Income Tax Appellate Tribunal - Delhi
Inder Sharma Foundation, New Delhi vs Assessee on 13 September, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI 'C' BENCH
BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM
IT A No.4727/D/2011
Assessment Year:2012-13
Inder Sharma Foundation V/s. Director of Income Tax
Suite 101-103, First Floor, (Exemption),Aayakar
Kanchanjunga Building, Bhawan,Delhi-110092
18,Barakhamba Road,
New Delhi-110001
[P AN: AAATI 3536 R]
(Appellant) (Respondent)
Assessee by S/Shri Gaurav Jain & Smt. Hemali Sethi, ARs
Revenue by Shri Salil Mishra, DR
Date of hearing 05-01-2012
Date of pronouncement 13-01-2012
ORDER
A.N.Pahuja:- This appeal filed on 31.10.2011 by the assessee against an order dated 13th September, 2011 of the Director of Income-tax (Exemptions) [DIT (E) in short] u/s 80G(5)(vi) of Income-tax Act, 1961 (hereinafter referred to as the 'Act') read with Rule 11AA of the Income-tax Rules, 1962 ,raises the following grounds :-
1. "The rejection orders of the learned DIT(E), New Delhi are bad both in law and on facts.
2. That on the facts and circumstances of the case the learned DIT(E), New Delhi was not justified in rejection of Form No.10G for exemption u/s 80G of the Income-tax Act 1961.
3. That rejection order of the learned DIT(E), New Delhi are passed without given any opportunity to the assessee. As per rule 11 AA of the Income Tax Rules, 1962, "no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard".
4. That rejection order of the learned DIT(E), New Delhi are received on 16th September, 2011 which is barred by time as prescribed in the Income Tax Rules, 1962 as the assessee filed 2 I.T.A. No.4727/D/2011 application on 8th March, 2011. The time limit with in which the Commissioner shall pass an order either granting the approval or rejection the application, shall not exceed six months from the date on which such application was made."
2. Facts, in brief, as per relevant order are that the aforesaid foundation submitted an application in Form No.10G on 8.3.2011, seeking approval u/s 80G(5)(vi) of the Act. On receipt of the application, DIT(E) vide letter dated 6.4.2011 sought certain details as mentioned on page 1 of the impugned order. In response, the assessee after seeking few adjournments filed relevant details and documents. On perusal of these details and accounts for period relevant to the AYs 2009-10 and 2010-11, the DIT(E) noticed that the foundation was involved in charitable activity by giving scholarship, financial assistance and seminar for poor and needy people/students or children. To a query by the DIT(E), the assessee trust submitted year wise details of scholarship/financial assistance with name, address, amount, father's name, monthly income and name of father's employer. On perusal of the details filed by the trust, the DIT(E) noticed that Shri Inder Sharma, Managing trustee was holding the post of MD in M/s Selected Holiday Resorts Pvt. Ltd. The said company contributed ``10 lacs each in the period relevant to assessment years 2009-10 and 2010-11 to the foundation by way of donation. It was further found that only the sons/daughters of the employees of the said company were beneficiaries of the trust. After considering the details and relevant documents, the DIT(E) denied the approval u/s 80G(5)(vi) of the Act in the following terms:-
"4.However, as per list and information filed for the needy and poor children who got the scholarship and financial assistance from the Trust, reveals that all these children are sons or daughters of employees of M/s Select Holiday Resorts Pvt. Ltd. working in different departments in above named company. A further perusal of list furnished for different years of the benefited children shows that not a single child apart from son/daughter of the employees of Select Holiday Resorts Pvt. Ltd. has been awarded any scholarship or financial assistance by the Trust as scholarship or financial assistance.3 I.T.A. No.4727/D/2011
5. In view of above, it is found that the said trust was created by M/s Select Holiday Resorts Pvt. Ltd. only for the benefit of sons and daughters of its employees and not for outside children or general public. Further, the said scholarship/financial assistance was awarded to the children of employees under an education grant scheme of the company. Since, the above company is a commercial entity and by way of providing financial assistance in the form of scholarship, the company is protecting the interest of its employees only and not for general public. By awarding scholarship to the children of its employees through the charitable trust created by the company is actually a mode of benefit to the employees and no charitable activity has been done by the trust for general people/public. It is actually a mechanism evolved by the company for the benefit of its employees, on the one hand it is claiming the said donation/contribution as company's expenditure on the other hand the same amount is being utilized for its employees in the form of scholarship/assistance through the above said trust created by the company which ultimately resulted the benefit of the commercial entity and not the general public at large.
