TMI Blog2013 (7) TMI 1174X X X X Extracts X X X X X X X X Extracts X X X X ..... f income for charitable purposes to the extent of 85% of income derived during the year. 2. The brief facts of the case are that the assessee is a registered society u/s 12A of the Income Tax Act, 1961 and it is a Govt. organization under the Govt. of Delhi. The society has carried out national programmes for welfare of the masses in respect of awareness of HIV / AIDS. The assessee has filed return of income declaring nil income on 7.8.2006. The case of the assessee was selected for scrutiny and during assessment proceedings the Assessing Officer observed that assessee had received grants from various sources. The Assessing Officer further observed that out of total grants a part of grant was directly taken to balance sheet instead of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deciding whether or not the exemption u/s 11(1)(a) of the Act should be granted or not. Reliance in this respect was placed on the following case laws:- 1. Commissioner Of Income Tax, Tamil Nadu I. v. Kannika Parameswari Devasthanam And Charities. 133 ITR 779 holding that any expenditure whether capital or revenue in nature would be treated as application if it serves the purposes or objects of the organization. 2. Satya Vijay Patel Hindu Dharamshala Trust. v. Commissioner of Income Tax, Gujarat I. 3. CIT v. St. George Forana Church 170 ITR 62. 4. It was further submitted that assessee was a Govt. organization and has to follow the accounting system as prescribed by the Govt. and as per the prescribed procedure the grant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additions on account of advances on the basis that these were not expenses. In this respect our attention was invited to Instruction No.1132 dated 5.1.1978 issued by CBDT stating that the payment of sum by one charitable trust to another for utilization by the donee trust towards its charitable object was proper application of income for charitable purposes in the hands of donee trust and donor trust will not loose exemption u/s 11 of the IT Act merely because the donee trust did not spend the donation during the year of receipt itself. He further argued that Ld CIT(A) had also held that these are loans but these are not loans and in this respect our attention was invited to paper book page 76 wherein a copy of sanction letter issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture A/c and thus has not been utilized during the year. There is no dispute about the fact that assessee had given amounts for charitable purposes to other charitable societies. The only dispute is with respect to treatment of such donation which should have been debited to Income Expenditure A/c instead of showing it as advances. As per Instruction No.1132 of CBDT dated 5.1.1978 it is clear that when a sum has been disbursed to another entity carrying out similar object and registered u/s 12A then it is the application of income for purposes of section 11 12 of the Act. The accounting practice of the appellant is crediting various grants to the Income Expenditure A/c only to the extent for which utilization certificates are receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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