Corpus donation treatment for a trust bequest turns on donor intent and the trust's capital treatment.

A bequest to a charitable trust is treated as corpus, and not taxable income, where the donor's intention is to endow the trust capital and the recipient trust treats the receipt as part of corpus. The decisive tests are the terms of the instrument and the surrounding circumstances, read with the manner in which the trust applies the amount. On the facts, the will described the payment as an endowment and the trust accounted for it as corpus, so the receipt qualified as a corpus donation eligible for exemption under section 11(1)(d) of the Income-tax Act, 1961.

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Issues: Whether the amount bequeathed to the trust under the will constituted a corpus donation eligible for exemption under section 11(1)(d) of the Income-tax Act, 1961, or taxable income.

Analysis: The character of a bequest or voluntary contribution depends upon the intention of the donor, which may be gathered from the express terms of the instrument and the surrounding circumstances, together with the manner in which the recipient trust treats the amount. An endowment intended to form part of the trust's capital and to be preserved for generating income is treated as a corpus receipt and not as revenue income. On the facts, the will described the amount as an endowment, and the trust had treated the receipt as corpus. The reasoning adopted by the lower authority was not accepted.

Conclusion: The amount was held to be a corpus donation and therefore eligible for exemption under section 11(1)(d) of the Income-tax Act, 1961, in favour of the assessee.

Ratio Decidendi: For determining whether a bequest to a charitable trust is corpus or income, the decisive tests are the donor's intention and the recipient's treatment of the receipt as capital.

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