Corpus Donations Not Taxable Without Section 12AA Registration | ITAT

Case Details: Shree Sant Bhojaji Maharaj Deosthan vs. Income-tax Officer(Exemption) - [2026] 185 taxmann.com 865 (Nagpur-Trib.)

Judiciary and Counsel Details

• Pawan Singh, Judicial Member & Khettra Mohan Roy, Accountant Member
• Manoj G. Moryani & Bhavesh M. Moryani, Advs. for the Appellant.
• Pankaj Kumar, CIT-DR for the Respondent.

Facts of the Case

The assessee, a charitable trust registered under the Bombay Public Trust Act, filed a return for the relevant assessment year claiming a deduction under section 11(1)(d) in respect of voluntary contributions treated as corpus donations. It was stated that donations were collected from devotees through a donation box, credited to the Corpus Fund Account, shown as capital receipts in the balance sheet, and fully utilised for the construction of a community hall.

Books of account were audited under the Bombay Public Trust Act, and an audit report was filed before the Charity Commissioner. Registration under section 12AA was granted later with effect from the subsequent assessment year. While processing the return, CPC disallowed the claim under section 11(1)(d). Assessee’s rectification application under section 154 was rejected. The matter reached the Nagpur Tribunal.

ITAT Held

The Tribunal held that a corpus fund denotes a permanent fund kept for the basic expenditure needed for the administration and survival of the trust. The corpus fund is generally not allowed to be used for the trust’s purpose. Such a fund can also be used to acquire a capital asset or property of the trust that generates income. Corpus funds are generally created from corpus donations. A donation will be treated as a corpus donation only if a specific written direction from the donor accompanies it.

In the instant case, the fund was collected from devotees by keeping a box in the temple premises; therefore, there was no written direction from the donors. The entire amount of donations was utilised to build a community hall, and the development fund was collected from devotees by keeping a box in the temple premises. The assessee used this corpus donation for the construction of the community hall, which is a capital expenditure.

Thus, in a series of decisions, the coordinate benches of the Tribunal held that corpus donations are capital receipts, being capital in nature, and are not taxable, despite the fact that the trust is not registered under section 12A/12AA.

List of Cases Referred to

• ITO (Exemption) v. Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust [IT Appeal No. 5082 (Delhi) of 2010, dated 19-1-2011] (para 4)
• ITO v. Gaudiya Granth Anuved Trust [2014] 48 taxmann.com 348/ 65 SOT 137 (Agra – Trib.) (para 4)
• Chandraprabhu Jain Swetamber Mandir v. Asstt. CIT [2017] 82 taxmann.com 245 (Mumbai) (para 4)
• Serum Institute of India Research Foundation v. ITO [IT Appeal No. 1539(PN) OF 2008, dated 12-8-2016] (para 4)
• Shri Marudhar Sewa Samiti v. ITO [IT Appeal No. 501(Ahd) of 2022, dated 16-6-2023] (para 4)
• CIT v. Pentafour Software Employees, Welfare Foundation [2019] 110 taxmann.com 69/418 ITR 427/267 Taxman 46 (Madras) (para 4)
• ITO v. Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust [IT Appeal No. 927 of 2009, dated 23-9-2009] (para 8).