2013 (12) TMI 1056 - AT - Income Tax

Exemption u/s 11(1)(d) Held that - The assessee has not diverted any specified funds of 35AC projects towards non specified projects - The aseesee has spent corpus donation for 35AC projects and the same cannot be the basis for denying the benefits of exemption as the later is not prohibited by the provisions of the Act Decided against Revenue. Depreciation on capital assets Held that - The donations received by the assessee trust have been exempt from tax as the provisions of sections 11 to 13 of the Act are applicable in those respective years - The claim of depreciation on the assets acquired through such donation on the opening of WDV in the subsequent years, in our view, does not amount to the claim of double deduction Decided against Revenue. Donation to other trust Held that - According to the CBDT circular No.1132 dated 5.1.1978, the payment of a sum by one charitable trust to another for utilisation by the donee trust towards its charitable objects is proper application of income for charitable purposes in the hands of the done trust and the donor trust will not lose exemption u/s 11 Following CIT vs. Sarladevi Sarabhai Trust No. 2 1988 (3) TMI 53 - GUJARAT High Court - The charitable trust will not lose its exemption u/s 11, if it passes some money to another charitable trust, for utilisation by the donee trust towards its charitable purposes - The provisions of 80G is not applicable to the facts in this case Decided against Revenue.

Summary

Issues:
1. Exemption u/s 11 and 11(1)(d) for running Vocational Training Centre of Computer and Tailoring.
2. Double deduction presumption based on Hon'ble Supreme Court judgments.
3. Allowance of donation without 80G certificate.

Issue 1: Exemption u/s 11 and 11(1)(d) for running Vocational Training Centre of Computer and Tailoring:
The Revenue appealed against the Ld.CIT(A)'s decision to allow exemption u/s 11 for corpus donation received by a Charitable Trust. The AO disallowed the exemption as the funds spent on vocational training were not from the 35AC account. The Ld.CIT(A) allowed the claim, stating the assessee was not engaged in business activities, focusing on charitable endeavors. The ITAT upheld the Ld.CIT(A)'s decision, noting the trust's charitable status in past assessments and lack of diversion of funds. The ITAT dismissed the Revenue's appeal, affirming the exemption u/s 11.

Issue 2: Double deduction presumption based on Hon'ble Supreme Court judgments:
The Revenue contested the allowance of depreciation claimed by the assessee on capital assets, arguing it amounted to double deduction. The AO disallowed the claim, citing Supreme Court judgments. However, the Ld.CIT(A) allowed the claim, relying on a High Court decision. The ITAT upheld the Ld.CIT(A)'s decision, stating that depreciation on assets acquired through exempt donations did not constitute double deduction. Various judicial precedents supported the trust's entitlement to claim depreciation even when income was exempt. The ITAT dismissed the Revenue's appeal, affirming the allowance of depreciation.

Issue 3: Allowance of donation without 80G certificate:
The Revenue challenged the allowance of a donation without an 80G certificate. The Ld.CIT(A) directed the AO to delete the addition, citing a CBDT circular and a High Court decision. The ITAT upheld the Ld.CIT(A)'s decision, stating that the payment by one charitable trust to another for charitable purposes did not require an 80G certificate. The ITAT dismissed the Revenue's appeal, affirming the deletion of the addition.

In conclusion, the ITAT dismissed the Revenue's appeal on all grounds, upholding the Ld.CIT(A)'s decisions regarding exemption u/s 11, allowance of depreciation, and donation without an 80G certificate.