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Facts
The assessee, a religious and charitable trust, was not registered under Section 12AA of the Income-tax Act for the Assessment Year 2012-13. They received donations of Rs. 1,24,47,730/- which they claimed as corpus donations. The Assessing Officer treated this amount as income as the trust was not registered.
Held
The Tribunal held that the provisions of Section 11 and 12 of the Income-tax Act are applicable only to registered trusts. Since the assessee was not registered during the relevant assessment year, they are not entitled to exemption under Section 11(1)(d) for corpus donations. The subsequent registration from AY 2020-21 onwards is not retrospective.
Key Issues
Whether an unregistered trust can claim exemption for corpus donations under Section 11(1)(d) when registration under Section 12AA is obtained subsequently but is applicable prospectively. Whether corpus donations received by an unregistered trust can be considered as capital receipts.
Sections Cited
143(3), 147, 11(1)(d), 12AA, 250, 11, 12, 2(24)(iia), 10(23), 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA KAMBLE
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the Assessee against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (in short ‘the CIT(A)’) dated 05.03.2024 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2012-13.
2. The Assessee has taken following grounds of appeal:-
“1. The Learned CIT (A) had dismissed partial appeal filed by appellant against the AO order u/s 143(3)r.w.s.147 of the Act by not allowing deduction for corpus donation under section 11(1)(d) as trust is not registered under section 12AA.
The Learned CIT (A) had dismissed partial appeal filed by appellant against the AO order u/s 143(3) r.w.s. 147 of the Act by not accepting corpus donation as capital receipt because it is found from the assessment order that there is no finding of AO on utilization of said fund of Rs.1,24,47,730/-.” The brief facts of the case are that the Assessee is a religious and 3. charitable trust, registered with charity commissioner since 1950. Trust was not registered under section 12AA of the Act for the year under consideration, but applied for registration u/s 12AA on 12.07.2019 which got approved on 22.01.2020 w.e.f. 12.07.2019. The Assessing Officer, during the assessment proceedings, observed that the assessee had shown interest earned on FDR of Rs.3,46,542/- in the assessee’s income and expenditure account, however, found that the assessee had not included the donation received of Rs. 1,24,47,730/- in its total income. Since the assessee-trust was not registered u/s 12AA of the Act for the year under consideration, the Assessing Officer treated the assessee not entitled for any exemption u/s 11(1)(d) of the Act and added the amount of Rs.1,24,47,730/- to the total income of the assessee.
Aggrieved by the order of Assessing Officer, the assessee filed appeal before the Ld. CIT(A) who, after considering the submissions of the assessee, restricted the addition to Rs.1,20,65,755/-, after deducting Rs.3,81,975/- erroneously added twice in the total income of the assessee.
Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
Before us, Ld. Counsel for the assessee contended that the Ld. CIT(A) erred in dismissing the appeal filed by the assessee without considering the order u/s 12A issued by the CIT(Exemptions) on 22.01.2020 mentioning that ‘the Trust/Institution/Company has been registered u/s 12AA of the I.T. Act, 1961, with effect from 12.07.2019’. In support of his proposition, he relied upon the decision of ITAT Kolkata bench in the case of Sree Sree Ramkrishna Samity Vs. DCIT [ITA No. 1680/2012], wherein it was held that the insertion of the proviso to Section 12A(2) of the Act has to be construed as retrospective in operation.
The Ld. AR also submitted that the assessee had not claimed any exemption u/s 11(d) of the Act, assuming that the donation received for specific purpose was capital receipt which was also utilized as per the documents already produced before the Assessing Officer, as mentioned in paragraph No. 5.4 of the Assessment Order.
The Ld. DR, on the other hand, supported the orders of the lower authorities and argued that the assessee was not a registered trust during the relevant assessment year. He further contended that the assessee's claim of capital receipt could not be accepted, particularly since the assessee had sought exemption under Section 11(1)(d) of the Act in its return of income. The DR emphasized that the general assertion of a capital receipt could not be upheld in all circumstances, as even for charitable trusts, if corpus donations are received, they must be utilized for specific purposes.
Heard both the parties and perused the material available on record.
