2008 (10) TMI 590 - AT - Income Tax

Summary

Issues Involved:
1. Whether the trust qualifies for exemption u/s 80G(5)(vi) based on its objects.
2. Taxability of the amount received by the trust through the will of Smt. Khushan Devi.
3. Treatment of amounts received by the trust on account of shop rent, sale of milk, advertisement, and water and electricity charges.

Summary:

1. Exemption u/s 80G(5)(vi) Based on Trust's Objects:
The Commissioner of Income-tax (CIT) rejected the renewal of approval u/s 80G(5)(vi) on the grounds that the trust was wholly religious. The Tribunal noted that the trust had been granted registration u/s 80G from 1987 to 2007 without any change in its objects. The Tribunal emphasized the rule of consistency, citing the Supreme Court's decision in Radhasoami Satsang v. CIT and the Delhi High Court's decision in Director of Income-tax (Exemptions) v. Escorts Cardiac Diseases Hospital Society. The Tribunal held that the propagation of vedic thoughts and philosophy is not confined to any religion and is more about lifestyle and moral values, thus not making the trust wholly religious.

2. Taxability of Amount Received Through Will:
The CIT held that Rs. 20,55,631 received by the trust from Smt. Khushan Devi's will was taxable as there was no specific direction that it would form part of the corpus. The Tribunal disagreed, stating that u/s 11(1)(a) and 12(1), such amounts are not included in the total income if applied for charitable purposes. The Tribunal concluded that the CIT's basis for taxing the amount was unfounded and the condition stipulated in clause (i) of sub-section (5) of section 80G was satisfied.

3. Treatment of Other Amounts Received:
The CIT found that amounts received from shop rent, sale of milk, advertisement, and water and electricity charges were incorrectly shown as donations, making the trust's books unreliable. The Tribunal found merit in the trust's submission that water and electricity charges were voluntary reimbursements and should be treated as donations. The amounts for rent and advertisement were minor and correctly accounted for, thus not justifying the denial of exemption u/s 80G.

Conclusion:
The Tribunal set aside the CIT's order and directed the renewal of registration/exemption u/s 80G for the trust, allowing the appeal of the assessee.