Case Law Details
Indian Red Cross Society Vs CIT (ITAT Ahmedabad)
Introduction: Two appeals have been filed by the Indian Red Cross Society against the denial of registration under sections 12AB and 80G(5) of the Income Tax Act. The denial is primarily based on concerns related to compulsory transfers of donation funds, raising questions about whether they fall under the definition of voluntary donations and if they contribute to the trust’s objectives.
Detailed Analysis: The Indian Red Cross Society, registered under the Bombay Public Trust Act for charitable purposes, sought registration under section 12AB of the Income Tax Act in September 2022. During the process, the Commissioner of Income Tax (Exemption) issued notices requesting detailed information about the trust’s activities and certain documents.
The trust provided the required information in response to these notices. However, a subsequent notice dated 2nd January 2023 raised concerns about the adequacy of the information provided. This notice did not specify the particular documents required, and in response, the trust submitted its earlier acknowledgment of details submitted to the Commissioner.
Despite the trust’s efforts to comply with the notices, the Commissioner of Income Tax (Exemption) rejected the registration application. The Commissioner’s decision was primarily based on the observation that a significant portion of the donations received by the trust (30%) would be compulsorily transferred to the State/Union Territory Branch and the National Headquarters of the Red Cross Society. This was seen as a contractual or compulsory transfer of donation funds, which, in the Commissioner’s view, did not constitute voluntary donations as defined in the Act. The trust was also noted to have failed to provide clarification on this matter.
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