Case Digest: Income Tax Deductions for Donations under Section 80G

The Government has allowed taxpayers for income tax deductions under Section 80G for the amount which has been donated. The amount which has been donated by a person is allowed to be claimed as a deduction under Section 80G, at the time of filing his income tax return.This Deduction for Donation can be claimed by any taxpayer (whether Individual/ Partnership Firm/HUF /Company/ LLP etc) irrespective of whether he is earning income from salary or business. The deduction available under Section 80G . Conditions for claiming deduction for donation under section 80 G Donations made are eligible to be claimed as a deduction under Section 80G in all cases except in cases where the donation has been made in kind (eg: food, clothes, medicine etc). In order to claim this deduction, the donor is also required to furnish a proof of payment. A stamped receipt is issued by the recipient trust in this regard, details of which should be mentioned by the taxpayer while filing his Income Tax Return. The receipt should necessarily mention the following details The name and address of the trustThe name of the donorThe amount donated (mentioned in words and figures)The registration number of the trust, as given by the income tax department u/s 80G along with its validity. M/s. Goldman Sachs Services Pvt. Ltd. vs Joint Commissioner of Income Tax CITATION: 2020 TAXSCAN (ITAT) 111 In a Relief to Goldman Sachs, the Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that Corporate Social Responsibility (CSR) is also eligible for deduction under Section 80G of Income Tax Act subject to assessee satisfying the requisite conditions prescribed for deduction under Section 80G of the Act. The Tribunal consists of an Accountant Member A.K. Garodia and a Judicial Member Pavan Kumar Gadale while directing the matter back to the AO observed that the AO has failed to consider the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. Deputy Commissioner of Income Tax vs Podar Education Trusts CITATION: 2023 TAXSCAN (ITAT) 243 The Income Tax Appellate Tribunal ( ITAT ), Mumbai Bench, has recently, in an appeal filed before it, held that the exemption u/s 10(23C) shall not be denied, unless the donation made to trusts, is evidentiated as bogus. “On appeal before the learned CIT – A, exemption was allowed to the assessee with respect to the alleged bogus donation holding that there is no evidence available with the learned assessing officer that the donation made by the assessee to those trust are bogus and further the exemption is allowable on provision for leave encashment and gratuity following the decision of the coordinate bench in case of Podar Education Trust. Therefore, we confirm the order of the learned CIT – A for all these years and dismiss the appeal of the learned assessing officer”, the Mumbai ITAT thus held. Malla Foundation vs The Commissioner of Income tax CITATION: 2022 TAXSCAN (ITAT) 162 The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) has held that the donations are the lifeline for starting charitable activities of the assessee trust and the CIT(E) cannot deny approval without verifying the activities The two-Member bench comprising Shri George George K, JM & Ms.Padmavathy S, AM found that the CIT(E) has refused to grant approval u/s 80G of the Act primarily for the reason that the assessee has not produced the necessary proof as regards the activities of the assessee-trust and in absence of the same it is not possible to verify the genuineness of the activities of the assessee-trust. Batuk Vithalabhai Donga vs ITO CITATION: 2023 TAXSCAN (ITAT) 255 The bench of Waseem Ahmed (Accountant Member) and Sidhhartha Nautiyal (Judicial Member) of Rajkot Income Tax Appellate Tribunal (ITAT) ruled that no addition shall be made under section 69A of Income Tax Act, 1961 on the ground of denial of deduction under section 80G. The bench observed that the assessee has not challenged the additions made by the AO under section 80U and 80G of the Act, but has only challenged the computation of tax liability by the AO under section 115BBE of Income Tax Act. The tribunal emphasized that the section 69A of Income Tax Act can only be used in the event that the assessee is discovered to be the owner of any money, bullion, jewelry, or other valuable item that is not recorded in the books of account and the assessee makes no attempt to explain the nature and source of acquisition of such money, bullion, jewelry, or other valuable articles. Lady Meherbai D. Tata Education Trust vs Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 170 The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), ruled that the Principal Commissioner of Income Tax ( PCIT ) cannot order conditional approval under Section 80G of the Income Tax Act, 1961. The role of the PCIT while according registration and approval under section 12A and 80G is only to make himself satisfied about the genuineness of the activities to be carried out by the assessee trust and compliance of such requirement of any other law for the time being in force by the trust or institution material to achieve its object and then to accord the registration and approval. The Counsel for the Revenue also contended that when the assessee trust itself moved an application for granting provisional approval as form 10AC only talks about “provisional approval”, the PCIT/CIT was well within his right to impose the conditions. Tata Education and Development Trust Bombay House vs Commissioner of Income Tax (Exempt.) CITATION: 2022 TAXSCAN (ITAT) 1949 In a significant case of Tata Education and Development Trust, the Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that CIT(E) has no Jurisdiction to impose unstipulated was noted that the CIT(E) again imposed conditions while passing the impugned order. Being aggrieved by the CIT(E)‘s action of stipulating several conditions while granting registration u/s 80G, the assessee is in appeal before us. It was noticed that clause (vi) of Section 80G of the Act provided that the Trust has to be