Unregistered Trusts can Claim Income Tax Exemption of Corpus Donations: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Amritsar bench has held that the Trusts not registered under section 12/12A of the Income Tax Act, 1961 can claim tax exemption towards corpus donations under section 11 of the Act.

The assessee, T.R. Gupta Public Charitableis running a charitable trust with operation since 22.10.2018. The object of the trust is to provide financial help/assistance by way of scholarship stipend to the poor and needy irrespective of their caste language or religion for their education, academic, technical or vocational or of any other kind and also to improve their skills in the field of sports. The assessee filed an application for registration before the ld. PCIT u/s 12AA of the Act. Which was rejected by the CIT(E) by stating that the trust was not registered under the Income Tax Act and the corpus donation is taxable before granting the registration..

A bench of Dr. M. L. Meena, Accountant Member and Sh. Anikesh Banerjee, Judicial Member observed that the Corpus donations received by the Trusts, which is not registered u/s.12A/12AA of the Act, are not taxable as they assume the nature of 'Capital receipt' the moment the donations are given to the "Corpus of the Trust".

Allowing relief to the assessee, the Tribunal held that “We find the provisions of section 2(24)(iia)/12(1)/11(1)(d)/35/56(2) are relevant for deciding the current issue. It is a settled legal proposition, in case of a registered Trust under the Income-Tax Act, the corpus-specific Voluntary Contributions are outside the scope of income as defined in section 2(24)(iia) of the Act due to their "Capital nature". But it is a case of un-registered Trust. Despite the detailed deliberations made by the Ld. DR, we find the principles relating to judicial discipline assume significance and the priority. It is also decided issue that there is need for upholding the favourable view if there exist divergent views on the issue. As discussed in the precedingparagraphs above, there are multiple decisions in favour of the assessee.The two issues must be settled during registration U/s 12AA which are genuinity of trust & activities are related to main object of trust. The two limbs must be considered during registration. The ld. CIT(E) is silent about the second issue. The first issue is adjudicated in favour of assessee-trust.”

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