ITAT Chennai grants exemption under Section 10(23C)(iiiad) for corpus donations, benefiting Trust.

The ITAT Chennai allowed the appeals for both assessment years, directing the AO to grant exemption under Section 10(23C)(iiiad). The Tribunal held that corpus donations should not be included in annual receipts, making the Trust eligible for the exemption as its regular receipts were below the threshold. The appeals for AY 2014-15 and AY 2015-16 were allowed, providing relief to the assessee.

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Issues Involved:
1. Whether the corpus fund should be included in the "annual receipts" for the purpose of exemption under Section 10(23C)(iiiad) of the Income Tax Act.
2. Whether the assessee is entitled to exemption under Section 11 of the Income Tax Act for the assessment years in question.

Summary:

Issue 1: Inclusion of Corpus Fund in Annual Receipts for Section 10(23C)(iiiad) Exemption

The assessee, a Trust, contested the disallowance of exemptions under Section 10(23C)(iiiad) for the assessment years 2014-15 and 2015-16. The Assessing Officer (AO) included corpus donations in the gross receipts, which exceeded the Rs.1 crore threshold, thereby denying the exemption. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, leading to the assessee's appeal to the ITAT.

The Tribunal found that the corpus donations, being capital receipts with specific directions for infrastructure development, should not be included in the "annual receipts" for the purpose of Section 10(23C)(iiiad). Citing judicial precedents, including the Punjab & Haryana High Court's decision in CIT (Exemptions) v. Shanti Devi Educational Trust and other relevant cases, the Tribunal held that the corpus donations do not form part of the annual receipts. Consequently, the Trust's receipts from regular activities were below Rs.1 crore, making it eligible for the exemption under Section 10(23C)(iiiad).

Issue 2: Entitlement to Exemption under Section 11

The assessee also claimed exemption under Section 11, which was initially denied due to the lack of registration under Section 12AA for the relevant years. However, the Tribunal noted that the Trust was granted registration under Section 12AA from AY 2018-19 onwards. Despite this, the Tribunal emphasized that the corpus donations should not be aggregated with regular receipts, and thus, the Trust's annual receipts were below the prescribed limit for the exemption under Section 10(23C)(iiiad).

Conclusion:

The ITAT Chennai allowed the appeals for both assessment years, directing the AO to grant exemption under Section 10(23C)(iiiad), as the annual receipts excluding corpus donations were below the Rs.1 crore threshold. The Tribunal set aside the orders of the lower authorities, emphasizing that the corpus fund should not be included in the annual receipts for the purpose of this exemption. The appeals for AY 2014-15 and AY 2015-16 were thus allowed, providing relief to the assessee.

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