Corpus Donations Received by Unregistered Trusts are not Taxable unless Verified: ITAT [Read Order]

The Amrtsar Bench of Income Tax Appellate Tribunal (ITAT) has held that the corpus donations received by an unregistered trust would not be taxable unless it is verified.

The assessee, Guru Govind Singh Educational Society, claimed exemption under Section 10(23C)(iiiad) of the Income Tax Act while operating a school under the name and guise of G.N. Convent School.

The AO had discovered that the assessee received corpus funds during the assessment process and looked into the corpus fund investments. The AO then added back the corpus fund that the assessee had received from the party after being unhappy with the investigation's findings and adjusted the tax amount accordingly

The AO also asserted that the assessee's turnover was recalculated after recognising this corpus money as income.The IT Act's Section 12A did not require the assessee to be registered. In light of this infringement of Section 12AA of the Income Tax Act, the exemption provided by Sections 11 and 12 of the Income Tax Act was rejected.

P.N. Arora,on behalf of the assessee relied on the order of  of Punjab and Haryana High Court in CIT vs. Smt. Shanti Devi Educational Trust that the assessee had not barred for taking corpus donation related to claim of exemption under Section 10(23C) of the Income Tax Act  though the assessee had not registered under Section 12AA of the Income Tax Act.

He further submitted that the assessee’s gross receipt was below Rs. 1 crore and would be eligible to take corpus donation without availing the above mentioned registration.

Radhey Shyam Jaiswal on behalf of the revenue argued and pointed out that the entire corpus donation was added back due to lack of verification. .

The two-member Bench of M. L. Meena, (Accountant Member) and S.H Anikesh Banerjee, (Judicial Member) allowed the appeal filed by the assessee and directed verification of the corpus donation holding that  the grievance of the revenue was related to unverified corpus donation.

The entire corpus donation was taken in the total income and was taxed accordingly. Further there was no point that the assessee could not take the corpus donation without availing the registration under Section 12AA of the Income Tax Act, 1961. As the unverified corpus donation was the moot point of the grievance of the revenue the Bench directed for reverification.

To Read the full text of the Order CLICK HERE

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