We find that, during the year the assessee was an unregistered trust and no evidence of receiving of corpus donation have been produced before us except the cash receipt statement at page no. 62 to 93 of the paper-book. We have gone through the provisions of the Act with regard to conditions for applicability of Section 11 & 12. The same are reproduced as under:-
[Conditions for applicability of sections 11 and 12.] 12A. [(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA] : [Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—
(i) from the date of the creation of the trust or the establishment of the institution if the [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period46 aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the [***] Commissioner is not so satisfied:] [Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;] [(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA;] (b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.] (c) [***]
[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.] 10.1 We have also gone through the explanatory notes to the provisions of the Finance (No.2) Act, 2014, of Circular no. 01/2015 dated 21.01.2025, which read as under :-
“8. Applicability of the registration granted to a trust or institution to earlier years 8.1 The provisions of section 12A of the Income-tax Act, before amendment by the Act, provided that a trust or an institution can claim exemption under sections 11 and 12 only after registration under section 12AA of the said Act has been granted. In case of trusts or institutions which apply for registration after 1st June, 2007, the registration shall be effective only prospectively. 8.2 Non-application of registration for the period prior to the year of registration caused genuine hardship to charitable organisations. Due to absence of registration, tax liability is fastened even though they may otherwise be eligible for exemption and fulfil other substantive conditions. However, the power of condonation of delay in seeking registration was not available. 8.3 In order to provide relief to such trusts and remove hardship in genuine cases, section 12A of the Income-tax Act has been amended to provide that in a case where a trust or institution has been granted registration under section 12AA of the Income-tax Act, the benefit of sections 11 and 12 of the said Act shall be available in respect of any income derived from property held under trust in any assessment proceeding for an earlier assessment year which is pending before the Assessing Officer as on the date of such registration, if the objects and activities of such trust or institution in the relevant earlier assessment year are the same as those on the basis of which such registration has been granted. 8.4 Further, it has been provided that no action for reopening of an assessment under section 147 of the Income-tax Act shall be taken by the Assessing Officer in the case of such trust or institution for any assessment year preceding the first assessment year for which the registration applies, merely for the reason that such trust or institution has not obtained the registration under section 12AA for the said assessment year.
8.5 However, the above benefits would not be available in the case of any trust or institution which at any time had applied for registration and the same was refused under section 12AA of the Income-tax Act or a registration once granted was cancelled. 8.6 Applicability: - These amendments take effect from 1st October, 2014.”
10.2 As per the explanation, the benefit of Sections 11 & 12 shall be available for any assessment year wherein the assessment is pending as on the date of such registration if the objects are same. Neither the section nor the explanation envisages benefit of Section 11 & 12 to an unregistered trust 8 years before the issue of registration certificate.
In the instant case, the registration certificate is applicable from AY 2020-21 onwards. The appeal before us pertains to 2012-13 and also in the absence of any evidence to prove that the donations received are for corpus. We have also gone through the judgment of Co- ordinate bench of Kolkata in the case of Sree Sree Ramkrishna Samity Vs. DCIT (ITA No.1680/Kol/2012, order dated 09.10.2015). We find that in that case the corpus donations received were meant for specific purpose and utilized for construction of old age home. There was no such evidence in the instant case. In the cases referred by the assessee, we find that the donations were received for specific purpose and were dealt u/s 2(24)(iia) of the Act.
10.3 For the sake of ready reference, the provisions of Section 2(24)(iia) of the Act as to what constitute “Income” is as under:-
“(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes [or by an association or institution referred to in clause (21) or clause (23), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) [or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10 [or by an electoral trust]]. Explanation.—For the purposes of this sub-clause, "trust" includes any other legal obligation ;]”
10.4 We have gone through the ratio of the Ld. CIT(A) while rejecting the claim of the assessee. The same is as under:-
“4.1. The AO during the course of assessment proceedings observed that it is not a registered trust and the donations received by the appellant needs to be routed through Income & Expenditure / P&L A/c. which has not been done as appellant claimed the said donation as corpus donation and claimed exemption u/s 11(1)(d) of the I.T Act, 1961. Subsequently, assessee was show-caused to explain as to why corpus donation should not be rejected as per provisions of section 11(1)(d) of the I.T Act, 1961. The AO after considering the explanation rejected the claim as per provisions of section 11(1)(d) of the I.T Act, 1961 amounting to Rs. 1,24,47,730/-.
