Background
The trust registered u/s 12A of the Income Tax Act, 1961 enjoys tax treatment in case of Corpus Donations upon fulfilment of certain conditions.
The question came up with the Mumbai ITAT1 as to the treatment of corpus donations received in case of a trust not registered under section 12A of the Act.
Facts
The assessee is a religious trust formed in 2013. The main objective of the assessee trust is to maintain, administer and manage the Masjid, Dargah, provide funeral facility for Muslims, celebrate and perform Muslim festivals, to provide burial ground for Muslims, to provide burial materials and facilities for last rites of Muslims.
While filing the ITR for the concerned AY, the assessee erroneously claimed the deduction u/s 11 even though it was not registered u/s 12A. The assessing officer, while issuing intimation u/s 143(1) made the addition to the income for the amounts received as corpus donation to purchase immovable property.
The matter went to CIT(A). The assessee made the plea that even though it had erroneously claimed the deduction u/s 11, since the receipts were in the nature of Corpus Donations, those ought not to be brought under the purview of tax.
The CIT(A) relying upon the case of Bank of India Retired Employees Medical Assistance Scheme v/s CIT2 rejected the contention of the assessee that irrespective of status of registration under section 12A of the Act the receipts for specific purposes cannot be treated as income under section 2(24) of the Act and thus upheld the addition made by the assessing officer.
Tribunal
The tribunal while distinguishing the case from Bank of India Retired Employees Medical Assistance Scheme (supra) observed that ‘corpus donations’ received for specific purpose by the trust, which is not registered under section 12A/12AA of the Act, are not taxable as they assume the nature of “Capital Receipt”
While ruling in favour of the assessee4 the ITAT relied upon the Orders in case of ITO v/s Serum Institute of India Research Foundation3 and Chadraprabhu Jain Swetamber Mandir v. ACIT5
Takeaway
This Order gives assesses a respite who for some reason have not registered themselves u/s 12A/12AA but had receipts during the year in the nature of Corpus Donations.
1 ITA No. 5905/Mum/2019
2 ITA No. 3249/Mum/2016
3 ITA No. 621/PUN/2016
4 ITA NO. 230/MUM/2016
5 subject to confirmation of facts by below authorities