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Jeypore Evangelical Lutheran Church Vs. ITO, Exemption Ward - (Income Tax Appellate Tribunal) (20 Oct 2021)

Corpus funds received by the trust are capital receipts, not includible in income of the trust


Direct Taxation

The assessee is a trust, filed its return of income claiming exemption under Section 11 of the Income Tax Act, 1961 (IT Act). The Assessing Officer, on verification of balance sheet, noticed that the assessee has shown special fund of Rs.2,09,36,028 from various donors without routing through the income and expenditure account. The AO asked the assessee to explain as to why the special fund received through donation would not treated as revenue receipt. The AO found that, an amount of Rs.44,91,791 has been donated for the specific purpose, therefore, same were considered to be genuine and balance amount of Rs.1,64,44,237 was added to the total income of the assessee and determined the total income at Rs.19,83,850. Aggrieved by the order of the AO, the assessee trust went in appeal before the learned CIT(A), who passed the order exparte confirming the addition so made by the AO. Hence, the assessee is in appeal before the Tribunal.

From the narration given in the list of donations, it is observed that the amount of donation has been given for the specific purpose. The Assessing Officer has bifurcated three donations as specific purpose and left out other donations not being specific purpose without giving any reason. The donations are being specific purpose and being capital receipts are not coming within the ambit of definition of income as defined under Section 2(24)(ii) of the Act. It being a capital receipts, there is no necessity of routing through income and expenditure account, as claimed by the Assessing Officer.

Some donations have been received for the special project undertaken by the trust and, therefore, same cannot be treated as revenue receipt. It is not the case that, the assessee trust has not disclosed the donation and have not accounted for. The amount received clearly demonstrates for the purpose of various project development and building construction. In view of above, the amount received by the assessee trust for specific direction to use the same for different project undertaken by the assessee and is entitled for deduction under Section 11 of the IT Act.

The decisions relied by the assessee, support the case of the assessee, wherein, the corpus funds received by the trust are considered as capital receipts, not includible in income of the trust. Therefore, the issue is covered in favour of the assessee. Hence, the AO is directed to delete the disallowance of Rs.1,64,44,237. Appeal of the assessee is allowed.


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