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Income Tax Appellate Tribunal, BANGALORE BENCH-SMC “ B ”
Before: SHRI VIJAY PAL RAO
Per Shri Vijay Pal Rao, J.M. : This appeal by the assessee is directed against the order dt.30.08.2016 of Commissioner of Income Tax (Appeals) for the Assessment Year 2011-12.
The assessee has raised the following grounds :
3. Ground No.1 is general in nature and do not require any specific adjudication. r.w.s. 11 of the Income Tax Act, 1961 (in short 'the Act') in respect of building fund collected. The assessee is a education society-trust and granted Registration under Section 12A as well as approval under Section 80G(5) of the Act. The assessee is running education institution. The Assessing Officer in the course of assessment proceedings observed that the assessee has collected Rs.1,15,63,756 under building fund during the year under consideration. The Assessing Officer asked the assessee to provide the details and evidence for the same. The assessee submitted that the amount is collected from the students as part of the fees itself and there are no specific receipts for the same. Thus the Assessing Officer concluded that no specific purpose for collecting the fund has been proved by the assessee and they are not voluntarily contributed therefore these receipts were added to the income of the assessee. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and contended that the assessee received specific donation towards construction of building. The collection was reflected in the balance sheet as a corpus fund for which a specific deposit is being made. It was also explained by the assessee that 60% of the amount collected from the students are to be treated as general donation and are reflected in the income and expenditure (Appeals) has not accepted the contention of the assessee and confirmed the action of the Assessing Officer.
5. Before the Tribunal the learned Authorised Representative of the assessee has submitted that the fund was collected for specific purpose and was used for the purpose of construction of building. As per the resolution of the assessee- trust, 60% of the amount collected from the students for the building fund was treated and reflected in the income and expenditure account. Thus the learned Authorised Representative has contended that it was a voluntary contribution for specific purpose which is a part of the corpus fund and cannot be treated as income of the assessee. In support of his contention, he has relied upon the decision dt.14.8.2015 of this Tribunal in the case of ITO Vs. Vokkaligara Sangha in to 285/Bang/2014. He has also relied upon the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Bharatiya Samskriti Vidyapith Trust 225 Taxman 131.
On the other hand, the learned Departmental Representative has relied upon the orders of the authorities below and submitted that it is not a voluntary contribution by the students but the assessee is charging along with fees. Further this collection is not for the specific purpose as the assessee is amount for building construction but 60% of the amount collected from the students towards building fund are treated as general donation. Therefore this cannot be treated as a donation for specific purpose and therefore part of the corpus fund of the assessee.
Having considered the rival submissions as well as the relevant material on record, it is noted that the assessee is running various education institutions and collected the funds from the students along with the education fees. The fund collected from the students has been stated by the assessee as under the building fund, however the assessee by its resolution decided to treat the 60% of the amount as general donation and rest was kept under building fund utilized for capital expenditure towards construction of building. This bifurcation of fund collected from the students has been reflected in the books of account under two separate heads, general donation and building fund.
Though there is no independent receipt in respect of the collection of building fund from the students but it has been collected as part of the fees of the students. The balance 40% of the fund was kept under the building fund and has been utilized for capital expenditure therefore the said portion of the fund which has been kept for specific purpose of construction of building was fund is not indicated in the donation itself but it was assessee's own decision and shown in the books of accounts. The Hon'ble High Court in the case of CIT Vs. Bhartiya Samskriti Vidyapith Trust (supra) while dealing with an issue of donation received from the students have held in paras 9 & 10 as under :
“ 9. The order of the Tribunal discloses that, earlier the assessee was issuing receipts for the donations received in excess of Rs. 1,000/- and subsequently, they are issuing receipts for the amounts received above Rs.5,000/-. This procedure has been accepted by the department. Now in the order of the assessment, the Assessing Officer has denied exemption on the ground that there is no specific direction from the donor to the donee to utilize the amounts given for the building purpose, i.e., it. was given towards the corpus of the trust. The reasons given are that the particulars of the donors are not mentioned and hence, the assessee is not able to give the full particulars of the donors. There is nothing to show that these donors have given any specific directions to utilize the fund as a part of the corpus of the trust. The amount involved is few lakh for each year. The assessee is running an educational institution and if philanthropic persons voluntarily donate funds for educational purpose and they have paid it by way of cash, the assessee has received the same and issued a receipt acknowledging the said amount. After receipt of the said amount, an entry is made in the account books of the trust. Thereafter, the amount is deposited in the Bank. Therefore, it; is not a case where the amounts received are not accounted for or there is any attempt not to disclose the income. The receipts issued clearly demonstrates that it is received for the purpose of building fund. Clause (d) of Sub-section (1) of Section 11 of the Act provides that income in the form of voluntary contribution made with a specific direction that they shall form part of the corpus of the trust or institution, shall not be included in the total income for the previous year of the person. Therefore, to be eligible for that exemption, the said contribution should be towards a part of the corpus. Though the words 'specific direction' is used in the said provision, the legislature consciously has not used the word 'in writing'. In the absence of any writing, only means to find out as to what is the specific direction can be gathered by considering how the recipient of the amount has accounted for it. The recipient has accounted the receipt as the amount received towards building funds and thereafter, a separate account is maintained for the said amount. From this, it could be inferred that there is a 'specific direction by the donor'. The said amount is used as part of the corpus. It may be possible that, in a given case, the provision may be abused and unaccounted monies could be converted into corpus fund without furnishing the particulars of the persons who are contributing and to avoid tax liability to have benefit of exemption, but that is a question of fact. The Court has to decide on the material available on record, whether the said provision is abused in the aforesaid manner or not. In the absence of any material to show that the said provision is abused and if it is demonstrated that the educational institution has collected money in the form of voluntary contributions from public and may be from the parents of the students who are studying in the institution and 7 when they have issued receipts acknowledging the said amount towards building fund and made requisite entries in the books and deposited the same in the bank, if the court is satisfied with the genuineness of the transaction, it is well within the power of judicial authority to hold that the requirement of Section 11(1)(d) of the Act is fulfilled and the assessee is entitled to be exempted.
