That the cardiac conference was held in a star hotel at considerable expenditure cannot deny the host the benefit of registration as a charitable trust eligible in addition for receiving donations that are tax deductible in the hands of the donors, said the Income Tax Appellate Tribunal in Heart Care Management v. Director of Income-tax (Exemption), New Delhi.

The wannabe trust having as its patron the renowned cardiac surgeon Naresh Trehan had laudable objectives including prevention of heart disease in the country and accordingly hosted a conference in Gurgaon in a lavish hotel which charged Rs 43 lakh.

This was the major item of expenditure with the other expenses on the conference being just Rs 6 lakh or so. Extravagance alone was not the only touchstone for rejection.

The Director Exemptions also found the donors who had donated as much as Rs 81 lakh in aggregate were all pharmaceutical companies with many of them strangely deducting tax at source from their donations.

Strange because the income tax law does not oblige a donor to deduct tax at source.

TDS is mandated on the payer of any income.

This naturally fuelled his suspicion that what these pharmaceutical companies had paid was in fact not donations but professional or consultancy fees from which TDS is of course mandated.

The ITAT while granting registration to the trust under section 12A and conferring tax deductible status for the donors under section 80G rejected the approach of the tax administration saying that extravagance does not negate charity and mistaken TDS does not negate charity either.

(The author is a New Delhi-based chartered accountant)

(This article was published on October 28, 2012)
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