VKJ Latest News Update

VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

Donation received by trust can be treated as corpus donation in its hands where requirement of specific directions in respect of donations is fulfilled through e-mails: ITAT

2019-TIOL-1504-ITAT-AHM

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘A’ AHMEDABAD

ITA No.1175/Ahd/2017
Assessment Year: 2013-14

SHRI GUJARAT BHAVSAR SAMAJ
1, BHAVSAR CHATRALAY, D P SCHOOL
NEW WADAJ, AHMEDABAD- 380013
PAN NO:AACTS0636G

Vs

INCOME TAX OFFICER
(EXEMPTION) WD-2, AHMEDABAD

Sudhanshu Srivastava, JM & Amarjit Singh, AM

Date of Hearing: June 27, 2019
Date of Decision: June 28, 2019

Appellant Rep by: Shri Bandish Soparkar, AR
Respondent Rep by: 
Shri S K Dev, Sr. DR

Income Tax – Sections 11(1)(d), 12A & 80G(5)

Keywords – Corpus donation – Donor

The assessee is a trust and is registered u/s 12A and also u/s 80G (5). The assessee had filed its return for the relevant AY declaring total income at NIL. The case was selected for scrutiny and during the course of assessment proceedings, the AO observed that the assessee trust had received Rs 47.50 lacs towards “Girls Chhatralaya Construction Fund” which the assessee had treated as corpus donation received during the year. The assessee trust was required to furnish the name and address of the donor. It was submitted by the assessee trust that the assessee trust had received donation of Rs 50 lacs from Shri Natubhai Bhavsar who was a NRI residing in USA.

Further it was submitted that the donation had been received through M/s. Helena Kaushik Women’s College and the amount of donation was directly credited in the bank account of the assessee trust. The AO opined that there were no specific directions from the donor to apply the donation towards a particular cause therefore, the donation could not be treated as corpus donation. Consequently, an addition of Rs. 47.50 lacs was made. On appeal, the CIT(A) confirmed the order of AO.

On appeal, the Tribunal held that,

Whether donation received by the assessee trust from donor can be considered to be corpus donation in the hands of assessee trust if requirement for a specific direction in respect of donation is fulfilled by the various E-mails – YES: ITAT

++ the donation amount was not directly received by the assessee trust from the donor Shri Natubhai Bhavsar but was routed through Helena Kaushik Women’s College. It is seen that the sole ground for the AO to make the addition was that the intention of the donor, while giving the donation was not a specific and therefore, in absence of specific directions it could not be said that it was in the form of corpus donation. Although, the assessee could not furnish required evidences before the AO, evidences in the in the form of E-mails were filed before the CIT (A) and these E-mails are dated December 2011 onwards. Copies of these E-mails have been placed in the Paper Book filed by the assessee and it has been mentioned in these E-mails that the donor Mr. Natubhai Bhavsar and his wife Janet have, through the good offices of M/s Helena Kaushik Women’s College, transferred the amount for the purpose of furtherance of construction of Girls Hostel by the assessee trust that is Shri Gujarat Bhavsar Samaj . Therefore, Tribunal is of opinion that in the requirement for a specific direction with regard to the corpus donation stands fulfilled by the various E-mails emanating from Mr. Natubhai Bhavsar and Mrs. Janet therefore, the assessee should be granted the benefit of the amount being treated as corpus donation. Accordingly, this Tribunal allow the grounds raised by the assessee and direct the AO to treat the donation as corpus donation.

Assessee’s appeal allowed

ORDER

Per: Sudhanshu Srivastava:

This appeal is filed by the assessee against order dated 02.03.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-9, Ahmedabad (hereinafter called the ‘CIT(A)’) and pertains to assessment year 2013-14.

2.0 The brief facts of the case are that the assessee is a trust and is registered under Sec. 12A of the Income Tax Act, 1961 (hereinafter cal led ‘the Act’) vide approval dated 04.02.1993. The trust is also registered under Sec. 80G (5) of the Act vide approval dated 02.11.2007. As per the objects of the trust, the main object of the trust is to provide building for post funeral activity and also provide accommodation to persons coming to Ahmedabad for medical treatment.

2.1 The return of income was filed for the relevant assessment year declaring total income at NIL. The case was selected for scrutiny and during the course of assessment proceedings, the AO observed that the assessee trust had received Rs. 47,50,000/- towards “Girls Chhatralaya Construction Fund” which the assessee had treated as corpus donation received during the year. The assessee trust was required to furnish the name and address of the donor and the directions, if any, issued by the donor so as to treat the donations of Rs. 47,50,000/- as corpus donation. It was submit ted by the assessee trust that the assessee trust had received donation of Rs. 50,00,000/- from Shri Natubhai Bhavsar who was a non-resident Indian residing in United States of America. It was further submit ted that the donation had been received through M/s. Helena Kaushik Women’s College, Malsisar, Jhunjhunu, Rajasthan and the amount of donation was directly credited in the bank account of the assessee trust from the said M/s. Helena Kaushik Women’s College. The AO took the view that there were no specific direct ions from the donor to apply the donation towards a particular cause and, therefore, the donation could not be treated as corpus donation. Since the amount of the donation had been taken directly to the balance sheet without routing it through the income and expenditure account, the donation was treated as regular income of the assessee. Consequently, an addition of Rs. 47,50,000/- was made.

