Kolkata bench of Income Tax Appellate Tribunal (ITAT) recently allowed exemption to charitable trust while it made donation to a university approved under section 10(23C)(vi) of the Income Tax Act and also exemption under section 11 of the Income Tax Act 1961 respectively.
Assessee, an education trust has filed its return of income declared total income as nil.
While verifying the books of accounts the Assessing Officer (AO) denied the exemption claimed by the assessee under section 11 of the Act. AO observed that during the year under consideration, the assessee has transferred to Singhania University and also noted that the said amount was directly deposited in the bank accounts of various persons without routing through assessee’s accounts by separate organizations. AO also noted that Singhania Foundation Education ‘Samity’ is a society registered under Rajasthan Societies Registration Act, 1958 having seven Trustees. Therefore, the ‘‘Samity’’ is the creator of Singhania University. He further stated that the aforesaid fund transferred from the ‘Trust’ to the ‘Samity’ was for the mutual benefit of both the entities and therefore, the assessee is not entitled to the benefit of tax exemption under section 11 of the Act.
The division bench comprising of Judicial Member A.T.Varkey and Accountant Member Dr.A.L.Saini observed that while considering the material facts and verifying the basic information, it is clear that the rental income of the trust has derived, that is rental agreement and assessee`s Trust entitlement to receive rental income and agreement between the trust and samity about use of services of service providers.
The tribunal bench was of the view that donation given by the assessee trust to university approved under section 10(23C)(vi) of the Income Tax Act is subject to charitable purpose and the trust is eligible for exemption under section 11 of the Act.
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