2008 (8) TMI 497 - HC - Income Tax

Charitable Purposes- The respondent-assessee is a trust registered under section 12A of the Act. During the period April 1 1996 to March 31 1996 relevant to the assessment year in question i.e. 1996-97 it had received 111 plots of land by way of gift/donation from 46 donors. All the 46 donors had purchased the land which they had gifted through registered sale deeds sometimes during the period 1992-94. They had gifted the land by way of registered gift deeds and the value of the plots so gifted came to be Rs. 3, 35, 39, 387. The assessee incurred an expenditure of Rs. 49, 51, 161 towards purchase of stamp papers and registration charges for execution of the gift deeds. The assessing authority added the amount towards the value of the land and expenses as unexplained investment under section 69 of the Act. The Com missioner of Income-tax (Appeals) deleted the addition which order has been affirmed by the Tribunal. Held that- dismissing the appeal (i) that there was no question of unexplained investment in the acquisition of the plots in question which had been received by way of gift. The Tribunal had rightly upheld the deletion of the additions so made. (ii) that the amount of Rs. 14, 74, 350/- had been given by the assessee to a trust which was also registered under section 12A of the Act. The donation given by one trust to another trust is treated as an expenditure for religious and charitable purpose under the Act and therefore could not be added under the head Income from other sources . (iii) That with regard to the sum of Rs. 5, 50, 000/- it had to be noted that the assessee was a very big trust and had a large following and if on some occasion it had distributed some cash to poor persons it could not be said that the expenditure was not incurred; more so when the Tribunal had recorded a finding that the expenditure was actually incurred. The amount was not assessable in the hands of the trust.

Summary

Issues:
Appeal under section 260A of the Income-tax Act, 1961 regarding the addition of unexplained investment in land received as gifts, treatment of donation to another trust as expenditure for religious and charitable purposes, and distribution of cash among poor persons by a trust.

Analysis:
The case involved an appeal under section 260A of the Income-tax Act, 1961, arising from an order of the Income-tax Appellate Tribunal related to the assessment year 1996-97. The respondent-assessee, a trust registered under section 12A of the Act, received 111 plots of land as gifts from 46 donors during the relevant period. The assessing authority added the value of the land and related expenses as unexplained investment under section 69 of the Act. However, the Commissioner of Income-tax (Appeals) deleted the addition, a decision upheld by the Tribunal. The Tribunal found that the donors had purchased the land legally and then gifted it to the trust out of love and affection, with the trust incurring expenses on registration charges and stamp papers. Therefore, there was no unexplained investment in acquiring the gifted plots, leading to the deletion of the addition.

Regarding a donation of Rs. 14,74,350 made by the assessee-trust to another registered trust, the Tribunal considered it as an expenditure for religious and charitable purposes under the Act. Consequently, this amount could not be added under the head "Income from other sources." The Tribunal reasoned that donations between trusts for such purposes should not be treated as income.

Lastly, an amount of Rs. 5,50,000 distributed by the assessee trust among poor persons in cash was also scrutinized. The trust, being substantial and having a large following, had incurred this expenditure as confirmed by the Tribunal. The Tribunal concluded that the distribution of cash to the poor should be considered a valid expenditure by the trust. Overall, the Tribunal's findings were deemed to be based on the evaluation of evidence and materials on record, without giving rise to substantial questions of law. Consequently, the appeal was dismissed for lack of merit.