ALLIANCE EDUCATIONAL FOUNDATION,MALAKKARA V. INCOME TAX OFFICER, ALAPPUZHA

ITA 903/COCH/2024

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The case involves the Alliance Educational Foundation, a society registered under the Societies Registration Act and under section 12A of the Income-tax Act, 1961, which appealed against the order of the National Faceless Assessment Centre / Commissioner of Income-tax (Appeals) that confirmed the addition of Rs.1.50 crore to its income. This amount represented a donation made to another charitable institution, Sri Vidya Samithy, which was also registered under section 12A. The Assessing Officer had initially added this amount to the taxable income, arguing that the donation did not qualify as an application of income for charitable purposes. The Tribunal, referencing several judicial precedents, overturned this decision, emphasizing that the donation was indeed an application of income for charitable purposes as it was made out of the current income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46996 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Other Referred Cases: CIT v. Aurobindo Memorial Fund Society (2001) 247 ITR 93 (Mad), CIT v. Thanthi Trust (1982) 137 ITR 375 (Mad), Aditanar Educational Institution v. Addl.CIT (1997) 224 ITR 310 (SC), CIT v. Shri Ram Memorial Foundation (2004) 269 ITR 35 (Delhi)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL
• Assessee Lawyers: M.S. VENKITACHALAM
• Keywords: Charitable institution

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri George George K, Vice-President & Shri Inturi Rama Rao, Accountant Member ITA No.903/Coch/2024 :Asst.Year 2016-2017 Alliance Educational Foundation Aranmula, Edayaranmula SO Alapuzha – 689 532. PAN : AAATA3723E. v. The Income Tax Officer Alappuzha. (Appellant) (Respondent) Appellant by : Sri.M.S.Venkitachalam, CA Respondent by :Smt.Leena Lal, Sr.AR Date of Hearing :02.04.2025 Date of Pronouncement : 08.04.2025 O R D E R Per Inturi Rama Rao, AM : This appeal at the instance of the assessee is directed against National Faceless Assessment Centre / Commissioner of Income-tax (Appeals) [“CIT(A)”] order dated 04.09.2024 passed u/s.250 of the Income-tax Act, 1961 [“the Act”] for the assessment year 2016-2017. 2. Briefly the facts of the case are that the appellant is a society duly formed under the Societies Registration Act, and also registered u/s.12A of the Income-tax Act, 1961 (“the Act”). The return of income for the assessment year 2016-2017 was filed on 2nd October, 2016 declaring Nil income after claiming exemption u/s.11 of the Act. Against the said return of income, the assessment was completed by the Assessing Officer (“the AO”) vide order dated 30.12.2018 passed u/s.143(3) of the ITA No.903/Coch/2024. Alliance Educational Foundation. 2 Act at a total income of Rs.1,50,64,637. While doing so, the AO made an addition of Rs.1.50 crore being the amount of donation made by the appellant society to another charitable institution, viz., Sri Vidya Samithy, Malakkara, which was enjoying registration u/s.12A of the Act. According to the AO, the donee trust is found to be engaged in religious and charitable activities with the emphasis on development and furtherance of spirituality and philosophy. Therefore, the AO was of the opinion that since the donation was made for the trust which has no object of educational activities, the donation cannot be treated as application of income and assessed the same to tax. 3. Being aggrieved by the above assessment order, an appeal was filed before the CIT(A), who vide the impugned order had confirmed the action of the AO by holding that the material on record does not indicate that the donee trust has applied the impugned amount of donation towards charitable purposes. 4. Being aggrieved by the above, the appellant is in appeal before the Tribunal in the present appeal. It is submitted that the lower authorities grossly erred in holding that the donation of Rs.1.50 crore made by the appellant trust, viz., Sri Vidya Samithy, the another charitable trust registered u/s.12A of the Act was not an application of income. It is further submitted that the lower authorities have failed to appreciate that the donee-trust, Sri Vidya Samithy, have similar object as that of the appellant trust. The AO as well as the NFAC cannot treat the donation amount to another charitable trust as non-application of ITA No.903/Coch/2024. Alliance Educational Foundation. 3 income for the reason that the donee-trust had failed to apply its income for the charitable purposes. 5. On the other hand, the learned Senior Departmental Representative by placing reliance on the orders of the lower authorities submits that the orders passed by the AO as well as the NFAC are speaking orders and no interference is called for therein. 6. We heard the rival submissions and perused the material available on record. The issue in the present case is whether the donation made by a charitable institution to another charitable trust amounts to application of income for charitable purposes or not. In the present case, the appellant trust made donation of Rs.1.50 crore to another charitable trust, viz., Sri Vidya Samithy, having the similar object. The donation made by a charitable institution to another charitable institution amounts to application of income for charitable purpose, as held by the Hon’ble Madras High Court in the case of CIT v. Aurobindo Memorial Fund Society (2001) 247 ITR 93 (Mad) following its earlier decision in the case of CIT v. Thanthi Trust (1982) 137 ITR 375 (Mad). It must be noted that the decision of the Madras High Court in Thanthi Trust was ratified by the Hon’ble Supreme Court in (1999) 239 ITR 502 (SC). Similarly, the issue also stands settled by the decision of the Hon’ble Supreme Court in the case of Aditanar Educational Institution v. Addl.CIT (1997) 224 ITR 310 (SC). The same view taken by the Hon’ble Delhi High Court in the case of CIT v. Shri Ram Memorial Foundation (2004) 269 ITR 35 (Delhi). It is also to be noted that the Parliament has imposed only embargo with effect from 01.04.2003 by ITA No.903/Coch/2024. Alliance Educational Foundation. 4 the Finance Act, 2002 by inserting explanation that the donation by a charitable institution to another charitable institution can be treated as application of income, out of the current income but not out of its accumulated income for subsequent use u/s.11(2) of the Act. Undisputedly, in the present case the donation was made only out of current income. Therefore, there is no statutory embargo to treat the subject donation as application of income. Accordingly, we direct the AO to treat the donation of Rs.1.50 crore as application of income and delete the addition. 7. In the result, the appeal filed by the assessee is allowed. Order pronounced on this 08th day of April, 2025. Sd/- (George George K) Sd/- (Inturi Rama Rao) VICE-PRESIDENT ACCOUNTANT MEMBER Cochin; Dated : 08th April, 2025. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT, Cochin. 4. The DR, ITAT, Cochin. 5. Guard File. Asst.Registrar/ITAT, Cochin "