Voluntary Contribution received towards Corpus by an Unregistered Trust u/s 12A is Capital Receipt and doesn't amount to Tax: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that voluntary contribution received towards corpus by an unregistered trust under Section 12A of the Income Tax Act, 1961 is a capital receipt and doesn’t amount to tax.

The assessee trust has filed its return of income declaring a total income of Rs.1,08,550/- after claiming exemption under Section 11 of the Income Tax Act. The assessee in its application requested that the corpus of Rs.6,00,000/- was by mistake considered as income but it was a voluntary contribution from members forming part of the Corpus of Trust.

The Assessing Officer observed that the trust wanted to apply for 12AA registration under the Income Tax Act. After careful consideration of the application of the assessee, held that the trust is not eligible for exemption under Sections 11 & 12 of the Income Tax Act as the trust is not having registration under Section 12AA of the Income Tax Act.

Thus, the Assessing Officer held that the trust is liable to tax at a maximum marginal rate under Section 164 of the Income Tax Act as it is not registered under Section 12AA of the Income Tax Act. Therefore, the application was rejected.

The Authorized Representative submitted that the assessee trust is not registered under Section 12AA of the Income Tax Act nor with The Charity Commissioner. As the said trust is an association of persons, 64 persons have joined hands together and contributed Rs.6,40,000/- to the common pool by making voluntary contributions towards the corpus of the trust.

It was further submitted that the amount of voluntary contribution received towards the corpus of the trust was received in earlier years by the trust and not in the assessment year under consideration.

Therefore, the Authorized Representative submitted that the Commissioner of Income Tax (Appeal) erred in confirming the addition of voluntary contribution forming part of the corpus fund received in earlier years and treating the same as income and the Commissioner of Income Tax (Appeal) should not have held that the same is taxable being capital receipt.

The Departmental Representative submitted that the trust was not a registered trust under Section 12AA of the Income Tax Act. It was further submitted that regarding opening balance contention that the assessee having voluntary contributions in the previous years are not justifiable as the bank account was opened in the present year and the cash derived was not explained by the assessee.

The single-bench member comprising of Suchitra Kamble (Judicial member) held that the reasons appear to be genuine for non-filing of the appeal within the stipulated time and hence the delay is condoned.

Thus, the appeal filed by the assessee is allowed.

To Read the full text of the Order CLICK HERE

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