Tax Exemption can’t be denied to Trust Merely because One Donation in One Year is doubted: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax exemption cannot be denied to a Trust merely because one donation in one year is doubted.

While concluding the assessment proceedings against the assessee, the CIT (Exemption) found that the assessee was not carrying out activities in accordance with the objects of the society and no genuine activities are being carried out by the society, is solely based upon the allegation that the assessee received the donation of Rs. 85 lakhs in lieu of cash.

The Tribunal noted that there is no basis for the Department to hold that the assessee received the donation of Rs. 85 lakhs from HHBRF in lieu of cash.

“Further, merely because the genuineness of one donation in one year is doubted, it cannot be a ground to draw the inference that the activities of the assessee society are not being carried out in accordance with the objects of the society or that no genuine activities are being carried out by the assessee. That if the genuineness of a donation in one year is doubted, the addition, if any, can be made in the assessment of the relevant assessment year in accordance with the law. However, that, by itself, would not be sufficient to withdraw the registration under Section 12AA(3). If the genuineness of a donation is doubted, at the most, it can be ground to examine deep into the activities of the society so as to ascertain whether the activities of the society are being carried out in accordance with the objects of the society. However, a conclusion cannot be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by the assessee merely because the genuineness of one donation in one year is doubted,” the Tribunal said.