2023 (1) TMI 1077 - AT - Income Tax

Exemption u/s 11 - assessee not having registration u/s. 12AA - voluntary donations received for specific purpose - Addition on account of corpus contribution treating the same as revenue receipts - HELD THAT - In the present case, as is evident from the impugned order that the assessee claimed a fund as donation to the corpus of the assessee. The AO held that the assessee is not eligible for exemption as the assessee not having registration u/s. 12AA of the Act. Admittedly, the voluntary donations received for specific purpose forming the corpus of assessee s trust for directly made to the Balance sheet as the capital receipt. Therefore, when the donations forming the corpus of the assessee s trust received with specific purpose are capital in nature. Thus, we hold the corpus specific voluntary donations are not taxable in the case of unregistered trust also and in view of the same the order of CIT(A) is not justified. Therefore, the denial of exemption for not having registration u/s. 12AA of the Act resulted into disallowance therein is deleted. Thus, the grounds raised by the assessee are allowed.

Summary

Issues:
Appeal against common order passed by NFAC for assessment years 2010-11 and 2012-13. Whether addition made by AO on account of corpus contribution as revenue receipts justified.

Analysis:
1. The appeals by the assessee were against the common order passed by NFAC for assessment years 2010-11 and 2012-13. As the issues raised in both appeals were similar based on identical facts, the tribunal decided to hear and pass a consolidated order for convenience.

2. In the appeal for A.Y. 2010-11, the main issue was whether the CIT(A) was correct in confirming the addition made by the AO on account of corpus contribution treated as revenue receipts. The assessee, a society registered under the Bombay Public Trust Act, operated a blood bank and received voluntary donations for specific purposes, treating them as capital receipts in the balance sheet. Both authorities disallowed corpus donations as revenue receipts due to the absence of registration u/s. 12AA of the Act.

3. The tribunal referred to a previous case involving Serum Institute of India Research Foundation, where it was held that voluntary contributions specifically received towards the corpus of the trust cannot be taxed, even without registration u/s. 12AA. The tribunal found similarities between the previous case and the current one, where the assessee received donations towards its trust corpus, which were capital in nature and not taxable. Therefore, the order of the CIT(A) disallowing the exemption due to lack of registration u/s. 12AA was deemed unjustified, and the grounds raised by the assessee were allowed.

4. In the appeal for A.Y. 2012-13, the issues and facts were identical to the appeal for A.Y. 2010-11. The tribunal decided that the findings given in the earlier appeal would apply mutatis mutandis to this appeal as well. Consequently, the appeal of the assessee for A.Y. 2012-13 was also allowed.

5. In conclusion, both appeals by the assessee were allowed, and the denial of exemption for not having registration u/s. 12AA of the Act was overturned. The tribunal held that specific voluntary donations towards the corpus of a trust, even for unregistered trusts, are not taxable, as they are considered capital in nature.