Trust exemption under section 11 upheld after revenue authority improperly rejected entire claim over single donation issue

The ITAT Delhi dismissed the revenue's appeal regarding denial of exemption under section 11. The AO had rejected the entire exemption claim after discovering the assessee trust donated to an unregistered trust, despite allowing similar claims in previous years. The ITAT found the AO's wholesale rejection improper as he failed to demonstrate how the donation violated the trust's objects or consider actual charitable activities performed. The CIT(A)'s decision allowing the exemption while restricting only the specific donation to the unregistered trust was upheld.

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Issues:
- Whether the assessee trust is entitled to exemption under section 11 of the Income Tax Act for the Assessment Year 2015-16.
- Whether the donation made by the assessee trust to an unregistered organization violates the conditions for granting registration under section 12A of the Income Tax Act.

Analysis:
1. The appeal was filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals) for Assessment Year 2015-16, challenging the exemption granted to the assessee trust under section 11 of the Income Tax Act.
2. The Revenue raised grounds asserting that the assessee trust applied income on objects not compliant with its stated objectives and that the donations made were towards non-charitable objects, violating the conditions of registration under section 12A of the Act.
3. The assessee trust, registered under section 12A, filed its return of income claiming exemption under section 11 for the impugned assessment year.
4. During assessment proceedings, the AO questioned the funds applied for charitable purposes by the assessee trust.
5. The AO raised concerns specifically regarding a donation of Rs. 6,60,000 made to an unregistered organization, AIMC, which led to the denial of exemption claimed by the assessee trust under section 11.
6. The AO's denial was based on AIMC not being a registered society under the Income Tax Act, lack of charitable activities in AIMC's financial records, and non-filing of ITR by AIMC.
7. The assessee trust defended its donation to AIMC, providing affidavits and explanations to support that the donation was used for charitable purposes.
8. The AO's order denying exemption under section 11 was appealed by the assessee, leading to the Ld. CIT(A) allowing the appeal, emphasizing that the denial was not in accordance with the law.
9. The Revenue challenged the Ld. CIT(A)'s decision, arguing that the donation to an unregistered trust contravened the conditions for registration and exemption under the Act.
10. The Ld. AR for the assessee trust contended that the consistent donations to AIMC were in line with the trust's objectives and charitable activities, supported by resolutions and affidavits.
11. The Tribunal observed that the Revenue had allowed similar donations in previous assessment years without verification, and the denial of exemption in the current year lacked merit.
12. Considering the actual charitable activities of the assessee trust and the relief granted in subsequent assessment years, the Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision to allow the exemption under section 11 for the assessee trust.

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