The Income Tax Appellate Tribunal (ITAT), Chennai bench held that corpus donation received by assessee trust would include in total income of trust when exemption under Section 11 of the Income Tax Act 1961 denied.
The assessee Ramsahaimal Sahuwala & Sons Charitable Trust is a Trust was established in the year 1972 and is registered under Section 12AA of the Income Tax Act, 1961. Assessee after filing the return of income by claiming exemption for ‘corpus donations’ on the ground that the assessee is eligible for exemption under Section 11 of the Income Tax Act.
However the AO has made addition towards ‘corpus donations’ as income of the assessee on the ground that when sec.11 of the Act, is inoperative and exemption is denied, ‘corpus donations’, and other capital receipts should be treated as income of the assessee.
Aggrieved by the order, the assessee filed an appeal before the CIT(A) dismissed the appeal and upheld the action of AO. Therefore the assessee filed a second appeal before the tribunal.
On behalf of the assessee T. Banusekar, Adv. and H. Yeshwanth kumar, CA, submitted that corpus donations’ received by any Trust is capital receipt which is outside the scope of income and cannot be taxed, even if exemption under Section 11 of the Income Tax Act, is denied.
P. Sajit Kumar counsel appeared for revenue submitted that “Corpus donations” received by any Trust come under the purview of the Trust’s income and are included in the Trust’s overall income if section 11 of the Act is invalid and the exemption is refused.
Therefore, since the assessee is a GPU Trust, the proviso to Section 2(15) of the Income Tax Act, comes into operation and as per said proviso, gross receipts from the activity is exceeds the specified sum, the Trust or Institution cannot claim the benefit of exemption under Section 11 of the Income Tax Act.
It was observed by the tribunal that the voluntary donation received by a trust that, when the trust is not eligible for exemption under section 11 of the Act, is directed to be income of the trust and forms part of the trust’s corpus. After reviewing the facts and submissions, the two-member bench of Manjunatha.G, (Accountant membera) and Mahavir Singh, (Vice President) held that corpus donation is income when Section 11 of Income Tax Act benefit is not applicable
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