2015 (11) TMI 1861 - AT - Income Tax

Exemption u/s 11 - assessee-trust is not registered u/s 12AA of the Act and its activities are also not examined by the lower authorities - Taxation of corpus donations - HELD THAT - The Tribunal considered the submission of both the counsels where the corpus donations are given with specific direction exempted from income-tax. Since the benefit of sec. 11 will not be available to the trust as it is not registered u/s 12AA of the Act. The ld. Counsel relied upon the order of this Tribunal in case of Pentafour Software Employees Welfare Foundation 2008 (7) TMI 984 - ITAT CHENNAI which is rendered on different facts wherein the Bench concluded that matter needs to be examined with reference to the scheme of the Act as regards corpus donation, but does not allow corpus donation exempted to unregistered trust. Since the assessee-trust is not registered u/s 12AA, corpus donations are taxed at normal rates. - Appeal of assessee dismissed.

Summary

Issues:
Assessment of corpus donations for unregistered trust under Income-tax Act, 1961.

Analysis:
1. The appeals were against separate orders of the Commissioner of Income-tax (Appeals) for assessment years 2008-09 and 2009-10. The assessee, a trust, declared NIL income for both years and was not registered u/s 12AA of the Income-tax Act. The corpus donations received were credited to the capital account, and donations were admitted for tax under income and expenditure account. The Assessing Officer taxed the corpus donations as the trust was unregistered u/s 12AA.

2. The assessee contended that voluntary contributions with specific directions should be treated as corpus and exempt under section 11(1)(d) of the Act, even without 12AA registration. The CIT(A) concluded that since the trust was not registered u/s 12AA, exemption u/s 11(1)(d) did not apply, and dismissed the appeals.

3. Appeals were then filed before the Tribunal, arguing that corpus donations with specific directions should be considered capital in nature. The Tribunal noted that while corpus donations are exempt from income tax, the trust must be registered u/s 12AA to avail benefits under section 11. Citing a previous Tribunal decision, the corpus donations were taxed at normal rates due to the unregistered status of the trust.

4. The Tribunal upheld the lower authorities' decision, emphasizing that the trust's unregistered status prevented the application of sec. 11 benefits. The appeals of the assessee were dismissed, and the corpus donations were taxed at normal rates.