Bombay High Court

Smt. Santaben Natwarlal ... vs Asstt. Director Of Income Tax on 14 October, 2003

Equivalent citations: (2004) 91 TTJ Mumbai 331

ORDER

I.P. Bansal, J.M.

This is an appeal filed by the assessee and is directed against the order of Commissioner (Appeals), dated 15--10-1997, for the assessment year 1993-94.

2. The grounds of appeal read as under :

"Ground No. 1: treatment of corpus donation of Rs. 9,69,675 as ordinary donation.

1.1 the appellant submits that the honouriable Commissioner (Appeals) had erred in treating the corpus donation of Rs. 9,69,676 as voluntary donation and thereby considering it as income of the trust.

1.2 the appellant submits that the donation was given with a specific direction to be credited to the corpus, therefore, the said donation was to be considered as a corpus donation only.

1.3 The appellant also submits that the corpus donation has been invested in approved investments and not spent on charitable activities as stated by the Commissioner (Appeals).

Ground No. 2 : donation to Nathadwara trust-Rs. 1, 75, 000

2.1 the appellant submits that the learned Commissioner (Appeals) has erred in holding that the donation to Nathdwara trust of Rs. 1,75,000 attracts the provision of section 13(l)(c) and, therefore, the assessee is not entitled to exemption under section 11 of the Income Tax Act.

2.2 the appellant submits that the said donation did not attract the provision of section 13 as the donation was for general public utility and not for personal benefit.

2.3 the appellant further submits that the learned Commissioner (Appeals) ought to have considered that the learned Director of income-tax (Exemption) had himself granted certificate under section- 80G, after considering all the facts including the above profit. "

3. The assessee is a charitable trust created after the death of Smt. Shantadevi. According to the will of Smt. Shantadevi, gold jewellery of Rs. 9,69,675 was given as donation to the assessee trust. It is the claim of the assessee that the said jewellery was received as corpus of the trust and accordingly deductible from income under section 11(l)(d). The deduction from income under section 11(l)(d) was denied to assessee by assessing officer on the ground that from will it is not clear that the said donation was given to the corpus of the trust. It is the case of the assessee that the donation was given only to the corpus of the trust which is clear from the will as well as from the letter of executor of will. For the sake of convenience the relevant portion of the translation of will of para 3 (original will is in Gujarathi) and a copy of the letter of executor of the will are reproduced below :

"3. My property No. 17'as described whatever ornaments are there my husband to form a trust and in that trust same to be kept if no trust is made, to be given to a trust which is going on."

(Property mentioned at Sr. No. 17 is gold ornaments weighing 2,700 gms. valuing Rs. 6,82,560)

Letter of Executor

Date : 23-3-1992

To,

The Trustees of Smt. Shantaben

Natvarlal Hargovandas Foundation,

109, V P Road, Bombay-400004

Re : Donation of Gold ornaments into the corpus of the trust

Dear Sirs,

It was the intention of the deceased Smt. Shantaben Natvarlal Shah as laid down in her will dated 8-11-1990, to donate her gold ornaments to the newly created charitable trust formed under the Public Trust Act. Accordingly, I hand over the following moveable articles of gold ornaments to your foundation trust, herewith :

Chain/sanklas,

Patla and bangles, Bajubands,

Waist chain,

Chandan hars, and

Sundry items, viz.,

Chuda set, ring, chakta, challa, collar, etc.

Total weight: Grams 2,700.000;

You are requested to take the physical possession of the abovesaid gold ornaments by way of donation as per the will of Late Smt. Shantaben Natvarlal Shah, and please note that this donation is towards the corpus of the trust. Kindly accept this donation in the form of gold ornaments. Please acknowledge receipt of the gold ornaments, and issue your official receipt of the donation as above.

With regards,

Yours faithfully,

Sd/-

(executor of the will of

late Smt. Shantaben Natvarlal)

Taken possession of and accepted

The above said gold ornaments

Weighing : grams 2,700.000

At Bombay this 23-3-1992"

4. The learned Authorized Representative of the assessee after referring to the abovementioned documents contended that combined reading of both these documents will suggest that the donation made was only towards corpus of the trust. Therefore, he pleaded that the claim of assessee has wrongly been disallowed. He further placed reliance on the decision in the case of K Marayan Setty Ramarathanamma Trust v. Asstt. CIT (1998) 66 ITD 138 (Bang) to contend that in a case where there was no mention in the will regarding donation to be made towards corpus of the trust, such donation by executor of the will towards corpus of the trust should be allowed under section 11 (1) (d).

