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Facts
The assessee, a charitable trust, filed its income tax return late for AY 2018-19. The Centralized Processing Centre (CPC) denied its claims for corpus donation (Rs. 72,14,721) under Section 11(1)(d) and 15% accumulation of gross receipts (Rs. 8,11,336) under Section 11(1)(a), treating voluntary contributions as general donations. The ld. CIT(A) upheld this adjustment, citing non-filing of Form 9A and judicial precedents.
Held
The Tribunal ruled that the CPC's adjustment, confirmed by the ld. CIT(A), was not sustainable. It clarified that Rule 17 of the I.T. Rules and Form 9A do not apply to claims for corpus donation under Section 11(1)(d), and the requirement for Form 9A for accumulation was also misunderstood. The case is remanded to the Assessing Officer (AO) for verification of the assessee's claims regarding the corpus donation and 15% accumulation.
Key Issues
Whether a charitable trust's claim for exemption on corpus donation and 15% accumulation of income can be denied solely based on late filing of the return and non-filing of Form 9A, and the correct interpretation of the applicability of Income Tax Rules for such claims.
Sections Cited
11(1)(a), 11(1)(d), 12A, 80G(5), 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI & SHRI SOUNDARARAJAN K.
Per Prashant Maharishi, Vice President
This appeal is filed by the Sangha Kowshika Sankethi [assessee/appellant] for the assessment year 2018-19 against the appellate order passed by the Jt.CIT(Appeals)-2, Ludhiana [ld. CIT(A)]
dated 21.02.2025 wherein the appeal filed by the assessee against the order issued u/s. 143(1) of the Income Tax Act, 1961 [the Act] dated 31.1.2020 was dismissed. Therefore assessee is in appeal before us.
The issue involved in this appeal is that income of the assessee trust is determined at Rs 80,26,057/- by not allowing the claim of corpus donation u/s 11 (1) (d) of the Act of Rs. 72,14,721/- and not allowing accumulation to the extent of 15 % of the gross receipt restricted to Rs. 811336/- to the assessee.
The brief facts of the case show that assessee is a charitable trust, who filed its return of income on 9.10.2018 whereas the due date of filing of return was 31.8.2018. In the original return, assessee has claimed deduction of Rs.80,26,057 being amount due as per clause (2) to Explanation to section 11(1) which was denied by the CPC. Intimation u/s. 143(1) was passed on 31.1.2020.
The amount of Rs.80,26,057 is comprising of corpus donation u/s. 11(1)(d) of Rs.72,14,721 and further a sum of Rs.8,11,336 is amount accumulated u/s. 11(1)(a) of the act being 15% of the total receipts. While processing the return, CPC has treated the voluntary contribution forming part of the corpus as general donation and therefore adjustment of Rs.80,26,057 to the total income was made.
On appeal before the ld. CIT(A), assessee has explained the above error. However, the ld. CIT(A) cited various judicial precedents and held that the claim of assessee is not allowable, as assessee has not filed Form 9A of the Act and delay in filing such Form is not within his purview. Thus, appeal of the assessee was dismissed.
The ld. AR had submitted a paperbook containing 60 pages being the copy of return of income, audited financial statement and also rectification application filed with the AO on 2.3.2021. The ld. AR submitted that it is a
mistake by the assessee at the time of filing of return of income and for which the assessee has also filed a rectification application which is pending before the AO. He submits that the income of the assessee being voluntary contribution received with the specific direction were not allowed as deduction from the gross receipts.
The ld. CIT(DR) vehemently submitted that there is an error in the return of income filed by the assessee and therefore no fault can be found with the processing of the return and the order of the ld. CIT(A).
We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The assessee is a charitable trust registered u/s. 12A of the Act and also granted recognition u/s. 80G(5) of the Act. At the time of filing of return of income, assessee submitted that a sum of Rs.72,14,721 is the voluntary contribution forming part of the corpus fund and therefore it is exempt under the provisions of section 11(1)(d) of the Act. While processing the return, the CPC has considered it as a general contribution. Further in the return of income, assessee has claimed accumulation u/s. 11(1)(a) of Rs.8,11,336 which was denied by the CPC. Thus total sum of Rs.80,26,057 was adjusted. The claim was made by the assessee u/s. 11(1)(d) and section 11(1)(a), but CPC stated that according to Rule 17 of the I.T. Rules, exemption is allowed only if assessee has exercised option by filing Form 9A before the due date. Since assessee has not filed Form 9A, the exemption claimed is not allowed. We do not find that provisions of Rule 17 applies for claim of deduction u/s. 11(1)(d) of the Act of the corpus donation. Further accumulation of Rs.8,11,336 is only 15% to the extent of gross income. Therefore, there is accumulation of total income for any specified purposes. Even in appeal before the ld. CIT(A), the issue before him was misunderstood and Form 9A is also for the purposes of exercising option of accumulation. This is the not the case and therefore the adjustment made by the CPC as well as confirmed by the ld. CIT(A) is not sustainable. However, the claim of the assessee that a sum of Rs.72,14,721 is the corpus donation and further an amount of claim of 15% of the gross income of Rs.8,11,336 is correct, but verification needs to be made by the ld. AO.
Accordingly, allowing ground No.2 of the appeal of the assessee, we direct the assessee to substantiate before the ld. AO the correct computation of total income with evidence. The ld. AO may verify and decide the issue in accordance with law that assessee has received the corpus donation and the claim of 15% of gross receipt, is in order.
Accordingly the appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 25th day of July, 2025.