VADAKKE MADHAM BRAHMASWOM,THRISSUR vs. THE ITO, EXEMPTION WARD, THRISSUR, THRISSUR

The appeal raises a single issue, i.e., whether the corpus donation received by the assessee-trust qualifies to be so, so that it is not liable to be, for its exemption from tax, applied u/s.11(1)(a) for the charitable purposes for which it is constituted. Any voluntary contribution received by such an institution is u/s.12(1) deemed to be income derived from property held under trust and, accordingly, liable to be excluded from it’s total income subject to it being applied for charitable purposes during the relevant year to the extent of a minimum 85% thereof; the balance 15% being entitled to be accumulated or set apart for being so applied in future [sec.11(1)(a)]. An application below 85% requires being allowed by the Assessing Officer (AO) on an application made to him in this regard [s. 11(2)]. A contribution received towards corpus, however, is not so deemed and, thus, exempt on its receipt (AY 2017-2018) Vadakke Madham Brahmaswom v. ITO [sec.11(1)(d)]. This is as corpus represents the source of income, which is therefore to be maintained, yielding income which is to be utilized for charitable purposes, i.e., is the property held under trust, income derived from which is to be so applied.

The assessee, a charitable trust, formed on 17.8.1949, is involved in the charitable purpose of disseminating knowledge of the hoary Vedas, a beacon of light for the humanity, origin of which is lost in antiquity. During the relevant year it received a sum of Rs.116.35 lakhs, being at Rs.100 lakh and Rs.16.345 lakh from two different donors. The Revenue regarded it as income derived from a property held under trust. The same was brought to tax as the assessee could not demonstrate its application for charitable purpose/s nor had applied for it being allowed to be accumulated or set apart for being so utilized in future at any time up to the close of the assessment proceedings. And which explains the instant appeal.

We have heard the parties, and perused the material on record. 4.1 We shall consider the two sums separately, as follows. Rs.100 lakh was received from the Government of Kerala (GoK) as grant for maintenance and renewal of it’s old building. Being received at the fag-end of the year, it could not be spent for the said purpose. The Revenue has regarded it as income u/s.12(1) inasmuch as there was no specific direction by the said donor that the sum shall form part of it’s corpus, and was therefore liable to applied for charitable purposes in India. The assessee, on the other hand, claims the purpose of the grant, i.e., for maintaining and renewal of old building, as itself sufficient for it being construed as a corpus donation. Alternatively, it claims for the remedial course inasmuch as it had, though belatedly on 21.12.2019, applied for accumulation, i.e., in excess of 15%, which has not been considered by the first appellate authority as there has been no condonation by the competent authority to date, and which as per the assessee is outstanding even to date. (AY 2017-2018) Vadakke Madham Brahmaswom v. ITO 4.2 We consider the Revenue’s case as misplaced. The reason is simple. The buildings, for the renovation of which the grant has been allowed to it, belong to the assessee, forming part of it’s corpus. By expending sums on their maintenance and renewal, it is only restoring or enhancing the same and, thus, maintaining it’s corpus, if not also adding value to it. It is not necessary that the funds or moneys received as contribution toward corpus are maintained in the form of or kept in a bank account. How would a trust or institution maintain its corpus where the same in the form of an asset, forming part of the property held under trust, as the buildings in the instant case? How would a school or hospital, say, maintain it’s building or even build one? Why, land or building, or any other asset for that matter, which could be deployed by the institution, may be directly donated thereto. Unless of course the law itself bars receipt of corpus donation – which we believe would be restrictive in character, other than by way of cash. The contribution, grant of which entailed approval of an estimate by the Government and followed by furnishing a utilization certificate, was through banking channel. There is, further, no dispute or doubt that the amount stands spent for the stated purpose/s, i.e., as claimed, in the following two years. The very nature of the work, i.e., retaining the aesthetics of the old structure, as indeed providing strength thereto – an expert work, entails time. The genuineness of the expenditure is in any case not in doubt.

4.3 The Revenue’s objection that the amount is not specifically stated to be for corpus, as both sec. 11(1)(d) and 12(1) provide, is to no moment. The condition, irrespective of the form or the exact words employed, is clearly met when the purpose is clearly stated, i.e., maintaining and renewal of the buildings of the assessee-trust (by name). That being the case, we do not think that the words used, which are not stated in legal terms, but only as used in common parlance, conveying the intent, would not hinder the applicability of the provision in its true sense. That in fact is also the purport of the decision in CIT v. Gujarat State Safai Kamdar Vikas Nigam(TA No. 1934 of 2009 dated 02.5.2011), relied upon by the assessee. In CIT v. 3 (AY 2017-2018) Vadakke Madham Brahmaswom v. ITO Sthanakvasi Vardhana Vanik Jansangh [2003] 260 ITR 366 (P&H), the Hon'ble Court confirmed the order of the Tribunal which held that the contribution received for construction of a Wadi formed a part of its corpus, and was not it’s income. We having held like-wise, i.e. that the impugned sum is not income, but received on capital account, do not consider it necessary to travel to the assessee’s alternate ground. The same is even otherwise subject to the assessee, condoning the delay in filing Form 10 – which is the province of the competent authority, being allowed time to expend the donation for the purpose for which it stands received. Suffice to say that it’s condonation petition merits being upheld in the facts and circumstances of the case, including Board Circular 30/2019, dated 17/12/2019.