Non-utilization of the amount of donation by the donee cannot lead to denial of deduction u/s 80G(5) in the hands of the donor:

Assessee claimed deduction u/s 80G(5) in respect of donation made to a Trust a part of which came to be disallowed by AO on the count that the donee had neither fully utilized the funds, nor had it transferred the unutilised fund to Prime Minister’s National Relief Fund before the time permitted. Such claim was allowed by ITAT. On Revenue’s appeal, Hon’ble High Court observed that it was an undisputed fact that donation made by the assessee was deductible u/s 80G(5). It was also not in dispute that it was the donee which neither utilized the funds nor transferred it to Prime Minister National Relief’s Fund as provided u/s 80G(5C). As per Explanation 2 to S.80G, deduction to which an assessee is entitled to in respect of any donation made to an institution or fund to which sub-section (5) applies shall not be denied merely on the count that subsequent to such donation, any part of income of the institution or fund becomes chargeable to tax due to non-compliance with any of the provisions of S.11, 12 or 12A. In the given case, breach of conditions prescribed u/s 80G(5C) by the donee trust shall render the concerned amount taxable in the hands of such donee trust by virtue of S.12(3). However, it will not have any effect on the deduction to which assessee is otherwise entitled to on such donation. Hon’ble High Court was of the view that ITAT had correctly observed that if the donor is also taxed alongwith taxing such amount in the hands of donee, it shall amount to double taxation. In light of the above, Revenue’s tax appeal was dismissed.

[CIT Vs. Gujarat Co. Op. Milk Marketing Federation Ltd. – Tax Appeal No.758 of 2013]