“corpus donation”
The decision most relied on for corpus donation is CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (211 ITR 293), cited in 204 judgments on BharatTax.
Leading authorities on corpus donation
A charitable trust can carry forward its excess expenditure from previous years and adjust it against the income of subsequent years, which qualifies as an application of income under Section 11. Additionally, voluntary contributions received for a specific purpose are treated as corpus funds and are not taxable.
The 15% exemption available to charitable trusts under Section 11(1)(a) is absolute and is not curtailed by the provisions of Section 11(2) regarding accumulation of income. Voluntary contributions received towards the corpus of a trust are excluded from the scope of income for Section 11(1)(a) exemption purposes.
For charitable or religious trusts, income for exemption under Sections 11 and 12 must be computed on a commercial basis, not head-wise as per Section 14, treating expenditure as a charge against income. The net income, along with non-corpus donations, forms the eligible base for determining the application of funds and the permissible accumulation under Section 11(1)(a).
The assessee bears the onus to prove the genuineness and voluntary nature of donations received, including corpus donations. Failure to discharge this burden allows the Assessing Officer to treat such donations as non-genuine or accommodation entries.
Dharmada collections are not taxable income of the assessee if they are genuinely meant for and spent on charitable purposes, or if they are voluntary contributions not accruing to the assessee's own benefit.
For charitable trusts claiming Section 11 exemption, Section 68 concerning cash credits does not apply to donations received. The non-submission or non-production of donor details does not automatically lead to an inference that the trust is introducing unaccounted money.
A one-time fee paid by members, with the understanding that it can only be used for capital purposes, is considered a corpus donation and is not taxable as income. This is especially true when separate fees are collected for services rendered.
Donations made for a specific purpose are considered capital in nature and cannot be applied for charitable or religious purposes, thus not being deemed income from property for the purposes of Section 11 of the Income Tax Act.
