Corpus Contributions to Section 12A Registered Trust Not Taxable, Treated as Capital Receipts: ITAT [Read Order]

The tribunal held that voluntary contributions towards corpus are not income and are not taxable. The Tribunal observed that there was no change in the objects of the trust and that adequate details of donations were furnished

8 May 2025 7:56 AM IST

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) dismissed the appeal filed by the revenue holding that Corpus contributions to registered trust under section 12A not taxable and should to be treated as capital receipts. Skill Development Society (assessee) trust had filed its return for Assessment Year 2019–20, claiming exemption of Rs. 10.45 crore under Sections 11 and...

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Skill Development Society (assessee) trust had filed its return for Assessment Year 2019–20, claiming exemption of Rs. 10.45 crore under Sections 11 and 12 on the ground that the entire income represented corpus donations. The trust had applied for registration under Section 12AA on 25.10.2019 and was granted approval w.e.f. the same date on 30.01.2020.

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The revenue treated the corpus contributions as taxable income and raised a demand through intimation under Section 143(1). The rectification application under Section 154 was rejected by CPC, Bangalore. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (appeals)[CIT(A)].

The CIT(A) allowed the appeal relying on the first provision to Section 12A(2) and granted exemption to the assessee. Aggrieved by the CIT(A)’s order, the Revenue filed an appeal before ITAT.

The Revenue contended that no assessment was pending on the date of registration and hence the benefit of the first provision to Section 12A(2) was not available. The Revenue relied on the decision of the Hon’ble Gujarat High Court in the case of Mayur Foundation.

The assessee argued that corpus donations are capital receipts not chargeable to tax and cited several tribunal decisions, including Prem Prakash Mandal Sewa Trust, Hosanna Ministries, and Financial Inclusion Trust to support its case.

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The assessee also submitted that the trust's objects remained unchanged, and the approval was granted before the final processing of return under Section 143(1) of the Income Tax Act.

The two-member Bench comprising Ms. Suchitra Kamble (Judicial Member) and Narendra Prasad Sinha (Accountant Member) held that the benefit of the provision to Section 12A(2) was rightly extended by the CIT(A) since the proceedings were pending when registration was granted.

The tribunal held that voluntary contributions towards corpus are not income and are not taxable. The Tribunal observed that there was no change in the objects of the trust and that adequate details of donations were furnished.

The Tribunal dismissed the revenue’s appeal, confirming the CIT(A)'s order and allowing the exemption claimed by the trust. The appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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