2021 (7) TMI 1084 - AT - Income Tax

Exemption u/s 11 - trust which was not registered u/s.12A - Addition of corpus donation - HELD THAT - Income of any trust including voluntary contributions received with a specific direction is not includable in the total income of the trust, if such trust is registered u/s.12A / 12AA of the Income Tax Act, 1961 - conditions precedent for claiming exemption u/s.11 including for voluntary contributions is registration of trust u/s.12A In this case, trust is not registered u/s.12A / 12AA of the Income Tax Act, 1961. Therefore, we are of the considered view that corpus donations received by the trust with a specific direction that they form part of corpus of the trust falls within ambit of income of a trust derived from property held under trust and hence, includable in total income of the trust. In this view of the matter and considering facts and circumstances of the case, we are of the considered view that voluntary contribution received by the trust with a specific direction that they form part of corpus of the trust is income of the trust within the meaning of section 11 12 of the Income Tax Act, 1961. We are of the considered view that there is no error in the findings recorded by the learned CIT(A) to confirm additions made by the Assessing Officer towards disallowance of corpus donations - Decided against assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeal.
2. Taxability of corpus donations received by a trust.
3. Requirement of registration under section 12A for claiming exemption under sections 11 and 12 of the Income Tax Act.

Condonation of Delay in Filing Appeal:
The appeal filed by the assessee was challenged on the grounds of being time-barred. The assessee sought condonation of the delay, attributing it to a change in counsel, which led to the delay in filing the appeal. The tribunal, after hearing both parties, accepted the reasons provided by the assessee for the delay as reasonable and condoned the delay, allowing the appeal to be admitted for adjudication.

Taxability of Corpus Donations Received by a Trust:
The case involved the tax treatment of corpus donations received by a public charitable and religious trust. The Assessing Officer had made additions to the income of the trust based on the disallowance of donations received. The trust contended that corpus donations, received for a specific purpose such as construction of a community building, should not be treated as income. The tribunal examined the provisions of the Income Tax Act and relevant case laws. It was observed that voluntary contributions received by a trust are considered income, but there are exemptions under sections 11 and 12 for trusts fulfilling certain conditions, including registration under section 12A. As the trust in question was not registered under section 12A, the tribunal held that corpus donations with a specific direction to form part of the trust's corpus were includable in the total income of the trust.

Requirement of Registration under Section 12A for Claiming Exemption:
The tribunal emphasized the importance of registration under section 12A for trusts to claim exemptions under sections 11 and 12 of the Income Tax Act. It was noted that the conditions precedent for claiming exemption, including for voluntary contributions, involve registration under section 12A. Referring to a Supreme Court decision, the tribunal clarified that unless an institution is registered under section 12A, it cannot avail the benefits under sections 11 and 12. In the absence of such registration, the tribunal upheld the additions made by the Assessing Officer towards disallowance of corpus donations, dismissing the appeal filed by the assessee.

This detailed analysis of the judgment highlights the key issues addressed by the tribunal and the legal principles applied in determining the taxability of corpus donations received by the trust in question.