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TMI Blog2018 (6) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... ster's National Relief Fund on 31.12.2004, and therefore, it is not taxable thereon as income?" 2. These questions arise in following background: Appellant is a registered charitable Trust and is also approved u/s. 80G(5) of the Income Tax Act, 1961 ['the Act' for short]. It was created for a specific object of providing relief to the earthquake victims of Gujarat. As part of its charitable activities, the Trust would receive donations. As is well known, State of Gujarat and, in particular, Kutch District experienced severe earthquake on 26.01.2001 leaving behind a trail of loss of human lives and widespread destruction of properties. To encourage the activity of rehabilitation of earthquake victims, the central legislature made certain tax concession provisions in the Income Tax Act, 1961. Clause (d) was added w.e.f. 03.02.2001 to sub-section (2) of section 80G providing exemption from tax in respect of any sums paid by the assessee during the period beginning on 26.01.2001 and ending on 30.09.2001 to any trust, institution or fund to which, the said section applies for providing relief to the victims of earthquake in Gujarat. Correspondingly, sub-section 5(C) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was that the amount of donation remaining unutilized on such last date i.e. 31.03.2004, if it is transferred to the Prime Minister's National Relief Fund before 31.03.2004, the benefit of the tax exemption would not be withdrawn. In this context, subsection (3) of section 12 inter alia provides that notwithstanding anything contained in section 11, any amount of donation received by the trust or institution which has neither been applied for providing relief to the earthquake victims of Gujarat before 31.03.2004 and which has also not been transferred to Prime Minister's National Relief Fund before such date, shall be deemed to be the income of the assessee of the previous year and would accordingly be charged to tax. 5. For the assessment year 2004-05, the assessee had filed return of income and claimed exemption in terms of section 80G(5C) contending that a sum of Rs. 3.89 crores (rounded off) was applied for the relief to the earthquake victims during the period relevant to the said assessment year. During the scrutiny assessment, the assessee pointed out to the Assessing Officer that the Trust had undertaken the work of construction of schools for which, the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the Prime Minister's National Relief Fund on 31.12.2004. The assessee relied on certain decisions to contend that for the purpose of sub-section (5C) what was required was application of the fund and not the actual spending. 9. The Tribunal accepted the assessee's contention that for the benefit of the statutory provisions in question, application of the fund was sufficient and not its actual spending before 31.03.2004. The Tribunal also believed that the necessary entries made by the assessee in the accounts amounted to application of fund. The Tribunal thereafter however made a distinction between the sum of Rs. 2.19 crores which was actually later on spent and Rs. 1 crore which remained unutilized. To the extent of Rs. 2.19 crores, the Tribunal granted the benefit of exemption. With respect to the remaining amount of Rs. 1 crore, the Tribunal was of the opinion that having not actually spent later on such benefit cannot be granted. The Tribunal was of the opinion that the assessee could have avoided these consequences only if the amount was transferred to the Prime Minister's National Relief Fund on or before 31.03.2004. 10. Learned counsel Mr. J P Shah for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 ITR 502 (SC), the Supreme Court approved the judgement of the High Court in which it was held that the assessee having made the credit entry in favour of educational institution had not retained any control over the monies and thus funds were made available to the institution by the Trust. The Supreme Court therefore held that the assessee could claim benefit of exemption u/s. 11 of the Act. 13. In case of Commissioner of Income Tax, Andhra Pradesh-I vs. Trustees of H.E.H. The Nizams Charitable Trust reported in 131 ITR 297 (AP), Division Bench of Andhra Pradesh High Court considered the question of exemption u/s. 11(1) of the Act which also used the expression "applied to". It was held that the act of the assessee to debit the amount in accounts of donee and to make a communication to the donee amounted to application of funds. Actual spending was not necessary. It was observed as under: "We shall first consider the second question referred to us for decision. From the facts set out earlier, it is clear that the donees concerned make a request for a grant from the trust and the trustees after considering the request, sanction certain amounts in deserving cases. As soon as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso deducted tax at source and in due course, deposited the same with the Government revenue. This was thus a clear case of application of fund for the benefit of victims of earthquake before 31.03.2004. 15. In fact the Tribunal also accepted this proposition to the extent the sum of Rs. 2.19 crores was concerned. Even though this amount was not actually spent or in strict terms, paid over to the contractor, the Tribunal referred to the judgement of Andhra Pradesh High Court in case of Trustees of H.E.H. The Nizams Charitable Trust (supra) and accepted the assessee's contention that it amounted to application of the fund. If that be so, we fail to see how the Tribunal could take a different view with respect to the remaining amount of Rs. 1 crore. This was part of entire amount of Rs. 3.19 crore for which, the bill was raised and credit entries were made. Merely because subsequently part of the amount was actually spent and rest remained unutilized, would not change the legal position. 16. The record would suggest that the assessee having committed to spend total of Rs. 3.19 crores for construction of the school buildings ended up paying Rs. 1 crore short to the contractor fo ..... 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