The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that donations received for capital projects of trust are corpus donations.
Thus, the bench directed for readjudication of the copies of receipts/details of corpus donations which was not verified by the tax authorities for providing exemption.
Assessee, Ayyappa Seva Samgham Bombay is registered as charitable organization under Section 12A of the Income Tax Act. During the assessment proceedings AO noticed that the assessee has claimed certain donations as “Corpus donations” and accordingly claimed the same as exempt.
According to the AO, the receipts and application of income shown in the computation of income did not match. Therefore, the AO re-computed the total income of the assessee by assessing corpus donations as normal donations and also did not consider depreciation as an application of income along with making additions.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal){ CIT(A)}, who uphold the addition. Thereafter the assesee filed a second appeal before the tribunal.
Before the bench, S.C. Tiwari, counsel for the assessee submitted that donations have been received for specific projects for construction of buildings the donation receipts, it is mentioned as “CHF”meaning ‘Community Hall Fund. The mentioning of “CHF” in the donation receipt would mean that it has been received towards corpus donations.
Further, the counsel argued that the donations are usually collected by different people holding different sets of receipt books and hence it couldn’t be expected that the numbering of receipts should be continuous.
Manoj Kumar Sinha, Counsel for the revenue supported the decision of lower authorities.
It was observed by the tribunal that donation received for capital projects are Corpus donations. When the wording of “CHF” is stated in the receipt, it can safely be presumed that the said wording has been mentioned as per the direction of the donor.
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of B.R. Baskaran, (Accountant Member ) and Narendra Kumar Choudhary, (Judicial Member) held that donations given for capital projects should be considered as Corpus donations, which are not liable to be taxed.
However copies of receipts/details of corpus donations have not been examined by the tax authorities. Thus the bench directed to restore the matter to the file of AO for examining sample copies of receipts and compute Corpus donations and allowed exemption.
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