2024 (7) TMI 1010 - AT - Income Tax

Exemption u/s 11 - treating capital receipt instead of corpus donation - assessee was not registered u/s 12A - HELD THAT - Similar situation arose in the case of Hosanna Ministries 2020 (3) TMI 496 - ITAT VISAKHAPATNAM corpus specific voluntary contribution being in nature of capital receipt, are outside scope o income under section 2(24)(iia) and, thus same cannot be brought to tax even in case of trust not registered u/s. 12A / 12AA. Also see Serum Institute of India Research Foundation 2018 (2) TMI 103 - ITAT PUNE Decided in favour of assessee.

Summary

Issues:
1. Treatment of corpus donation as capital receipt.
2. Eligibility for exemption under section 11(1)(d) of the Income-tax Act, 1961.
3. Impact of non-registration under section 12A of the Act on tax liability.

Analysis:
1. The appeal by the Revenue challenged the treatment of Rs. 44.25 crores as a capital receipt instead of a corpus donation by the assessee trust, which was not registered under section 12A of the Income-tax Act, 1961. The Assessing Officer contended that the trust was ineligible for exemption under section 11(1)(d) due to lack of registration and treated the amount as income.

2. The ld. CIT(A) examined the nature of the receipt and concluded that it was a capital receipt meant for permanent retention, with accretions to be utilized as per the donor's directions. Citing judicial decisions, the ld. CIT(A) determined that the grant was not a corpus donation but a specified grant for specific utilization, thus qualifying as a capital receipt exempt from tax liability under section 11(1)(d).

3. The Tribunal considered the letter from the donor trust, Bandhan-Konnagar, specifying the purpose of the grant and noted similar cases where corpus donations were treated as capital funds exempt from taxation. Referring to decisions from various Tribunals and High Courts, including the principles of judicial discipline, the Tribunal upheld the ld. CIT(A)'s findings and dismissed the Revenue's appeal, emphasizing that the trust's registration under section 12A post-receipt of the grant further supported the capital nature of the funds.

4. The Tribunal's decision aligned with precedents and established principles regarding the tax treatment of corpus donations, emphasizing the distinction between capital receipts and income under the Income-tax Act, 1961. The judgment highlighted the significance of donor directions, the purpose of funds, and the registration status of the trust in determining tax liability, ultimately affirming the exemption of the grant from taxation.

5. The judgment delivered by the Tribunal on 03.11.2023 in ITA No. 2001/DEL/2020 dismissed the Revenue's appeal, maintaining the capital nature of the grant and the trust's eligibility for exemption under section 11(1)(d) despite non-registration under section 12A, in line with established legal interpretations and principles.