DCIT Vs Saraswati Education Sansthan (ITAT Ahmedabad)
ITAT Ahmedabad held that corpus donations are capital in nature and hence cannot be added to the income of the assessee and hence not taxable.
Facts- The assessee is a trust engaged in educational activities. The return of income for the impugned year had been filed by the assessee showing NIL income. During assessment proceedings, AO noted that the assessee had not been granted registration as a Charitable Trust u/s. 12 of the Act and was therefore not eligible to claim its income as exempt as per the provisions of Section 11 of the Act.
AO proceeded to compute the income of the assessee as per the normal provisions of the Act and, accordingly, he picked up the total profit from the income & expenditure account of the assessee amounting to Rs.3,45,721/- and noting that corpus donations received by the assessee amounting to Rs.1,93,75,000/-, was not included in the same, he added the same to the said profits, holding that exemption of corpus donation was available only as per Section 11(1)(d) of the Act and since the assessee was not eligible to an exemption u/s. 11 of the Act, provisions of Section 11(1)(d) would not be applicable.
AO also invoked provisions of section 115BBC of the Act relating to anonymous donations and levied tax at the rate of 30% of the anonymous donations including both corpus and voluntary donations received by the assessee amounting in all to Rs.3,03,25,000/-. The donation received in excess of 5% of this total donation amounting to Rs.2,88,08,750/-was subjected to tax at the rate of 30% which amounted to Rs.86,42,625/- as per section 115BBC of the Act.
CIT(A) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- In view of overwhelming view of the ITAT in numerous decisions, uniform view on the issue is that corpus donations are capital in nature. Accordingly, Held that corpus donations to be capital in nature. In view of the same, therefore, we have no hesitation in confirming the finding of the ld.CIT(A) that corpus donations were capital in nature and could not be added, therefore, to the income of the assessee while computing the same as per normal provisions of the Act.
Held that that the finding of non genuine credits has to be specifically arrived at with respect to all such credits. It cannot be based on generalizations and assumptions. After all, the entire donations have been treated as ingenuine u/s.68 of the Act and hence anonymous donations for invoking section 115BBC of the Act. Therefore there has to be finding of all donations being ingenuine and it cannot be based on generalizations.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the Revenue against order passed by the ld.Commissioner of Income-Tax (Appeals), Gandhinagar, Ahmedabad [hereinafter referred to as “CIT(A)”] dated 30.10.2013pertaining to the Asst.Year 2010-11.
2. Brief facts leading to the present appeal before us is that the assessee is a trust engaged in educational activities. The return of income for the impugned year had been filed by the assessee showing NIL income. During assessment proceedings, the AO noted that the assessee had not been granted registration as Charitable Trust under section 12 of the Income Tax Act, 1961 (“the Act” for short) and was therefore not eligible to claim its income as exempt as per the provisions of section 11 of the Act. He therefore proceeded to compute the income of the assessee as per the normal provisions of the Act, and accordingly, he picked up total profit from income &expenditure account of the assessee amounting to Rs.3,45,721/- and noting that corpus donations received by the assessee during the year, amounting to Rs.1,93,75,000/-,was not included in the same, he added the same to the said profits, holding that exemption of corpus fund/donation was available only as per section 11(1)(d) of the Act and since the assessee was not eligible to exemption u/s 11 of the Act, provisions of section 11(1)(d) would not be applicable. Accordingly, he computed the taxable income of the assessee at Rs.1,67,24,902/- after allowing depreciation as per the rates prescribed under the Income Tax Act. The computation of the taxable income is reproduced at page 5 of the order as under;
