Unreported Decisions – October 2021
By Ajay R. Singh, Advocate and CA Rohit Shah
1. Cash Investment in House Property out of savings and streedhan
Assessee had e-filed its return of income for A.Y. 2011- 12, declaring a total income of ` 5,08,190/-. Original assessment was framed by the A.O. u/s. 143(3) after making addition of ` 7,15,000/- (being ` 3,60,000/- against investment out of current years income and ` 3,55,000/- out of Savings of earlier years). On Appeal before Ld. CIT (A), a partial relief was given and disallowance was restricted to ` 2,15,000/-. Assessee preferred appeal before Hon’ble ITAT against the same. Before both the appellate authorities and Assessing Officer, assessee demonstrated the source of these savings, the assessee has given break up of personal drawings of the cash as well as break up taken out by the husband and two unmarried sons which were, in turn, invested in House Property and hence contended that no addition was required to be made.
The Hon’ble ITAT held that: Assessee has given the reason that Indian women generally keep some savings with them to meet contingency expenses and urgent needs. The explanation given by the assessee appears to be tenableas she has demonstrated through her written submissions that the cash of ` 2,15,000/- has an element of savings for the contingencies of the family of four which also includes her “Streedhan”. Though the CIT(A) has raised the doubt that these “Streedhan” cannot be in cash, it is in fact in Indian tradition certain amount in cash is given by the relatives to the women in the family especially from the woman’s father side. Further, the assessee is also a self employer/entrepreneur who derives certain income from sale and purchase of spices and therefore, has to keep certain amount of cash in hand for purchase of the items/necessary goods for preparing spices in case of emergency/contingencies and thus, allowed the appeal.
Smt. Anu Agarwal vs. ITO Ward-1(1) [ITA No. 68/ DDN/2019; dated 24-3-2021; A.Y. 2016-17 Dehradun Circuit Bench]
2. Voluntary Contribution Received by a trust not registered u/s. 12A with a Specific Direction
Assessee, a public charitable and religious trust registered under the Indian Trust Act, 1882, filed its return of income for AY: 2014-15 declaring total income of ` Nil. The return of income filed by the assessee has been processed u/s. 143(1) of the Act, by CPC, Bengaluru and determined total income of ` 55,82,600/- by making additions towards disallowance of donations received. Before Ld. CIT(Appeals), the assessee contended that corpus donations received by any trust or institution is excluded from the income derived from property held under the trust u/s. 11(1)(d) of the Act and hence, even though trust is not registered u/s. 12AA of the Act, corpus donations cannot be included in the income of the trust. The learned CIT(A) rejected contention of the assessee and held that conditions precedent for claiming exemption u/s. 11 of the Act is registration of trust u/s. 12A of the Act. The learned CIT(A) relied on the decision of Hon’ble Supreme Court in the case of M/s. U. P. Forest Corporation & Another vs. DCIT in Civil appeal No. 9432 of 2003 dated 27-11-2007. Aggrieved by the learned CIT(A) order, the assessee preferred appeal before Hon’ble ITAT.
The submitted that donations have been received for specific purpose and such donations have been utilized for the purpose it was received. In support of the contention, assessee relied on various judicial precedents including the decision of ITAT, in the case of ITO vs. Serum Institute of India Research Foundation (2018) 169 ITD 271(Pune), Bank of India Retired Employees Medical Assistance Trust vs. ITO(Exemption) 2018 172 ITD 78(Mum) which supported Assessee’s view that this is a capital receipt and hence, it is outside scope of income. Referring to financial statement of the assessee submitted that the assessee has received donations to the specific purpose of construction of building and said donation has been used for construction of building, therefore, same is outside the scope of income of the trust.
The Hon’ble ITAT dismissing Appeal of Assessee held that:-The definition of income as defined u/s. 2 of sub-section (24) includes voluntary contribution received by any trust created wholly or partly for charitable or religious purpose. This means, for any assessee, including trust or institution voluntary contribution is income. The provisions of section 11, 12A & 12AA, deals with taxation of trust or institution. The provisions of section 11(1)(d) of the Act excludes voluntary contributions received by trust, with a specific direction that they shall form part of corpus of trust or institution. Provisions of section 12A states that provisions of section 11 & 12 shall not apply in relation to income of any trust or institution, unless such trust or institution fulfill certain conditions. As per said section one of the conditions for claiming benefit of exemption u/s. 11 & 12 of the Act is registration of trust under sub-section (aa) of the Act. From conjoint reading of the above provisions, it is very clear that income of any trust including voluntary contributions received with a specific direction is not includable in the total income of the trust, if such trust is registered u/s. 12A / 12AA of the Income Tax Act, 1961. This principle is supported by the decision of the Hon’ble Supreme Court in the case of M/s. U. P. Forest Corporation & Another vs. DCIT (supra). In view of above ITAT held that voluntary contribution received by the trust with a specific direction that they form part of corpus of the trust is income of the trust within the meaning of section 11 & 12 of the Income Tax Act, 1961. Therefore, confirmed additions made by the Assessing Officer towards disallowance of corpus donations.
Veeravel Trust vs. ITO, Exemption, Salem [ITA No. 2064/Chny/2019; dated 22-7-2021; AY 2014-15; Bench : C Chennai ITAT]