INCOME TAX ACT, 1961

Section 11

Charitable trust - Exemption under section 11 - Corpus donation receipts -

Assessee, a charitable institution registered under section 12A, claimed deduction towards 'Large Corpus donations' received by it. During assessment proceedings, assessee was asked to substantiate its claim of corpus donation. In reply, assessee submitted before AO the letter received from donor stating that the donation is towards corpus fund and also pointing out that 'balance amount shall be treated as build the corpus fund for the running of activities in the long run'. AO after receiving the letter, issued a show cause notice stating that there is no specific direction in the letter submitted by the assessee and being not satisfied with the reply of assessee, he treated the donation as general donation and assessed the same to tax. Assessee appealed to CIT(A) who allowed appeal of the assessee. Aggrieved, Revenue went to Tribunal. Held: From the letter submitted by assessee, there is a clear direction from the donor to treat the amount donated as corpus donation which is a specific direction i.e. in order to build the corpus fund for the running of activities in the long run. 'The essence of the contract is crucial and to be seen, keeping in mind the intention of the parties.' As the intention of the donor is to build the corpus fund for the running of VMSS activities in the long run, they cannot be treated as general donations since specific direction has been given. Therefore, donation received, is to be treated as corpus donation.

REFERRED : State of Andhra Pradesh v. Kone Elevators India Ltd. (2005) 181 ELT 156 (SC) : 2005 TaxPub(EX) 0521 (SC), Sundaram Finance Ltd. v. State of Kerala AIR 1966 SC 1178 the Supreme Court, Bharat Sanchar Nigam Ltd. v. Union of India 2006-TMI-309 (SC) : 2006 TaxPub(DT) 1454 (SC)

FAVOUR : In favour of the assessee.

A.Y. : 2015-16

INCOME TAX ACT,1961

Section 11

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