Vildirect: IncomeTax-caselaws-1980-VIL-09-ITAT-BLR

1980-VIL-09-ITAT-BLR

Equivalent Citation: TTJ 013, 185,

Income Tax Appellate Tribunal BANGALORE

Date: 17.07.1980

ST. ANNâS HOME FOR THE AGED.

INCOME TAX OFFICER.

BENCH

Member(s) : V. Rajagopalan., O. V. Subramanian.

JUDGMENT

2. The first common point that arises is whether the assessee is entitled to exemption in respect of a sums of Rs. 61,886 and Rs. 25,625 respectively, being the voluntary contributions made by donors to the assessee, u/s. 12 of the IT Act, 1961. The ITO observed that the donations were specifically included in the definition 'income' and therefore, it formed part of the income of the institution. The ITO also rejected the assessee's claim that the above donations were made towards the corpus of the institution. On appeal, the AAC confirmed this order.

3. Before us, the ld. Rep. for the assessee pointed out that the assessee was running a permanent boarding and lodging house for the aged people, that for the purpose of constructing a building for the above purpose, it appealed for funds by way of donations, that accordingly, the assessee institution received donations of the above sums, specifically ear-marked for the corpus of the institution, that as a matter of fact, the above amounts were utilised for the construction of the building, which was supported by entries in the balance-sheet and that, before the AAC, the correspondences from various donors were produced in support of the claim that the donors intended the contributions only for the purpose of construction of the building, in the premises owned by the assessee-institution and that, in these circumstances, the contributions made with specific directions shall form part of the corpus of the institution and are exempt as capital receipts. He further submitted that after the amendment made in s. 12 by the Finance Act, 1972, w.e.f. 1st Apr., 1973, the voluntary contributions made by the donors for the above specific purposes were exempt from being deemed as income. He stated that the assessee had complied with all the conditions u/s 12A and, therefore, there is no justification for disallowing the assessee's claim. On behalf of the revenue, the ld. Deptl. Rep. supported the orders of the lower authorities. He submitted that the voluntary contributions made by the donors cannot be said to be towards the corpus of the assessee-institution. He added that the contributions made for the construction of the building could not be described as contribution towards the corpus. He, therefore, urged that the voluntary donations made would fall within the term 'income' u/s. 12 of the IT Act, 1961. He, therefore, urged that the order of the AAC should be confirmed.

4. We have considered the rival submissions. It is common ground that the assessee was running a permanent boarding and lodging house for the aged people. There is also no dispute that the institution was maintained mainly by public donations. During the accounting years under consideration, the assessee-institution had received sums of Rs. 61,886 and Rs. 26,625 respectively from donors who made voluntary contributions. The assessee claims that such voluntary contributions were made with the specific direction that they shall form part of the corpus of the institution. In supports of the above claim, the assessee had produced several letters from the donors. The AAC has referred to these letters. The AAC has observed that the letters showed that the donors intended the contributions only towards construction of a building in the premises owned by the assessee. The AAC however, rejected the assessee's claim on the ground that conditions in ss. 11 and 13 of the IT Act, 1961 were not fulfilled. The ld. Deptl. Rep. however, urged before us that the only ground on which the assessee's claim should be rejected was that even after the amendment made to s. 12 by the Finance Act, 1972, w.e.f. 1st Apr., 1973, only if contributions were made with a specific directions that they should form part of the corpus of the institution would be exempt and that was not so in this case. The point made out by the revenue is that voluntary contributions made by the donors were not made with a specific direction that they should form part of the corpus. As pointed out earlier, it is common ground that voluntary contributions were made by the donors with a specific direction that they are made towards construction of a building in the premises of the assessee for its use. The ld. Chartered Accountant appearing for the assessee pointed out that the entire contributions were actually spent for the construction of the said building. The revenue has not challenged the correctness of this statement. The only point that now survives for consideration is whether the contributions made by the donors voluntarily for the purpose of construction of the building for the assessee institution, could not be described as contribution made towards the corpus. Admittedly the building belongs to the assessee and it would naturally constitute capital of the assessee and thus form part of the corpus. We are also supported in our above view by the ruling of the Allahabad High Court in the case of Dwarkakdheesh Charitable Trust vs. ITO, Kanpur, reported in (1975) 98 ITR 557 (All), cited before us, on behalf of the assessee. We are, therefore of the opinion that the above amounts contributed voluntarily by the donors with a specific direction that they should be utilised for the construction of the building for the assessee institution and which were actually utilised for that purpose form part of the corpus of the institution and, therefore, they would not constitute 'income' in accordance with the provisions of s. 12 of the IT Act, 1961, as amended by Finance Act, 1972, w.e.f. 1st Apr., 1973 which applies to the year under appeal. We, therefore, hold that the assessee's claim is admissible. The ITO shall modify the assessments accordingly.

