DIT (Exemption) vs. Sri Ramakrishna Seva Ashram: 258 CTR 201 (Kar):
The assessee, a charitable trust, was registered u/s. 12A of the Income-tax Act, 1961 in May 1991 and was allowed exemption u/s. 11 of the Act since then. A certificate u/s. 80G(5) of the Act was also issued to the assessee trust. The assessee’s application dated 02-02-2009 for continuation of certificate u/s. 80G was rejected on the ground that the donations to the rural project fund are not corpus donations, as such, the same are not credited to corpus account. No details of the donors is furnished in spite of the specific directions. Such donations have not been considered for computation of 85% application u/s. 11(1) of the Act for the A. Ys. 2005-06 to 2007-08. The Tribunal allowed the assessee’s appeal and directed the DIT(Exemption) to grant continuation of the 80G certificate.
On appeal by the Revenue, the following question was raised before the Karnataka High Court:
“If the assessee receives contributions for charitable purposes and does not show them in the statement of account as the ‘corpus fund’, but, shows the said amount under a different specific head, does it cease to be a corpus fund to be eligible for the benefit u/s. 11(1)(d) of the Act.?”
The High Court upheld the decision of the Tribunal, dismissed the appeal filed by the Revenue and held as under:
“i) The word ‘corpus’ is used in the context of IT Act. This can be understood in the context of a capital opposed to expenditure. It is a capital of an assessee; a capital of an estate, capital of a trust; a capital of an institution. Therefore, if any voluntary contribution is made with a specific direction, then it shall be treated as the capital of the trust for carrying on its charitable or religious activities. Then such an income falls u/s. 11(1)(d) and is not liable to tax. Therefore, it is not necessary that a voluntary contribution should be made with a specific direction to treat it as corpus.
ii) If the intention of the donor is to give that money to a trust which they will keep in trust account in deposit and the income from the same is utilized for carrying on a particular activity, it satisfies the definition part of the corpus. The assessee would be entitled to the benefit of exemption from payment of tax levied. From whatever angle it may be seen, the deposited amount cannot be said to be income in the hands of the recipient trust.
iii) Similarly, the assessee after receiving the amount keeps the amount in deposit and only utilises the income from the deposit to carry out the charitable activities, then also the said amount would be a contribution to the corpus of the trust and the nomenclature in which the amount is kept in deposit is of no relevance as long as the contribution received are kept in deposit as capital and only the income from the said capital which is to be utilised for carrying on charitable and religious activities of the institute/corpus of the trust, for which section 11(1)(d) is attracted and the said income is not liable to tax under the Act. In so far as the argument that the person who made these contributions do not specifically direct that they shall form part of the corpus of the trust is concerned, it has no substance. In view of the language employed in section 11(1)(d), the requirement is that the voluntary contributions have to be made with a specific direction. The law does not require that the said direction should be in writing. In the absence of the direction in writing, the only way that one can find out whether there was a specific direction and to find out how the money so paid is utilised. If the money so received by way of voluntary conrtributions, if it is meant to be used for the leprosy patients and is credited to a particular account and from the income from the said capital, the said activity is carried on, the requirement of section 11(1)(d) is complied with.
iv) In the instant case from records it is seen that those people who have paid by way of donation that includes the cheque with a letter with a specific direction, which is in compliance with section 11(1)(d). But, in case the contributions are made without cheque, i.e., by cash, and oral direction has been issued to the trust to utilise the said fund for the purpose of treating the leprosy patients and if such amounts are credited to the account meant for it, even then the requirement of section 11(1)(d) is complied with.
v) The attitude of the IT authorities is surprising who are over-technical in denying the benefit to the deserving institutions which are rendering laudable services to the rural masses. By not granting tax exemption, which they deserve, the authorities have hampered the said social activities of the trust and they are made to waste their precious time, energy and money in fighting this litigation. Unfortunately, the persons who took a decision to file an appeal before this court are wasting the precious time of the trust which could have been used in the social service. Public money and the time of this court is also wasted. This attitude on the part of the Department cannot be countenanced. Therefore, it is appropriate to impose cost incurred by the assessee for fighting litigation so that the Department would be more careful in taking decision to file appeal in such frivolous cases by ignoring the policy of the Government, viz., National Litigation Policy, 2011.
vi) Hence, the appeal is dismissed with cost of Rs. 1,00,000/-, to be deposited by the Department within one month from today in favour of the rural project fund of the assessee trust.”
