A post-dated cheque that confers no benefit to the recipient or to the donor need not be viewed with suspicion, held the Supreme Court in Director of Income tax (exemption) vs. Raunaq Education Foundation. Apollo Tyres Ltd had given a donation for Rs 40 lakh to the respondent through a cheque that bore a date falling into the next assessment year. The respondent showed the amount in its balance sheet as an asset and not in its revenue statement as income. The donor company followed suit and did not claim any tax benefit under section 80G in the year in which the donation was made but only in the next year when the amount was debited to its bank account.

The tax administration sought to cancel the status of trust conferred on the respondent that has been begetting it tax exemption under section 11 and tax it as Association of Persons.

It did so because the donor and donee were related to each other inasmuch as the promoters of the trusts and the donor-company were the same set of persons.

The Apex court upheld the High Court view that there was nothing sinister much less out of place in the transaction as to warrant the extreme step of cancellation of registration as a trust.

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

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