2012 (9) TMI 1132 - AT - Income Tax

Summary

Issues involved:
The judgment involves the assessment of a foundation's income tax liability based on a corpus donation of Rs. 3 crores, the application of sections u/s.10(21), u/s.35(1)(ii), and u/s.12A of the Income Tax Act, and the treatment of capital expenditure.

Assessment of Corpus Donation:
The foundation, not registered u/s.12A, received a corpus donation of Rs. 3 crores. The AO held it as taxable income due to lack of u/s.35(1)(ii) approval. The CIT(A) upheld this decision, rejecting the argument that corpus donations are capital receipts not subject to tax. The Tribunal directed the AO to reconsider, emphasizing the gift nature of the donation and pending writ petition challenging the denial of u/s.35(1)(ii) approval.

Application of Income Tax Sections:
The foundation argued that since it was recognized u/s.35(1)(ii) until 31-03-2004, the corpus donation should not be taxed. The CIT(A) disagreed, citing lack of u/s.12A registration and scientific research organization status. The Tribunal directed a fresh examination considering the gift nature of the donation and pending writ petition outcome.

Treatment of Capital Expenditure:
The foundation claimed capital expenditure of Rs. 8,42,461 should reduce taxable income, but the AO and CIT(A) did not allow it. The Tribunal directed the AO to reevaluate the issue, considering the gift nature of the corpus donation and pending writ petition outcome.

The Tribunal allowed the appeal for statistical purposes, directing the AO to reconsider the taxability of the corpus donation as a gift and to consider the pending writ petition outcome.