cannot be transferred to the corpus fund. It was pointed out by the Ld. AR that when donation is received through charity boxes it will not be considered as corpus donation even if the donation box is marked with the word ‘corpus’. This, according to Ld. AR, is because there is no specific direction from the donor in writing in order to constitute a corpus donation. So, according to Ld. AR, in the instant case there was in fact a written instrument by the donor that donation is for Corpus of the assessee. I note that the assessee has received foreign donations aggregating to Rs. 67,36,518/- with a specific direction that the same shall form part of corpus of the assessee. Out of the said amount Rs. 23,75,340/- was received towards Katie Baddeley Fund for Arts and Rs.43,61,178/-was received towards corpus from France (St. Gobain). In the return of income, applying the provision of section 11(1)(d) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), the assessee claimed the same as non-taxable receipt. During the Future Hope India, AY- 2012-13 course of assessment proceedings, the assessee has submitted copies of letters and documents evidencing that the donations were received with specific directions that they shall form part of the corpus. However, in the assessment order, the AO considered such amount of Rs.67,36,5187- as part of the total income and made the additions. We note that the donation in question where in fact given by the respective donors with a specific direction to be used as the corpus of the assessee. The assessee is a charitable organization and is admittedly doing philanthropic activities, and its objects are charitable in nature. So, when the donor of donation gives it with a direction to use it for the corpus of the assessee means that it is for the objects enshrined for which assessee was formed. So, the question of treating the donation as not corpus does not arise and I direct the AO to treat the donation of Rs.67,36,518/- as corpus donation.

Ground no. 3 of assessee is as under:- “3. On the facts of the case and in law, the ld. LD. CIT(A) erred in confirming the disallowance of the exclusion of interest earned of the amount of Rs.6,79,329/- on investment of the corpus donation from the total income

Coming to the interest earned on the Fixed deposit from Rs. 67,36,518/- which is Rs. 6,79,329/- is concerned, I am of the opinion that interest will be part of the current year income of the assessee and the AO is directed to re-compute the income as per section 11 of the Act.

Ground nos. 4 & 5 are consequential and does not require any adjudication.

In the result, the assessee’s appeal is partly allowed.