Case Law Details

Case Name : Kittur Rani Channamma Vs ACIT (ITAT Panaji)
Appeal Number : ITA No. 269 & 417/PNJ/2013 and S.A. No. 13/PNJ/2014
Date of Judgement/Order : 12/06/2015
Related Assessment Year : 2007-08
Courts : All ITAT (7336) ITAT Panaji (8)

Brief Facts of the Case and Question

Brief Facts: Assessee is running a residential school at Kittur. Assessee is a charitable trust within the meaning of sec. 2(15) of the Act claiming exemption u/s.11. Assessing Officer found that the assessee has received a sum of Rs. 29,03,109/- on account of sale of Women’s Day Flags and the same has been credited to the capital fund and he treated the same as revenue receipt. On Appeal Honourable ITAT has held that  sale proceeds of flags on Women’s Day are in the nature of capital receipts.

Question Raised:

  1. Whether the sale proceeds of flags on Women’s Day are in the nature of capital receipts?
  2. Whether the treatment of sale proceeds of books as capital receipt is correct?

Contention of the Assessee

Assessee contended that he has been specifically directed and permitted by the Govt. of Karnataka for distributing flags of Kittur Rani Channamma which is commemorated as Women’s Day. Necessary documents/orders from the Govt. of Karnataka were supplied. It was explained that the intention of the Govt. was clear about creation of separate capital fund out of sale proceeds received on account of sale of flags so the same cannot be treated as revenue receipt or Income of the Trust.

Assessee further contended that fund shall be utilized mainly for incurring recurring and non-recurring expenditure connected with the Kittur Rani Channamma Memorial Primary & High School for Girls at Kittur in Belgaum. Therefore, the sale receipts from the flags have been treated as capital receipts.

Contention of Revenue:

AO contended that there is no specific government direction to treat the sale of flags as capital receipts. He further contended that as per sec. 2(24)(iia), all voluntary contributions received by the trust in whatever manner is income of such trust and income from the sale of flags cannot be termed as contribution towards corpus of the trust.

Held by ITAT:

From the reading of Assessment order it is observed that A.O’s decision is simply based on the fact that no direction letters were given by the donors by which receipts from sale of flags can be treated as capital receipt.

The Revenue authorities have ignored the application of sale proceeds of flags of Women’s Day when the Govt. has specifically ordered for utilization of the funds for the purposes of maintenance of school buildings. Thus, it can be safely concluded that the intentions were clear that the sale proceeds have to be treated as capital receipts. A similar view was taken by the Coordinate Benches of the Tribunal Mumbai in the case of DDIT(E)1(2) Vs. Swati Education Trust in I.T.A.No. 2981/Mum/2009.

ITAT further found that sale proceeds have been utilized for specific purpose of maintenance of school building and other infrastructure, thereby fulfilling the requirement of sec. 11(1 )(d) of the Act. Since in the case of the assessee, no such violation of corpus being utilized for objects of the trust has been noticed or established by the Assessing Office , so it cannot be held that the sale proceeds of flags on Women’s Day are not in the nature of capital receipts.

ITAT set aside the findings of the Ld. CIT(A) and direct the Assessing Officer to treat the sale proceeds as a capital receipt.

Download Judgment/Order

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