The Income Tax Appellate Tribunal (ITAT) Allahabad has ruled that donations by a charitable trust to educational activities will not be eligible for exemptions under section 11(1)(a) of the Income Tax Act 1961 if such educational activity is not specified under the objective of the charitable trust.
The assessee, Nazareth Hospital Society, is running hospitals and schools of Nursing in Allahabad and was registered as a charitable society under section 12AA. The society’s case was selected for framing scrutiny assessment by Revenue and the assessee participated in assessment proceedings before the Assessing Officer (AO) and furnished required information and details. The AO observed that the assessee has contributed Rs. 72,00,000/- as a donation to Roman Catholic Diocese Private Limited. On being asked, the assessee submitted that donation given by one charitable institution to another charitable institution is to be treated as an application of income under section 11 and is exempt from income tax. The AO rejected the contentions by holding that object of the donor and the donee society are not the same, as can be seen from their Memorandum of Association, and hence said amount cannot be considered as an application of income for charitable purposes. The AO observed that the main object of the donor assessee society is a medical relief and the running of hospitals, while the main object of the donee society was education. The AO was of the view that when the assessee contributes a fund as a donation to the donee society who is engaged in different activities, then assessee society is not fulfilling its objects for which assessee society was established and hence said the amount of donation of Rs. 72,00,000 made to ‘Roman Catholic Diocese Private Limited’ cannot be exempt from income tax.
Judicial Member Vijay Pal Rao and Accountant Member Ramit Kochar sided with the revenue and held, “we have observed that the objects of the donor viz. assessee only permitted to engage in activities to establish and run hospitals, nursing homes, welfare homes, rest houses for the good and benefit of the people, and other objects which are incidental to the attainment of the above main object. The objects as are approved by the assessee nowhere stipulated engaging in educational activities and its act in donating Rs. 72 lacs to a charitable organization namely M/s Roman Catholic Diocese Private Limited who is engaged in educational activities, is an act ultra vires to the object clause of the assessee and also does not fulfill the condition as stipulated u/s 11(1)(a) to apply its income for such purposes in India. Thus, based on detailed discussions above, we hold that the assessee will not be entitled to an exemption of Rs. 72 lacs paid by it as a donation to M/s Roman Catholic Diocese Private Limited, under the provisions of Section 11(1)(a) of the 1961 Act and the appeal filed by assessee fails.”
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