Society not Eligible to Tax Exemption If Fund was used for providing Scholarships to Students to satisfy Business Needs of Another Entity: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) in Commitment Mortality Vision Education Society v. ACIT, held that a society is not eligible to claim tax benefit under the Income Tax Act as the fund was used for providing scholarships to students to satisfy Business needs of another Entity.

In the instant case, assessee colluded with FIITJEE Group and the funds have been given the Group entities in the name of disbursement of scholarship etc. The scholarships were given to attract the students to various courses run by the said Group.

The Assessing Officer, while completing assessment against the assessee, observed that the sanctity of the objective of the society was thoroughly violated for personal benefit by Sri Aseem Gupta as it was done against the consideration in the form of statutory audit of assessee as given to him.

Before hthe Tribunal, the Revenue contended that the donations received by the assessee have not been applied for the object of the charitable purpose of the assessee society and same have been used for furtherance of the business of the FIITJEE group and therefore the the Assessing Officer was right in denying the application of the funds in terms of section11 and 12 of the Act.

While upholding the above order, the Tribunal observed that by way of collusion between the FIITJEE Group and the assessee, the funds have been given the Group entities in the name of disbursement of scholarship etc.

“This collusion is evident from the statement of Sh. Aseem Gupta as how the chequebooks of the assessee society were controlled by the authorities of the FIITJEE group. By way of providing scholarship to the meritorious students, the FIITJEE group has served its business purposes of attracting the students to various courses run by them. Thus in our opinion, the funds of the assessee society have not been utilised for the charitable purposes. We, accordingly, uphold the finding of the lower authorities in denying the exemption under section 11 and 12 of the Act.”