IN INCOME TAX APPELLATE TRIBUNAL, BENCH- A, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA No.1086 /Bang/2016 (Asst. Year 2010-11) Dy. Commissioner of Income-tax (E), Circle-1, Bengaluru. . Appellant Vs. M/s All India Granite Association, No.429/7, 12th Cross, Sadashivnagar, Bengaluru-560 080. . Respondent Appellant by : Shri DK Jha, Addl. CIT Respondent by : Smt. Sheetal, Advocate Date of Hearing : 25-08-2016 Date of Pronouncement : -09-2016 ORDER PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER:` This appeal by assessee is directed against order of Commissioner of Income-tax (Appeals), Bengaluru 14 dated 22/3/2016 and it pertains to assessment year 2010-11. ITA No.1086/B/16 2 2. return of income was filed by assessee on 27.09.2010 vide Acknowledgement No.1702001271 with ADIT(E), Circle- 17(2), Bangalore. return was processed on 13.04.2011 and it resulted in refund of Rs.4,66,200/-. case was picked up for scrutiny and statutory notice U/S 143(2) of Income Tax Act, 1961 dated 13.09.2011 was issued to assessee and was duly served. Subsequently, notice u/s 142(1) of I.T. Act dated 22.06.2012 was issued to assessee. 3. assessee was asked to clarify charitable activities in view of amendment to sec 2(l5)rws 13(8) of Income Tax Act, 1961 and other details were also called for AY 2010-11. 4. assessee has been granted 12AA registration vide order in No. Trust/728/10ANoI.AlIA.62 dated 20.02.1987. main objects of association are:- (i) To promote Granite and other Natural Stones and Allied Industries. ITA No.1086/B/16 3 (ii) To promote auxiliary industries for Natural Stones i.e., Mining, Quarrying, Processing, Machineries, Tools, Equipment, Consumables etc. (iii) To promote and exchange technological developments in field of Natural Stone Industries of India i.e., technological upgradation. (iv) To promote dynamic healthy and co-operative approach to Natural Stone Industry/Trade in India and abroad. 5. learned AO observed that assessee was asked to explain activities and assessee has given clarifications. It is seen that assessee is mainly engaged in promotion of Granite and other Natural Stones and auxiliary industries for Natural Stones i.e., Mining, Quarrying, Processing, Machineries, Tools, Equipment, Consumables etc. assessee has taken amount of Rs. 33,19,036/- straight to Receipts side and has not offered as income. Further it is noticed that this amount has been received from members as life ITA No.1086/B/16 4 membership and has been treated as corpus. 6. ld. AO further held that assessee has not filed any confirmation to show that amount has been received as corpus. However, in computation of income, assessee has claimed exemption u/s 11(1)( d) of Income Tax Act. Which cannot be allowed to assessee for reason that specific confirmation from donor stating that amount towards corpus has to be filed. And this amount is treated as income for A.Y. 2010-11. 7. During course of appeal before CIT(A) hearing assessee produced copy of Ledger a/c of association bank a/c details etc. wherein receipts were identifiable to person who has become life member in ledger account and also assessee contended as under:- assessee has furnished details of names and address of corpus donors who had become life members of society. list is placed on record in Annexure-A for your kind perusal. In fact Memorandum of Association and rules and ITA No.1086/B/16 5 Regulations of assessee, under Clause 6 which deals with Aims and Objectives, in sub-clause q clearly states that one of objective is to maintain corpus fund of all life membership fees . In other words one of objectives of assessee is to treat life membership fees as corpus fund of assessee. This has been specifically stated, made part of Rules and Regulations of assessees society. Accordingly all life membership fees, which forms part of capital fund of assessee and accordingly it is excluded from gross income of assessee. It has to be appreciated that list comprises of names of members, type of membership and membership number allotted to them and their full postal address. Hence by no stretch imagination, these fees can be equated with anonymous donations. Before answering to observation that no confirmation to show that amount has received as corpus it is hereby explained real intention of Sec.11(1)(d) of Act for exempting corpus donations from income of charitable institution. Section 11(1)(d) grants exemption to donations made with specific direction that they shall form part of corpus it is hereby explained real intention of Sec.11(1)(d) grants exemption to donations made with ITA No.1086/B/16 6 specific direction that they shall form part of corpus, but benefit of this section is available only to trusts enjoying benefit of exemption U/s.11. Kindly note that assessee is registered U/s.12A of Act, enjoying benefit of exemption U/s.11. In case of Hakmuddin Mulla Hassubhai Singaporewala Charitable Trust vs.ITO(1985)23TTJ(Bom)43, Bombay bench of Tribunal held that in case of trust whose deed contains stipulation that donations received shall form part of corpus of trust, it shall not be necessary for trust to obtain separate direction letter from donor. In Director of Income tax (Exemptions) & ANR vs. Sri Ramakrishna Seva Ashrama (2013) 258 CTR 0201, in Para 17, High Court of Karnataka (the Jurisdictional High Court held that argument that persons who made these contributions does not specifically direct, that they shall form part of corpus of Trust is concerned, was rejected. In view of language employed in Clause (b) of Sub- Section (a) of Section 11, requirement is that voluntary contributions have to be made with specific direction. law does not require that said ITA No.1086/B/16 7 direction should be in writing. In absence of direction in writing, only way that one can find out whether there was specific direction and to find out how money so paid it is utilize. In view of aforesaid factual and legal position, we submit that corpus donation of Rs.33,19,036/- cannot be treated as income of assessee liable tax and we request you to set aside this disallowance. 8. CIT(A) stated that he had gone through arguments, ledger, statement of bank a/c copies filed by assessee where ledger extract and bank account clearly reflects cheque details, name of person who has paid and who has become life member and all receipts are clearly accounted to corpus as per By-laws of association, confirmation per say, again, from these members does not have much relevance. Therefore, CIT(A) agreed with view of assessee and Asseessee s appeal allowed. 9. Aggrieved department has filed following grounds of appeal:- ITA No.1086/B/16 8 (i). Whether CIT(A) has failed to appreciate fact that provisions of Sec.11(1)(d) is clear about nature of receipt being voluntary contribution and not anything else in whatever name called. (ii). Whether CIT(A) has failed to appreciate fact that voluntary contribution made should be with specific direction to treat contributed amount as part of corpus, for same to be qualified for exemption u/s.11(1)(d). iii). Whether CIT(A)has failed to appreciate fact assessee has no power/discretion to treat and classify life membership fee as corpus. iv). Whether, in given facts and circumstances, CIT(A) is correct in allowing appeal filed by assessee based on ledger extracts and bank account details on which names of persons who have paid and become life members, are appearing without going into provisions of Sec.11(1)(d). ITA No.1086/B/16 9 10. We heard both parties. In case of Hakumddin Mulla Hassubhai Singaporewala Charitable Trust Vs. ITO(1985) 23 TTJ(Bom) 43, Bombay bench of Tribunal held that in case of trust whose deed contains stipulation that donations received shall from part of corpus of trust, it shall not be necessary for trust to obtain separate direction letter from donor. 11. Respectfully following ratio of Bombay Tribunal we dismiss departmental appeal. In result, appeal of Department is dismissed. Order pronounced in open court on 21st September, 2016. Sd/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER Bangalore Dated : 21/09/2016 Vms ITA No.1086/B/16 10 Copy to :1. Assessee 2. Revenue 3.The CIT concerned. 4.The CIT(A) concerned. 5.DR 6.GF By order Asst. Registrar, ITAT, Bangalore. Dy. Commissioner of Income-tax (E), Circle-1, Bengaluru v. M/s All India Granite Association