Girdhari Lal Sundari Devi Jain Trust vs Income Tax Officer

The above captioned appeal is filed by the assessee against the order dated 05.07.2024, passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [for short, the CIT(A)], for A.Y. 2020-21.

The assessee in appeal has raised following grounds assailing the addition confirmed by the CIT(A):

Shri Rajan Sachdeva, appearing on behalf of the assessee submits that the short issue in appeal is that the AO has treated donations received by the assessee as its income, whereas, expenses recorded against said income have not been allowed. Narrating facts of the case, he submits that the assessee is a trust engaged in charitable activities. Admittedly, registration u/s 12A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was granted to the assessee by the CIT(E) in later years i.e., with effect from 29.12.2022. During the impugned assessment year, the donations received by the assessee were treated as income of the assessee, whereas, the expenditure i.e., payments made to Holy Family Hospital after deduction of tax at source were not allowed as expenditure. He submitted that all the payments made to Holy Family Hospital were for charitable purposes and were subject to TDS. He referred to Form 16A at page no. 9 to 12 of the Paper Book. He thus, prayed for deleting the addition.

Per contra, Shri. Manoj Kumar, representing the department vehemently defending the impugned order prayed for dismissing appeal of the assessee. The ld. DR submits that the assessee has not furnished documentary evidences to substantiate that payments were made by the assessee for charitable purposes.

Both sides heard. Orders of the lower authorities examined. Undisputedly, the assessee was not registered under section 12A of the Act in the impugned assessment year, therefore, the donations received by the assessee were treated as income of the assessee. The AO has held that the expenses claimed against the donations are not allowable.

I find that the AO is not justifying in not allowing the expenditure against donations. Once the donations received are treated as income of the assessee, the corresponding expenditure has to be allowed. The assessee has furnished documentary evidence to show that the payments were made to “New Delhi Holy Family Hospital Society” for treatment of poor patients and all such payments are subject to TDS. This shows that the assessee was carrying out some charitable activities and the donations received were utilized for payments towards the treatment of needy patients. It is also not in dispute that subsequently the assessee was granted registration u/s 12A of the Act. This shows bonafide of the assessee. Thus, in light of the above facts, I find merit in submissions of the assessee. Accordingly, the AO is directed to allow expenditure i.e., payments made to Holy Family Hospital, claimed by the assessee.

In the result, impugned order is set-aside and appeal of the assessee is allowed.