Mahamai/charity charged - is it taxable ??

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CA. Arul Mozhi Varman (Querist)

29 November 2011 Facts of the Case:
The Assessee Company is a Supermarket Company selling FMCG. The
assessee company charges 1.5% on its Sale Price as Mahamai/Charity to
its customers. The Assessee company collects (charges) the charity
from customers and remits the same into a charitable trust. The
assessee does not show the ‘Charity collected’ in the Sales Account in
Profit & Loss Account. That is, the assessee brings the 1.5% of
Charity to Balance Sheet and pays the same to the Charitable Trust.

Proposal of ITO:
The ITO has proposed to add the “Charity Collected” to the Total
Income of the Assessee. Whether the ITO’s contention is correct ?

I am on the side of Assessee Company. If the assessee accepts the
ITO's Demand, the ITO is definitely going to Reopen the last years
records. Is there any way out for this ?

Thanks in advance
Arul.

CA.Amit Revankar

CA.Amit Revankar (Expert)

30 November 2011 Income tax provisions r clear on charity aspect...1) form a charitable trust 2) claim 80G deduction for donation. If u r case is not falling in any of above case than its difficult to defend.

CA. Arul Mozhi Varman

CA. Arul Mozhi Varman (Querist)

30 November 2011 Dear CA.Amit, Thanks for your reply.

The Charitable Trust for which the collected charity paid is a 80G registered Trust. Therefore, we can claim 50% of the charity paid as Deduction u/s. 80G.

Thanks you very much.
Arul.

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