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2018 (2) TMI 103 - AT - Income TaxExemption u/s 11 - whether Voluntary Contributions made to the corpus of the Trust constitutes taxable income of the Trust? - taxations in case of an unregistered Trust - Held that - Corpus donations received by the Trusts, which is not registered u/s.12A/12AA of the Act, are not taxable as they assume the nature of Capital receipt the moment the donations are given to the Corpus of the Trust . We find the provisions of section (24)(iia)/12(1)/11(1)(d)/35/56(2) are relevant for deciding the current issue. It is a settled legal proposition, in case of a registered Trust under the Income-Tax Act, the corpus specific Voluntary Contributions are outside the scope of income as defined in section 2(24)(iia) of the Act due to their Capital nature . But it is a case of un-registered Trust. Despite the detailed deliberations made by the Ld. DR, we find the principles relating to judicial discipline assume significance and the priority. It is also decided issue that there is need for upholding the favourable view if there exists divergent views on the issue. As discussed in the preceding paragraphs above, there are multiple decisions in favour of the assessee. Corpus-specific-voluntary contributions are outside the taxations in case of an unregistered Trust u/s.12/12A/12AAA of the Act too. From this point of view, and for this reason, the decision of the CIT(A) in granting relief to assessee does not call for any interferences. Accordingly, grounds of appeal raised by the Revenue are dismissed.
Issues Involved:
1. Taxability of voluntary contributions received by a charitable trust, specifically corpus donations, under section 2(24)(iia) of the Income Tax Act. 2. Applicability of exemptions under sections 11(1)(d) and 12A/12AA of the Income Tax Act. 3. Interpretation and implications of relevant case laws and amendments to the Income Tax Act. Issue-wise Detailed Analysis: 1. Taxability of Voluntary Contributions: The primary issue revolves around whether voluntary contributions, specifically corpus donations, received by the charitable trust constitute taxable income under section 2(24)(iia) of the Income Tax Act. The Revenue argued that such contributions are income and taxable unless the trust is registered under section 12A/12AA, which provides specific exemptions under section 11(1)(d). The Tribunal, in its previous order, directed the Assessing Officer (AO) to examine if the ?3 crores received as corpus donation could be considered a gift and therefore not taxable. The AO reiterated that the donation is taxable, referencing section 2(24)(iia) which includes voluntary contributions as income. The AO also distinguished the donation as a conditional gift, thus taxable. 2. Applicability of Exemptions: The CIT(A) reversed the AO's decision, emphasizing the nature of corpus donations as capital receipts, which are not taxable. The CIT(A) relied on various case laws, including the Delhi High Court's decision in the case of Smt. Basantidevi and Shri Chakan Lal Garg Educational Trust, which held that corpus donations are capital receipts and not taxable, irrespective of the trust's registration status under section 12A. The CIT(A) also discussed the amendments brought by the Direct Tax Laws (Amendment) Act, 1989, which included voluntary contributions in the definition of income under section 2(24)(iia). However, the CIT(A) noted that corpus donations, being capital sums, were not considered income even before the amendment and should remain non-taxable. 3. Interpretation and Implications of Relevant Case Laws: The Tribunal considered multiple case laws to determine the taxability of corpus donations. The Mumbai Bench of the Tribunal in Chandraprabhu Jain Swetamber Mandir Vs. ACIT concluded that corpus donations are not taxable even if the trust is not registered under section 12A/12AA, as they are capital receipts. This decision aligned with other Tribunal decisions, including those in the cases of ITO Vs. Gaudiya Granth Anuved Trust and M/s. Pentafour Software Employees Welfare Foundation, which supported the non-taxability of corpus donations. The Tribunal also referenced the Bombay High Court's decisions in R.B. Shriram Religious and Charitable Trust and Trustees of Kasturbai Scindia Commission Trust, which held that voluntary contributions specifically directed towards the corpus of the trust are not taxable. Conclusion: The Tribunal upheld the CIT(A)'s decision, affirming that corpus-specific voluntary contributions are capital receipts and not taxable, even if the trust is not registered under section 12A/12AA. The Tribunal emphasized judicial discipline and the principle of favoring the assessee in cases of divergent views. Consequently, the appeal of the Revenue was dismissed, and the CIT(A)'s order was sustained.
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