Income tax - Whether when a charitable Trust makes donation to another Trust having Sec 80G Certificate, such donation can also be treated as charitable object - YES, rules ITAT
CHENNAI, NOV 28, 2011: THE issues before the Tribunal are - Whether making of donation to other trust possessing 80-G certificate is also charitable object; Whether benefit of section 11 can be denied merely because certain payments were made at the directions of the trustee who in turn returned the money to the trust within same assessment year, and whether minor discrepancies in the accounts of public charitable trust is sufficient to deny the benefit of section 11. And the verdict goes against the Revenue.
Facts of the case
Assessee, a Public Charitable Trust, is constituted by a Deed of Trust dated 19.4.1984 with Supplementary Deeds dated 6.5.2000 and 19.1.2001. It is registered u/s 12A of the Act and its income is exempt u/s 11 of the Act. However, the Assessing Officer has held that the Trust is not eligible for exemption u/s 11 because it has given certain donations in contravention of the objects of the Trust- CIT(A) relying on the observations made in remand report allowed the appeal of the assessee- Matter reached to the ITAT.
After hearing the parties the ITAT held that,
++ the Assessing Officer has accepted the major share of donations but has not accepted the paltry amount of donations. Most of the donations denied by the Assessing Officer are in relation to trust having exemption u/s 80G of the Act. The other donations were in relation to Tsunami relief, staff welfare activities, advertisement to promote environment/nature, disbursement of cloth and feeding of the poor and small donation given to youth organization;
++ some donations were made during the year to various persons/institutions at the request of the founder of the assesseetrust. Since the money was remitted back by the founder in the same financial year, the assessee-trust has not claimed it as expenditure. It cannot be disputed now that such donations are not permitted by the objects of the Trust and the trustees are given absolute discretion to apply the trust funds to any one or the other specific objects of the Trust. The Assessing Officer, in his remand report, has accepted almost all the donations;
++ this case is a normal Public Charitable Trust which is governed by the provisions of section 11 of the Act and its activities are not restricted only to the educational activities but all public charitable activities. It is a well settled proposition of law that minor discrepancies found in any Trust's case have to be ignored. To be more specific, minor discrepancies cannot terminate into denial of benefit of exemption u/s 11 of the Act. In this regard, decisions of J.K.Trust vs CWT, 205 ITR 524 (Cal), and Dy. CIT vs Cosmopolitan Education Society, 244 ITR 494(Raj), are relevant. The ratio decidendi of the Hon'ble Calcutta and Rajasthan High Courts, inter alia, support our above conclusion. Obviously, non-withdrawal of registration, already granted u/s 12AA of the Act, is a factum which colossal overtures because the `Act' itself provides that exemption can be withdrawn only and only when either the provisions of section 13 are successfully invoked by the Assessing Officer, or the registration already granted is withdrawn u/s 12AA(3) of the Act. As is evident from the Remand Report, the Assessing Officer has not invoked section 13 of the Act and undeniably the assessee-trust continues to be registered u/s 12AA of the Act. Thus, we are of the considered view that in the given facts and circumstances of the case, it is not correct and would rather be unjust to deny exemption u/s 11.
CHENNAI, NOV 28, 2011: THE issues before the Tribunal are - Whether making of donation to other trust possessing 80-G certificate is also charitable object; Whether benefit of section 11 can be denied merely because certain payments were made at the directions of the trustee who in turn returned the money to the trust within same assessment year, and whether minor discrepancies in the accounts of public charitable trust is sufficient to deny the benefit of section 11. And the verdict goes against the Revenue.
Facts of the case
Assessee, a Public Charitable Trust, is constituted by a Deed of Trust dated 19.4.1984 with Supplementary Deeds dated 6.5.2000 and 19.1.2001. It is registered u/s 12A of the Act and its income is exempt u/s 11 of the Act. However, the Assessing Officer has held that the Trust is not eligible for exemption u/s 11 because it has given certain donations in contravention of the objects of the Trust- CIT(A) relying on the observations made in remand report allowed the appeal of the assessee- Matter reached to the ITAT.
After hearing the parties the ITAT held that,
++ the Assessing Officer has accepted the major share of donations but has not accepted the paltry amount of donations. Most of the donations denied by the Assessing Officer are in relation to trust having exemption u/s 80G of the Act. The other donations were in relation to Tsunami relief, staff welfare activities, advertisement to promote environment/nature, disbursement of cloth and feeding of the poor and small donation given to youth organization;
++ some donations were made during the year to various persons/institutions at the request of the founder of the assesseetrust. Since the money was remitted back by the founder in the same financial year, the assessee-trust has not claimed it as expenditure. It cannot be disputed now that such donations are not permitted by the objects of the Trust and the trustees are given absolute discretion to apply the trust funds to any one or the other specific objects of the Trust. The Assessing Officer, in his remand report, has accepted almost all the donations;
++ this case is a normal Public Charitable Trust which is governed by the provisions of section 11 of the Act and its activities are not restricted only to the educational activities but all public charitable activities. It is a well settled proposition of law that minor discrepancies found in any Trust's case have to be ignored. To be more specific, minor discrepancies cannot terminate into denial of benefit of exemption u/s 11 of the Act. In this regard, decisions of J.K.Trust vs CWT, 205 ITR 524 (Cal), and Dy. CIT vs Cosmopolitan Education Society, 244 ITR 494(Raj), are relevant. The ratio decidendi of the Hon'ble Calcutta and Rajasthan High Courts, inter alia, support our above conclusion. Obviously, non-withdrawal of registration, already granted u/s 12AA of the Act, is a factum which colossal overtures because the `Act' itself provides that exemption can be withdrawn only and only when either the provisions of section 13 are successfully invoked by the Assessing Officer, or the registration already granted is withdrawn u/s 12AA(3) of the Act. As is evident from the Remand Report, the Assessing Officer has not invoked section 13 of the Act and undeniably the assessee-trust continues to be registered u/s 12AA of the Act. Thus, we are of the considered view that in the given facts and circumstances of the case, it is not correct and would rather be unjust to deny exemption u/s 11.
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