approved by the PCIT or CIT. Further stated that the PCIT / CIT was not conferred with any powers to impose conditions while granting provisional approval under section 80G and therefore urged that these conditions be struck down. Santshreshtha Gajajan Maharaj Sevabhavi Sanstha vs Commissioner of Income-tax CITATION: 2022 TAXSCAN (ITAT) 1837 The Pune bench of Income Tax Appellate Tribunal (ITAT) presided over by R.S. Syal, Vice President and Accountant Member with Partha Sarathi Chaudhury, Judicial Member held that the assessee-trust is allowed to get exemption under the Section 80G of the Income Tax Act, 1961 The bench ruled that the department had not provided sufficient evidence to support the trust’s religious nature. If the trust engaged in religious activities, it is not subject to the provisions of section 80G of the Income Tax Act. As a response, the tribunal directed the CIT(E)’s to grant the exemption under Section 80G of the Income Tax Act. COMMISSIONER OF INCOME TAX, (EXEMPTION) KOLKATA vs VIJAY KUMAR BAJORIA FOUNDATION CITATION: 2022 TAXSCAN (HC) 952 The Calcutta High Court (HC) has held that registration of trust u/s 12AA of the Income Tax Act,1961 is valid when the object of the Trust is charitable in nature and allowed the Exemption u/s 80(G)(S)(vi) of the act. The Commissioner of Income Tax (Exemption), Kolkata rejected the application filed by Vijay Kumar Bajoria Foundation, the assessee for registration under Section 12AA of the Act on the ground that the assessee was not carrying on any charitable activity. Justice T S Sivagnanam and Justice Hiranmay Bhattacharyya observed that the Tribunal had rightly pointed out that no material was produced by the assessee therein to show that it carried out any charitable activity. While dismissing the tax case appeal, the Court upheld the order of the Tribunal. Bai Navajbai tata vs CIT CITATION: 2022 TAXSCAN (ITAT) 1726 The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ), held that the Commissioner of Income Tax (Exemptions) (CIT(E)) cannot impose conditions on his own while granting approval under Section 80G of the Income Tax Act, 1961. In the present appeal the assessee, Bai Navajbai Tata Zoroastrian Girls School is a charitable trust registered under Section 12A of the Income Tax Act. Bench consisting of Aby T Varkey, Judicial Member and Pramod Kumar, Vice President observed that “We hold that the CIT(E) did not enjoy the power to impose any conditions on his own while granting the approval u/s 80G of the Income Tax Act (other than what is stipulated in law).” Sir Ratan Tata Trust vs Commissioner of Income Tax CITATION: 2022 TAXSCAN (ITAT) 1689 The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, while deciding an appeal filed before it and thereby granting relief to Sir Ratan Tata Trust, held that no conditions can be imposed by PCIT under clause 1 of section 80g (v), for granting registration to trusts. The aforesaid observation was made by the Mumbai ITAT, when appeals were preferred before it by the assessees, namely, Sir Ratan Tata Trust and Sir Dorabji Tata, to set aside the impugned orders, dated 01.010.2021 & 02.10.2021, passed by the Principal Commissioner of Income Tax, Mumbai, qua the assessment year 2022-23 to 2026-27, on identically worded grounds. “In the instant case, the assessee has come up under clause I of sub section v of section 80G, no such condition can be imposed by the Ld. PCIT. So we are of the considered view that impugned order passed by the Ld. PCIT is not sustainable to the extent of imposing conditions in para 10(a) to (j) of the impugned order, in the eyes of law.” The Jt.CITS.K. RangeHimatnagar vs Shree Ganesh Construction CITATION: 2022 TAXSCAN (ITAT) 1338 The Income Tax Appellate Tribunal “A” Bench, Ahmedabad, has recently, in an appeal filed before it, held that the assessee is entitled to 80G deduction with regard to the contributions or donations made to certain relief funds and charitable institutions, such as Chief Minister KanyaKelvani Nidhi. The aforesaid observation was made by the Tribunal when an appeal was filed before it by the Revenue against the order of the Commissioner of Income-tax (Appeals)-10, Ahmedabad , dated 10th December-2015.the Tribunal observed as below: “ We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that even though the original receipt for payment of donation of Rs.50,000/- made to Chief Minister KanyaKelvani Nidhi was not produced by the assessesas the same was lost or misplaced, sufficient evidence was produced by the assessee to support and substantiate its claim of having paid the said donation. Shree Radheshyam Sharnam vs Commissioner of Income-tax CITATION: 2022 TAXSCAN (ITAT) 808 The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has been allowed to submit the required documents for the approval of exemption u/s 80G(5)(vi) before the CIT(Exemption) as a relief to the critical covid pandemic period. Shri Sandeep Gosain, JM & Shri Rathod Kamlesh Jayantbhai, AM has ordered to remand the matter back to the file of the CIT (Exemptions) to decide the matter afresh after affording a reasonable opportunity. The appeal was allowed for statistical purposes. Shiv Raj Sharma Shiksha Samiti Bilaspur vs CIT CITATION: 2020 TAXSCAN (ITAT) 112 The ITAT Mumbai bench, while ruling in favor of Shiv Raj Sharma Shiksha Samit, held that the benefit of Section 80G under the Income Tax Act, 1961 cannot be denied to society solely for the reason that it is not involved in charitable activities. the Tribunal held that it is well-settled position of law that at the time of granting approval under Section 80G of the Act, what is to be examined is the object of the trust and so far as the aspect of income is concerned, the same can be very well examined by the AO at the time of framing assessment. Bhuvaneshwari Kali Thakuranir Seva Samity vs Commissioner of Income Tax-(Exemptions) CITATION: 2020 TAXSCAN (ITAT) 113 Recently the Kolkata Bench of Income Tax Appellate Tribunal (ITAT) in the case of Bhuvaneshwari Kali Thakuranir Seva Samity vs. Commissioner of Income Tax-(Exemptions), held that