Mumbai Tribunal deprecates Tax Authority’s action indisallowing claim for application of income by way of donation to foreign universities approved by the CBDT.
Author
CS Deepak P. Singh
Mumbai Income Tax Appellate Tribunal (Tribunal), dated 24 July 2020,Tata Education and Development Trust. |
Mumbai Tribunal deprecates Tax Authority’s action indisallowing claim for application of income by way of donation to foreign universities approved by the CBDT.
BRIEF FACTS:
-
In the case of Tata Education and Development Trust(Taxpayer), the Mumbai Tribunal held that the amount spentfor charitable purposes outside India, which is approvedby the Central Board of Direct Taxes (CBDT), is allowableas qualifying application of income in the hands of thecharitable trust.
-
During the pendency of application for approval beforethe CBDT as required by the Income Tax Act,1961 , the Tax Authority did notallow spending by way of donations to foreign universitiesas application of income to the Taxpayer trust in concludedassessments.
-
The application made to the CBDT was initiallyrejected by the CBDT for want of establishing the conditionas to how such spending abroad promotes internationalwelfare in which India is interested.
-
However, on subsequentfiling of detailed application, the CBDT approved thespending by an order for the relevant years under reference.
-
Basis the CBDT’s order, the Tax Authority rectified theassessment order and allowed the spending as application ofincome in computing total income of the Taxpayer.
-
However,the First Appellate Authority , in an appeal filed against original assessment order,did not take cognizance of the rectification order of the TaxAuthority and proceeded to examine the issue on merits.
-
The First Appellate Authority also did not follow the CBDT’s order by citingvarious reasons. It also confirmed the disallowance made inthe original assessment order.
-
The tribunal allowed the claim of the Taxpayer consideringthat the Tax Authority had already rectified the assessmentorder by granting deduction of the amount spent outsideIndia, basis the CBDT’s approval order.
-
The claim is inconsonance with CBDT’s order.
-
Also, the tribunal noted thata similar claim for other tax years was allowed in the pastand applied the rule of consistency.
-
The tribunal furtherdeprecated the action of the First Appellate Authority[ CIT(A)] which acted contrary tothe CBDT’s order on hyper pedantic grounds and held thatlitigation could have been avoided in this case.