5. The second common point that arises for consideration in these appeals is whether the assessee is entitled to the allowance of depreciation. The ITO added back a sum of Rs. 18,893 stating that the same represented depreciation which was not admissible since the institution was a charitable one not deriving any income from business or profession as such. On appeal, the AAC agreed with him.

6. Before us the ld. Rep. for the assessee pointed out that the true income can be arrived at only after making due provision for the user of the assets, that the assessee-institution is bound in law to preserve and protect its property and that the assessee is entitled to depreciation. He referred us to the decision of the Tribunal, Bombay Bench 'E' in ITA No. 2444 (Bom)/76-77 (asst. yr. 1975-76, order dt. 17th May, 1978) in support of his stand. On behalf of the revenue, the ld. Deptl. Rep. supported the orders of the authorities below. He submitted that the assessee is not running a business or profession and that the assessee cannot also be said to be carrying on a vocation. He, therefore, submitted that the assessee is not entitled to the allowance of depreciation. In support of his claim, he referred us the order of the Tribunal, Bangalore Bench, in the case of ITO, Trust Circle vs. All Saints Church in ITA Nos. 1033 & 1934 (Bang) 1977-78 (asst. yr. 1974-75 and 1975-76, order dt. 31st July, 1979).

7. We have considered the rival submissions. Under s. 32 of the IT Act, 1961, depreciation is admissible on buildings, machinery, plant or furniture owned by an assessee and used for the purpose of business or profession. Sec. 2(36) of the IT Act defines 'Profession' to include 'vocation'. 'Vocation' is defined in Oxfords Illustrated Dictionary as under:

"Divine call to, sense of fitness for a career or occupation, employment, trade, profession." The assessee, in this case, is running a permanent boarding and lodging house for the aged people. The inmates of the institution are said to be given food, shelter and medical facilities. We are of the opinion that the activities of the assessee-institution would fall within the meaning of the term 'vocation'. The Bangalore Bench of the Tribunal, in the case of ITO vs. St. Annes' Convent in I.T.A. No. 328 (Bang)/1977-78 (asst. yr. 1973-74, order dt. 6th Oct, 1978) to which one of us (Judicial Member) was a party, has taken the view that the activities of the convent in that case would fall within the meaning of the term 'vocation'. We are in agreement with the above view. The other decision of the Bangalore Bench relied on by the revenue is distinguishable on facts. That was a case of a church and the Tribunal, therefore, held that the church could not be said to carry on a business or vocation. Following the order of the Tribunal in St. Anne's Convent's appeal, referred to above, we hold that the assessee institution was carrying on a vocation. It is, therefore, entitled to depreciation admissible u/s. 32 of the IT Act, 1961. The AAC has observed that the correct particulars of written down value etc. were not furnished by the assessee. It is not clear from the assessment order whether the ITO has called upon the assessee to furnish the particulars and whether he had examined the same. We, therefore, direct the ITO to examine the detail with reference to the above claim of depreciation and grant depreciation admissible in accordance with law. In the result, the appeals are allowed.

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