Panchjanya Trust v. ITO - Taxpublishers.in

Case Laws Analysis
REFERRED DIT & Ors. v. Al-Ameen Charitable Fund Trust 2016 TaxPub(DT) 1833 (Karn-HC)
REFERRED DIT v. Indraprastha Cancer Society 2015 TaxPub(DT) 0012 (Del-HC)
REFERRED CIT v. Siliguri Regulated Market Committee 2014 TaxPub(DT) 3376 (Cal-HC)
REFERRED CIT v. Birla Janahit Trust 1994 TaxPub(DT) 0079 (Cal-HC)
REFERRED CIT v. Jayashree Charity Trust 1986 TaxPub(DT) 0441 (Cal-HC)
REFERRED CIT v. Janaki Ammal Ayya Nadar Trust 1985 TaxPub(DT) 0122 (Mad-HC)
REFERRED CIT v. The Estate of Shri V.L. Ethiraj 1982 TaxPub(DT) 0175 (Mad-HC)
REFERRED CIT v. Trustee of H.E.H. The Nizam S Supplemental Religious Endowment Trust 1981 TaxPub(DT) 0297 (AP-HC)
REFERRED Deo Radha Madhava Lalji Genda Trust v. Property Tax Officer, Sagar, & Ors. 1980 TaxPub(DT) 0952 (MP-HC)

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The Tax Publishers2019 TaxPub(DT) 6841 (Kol-Trib) IN THE ITAT, KOLKATA BENCH S.S. GODARA, J.M. & A.L. SAINI, A.M. Panchjanya Trust v. ITO ITA Nos. 1841 & 1994/Kol/2017 1 October, 2019 Revenue Dismissed. Assessee by: S.K. Das, FCA Respondent by: Robin Chowdhury, DR ORDER *A.L. Saini, A.M.* The captioned cross appeals filed by the assessee and Revenue, pertaining to assessment year 2014-15, are directed against the order passed by the Commissioner (Appeal)-25, Kolkata in Appeal No. Commissioner (Appeals),Kol 25/10250/2016-17, dated 21-6-2017, which in turn arises out of an assessment order passed by the assessing officer under section 143(3)/11 of the Income Tax Act, 1961 (in short the 'Act') dated 30-11-2016. 2. Since these appeals relate to the same assessee, identical and common issues are involved, therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 3. First we shall take assessee's case in I.T.A. No. 1841/Kol/2017, for assessment year 2014-15. The grounds of appeal raised by the assessee is as follows :-- '1. For that the disallowance of claim of capital receipts on account of Admission Fee of Rs. 4,49,180, Re-admission Fees Rs. 1,00,00,000, Term Charges Rs. 21,70,700 have been wrongly made without narrating any cogent reasons.' 4. Brief facts qua the issue are that during the course of assessment proceedings, the assessing officer observed from the balance sheet of the assessee as at 31-3-2014, that the General fund at the disposal of the assessee was Rs. 6,14,48,893 as compared to Rs. 4,48,70,032 as at 31-3-2013. On being asked, the assessee submitted explanation of the difference in amount of Rs. 1,65,78,861 (Rs. 6,14,48,893-Rs. 4,48,70,032), as follows :-- (i) Rs. 39,58,981 as Surplus of Income over Expenditure. (ii) Rs. 1,00,00,000, collected as Re-Admission Fees. (iii) Rs. 21,70,700 Term charges. (iv) Rs. 4,49,180, Admission fees Totaling Rs. 1,26,19,880. 5. The assessing officer was of the view that as per provisions of section 12(1) and section 11(1)(d), a corpus donation is that which comes with a specific direction of the donor that the said donation; would be corpus donation and any other donation is not a corpus donation. A donation given by any donor with a direction that it shall be used for any other revenue or capital expenses for relief to poor, or for providing medical relief etc. are all earmarked donations to be used for that particular purpose and hence for a particular expenditure. Corpus donation is to be invested and it cannot be used for any expenditure. Income from such investment is required to be applied. Hence earmarked donations or specific expenditure donations are not corpus donations. Such earmarked donations/receipts/fees, or in whatever nomenclature it is used, are income of the trust and have to be routed through Income & Expenditure Account and not directly charged to Balance Sheet. When such earmarked donations are directly taken to the Balance Sheet then such treatment is wrong. Such donations are given for a particular specified expenditure and hence they have to be routed through Income & Expenditure Account. If it is not routed through income & expenditure account then such donations/fees must be added back to the income in the computation of Income. If expenditure out of such donation is to be spread over more than one year duration, the same has to be accumulated as per the rules provided in section 11 of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2019 TaxPub(DT) 6841 (Kol-Trib)

