Income Tax Appellate Tribunal - Chandigarh
M/S Bhai Gurdas Educational Trust, ... vs Cit(E), Chandigarh on 29 November, 2017
1
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No.1081/Chd/2017
Assessment Year: 2017-18
M/s Bhai Gurdas Educational Trust Vs. CI T(E)
B-50, D.L. F Colony, Sirhind Road Chandigarh
Patiala
PAN No. AAATB8146N
(Appellant) (Respondent)
Assessee By : Sh. Rajiv Saldi
Revenue By : Sh. Gulshan Raj
Date of hearing : 27/11/2017
Date of Pronouncement : 29/11/2017
ORDER
PER Dr. B.R.R. KUMAR A.M. This appeal has been filed by the assessee against the order of Ld. CIT(E)-, Chandigarh dt. 31/05/2017.
2. The assessee has raised the following grounds of appeal:
1. The order of the Ld. CIT (Exemptions) is illegal as it is grossly in violation of the provisions of sec 80G (5) read with 80G(2)(a)(iv).
2. The Ld. CIT (Exemptions) in his order has made no reference as to how the Trust does not comply with all or even any of the conditions required for approval under section 80G and has vaguely passed the order.
The Appellant has already submitted an application dated 15/05/2017 explaining in detail how all the conditions are being fulfilled by it. The Ld. CIT (Exemptions) has completely ignored the same.
3. The Ld. CIT (Exemptions) has made frivolous objections like :
a) That the appellant has at its disposal investible balances and the rationale for seeking donations is not brought out in the case.
b) That allowing donations to educational institutions would be contrarian to the thumbs down given to the practice of donations.
c) That no evidence has been provided by the applicant that could project safeguards that may have been built into the administrative and financial practices being followed by the trust and the institution being run under its aegis.
d) That no purpose has been projected for donations and there is no history of any receipt of donation either.2
These objections cannot be regarded as a ground for rejection of application u/s 80G.
4. The application for exemption u/s 80G has been rejected without giving a reasonable opportunity of being heard by the Ld. CIT (Exemptions).
3. An application in Form 10G was filed by the applicant on 25.11.2016 in this office for approval u/s 80G of the Income Tax Act, 1961. The trust was created on 28.08.1998. The registration u/s 12A of the Act was granted to the applicant by the order of the Commissioner of Income Tax (Exemptions), Chandigarh vide order dated 17.10.2016
4. Letter dated 02.05.2017 was issued based on the information and documents submitted along with the application form requesting to produce the following details/ clarifications:-
i. Details of properly vested in the trust, as envisaged u/s 11 of the I.T. Act, income from which is sought to be exempted, ii. Details of voluntary contributions received by the trust, as envisaged u/s 12 of the I.T. Act and whether any specific directions have been received by the persons making voluntary contributions.
iii. The originals of MOA/Bye-laws of the trust along with the Registration Certificate.
iv. The copies of Bank statements through which activities are being propagated.
v. The complete details of the Donations received or intended to be received and documentary evidence as regards to Grants received. vi. Copy of I.T. Returns for the A.Y. 2015-16 and 2016-17 has been submitted. The copy of the I.T Returns for assessment year 2014-15 may be filed, vii. If any donation under FCEA has been received, the relevant details may be furnished. The copy of the return for FCRA and the copy of specified bank account may please be furnished.
viii. There is huge surplus in books for A.Y.2014-15, 2015-16 and 2016-17 then what is necessity of requirement of more funds as donations, Explanation regarding this.
ix. The details of corpus fund and whether the same are with any written specific directions.
x. A note on activities specifying the application of funds for charitable activities specifying whether the activities fall under the category of religious or charitable? xi. Explanation of source of donations with name, address, PAN, amounts and donation receipts.
xii. Fee structure class wise and year wise for A.Y. 2014-15, 2015-16, 2016-17, Current year, xiii. xiii. Details of salary paid with name, address, sole, amounts paid, education qualification.