exemption to donations under Section 80G of the Income Tax Act, 1961 cannot be granted if the assessee spend more than 5% of its total income for religious purposes. The CIT(E), the bench consisting of Judicial Member J. Sudhakar Reddy and Accountant Member Aby T. Varkey observed “The ld. CIT(E), in his order u/s 80G(5B) of the Act, held that the assessee spent more than 5% of its income towards religious purposes. The religious expenditure in question is towards puja expenses and honorarium paid to priests. In our view the judgment in the case of Umaid Charitable Trust (supra), does not come to the rescue of the assessee, because in that case a single charitable contribution was made to another trust, which carries out renovation of Lord Vishnu Temple. Such a single contribution was not considered as a religious activity. General Capital and Holding Company Pvt. Ltd vs Income Tax Officer, In the case between General Capital and Holding Company Pvt. Ltd vs Income Tax Officer, Ahmedabad bench of Income Tax Appellate Tribunal (ITAT) held that deduction under Section 80G of the Income Tax Act 1961 is allowable in the year of actual payment as well as that of getting the necessary donation receipt. The division bench further observed that “the purpose of using the crucial expression “in relevant previous year” in statute is to ensure actual payment on or before the relevant previous year rather than altogether rejecting a case like the instant facts only”. After verifying the books of accounts submitted by the Assessee, the bench found that the assessee having actually transferred the money to donee trust through banking channel only and the said trust is an approved institution. Therefore, the bench directed the Revenue to delete the disallowance under section 80G of the Income Tax Act. Pioneer Himudyog P. Ltd. vs Assistant Commissioner of Income-tax CITATION: 2020 TAXSCAN (ITAT) 115 A division bench of the Kolkata Appellate Tribunal, in Pioneer Himudyog P. Ltd. V. ACIT, held that payments in respect of “Donation & Subscription”, which are incidental to the business activities are allowable as expenditure under the provisions of the Income Tax Act, 1961, even in the absence of any receipt /80G certificate . The bench observed that “the subscription and donation was given by the assessee to various organizations to avoid confrontation and to smooth running of its business and, therefore, the expenses incurred by the assessee on subscription and donation of Rs.10,747/- is incidental to assessee’s business and are allowable as business expenditure. This view has been upheld by the Hon’ble Calcutta High Court in the case of CIT Vs. Bata India Ltd. reported in (1993) 201 ITR 884 (Cal) wherein it has been held at page 890 that contribution to local puja and festival committees or organizations to avoid confrontation and for smooth running of its business are allowable as business expenditure.” CIT v. M/S Rama Educational Society, In CIT v. M/S Rama Educational Society, the division bench of the Allahabad High Court held that benefit of section 80G of the Income Tax Act cannot be granted to assessee merely on ground that it satisfies all the conditions prescribed under section 10(23)(c) of the Income Tax Act. While quashing the ITAT order, the bench confirmed the order of the CIT denying exemption to the assessee for want of regular maintenance of Books of Accounts. Comparing both the provisions of section 10(23)(c) and 80G, the bench pointed out that Section 10 (23 C) of the Act operate in a totally different field and the conditions contained in the section are not identical to the conditions as laid down in Section 80 G (5) of the Act. It was also noted that “Section 80 G (iv) contemplates maintenance of regular receipts and expenditure by the concerned institution. It does not talk about the maintenance of separate books of accounts. Therefore, the conditions provided in the two provisions are not identical but at variance as has been illustrated above by the comparison of one of the relevant conditions of the two provisions.” Director of IncomeTax (Exemptions) v Chartered Accountants Study circle (2012) In this case the court held that The institutions or fund should be established for charitable purposes .The assessee was conducting regular courses, seminars, etc. which had resulted in surplus income and had also engaged in I.T.A. No. 1971/Mds/10 2 publishing and selling of books of professional interest for being used as reference material by general public as well as professionals in respect of bank audit, tax audit. It was a study circle of Chartered Accountants and catering to improvement of knowledge through such studies and the activities are fully educational in nature. The court observed that the assessee was conducting courses and seminars. Assessee was also publishing and selling books of professional interest. Ld. DIT (Exemptions) himself has admitted that such reference might be used by the general public as well as professionals doing bank audit, tax audit, etc. These activities could only be considered as a part of on-going education of Chartered Accountants which, in turn, would necessarily help society to get a better, well-equipped and skilled set of Chartered Accountants for maintaining audit quality. So, it cannot say that such activities were in the nature of trade, commerce or business, even if it considers the activity done by the assessee as one for advancement of object of general public utility.In the result, appeal of the assessee was allowed. Shantaben Maganlal Vasant Charitable Trust Vs The Income Tax Officer. ITAT (Income Tax Appellate Tribunal). While deciding the application for grant of registration under sec 80 G ,The authority has to consider the substance and not nomenclature mentioned in the income and expenditure account. The Assessee trust has filed an application dated 13.1.2009 for grant of Registration Under Section 80G of the I T Act. The Assessee has also been granted registration Under Section 12A of the I T Act vide order dated 9.12.2005. The DIT (E) observed that the trust had expended a sum of Rs. 4500/- during the financial year 2005-06 under the head 'religious'. Therefore, in view of the fact that the expenditure on religious activities has exceeded the prescribed monetary limit of 5% of the total income, which is in contravention to the provisions of Section 80G(5B) of the I T Act. Accordingly, the grant of registration Under Section 80G was rejected vide the impugned order. The ld DIT(E) Mumbai has erred in law and in facts in passing the impugned order which is in valid and bad in law ,The ld DIT(E) has erred in law and in facts in passing the impugned order without giving proper opportunity of hearing and without following the principles of natural justice.The ld DIT(E) has erred in law and in fact in declining to grant registering u/ 80G of the Act to the Appellant. Heal A Child Foundation, , ... vs Director if Income tax 2012 In this case, the approval under section 80G of the Act was denied by the DIT (E) only on the reason that the object clause contains the clause that the activities of the trust and its objects will not be confined to India. To grant approval under section 80G of the Act, the DIT (E) can examine whether or not the conditions set out in section 80G(5) (i) to (v) are satisfied. If the assessee has satisfied the above conditions, there is no reason to deny the approval under section 80G of the Act by the DIT (E). More so, in the present case, the assessee has already made amendment to the trust deed whereby clause 3.2 was amended as follows:-" the activities of the Trust and its objects will be confined only to India". Being so, as on date, there cannot be any objection to grant approval under section 80G of the Act as the impugned clause is amended by the Trust. In the circumstances, we direct the DIT (E) to consider the amendment and decide the issue in accordance with law.. In the result, the appeal filed by the assessee was allowed. Commissioner of Income tax and another vs Shree public Charitable trust (2016) In this case ,the renewal was denied by the Director of Income tax (Exemptions) without assigning any reasons but merely stating that certain clauses of the trustees were not charitable in nature, in view of the insertion of proviso to section 2(15)of the Act. The Tribunal in its order has set aside the order of the Director of Income Tax (Exemptions) and considered the object of the trust.The court observed that refusal to renew approval without assigning reasons not valid. The construction of “Prayer hall “ or encouraging meditation ,yoga,etc ,Could not be religious activities .Therefore, order of the Director of Income tax (exemptions) was set aside. Bangalore Education Trust vs Director Of Income Tax (2004) In this case ,It was held that when the enquiry was initiated within the time frame and could be concluded after obtaining all the information ,merely because order was passed after six months will not violate the proceedings particularly in view of sub-rule (3)to rule 11 AA . The trust has committed a fraud furnishing the department an audit report without actually getting the accounts audited by a qualified Chartered Accountant. The authority has also noticed that it is a clear case of irregular maintenance of accounts. Insofar as activities are concerned, the authority has noticed that the assessee has not indicated the purpose for which the corpus donation was given by the alleged donors. It is seen that the fund is being used to make substantial advances of Rs. 11, 14, 50, 12 lakhs to some other persons. An indication is given that there is deviation of funds. After noticing the material facts, the authority has rejected the renewal application. The order is based on facts. No acceptable grounds are available to the petitioner. Karnataka Golf Association vs The Director Of Income-Tax (Exe.) , 2003 Whenever the Income-tax Department is proposing to reopen a concluded assessment, it is necessary that the Department should disclose the reasons for such reopening if the assessee requests for the same. At the same time, emphasis is laid that on receipt of notice of this nature, it is the duty of the assessee to file its return and respond to the notice. A proper reading of this decision indicates that the reasons to be disclosed by the Department is for the purpose of enabling the assessee to file its reply and objections effectively in the context of proposition for reopening and in furnishing its stand or information. The decision of the Supreme Court does not indicate that the dealing with the objections raised by the assessee for reopening on the disclosure of reasons in itself could form an independent proceeding which should again be tested before the High Court or elsewhere. However, what is required is that while dealing with such objections, the order to be passed by the competent officer should be a reasoned order in the sense that it should disclose as to in what manner the objections have been dealt with by the concerned officer as in the event of the ensuing assessment order being made the subject-matter of appeal or being taken up before the higher forum, the order should speak for itself. Society For The Promotion Of ... vs Commissioner Of Income-Tax, , 2008 In the present case, It finds that there is no such public element or public interest. Taking the view that non-consideration of the registration application within the time fixed by Section 12AA(2). would result in deemed registration, may at the worst cause loss of some revenue or income tax payable by that individual assessee. This would be similar to a situation where the Assessing Authority fails to make the assessment or reassessment within the limitation prescribed for the same. That also leads occasionally to loss of revenue from that individual assessee. On the other hand, taking the contrary view and holding that not taking a decision within the time fixed by Section 12AA(2) is of no consequence would leave the assessee totally at the mercy of the Income Tax Authorities, inasmuch as the assessee has not been provided any remedy under the Act against non-decision. Sardari Lal Oberai Memorial ... vs Ito on 29 March, 2005 The Tribunal held that the department could not take undue benefit of its own latches. Hence, registration was deemed to have been granted on the expiry of limitation period prescribed under section 12AA(2) of the Act. The analogy is equally applicable to the facts of the present case also. Once the period of limitation had expired, the subsequent impugned order refusing registration, stands reduced to nothing but a nullity. The expression used in the section is 'shall'. This 'shall' cannot be expressed to mean 'may'. The unequivocal purport of the section is mandatory. There is no escape for the department. Once the limitation period has expired, the department becomes functus officio so far as regards the application under consideration before them. At the very moment of expiry of limitation, the application is deemed to have been accepted, in case no order thereon is passed by him. Hence, on this score, the assessee is successful. Kirti Chand Tarawati Charitable Trust v. Director of Income Tax (Exemption) and Ors. (1999) 152 CTR (Del) 322 The Delhi High Court observed that "for the purpose of construing the purpose of the trust, one need not remain necessarily confined to the objects of the trust and set out in the deed of declaration. The real purpose of the establishment of the trust has to be found out and spelled out. 'Purpose' means that which one sets before him to accomplish or attend, an intention or aim, object, plan, project; the term is synonymous with the end sogut and an object to attain, an intention, etc. Purpose must obviously be construed as a real purpose and not a purpose as it outwardly appears to be. Any other interpretation would permit a fraud being played on the law permitting exemption from taxation. If the argument of counsel of petitioner were to be accepted then a trust may be established with a purpose as set out in the deed of declaration which appears to be highly charitable but the trust may in fact be engaged in such activities which cannot even remotely be called charitable, and yet the donations made to it would enjoy exemption. The authority conferred with the power to grant exemption is not debarred from finding out the real purpose as distinguished from the ostensible purpose and if it may find that the purpose of the trust was other than charitable then nothing debars the authority from denying the approval. The purpose of the establishment - the real purpose as distinguished from the ostensible purpose- is germane to the inquiry, which the CIT has to hold while granting or refusal to grant approval." Sonepat Hindu Educational & Charitable Society vs. CIT (2005) Punjab & Haryana H.C : the Tribunal was justified in concurring with CIT who has erred in denying registration under s. 12A and exemption under s. 80G to the appellant trust by erroneously holding that apparently the appellant trust has not been performing the charitable activities as per its aims and objects for which it was formed, which action of the CIT is illegal and thus needs to be quashed being in clear contradiction to the findings by the Court . Kalyanam Karoti v. Commissioner of Income-tax-II, Lucknow This is an appeal filed by the assessee against the order of the learned CIT in refusing to grant continuation of recognition under section 80G (5). In his order dated 8-9-2008, learned CIT has mentioned that the assessee-society has received donations from the persons whose PAN details are not available. there is no material to say that assessee-society has violated clauses (1) to (5) of sub-section (5) of section 80G then there cannot be a valid ground for refusing continuation of recognition under that section. The court noticed that the ld. CIT has not given a finding that donations are the money of the society. In this regard, it is mentioned that there is a difference between a situation where donations are found to be the income of the assessee-society and donations are the actual money received from others but the full particulars are not provided by the donors. DIT, BANGALORE VS. SRI RAMAKRISHNA SEVA ASHRAMA The Director of Income Tax made a mistake in computing the quantum of 85% of the income of the assessee. The assessee collected the amounts by way of donations directly towards funds, known as Rural Project Fund. It is a capital fund formulated by the assessee and earmarked for specific rural projects. Therefore, all donations collected under that head were in the nature of corpus donations and such corpus donations do not form part of the income of a charitable trust. Therefore, non-spending of 85% of such a capital fund cannot be said to be non-spending of 85% of the income of the trust. In other words, the funds collected under the capital account cannot be equated to the income of the assessee-trust. But, the Director of Income Tax Department has treated such corpus donations as expendable income of the trust. He was wrong in that regard by excluding the same from the expandable income of the assessee. He erred in not treating donations of the rural project fund as corpus donations only, for the reason that the capital fund has been designated as special fund in the name of Rural Project Fund. It does not cease to be the capital fund. After examining the details of the activities carried on by the trust, they were satisfied that the assessee is carrying on expandable charitable works in rural areas especially in the field of medical care, namely eradication of leprosy. By virtue of the charitable activities carried on, it is entitled for the benefit of Section 11(1) as well. Therefore, they set aside the order of the Director of Income Tax (Exemptions) and directed him to pass an order making recognition to the assessee for the purpose of Section 80-G of the Act. Ganjam Nagappa & Son Trust vs Director Of Income Tax The petitioner is a Charitable Trust registered under section 12A of the Income Tax Act by the Commissioner of Income Tax, Karnataka. The Commissioner of Income Tax by an order dated 26-11-1999 renewed the recognition of Trust under section 80G of Income Tax Act, 1961 up to 31-3-2001. The Trust applied for renewal of recognition under section 80G(5) to the Director of Income Tax (Exemption) and the Director of Income Tax has rejected the renewal sought for by the petitioner. The same is challenged in this petition. After noticing all the factual aspects of the matter, the authority was not satisfied with any charitable activities being carried on by the petitioner. Satisfaction is necessary in terms of section 80G read with rule 11AA of the Act. The facts of the case would show that the petitioner-trust has done several acts warranting no renewal. Satisfaction is necessary on the part of the authority for renewal purposes. The reason given by the authority cannot be said to require my interference in the case on hand. In my view, a trust cannot be a tool for furtherance of trade interest of another commercial organization. The purpose of section 80G is not for further promoting commercial activities. Order is based on the material available on record. No contra material is placed before this court to dislodge this factual finding arrived by the Commissioner. Harnam Singh Harbans Kaur ... vs Assessee ,2011 In this case the assessee trust filed an application for renewal of exemption under sec.80g of the act on 17.02.2011 i n form no.10g. The learned dit(e) required the assessee to submit certain detailed documents and explanations which were duly furnished before him. The assessee trust has been running under its management a charitable dispensary and medical/health center. It has been registered under sec12a as a charitable trust..The assesses application for renewal of exemption under sec. 80g was 3 considered by the learned dit(e) but he was of the view that the assessee has not been able to establish that it satisfies the conditions laid out under sec. 80g(5) of the Act. Therefore the assesses application for renewal of exemption under sec. 80g of the Act has been rejected by the dit(e) vide impugned order. Association for advocacy & Legal Initiatives v commissioner of Income Tax 1,Lucknow The assessee is a "Statutory Authority" which was established under the provisions of the Uttar Pradesh Planning and Development Act, 1973. In the instant case, prior to 1st April, 2003, the assessee were enjoying exemption under Section 10(20A) and Section 10(29). When these provisions were amended w.e.f. 1st April, 2003, then the necessity arose to register these institutions under Section 12A. In view of the objects, there is no good reason for holding that statutory bodies could not be treated as "charitable" within the meaning of Section 2(15). The object of the "Authority" is to provide shelter to the homeless people, therefore, there is no objectionable material to treat these institutions as non-charitable. The registration under Section 12A is mandatory to claim exemption under Sections 11 & 13, but registration alone cannot be treated as conclusive. It is always open to Revenue Authorities, while processing return of income of these assessees, to examine the claim of the assessees under Sections 11 & 13 and give such treatment to these institutions as is warranted by the facts of the case. Revenue Authorities are always at liberty to cancel the registration under Section 12AA(3). Moreover, it may be mentioned that the benefit of Section 11 is not absolute or conclusive. It is subject to control of Sections 60 to 63. If it is found by keeping in view the provisions of Sections 60 to 63 that it is not so includible then such income does not qualify for any relief. Gulab Devi Memorial Hospital Trust v CIT An application dated 23.03.2009 was made to the Commissioner of Income Tax, Jalandhar-I, Jalandhar, by the assessee, which through order dated 22.09.2009, was rejected. The Commissioner found that the assessee was generating substantial surplus and was spending only a small For Subsequent orders. In this case the court held that surplus is not a ground for denying renewal of sec 80 G unless proved that the education institute was run on commercial lines ,as held in the case of Dr virendra swarup Educational Foundation V CIT(2010). CIT V Gaur Brahmin VIdya pracharini Sabha (2011) Gaur Brahman Ayurvedic College and was charging fees in the range of ` 36,000/- to ` 1 lakh and, therefore, it was not a charitable purpose. The Commissioner of Income Tax has relied upon the table wherein percentage of profit was reflected from 20.44% to 28.49% and came to the conclusion that the respondent was enhancing the earning capacity of the institutions through acquisition of the buildings and fixed assets and not fulfilling any noble objectives The Tribunal held that as per provisions under Section 80G(5) read with Rule 11AA of the Income Tax Rules, 1962 for granting registration, the Commissioner needs to be satisfied that the condition laid down in clause (i) to (v) of sub-sections (5) of section 80G are fulfilled. There is no dispute that the application for approval in Form 10G along with required documents has been filed and as per assessment of the last three years, it was seen that though the assessee derived **** income yet such income was held not liable to inclusion in total income as per Sections 11 and 12 of the Act. Reference has also been made to Section 2(15) of the Act to hold that the education is per se charitable purpose irrespective of the fact that for imparting education, the assessee charges fee and there is no condition to hold that to become eligible for charitable purposes in respect of imparting education, the same should be imparted freely or without charging any fee. Just because the educational society charged fees and got surplus cannot be a ground for denial of exemption under sec 80 G. CIT v Rajmala Educational society (2012) When all the conditions as stipulated in rule 11AA and sec 80 G (5) aer satisfied ,merely because of surplus not a ground to deny approval section 80 G. Mehta Jivraj Makandas &Parekh Govindaji kalyanji modh Vanik vidhyarthi Public Trust v DIT(2011) When the factual and legal position is the