Corpus Donation received for specific purpose not taxable even though trust is not registered u/s 12A of Income Tax

The ITAT Mumbai Bench, comprising of Shri Sandeep Singh Karhail (Judicial member) and Shri Gagan Goyal (Accountant Member), has determined in the case of Versova Kokni Sunni Jamat Trust v/s CIT (A), that corpus donation received specifically for the purpose of purchase of a property is not taxable being capital receipt in nature even though the trust is not registered u/s 12A of the Income Tax Act, 1961 (Act).

The assessee, Versova Kokni Sunni Jamat, is a religious trust registered with “Maharashtra State Board of Wakf”. The assessee had received corpus donation specifically for the purpose of purchase of property/Masjid/Dargah. The assessee filed its return of income in form ITR-7 claiming exemption u/s 11 of the Act. While processing the return u/s 143(1), the Assessing Officer disallowed the amount of voluntary contribution received specifically towards the purchase of the property. The assessee appealed the decision to the CIT (A) stating that the corpus donation is in the nature of capital receipt and thus not taxable in the hands of the assessee trust irrespective of not being registered u/s 12A of the Act. The CIT (A) rejected the contention of the assessee that irrespective of the status of registration u/s 12A of the Act the receipts for specific purposes cannot be treated as income u/s 2(24) of the Income Tax Act. The assessee had filed an appeal with ITAT against the CIT (A) decision.

In appeal, the assessee argued before the ITAT that the assesse had wrongly filed a return of income in form ITR-7 which is applicable to trust u/s 12A of the Act. Further, the assesse submitted that since the trust was not registered u/s 12A of the Act, it could not claim benefits u/s 11 and 12 of the Act. However, corpus donation received for the purpose of purchase of property is not taxable being capital receipt in nature. The assesse also furnished details of donors along with their PAN and copy of deed of conveyance in respect of the purchase of the property.

The ITAT said that the Assessing Officer rightly proceeded to disallow the erroneous claim made by the assessee under section 11 of the Act, which is available only to a trust registered under section 12A of the Act. However, before the CIT (A), the assessee agreed that it had made a wrongful claim under section 11 even when assessee is not registered under section 12A of the Act and submitted that despite not being registered under section 12A of the Act, the corpus donation received specifically for the purpose of purchase of property/Dargah is not taxable being capital receipt in nature.

Further, the ITAT said that the Co-ordinate bench of Tribunal in ITO versus Serum Institute of India Research Foundation, ITA No. 621/PUN/2016 vide order dated 29.01.2018 following the decision of another Co-ordinate bench of Tribunal in Chadraprabhu Jain Swetamber Mandir v. ACIT [2017] 82 taxmann.com 245 (Mumbai-Trib.) held that corpus donation received for a specific purpose by the trust, which is not registered under section 12 A/12AA of the Act, are not taxable as they assume the nature of “Capital Receipt”.

The ITAT noted that during the appellate proceedings before the CIT(A), the assessee filed various documents in support of its submission that corpus donations were received by the assessee for the purpose of purchase of property/Dargah and therefore is in nature of capital receipt. The assessee also furnished the details of donors along with their PAN card, on sample basis. The assessee also filed copy of deed of conveyance in respect of purchase of property/Dargah. However, neither these documents were examined by the CIT(A) nor any report was sought from the Assessing Officer, and merely by an erroneous understanding of order passed by the Co-ordinate Bench of Tribunal in Bank of India Retired Employees Medical Assistance Scheme ITA No. 3249/Mum/2016 fresh plea of the assessee was rejected by the CIT(A). As no scrutiny proceedings were initiated by the Revenue and return filed by the assessee was processed vide intimation under section 143 (1) of the Act, these documents also could not be verified by the Assessing Officer. In view of the above, the ITAT deemed it appropriate to set aside the order passed by the CIT(A) and remand this issue to the file of CIT(A) for de novo adjudication after necessary verification of all the details / documents in respect of claim of the assessee.