Case Law Details
ACIT Vs Financial Inclusion Trust (ITAT Delhi)
Introduction: The Income Tax Appellate Tribunal (ITAT) Delhi recently rendered a significant decision in the case of ACIT vs Financial Inclusion Trust. The dispute revolves around the treatment of Rs. 44.25 crores received by the trust and the applicability of taxation on corpus-specific voluntary contributions.
Detailed Analysis: The crux of the matter lies in the trust’s non-registration under section 12A of the Income-tax Act, rendering it supposedly ineligible for exemption under section 11(1)(d). The Assessing Officer treated the received corpus donation as income, leading to the appeal. The ITAT, however, disagreed, emphasizing the nature of the grant and its capital receipt status.
The ITAT referred to previous judgments and highlighted the distinction between registered and unregistered trusts. Citing cases such as M/s. Pentafour Software Employees Welfare Foundation and Smt Basantidevi and Shri Chakan Lala Garg Education Trust, it affirmed that corpus donations, being capital receipts, are not subject to income tax.
In alignment with judicial precedents, the ITAT emphasized that the corpus nature of the received funds, coupled with their specified utilization, exempted them from taxation. The ITAT dismissed the Revenue’s appeal, affirming the capital receipt status of the corpus-specific voluntary contributions.
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