5. The ld. CIT(E) held that the perusal of the documents submitted revealed that the trust is running a nursing college and there is no history of any donation received by the trust as revealed by the documents on record which is also stated in reply of the applicant dated 15.05.2017. Financial statements submitted by the applicant for F.Y. 2013-14 to 2015-16 reveal that the trust has received income under the head 'Fee and other receipts' and 'Bank interest' only and the largest expenditure during F.Y 2013-14 is under the 3 head 'salary' which is 27% of the total receipt and during F.Y. 2014-15 & 2015- 16 is under head 'University expenses' which is 12.2% and 12% of the total receipts respectively. The summary of the financial statements for the last three years is tabulated below:
F.Y. Gross Receipt Net Surplus (%) Fixed Assets
Cash & Bank
Balance
2013-14 1,76,18,629/- 39,29,596/- (22.3%) 3,21,29,573/- 1,35,26,480/-
2014-15 1,36,77,789/- (-) 2,35,308/- 3,16,16,624/- 86,18,926/-
2015-16 1,53,39,828/- 34,75,099/- (22.6%) 3,44,92,372/- 1,07,24,258/-
6. The ld. CIT(E) held that the applicant has claimed approval on the basis of 12AA granted to the applicant in pursuance to ITAT's order. 12AA is merely a necessary condition and in no way a sufficient condition for grant of approval under section 80G.
7. The ld. CIT(E) rejected the application of the assessee holding as under :
"The activities of the applicant have also been thoroughly looked into. Vis-a-vis actual activities, it is clear that the applicant has not pursued its main purpose of establishing a Guru Nanak Museum and a Research University/ Centre to study ancient literature. The only purpose pursued pertains to one of the stated aims i.e. to promote education by establishing professional colleges. The activities of the applicant trust reveal that it is running a nursing college only. The applicant has received income by interest from FDRs and transferred the same to investment and other funds in the preceding years apart from collecting fee under the head 'fee & other receipts' etc. and kept claiming depreciation down the years to accumulate large surpluses. The purpose of legislature to include this section in the Act is to promote and encourage people for making donations to the societies/trusts which otherwise lack funds for performing charitable activities. On the contrary, the trust has accumulated large funds in the form of FDR and cash that the trust does not seem to utilize for expansion.
As revealed by the submissions of the applicant, the current activity vis-a-vis qualification for 80G gets impinged because the activities of the trust are based on a substantial fee structure. Fees and donations do not gel together. Moreover, the applicant has substantial returns from fees that have consistently been reflected as cash/ bank balances which also is evidenced in the table above. Further, no rationale for donations has been put forth by the applicant. Neither has the source of possible donations hinted at in its submissions. It is also clear from the accounts of the applicant that no donation hitherto has been taken by the applicant. Furthermore, the judicial authorities have frowned upon the concept of donations in the case of institutions dealing with professional degrees. It is reiterated that the applicant is running a nursing college.
All of above clearly leads one to conclude that the entity has at its disposal investible balances and the rationale for seeking donations is not brought out in the case. Moreover, allowing donations to educational institutions would be contrarian to the thumbs down given to the practice of donations. No evidence has been provided by the applicant that could project safeguards that may have been built into the administrative and financial practices being followed by the trust and the institution being run under its aegis. Moreover, no purpose has been projected for donations although there is no history of any receipt of donations either. The application for approval u/s 80G is accordingly rejected."4
8. In short the Ld. CIT(E) rejected the application on these grounds:
a) That the appellant has at its disposal investible balances and the rationale for seeking donations is not brought out in the case.
b) That allowing donations to educational institutions would be contrarian to the thumbs down given to the practice of donations.
c) That no evidence has been provided by the applicant that could project safeguards that may have been built into the administrative and financial practices being followed by the trust and the institution being run under its aegis.
d) That no purpose has been projected for donations and there is no history of any receipt of donation either.
9. Before us the Ld. AR submitted that the assessee has met all the conditions relevant for section 80G read with Rule 11AA. The submission of the assessee by each provision / clause is as under:
510. Ld. DR vehemently supported the order of the Ld. CIT(E).
11. We find that the issues have not been considered in toto by the Ld. CIT(E). Hence the case is being sent back to the file of Ld. CIT(E) to re-examine the matter afresh as per the provisions stipulated under section 80G vis-à-vis the activities of the assessee and to decide the issue in accordance with law.
12. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court.
Sd/- Sd/- (SANJAY GARG) (B.R.R.KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 29/11/2017 AG
Copy to: The Appellant, The Respondent, The CIT, The CIT(A), The DR