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2019 (5) TMI 1064

..... a loan by one charitable trust to another should be treated as application of income towards the objects of the trust - ITAT held that this advancing of loan to another trust did not violate either Section 13(1)(c) or 13(2)(g) - HELD THAT:- The issue appears to be no longer res integra. In CIT v. Shri Ram Memorial Foundation [2004 (5) TMI 44 - DELHI HIGH COURT] the donation of income to another charitable trust was held to be in consonance with the objects of the trust. Subsequently, in Director of Income-Tax v. ACME Educational Society [2010 (7) TMI 159 - DELHI HIGH COURT] this Court again upheld the advancing of a loan by one charitable trust to the other. The Court referred to an earlier decision of Director of Income-Tax v. Pariwar Sewa .....

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..... assessment order passed under Section 143(3) of the Act on 16th November 2009, the Assessing Officer ( AO ) held that inasmuch as the Assessee had advanced loan to another charitable trust it had violated Section 13(1)(c)(ii) of the Act. In other words, it was impermissible for the Assessee to have advanced a loan to another charitable trust. 5. The Assessee filed an appeal before the Commissioner of Income Tax [ CIT (A) ] who held that RKSCT was itself registered under Section 12A of the Act and that the advancing of a loan by one charitable trust to another should be treated as application of income towards the objects of the trust. 6. Aggrieved by the above decision, the Revenue filed an appeal before the ITAT. The ITAT accepted the ple .....

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..... ated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. 9. It is noticed that this was inserted in the Act with effect from 2003. The issue appears to be no longer res integra. In CIT v. Shri Ram Memorial Foundation (2004) 269 ITR 35(Del) the donation of income to another charitable trust was held to be in consonance with the objects of the trust. This was subsequently relied upon by this Court in Director of Income Tax (Exemption) v. Bagri Foundation (2010) 233 CTR 538. After considering the above explanation under Section 11(2) the Court noted as under: 9. What follows is that the amount accumulated cannot be donated to another trust. However, the said explanation does no .....

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..... , if a trust donates its entire income for a year to another charitable trust, it would still be entitled to exemption under Section 11(1)(a). It defies logic as to why such donations cannot be permitted out of 15% accumulation permitted under Section 11(1)(a) itself. There is however rationale for imposing the restriction as contained in the explanation (supra) to accumulations in excess of 15%. Such accumulations, but for the conditions imposed in Section 11(2) and in the explanation aforesaid, would have been eligible to be taxed. One of the conditions in Section 11(2)(a) is that the purpose for which accumulation in excess of 15% is being made is to be notified; another condition is of the accumulation being permitted for a period not e .....

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