4.2 The appellant contended that it is now a registered trust and obtained registration certificate and hence, eligible for exemption u/s 11(1)(d) of the I.T Act, 1961 as assessment was completed after obtaining the certificate. The appellant also contended that the AO also added sum of Rs.3,81,975/- twice in the total income erroneously as this amount is merely a transfer entry from one account to another account. The appellant stated that contribution received as corpus are used for specific purposes and same are audited by Chartered Accountant. The appellant contended that it is registered with Charity Commissioner and relied on judicial pronouncements that voluntary contribution received for specific purpose should be treated as capital receipt.
Decision 4.3 The contention of the appellant has been duly considered, however, same is found to be not completely acceptable. The provisions of the Income-tax Act, 1961 lays down special computation provision for a charitable trust u/s 11, 12 and 13 of the I.T Act, 1961. The said provisions are applicable only to a trust which is registered under the provisions of the Income-tax Act, 1961. An AOP though formed for purpose of general public utility or educational purpose etc. cannot claim the benefit of provision of section 11 of the I.T Act, 1961, if it is unregistered. It is a fact that the appellant is not a registered trust. Hence, the concept of corpus donation for which exemption is available u/s 11(1)(d) of the I.T Act, 1961 is not applicable to the appellant. The appellant cannot state that the corpus donation are not taxable in its hands. Further, the contention of the appellant that it had now obtained registration certificate and hence, the benefit of exemption u/s 11(1)(d) also cannot be accepted because the registration certificate is applicable from A.Y.2020-21 onwards. The appellant's contention of capital receipt cannot be accepted because appellant in the return claimed exemption u/s 11(1) (d) of the Act and further during the assessment proceedings there is no finding in respect of utilisation of capital receipt by the AO. Further, the general contention of capital receipt cannot be always accepted because even in charitable trust, fi there are corpus donations, the donation needs to be used for the purpose for which it is taken and till the mean time, if it is not used, it needs to be invested in the specified modes. Hence, even general contention of capital receipt cannot be accepted because it is found from the assessment order that there is no finding of AO on utilisation of said fund of Rs. 1,24,47,730/-. Accordingly, the contention of the appellant is rejected and the addition is sustained. However, the addition of Rs.1,24,47,730/- is reduced by Rs.3,81,975/- being entry double counted.
10.5 In present assessee’s case, there was no evidence to show that the donations received are for corpus. As per section 11(1)(d) of the Act, voluntary contributions received by the trust or charitable institutions with a specific direction that the contribution shall form part of the corpus of the trust or institution shall not be treated as income of the trusts or institution, but this is not the case of the assessee. As per Section 12 of the Act, any voluntary contribution not with a specific direction that it will form part of the corpus will be treated as income of the trust or institution existing for charitable purposes. As per section 12A of the Act, the benefit of Sections 11 & 12 will be available only if the trust or the institution is registered under the Income Tax Act as a trust or charitable institution u/s 12AA. Therefore, in light of the above tax treatment of voluntary contributions can be summarised as follows:
Tax treatment of voluntary contributions Voluntary contribution received with a specific direction that it forms part of the corpus of the trust is treated as follows:
• If the trust or charitable institution is registered u/s 12AA of the Income Tax Act’1961 - Then not taxable as per section 11(1)(d) of Income Tax Act’1961.
• If the trust or institution is not registered U/s 12AA- Then voluntary contribution received is taxable as per Sec 2 (24) (iia) of the Act.
Voluntary contribution received without direction that it forms part of corpus is taxable under the head income from other sources.
10.6 The “Income” under Section 2(24)(iia) of the Act would not form part of total income u/s 11 and 12A of the Act only if the assessee is registered or filed an application before the competent authorities, the condition of which is absent in present case.
10.7 In the background of these facts, provisions of the Act viz. Sections 2(24)(iia), 10(23), Sec. 11 & 12A , Explanatory Notes to the provisions of the Finance (No.2) Act, 2014 - Circular No. 01/2015, dated 21.01.2025 and the judgments, we, therefore, decline to interfere with the order of the ld. CIT(A).
In the result, the appeal of the assessee is dismissed.
The order is pronounced in the open Court on 18.02.2025