2024 (8) TMI 338 - AT - Income Tax

Exemption u/s 11 - corpus funds/Donation receipts - disallowance of capital expenditure - HELD THAT - Corpus donations, being identified and recognized in law as distinct and separate from Incomes derived from property held under Trust and both being granted exemption separately u/s 11(1)(a) and 11(1)(d) of the Act, there arises no question of overlapping exemption. Different incomes recognized for exemption have been separately granted exemption in law. There arises no question therefore of corpus donations claiming exemption in law both under sub-clause (d) and sub-clause (a) of section 11(1) of the Act. The above interpretation of law was confronted to the assessee during the course of hearing before us who was unable to point out any infirmity in the same. As when asked whether any of the said decisions had interpreted the position of law considering section 11(1)(a) r.w.s. 12(1) of the Act, as above, he was unable to point out any. The decisions relied upon by assessee, we have noted are all either distinguishable on facts or have been rendered without considering the clear provision of law as noted above by us. The decisions therefore are of no assistance to the assessee. No reason to allow the ground raised by the assessee before us, seeking exemption u/s 11(1)(a) of the Act of corpus donations received - Appeal of the assessee is dismissed.

Summary

Issues Involved:
1. Allowance of claim of exemption to corpus donation received/utilized for capital purposes under Section 11(1)(a) of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Allowance of Claim of Exemption to Corpus Donation Received/Utilized for Capital Purposes under Section 11(1)(a) of the Income-tax Act, 1961.

Background:
The assessee, a trust registered under Section 12A of the Income-tax Act, claimed exemptions under Sections 11(1)(a) and 11(1)(d) for the Assessment Year (AY) 2016-17. The trust received corpus donations amounting to Rs. 1,08,37,253/- for constructing a building and utilized Rs. 99,12,380/- for capital expenditure. The Assessing Officer (AO) and the Commissioner of Income-tax (Appeals) (CIT(A)) denied the exemption under Section 11(1)(a), citing it as a double exemption claim.

Arguments by Assessee:
The assessee argued that corpus donations utilized for charitable purposes should be exempt under Section 11(1)(a). They referenced various decisions from ITAT and High Courts supporting this claim and contended that the law, amended effective from 01-04-22, should not apply retrospectively.

Tribunal's Findings:
1. Section 11(1)(a) and 11(1)(d) Analysis:
- Section 11(1)(a) grants exemption to "income derived from property held under trust" for charitable or religious purposes.
- Section 11(1)(d) separately exempts "income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution."

2. Corpus Donations:
- Corpus donations are not considered "income derived from property held under trust" as per Section 12(1), which deems voluntary contributions (excluding corpus donations) as income derived from property held under trust.
- Therefore, corpus donations do not qualify for exemption under Section 11(1)(a).

3. Non-Overlapping Exemptions:
- The law clearly distinguishes between income derived from property held under trust (Section 11(1)(a)) and corpus donations (Section 11(1)(d)).
- Each type of income is granted exemption separately, with no overlap.

4. Decisions Cited by Assessee:
- The Tribunal found the decisions cited by the assessee either distinguishable on facts or rendered without considering the clear provisions of Sections 11(1)(a) and 12(1).

Conclusion:
The Tribunal concluded that the exemption under Section 11(1)(a) is not available for corpus donations. The appeal filed by the assessee was dismissed, affirming the decisions of the AO and CIT(A).

Order:
The appeal filed by the assessee is dismissed, and the order was pronounced in open court on 03/05/2024 at Ahmedabad.