2014 (1) TMI 240 - AT - Income Tax

Charitable trust - exemption u/s 11(1) - Expenditure incurred towards attendance of international conferences and training - Held that - It is neither necessary nor required as per the statute that for availing exemption u/s 11 of the Act a particular charitable activity has to be notified in a circular issued by the CBDT - The expenditure was incurred on behalf of the Society for attending international conferences and seminars and for the purpose of advancing the objects of the Society - It is not for the personal benefit of the Secretary - It cannot be said that the expenditure incurred in that behalf is not for charitable purpose. Addition on account of refund of loan - Held that - The assessee has incurred the expenditure towards implementation of the project relating to Prevention and Control of HIV/AIDS - The project is a Government promoted project and the grant has been specifically for implementing the said project - If amount received is treated as grant then corresponding expenditure incurred by the assessee is also to be allowed. Non registration of the assessee society under A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987 - Held that - The exemption u/s 11 of the Act cannot be denied to the assessee merely because the assessee is not registered under the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987 - When there is no such restriction put u/s 11,12, and 13 of the Act or any other provision under the Act the Assessing Officer cannot deny exemption to the assessee. Grant received for repair to the houses - Held that - The grant received from the donor agency is to be utilised for a specific purpose i.e., repair of houses of Tsunami victims in three districts - The assessee has supplied relief materials for construction of houses as well as cash distribution under certain mechanism adopted by the assessee is not disputed by the Assessing Officer - The assessee had participated in a programme of government for the benefit of Tsunami victims by providing help for construction of their houses - The Assessing Officer has not brought any material on record to show that the amount has not been actually distributed by the assessee to Tsunami victims - Decided against Revenue.

Summary

Issues Involved:
1. Disallowance of Rs.2,90,154/- towards international conference and training.
2. Disallowance of Rs.10,33,000/- towards grants from HLF PPT.
3. Non-registration of the Society under section 43(1) of the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987.
4. Amount spent for repairs to the houses (Tsunami) Rs.50,65,125/-.
5. Amount spent for support to women of Rs.12,69,629/-.

Detailed Analysis:

1. Disallowance of Rs.2,90,154/- towards international conference and training:
The Assessing Officer (AO) disallowed the expenditure of Rs.2,90,154/- incurred for international conferences and training, arguing it was not for charitable activities under section 11(1)(a) of the Act as it lacked support from a special or general order of CBDT. The CIT (A) disagreed, noting that the expenditure was for advancing the objectives of the Society, not for personal benefit. The Tribunal upheld the CIT (A)'s decision, stating that the expenditure was indeed for charitable purposes and did not require CBDT notification for exemption under section 11. The department's ground was dismissed.

2. Disallowance of Rs.10,33,000/- towards grants from HLF PPT:
The AO treated a refund of Rs.10,33,000/- as income, arguing it was a grant. The assessee contended the amount was a refund of temporary funds used for a government project on HIV/AIDS prevention. The CIT (A) accepted this explanation, noting the funds were for a specific project and not additional grants. The Tribunal agreed, emphasizing that the expenditure was for the project and any received amount should be considered a refund, not income. The department's ground was dismissed.

3. Non-registration under section 43(1) of the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987:
The AO denied exemption under section 11, citing the Society's non-registration under the AP Charitable and Hindu Religious Institutions and Endowments Act, 1987. The CIT (A) relied on a Tribunal decision, asserting that non-registration under the state act does not affect eligibility for exemption under section 11 of the Income Tax Act. The Tribunal upheld this view, dismissing the department's ground.

4. Amount spent for repairs to the houses (Tsunami) Rs.50,65,125/- and 5. Amount spent for support to women of Rs.12,69,629/-:
The AO argued that the assessee did not follow the MOU terms with the donor agency, Misereor, and instead implemented a different scheme, Indiramma, thus misusing the tied-up grants. The CIT (A) found that the funds were indeed used for the intended purpose, with deviations approved by the donor. The Tribunal agreed, noting that the relief reached the intended Tsunami victims and the deviations were donor-approved. The AO's presumption-based additions were found unjustified. Both grounds raised by the department were dismissed.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue, upholding the CIT (A)'s decisions on all grounds. The judgment emphasized the proper utilization of funds for charitable purposes, adherence to donor agreements, and the irrelevance of state registration for federal tax exemptions. The order was pronounced on 03-01-2014.