2010 (7) TMI 73 - HC - Income Tax

Exemption u/s 11 & 12 Donation Exemption to NGOs/institutions - The Assessing Officer was of the view that the donations must have been made as per directions of the directors or specified persons of a profit making company to the person of their choice. He concluded that the assessee was a tool in the hands of the parent company that is HCL Perot System. Accordingly he denied benefit of exemption under Section 11 and 12 of the Income Tax Act 1961 to the assessee and determined its taxable income at Rs.70, 98, 120/- and expense of Rs.10, 00, 820/- inclusive of depreciation. Held that - CIT(A) and ITAT both have found that the organizations to which donations were given by the assessee during assessment year in question were genuine charity organizations. There was no evidence before the Assessing Officer to show that these were not genuine organizations or were not engaged in social and charitable activities. The Assessing Officer attributed personal elements to these donations without even indicating any circumstance which could give rise to such an inference. - There was absolutely no material before the Assessing Officer to show that the funds given to these NGOs/institutions were used for personal benefit of HCL Perot System or any of its Directors decided in favor of assessee

Summary

Issues:
Appeal against order of Income Tax Appellate Tribunal, denial of exemption under Section 11 and 12 of Income Tax Act, 1961, donations made by the assessee, infringement of Section 13 of Income Tax Act, genuineness of charity organizations receiving donations.

Analysis:
The case involved an appeal against the Income Tax Appellate Tribunal's order dismissing the Revenue's appeal against the Commissioner of Income Tax (Appeals) order for the assessment year 2005-06. The Assessing Officer had denied exemption under Section 11 and 12 of the Income Tax Act to the assessee, attributing the donations made to various parties as a tool in the hands of a profit-making company. The Commissioner of Income Tax (Appeals) deleted most additions, except for two donations, upholding the charitable nature of the donations to various institutions. The Tribunal, finding no infringement of Section 13, upheld the Commissioner's decision.

The key point of contention was the genuineness of the donations and whether they were used for personal benefit. Both the Commissioner of Income Tax (Appeals) and the Tribunal found that the organizations receiving donations were genuine charity organizations engaged in charitable activities. The Assessing Officer failed to provide evidence or circumstances to suggest otherwise. Payments were made through account payee cheques, and confirmations from the majority of organizations were submitted. The Assessing Officer's doubts were deemed insufficient to challenge the donations' genuineness, as he did not summon the organizations' officers for verification.

The Court emphasized that there was no material showing funds were misused for personal benefit, thus upholding the genuineness of the donations. With no contravention of Section 13 established and the genuineness accepted by both the Commissioner of Income Tax (Appeals) and the Tribunal, the Court found no grounds for intervention under Section 260A of the Income Tax Act. Consequently, the appeal was dismissed, with no substantial question of law identified for consideration.

In conclusion, the judgment centered on the genuineness of charitable donations made by the assessee, the lack of evidence to support misuse of funds, and the absence of grounds for challenging the exemption under Section 11 and 12 of the Income Tax Act. The decision highlighted the importance of substantiating claims against charitable organizations and the need for concrete evidence to challenge their activities under relevant tax provisions.