Charitable trust donations taxable under section 2(24)(iia) but corpus donations remain capital receipts

ITAT Ahmedabad ruled on a charitable trust's tax treatment of donations. The tribunal held that voluntary contributions received by the trust are taxable income under section 2(24)(iia), even for unregistered trusts. However, corpus donations were deemed capital in nature and not taxable income. The AO's alternative assessment under section 115BBC was rejected as this provision applies only to trusts registered under section 12A. The tribunal also dismissed the addition under section 68, finding insufficient evidence to treat all donations as non-genuine based on examination of only a small sample. Revenue's appeal was partly allowed regarding voluntary donations but dismissed on corpus donations and section 115BBC application.

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Issues Involved:

1. Taxability of voluntary donations as revenue receipts.
2. Taxability of corpus donations as income or capital receipts.
3. Applicability of Section 115BBC regarding anonymous donations.
4. Genuineness of corpus donors and the treatment of donations as anonymous.

Detailed Analysis:

1. Taxability of Voluntary Donations as Revenue Receipts:

The AO treated voluntary donations of Rs. 1,09,50,000/- as revenue receipts, arguing that as per Section 2(24)(iia) of the Income Tax Act, voluntary contributions received by trusts created for charitable and religious purposes are considered income. The CIT(A) excluded these donations from being treated as income, holding them as gifts. The Tribunal agreed with the AO, stating that the definition of income under Section 2(24)(iia) clearly includes voluntary contributions, leaving no scope for treating them as gifts and excluding them from income. Thus, the voluntary contributions received by the assessee are taxable.

2. Taxability of Corpus Donations as Income or Capital Receipts:

The AO included corpus donations of Rs. 1,93,75,000/- in the taxable income, arguing that these are voluntary contributions and thus income as per Section 2(24)(iia). The CIT(A) treated them as capital receipts, relying on various ITAT decisions. The Tribunal upheld the CIT(A)'s view, citing consistent ITAT rulings and a Delhi High Court decision confirming that corpus donations are capital in nature and not taxable as income. The Tribunal dismissed the AO's reliance on a contrary ITAT Chennai decision, emphasizing the overwhelming consistent view treating corpus donations as capital.

3. Applicability of Section 115BBC Regarding Anonymous Donations:

The AO alternately treated the donations as anonymous and taxed them under Section 115BBC, applicable to trusts registered under Section 12A. The CIT(A) held that Section 115BBC applies only to registered trusts. The Tribunal agreed, stating that Section 115BBC clearly applies to trusts enjoying exemption under Section 11, which requires registration under Section 12A. As the assessee was not registered, Section 115BBC could not be invoked.

4. Genuineness of Corpus Donors and Treatment of Donations as Anonymous:

The AO questioned the genuineness of corpus donations, noting that most were received in cash and some donors did not appear for examination. Based on this, the AO treated the donations as bogus and anonymous. The CIT(A) found merit in the assessee's contention that the genuineness of donors was established, and the Tribunal agreed. The Tribunal emphasized that findings of non-genuine credits must be specific and cannot be generalized based on a small sample. The Tribunal dismissed the Revenue's plea, stating that the AO's generalization from a minuscule sample was unjustifiable.

Conclusion:

The Tribunal upheld the AO's treatment of voluntary donations as taxable income but confirmed the CIT(A)'s view that corpus donations are capital in nature and not taxable. The Tribunal also set aside the AO's alternate treatment of donations as anonymous under Section 115BBC, agreeing with the CIT(A) that the section applies only to registered trusts. The appeal of the Revenue was partly allowed.

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