Case Law Details
CIT (Exemption) Vs Om Prakash Jindal Gramin Jan Kalyan Sansthan (Delhi High Court)
1. Present appeal has been filed challenging the order dated 03rd September, 2019 passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) in ITA No. 6012/Del./2015 for the Assessment Year 2010-11.
2. Learned counsel for the Appellant states that the ITAT has erred in upholding the order of CIT(A) allowing the utilization of corpus fund of Rs.19 crore towards revenue expenditure as application of income under Section 11(1)(d) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). He states that after transfer of corpus fund of Rs.19 crore to general reserve, the Respondent/Assessee has purchased land worth Rs. 5,27,45,958/- only and has given a donation of Rs. 13.4 crore to another Trust.
3. He further states that the impugned decision implies that a Trust can transfer funds from corpus to general reserve and still claim that the department adjudicate the real nature of the expenditure incurred from general reserve account and grant exemption. According to him, Section 11(1)(d) does not permit exemption in cases where donation received is transferred from corpus to general reserve even if the nature of expense incurred from general reserve is charitable in nature.
4. A perusal of the paper book reveals that both CIT(A) and ITAT have set aside the assessment order on the ground that Rs.19 crore cannot be added as additional income of the Trust since exemption on corpus donation is allowed on purchase of land, as it is a purchase of capital asset. This Court also finds that there is no ground of appeal either before the ITAT or before this Court challenging the concurrent finding of the CIT(A) and the ITAT that the substance of the transaction was that the corpus fund had been utilised for a purchase of a capital asset.
5. This Court is further in agreement with the findings of the CIT(A) and ITAT that the substance of the transaction must prevail over the form and, if required, the Appellant must examine the nature of the transaction. In fact, this approach is commended by the Allahabad High Court in Sri Dwarkadheesh Charitable Trust vs. Income Tax Officer, “C” Ward [(1975) 98 ITR 557(AII)], which has been quoted by the appellant in the present appeal. The relevant portion of the Allahabad High Court judgment is reproduced hereinbelow:-
“18. Normally, if a charitable trust mikes a gift of property which constitutes its own capital or corpus, it will be income in the hands of the receiving trust. The receiving trust will be free to apply or spend the property which is the subject-matter of gift for any of the purposes for which it can spend money or property; though the property was capital in the hands of the donor trust, it will be deemed to be income in the hands of the receiving trust. But, if the donor trust makes the gift on the express condition that the subject-matter will constitute capital or corpus of the receiving trust, and the donee-trust accepts the gift or donation subject to the condition that it will form part of the capital or corpus of the donee-trust, the subject-matter of the donation becomes part of the corpus or capital of the donee-trust. In such, a case the subject-matter of the donation will not constitute, or be deemed to be, the income of the receiving trust. There is no law which prohibits such a transaction. A bilateral contract to that effect is perfectly valid and enforceable. If, in spite of it, the receiving trust spends the donation as if it were its income, the receiving trust would be guilty of misapplication of its assets and could be restrained in suitable proceedings from committing breach of trust.”
6. Consequently, this Court is of the view that no substantial question of law arises for consideration in the present appeal. Accordingly, the same is dismissed.
