The Income Tax Appellate Tribunal (ITAT), Jaipur bench while giving relief to Rajasthan Cricket Association held that the exemption under Section 11 and 12 is allowable on donation by a charitable trust to others for utilization towards charitable objects.
The assessee, Rajasthan Cricket Association is a society trust registered under Rajasthan Society Trust Registration Act, 1958 and also registered under Sport Association’s Registration Accreditation Act, 2005. The assessee society filed its return of income declaring total income at NIL after claiming the exemption under section 11 or 12 of the Income Tax Act, 1961.
The Assessing officer has disallowed the same primarily for the reason that the assessee is not eligible for exemption under section 11 and 12 of the Act being not registered under section 12A and the said expenditure is either in the nature of capital expenditure or in the nature of application of income.
In view of the CBDT instruction No. 1132 dated January 5, 1978 inter-trust donations from one charitable trust to another for utilization by the donee trust for charitable purposes was proper application of income for charitable purposes in the hands of the donee trust and it would not affect the exemption claimed as application by the Donor trust.
The Coram consisting of Vijay Pal Rao and Vikram Singh Yadav observed that the assessee has given grants to various district cricket associations amounting to Rs. 1,87,70,025 in the nature of subsidy, grants for infrastructure development and for buying cricket equipment.
The Tribunal found that by incurring such expenditure by way of grants to the district cricket association, the assessee society is contributing to creation of necessary infrastructure and purchase of equipments however such infrastructure and equipments results in creation or enhancement of existing or new infrastructure or acquisition of assets in the hands of the district cricket association, however as far as the assessee society is concerned, such an expenditure doesn’t result in creation of any asset or advantage of enduring benefit in the hands of the assessee society and therefore, the same cannot be termed as capital expenditure.
Therefore, the ITAT held that the assessee is duly registered under section 12A of the Act and is eligible for exemption under section 11 and 12 of the Act and therefore, the said expenditure is clearly in nature of application of income as the same has a direct nexus with the objectives of the assessee society in terms of promotion of sport of cricket in the state of Rajasthan.
Subscribe Taxscan Premium to view the Judgment
