2009 (9) TMI 1003 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are the entitlement of exemption u/s 11 of the I.T. Act for the assessee trust, the consideration of income vs. application for charities (earthquake relief), and the violation of section 11(5) of the I.T. Act.

Entitlement of Exemption u/s 11:
The assessee trust initially submitted a return showing a loss, claiming specific donations for Earthquake Relief and Building Fund as capital receipts. The Assessing Officer observed that the assessee had accumulated 25% of gross receipts u/s 11(1) and made additional expenditures for Earthquake Relief. The Assessing Officer also noted violations of section 13(1)(c), 13(1)(d), and 13(2)(4), concluding a violation of section 11(5). The plea to exclude donations under section 11(1)(d) was not considered. The Tribunal set aside the assessment order, directing a fresh assessment to determine if donations could be considered income of the trust.

Consideration of Income vs. Application for Charities:
Upon appeal, the CIT(A) acknowledged the trust's registration and entitlement to exemption u/s 80G. The CIT(A) emphasized that the donations received were genuine and applied for the trust's objectives. The Assessing Officer was directed to grant exemption u/s 11, considering the trust's utilization of donations for charitable purposes. The CIT(A) highlighted discrepancies in the original assessment and the acceptance of certain expenditures, leading to the conclusion that the trust had indeed applied its income appropriately.

Violation of Section 11(5) of the I.T. Act:
The Assessing Officer, in a subsequent order, again denied exemption u/s 11 to the assessee trust. However, the CIT(A) overturned this decision, emphasizing the trust's compliance with registration and utilization of donations for charitable activities. The Tribunal upheld the CIT(A)'s decision, stating that no new evidence warranted a different conclusion. The appeal filed by the Revenue was ultimately dismissed, affirming the grant of exemption u/s 11 to the assessee trust.