ITO vs. Saraswati Educational Charitable Trust (ITAT Lucknow)

(i) The trust is registered u/s 12A of the Act. There is no dispute that the entire voluntary donations have been disclosed by the trust as income in the Income and Expenditure account. The income so disclosed has been applied for charitable purposes as provided u/s 11(1) of the Act and hence cannot be included in total income of the trust. Adding part of the voluntary donations again as unexplained cash credits u/s 68 to the total income of the trust amounted to taxing, the same income twice which is not permissible (Director of Income Tax (Exemption) v. Keshav Social and Charitable Foundation, [2005] 278 ITR 152 (Delhi), CIT, Ghaziabad v. Uttaranchal Welfare Society, [2014] 42 taxmann.com 361 (All.) referred);

(ii) To obtain the benefit of the exemption under section 11, an assessee is required to show that the donations were voluntary. In the instant case, the assessee had not only disclosed its donations, but had also submitted a list of donors. The fact that the complete list of donors was not filed or that the donors were not produced, did not necessarily lead to the inference that the assessee was trying to introduce unaccounted money by way of donation receipts. That was more particularly so in the facts of the case where admittedly, more than 75 per cent of the donations were applied for charitable purposes;

(iii) Section 68 had no application to the facts because the assessee had in fact disclosed the donations as its income and it could not be disputed that all receipts, other than corpus donations, would be income in the hands of the assessee. There was, therefore, full disclosure of income by the assessee and also application of the donations for charitable purposes. It was not in dispute that the objects and activities of the assessee were charitable in nature, since it was duly registered under the provisions of section 12A;

(iv) Section 115 BBC of the Act were not violated by the trust and the donations received from the nine donors cannot be categorized as anonymous donations. To be excluded from the definition of expression “anonymous donation” the person receiving the voluntary contributions referred to in section 2(24) (iia) is required to maintain a record of identity indicating the name and address of the contributor and such other particulars as may be prescribed. Since no other particulars have been prescribed under the provisions the person receiving the donation is under obligation to maintain the identity of donors indicating the name and address only. On perusal of the details furnished by the trust it is seen that the trust has not only furnished the names and addresses of the donors but also furnished a number of other details in respect of such donors viz. their PANs, copy of ITRs, copy of bank statements their confirmations, financial statements, computation of income etc. In view of the above it is held that the trust has established the identity of donors as provided u/s 115BBC of the Act and the donations cannot be categorized as anonymous donations and subjected to tax as per provisions of section 115BBC of the Act.