5. The learned departmental Representative, however, relied on the orders of authorities below.

6. We have carefully considered the rival submissions in the light of material placed before us. We have already reproduced the relevant portion of will and the letter given by executor of the will. Reading both together, the intention of the donor as well as executor is clear that the donation is only towards corpus of the trust. The case law relied upon by the learned Authorised Representative of the assessee also support the case of assessee. Therefore, we hold that the donation was towards corpus of the trust and should be considered entitled to deduction under section 11(l)(d). We direct accordingly. This ground is, therefore, allowed.

7. Apropos ground No. 2, donation made by the assessee to Nathdwara Trust of Rs. 1,75,000 has been held not entitled to exemption under section 11 on the basis of application of section 13(l)(c). The relevant observations of assessing officer as contained at p. 3 in this regard are as under:

"Donation given: In the corpus of the proceedings it is found that the trust has donated Rs. 1,75,000 to Nathdwara Temple Board which is religious in nature. The assessee trust entered into an agreement with trustees of Nathdwara Temple Board. The agreement shows that trustee, his family members and relatives have been reserved by way of staying in Dharmshala free of charge for a period of 30 days in a year. There is an element of quid pro quo in this transaction. It is not an application towards objects of trust. But it is an application of the trust income towards permanent facility for personal stay for trustee/relative without paying any compensation. This part of trust property or income of trust is utilised in contravention to the provisions mentioned in section 13(l)(c) of Income Tax Act. Under the circumstances, benefit of income under section 11 is liable to be rejected to the entire income of the assessee-trust."

8. According to the agreement entered into between the assessee and Nathdwara Temple Board, the members of assessee-trust on their recommendations have the right to use and occupy the block to be constructed with the help of fund donated and such user is restricted to 30 days in a year and was free of charge and it has also been mentioned that stay at a one time cannot exceed 10 days. It is also mentioned in the agreement that the donation given will be used for construction of one block on the first floor of Dahliwali Dharmashala. On the basis of agreement, the assessing officer has disallowed the claim of the assessee.

9. After narrating the above-mentioned facts, the learned Authorised Representative of the assessee contended that the claim of the assessee has wrongly been disallowed. The donation was towards construction of block in Nathdwara Temple. The object of the donation was object of the trust and application of funds towards object of the trust. He further contended that it is only recommendation of the trustee of assessee-trust upon which accommodation could be granted by the authorities of Nathdwara Temple Board. It does not mean that assessee has derived any undue benefit. He further contended that donation was made out of corpus of the trust and if it is so, the same could not have been disallowed under the provisions of section 13(l)(c) as section 13(l)(c) is applicable only to the income of the trust and not to the corpus. For this purpose, he placed reliance on the following decisions:

(i) Laxmi Kanthammal Rajagopal Charitable Trust v. ITO (1989) 34 TTJ (Mad) 6

(ii) Arunkumar Jain v. ITO (1990) 70 ITD 115 (Chd)

(iii) Appollo Hospitals Research Foundation v. Asstt. Director of Income Tax (1999) 70 ITD 115 (Mad)(TM)

10. On the other hand, the learned departmental Representative relied on the orders of authorities below.

11. We have carefully considered the rival submissions in the light of material placed before us. In the proceedings before the lower authorities, it has never been contended by the assessee that donation of Rs. 1,75,000 was made out of the corpus of trust and not out of the income of the trust. This aspect has not been at all examined by the CWT(A). According to the decision relied upon by the learned authorised Representative of the assessee, the provision of section 13(l)(c) could not be applied to the corpus of the trust as the same is outside the purview of "income". Therefore, we consider it necessary to restore this issue to the file of CWT(A) to examine the case of assessee from this angle and decide the same as per the provisions of law. For statistical purposes this ground shall be treated to be allowed.

12. In the result, the appeal filed by the assessee is allowed for statistical purposes.