TaxTMI 
TaxTMI 
2018 (8) TMI 596
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....ing the quantum of the disallowance in regard to 2.1 above. 2.3 That the amount of donations paid to various charitable institutions registered under section 12A of the Act was to be disallowed as it did not according to him, represent the application of income u/s 11(1) (a) of the Act. Donations to various colleges amounting to Rs. 36,82,865 3. The CIT(A) has erred in holding that the donations of sums of money paid by issue of cheques to various government financed colleges for the advancement of education and/ or the advancement of general public utility activity cannot be treated as application of income for charitable purposes under section 11(1)(a) of the Act as according to CIT(A), the donations could not be linked to any student or any beneficiary in particular. Application of income for other charitable activities like tree plantation, distribution of prizes among students etc. aggregating to Rs. 12,59,155 4. The CIT(A) has erred in holding that the application of income towards charitable purposes of tree plantation, marathon participation, distribution of prizes among students, printing of annual reports, cannot be treated as ....
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....he Ld. CIT(A) from pages 3 to 4 of the appellate order. The said submissions were sent for remand report before the AO who has submitted its report which has been incorporated at page 5 and 6 of the appellate order and also assessee's counter on such report of the AO. However, the Ld. CIT(A) again required the assessee to furnish each and every item of expenditure incurred and noted that assessee has shown following expenses under different heads: - Head of Expense Amount (Rs.) Schedule G: Donation Paid 3,51,13,499 Schedule H: Administrative & General Expenses 19,65,794 Total 3,70,79,293 But again, the bifurcation of donations was asked by the Ld. CIT (A) with regard to the grouping of expenses in Schedule G & H, which was submitted by the assessee in the following manner: - Regrouping of expenses of Schedule G Amount (Rs.) (i) Organisation having 12AA Registration 2,92,40,173 (ii) Schools 9,31,306 (iii) Colleges 36,82,865 (iv) Others 12,59,155 Total 3,51,13,499 Sub-head of expense Amount (i) Professional fee 2,24,720 ....
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....tion among school children 3,26,702 2. Payment to vendor (i.e. Reprint) for printing annual reports on charitable activities of the Appellant 2,67,750 3. Saplings purchased from 'Green Carbon Energy & IT Consultancy' for free plantation drives 2,30,623 4. Participation in Marathon - Procam International Ltd. 1,40,000 5. Saplings purchased from 'Carbon And Energy Consultants' for tree plantation drives 1,32,026 6. Purchase of 200 mugs for distribution among winners of tree planting challenge from Vendor (i.e. mystic Charlies) 45,000 7. Participation fees in Marathon -PROCAM INTERNATIIONAL LTD. 31,200 8. Purchase of flags and banners for walk for life in Delhi from Vendor (i.e. Modern Business Systems) 26,325 9. Purchase of drawing materials (i.e. colours stationery) for a painting activity among children 18,386 10. T he Socio-Friendly Football Championship charges 16,854 11. Cost of printing posters for promoting Earth Day and Walk for life from Vendor (i.e. MKM Creatives) 15,850 12. Transport charges for volunteering activities paid to Shree Enterprises 7,289 13. Water ....
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....Payment in the form of materials would not be in compliance of section 11(3)(d) of the Act. 3. Payment of material on behalf of section 12AA organisation does not constitute compliance of section 11(3)(d) of the Act Disallowance can be made u/s 11(3)(d) only if payment is made to another charitable Institution out of accumulated funds. No embargo on payment/application of current year's income. Covered by Delhi HC in the case of Bagri Foundation [192 Taxmann.309] 2. Donations in cheque i.e Mumbai Mobile Creches & Literacy India Not been demonstrated as to how the said amount has been applied for the purpose of the trust and donation of material is legally not permissible >Material has provided for the running of the trust. Documentation has been provided for. >Disallowance can be made u/s 11(3)(d) only if payment is made to another charitable Institution out of accumulated funds. No embargo on payment/application of current year's income. 3. >Donations to colleges for scholarship of students >Donations to colleges for Solar installation at colleges >Donations not linked with any particular student. >Colleges receiving donations are not registe....
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....ave heard the rival submissions and also perused the relevant finding given in the impugned order. It is not in dispute that assessee is a charitable organisation which has been registered u/s 12A, looking to its objects which were purely for 'charitable purposes' as defined u/s 2(15). The AO had disallowed certain payments / expenditure incurred on the ground that either complete details were not furnished or the expenditure incurred on certain activity is not for charitable purpose or donations given to various organisation and colleges are not backed by any proper documentary evidences. Ld. CIT (A) went step further in analysing each and every heads of expenses so as to conclude that most of these expenditures incurred cannot be held to be spent for charitable activities at all and hence would not fall within the utilisation limit of 85% as provided in section 11(1). The summary of expenditure claimed by the assessee, amount disallowed by the AO and the Ld. CIT (A) can be tabulated in the following manner: - S. No. Item of Expense Claimed by the Appellant Disallowed by the AO Disallowed by CIT(A) 1 Organisations registered under 12A 2,92,40,173 10,99,4....
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....which otherwise are for charitable purposes. Here in this case the incurring of the amounts either in kind or in cheques for donation cannot be disputed, because, so far as donation in kind to these institutions are concerned same are fully supported by confirmation from these institutions and by payment advices, etc. for which the evidences were given before CIT (A). What Ld. CIT (A) has held that, since assessee trust has not directly incurred these expenses but has given to institutions who have incurred these expenses and donation has been given kind, therefore, it cannot be reckoned as utilisation of funds for charitable purposes. We are unable to appreciate such logic, sans any legal authority to support such reasoning. Further Ld. CIT (A) has held that, since some these donations have been given to organisations which are registered u/s 12A, therefore, such an amount spent cannot be allowed in view of section 11(3) (d). In our opinion such a contention of Ld. CIT (A) that donations made in kind or in cheques to charitable organisation which are registered u/s 12A are deemed to not allowable as per section 13(3)(d) is completely misunderstanding of the said provision, because....