Asst. Commissioner of Income-tax (Exemption), Trivandrum v. M/s. Mata Amrithanandamayi Math
[Citation -2016-LL-0927-33]

Citation 2016-LL-0927-33
Appellant Name Asst. Commissioner of Income-tax (Exemption), Trivandrum
Respondent Name M/s. Mata Amrithanandamayi Math
Court ITAT-Cochin
Relevant Act Income-tax
Date of Order 27/09/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags voluntary contribution • specific direction • interest accrued • overriding title • notional income • corpus donation • interest earned • interest income • relief fund
Bot Summary: There is no provision under the Income Tax Act which exempts even interest income out of the deposits made out of corpus donations u/s.11(1) of the I.T.Act A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the donor. Interest on Corpus Fund:- As per section 11(1)(d), only Income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution shall be outside the scope of income. The very condition the donors have contemplating that don't spend immediately but earn interest keeping the corpus fund in the bank deposits for certain period and then spend for charity would literally deprive the appellant to have both the corpus fund and interest earned thereon as its income during the intermittent period, the period between the contribution of donation and end of the stipulated period. Accordingly, the corpus donations and the interest earned out of such 5 ITA No 185 to188/Coch/2016 corpus donations were claimed as exempt u/s 11(1)(d), as according to the assessee trust, interest gets added on to the corpus. The CIT(Appeals) has observed in Para 6.2 of the order(Asst Year 2007-08) that though the AO came to the conclusion that the interest accrued on corpus fund ought to have been treated as income of the assessee to be applied for charitable purpose and thereby cannot form part of corpus fund, but have to be treated as income to be applied for charitable purposes, nothing much has been discussed about such a treatment in the Asst. In the case of the assessee: the issue is not with regard to exempting interest income out of the deposits made of corpus funds, but the question is whether the interest earned on such corpus donations kept as deposits with a specific mandate to accrue the interest on the principal, would not amount to the 8 ITA No 185 to188/Coch/2016 corpus itself by virtue of an overriding title created as a result of the mandate. The interest from corpus deposits is also taken to the corpus fund and hence the assessee had rightly excluded the interest income on Term Deposits with Bank which were accrued but not due.


ITA No 185 to 188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13) IN INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH KOCHI BEFORE S/SHRI B P JAIN, AM & GEORGE GEORGE K, JM ITA No 185 to 188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13) Asst. Commissioner of Income Tax Vs M/s. Mata Amrithanandamayi (Exemption), Math, Room No.407, 4th Floor, Aaykar Amrithapuri, Karunagapally, Bhavan, Kawdiar, Kollam 690 525 Trivandrum 695 003 ( Appellant) (Respondent) PAN No. AATM2403M Appellant by Shri Shantom Bose Revenue By Shri R.Krishnan Date of Hearing 8th Sept 2016 Date of pronouncement 27-9-16 ORDER PER GEORGE GEORGE K,JM: These are appeals at instance of Department, directed against consolidated order of CIT(A), Trivandrum dated 02/02/2016. relevant assessment years are 2007-08 to 2009-10 and 2012-13. Common issue is raised in these appeals, hence, they were heard together and disposed of by this consolidated order. 2. Identical grounds are raised for all assessment years and they read as under:- 1 ITA No 185 to 188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13) 1. order of Id. CIT(A) Thiruvananthapuram in ITA No. 11 to 14/Exempt/KLM/CIT(A),TVM/2015-16 dated 02.02.2016 is opposed to law, facts and evidences of case, in following grounds. 2. Id. CIT(A) Thiruvananthapuram erred in deleting addition made on account of treating interest earned on corpus fund as income of assessee for following reasons :- (a) In case under consideration, assessee has treated contributions received as corpus donations eligible for exemption u/s.11(1)(d) of I.T. Act,1961. Not contended and restricting claim of exemption to extent of contributions received during year, assessee has treated interest earned out of deposits made from such contributions also as exempted u/s.11(1)(d) of I.T. Act. In such situation, neither intention of donor nor objects of trust will be fulfilled since both capital and interest will not be applied for objects of Trust in interest of beneficiaries and continue to remain unutilized perpetually. (b) Normally corpus fund denotes permanent fund kept for basic expenditures needed for administration and survival of organization. corpus fund is generally not allowed to be utilized for attainment of purposes, but interest accrued on such fund has to be utilized or accumulated. There is no provision under Income Tax Act which exempts even interest income out of deposits made out of corpus donations u/s.11(1) (d) of I.T.Act (c) donation will be treated as corpus donation only if it is accompanied by specific written direction of donor. In absence of any written direction of donor, contribution' or grant cannot be transferred to corpus fund. intention of donor is restricted to amount of corpus donation made. 3. decision of Id. CIT(A) is not acceptable as AO has rightly made addition on account of treating interest earned on corpus fund as income of assessee. 