- In Versova Kokni Sunni Jamat Trust versus Centralised Processing Centre Bangalore (2022), a bench of the Mumbai Income Tax Appellate Tribunal observed that even if a Trust is not registered under Section 12 A of the Income Tax Act, the corpus donations received by the Trust for a specific purpose will not be taxable as they are like a capital receipt.
- In this instance, Assessee Versova Kokni Sunni Jamat Trust filed an income tax return for the relevant assessment year. The Assessing Officer refused the exemption for voluntary contributions, including the corpus donation received by them for purchasing an immovable property (AO). As a result, a case was filed with the Commissioner of Income Tax (CIT). The Trust maintained that the corpus donation received by it was in the form of a capital receipt and hence not taxable in the hands of the Assessee Trust, notwithstanding the fact that it had not been registered under Section 12A of the Income Tax Act.
- Furthermore, while rejecting the Trust's contentions, the CIT found that the Trust could not benefit from Section 11 of the Income Tax Act's exemption because it was not registered under Section 12 A. As a result, an appeal was filed with the ITAT against the CIT's order. Following that, The Trust raised the aforementioned arguments before the ITAT.
- Section 11 of the Act exempts income from property held under a trust for charitable or religious purposes in India to the extent that the income is used for those purposes in India.
- Section 12 A of the Act states that the benefit of the exemption under Section 11 is not applicable with respect to the income of any trust or institution unless the person receiving the income has applied for registration of the Trust or institution in accordance with the rules thereof.
- In a relevant case, ITO versus Serum Institute of India Research Foundation (2018), it was observed that corpus donations received for a specific reason by a Trust that is not established under Section 12A/12AA of the Income Tax Act are not taxable since they are treated as a capital receipt.
- As a result, the ITAT observed, citing the aforementioned case and statutes, that various documents supporting the Trust's submission of the corpus donations received for the specific purpose of purchasing an immovable property had been filed, indicating that the transaction was in the nature of a capital receipt.
- Furthermore, the Trust had provided the contributors' information, including their PAN cards and proof of purchase of the designated property in the previous fiscal year. However, the AO could not verify the documents supplied by the Trust as the revenue agency did not undertake any scrutiny proceedings.
- Therefore, the appeal filed by the Trust was allowed by the ITAT.
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