Case Law Details
Shree Swaminarayan Bhagwan Vs ITO (ITAT Ahmedabad)
Introduction: In a significant decision, the Income Tax Appellate Tribunal (ITAT) in Ahmedabad ruled in favor of Shree Swaminarayan Bhagwan, a religious trust, providing tax exemption on a gold donation it received. The decision was based on the stipulations outlined under Section 11(1)(d) of the Income Tax Act, considering the gold donation as corpus donation since it was used for the specific purpose of preparing an art gallery depicting the life and teachings of Bhagawan Swaminarayan.
Analysis: The case primarily revolved around whether the gold donation received by the trust was eligible for exemption under Section 11(1)(d) of the Income Tax Act. The tax department argued that there was no specific direction mentioned on the receipts, hence disallowing it as corpus donation. However, the ITAT found the trust had maintained detailed records indicating the specific use of the donation and had also obtained confirmation from donors that the gold was indeed a corpus donation meant for the art gallery and ceiling of the gallery room.
ITAT held that evidences provided by the assessee trust are more specific about the donations in Gold to be in respect of corpus gold fund and therefore, it is a corpus fund of the trust which is allowable as exempt under Section 11(1)(d) of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals), National Faceless Appeal Centre (in short “NFAC”), Delhi on 09.12.2022 for A.Y. 2016-17.
2. The grounds of appeal raised by the assessee are as under:
“1. Ld. CIT(A) (NFAC) erred in law and on facts in confirming action of AO denying exemption of Rs. 20,92,270/- claimed u/s. 11(1)(d) of the Act.
2. CIT(A) (NFAC) erred in law and on facts in confirming action of AO to treat donation received in Gold for specific purpose inpreparingart gallery to depict life & preaching of Bhagwan Swaminarayanas general donation.
3. CIT(A) (NFAC) ought to have granted exemption claimed by the Trust u/s 11(1)(d) of the Act appreciating the documents and pictures submitted in support of the fact that Gold donation was indeed received towards corpus.
3. Levy of interest u/s 234A/234B, 234C & 234D of the Act is justified.
4. Initiation of penalty proceedings u/s 271(1)(c) of the Act is unjustified.”
3. The assessee is a public trust and registered under Bombay Public Trust Act, 1950. The trust is also registered with Income Tax Department and has obtained registration under Section 12A of the Act dated 28.08.1981. The object of the trust is religious activities. The assessee trust filed its return of income for A.Y. 2016-17 in ITR-7 on 11.01.2017 declaring total income at Rs. 4,01,750/-. The case was selected for complete scrutiny to examine whether the requirement for filing Form 10B has been complied with. Notice under Section 143(2) dated 18.09.2017 and notice under Section 142(1) alongwith detail questionnaire dated 20.06.2018 was issued and served to the assessee. In response to the notices, the assessee trust submitted the detail along copy of Audit Report, Balance Sheet, Income and Expenditure Account and other details. The Assessing Officer observed that the trust has received interest, dividend, donation and capital gain during the year under consideration. The trust has shown the gross receipt of Rs. 1,69,10,563/- and applied income of Rs. 55,93,987/- for revenue expenses and Rs. 47,25,261/- for capital expenses. The assessee claimed exemption under Section 11(1)(d) of the Act of Rs. 42,97,630/- and exemption under Section 11(1)(a) of the Act of Rs. 18,91,940/-. The Assessing Officer further observed that the Trust has claimed exemption under Section 11(1)(d) of the Act being corpus donation earmarked funds of Rs. 42,97,270/-. On verification of corpus donation receipt, it was observed by the Assessing Officer that assessee has shown total corpus donation of Rs. 42,97,630/-. The whole corpus donation has been divided into three parts that is publication fund, building fund and Gold fund. The assessee has shown Rs. 20,92,270/- in Gold fund. However, the Assessing Officer observed that in all the receipts of Gold fund no specific direction has been mentioned. After taking cognizance of the evidences the Assessing Officer held that the assessee has received donation in the form of Gold but there is no specific purpose of donation is mentioned and therefore, the said donation cannot be said as corpus donation. The Assessing Officer disallowed Rs. 22,05,360/- in respect of claim on exemption under Section 11(1)(d) of the Act of corpus donation.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.
