1987 (6) TMI 75 - AT - Income Tax

Trust's charitable expenditure deductible, corpus donations as voluntary contributions upheld, ITAT Bombay-B decision dismisses Income-tax Officer's arguments.

The ITAT Bombay-B upheld the Commissioner's rulings, allowing the deduction of charitable expenditure incurred by the trust and confirming that corpus ... Charitable Or Religious Trust, Exemption Of Income From Property Held Under Issues:1. Whether the expenditure incurred by the trust for charitable purposes is allowable as per the provisions of the trust deed.2. Whether corpus donations received from parties hiring the trust premises should be treated as voluntary donations towards corpus or as service charges.Detailed Analysis:Issue 1:The appeal before the ITAT Bombay-B pertains to the assessment year 1980-81 involving a trust named Shri Lakhamsey Napoo Smarak Sadharan Fund, which is charitable in nature. The trust deed specifies the allocation of funds for various purposes, with separate sums settled for maintenance of trust premises, educational institutions, and charitable activities. The dispute arose when the Income-tax Officer disallowed an expenditure of Rs. 56,819 incurred for charitable purposes under clause 3(c) of the trust deed, arguing that the income from Napoo Hall, the primary source of income, should only be used for maintenance and repairs as per clause 3(a. However, the Commissioner of Income-tax (Appeals) held that there was no prohibition in the trust deed against utilizing the income from Napoo Hall for charitable purposes mentioned in clause 3(c). The ITAT concurred, emphasizing the trustee's power to amalgamate funds and use them for charitable objectives, as long as the surplus income from the Hall is first applied towards maintenance and improvement of the premises. The ITAT upheld the Commissioner's decision, allowing the deduction of the expenditure in question.Issue 2:Another aspect of the dispute involved corpus donations received from parties hiring the trust premises. The Income-tax Officer contended that these donations were akin to service charges and not voluntary contributions towards the corpus. However, the Commissioner of Income-tax (Appeals) disagreed, noting that a significant number of parties did not make any donations, indicating the voluntary nature of the corpus donations. The ITAT supported this view, highlighting instances where parties made corpus donations alongside payments for premises usage, suggesting a genuine intent to contribute towards the corpus fund. The ITAT confirmed the Commissioner's decision to treat the corpus donations as voluntary contributions, dismissing the Income-tax Officer's contention.In conclusion, the ITAT Bombay-B dismissed the appeal, upholding the Commissioner's rulings on both issues regarding the allowance of charitable expenditure and the treatment of corpus donations, thereby resolving the tax implications concerning the trust's financial transactions and compliance with the trust deed provisions.