2015 (11) TMI 1767 - AT - Income Tax

Exemption u/s 11 - whether the corpus donation received by the assessee is exempted u/s 11(1)(d) of the Act or not ? - registration u/s 12AA mandation pre-condition for grant of exemption u/s 11 and 12 - Held that - Admittedly, the trust was not registered u/s 12AA of the Act. This Tribunal is of the considered opinion that registration u/s 12AA is a mandatory pre-condition for grant of exemption u/s 11 and 12 of the Act. As carefully gone through the order of this Tribunal in case of Pentafour Software Employees Welfare Foundation vs ACIT (2008 (7) TMI 984 - ITAT CHENNAI). This Tribunal has not considered the mandatory requirement of registration u/s 12AA for claiming exemption u/s 11. Under the scheme of the Income-tax Act, 1961, donations are considered as income unless the same were received from blood relatives. In the case before us, admittedly the assessee is not registered u/s 12AA of the Act. Therefore, sec. 11 of the Act is not applicable. There is no provision in the Income-tax Act, 1961 for exempting the donation received by the assessee in case it is not registered u/s 12AA of the Act. Therefore, the order of this Tribunal in M/s Pentafour Software Employees Welfare Foundation is not applicable. - decided against assessee.

Summary

Issues:
1. Exemption of corpus donations under section 11(1)(d) of the Income-tax Act for an unregistered trust.
2. Applicability of registration under section 12AA as a pre-condition for exemption under sections 11 and 12 of the Act.

Analysis:
1. The case involved an appeal by an assessee trust against the order of the Commissioner of Income-tax (Appeals) regarding the treatment of corpus donations received during the financial year 2006-07. The trust, not registered under section 12AA, declared NIL income and credited corpus donations to the capital account. The Assessing Officer brought the corpus donations to tax due to the lack of registration. The assessee contended that donations with specific direction should be considered as corpus and exempt under section 11(1)(d). The CIT(A) dismissed the appeal, stating that without registration under section 12AA, exemption under section 11(1)(d) is not available.

2. The appeal before the Tribunal focused on whether corpus donations are exempt under section 11(1)(d) without registration under section 12AA. The Tribunal noted that registration under section 12AA is a mandatory pre-condition for claiming exemption under sections 11 and 12. Referring to a previous decision, the Tribunal emphasized that donations are considered income unless received from blood relatives. Since the trust was unregistered under section 12AA, section 11 was deemed inapplicable. The Tribunal held that without registration, there is no provision to exempt donations, confirming the CIT(A)'s order and dismissing the appeal.

In conclusion, the Tribunal upheld the decision that without registration under section 12AA, a trust cannot claim exemption for corpus donations under section 11(1)(d) of the Income-tax Act. The judgment emphasized the mandatory requirement of registration for granting exemptions under the Act and clarified that unregistered trusts are not eligible for such benefits.