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TMI Blog2011 (2) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable institutions represented the assessee's income. 3. Assessing Officer in this case noted that on perusal of the details and information it is observed that donations amounting to Rs. 1,36,000 were paid by the assessee out of its accumulated income and not out of its current income relevant to F.Y. 2006-07. Assessing Officer enquired as to why the same should not be treated as application of income for purpose other than charitable activities in view of the provisions contained in section 11(2) of the IT Act. Assessee responded that they have paid donations fully for charitable purposes and it covers under 15% and not out of accumulated income. This provision contained in section 11(2) of the IT Act is not attracted. However, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r set apart. Therefore, as the donations have not been made out of the current year's income, the Assessing Officer was justified in treating the sum as an income. Accordingly, the appeal filed by the appellant stands dismissed." 5. Against this above order the assessee is in appeal before us. 6. We have heard rival contentions in light of the material produced and precedent relied upon. Here we can gainfully refer the provisions of section 11(1)(a) which reads as under:- 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- [(a) income derived from property held under trust wholly for charitable or religious pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Amount of donation To whom donated Rs. 1,10,000 To Indian Cancer Society with an object to enable children and their families faced with Cancer. Rs. 21,000 To Maharishi Patanjali Yoga Foundation with an object to promote yoga. Rs. 5,000 To Chetna Charitable Trust. 8.1 In this regard, exposition by the Hon'ble Jurisdictional High Court in the case of Director of Income-tax (Exemption) v. Bagri Foundation is relevant. In the above said case facts of the case were as under :- "The assessee was a trust duly registered under section 12AA and duly recognized under section 80G(5)(vi). For the relevant assessment year, the assessee had shown certain gross income and deducted therefrom the amount applied for charitable purposes by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the donation is subject to a condition that the doneee trust will treat the donation as towards its corpus and can only utilize the accruing income from the donated corpus for religious and charitable purposes. From the same, it follows that if the assessee trust either itself uses any part of its income for charitable purposes or donates the same to any other charitable trust, such income is exempt from inclusion in the total income of the assessee trust for the relevant year. The emphasis is on utilizing the income in the relevant year and accumulation is permitted only to a maximum extent of 15 per cent. As long as such accumulation is not more than 15 per cent, such accumulation is also exempt from inclusion in the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to completely ban/discourage inter se donation between trusts, it would have changed the position as existing in law, as noticed in Shri Ram Memorial Foundation's case (supra). The Legislature did not do so. Even after the insertion of the Explanation, if a trust donates its entire income for a year to another charitable trust, it would still be entitled to exemption under section 11(1)(a). It defies logic as to why such donations cannot be permitted out of 15 per cent accumulation permitted under section 11(1)(a) itself. There is, however, rationale for imposing the restriction as contained in the Explanation to accumulations in excess of 15 per cent. Such accumulations, but for the conditions imposed in section 11(2) and in the Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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