Charitable exemption and corpus donations: registration barred reassessment of status, and voluntary school contributions remained exempt.

Registration under section 12A prevents the Assessing Officer from denying an institution's charitable character merely because its school was not recognised by the Directorate of Education; the absence of such recognition was treated as irrelevant to exemption on the facts. The decision also treated donations used for construction of the school building and furtherance of educational objects as voluntary corpus contributions eligible for exemption under section 11(1)(d), where no diversion for non-charitable purposes or violation of section 13 was proved. A mere allegation that the receipts were capitation fee was insufficient. The result was that the assessee's exemption claim was sustained and the addition deleted.

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Issues: (i) Whether the Revenue could deny the assessee's charitable character and exemption merely because the school run by the society was not recognised by the Directorate of Education, and whether the Assessing Officer could re-examine the charitable status despite registration under section 12A; (ii) Whether the amount received as corpus donation was voluntary in nature and eligible for exemption under section 11(1)(d), or was in substance capitation fee liable to be taxed.

Issue (i): Whether the Revenue could deny the assessee's charitable character and exemption merely because the school run by the society was not recognised by the Directorate of Education, and whether the Assessing Officer could re-examine the charitable status despite registration under section 12A.

Analysis: The assessee had been granted registration under section 12A, and the registration authority had already examined the genuineness of the charitable activities. Once such registration is in force, the Assessing Officer cannot sit in judgment over the charitable character of the institution or reclassify it merely because the school is not recognised by another educational authority. The absence of recognition by the Directorate of Education was held to be irrelevant to the claim for exemption in the facts of the case. The finding was also supported by the principle that the Assessing Officer cannot, after grant of registration, further probe into the objects so as to deny the basic charitable status.

Conclusion: The issue was decided in favour of the assessee; the charitable status and eligibility to exemption could not be denied on the ground of non-recognition by the Directorate of Education.

Issue (ii): Whether the amount received as corpus donation was voluntary in nature and eligible for exemption under section 11(1)(d), or was in substance capitation fee liable to be taxed.

Analysis: The contributions were found to have been utilised for construction of the school building and for carrying out the educational objects of the trust. The Revenue did not establish any diversion of funds for non-charitable purposes or any violation of section 13. The receipt of donation was thus treated as a voluntary contribution towards corpus, and the mere allegation of capitation fee was not accepted. The principle of consistency was also noticed, as the Revenue had accepted exemption in subsequent years on similar facts. The legal distinction drawn was that corpus donations made with a specific direction are covered by section 11(1)(d), and where the amount is applied for charitable purposes, exemption cannot be denied on a mere suspicion of compulsion.

Conclusion: The issue was decided in favour of the assessee; the corpus donation was treated as voluntary and exempt, and the addition was rightly deleted.

Final Conclusion: The Revenue's appeal failed in full, as the assessee remained entitled to exemption and the impugned addition was not sustainable.

Ratio Decidendi: Once registration under section 12A is granted, the Assessing Officer cannot re-determine the institution's charitable status, and voluntary contributions received for a specified charitable object and applied for such object are eligible for exemption under section 11(1)(d) in the absence of any proved violation of section 13.

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