2.2 The assessee took the matter before the Ld. First Appellate Authority and the assessee requested the Ld. CIT (A) to admit additional evidences to verify the fact that the donation received by the assessee trust was a corpus donation. It was submit ted before the Ld. CIT (A) that Mr. Natubhai Bhavsar was desirous of making donation for the purpose of establishing Babuben Prahladji Bhavsar Woman Education Hostel through the assessee trust and he had approached the secretary of the assessee trust for the same. The trust had informed Mr. Natubhai Bhavsar that i t had no approval of receive foreign funds and, therefore, Mr. Natubhai had approached the trustee of Helena Kaushik Education Foundation at USA for necessary guidance to remit the funds in India to the trust for the purpose for establishing the hostel for women’s education. It was further submit ted that the trustee of Helena Kaushik Education Foundation had informed Mr. Natubhai Bhavsar that Helena Kaushik Education Foundation could help in receiving donation in USA and in sending the fund to M/s. Helena Kaushik Women’s College at Rajasthan as it was having the necessary permission to receive foreign funds and which in turn could be transferred to the assessee trust through banking channels. The assessee also submit ted various correspondence/s in this regard before the Ld. CIT (A) and submit ted that in view of the correspondence/s the foreign funds which were transferred to the assessee trust through M/s Helena Kaushik Women’s College of Rajasthan, a direct link was established and in view thereof the donation received by the assessee trust was a corpus donation as specific direction was expressed in the correspondences which were now submitted before the Ld. CIT (A). It was also submit ted that Mrs. Janet, who was corresponding along with Mr. Natubhai was the wife of Mr . Natubhai Bhavsar and, therefore, both of them were working in tandem to ensure that the funds were transferred to the assessee trust. However, the Ld. CIT (A) did not accept the assessee’s contention and dismissed the assessee’s appeal by holding that the AO was right in denying the benefit of Sec. 11(1)(d) of the Act and adding the same to the income of the assessee.

2.3 Now, the assessee is before this Tribunal (ITAT) and has challenged the order of the Ld. CIT (A) by raising in the following grounds of appeal:-

“1. The learned AO has erred in law and on facts in treating the amount of Rs. 47,50,000/ – received as donation for “Girls Chhatralaya Construct ion” being corpus donation as “General Donation” and Ld. CIT(A)-9, Ahmedabad has erred in confirming the addition even though the purpose of the donation was fully explained to him that the donation received by the appellant trust was corpus donation with reference to the e-mail correspondence of the NRI donor.

2. The Ld. CIT(A)-9, Ahmedabad, while confirming the addition, has erred both in law and on facts in not giving any direct ion to AO to grant deduct ion on account of the amount applied for the object of the trust i .e. “construct ion of Girls Chhatralaya” which is evident from the audi t report for the year under consideration.”

3.0 The Ld. Authorised Representative (AR) reiterated the submissions as were made before the Ld. CIT (A). He drew our attention to the copies of e-mails placed in the paper book and highlighted the fact that it was implicit in the said e-mails that the donation was being made for the purpose of building a girls’ hostel. It was prayed that the assessee’s appeal be allowed.

4.0 In response, the Ld. Sr. DR placed extensive reliance on the findings and observations of the Ld. CIT (A) as well as that of the AO and submitted that the addition had been rightly confirmed by the Ld. CIT (A).

5.0 We have heard the rival submissions and have also perused the material on record. The only issue before us for consideration is whether the amount of Rs. 47,50,000/- received by the assessee trust from Helena Kaushik Women’s College, Jhunjhunu, Rajasthan can be considered to be corpus donation in the hands of the assessee trust. Admittedly, and undisputedly, the aforesaid amount was not directly received by the assessee trust from the donor Shri Natubhai Bhavsar but was routed through Helena Kaushik Women’s College, Jhunjhunu, Rajasthan. It is plea of the assessee that the amount was not directly sent to the assessee trust by Shri Natubhai Bhavsar because the assessee trust did not have the required permission to receive foreign donations and Helena Kaushik Women’s College, Jhunjhunu, Rajasthan had the requisite approval and, therefore, the funds were routed through it. It is seen that the sole ground for the AO to make the addition was that the intent ion of the donor, while giving the donation, was not a specific and, therefore, in absence of specific directions it could not be said that it was in the form of corpus donation. Although, the assessee could not furnish required evidences before the AO, evidences in the in the form of E-mails were filed before the Ld. CIT (A) and these E-mails are dated December 2011 onwards. Copies of these E-mails have been placed in the Paper Book filed by the assessee and it has been mentioned in these E-mails that the donor Mr. Natubhai Bhavsar and his wife Janet have, through the good offices of M/s Helena Kaushik Women’s College, transferred the amount for the purpose of furtherance of construct ion of Girls Hostel by the assessee trust that is Shri Gujarat Bhavsar Samaj . Most of the E-mails have jointly been sent by Mr. Natubhai Bhavsar and his wife Janet . It is also undisputed that the amount of deduction had been transferred by M/s Helena Kaushik Women’s College to the assessee trust through banking channels. We have also perused the remand report of the AO which also states that no further verification was required in this regard. Therefore, in view of the peculiar facts of this case, it is our considered opinion that in substance the requirement for a specific direct ion with regard to the corpus donation stands fulfilled by the various E-mails emanating from Mr. Natubhai Bhavsar and Mrs. Janet and, therefore, the assessee should be granted the benefit of the impugned amount being treated as corpus donation. Accordingly, accepting the content ions of the Ld. AR, we allow the grounds raised by the assessee and direct the AO to treat the impugned donation as corpus donation.

6. In the final result , the appeal of the assessee stands al lowed.

(This Order pronounced in Open Court on 28.6.2019 )

Leave a Reply

Close Menu
%d bloggers like this: