13/08/2013
Delhi State Aids Control Vs. ITO, ITA No. 2906/Del/2010, Date of Decision: 5.7.2013, ITAT- Delhi Section 12A of the Income Tax Act, 1961 Whether the advances made by one trust to another trust registred u/s 12A of the Act and used by that trust for charitable purpose would qualify for exemption u/s 11 of the Act by the first trust irrespective of accounting treatment followed? Held - Yes The assessee is a registered society u/s 12A of the Act and it is a Govt. organization under the Govt. of Delhi. During the year under consideration, Assessee had received grants from various sources. Out of total grants, a part of grant was given, for charitable purposes, by the assessee to the peripheral units who itself were registered charitable institutions and the same was directly taken to balance sheet instead of Income & Expenditure Account. The AO held that grants directly credited in the balance sheet were not used for charitable purposes and hence the total use for charitable purposes was less than 85% of total income. The assessee has followed the Instruction No.1132 dated 5.1.1978 issued by CBDT stating that the payment of sum by one charitable trust to another for utilization by the donee trust towards its charitable object was proper application of income for charitable purposes in the hands of donee trust and donor trust will not loose exemption u/s 11 of the IT Act merely because the donee trust did not spend the donation during the year of receipt itself. Held that the accounting practice followed by the assessee cannot come in the way of entitlement of exemption to the assessee as the sums were actually distributed to the charitable organizations and in view of CBDT Instruction No. 1132, these payments shown by assessee as advances are in fact a proper utilization of funds of the assessee for charitable purposes
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