Thus, the two appellate authorities have taken this view in the present case. No hard and fast rule can be laid down. The legal position cannot be expressed in a straightjacket form. In the facts of the case, we are satisfied from the material on record that these voluntary contribution made by the public to the assessee was with a specific direction to use the same for building purpose and therefore, the said donations shall form part of the corpus of the trust and assessee is entitled to the benefit under Section 11 of the Act. That is, precisely what both the appellate authorities have concurrently held and it being a pure question of fact, we do not see any justification to interfere in the said question of fact. In the light of the aforesaid discussions, we do not find any error committed by the authorities. Thus, the substantial question of law is answered in favour of the assessee and against the revenue. Accordingly, the appeals are dismissed.”
Thus it is clear that when the donation was received for specific purpose of building fund as it was indicated in the receipts issued by the trust then it will be part of the corpus of the assessee-trust and eligible for exemption under Section 11. However, in the case of the assessee there is nothing on record to suggest that the fund was collected from the students for specific purpose of building fund. It is assessee's own decision to categorize part as the building fund and balance 60% of the same as general donation. Therefore the said decision of Hon'ble jurisdictional High Court cannot be applied to the facts of the present case. Similarly, the decision of the Tribunal in the case of ITO Vs. Vokkaligara Sangha (supra) is based on the facts that the voluntary contribution received for specific purpose cannot be treated as income under assessee.
Ground Nos.3 & 4 are regarding the exemption under Section 10(23c)(iiiad) of the Act.
The learned Authorised Representative of the assessee has submitted that the assessee is having 4 educational institutions, the details of which have been given by the CIT (Appeals) in the impugned order. The CIT (Appeals) has disallowed the claim of the assessee on the ground that the donation exceeds Rs.1 Crore and further when the assessee specifically claimed the exemption under Section 11 of the Act then the exemption under Section 10(23C) cannot be considered. He has further contended that the CIT (Appeals) has taken into consideration, the total amount of donation received by all the educational institutions instead of considering each college as a separate education institution for this purpose. Thus he has submitted that when the donation of each institution is less than the limit prescribed under the section then the assessee is eligible for deduction under Section 10(23C) of the Act. In support of his contention, he has relied upon the decision dt.24.2.2014 of Hon'ble jurisdictional High Court in the case of Gitajali Education Society Vs. ADIT in & 300/2013. authorities below.
Having considered the rival submissions as well as the relevant material on record, it is noted that the assessee is running educational institutions as under :
Hasnath PU College for Women 2. Hasnath PU College, Hennur Bande 3. Hasnath Degree College for Women 4. Hasnath Degree College, Hennur Bande.
The gross receipts in respect of three colleges has been given by the CIT (Appeals) in the impugned order as under :
Thus it is clear that out of the thee institutions, the gross receipts of two institutions is less than Rs.1 Crore and only in case of one Institution, the gross of Gitanjali Education Society Vs. ADIT (supra) has held in para 13 as under : both the substantial questions of law in favour of the assessee and against the revenue.”
In view of the fact that the assessee's object and actual activity of running education institution is not in dispute then it is clear that except educational activity the assessee did not carry on any other activity. Further the collection of donation for each education institution has to be considered separately as it is settled by the Hon'ble jurisdictional High Court. Since the authorities below have not examined this issue by considering each college as a separate issue is set aside to the record of the Assessing Officer for fresh consideration.
Ground Nos.5 & 6 are regarding disallowance of depreciation. The Assessing Officer has disallowed the claim of depreciation on the ground that it will amount to double deduction as the capital expenditure was also allowed as application of income under Section 11 of the Act and therefore the depreciation is not allowable on such expenditure. The CIT (Appeals) has not adjudicated this issue.
Having considered the rival submissions as well as the relevant material on record, it is noted that the claim of depreciation as a fresh plea rasied by the assessee before the Tribunal as it was not raised before the CIT (Appeals).
There is no dispute that this issue is covered by the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Bangalore Baptist Hospital Society 225 Taxman 131 (Kar) Since these issues have not examined by the authorities below the claim of depreciation is set aside to the record of the Assessing Officer for considering the same in the light of the decision of Hon'ble jurisdictional High Court.
Ground No.7 is regarding TDS credit. that the Assessing Officer has not given the TDS credit of Rs.80,301. Therefore the Assessing Officer may be directed to allow the TDS credit.
On the other hand, the learned Departmental Representative has submitted that if there is any mistake in the assessment order, the assessee would have raised this issue under Section 154 of the Act.
Having considered the rival submissions as well as the relevant material on record, it is noted that this is not an issue to be decided in this appeal. The grievance of the assessee is that the Assessing Officer has not allowed the TDS credit while raising the demand. Therefore in the facts and circumstances of the case the Assessing Officer is directed to verify the claim of the assessee and allow the TDS credit if any.
Last ground of the assessee is regarding levy of interest under Section 234B of the Act, which is consequential in nature.