Corpus donation with specific purpose was not income u/s 2(24)(iia) but capital receipts – ITAT

Corpus donation with specific purpose of purchase of lands for furtherance of the objects not income u/s 2(24)(iia) as they were capital receipts for specific purpose – ITAT

ABCAUS Case Law Citation:
ABCAUS 2781 (2019) (02) ITAT

Important Case Laws Cited/relied upon by the parties
ITO Vs. Vokkaligara Sangha

The assessee-trusthad received voluntary corpus donations for furtherance of its objects by purchase of lands.

On the basis of information received, that the assessee trust has received corpus donations in the period when the assessee trust was not granted registration under section 12A of the Income Tax Act, 1961 (the Act), the Assessing Officer (‘AO’) initiated proceedings u/s 147 of the Act and after recording that he had reason to believe that income of the assessee exigible to tax had escaped assessment, issued notices under section 148 of the Act.

The AO did not accept the assessee’s contentions that the corpus donations were in the nature of capital receipts and were not exigible to tax, irrespective of whether registration under section 12A of the Act is available or not.

Relying on section 12A(2) of the Act, the AO held that since the assessee, during the relevant time had not been  granted registration under section 12A, exemption under section 11 of the Act was not available for the Assessment Years under consideration.

The assessments were accordingly completed under section 143(3) r.w.s. 147 of the Act making additions to the income for the corpus donations received.

The assessee preferred appeals before the CIT(A) which was dismissed. Aggrieved by the orders of CIT(A), the assessee had filed the instant appeals before the Tribunal.

The Tribunal observed that in similar factual circumstances a Co-ordinate Bench of the Tribunal had held that voluntary contributions received for a specific purpose cannot be regarded as income under section 2(24)(iia) of the Act since they are capital receipts to be utilised for specific purpose.

Accordingly, the Tribunal held that the voluntary corpus donations / contributions received by the assessee for the specific purpose of purchase of lands for furtherance of the assessee’s objects cannot be regarded as income under section 2(24)(iia) of the Act since they were capital receipts for specific purpose.

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