2022 (4) TMI 342 - AT - Income Tax

Assessment of trust - taxability of corpus donation received by assessee trust for a specific purpose - HELD THAT - In the present case, it is evident from the record that there is no dispute that the assessee is trust registered with Maharashtra State Board of Wakf . It has also not been disputed that assessee is not registered u/s 12A and thus not entitled to any benefit u/s 11 - AO rightly proceeded to disallow the erroneous claim made by the assessee u/s 11, which is available only to a trust registered under section 12A - before the CIT(A), the assessee agreed that it had made wrongful claim under section 11 even when assessee is not registered under section 12A of the Act and submitted that despite not being registered u/s 12A the corpus donation received specifically for the purpose of purchase of property/Dargah is not taxable being capital receipt in nature. Assessee filed various documents in support of its submission that corpus donations were received by the assessee for the purpose of purchase of property/Dargah and therefore is in nature of capital receipt . The assessee also furnished the details of donors along with their PAN card, on sample basis. The assessee also filed copy of deed of conveyance in respect of purchase of property/Dragah in financial year 2018 19. Neither these documents were examined by the CIT(A) nor any report was sought from the AO and merely by erroneous understanding of order passed in Bank of India Retired Employees Medical Assistance Scheme 2017 (2) TMI 602 - ITAT MUMBAI fresh plea of the assessee was rejected by the CIT(A). As no scrutiny proceedings were initiated by the Revenue and return filed by the assessee was processed vide intimation under section 143 (1) these documents also could not be verified by the AO. We deem it appropriate to set aside the order passed by the CIT(A) and remand this issue to the file of CIT(A) for de novo adjudication after necessary verification of all the details / documents in respect of claim of the assessee. We further direct that if it is found that donations were received with respect to corpus of the trust for the purpose of purchase of property/Dargah then to that extent the same be not taxed being in the nature of capital receipt . Correct head of income - treating the rental income as Income from House Property instead of Income from Other Sources - HELD THAT - As the issue is only pertaining to classification of rental income under the correct head of income, we deem it appropriate to remand this issue to the file of CIT(A) for de novo adjudication, as per law. We further direct the assessee to file all the details for adjudication of this issue. Needless to mention that the CIT(A) shall have the liberty to call for remand report, if any, from the jurisdictional Assessing Officer while deciding this issue. Further, no order shall be passed without affording reasonable opportunity of hearing to the assessee. As a result, ground No. 2 in assessee s appeal is allowed for statistical purpose.

Summary

Issues:
1. Taxability of corpus donation received by assessee trust for a specific purpose.
2. Classification of rental income under the correct head of income.

Issue 1: Taxability of Corpus Donation:
The appeal concerned the taxability of corpus donation received by the assessee trust for a specific purpose. The assessee trust, not registered under section 12A of the Income Tax Act, received a corpus donation of ?8,99,811 for the purpose of purchasing immovable property/Masjid/Dargah. The Assessing Officer disallowed this amount as a voluntary contribution, leading to a higher total income determination. The CIT(A) rejected the contention that despite not being registered under section 12A, the corpus donation should not be taxable as it was a "capital receipt." The CIT(A) relied on a previous Co-ordinate Bench decision, which was deemed erroneous. The Tribunal noted that corpus donations for specific purposes received by trusts not registered under section 12A were considered "capital receipts" in nature in previous cases. The Tribunal remanded the issue to the CIT(A) for further examination and verification of details/documents provided by the assessee, directing that if the donations were indeed for the corpus of the trust for purchasing property/Dargah, they should not be taxed.

Issue 2: Classification of Rental Income:
The second issue revolved around the classification of rental income as "Income from House Property" instead of "Income from Other Sources." The assessee claimed that ?4,87,924 was incorrectly shown as income from other sources and taxed as such. The CIT(A) rejected this claim due to lack of details and absence of a specific ground of appeal on this issue. The Tribunal decided to remand this issue to the CIT(A) for fresh adjudication, directing the assessee to provide all necessary details for consideration. The CIT(A) was given the authority to seek a remand report from the Assessing Officer if needed. The Tribunal emphasized that no decision should be made without giving the assessee a fair opportunity to be heard. Consequently, the appeal was allowed for statistical purposes.

In conclusion, the judgment addressed the taxability of corpus donations and the classification of rental income, providing detailed analysis and directives for further examination and adjudication by the CIT(A) on both issues.