2019 (2) TMI 1840 - AT - Income Tax

Exemption u/s 11 - assessee was granted registration u/s 12A - voluntary contributions received for a specific purpose - whether cannot be regarded as income u/s 2(24)(iia) since they are capital receipts to be utilised for specific purpose? - assessee has pleaded that the amount received by the assessee was a tied up grant or an amount received for a specific purpose as being capital in nature - HELD THAT - Voluntary contributions received for a specific purpose cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts to be utilised for specific purpose. Respectfully following the decision of ITO Vs. Vokkaligara Sangha 2015 (8) TMI 920 - ITAT BANGALORE where we find the factual matrix therein to be similar to that of the case on hand and the decision therein squarely applicable to the instant case, we hold that the voluntary corpus donations / contributions received by the assessee in the periods under consideration (i.e., Assessment Years 2011-12 and 2012-13) for the specific purpose of purchase of lands for furtherance of the assessee s objects cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts for specific purpose. - Assessee s appeals are allowed.

Issues Involved:
1. Eligibility for exemption under Section 11 of the Income Tax Act for corpus donations received before the assessee's trust registration under Section 12A.
2. Nature of corpus donations: Whether they are capital receipts or income.
3. Applicability of Section 2(24)(iia) of the Income Tax Act to voluntary corpus donations received for specific purposes.

Detailed Analysis:

Issue 1: Eligibility for Exemption under Section 11
The assessee-trust, established on 22.11.2011, filed returns for AY 2011-12 and AY 2012-13, claiming exemption for receipts from voluntary corpus donations. The AO initiated proceedings under Section 147, asserting that the trust's registration under Section 12A on 8.11.2013 did not entitle it to exemptions for AY 2011-12 and AY 2012-13. The assessments were completed under Section 143(3) r.w.s. 147, including the corpus donations as taxable income. The CIT(A) upheld this decision, leading the assessee to appeal to the Tribunal.

Issue 2: Nature of Corpus Donations
The assessee argued that voluntary corpus donations received for specific purposes (purchase of land) are capital receipts and not income, irrespective of Section 12A registration. The Tribunal examined the legal position, referencing several judicial pronouncements. It was emphasized that voluntary contributions received for specific purposes are capital in nature and should not be treated as income under Section 2(24)(iia).

Issue 3: Applicability of Section 2(24)(iia)
The Tribunal referred to the decision in ITO Vs. Vokkaligara Sangha, where it was held that voluntary contributions for specific purposes are capital receipts and not income. The Tribunal noted that the factual circumstances in the present case were similar to Vokkaligara Sangha. Consequently, it was concluded that corpus donations for specific purposes could not be regarded as income under Section 2(24)(iia).

Conclusion:
The Tribunal allowed the appeals for AY 2011-12 and AY 2012-13, holding that the voluntary corpus donations received for the specific purpose of purchasing land were capital receipts and not income under Section 2(24)(iia). The assessee's appeals were thus allowed, and the orders of the lower authorities were set aside. The judgment was pronounced in the open court on 06.02.2019.

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