The Income Tax Appellate Tribunal, Ahmedabad Bench allowed exemption on corpus donations under Section 11(1)(d), directing the AO to grant relief to Falahe Darain Education Society, which received Rs 48,38,779 during the assessment year under Income Tax Act 1961.
AHMEDABAD: The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, ruled that corpus donations received by the educational trust from various donors qualify for exemption, instructing the Assessing Officer (AO) to permit the exemption on the total corpus donation under Section 11(1)(d) of the Income Tax Act, 1961.
The appellant, Falahe Darain Education Society, is a trust established for educational and charitable aims, registered under sections 12AA and 80G of the Income Tax Act, 1961. For the assessment year, the appellant received Rs 48,38,779 as corpus donations and sought exemption under Section 11(1)(d).
Section 11(1) of Income Tax Act, 1961:
Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-
(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution, subject to the condition that such voluntary contributions are invested or deposited in one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus.
Section 11 of the Income Tax Act grants tax exemption on income earned from property held for charitable or religious purposes, provided certain conditions are fulfilled. The concerned trust or institution must operate on a non-profit basis, and its earnings must be applied exclusively towards approved charitable or religious activities.
To avail this benefit, the income must arise from assets used solely for such purposes, and the organization must be duly registered under Section 12A or Section 12AA of the Act.
During the assessment, the appellant did not provide the necessary details regarding the corpus donation, which led the AO to deny the exemption claim and include the amount in the income of the assessee.
The appellant then appealed to the Commissioner of Income Tax (Appeals) (CIT(A)), submitting evidence to validate its claim. CIT(A) accepted the evidence presented by the appellant, forwarded it to the AO, and instructed the AO to provide a remand report.
The AO submitted a remand report defending the additions made during the assessment. The appellant responded to this report. After reviewing both the AO’s report and the appellant’s response, CIT(A) upheld the AO’s addition.
Sunil Talati, the appellant’s counsel, argued that the findings of the respondent were factually flawed and based primarily on the AO’s remand report. He claimed the respondent overlooked the documents and the appellant’s reply to the remand report. Ananya Kulshresth represented the respondent.
Judicial Member Senthil Kumar and Accountant Member Annapurna Gupta noted that the deficiencies identified by the AO and CIT(A) regarding the corpus donations were insufficient to deny the total corpus donation of Rs 48,38,779.
The tribunal addressed each identified issue and determined that the disallowance of the exemption for the corpus donation was unwarranted, concluding that the AO’s and CIT(A)’s refusal of the exemption was erroneous. Given the circumstances of the case, the Tribunal directed the AO to approve the assessee’s exemption claim under Section 11(1)(d) for the full corpus donation of Rs 48,38,779.
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