2022 (12) TMI 994 - AT - Income Tax

Exemption u/s 11 - Receipt of donations - claim of the assessee was rejected on the ground that exemption u/s 11 of the Act is available to a trust which has been registered u/s 12AA and as the assessee is not registered u/s 12AA the authorities treated the assessee as a regular assessee and did not grant exemption u/s 11(1)(d) - HELD THAT - The expression income for the purpose of Income Tax, includes voluntary contribution received by a trust created wholly or partly for charitable or religious purposes or an institution established wholly or partly for such purposes. Any donation received by any trust or institution has to be treated as income. However, the scheme of Income Tax u/s 11 to 13 of the Act provides a mechanism for assessment of income from property held by a charitable or religious trust. A perusal of Section 11(1)(d) of the Act would indicate that if any voluntary contribution is being received by a trust or institution with a specific direction that such contribution will be part of corpus then, it will be credited to a separate account meant for construction of building or any infrastructure. In other words, it can be treated as a capital contribution towards the corpus of the trust. Perusal of Section 12A of the Act would indicate that before claiming any exemption from taxability of income u/s 11 or 12 of the Act, the assessee should be registered with the Income Tax Department u/s 12A of the Act. Further Section 12AA of the Act provides a procedure for grant of registration. Since the assessee is not having any registration, the grant/non-grant of such registration is not in dispute, therefore, there is no necessity to make reference to Section 12AA If we accept the proposition as canvassed by assessee, then the whole scheme of assessment of charitable institution/trust contemplated in Section 11 to 13 of the Act would become redundant. The arguments of the ld. Counsel for the assessee is that, it is not necessary that a trust/institution should be registered for availing benefit of Section 11(1)(d) of the Act. If an institution has demonstrated that donations were received towards corpus then automatically, it will become a capital receipt which is not taxable. However, we do not agree with these submissions because nowhere in the Act this proposition has been provided. Decided against the assessee.

Summary

Issues:
- Delay in filing appeals by the assessee
- Exemption u/s 10/11 not granted
- Registration u/s 12AA not obtained

Issue 1: Delay in filing appeals by the assessee
The Tribunal considered a delay of 71 days in filing the appeals by the assessee. After reviewing the petition for condonation of delay, the Tribunal found that the assessee had sufficient cause for the delay and thus decided to condone the delay and admit the appeals.

Issue 2: Exemption u/s 10/11 not granted
The primary grievance of the assessee in both Assessment Years 2012-13 and 2014-15 was the denial of exemption u/s 10/11 by the ld. CIT(A) regarding corpus donations received. The assessee claimed these donations as capital receipts exempt from tax u/s 11(1)(d) of the Income Tax Act. However, both revenue authorities rejected the claim as the assessee was not registered u/s 12AA of the Act, which is a prerequisite for claiming such exemptions.

Issue 3: Registration u/s 12AA not obtained
The Tribunal analyzed the provisions of Section 12A of the Act, which specify that the provisions of Section 11 and Section 12 shall not apply unless the trust or institution is registered u/s 12AA. Since the assessee lacked registration during the relevant Assessment Years, it was not entitled to the benefits under Section 11(1)(d) of the Act. The Tribunal emphasized the importance of registration for availing exemptions under the Act and dismissed the appeals of the assessee based on this ground.

In conclusion, the Tribunal dismissed the appeals of the assessee due to the absence of registration u/s 12AA, which is a prerequisite for claiming exemptions under Section 11(1)(d) of the Income Tax Act. The Tribunal highlighted the significance of compliance with registration requirements for charitable trusts or institutions to avail tax benefits and upheld the decisions of the revenue authorities in denying the exemptions sought by the assessee.