Corpus donations and capital expenditure qualify for charitable treatment, supporting renewal of approval for a trust.

Corpus donations supported by receipts and surrounding evidence were treated as capital receipts, and not as income merely because they were wrongly credited in the profit and loss account. Book entries were held not conclusive of the true character of the receipts. Expenditure on additions to fixed assets was also recognised as application of funds for charitable purposes. On that basis, the trust satisfied the conditions for approval, and the rejection based on an assumed breach of sections 11(2) and 11(5) was found unsustainable. Renewal of approval under section 80G(5) was therefore due.

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Issues: Whether the assessee-trust was entitled to renewal of approval under section 80G(5) of the Income-tax Act, 1961, in the light of the claim that the receipts in question were corpus donations and that the expenditure on fixed assets amounted to application of income for charitable purposes.

Analysis: The donations received during the relevant period were proved to be corpus donations on the basis of the receipts issued by the trust and the surrounding evidence. Such receipts could not be treated as income required to be applied during the year for charitable objects merely because they were wrongly credited in the profit and loss account. The entries in the books were not conclusive of the true character of the receipts. The trust had also incurred expenditure on additions to fixed assets, and capital expenditure for charitable objects constitutes application of funds for charitable purposes. The rejection of renewal was founded on an erroneous assumption of violation of section 11(2) and section 11(5), and the material on record supported the assessee's compliance with the conditions for approval.

Conclusion: The assessee was entitled to renewal of approval under section 80G(5), and the rejection order was unsustainable.

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