Trust donations in marked corpus boxes qualify as corpus donations under section 11(1)(d) despite lack of photographic evidence

The ITAT AGRA held that donations received through boxes specifically marked as "corpus donation" should be treated as corpus donations under section 11(1)(d), not general donations. The AO erred in disallowing the trust's claim for lack of photographic evidence from the assessment year, especially when proceedings commenced six years later. The tribunal found no evidence that corpus donations were misused for other purposes. Following precedent from Shree Mahadevi Tirath Sharda Ma Seva Sangh, the ITAT directed the AO to treat the donations as corpus donations and recompute income accordingly. The assessee's appeal was allowed.

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The core legal questions considered by the Tribunal in these appeals concern the tax treatment of donations received by a religious trust through donation boxes, specifically whether such donations marked as "corpus fund" qualify as corpus donations exempt under section 11(1)(d) of the Income Tax Act or are liable to be taxed as general income. The issues also involve the applicability of section 115BBC relating to anonymous donations, the evidentiary requirements to establish the corpus nature of donations, and the correctness of reopening assessments under section 147 based on investigation reports.

First, the Tribunal examined whether the donations collected through boxes marked "corpus fund" could be treated as corpus donations exempt from tax. The relevant legal framework includes section 11(1)(d) which exempts voluntary contributions made with a specific direction that they form part of the corpus of the trust. Section 12(1) further clarifies that voluntary contributions with such specific directions are not treated as income for exemption purposes. The Tribunal relied on precedents including the decision in Shree Mahadevi Tirath Sharda Ma Seva Sang (2010) 133 TTJ 57, where it was held that the absence of a prescribed mode for giving specific directions means that such directions can be inferred from facts and circumstances, including markings on donation boxes. The Tribunal noted that the boxes in question were clearly marked for corpus donations, and the trust continuously followed the practice of collecting donations through these boxes. It was also observed that the trust's affairs were managed by a government-appointed Receiver, and expenses were incurred with his approval, negating any suspicion of diversion of funds.

The Assessing Officer (AO) had rejected the claim on the ground that the assessee failed to produce photographs or video evidence of the donation boxes for the relevant years and relied on a detailed enquiry report from the Investigation Wing alleging diversion of donations. However, the Tribunal found that the AO did not produce the enquiry report itself in the remand report and that the department initiated proceedings after a considerable delay of six years, making it unreasonable to expect the assessee to maintain year-wise photographic evidence. The Tribunal held that the AO's inability to produce contrary evidence or to demonstrate misuse of funds meant that the donations marked as corpus should be accepted as such. The Tribunal applied the law to facts by concluding that the donations received through boxes marked "corpus fund" were corpus donations and not liable to tax as general income.

Secondly, the Tribunal addressed the applicability of section 115BBC, which imposes a 30% tax on anonymous donations received by charitable or religious trusts to curb unaccounted money. The Tribunal observed that this provision does not apply to trusts created wholly for religious purposes, as per subsection (2) of section 115BBC. The legislative intent, as explained in the Finance Bill memorandum and the Finance Minister's Budget Speech, was to target unaccounted or black money, not genuine small-scale charitable collections. The Tribunal emphasized that the donations received by the assessee trust through marked donation boxes cannot be termed anonymous donations because the trust maintains records and the donations are for a specific purpose. Therefore, section 115BBC was held inapplicable to the facts of the case.

Thirdly, the Tribunal considered the reopening of assessments under section 147 based on the Investigation Wing's enquiry report. The AO relied on this report to justify taxing the donations as general income. However, the Tribunal found that the report was not placed on record or sufficiently detailed in the remand report. The Tribunal also noted that the CIT(A) had called for a remand report, but the AO declined to add new comments, relying on the original assessment order. The Tribunal concluded that the reopening was not justified on the basis of the material before it, as the AO failed to demonstrate any violation of the conditions for corpus donations or any misuse of funds.

The Tribunal further examined the evidentiary standards and treatment of competing arguments. While the AO stressed the absence of photographic evidence and the Investigation Wing's report, the assessee relied on the markings on donation boxes, continuous practice, and the management of the trust by a government-appointed Receiver. The Tribunal found the assessee's arguments more persuasive, especially in light of the absence of any finding that the corpus donations were diverted or misused. The Tribunal also relied on several judicial precedents supporting the view that donations with specific directions, even if collected through donation boxes without formal receipts, qualify as corpus donations. These include decisions in CIT vs. Bhartiya Samskriti Vidyapith Trust, ITO vs. Diamond Jubilee Trust, and ITO vs. Maharaja Agrasen Hospital Charitable Trust, which collectively establish that the mode of giving specific directions is not prescribed and can be inferred from facts such as markings on donation coupons or boxes.

Regarding the AO's reliance on the absence of donor identity and the applicability of anonymous donation provisions, the Tribunal clarified that section 115BBC does not apply to wholly religious trusts and that the donations in question were not anonymous as the trust maintained adequate records and the donations were for a specific purpose. The Tribunal also distinguished the facts from cases where donations were received from other charitable trusts, emphasizing that here the donors were members of the public visiting the temple.

On the question of whether the donations were used for construction of the temple, the Tribunal noted that the AO did not find any evidence that the donations were diverted for other purposes. The absence of such adverse findings supported the conclusion that the donations were used as intended or at least that the trust was entitled to the benefit of the doubt.

The Tribunal's conclusions were:

• The donations received through boxes marked "corpus fund" are voluntary contributions with a specific direction to form part of the corpus and hence exempt under section 11(1)(d).
• The AO was not justified in treating these donations as general income liable to tax.
• The reopening of assessments under section 147 was not sustained due to lack of material evidence.
• Section 115BBC relating to anonymous donations does not apply to the assessee trust as it is a wholly religious trust and the donations were not anonymous.
• The assessee was not required to produce photographic evidence of donation boxes for each year, especially given the delay in proceedings.
• The impugned orders deleting the additions were well reasoned and rightly upheld.

Significant legal principles established or reaffirmed include:

"The requirement contained in s. 12(1) is 'contributions made with a specific direction that they shall form part of the corpus' is relevant. It is clear that the manner in which the specific direction is to be made has not been laid down in the Act or in the IT Rules, 1962. Therefore, it would be in the fitness of things to deduce that the same are to be gathered from the facts and circumstances of each case."

"When the boxes are marked as 'corpus donation', the only thing left is how the donations received from such boxes were used. There is no finding of the AO in the assessment order that such donations were used for any other purposes."

"Section 115BBC was not meant for taxing the small and general charities collected by the genuine charitable trusts but to catch unaccounted money which was brought in as tax-free income in the hands of charitable trusts."

In sum, the Tribunal dismissed the Department's appeals, confirming that donations received through clearly marked corpus donation boxes in a religious trust are corpus donations exempt under section 11(1)(d), and that the AO's contrary treatment was unsustainable in law and on facts.

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