Rohilkhand Educational Charitable Trust Vs DCIT (ITAT Lucknow)
Corpus Donations, Capital Spend & Accumulation Recognized as Charitable Application- Cash Deposits During Demonetisation Not Taxable u/s 68 – Relief for Educational Trust
Assessee, a public charitable trust registered u/s 12A, filed appeals against CIT(A)’s orders sustaining major additions after denial of exemption u/s 11 & 12 on account of cancellation of registration u/s 12AA(3) by PCIT. AO taxed corpus donations, accumulation u/s 11(2), 15% statutory accumulation, capital expenditure, cash deposits during demonetization & also disallowed 10% of expenses for AY 2017-18. For AY 2018-19, donations made by the Trust to two other charitable trusts & surplus of income were taxed by treating the Trust as an AOP.
Assessee argued that its registration had already been restored by ITAT on 20.10.2021, & pending Revenue’s challenge before HC, the Trust continued to enjoy exemption. It was contended that corpus donations were supported by confirmations, accumulation in Form 10 specified charitable purposes, capital expenditure on hospital assets was application of income, cash deposits represented recorded fee collections, & adhoc disallowance of 10% expenses was without basis.
Tribunal held that once registration stood restored, exemption u/s 11 could not be denied. It noted that donations with specific directions must be treated as corpus, accumulation u/s 11(2) was valid if Form 10 filed, & capital outlay for hospital assets was application of income. The Tribunal further ruled that cash deposits during demonetisation, being fee collections recorded in books, could not be taxed u/s 68, & adhoc disallowance of 10% expenses without pointing out specific defects was unsustainable. As regards AY 2018-19, donations to other charitable trusts registered u/s 12A & approved u/s 80G were allowable as application of income, unless misapplied, & mere common trusteeship did not invoke s.13(3). Accordingly, most of the additions sustained by CIT(A) were deleted, & appeals of the Trust were allowed.
