Trust wins exemption under section 11 but corpus donation receipts remanded for fresh examination

ITAT Bangalore upheld exemption u/s 11 for a trust, rejecting AO's denial of charitable status. The tribunal confirmed that serving a specific section of public constitutes charitable purpose under s. 2(15), noting the trust had valid 12AA and 80G approvals. However, corpus donation receipts were remanded to AO for fresh examination per jurisdictional HC precedent. The tribunal also confirmed taxation of memento expenses to association officials under s. 13(1)(c), ruling such expenditure didn't serve charitable purposes and violated trust provisions.

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Issues Involved:
1. Granting of exemption under Section 11 of the Income Tax Act.
2. Treatment of corpus donation under Section 11(1)(d) of the Act.
3. Expenditure on mementoes and its implications under Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act.
4. Levy of interest under Section 234B of the Act.

Summary:

1. Granting of exemption under Section 11 of the Act:
The Revenue appealed against the granting of exemption under Section 11 of the Act for the assessment years 2016-17 and 2017-18. The Revenue contended that the assessee's activities did not fall under the definition of "charitable purpose" as per Section 2(15) of the Act, arguing that the assessee's activities were not for the benefit of the public at large. The Tribunal upheld the CIT(A)'s decision, stating that the assessee's activities for the welfare of milk producers and their families qualify as "relief to the poor," thus entitling the assessee to exemption under Section 11 of the Act.

2. Treatment of corpus donation under Section 11(1)(d) of the Act:
The Revenue challenged the CIT(A)'s decision to grant exemption on a corpus donation of Rs. 4,34,13,684/- without calling for a remand report from the AO. The Tribunal remitted the issue back to the AO for fresh examination, directing the AO to verify the records and the purpose of the donation in light of the Karnataka High Court judgment in the case of Director of Income-tax Vs. Sri Ramakrishna Seva Ashram.

3. Expenditure on mementoes and its implications under Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act:
The assessee appealed against the CIT(A)'s decision to treat the expenditure on mementoes given to Presidents and Secretaries of Milk Producers Association as falling under the purview of Section 13(1)(c) read with Sections 13(2) and 13(3) of the Act. The Tribunal upheld the CIT(A)'s decision, stating that the expenditure was not for charitable purposes and benefited specific individuals, thus violating Section 13(1) of the Act. Consequently, the amount spent on mementoes was to be taxed in the hands of the assessee.

4. Levy of interest under Section 234B of the Act:
The assessee raised grounds regarding the levy of interest under Section 234B of the Act. The Tribunal noted that the levy of interest is consequential and mandatory in nature, to be charged accordingly.

Conclusion:
The Tribunal dismissed the Revenue's appeal regarding the exemption under Section 11 of the Act, remitted the issue of corpus donation back to the AO for fresh examination, upheld the CIT(A)'s decision on the treatment of expenditure on mementoes, and acknowledged the consequential nature of the levy of interest under Section 234B of the Act. The appeals were partly allowed for statistical purposes.

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