Donations to Trusts with Common Trustees Allowed Absent Proof of Benefit | ITAT

Case Details: Rohilkhand Educational Charitable Trust v. Deputy Commissioner of Income tax, Central - [2025] 178 taxmann.com 672 (Lucknow - Trib.)

Judiciary and Counsel Details

• Sudhanshu Srivastava, Judicial Member & Nikhil Choudhary, Accountant Member
• Rakesh Garg, Adv. for the Appellant.
• S.H. Usmani, CIT DR for the Respondent.

Facts of the Case

The assessee, a charitable trust, filed its income return for the relevant year. Following a search and seizure, the AO issued notices under section 142(1). The AO observed that the trust had donated to another trust with common trustees and disallowed the exemption under section 11, citing sections 13(1)(c) and 13(2)(h) and Explanation 3 to section 13.

The AO made additions to income, which were upheld by the CIT(A). The assessee appealed to the Tribunal.

ITAT Held

The Tribunal held that the provisions of section 13(2)(h) have been invoked to suggest that the trust falls under the conditions of section 13(1)(c). However, it is noted from Explanation 3 to sub-section (1) of section 13 that for the purposes of this section, a person shall be deemed to have a substantial interest in a concern if a person is entitled to not less than 20% of the profits of that concern. That being the case, it is doubtful whether the giving of donations to another public charitable trust in which the trustees of the assessee trust are also associated can be considered a violation of section 13(1)(c), owing to the provisions of section 13(2)(h).

A public charitable trust, which is not entitled to distribute its profits, cannot be classified as a concern in which the common trustees have a substantial interest, given the definition of the same in Explanation 3 to section 11.

Thus, the giving of donations by one public charitable trust to another, having common trustees, would not require the exemption of the assessee trust to be withdrawn, so long as it could not be proved that the income of the donee trust was being utilised for the benefit of the trustees in some way.

Since no instance of utilisation of funds of the donee trusts for the benefit of the common trustees has been brought on record, the decision to disallow the donation to both the trusts, as application of income, on this ground was unjustified.

List of Cases Reviewed

• St Joseph’s Convent Chandan Nagar Educational Society vs JCIT (OSD) [IT Appeal No. 1695 (Kol) of 2012, dated 11-5-2016][Para 16] Followed

List of Cases Referred to

• Modern Dental College & Research Centre v. State of Madhya Pradesh [Civil Appeal No. 4060 of 2009, dated 2-5-2016] (para 5)
• CIT v. J.K. Charitable Trust [1991] 59 Taxman 602/196 ITR 31 (Allahabad) (para 6)
• Nazareth Hospital Society v. Dy. CIT (Exemption) [2024] 159 taxmann.com 394 (Allahabad – Trib.) (para 6)
• Mool Chand Khairati Ram Trust v. DIT (Exemptions) [2015] 59 taxmann.com 398 (Delhi)/234 Taxman 222 /377 ITR 650 (Delhi) (para 6)
• Dy. CIT (Exemption) v. Shri Ram Swaroop Charitable Trust [IT Appeal No. 557/LKW/2018, dated 28-6-2019] (para 7)
• Rohilkhand Educational Charitable Trust v. Pr. CIT (Central) [IT Appeal No. 737/LKW/2019, dated 20-10-2021] (para 11)
• ITO v. U.P. Awas Evam Vikas Parishad [2025] 173 taxmann.com 152 (Lucknow – Trib.) (para 14)
• St Joseph’s Convent Chandan Nagar Educational Society vs JCIT (OSD) [IT Appeal No. 1695 (Kol) of 2012, dated 11-5-2016] (para 16).