4. For these and other grounds that may be urged at time of hearing order of CIT(A) may be set aside and that of Assessing Officer may be restored on issue of deleting addition on account of treating interest earned on corpus fund as income of assessee. 3. Briefly stated, facts of case are as follows. For assessment year 2007-08 to 2009-10 and 2012-13 assessment orders were completed accepting claim of assessee that its income is exempt under section 11 of Income Tax Act,1961 (in short Act ). However, claim of exemption 2 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) under section 10(23C)(V) was rejected. While completing assessment for four assessment years, additions were made bringing to tax interest earned of corpus fund. relevant finding of AO reads as under:- 1. Interest on Corpus Fund:- As per section 11(1)(d), only Income in form of voluntary contributions made with specific direction that they shall form part of corpus of trust or institution shall be outside scope of income. As mentioned in above table (Col.A) interest on corpus fund which was added to corpus fund was Rs37,76,50,000/-. assessee was asked to produce details like total number of donors who have given specific direction to accumulate interest on corpus fund donated by them in respect of interest added to corpus during relevant year, period specified by them etc and evidences supporting same. details furnished vide letter dated 24/03/2015 are as under:- S.No. Total No. of Period of Amount Interest Remarks donors who accumul have given ation specific direction to accumulate interest on funds donated by them 1 84958 10 Yrs. 698,937,121 1. No of donors is those who have 2 23 5 Yrs 960,000 given specific direction during year. ___________ _______ 2.Int. Includes on 699,897,12 37.76 cr. current year s as well as opening balance. assessee produced copies of letters for verification. Out of it certain cases were selected and assessee was asked to produce original letters for verification, on random basis. In letters verified there is such direction. However, from this no general conclusion can be reached. Under 3 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) circumstances, interest accruing on corpus fund, need to be treated as income of assessee to be applied for charitable purposes. Hence, said interest on corpus fund amounting to Rs.37,76,50,00/- is included in total income of previous year and not considered as forming part of corpus which is exempt section 11(1)(d). 4. On further appeal, CIT(A) decided issue in favour of assessee. relevant finding of CIT(A) read as under:- 6.4. I carefully examined captioned issue. On plain reading of section 12 of Act, it is obvious that any voluntary contribution which is made with specific direction that it shall form part of corpus of 'trust would not be deemed to be income derived from property held by trust and it cannot be treated as income of receiving trust for purpose of section 11(1)(d) as well. When voluntary contribution made with specific direction that it shall form part of corpus of trust itself cannot be treated as income both u/s 11 and u/s 12 then how interest earned on such voluntary contribution kept in term deposits with banks could be treated as income of trust. By virtue of provisions of section 11(1)(a) of Act, interest received/earned from bank deposits is exempt from tax network but requisite qualification for attracting above mentioned section is that such income should be derived from property held by trust for charitable purpose. It is not disputed in instant case of appellant, that interest had been earned on deposits which are to be treated as property of appellant and section 11 of Act clearly exempt income derived from such property held by trust for charitable purpose. Here is case donation is given with condition to keep same in bank deposits, earn interest thereon, keep both principal and interest continuously with bank for stipulated period and use both fund and interest at end of stipulated period for charity. For contribution made through which interest is to be earned, appellant is actually acting as custodian until it becomes income of trust at end of stipulated period. Even after becoming income of trust after stipulated period, interest is anyhow going to be exempted u/s 11(1)(a) if it is spent for charitable