Corpus donations received by trust (not regd. u/s 12AA of the IT Act) – whether taxable?

As a general rule, every capital receipt is exempt form tax, unless made taxable by the express provision of the Act. Similarly, every revenue receipt is taxable, unless otherwise exempt under any of the express provision of the Act.

Therefore, the corpus donations in the nature of capital receipt are not taxable, irrespective of the fact whether trust is registered u/s 12AA or not.

Useful references: ITO -Vs- Vokkaligara Sangha (ITAT Bangalore), I.T.A. Nos.281 /Bang/2014, ITO vs. Gaudiya Granth Anuved Trust (ITA No. 386/Agra/2012), Delhi High Court in ITA No.5082/Del/2010, ITO vs. Basanti Devi Garg Trust, Divine Educational Institute and Social Development Society Vs. ITO – ITA No. 5082/Del/2010 (ITAT Delhi) – ITA No. 380/Del/2017, Shri Shankar Bhagwan Estate Vs. ITO 61/ITD/196 (Calcutta), ITO vs. Serum Institute of India – ITA No. 621/PUN/2016 dt. 29.01.18 etc.

NOTE:

A corpus fund denotes a permanent fund kept for the basic expenditures needed for the administration and survival of the trust. Such fund can also be used for creation of capital asset or property of the trust from which income can be generated. Corpus fund are generally crated out of corpus donation. A donation will be treated as corpus donation only if it is accompanied by a specific written direction of the identifiable donor. In the absence of any written direction of the donor, a contribution of grant cannot be transferred to corpus fund.

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