same as a charitable trust or institution ,There is no justification for rejecting the application for renewal of sec 80 G. Kamalakar Memorial charitable Trust v DIT(2011) The assessee-trust is not registered under the provisions of the A.P. Charitable and Hindu Religious Institutions and Endowments Act, 1987, shall not render the assessee trust as a non-charitable one, and registration under S.12A of the Income-tax Act alone is enough for an assessee to claim exemption in respect of its income under S.11 of the Act. Since the order of the CIT(A) on this aspect is in consonance with this consistent view taken by the Tribunal on this aspect, we find no infirmity in the same. Merely not complying with the requirements of other enactments should not be a ground to deny exemption under sec 80 G . Reliance Motor Co Pvt Ltd v CIT (1995) In this case, it was held that if the objects of the institutions are for a particular community or religion ,sec 80G will not apply. Upper Ganges sugar Mills Etc v Commissioner of income tax (1997) The supreme court observed that Section 80G applies to donations to any institution or fund established in India "or a charitable purpose". "Charitable purpose, for the purposes of the section, does not include any purpose the whole or substantially the whole of which is of a religious nature". (Emphasis supplied.) Explanation 3, which uses this phraseology, takes note of the fact that an institution or funds established for a charitable purpose may have a number of objects. If any one of these objects is wholly, or substantially wholly, of a religious character, the institution or funds falls outside the scope of section 80G a donation to it does not secure the advantage of the deduction that it gives. The Court said that if the primary or dominant purpose of the Trust was charitable, another object which by itself may not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or the institution from being a valid charity. The judgment is of no assistance in construing Explanation 3 of Section 80G. To reiterate, explanation 3 does not require the ascertainment of whether the whole or substantially the whole of the institution or fund’s charitable. Shri sardarmal Sancheti Charitable trust v Union of India (2009) In this case the nature of impugned order passed by the CIT, the Court is satisfied that such an order cannot be sustained and the matter would definitely require reconsideration by the CIT in the light of the view taken by the Court in Umaid Charitable Trust's case (supra) that a single instance of donation of more than 5 percent of income for renovation of temple would not by itself disentitle the trust from claiming the exemption particularly when there is no clause in the trust deed indicating that the income of the trust was to be applied wholly or substantially for a particular religion. Shiv Ratan Rathi Foundation v CIT(2012) S. 80G registration can be rejected for conducting Bhagwat Katha if expense exceeds 5% of income The assessee-trust registered under section 12A and also approved under section 80G(5) was found to have more then 3/4th of of its total receipt for organizing ‘Bhagwat Katha’; section 80G(5B) limits expenditure on activities of religious nature to 5% of income for year; since expenditure in instant case exceeded 5% and violated section 80G(5B), approval under section 80G was withdrawn with observation that Bhagawat Katha is religious notwithstanding its public character and being open to all castes and religions. Tirumala Tirupathi Devasthanam v Chief CIT & Anr.(2001) In this case ,The objects contained both charitable and religious objects .The CIT had rejected the approval under sec 80 G in view of religious objects. The court remanded the case back to the CIT to reconsider the assessee’s application and dispose reasonably after application of mind since the assessee engaged in multifarious activities. O.P. Jindal Global University v CIT (2010) The reason for denying the approval under sec. 80G is that on dissolution of the assessee university, the net assets after meeting the liabilities were to be handed over to the sponsoring body which involved to undertake religious activities wholly or substantially in its aims and objects. According to the ITAT, The Supreme Court in the case of Upper Ganges Sugar has held that if one of the objects of such a trust or institution is of religious character then the institution or fund falls outside the scope of sec. 80G(5) of the Act. This lacuna in the aims and objects have been removed by the sponsoring body. The sponsoring body is also enjoying registration under sec. 12AA as well as under sec. 80G. Therefore, taking into consideration all these aspects and considering the changed circumstances. Sri marudhar Keseri Sthanakwasi Jain Yadgar Samiti Trust v Union of India(2005) In this case ,the court held that section 080 G (5 B) which was inserted by the Finance Act 1999 with effect from 1.4.2000 will not have any retrospective effect. Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent. of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this sec- tion apply." The aforesaid provision is a non obstante clause and overrides Explanation 3 and declares that to the extent any institution or fund incurs not exceeding five per cent. of its total income for religious purposes, it does fall within the ambit of section 80G and it shall be deemed to be an institution to which section 80G apply. To such institutions the restriction of Explanation 3 will not be attracted. Thus, the position with effect from April 1, 2000 would be that notwithstanding one or more clauses of the trust deed being wholly or substantially religious, if the income- expenditure ratio in respect of the expenses incurred on such purposes falls within the ambit of subsection (5B), it shall still be treated to be an institution to which the provisions of section 80G would apply and the donations to which would qualify for deduction. This petition relates to the assessment years 1994-95 to 1997-98 before the insertion of sub-section (5B) in section 80G