“corpus fund”
The decision most relied on for corpus fund is CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (211 ITR 293), cited in 204 judgments on BharatTax.
Leading authorities on corpus fund
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.
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).
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.
Profits generated from activities for the advancement of a general public utility (GPU) do not automatically qualify for exemption under Section 11 if the GPU is carried on as a business. Even if business profits are reinvested into charitable activities, the exemption under Section 11 will not be available.
Before registration is granted under section 12AA, all voluntary contributions, even those designated as corpus funds, are considered income of the charitable or religious trust.
Voluntary contributions specifically received towards the corpus of a trust cannot be brought to tax as income. Funds created for specific objectives remain capital funds and are not to be pooled with normal income.
Receipts stand diverted by an overriding title where an obligation to pay an amount is attached to the very source of income, rather than being a mere application of income.