purpose for which trust is created. very condition donors have contemplating that don't spend immediately but earn interest keeping corpus fund in bank deposits for certain period and then spend for charity would literally deprive appellant to have both corpus fund and interest earned thereon as its income during intermittent period, period between contribution of donation and end of stipulated period. It is not case of Assessing Officer that donations were made without specific conditions to be followed by appellant. It is also not case that appellant failed to bring out documentary evidence for donation received and verification carried out by Assessing Officer resulted in shortfalls to claim appellant had made. As argued by authorized representative unless income is received 4 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) how it could be applied for charity. income should actually be earned and cannot be due from. Income actually earned alone can be applied for charity. income which is due from is notional income and cannot be actually spent for charity purpose. This being factual position, I don't find any infirmity in stand of appellant that interest earned on corpus fund cannot be treated as its income. Reliance is placed here, in addition to decisions appellant relied on as mentioned supra, to decision of Hon'ble Kerala High Court in case of CIT vs Vanchi Trust & Another (127 ITR 227) wherein it was held that II contribution given and accepted with specific stipulation that it shall be treated only as corpus of receiving trust and not as income will fall within scope of section 12(1) and voluntary contribution so made will not be taken into description ( such contributions as are referred to in sub- section (1) ( contained in sub-section (2) and cannot be treated as income of receiving trust for purpose of section 11 ". Reliance is also placed here to decision of Hon'ble High Courts of Gujarat and Punjab & Haryana namely 1.ClT vs Sthanakvasi Vardhanman Vanik Jain Sangh (260 ITR 366(Guj)), 2.ClT vs Haryana CM Relief Fund (309 ITR 275 (P&H)) and 3.ClT vs Punjab Energy Development Agency (323 ITR 463 (P&H)). In view of above, I am of considered opinion that Assessing Officer has not justified stand taken in treating interest accrued and credited to corpus fund as income of appellant and bringing same to tax. Accordingly, addition made on account of treating interest earned on corpus fund as income of appellant trust is hereby deleted. Appeal on this ground hence, is allowed. 5. Aggrieved, Revenue is in appeal before us. Ld. D.R relied upon findings of Assessing Officer. On other hand, Ld. A.R reiterated submissions made before income tax authorities and relied on findings/ conclusions of Ld. CIT(A). 6. We have heard rival submissions and perused material on record. assessee was in receipt of contributions from donors who had made specific condition that donation was to be treated as corpus donations and interest earned thereon, has also to be added to corpus. conditions on which contributions are made are regulated by donors and hence assessee trust had no other go, but to follow directions laid down by donors. Accordingly, corpus donations and interest earned out of such 5 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) corpus donations were claimed as exempt u/s 11(1)(d), as according to assessee trust, interest gets added on to corpus. Assessing Officer did not agree to this treatment with regard to interest earned and hence, included it as income u/s 11 (1) of Act. 6.1 It was case of AO that assessee had produced copies of letters for verification and on such verification, AO has found out that there is specific direction from donors to accumulate interest to principal corpus fund deposits for periods ranging from 5 to 12 years. However, according to him, no general conclusion can be reached. He, therefore concluded that interest accruing on corpus fund deposits need to be treated as income of assessee to be applied for charitable purposes and shall not form part of corpus fund for exemption u/s 11(1 )(d) of IT Act. 6.2 CIT(Appeals) found that AO had made verification of original letters produced by assessee and got satisfied both with respect to donations made and conditions contemplated therein. CIT(Appeals) has observed in Para 6.2 of order(Asst Year 2007-08) that though AO came to conclusion that interest accrued on corpus fund ought to have been treated as income of assessee to be applied for charitable purpose and thereby cannot form part of corpus fund, but have to be treated as income to be applied for charitable purposes, nothing much has been discussed about such treatment in Asst. order. CIT(Appeals) observed that AO has 6 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) not given finding as to why interest accrued should be treated as income of assessee and how it would not form part of corpus fund to be eligible for