Donation by assessee trust to a university approved U/s. 10(23C)(vi) is for charitable purpose & eligible for section 11 exemption

Singhania Foundation Education Trust Vs. DDIT (ITAT Kolkata)

Assessing Officer denied the exemption under section 11 of the Act, based on the reason that income of Rs. 22,83,087/- of Singhania Foundation Education Trust (in brief ‘Trust’) was transferred to Singhania Foundation Education Samity (in brief ‘Samity’) for mutual benefit and both have a common key person namely Shri D.C. Singhania who have substantial interest in both, that is, in ‘Trust’ as well as in ‘Samity’. The AO also noted that facts and circumstances of the case is not coming within the exceptional circumstances provided in the provisions of section 13(1) (c) of the Act. Another stand taken by the Assessing Officer to deny the exemption under section 11 of the Act was that the said amount of Rs. 22,83,087/- was directly deposited in the bank account of the various persons without routing through assessee’s Trust accounts, that is, the said money was routed through separate organizations namely, International Legal Consultants Ltd. and Law Firm Management Services Ltd( LFMS).

We note that ld.CIT(A) took a different stand to deny the exemption which was not arising out of the assessment order passed by Assessing Officer under section 143(3)/11 of the Act. The ld CIT(A) held that in case of assessee trust under consideration, the explanation below sub-section (2) of Section 11 are applicable, as the trust made payments to a university approved under section 10(23C)(vi), therefore, there cannot be claim of deduction at both ends, that is, an application by the assessee and as income by the recipient. Therefore, CIT(A) held that such payments should not be treated as application of income as per explanation of section 11(2), and this way, he denied the exemption.

We note that as per submissions of ld DR for the Revenue, the basic information were not available on record such as:

(i) Property from which the rental income of the trust has derived, that is rental agreement and assessee`s Trust entitlement to receive rental income.

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