9911796707
TMI Blog2018 (7) TMI 2280X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that the appellant is not eligible for exemption u/s 11(2) of the Income Tax Act 1961, in view of the Cancellation of Registration u/s 12A of the Income Tax Act 1961 by the CIT on 18/03/2013. (b) The order of the CIT(A)-2 is devoid of any merits as cancellation of Registration cannot apply retrospectively. 3. Brief facts of the case are that during the year under consideration the assessee has shown income from other sources of Rs. 75,435/- and exempt income of Rs. 10,96,957/- along with short term capital loss of Rs. 10,67,936/. The assessee has given donations to other parties amounting to Rs. 3,15,095/. During the assessment proceedings the assessee was asked to produce receipt vouchers of these donations and to explain how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration granted to the assessee society u/s 12A of the I.T Act. The same was confirmed by Hon'ble ITAT vide its order in ITA No. 397/CHD/2013 dated 04.12. 2017. It was observed that the business activity of the trust was trading in mutual funds as its main object and therefore it was not carrying out any charitable activity. It was also noted that only a meager portion of the total receipts were spent on charitable purposes in the FYs 2007-08 to FY 2009-10. The only application of the income was giving donations to the other purported charitable institutions which could not be treated as application of its income in terms of section ll(l)(a) of the Act. The purpose for which salary was paid by the assessee society did not appear to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the only activity in which the assessee society was indulging in the past three years, it should not be held that the activities of the assessee society were not in consonance and as per its stated objects and hence not genuinely carrying out charitable activities. The Ld. counsel for assessee in response to the same submitted that in any case even without inclusion of the activity of giving donations in the objects of the assessee society, the act of giving donations tantamounted to application of funds as per section 11(1)(a) of the Act as accepted by the Revenue also vide the CBDT Circular No.1132 issued on 05.01.1978 which stated so in unambiguous terms. 9. We have heard the rival contentions and having gone through the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, but we find that the assessee's case is not covered by this proposition of law. As per CBDT Instruction and case laws, it is permissible under law for charitable trusts to donate for charitable or religious purposes and apply its income for the said purpose but the benefit of application cannot be claimed if it is found that the funds are being diverted for non-charitable purposes. The CBDT Instruction states so as under: BOARD'S INSTRUCTION NO. 1132 DATED 5TH JANUARY, 1978 Amounts paid as donation to other charitable trust-Availability of exemption under s. 11 CHARITABLE TRUSTS SECTION 11 A question has been raised regarding the availability of exemption in the hands of charitable trusts of amounts paid as donation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized by the donee societies/institutions, nothing was shown by the assessee. The assessee has, therefore, neither established the user of the donations for charitable purposes, nor demonstrated that the said donee society was a charitable society registered u/s 12A of the Act. Meaning thereby that the assessee society has not demonstrated the application` of its funds for charitable purposes. The assessee, therefore, is not entitled to claim the donations as application of its income. 11. In view of the above, we agree with the Ld. Commissioner of Income Tax that the assessee is indulging in the activity of giving donations to other institutions which is not in consonance with the approved objects of the assessee society. We, therefore, up ..... X X X X Extracts X X X X X X X X Extracts X X X X
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