2018 (8) TMI 198 - HC - Income Tax

Claim under Section 80G - charitable purpose - Held that - In the present case, there were never a case set up of a donation made to the trust. The claim was made of business expenditure which was later altered to one of a donation to the trust. The purpose of the activity for which the fund is applied does not change with the change of the provision under which the claim for deduction is raised. The fund was applied for the air-conditioning of a town hall which is owned by the Local Authority and bears the name of the founder of the assessee. We do not see any charitable purpose in the application of the funds and we also notice that the trust had no control over the funds and acted merely as an agent of the assessee in carrying out the air-conditioning of the hall, if at all it was so carried out. We find that there is no donation made by the assessee to the charitable institution; which it could have applied to the charitable purposes for which it was established. Hence we reject the claim and affirm the order of the Assessing Officer, setting aside those of the first appellate authority and the Tribunal to that extent. We answer the alternate question raised by us in favour of the revenue and against the assessee.

Issues Involved:
1. Whether the assessee is entitled to make an alternate plea for deduction by mere submission before the Assessing Officer without revising the return.
2. Whether the Tribunal erred in allowing the claim under Section 80G of the Income Tax Act for air-conditioning a town hall through a charitable institution.

Detailed Analysis:

Issue 1: Alternate Plea for Deduction Without Revising Return

The core issue revolves around whether an assessee can claim a deduction under a different provision than initially claimed in the return, without filing a revised return. The assessee initially claimed a deduction under Section 37 for business expenses, which was disallowed. Subsequently, they claimed a deduction under Section 80G for donations to a charitable trust.

The court referenced Goetze (India) Ltd. v. Commissioner of Income-Tax [2006] 284 ITR 323 (SC), where it was held that a claim made other than by way of a revised return is not permissible. However, the assessee cited NTPC Limited v. Commissioner of Income-Tax [1998] 229 ITR 383 (SC), which allowed for such claims to be considered by appellate authorities.

The court noted that the facts and law in Goetze (India) Ltd. and Pruthvi Brokers and Shareholders Pvt. Ltd. [2012] 349 ITR 336 (Bom) are distinguishable. In the latter, the claim was made in the return but the figures were for another year, which was corrected during assessment. The court emphasized that appellate authorities can consider claims not raised in the return if the necessary facts are available in the return, as supported by Additional Commissioner of Income-Tax v. Gurjargravures [1978] 111 ITR 1 and NTPC.

The court concluded that the assessee could make the alternate claim under Section 80G before the appellate authorities, even if the Assessing Officer disallowed it for lack of a revised return. The necessary facts for the claim were present in the return, and the appellate authorities had the jurisdiction to consider it.

Issue 2: Deduction Under Section 80G for Air-Conditioning a Town Hall

The court examined whether the Tribunal erred in allowing the deduction under Section 80G. The assessee claimed that the expenditure for air-conditioning a town hall through a charitable trust should be considered a donation eligible for deduction under Section 80G.

The court scrutinized the nature of the payment and found that it was not a donation to the trust but an expenditure for a specific purpose, i.e., air-conditioning a hall owned by the local authority. The trust acted merely as an agent of the assessee, and the funds were not applied for charitable purposes by the trust.

The court emphasized that for a deduction under Section 80G, the donation must be to an institution or fund established for charitable purposes, which was not the case here. The trust had no control over the funds and could not apply them for its charitable activities.

The court concluded that the payment did not qualify as a donation under Section 80G and rejected the claim. The orders of the first appellate authority and the Tribunal were set aside, affirming the Assessing Officer's decision.

Conclusion

1. The assessee is entitled to make an alternate claim for deduction before the appellate authorities even without a revised return, provided the necessary facts are available in the return.
2. The deduction under Section 80G for air-conditioning a town hall through a charitable trust was not allowable as it did not constitute a donation for charitable purposes.

The appeal by the revenue was allowed, setting aside the orders of the appellate authorities to the extent they allowed the claim under Section 80G.

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