Recently, in Divine Educational Institute and Social Development Society v. ITO, the Delhi ITAT held that corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of educational institution, even if the trust is not registered under section 12AA of the Income Tax Act.
Assessee-Trust received corpus fund during the relevant year and claimed exemption under section 10(23C)(iiiad) of the Income Tax Act. AO denied deduction on ground that assessee has not been granted registration u/s 12AA nor registered u/s 10(23C)(vi) of I.T. Act.
Assessee failed to secure relief from the CIT(A) and approached the Tribunal on second appeal.
The bench noticed that the assessee has been able to prove that corpus fund was received for meeting out capital expenditure which accordingly to explanation of assessee have been used actually to meet the capital expenditure. Further assessee society is different from education institution whose aggregate annual receipts are less than Rs. 1 crore.
The bench relied on a catena of decisions and held that “corpus fund which is meant for specific purpose to meet out capital expenditure could not be part of annual receipts of educational institution, even if no registration u/s 12AA have been granted. If the corpus fund is excluded, the balance aggregate annual receipt of the assessee’s educational institution would be less than Rs. 1 crore. Therefore assessee would be entitled for exemption u/s 10(23C)(iiid) of the Income Tax Act.”
Read the full text of the Order below.
