TMI Blog2016 (5) TMI 588X X X X Extracts X X X X X X X X Extracts X X X X ..... d hold any substantial interest. In view of the above findings, we hold that the payment of donation by assessee trust to another registered public charitable trust is not in violation of section 13(1)( c) of the Act as the said payment is not made for the benefit of any person either directly or indirectly referred to in section 13(3) of the Act. - Decided in favour of assessee - ITA. 1695/Kol/2012 - - - Dated:- 11-5-2016 - Shri N. V. Vasudevan, JM And Shri M. Balaganesh, AM For the Appellant : Shri Miraj D.Shah, AR For the Respondent : Shri Pinaki Mukherjee, JCIT(DR) ORDER Per Shri M. Balaganesh, AM 1. This appeal of the assessee arises out of the order of the Learned CITA in Appeal No. 306/CIT(A)-XXXVI/Kol/Cir.- 2. Hgl./11-12 dated 3.10.2012 against the order of assessment framed for the Asst Year 2009-10 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal is as to whether the assessee is entitled for claiming exemption u/s 11 of the Act in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee is a society registered under the West B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) and Assessing Officer erred in adding ₹ 18,30,000/- as income of the assessee and in violation of Section 13 of the Act. The addition being uncalled for, the same be deleted. 3. For that in the facts and circumstances of the case the CIT (A) and Assessing officer erred in not allowing the benefit of section 11 of the IT Act 1961. 4. For that in the facts and circumstances of the case the CIT (A) and Assessing officer erred in not allowing the sum of ₹ 3,94,40,936 being application u/s section 11 of the IT Act 1961. 5. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 5. We have heard the rival submissions and perused the materials available on record. We find that the assessee trust is a registered charitable trust enjoying registration u/s 12AA of the Act. It is not in dispute that the objects of the trust are charitable in nature. The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. The following issues are to be adjudicated in this appeal :- (i) Whether the donation given by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act, 2002, an Explanation has been inserted below sub-section (2) of section 11 so as to provide that any amount paid or credited out of income from property held under trust referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, either during the period of accumulation or thereafter, shall not be treated as application of income for charitable or religious purposes. Thus, payment to other trusts and institutions out of income from property held under trust in the year of receipt will continue to be treated as application of income. However, any such payment out of the accumulated income shall not be treated as application of income and will be taxed accordingly. 21.2 Through Finance Act, 2002, a new clause (d) has also been inserted in subsection (3) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny doubt that it would amount to an application of income for charitable or religious purposes by the donor trust. As already pointed out it would be permissible for a trust either to directly apply the income for charitable purposes or to a charitable work in the field as put by Slade J., or the same funds or income could be utilised through the medium of another charitable institution which applies its funds or income to charitable purposes. The Tribunal is, in our view, right in holding that the assessee was entitled to relief under s. 11 (1) (a) of the 1. T. Act, but the propriety of the direction given by the Tribunal need not be dealt with in this reference. (c) Decision of the Hon ble Gujarat High Court in the case of CIT vs Sarladevi Sarabhai Trust No. 2 reported in (1988) 172 ITR 698 (Guj) In this case, question came up if the payment made by donation is an application. The court held it as application. The observation of the court is as follows: 'The word 'applied' is not defined by the Act. The dictionary meaning of the term 'apply' as given in Chambers 20th Century Dictionary, amongst others is 'to put to use. In this context, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or to any concern in which they have substantial interest. Admittedly, the donee trust is a registered public charitable trust and there is no question of any individual holding substantial interest in the said trust. Hence the case does not fall in clause (e) of section 13(3) of the Act also. We hold that when the donation given by one trust to another trust out of current year s income is permitted in section 11 of the Act as an application of income, the same cannot be curtailed by another provision of the Act (i.e section 13(1)(c ) (ii) read with section 13(3) of the Act) as it would defeat the very purpose of such provision. It is not the case of the revenue that the funds of the trust have been applied /diverted for the private benefit of the trustees, settlors or any individuals /relatives. This is what is the true intention of section 13(1)(c ) of the Act. In the instant case, it is a case of simple donation by one public charitable trust to another public charitable trust, wherein no individual could hold any substantial interest. In view of the above findings, we hold that the payment of donation by assessee trust to another registered public charitable trust is not ..... 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