5. The Ld. A.R. submitted that the Assessing Officer was not right in denying the exemption under Section 11(1)(d) of Rs. 20,92,270/- toward Gold fund. As the Gold fund donation is corpus fund for trust and the same is exempt under Section 11(1)(d) of the Act. Not allowing exemption on Gold donation is not as per law. The Ld. A.R. further submitted that trust is developing art gallery and for the said purpose, trust appointed artists which prepares painting based on life and preaching of Bhagawan Swaminarayan and Sanatan Dharma. Gold Foils are used in making these printing and thus, the Gold is used in printing are in gallery ceiling and trust is accepting donation in Gold for the specific purpose to prepare art for art gallery and ceiling of gallery room. More than 600 arts are display at gallery room and some art photos were also submitted before the revenue authorities. The Ld. A.R. further submitted that trust is maintaining separate Gold corpus fund donation receipt book for receiving Gold. The said corpus Gold receipt book was also submitted before the Assessing Officer as well as before the CIT(A). Trust is also maintaining separate ledger for Gold corpus fund in its books and the said books on account are regularly audited by Charted Accountant. The Ld. A.R. submitted that Gold is received for specific purpose from donor and donor is also aware that the said Gold donation is corpus donation and it will be utilized only for art in gallery and ceiling of gallery room. As Gold donation of Rs. 20,92,270/- was received for specific purpose the trust is eligible to claim under Section 11(1)(d) of the Act. The Ld. A.R. pointed out the Balance Sheet as well as Profit & Loss Account where the Gold corpus fund was separately indicated. The Ld. A.R. also pointed out confirmations from donors which was submitted before the CIT(A), thereby specifically mentioned that the donation is towards the corpus donation which is in form of Gold.
6. The Ld. D.R. submitted that before the Assessing Officer the assessee never submitted the confirmation from the donor and the said confirmations has not mentioned in details such as debts or the purpose of the donation in Gold. Therefore, the CIT(A) has rightly confirmed the disallowance.
7. Heard both the parties and perused all the relevant material available on record. From the perusal of the confirmations from donors regarding corpus donation which was in the form of Gold the observation made by the CIT(A) that it does not contains the details of donor appears to be incorrect. The CIT(A) has not taken proper cognizance of the confirmation for Gold given as corpus fund. The CIT(A) has also not taken cognizance of the Profit & Loss Account where it was specifically mentioned that is donation in Gold is related to Gold corpus fund and it is specifically used for gallery of the temples situated at various places. The ledger account of corpus fund Gold and the Annual Accounts and Audit Report is harping that the donation in Gold and actually for corpus donation. At the time of hearing the Ld. A.R. has also submitted that the Gold corpus fund was already accepted in the previous and the subsequent year by the Revenue and only in this year the same has been disputed. The Ld. A.R. also pointed out the decision of Ahmedabad Bench (Third Member Tribunal) ITO vs. Sardar Vallabhbhai Education Society (2012) 26 taxmann.com 174 (Ahmedabad) wherein it is held that where assessee society furnished donation receipts with complete names and addresses of donors for donations towards corpus fund of society, same would be exempt under Section 11 of the Act. The evidences provided by the assessee trust are more specific about the donations in Gold to be in respect of corpus gold fund and therefore, it is a corpus fund of the trust which is allowable as exempt under Section 11(1)(d) of the Act. The decision of the Tribunal is also relevant and apt in the present case. Hence, the Assessing Officer as well as CIT(A) was not right in denying the claim of exemption under Section 11(1)(d) of the Act.
8. In result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 24/05/2023
