Corpus Funds Misuse Leads to Exemption Denial

The Tribunal dismissed the Assessee's appeal against the rejection of their application for renewal of exemption under section 80G(5) due to advancing corpus funds to other trusts without permission from the Charity Commissioner. The Tribunal found that the advances constituted a diversion of corpus funds, violating donor directions and laws, as the corpus fund was used to advance funds without proper authorization. Previous case laws cited were distinguished, and the order of the DIT(E) rejecting the Assessee's application for renewal of exemption was upheld.

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Issues involved: Appeal against rejection of application for renewal of exemption u/s 80G(5) due to advancing of corpus fund to other trusts without Charity Commissioner's permission.

Summary:
The appeal was filed against the order of DIT(E) rejecting the Assessee's application for renewal of exemption u/s 80G(5) due to advancing corpus fund to other trusts without permission. The Assessee argued that the advances were made to trusts with similar objects, no interest was charged, and trustees had the power to utilize corpus funds. However, it was noted that the corpus fund was used to advance funds to other trusts without permission from the Charity Commissioner. The Tribunal found that the advances were not in the nature of loans but a diversion of corpus funds, violating donor directions and laws. The Assessee's appeal was dismissed, upholding the order of DIT(E).

The Assessee had previously been granted approval u/s 80G(5) valid from 1.4.2006 to 31.3.2009. The Assessee's application for renewal was rejected as it had advanced funds to 3 trusts out of its corpus fund without charging interest. The total capital of the Assessee was &8377; 53.68 lacs, with almost 93% advanced to the 3 trusts. The amounts advanced had not been returned, indicating a diversion of corpus funds. Resolutions authorizing the advances lacked details and no refunds were demanded. The Assessee failed to obtain permission from the Charity Commissioner for the advances.

The Tribunal held that the corpus fund, being a permanent fund with specific directions, cannot be used contrary to donor directions. The advances were deemed a diversion of corpus funds, violating donor directions and laws. Previous case laws cited were found distinguishable. The appeal was dismissed, upholding the order of DIT(E) rejecting the Assessee's application for renewal of exemption u/s 80G(5).

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