AKIL KURESHI, J.

1. This appeal is filed by the assessee challenging the judgment of the Income Tax Appellate Tribunal dated 22.06.2007 to the extent it is adverse to the appellant. Following questions were framed while admitting the appeal.

“(i) Whether on the facts and in circumstances of the case, the Tribunal was right in law in holding that Rs. 1 crore was not applied for the earthquake relief in Asst. Year 2004-05, and therefore, was income of the assessee Trust in that year in terms of section 80G(5C)(iv) read with section 12(3) of the Income Tax Act, 1961?

(ii) If the reply to question No. 1 is in the affirmative i.e. in favour of the Department, whether the assessee Trust had fulfilled the terms of section 80G(5C)(iv) by depositing one crore of rupees in Prime Minister's National Relief Fund on 31.12.2004, and therefore, it is not taxable thereon as income?”

2. These questions arise in following background: Appellant is a registered charitable Trust and is also approved u/s. 80G(5) of the Income Tax Act, 1961 ['the Act' for short]. It was created for a specific object of providing relief to the earthquake victims of Gujarat. As part of its charitable activities, the Trust would receive donations. As is well known, State of Gujarat and, in particular, Kutch District experienced severe earthquake on 26.01.2001 leaving behind a trail of loss of human lives and widespread destruction of properties. To encourage the activity of rehabilitation of earthquake victims, the central legislature made certain tax concession provisions in the Income Tax Act, 1961. Clause (d) was added w.e.f. 03.02.2001 to sub-section (2) of section 80G providing exemption from tax in respect of any sums paid by the assessee during the period beginning on 26.01.2001 and ending on 30.09.2001 to any trust, institution or fund to which, the said section applies for providing relief to the victims of earthquake in Gujarat. Correspondingly, sub-section 5(C) of section 80G was inserted also w.e.f. 03.02.2001 which provided as under:

“[5C] This [section] applies in relation to amounts referred to in clause (d) of sub-section (2) only if the trust or institution or fund is established in India for a charitable purpose and it fulfills the following conditions namely:-

(i) it is approved in terms of clause (vi) of sub-section (5);

(ii) it maintains separate accounts of income and expenditure for providing relief to the victims of earthquake in Gujarat;

(iii) the donations made to the trust or institution or fund are applied only for providing relief to the earthquake victims of Gujarat on or before the 31st day of March, [2004]

[(iv) the amount of donation remaining unutilized on the 31st day of March, [2004] is transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, [2004];]

(v) it renders accounts of income and expenditure to such authority and in such manner as may be prescribed on or before the 30th day of June, [2004]”

3. Sub-section (3) was added to section 12 of the Act w.e.f. 03.02.2001 which provides as under:

[(3) Notwithstanding anything contained in section 11, any amount of donation received the trust or institution in terms of clause (d) of sub-section (2) of section 80G [in respect of which accounts of income and expenditure have not been renderred to the authority prescribed under clause (v) of subsection (5C) of that section, in the manner specified in that clause, or]which has been utilized for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March [2004] shall deemed to be the income of the previous year and shall accordingly be charged to tax.]”

4. Combined reading of the said two provisions would show that the donations received by the Trust would be eligible for tax benefit provided the conditions contained in sub