2023 (6) TMI 169 - AT - Income Tax

Exemption u/s 11 and 12 - Assessment of trust - violation of Section 12AA - whether assessee is eligible to take corpus donation without availing the registration U/s 12AA? - AR submitted that the assessee is eligible the exemption u/s 10(23C) as the gross receipt is below the Rs.1 crore during impugned assessment year - HELD THAT - From the factual matrix and considering the order of the revenue authorities, it is found that the grievance of the revenue is related to unverified corpus donation. The entire corpus donation was taken in the total income and was taxed accordingly. There is no point that the assessee cannot take the corpus donation without availing the registration u/s 12AA. But the unverified corpus donation is the moot point of the grievance of the revenue. The assessee filed a written submission with details of the payment and assessee is also interested re verification of the evidence before the ld. assessing authority. DR had not made any strong objection against this assessee s submission. Accordingly, the matter is remitted back to the ld. AO for further verification of the corpus donation received by the assessee for this impugned assessment year. Appeal of the assessee allowed for statistical purposes.

Summary

Issues Involved:
The appeal against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2010-11 concerning the addition of corpus fund received by the assessee, eligibility for exemption under section 10(23C), and the necessity for further verification of corpus donation.

Addition of Corpus Fund:
The assessee contested the addition of Rs. 97,42,782 towards income, claiming the donation as exempt under section 11(1)(d) of the Income Tax Act. The appellant argued that the donors had legitimate sources for the donation, supported by detailed lists and evidence. The corpus funds were utilized for constructing a school building, emphasizing that corpus donations are capital receipts. The Tribunal noted the appellant's submissions and remitted the matter for further verification by the assessing authority.

Eligibility for Exemption under Section 10(23C):
The appellant, an educational society running a school, claimed exemption under section 10(23C)(iiiad) of the Act. The Assessing Officer (AO) added back the corpus fund received, recalculating the turnover and rejecting exemption under sections 11 and 12 due to non-registration under section 12AA. The appellant relied on the Punjab and Haryana High Court's decision, arguing eligibility for corpus donations under section 10(23C) despite lacking registration under section 12AA, given the gross receipts were below Rs. 1 crore. The Tribunal considered the appellant's turnover and eligibility for exemption, directing further verification of the corpus donation.

Further Verification of Corpus Donation:
The AO added the corpus donation to the total income, disallowing it under section 68 due to lack of registration under section 12A or 10(23C). The Tribunal observed that the grievance of the revenue authorities was related to unverified corpus donation. Considering the appellant's submission and the absence of strong objections from the revenue, the matter was remitted back to the AO for thorough verification of the corpus donation amount. Consequently, the appeal was allowed for statistical purposes.