1991 (1) TMI 215 - AT - Income Tax

Summary

Issues:
1. Registration of trust under section 12A.
2. Audit requirement for trust accounts.
3. Treatment of corpus donations received by the trust.

Analysis:

1. Registration of trust under section 12A:
The appeals arose from the order of the Income Tax Officer (ITO) regarding the registration of a trust under section 12A. The trust, constituted under a Trust Deed, had not filed returns for the relevant assessment years, leading to notices under section 148. The trust subsequently filed returns under the Voluntary Disclosure Scheme, declaring income. The ITO added donation amounts as income, citing lack of registration and proof of corpus donations. However, the ITAT found discrepancies in the directions given by the Dy. Commissioner and the actual application date for registration. The ITAT concluded that the trust was registered under section 12A from the inception of the trust, allowing application of sections 11 and 12.

2. Audit requirement for trust accounts:
The trust contested the audit requirement for its accounts, claiming its total income did not exceed Rs. 25,000 for the relevant assessment years. The ITAT determined that without considering sections 11 and 12, the total income did not surpass the threshold, relieving the trust from the obligation to furnish audited accounts in Form No. 10B.

3. Treatment of corpus donations received by the trust:
The crucial issue revolved around corpus donations received by the trust. The ITAT analyzed the nature of donations, emphasizing the specific direction for donations to form part of the trust's corpus. The trust provided evidence, including signed receipts and explanations, to support its claim. Citing legal precedents and trust deeds, the ITAT concluded that the donations were indeed corpus donations, exempting them from income tax treatment. As the trust's income remained below Rs. 25,000, the audit requirement under section 12A(b) did not apply.

Additional Grounds:
The ground regarding the assessment order being time-barred was not pursued during the appeals. Furthermore, issues related to interest charges under sections 139(8) and 217 were deemed unrelated to the CIT(A) order and were not considered. Consequently, the appeals by the assessee were partly allowed, affirming the treatment of corpus donations and registration status while dismissing other grounds.