The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the corpus-specific voluntary contribution is a capital receipt and cannot be offered to tax in the case of trust not registered under Section 12A of the Income Tax Act, 1961.
The assessee filed its return of income, which return was selected for scrutiny assessment and the assessment was framed under Section 143(3) of the Income Tax Act. Assuming jurisdiction conferred upon him by provisions of Section 263 of the Income Tax Act, the Principal Commissioner of Income Tax (PCIT) held that the assessment order was not only erroneous but also prejudicial to the interest of the Revenue and accordingly, set aside the assessment.
The AO further found that the assessee has received a corpus donation grant of Rs. 44.25 crores from another trust, namely, Bandhan-Konnagar, which is registered under Section 12A of the Income Tax Act and held that since the assessee trust was not registered under Section 12A of the Income Tax Act, therefore, it is not eligible for exemption under Section 11(1)(d) of the Income Tax Act in respect of corpus donation received by it and, accordingly, treated Rs. 44.25 crores as income of the assessee.
The Commissioner of Income Tax (Appeal) [CIT(A)] observed that the impugned receipt is a capital receipt that is to be kept permanently and only accretions are to be used. The utilization of the grant is governed by the directions of the donor and since the grant was not in the form of a corpus donation but was a specified grant given for utilization as per the directions of the donor, hence was a capital receipt and, accordingly, directed the AO to delete the impugned addition. The Two-member bench comprising of N.K. Billaiya (Accountant member) and Astha Chandra (Judicial member) upheld the decision of CIT(A) and dismissed the appeal of the revenue.