The Income Tax Appellate Tribunal (ITAT) Hyderabad Last week ruled that ‘hundi’ receipts in cash from donors are not revenue items but capital receipts only.
The assessee, Boyakonda Gangamma Devasthanam, is governed by the provisions of Andhra Pradesh Charitable and Hindu Religious Institutions and Endowments Act, 1987 wherein section (1)(g) states, “thereof stipulates that ‘donations in cash or kind by the donors as contributions to capital’ shall not be deemed to be income of the concerned institution.” The Assessing Officer also did not dispute the assessee’s hundis during the course of scrutiny. But Commissioner of Income Tax (CIT-(DR)) at argued that the provisions of the said Endowments law tend to override the provisions of the Income Tax Act despite the fact the latter law is specific in nature. He also threw light on legislative relations between the Union and the States as per Part-XI of the Constitution of India that the latter statute; enacted under Union list, prevails over the state endowment law hereinabove.
The ITAT bench comprising of Accountant member Laxmi Prasad Sahu and Judicial Member S.S. Godara while foregoing the rival contentions, found no merit in the Revenue’s stand and held, “The relevant provisions of the ‘Endowment Act’ duly makes it clear that they are corpus donations which nowhere go against the provisions of tax law. We therefore see no reason to sustain the learned lower authorities’ action treating the assessee’s hundi receipts embedded with specific purpose of corpus donation u/s.11(1)(d) of the Act are not entitled for exemption being revenue receipts. We thus direct the Assessing Officer to delete the impugned addition.”
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