exemption. AO has merely remarked after seeing confirmations "from this no general conclusion can be reached". findings of CIT(Appeals) are confirmed in Para 6.4 of appellate order for Asst.Year 2007-08. CIT(Appeals) relying on decision of Kerala High Court in case of CIT Vs. Vanchi Trust and another, 127 ITR 227 (Ker), HC of Gujarat in case of CIT Vs. Sthanak Vasi Vardhan Man Vanik Jain Sangh, 260 ITR 366 (Guj) and Punjab & Haryana HC in cases of CIT Vs. Hariyana CM Relief Fund, 309 ITR 275 (P & H) and CIT Vs. Punjab Energy Development Agency, 323 ITR 463 ( P & H), held that interest accrued and credited to corpus fund cannot be treated as income of assessee. conclusions drawn by CIT(Appeals) are: i) interest got added on to deposit by virtue of specific directions to do so and both principal and interest continuously remained with bank. ii) income does not reach hands of assessee as it gets added on to deposit. In other words, income should actually be earned and cannot be due from, which is notional income and cannot be actually spent for charitable purposes. 7 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) iii) It is not case of AO that assessee had failed to bring out documentary evidence for donations received and mandate given. All these were verified by AO. 6.3 Thus, after going into factual and legal position, CIT(A) came to conclusion that Assessing Officer is not justified in treating interest accrued and credited to corpus fund as income of appellant. 6.4 In Grounds of Appeal, in point 2(a), Department has taken stand that neither intention of donor nor objects of trust will be fulfilled since both capital and interest will not be applied for objects of trust in interest of beneficiaries and continue to remain unutilised perpetually. This argument is incorrect since mandate is for specific number of years for which period alone interest gets added to corpus. Thereafter interest on such corpus becomes available for objects of trust. Therefore, this argument of department is incorrect. 6.5 In Ground 2(b) department has taken stand that there is no provision under Income Tax Act which exempts interest income out of deposits made out of corpus donations u/s 11 (1) (d) of IT Act.. In case of assessee: issue is not with regard to exempting interest income out of deposits made of corpus funds, but question is whether interest earned on such corpus donations kept as deposits with specific mandate to accrue interest on principal, would not amount to 8 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) corpus itself by virtue of overriding title created as result of mandate. 6.6 In Ground 2 (c), department has taken ground that intention of donor can be restricted only to amount of corpus donations made and not income earned thereon. There is no such restriction in Income Tax Act whatsoever and therefore that ground is also not sustainable. Unless income is received in particular year, it cannot be applied. interest from corpus deposits is also taken to corpus fund and hence assessee had rightly excluded interest income on Term Deposits with Bank which were accrued but not due. This is being consistently followed by assessee. 6.7 In ITO vs. Shrisachyaya Mataji Trust Osian, Jodhpur ITA No.538/Jodh/2013 dated 09/05/2014, Jodhpur bench of ITAT held that if voluntary contribution is made with specific direction, it shall be treated as capital of trust for carrying on its charitable or religious activities. Then such income falls under section 11 (1) (d) as is not liable to tax. If intention of donor is to give that money to trust to keep in trust account in deposit and utilise income therefrom for carrying on particular activity, it satisfies definition part of corpus. assessee would be entitled to benefit of exemptions from payment of tax. 9 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) 7. In view of aforesaid reasoning and judicial pronouncements, we hold that CIT(A) s order is correct and in accordance with law and no interference is called for. It is ordered accordingly. 8. In result, appeals field by Revenue are dismissed. Order pronounced in open Court on this 27th day of Sept 2016. Sd/- Sd/- (B P JAIN) (GEORGE GEORGE K ) Accountant Member Judicial Member Cochin: Dated 27th Sept 2016 Raj* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT, 5. DR 6. Guard File By order Assistant Registrar ITAT, COCHIN 10 ITA No 185 to188/Coch/2016 (Asst Years 2007-08 to 2009-10 & 2012-13 ) 1 Date of dictation 26/09/2016 2 Dt on which typed draft is placed before dictating Member 26/09/2016 3 Dt on which approved draft comes to Sr PS/PS 4 Dt on which fair order is placed before dictating Member 5 Dt of pronouncement 6 Dt on which file goes to Bench Clerk 7 Dt on which file goes to Head Clerk 8 Dt on which file goes to AR 9 Dt of dispatch of order 11 Asst. Commissioner of Income-tax (Exemption), Trivandrum v. M/s. Mata Amrithanandamayi Math
Report Error