Subsequent 12AA Registration Saves Trust: ITAT Treats Corpus Donation as Capital Receipt, Deletes Tax Addition

Shree Aanta Kadva Patidar Samaj Vs ITO (Exemption) (ITAT Ahmedabad)

Subsequent 12AA Registration Saves Trust: ITAT Treats Corpus Donation as Capital Receipt, Deletes Tax Addition

The Ahmedabad ITAT granted relief to Shree Aanta Kadva Patidar Samaj and held that corpus donations received by the trust could not be taxed merely because registration under Section 12AA was granted subsequently. The Tribunal observed that once registration stood granted before processing of return and there was no change in objects of the trust, benefit of Section 11 could not be denied.

The assessee-trust had claimed corpus donation of ₹22.28 lakh as exempt under Section 11(1)(d). However, CPC while processing return under Section 143(1), and later while rejecting rectification application under Section 154, denied exemption and computed tax at maximum marginal rate of 30%. The CIT(A) also confirmed the action.

Before the Tribunal, it was pointed out that registration under Section 12AA had already been granted on 08.02.2018, whereas the intimation under Section 143(1) was passed later on 31.03.2019. The ITAT noted that neither the genuineness of corpus donations nor the charitable nature of the trust was disputed by the department. Further, the authorities failed to consider the effect of subsequent registration and the first proviso to Section 12A(2).

The Tribunal accordingly held that corpus donations were capital receipts eligible for exemption and that taxing the trust at maximum marginal rate was unjustified. Relief was also granted regarding incorrect tax computation and consequential interest.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

This is an appeal filed against the order dated 01-12-2025 passed by Office of the Commissioner of Income Tax, Appeal ADDL/JCIT (A)-5 Kolkata for the assessment year 2016-17.

2. The grounds of appeal are as under:-

“1. Learned CIT(A) has erred in law and facts in confirming the order of ADIT, CPC for rejecting application under section 154 for rectification of the order under section 143(1) in respect of addition by disallowing deduction under section 11 of IT Act of Rs. 22,28,500/- without considering the facts that trust is registered subsequently under section 12AA of IT Act.

2. Learned CIT(A) has erred in law and facts in confirming the order of ADIT, CPC for rejecting application under section 154 for rectification of the order under section 143(1) in which calculation of tax made at MMR ie. 30 percentage of assessed income instead of applicable slab rate.

3. Learned CIT(A) has erred in law and facts in rejecting the ground of appellant for claim of deduction under section 11(1)(d) of IT Act of Rs. 22,28,500/- by considering the facts of registration under section 12AA obtained by appellant subsequently as no assessment is made.

4. Learned CIT(A) has erred in law and facts in not considering the ground of appellant of considering corpus donation of Rs. 22,28,500/- as capital receipts.

5. Learned CIT(A) has erred in law and facts in not considering the additional ground of appellant for giving relief of incorrect tax computed of Rs. 50,867/- by way of tax of Rs. 40,735/- and interest Rs. 10,132/- in income tax return by assessee trust itself”.

3. The assessee is a trust and filed return of income for the A.Y. 2016-17 on 08.10.2016 declaring total income of Rs.93,205/- but not processed due to defective return. The assessee filed rectified return on 23.03.2018 by declaring total income of Rs.1,31,830/-. The return was processed u/s 143(1) of the I.T. Act by CPC, Bangalore on 31.03.2019 making certain adjustments/raising tax payable over and above the returned income / tax payable. The assessee filed rectification request against the said Intimation u/s 143(1). AO, CPC passed the rectification order u/s 154 dated 06.01.2020 rejecting appellant’s request and without modifying the adjustments made in earlier Intimation u/s 143(1).

4. Being aggrieved by the order under Section 154 of the Act dated 06-01-2020, the assessee filed an appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5. The Ld. A.R. submitted that the assessee has claimed corpus donation of Rs.22,28500/- under Section 11(1)(D) in return of income filed on 23-03-2018. The application under Section 12A was decided by the CIT(A) exemption on 08-02-2018 and the said order has granted registration under Section 12AA of the Income Tax Act 1961 to the assessee trust. The order under Section 143(1) that is Assessment Order was passed on 31-03-2019 thus, the trust was registered on the date of order and as no objects were changed by the trust, the first proviso of Section 12(A)(2) was clearly applicable to assessee’s case.

6. The Ld. D.R. relied upon the Order of the CIT(A).

7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee’s trust is public charitable trust and is registered trust under Section 12A from the date 08-02-2018 the corpus donation was not at all disputed by the Assessing Officer while passing the Assessment Order as well as the Order under Section 154 of the Act. There was no discrepancy pointed out by the Assessing Officer related to exemption claimed by the assessee under Section 11(1)(D). The registration passed on 08-02-2018 was not at all considered either by the Assessing Officer or by the CIT(A). Therefore, the addition made by the Assessing Officer and sustain by the CIT(A) is not justifiable related to the calculation of tax made at MMR that is at 30% of assessed income instead of applicable slab rate to the assessee trust. Thus, the corpus donation in the present case are termed as capital receipts and the incorrect tax computed was also not justified.

8. In result the appeal of the assessee is allowed.

Order pronounced in the open court on 15-05-2026