with effect from April 1, 2000 and it does not have retrospective effect, the petitioner is not entitled to any relief for the assess- ment years in question. This petition fails and is hereby dismissed. DIT (Exemption) v International Society for Krishna Consciousness (2011) The activity of the assessee towards religious purposes was less than 5 % therefore held that the assessee is entitled to recognition under section 80 G . CIT V Empire Jute Co Ltd . (1986) THe deduction allowable under sec 80 G principally lies with the arriving of the gross total income. If the assessee has loss before giving deduction under section 80 G,He is not entitled to deduction. Shree lalita ashram trust, rohtak v. Cit, rohtak While considering 5% of the amounts spent towards religious purposes ,It is to be reckoned on the ‘total income’ and not on the income as per the language used in section 11 as held in the case CIT v programme for Community Organization (2001) . Parkside Holding Ltd v DCIT(2003) In this case ,it was held that to claim deduction there is no pre-condition that the amount must come out of the income chargeable to tax.The deduction has to be allowed during the assessment year relevant to the previous year when the cheque was issued and not qua the date of encashment of cheque. Commissioner of Income tax ,West Bengal v Samnugger Jute Factory Co .(1953) The Calcutta high court in this case held that ‘any sum’ means the sum must have been paid out of income liable to tax. Commissioner of income tax v Ramniwas Karwa (1978). if a donation to an existing fund or institution. In other words, if a donation is made for the purpose of starting or founding a fund or institution, it is submitted on behalf of the department, such a donation would not attract the provisions of Section 88(1)(b)(ii) of the Act. The rationale of this submission made on behalf of the department is neither logical nor, in our opinion, in conformity with the object of the provisions ejection 88 of the Act itself. If a donation to an existing fund or trust, of course, if it fulfills. the required conditions are exempted from tax, there is no reason why a donation made to a fund or trust or institution, which is started or founded with the same donation, will not have the benefit of exemption. There is no reason to exclude the first donation with which the fund or institution is started or founded when the benefit is given to the subsequent donation. Similar principles were upheld in the case of CGT ,of the Bombay City 1 v Commissioner of Gift-tax v. Yogendra N. Mafatlal reported in 58 ITR 40. Golecha properties (P)Ltd v CIT(1988) Proof of donation is a prerequisite,The deduction allowed under section 80 G based on proof of payment and Proof of Charitable purpose.Similar views were upheld in the following cases Amar Nath V ITO,G.D. Metsteel (P) Ltd v ACIT. CIT V General Textiles (1978) In this case,it was held that the deduction was claimed under section 80 G by a registered firm . The same deduction shall not be allowed in the hands of the partners Commissioner of Income Tax v Bharath bhandar (1974) Since income tax was payable by a registered firm, it was an assessee. It was, therefore, entitled to claim exemption under S. 15C of the 1922 Act from payment of tax in respect of the amount of exempted profits in the determination of the tax payable by it even if such exemption had been given to its partners in their individual assessments. Where a registered firm manufactures or produces articles in an industrial undertaking, each of its partners does so and is, therefore, an assessee within the meaning of S. 15C(1) and would be entitled to claim that no tax was payable by him in respect of his share of the exempted profits. The registered firm and its partners being distinct and separate assessees, the registered firm and the partners were entitled to claim exemption under S. 15C(1) in their respective assessments. In CIT vs. Bharat Bhandar (1974) 94 ITR 315 (All), the Allahabad High Court dealt with the provisions of the present Act. In the case before it, the ITO had held that the assessee, which was a registered firm, was entitled to claim rebate under S. 84, but he apportioned the amount of exemption in the hands of the individual partners. On second appeal, the Tribunal held that the firm should have been allowed the benefit in its assessment. The High Court affirmed the Tribunal's view and held that the relief under s. 84 was to be allowed in the hands of the registered firm as it in no uncertain terms provided for grant of relief and exemption to the assessee. The fact that the ITO had granted exemption in other hands was no reason to deny to the assessee the benefit to which it was entitled. We find that by Circular No. 123 dt. 31st Oct., 1973, issued by the CBDT to all CIT ((1973) 92 ITR (St.) 6), the Allahabad High Court judgment just mentioned has been accepted by the Board which had decided that the law laid down therein should be applied to all cases covered by S. 15C of the 1922 Act and S. 84 of the present Act CIT v Cement Co.Ltd (1968) The court has taken the view that while interpreting sec 80G (2)(a),the substance of the nature of the transaction should be taken into account and it is not necessary that the donation must be in cash .Similar views were upheld in the following cases Addl. CIT v Abhai Maligai (1978),CIT v Bangalore Woolen Cotton and Silk Mills Co.Ltd. CIT v Amonbolu Rajiah (1976) Sec 80 G (2)(a) contemplates only cash amount of money as donation.Similar views were upheld in the following cases CIT v Gopal Krishna singhania,CIT v Smt Dhirajben R .Amin (1983),Sri Rama Varma v Commissioner of Income Tax(1991) CIT V Yeraben R. Amin Miss (1993) The courts have held the view that ‘any somes’ money does not include in kind . Similar views were upheld in the following cases CIT v Gaj Singh(1995),Kantilal P. Shah v CIT,Surat Electricity Co Ltd v Asst. CIT (2010) Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Case Digest: Income Tax Deductions for Donations under Section 80G

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