2003 (10) TMI 253 - AT - Income Tax

Summary

Issues:
1. Treatment of corpus donation as ordinary donation
2. Exemption under section 11 for donation to Nathdwara trust

Analysis:
1. Treatment of corpus donation as ordinary donation:
The appeal was filed by the assessee against the order of CIT(A) regarding the treatment of a corpus donation of Rs. 9,69,675 as an ordinary donation for the assessment year 1993-94. The appellant argued that the donation was specifically directed to be credited to the corpus, making it a corpus donation. The donation, in the form of gold jewelry, was received by the trust after the death of Smt. Shantadevi. The appellant provided the will of Smt. Shantadevi and a letter from the executor, both indicating that the donation was intended for the corpus of the trust. The ITAT, after considering the documents and relevant case law, held that the donation was indeed towards the corpus of the trust and allowed the deduction under section 11(1)(d).

2. Exemption under section 11 for donation to Nathdwara trust:
The second issue involved a donation of Rs. 1,75,000 made by the assessee to Nathdwara Trust, which was denied exemption under section 11 based on the application of section 13(1)(c). The AO contended that there was an element of quid pro quo in the transaction, as the trustees and their relatives were allowed free stays at a facility constructed using the donation. The ITAT noted that the claim of the assessee was disallowed without considering whether the donation was made from the trust's income or corpus. Citing relevant case law, the ITAT held that section 13(1)(c) could not be applied to the corpus of the trust. Therefore, the ITAT directed the issue to be reconsidered by the lower authorities to determine if the donation was made from the trust's income or corpus, emphasizing that section 13(1)(c) applies only to the income of the trust.

In conclusion, the ITAT allowed the appeal for statistical purposes, holding in favor of the assessee on both issues.