ITAT Grants Full Corpus Exemption to Educational Trust, Deletes Rs. 69 Lakh Cash Addition

The assessee, a charitable trust running educational institutions and registered under Sections 12AA and 80G, filed its return for AY 2016-17, declaring NIL income. During assessment, the Assessing Officer denied exemption under Section 11(1)(d) on corpus donations of Rs. 48.38 lakh, alleging absence of specific written directions from donors and defects relating to donor identity.

The AO also treated cash deposits of Rs. 70.69 lakh in two bank accounts as unexplained money under Section 69A, on the ground that the fee receipts and reconciliation were not properly furnished.

In appeal, the CIT(A), NFAC admitted additional evidence and called for a remand report, but finally sustained both additions. Aggrieved, the assessee carried the matter before the ITAT.

Issue Before ITAT: Whether corpus donations were eligible for exemption under Section 11(1)(d), and whether cash deposits representing student fee collections could be taxed as unexplained money under Section 69A.

ITAT Rules: The ITAT allowed the appeal in full. The Tribunal held that donor’s intention to treat the contributions as corpus was clearly established. It noted that a major part of the donations was accepted as genuine even in the remand report, while the remaining disallowances were based on factual mistakes or hyper-technical objections. Thus, exemption under Section 11(1)(d) was directed to be allowed for the entire corpus donation of Rs. 48.38 lakh.

The Tribunal held that the assessee had satisfactorily explained the source as fee collections from students, supported by student-wise details, cash books, bank statements and audited accounts. Since the books were not rejected and no contrary evidence was brought on record by the Revenue, the addition under Section 69A was held to be unsustainable and was deleted in entirety.

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