Voluntary Contributions Cannot Be Treated as Membership Fees: ITAT

Case: National Solar Energy Federation of India (NSEFI) v. Income Tax Officer, Exemption

Court: Delhi

Assessment Year: 2017-18

ITA No.: 5483 (Delhi) of 2025

Date of Order: November 20, 2025

Brief Facts:

• The assessee was a society registered under section 12AA and engaged in promoting the development and adoption of solar energy across India.

• For A.Y. 2017-18, the assessee received voluntary contributions from various donors, which it treated as donations eligible for exemption under sections 11 and 12.

• The Assessing Officer, however, held that these receipts were annual membership fees collected in lieu of services and were therefore in the nature of commercial receipts.

• On this basis, the AO denied exemption under sections 11 and 12 and invoked the proviso to section 2(15), treating the activities as trade or business.

• The CIT(A) upheld the AO’s stand, following which the assessee filed an appeal before the ITAT.

Observations of the Tribunal:

The Tribunal made the following key observations:

• Varied donation amounts indicated that contributions were not fixed or uniform, and thus could not be characterised as membership fees. This dispelled the AO’s assumption of compulsory payments.

• The assessee had furnished details of specific purposes for which the donations were received, supporting the voluntary nature of contributions.

• In multiple preceding and subsequent assessment years (A.Y. 2018-19 to 2024-25), the same types of receipts had been accepted by the Revenue as donations, and exemption under sections 11, 12 and 80G had been consistently granted.

• No evidence was produced by the Revenue to show that the assessee rendered services in return for the donations or carried on any commercial activity.

• Further, the Tribunal noted that mistaken deduction of TDS by some contributors under section 194C does not change the nature of receipts in the hands of the assessee.

• Considering the objectives of the trust, the receipts and their application were found fully aligned with charitable purposes relating to the advancement of solar energy, falling within the ambit of “general public utility.”

• Therefore, the view that the assessee was hit by the proviso to section 2(15) was held to be unsustainable.

Hence, the ITAT held that the donations received by the assessee were genuine voluntary contributions and not membership fees or commercial receipts. Accordingly, the assessee’s activities were not hit by the proviso to section 2(15), and exemption under sections 11 and 12 could not be denied. The addition made by the Assessing Officer was deleted, and full relief was granted to the assessee. The appeal was allowed in favour of the assessee.