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Markup on activity of advancement of general public utility and Pre-printed receipts with donor directions

Citation- ACIT v. Shree Maheshwari Samaj

ITAT: Jodhpur

ITA No: 368 of 2019

Assessment Year: 2016-17

Date of Order- May 10, 2024

Brief Facts:

  • The assessee registered u/s 12AA, was engaged in arrangement, management and enhancement of immovable property and renting these properties on nominal charges for various activities and claimed exemption on the rental income earned from such properties

  • For AY 2016-17, the AO observed that assessee was using the properties in a commercial manner. Hence, the rental income attracted proviso to section 2(15) and consequently, the benefit of exemption under section 11 was not available

  • Further, he also disallowed “corpus donations” received for construction of bhawan on the ground that the assessee had only provided pre-printed receipts having name of donor and amount and there was no “specific direction of the donor”. Hence, the said donations could not be considered as exempt under section 11(1)(d) i.e. exempt as corpus donation

Observations of the Tribunal

  1. The assessee had constructed Jyanpyogi Bhawan which was being used by the public at large for organising various events having the social, cultural, charitable and religious ceremonies.

  2. For conducting the said activity the assessee was recovering nominal cost and the rent and charges were based on a pre-set standard. This had not been disputed by the revenue.

  3. In earlier years having same set of income and facts, the revenue authorities had allowed exemption under section 11.

  4. It had been held by the SC in ACIT v. Ahmedabad Urban Development Authority 278(SC) that if markup is up to 20 per cent of the overall receipt, exemption under section 11 was available provided the quantitative limit (of not exceeding 20 per cent) under second proviso to section 2(15) for receipt from such profits, is adhered to.

  5. The AO had not brought anything on record to prove that the assessee was earning more than 20% of overall receipts from its rental income or that the markup on such activity was not nominal

  6. W.r.t to the corpus donations, the CIT(A) had noted that the copies of receipts placed on records contained the direction of the donor that the money was for the construction of bhawan. Further, the assessee had utilised the same for construction of bhawan only.


Hence, it was held that the assessee was entitled to exemption under section 11 and donation received for construction of bhawan was corpus donation, exempt under section 11(1)(d).

[Editorial Note: With respect, it is not clear in Ahmedabad Urban Development Authority’s case, whether the Supreme Court has observed that the markup upto 20% of overall receipts would qualify as “nominal over cost” or not]

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