IN THE ITAT, KOLKATA BENCH

S.S. GODARA, J.M. & A.L. SAINI, A.M.

Panchjanya Trust v. ITO

ITA Nos. 1841 & 1994/Kol/2017

1 October, 2019

Revenue Dismissed.

Assessee by: S.K. Das, FCA

Respondent by: Robin Chowdhury, DR

ORDER

A.L. Saini, A.M.

The captioned cross appeals filed by the assessee and Revenue, pertaining to assessment year 2014-15, are directed against the order passed by the Commissioner (Appeal)-25, Kolkata in Appeal No. Commissioner (Appeals),Kol 25/10250/2016-17, dated 21-6-2017, which in turn arises out of an assessment order passed by the assessing officer under section 143(3)/11 of the Income Tax Act, 1961 (in short the 'Act') dated 30-11-2016.

2. Since these appeals relate to the same assessee, identical and common issues are involved, therefore these have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity.

3. First we shall take assessee's case in I.T.A. No. 1841/Kol/2017, for assessment year 2014-15. The grounds of appeal raised by the assessee is as follows :--

'1. For that the disallowance of claim of capital receipts on account of Admission Fee of Rs. 4,49,180, Re-admission Fees Rs. 1,00,00,000, Term Charges Rs. 21,70,700 have been wrongly made without narrating any cogent reasons.'

4. Brief facts qua the issue are that during the course of assessment proceedings, the assessing officer observed from the balance sheet of the assessee as at 31-3-2014, that the General fund at the disposal of the assessee was Rs. 6,14,48,893 as compared to Rs. 4,48,70,032 as at 31-3-2013. On being asked, the assessee submitted explanation of the difference in amount of Rs. 1,65,78,861 (Rs. 6,14,48,893-Rs. 4,48,70,032), as follows :--

(i) Rs. 39,58,981 as Surplus of Income over Expenditure.

(ii) Rs. 1,00,00,000, collected as Re-Admission Fees.

(iii) Rs. 21,70,700 Term charges.

(iv) Rs. 4,49,180, Admission fees

Totaling Rs. 1,26,19,880.

5. The assessing officer was of the view that as per provisions of section 12(1) and section 11(1)(d), a corpus donation is that which comes with a specific direction of the donor that the said donation; would be corpus donation and any other donation is not a corpus donation. A donation given by any donor with a direction that it shall be used for any other revenue or capital expenses for relief to poor, or for providing medical relief etc. are all earmarked donations to be used for that particular purpose and hence for a particular expenditure. Corpus donation is to be invested and it cannot be used for any expenditure. Income from such investment is required to be applied. Hence earmarked donations or specific expenditure donations are not corpus donations. Such earmarked donations/receipts/fees, or in whatever nomenclature it is used, are income of the trust and have to be routed through Income & Expenditure Account and not directly charged to Balance Sheet. When such earmarked donations are directly taken to the Balance Sheet then such treatment is wrong. Such donations are given for a particular specified expenditure and hence they have to be routed through Income & Expenditure Account. If it is not routed through income & expenditure account then such donations/fees must be added back to the income in the computation of Income. If expenditure out of such donation is to be spread over more than one year duration, the same has to be accumulated as per the rules provided in section 11 of the Act.