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2025 (3) TMI 804 - AT - Income TaxExemption u/s 11 12 denied - corpus donations received by the Assessee - Tax treatment of voluntary contributions - HELD THAT - In present assessee s case there was no evidence to show that the donations received are for corpus. As per section 11(1)(d) of the Act voluntary contributions received by the trust or charitable institutions with a specific direction that the contribution shall form part of the corpus of the trust or institution shall not be treated as income of the trusts or institution but this is not the case of the assessee. As per Section 12 of the Act any voluntary contribution not with a specific direction that it will form part of the corpus will be treated as income of the trust or institution existing for charitable purposes. As per section 12A of the Act the benefit of Sections 11 12 will be available only if the trust or the institution is registered under the Income Tax Act as a trust or charitable institution u/s 12AA. The Income under Section 2(24)(iia) of the Act would not form part of total income u/s 11 and 12A of the Act only if the assessee is registered or filed an application before the competent authorities the condition of which is absent in present case. In the background of these facts provisions of the Act viz. Sections 2(24)(iia) 10(23) Sec. 11 12A Explanatory Notes to the provisions of the Finance (No.2) Act 2014 - Circular No. 01/2015 dated 21.01.2025 and the judgments we therefore decline to interfere with the order of the ld. CIT(A). Appeal of the assessee is dismissed.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered two primary issues: 1. Whether the Assessee, a charitable trust not registered under Section 12AA during the relevant assessment year, is entitled to claim exemption under Section 11(1)(d) of the Income-tax Act, 1961, for corpus donations. 2. Whether the corpus donations received by the Assessee should be treated as capital receipts and not included in the total income despite the lack of registration under Section 12AA. ISSUE-WISE DETAILED ANALYSIS 1. Entitlement to Exemption under Section 11(1)(d) Relevant Legal Framework and Precedents: The Income-tax Act, 1961, under Sections 11 and 12, provides exemptions for income derived from property held under trust for charitable or religious purposes, contingent upon registration under Section 12AA. Section 11(1)(d) specifically exempts voluntary contributions received with a specific direction to form part of the corpus of the trust. Court's Interpretation and Reasoning: The Tribunal noted that the Assessee was not registered under Section 12AA during the assessment year in question. The registration obtained later, effective from July 2019, could not be applied retrospectively to the assessment year 2012-13. The Tribunal referenced explanatory notes to the Finance (No.2) Act, 2014, which clarified that the benefits of Sections 11 and 12 apply only from the assessment year following the year of registration. Key Evidence and Findings: The Assessee failed to provide evidence that the donations were specifically directed to form part of the corpus. The Tribunal found no documentation supporting the claim that the donations were utilized for specified purposes. Application of Law to Facts: Since the Assessee was not registered under Section 12AA during the relevant period, the Tribunal concluded that the Assessee could not claim the exemption under Section 11(1)(d). The absence of registration precluded the application of the exemption provisions. Treatment of Competing Arguments: The Assessee argued that the donations should be treated as capital receipts and relied on a decision by the ITAT Kolkata bench, which interpreted the proviso to Section 12A(2) as retrospective. However, the Tribunal distinguished the present case, noting the lack of evidence for specific utilization and the absence of registration during the assessment year. Conclusions: The Tribunal upheld the lower authorities' decision, affirming that the Assessee was not entitled to the exemption under Section 11(1)(d) due to the lack of registration under Section 12AA during the relevant year. 2. Treatment of Corpus Donations as Capital Receipts Relevant Legal Framework and Precedents: Section 2(24)(iia) of the Income-tax Act defines "income" to include voluntary contributions received by a trust. For unregistered trusts, such contributions are taxable unless directed to form part of the corpus. Court's Interpretation and Reasoning: The Tribunal emphasized that without specific directions for corpus formation, voluntary contributions are taxable. The Assessee's claim of treating the donations as capital receipts was unsupported by evidence of specific utilization or direction. Key Evidence and Findings: The Tribunal found no evidence that the donations were intended for a specific purpose or that they were utilized as such. The Assessee's reliance on registration with the Charity Commissioner was insufficient for income tax purposes without Section 12AA registration. Application of Law to Facts: The Tribunal applied Section 2(24)(iia) to classify the donations as income, given the absence of specific directions for corpus formation and the lack of registration under Section 12AA. Treatment of Competing Arguments: The Assessee cited judicial precedents where voluntary contributions were treated as capital receipts. However, the Tribunal noted that those cases involved specific directions for corpus formation, which were absent in the present case. Conclusions: The Tribunal concluded that the donations were taxable as income, as the Assessee failed to demonstrate that they were corpus donations or utilized for specific purposes. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reaffirmed the principle that exemptions under Sections 11 and 12 of the Income-tax Act are contingent upon registration under Section 12AA. Without such registration, voluntary contributions are taxable unless specifically directed to form part of the corpus. Final Determinations on Each Issue: The Tribunal dismissed the Assessee's appeal, upholding the addition of the corpus donations to the Assessee's total income for the assessment year 2012-13. The Tribunal emphasized the necessity of Section 12AA registration for claiming exemptions under Sections 11 and 12.
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