Corpus Donations to ICICI Foundation Stay Exempt under Section 11(1)(d): ITAT

Corpus Donations to ICICI Foundation Stay Exempt under Section 11(1)(d): ITAT

ITAT Chennai held that corpus donations with clear donor direction are entitled to exemption under Section 11(1)(d), even without an explicit trust deed clause. Ruled in favour of the assessee and dismissed the Revenue’s appeal.

The assessee is a charitable trust, the ICICI Foundation for Inclusive Growth, registered under Section 12AA of the Income Tax Act. The assessee also possesses approval under Section 80G of the Act. The key issue raised in the present case was whether corpus donations received by the trust should be entitled to the Section 11(1)(d) exemption due to the absence of a specific clause in the trust deed allowing such donations.

During the year in consideration, the assessee had received corpus donations of Rs 23.61 crore. Initially, the return was successfully processed under Section 143(1) of the Act. Later, the assessment was reopened, and the Section 11(1)(d) exemption was denied, treating corpus donations as income and also calculating a shortfall in application of funds. However, when the case was taken before the CIT(A), the Trust’s claim was allowed, stating that donations given with a clear direction to form part of the corpus are exempt.

The aggrieved tax authorities filed an appeal before the ITAT Chennai. When the tribunal analysed the facts of the case, it endorsed the CIT(A)’s ruling and held that the most important factor is the donor’s intention, not whether the trust deed clearly allows corpus donations. Since the donors had clearly specified that the contributions were for the corpus, and the AO could not challenge their genuineness or use, the assessee’s Section 11(1)(d) exemption claim was valid.

The tribunal also denied the argument of the Assessing Officer (AO) regarding shortfall in application of income, noting that once corpus donations are excluded from income, such a calculation becomes irrelevant. Additionally, the trust had adhered to procedural requirements like filing Form 9A for accumulation.

The tribunal noted that “the AO has made an addition on account of alleged shortfall in application of income by invoking Explanation 2 to section 11(1) of the Act. However, once the corpus donations are excluded from the ambit of income, the question of computing any shortfall on that basis does not arise. Even otherwise, we find merit in the contention of the assessee that Form No. 9A was filed during the course of assessment proceedings before completion of assessment, and therefore, the requirement of law stands duly complied with. Accordingly, the benefit of accumulation cannot be denied on technical grounds.”

The tribunal further noted that later years, similar donations were also accepted by the department as exempt. Therefore, it was not justified to take a different view this year. Considering the same, the tribunal ruled in the assessee’s favour by allowing the Section 11(1)(d) exemption and dismissing the tax authorities’ appeal.