6.In view of above facts and circumstances of the case, the contention of the applicant that it is doing charitable activity by helping poor and needy children in the form of scholarship and assistance is not tenable, as its activity is only for a particular section/group or employees of a company who is founder of the trust.
7.In view of above fact and of documentary evidences of charity that applicant is not involved in charitable activities and it could not be established that applicant satisfies the conditions laid out u/s 80G(5) of the Income-tax Act, 1961. Therefore, the appellant's application furnished in Form No.10G for exemption u/s 80G of the Income-tax Act, 1961 is rejected."
3. The assessee trust is now in appeal before us against the aforesaid findings of DIT(E). The ld. AR on behalf of the foundation while carrying us through the education grant policy framed by the trust for employees of M/s Select Holiday Resorts Pvt. Ltd. contended that the DIT(E) was not justified in refusing the approval u/s 80G(5)(vi) of the Act even when the trust continued to be registered u/s 12A of the Act. To a query by the Bench, the learned AR replied that trust was registered u/s 12A of the Act on 20th September, 1973 and 4 I.T.A. No.4727/D/2011 thereafter, approval u/s 80G(5)(vi) of the Act was granted until 31st March, 2011. It was only on their application seeking extension of the said approval filed on 8th March, 2011 that the DIT(E) refused the approval without granting sufficient opportunity of hearing and without issuing any showcause notice. The ld. AR submitted that the beneficiaries were sons and daughters of the employees of the aforesaid company, drawing salary below `10,000/-pm each and on that ground approval cannot be denied. In this connection, the ld. AR relied upon the decisions in the case of CIT Vs. Walchand Diamond Jubilee Trust,34 ITR 228 (Bom.); CIT vs. Tata Steel Charitable Trust,203 ITR 764(Pat.);&Hira Lal Bhagwati vs. CIT,246 ITR 188 (Gujarat) . The ld. AR further pointed out that the ld. DIT(E) was not justified in declining approval u/s 80G during subsistence of registration u/s 12A of the Act. In this connection, the ld. AR relied upon the decisions in N.N. Desai Charitable Trust Vs. CIT: 246 ITR 452 (Guj.);Sonepat Hindu Educational Trust Vs. CIT: 278 ITR 262 (P&H);Gaur Brahman Vidya Pracharni Sabha Vs. CIT (2010) 129 TTJ 627 (Del.);Mayo College Old Boys Association Vs. DIT (E): (I.T.A. No.2010/D/2010);Maharishi Dayanand Education Society Vs. CIT: (I.T.A. No.218/d/09);Aggarwal Sabha Vs. DIT(E): (I.T.A. No.4456/D/09) . The ld. AR added that as held in Lions Club Calcutta Hastings Vs. DIT(E) in I.T.A. No.2019/Kol/2010) dated 12.12.2011 and Association for Advocacy & Legal Initiatives vs. CIT, in ITA no.674/Luck/2010 dated 28.2.2011,no application of renewal is required to be filed for approvals existing on or after 1.10.2009 in terms of Circular no.7/2010 dated 27.10.2010.On the other hand, learned DR supported the findings of the ld. DIT(E).
4. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by the ld. AR. Indisputably, the applicant trust ,created vide indenture dated 17th December,1970 for promotion of national integration, international goodwill & brother hood, building and maintaining national and international welfare centres for tourists besides aiding and assisting students by scholarships etc. to prosecute higher education, study and research 5 I.T.A. No.4727/D/2011 particularly in the field of travel tourism etc., is registered u/s 12A of the Act on 20th September, 1973 and all along approval u/s 80G(5)(vi) of the Act was being granted, latest being on 16th June, 2008 for the period 01.04.2008 to 31.03.2011. Even when the registration u/s 12A of the Act has not been withdrawn, the ld. DIT(E) declined to renew the approval u/s 80G(5)(vi) of the Act for the period after 31.3.2011 on the ground that scholarship/financial assistance was awarded to the children of the employees of Select Holiday Resorts (P) Ltd. and that not any other child apart from sons/daughters of employees of Select Holiday Resorts (P) Ltd., was the beneficiary . As pointed out by the ld. AR , financial assistance has been provided to only those employees in the wage category below `10,000/- pm. There is nothing in the objects of the trust that only the employees of Select Holiday Resorts (P) Ltd. or their children alone would be the beneficiaries. There is no obligation cast on the trustees to prefer the employees of the aforesaid company and it is for the trustees to exercise their discretion. If a member of the public also happens to be an employee of the Select Holiday Resorts (P) Ltd.., it is open to the trustees to give him preference. As held in Walchand Diamond Jubilee Trust(supra) the test is whether the exercise of the discretion of the trustees is so fettered that they are bound to select particular persons in preference to others. That is clearly not the case here. The provisions of the trust deed do not compel the trustees to make the employees of the aforesaid company, the sole beneficiaries of the bounty of the settler. The ld. DR did not even whisper before us that the sons/daughters of employees of Select Holiday Resorts (P) Ltd. fall within the provisions of sec. 13(3) of the Act. The Hon'ble Apex Court in Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 and CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1 (SC) held that the law recognises no purpose as charitable unless it is for a public charity. That is to say, a purpose must, in order to be charitable, be directed to the benefit of the community or a section of the community. The expression "object of general public utility", however, is not restricted to the objects beneficial to the whole of mankind. An object beneficial to a section of the public is an object of general public utility. Moreover. the 6 I.T.A. No.4727/D/2011 registration of a charitable trust under section 12A of the Act is not an idle or empty formality. Once the registration under s. 12A(a) of the Act is granted, the grant of benefit cannot be denied. The ld. DIT(E) was not justified in refusing the benefits which would otherwise accrue under the registration as held in Hiralal Bhagwati(supra). The ld. DR did not even whisper before us that the sons/daughters of employees of Select Holiday Resorts (P) Ltd. fall within the provisions of sec. 13(3) of the Act. It cannot be denied that even the employees of Select Holiday Resorts (P) Ltd. and their sons/daughters form part of the general public and merely because they have some relationship with the author of the trust, they do not lose their primary identity as members of the public. In any case,, the facts and circumstances are the same as in earlier years since 1973 and grant to the children of the employees of the aforesaid company was being made available even in the preceding years. In these circumstances, we are of the opinion that the ld. DIT(E) was not justified in denying the approval u/s 80G(5)(vi) of the Act..
5. Even otherwise, registration granted to the assessee as a charitable trust is subsisting and no material has been placed before us that the same has been or is intended to be withdrawn. In such circumstances, renewal of approval u/s 80G(5)(vi) of the Act could not be denied to the assessee as held by a co- ordinate Bench in Mayo College Old Boys Association(supra).Following this decision, similar view was taken in another decision dated 20.4.2011 by a co- ordinate bench in I.T.A. No.218/D/09 in the case of Maharishi Dayanand Education Society and decision dated 25.2.2011 in I.T.A. No.4456/D/09 in the case of Aggarwal Sabha.
6. Indisputably, in the instant case, approval u/s 80G(5)(vi) of the Act was granted until 31.3.2011. and vide application dated 8.3.2011, the assessee sought renewal of the approval for further period. In this connection in the case of M/s Association for Advocacy and legal initiatives, Lucknow Vs. CIT, the Lucknow Bench of ITAT vide their order dated 28.2.2011 in I.T.A. 7 I.T.A. No.4727/D/2011 no.674/Luc./2010 while referring to omission of proviso to section 80G(5)(vi) of the Act w.e.f. 01.10.2009 by the Finance (no.2) Act of 2009 concluded that the approval once granted u/s 80G(5)(vi) shall continue in perpetuity. The relevant findings of the ITAT read as under:-
10. We have considered the submissions of both the parties and carefully gone through the material available on record. In the instant case, it is not in dispute that the assessee-trust is registered with the Sub-Registrar, Lucknow, having registration u/s. 12AA of the Act also which has been granted by the ld. Commissioner of Income Tax, Lucknow vide order dated 10.2.2010. The assessee was also granted approval u/s.
80G(5)(vi) of the Act w.e.f. 10.3.2000 which was valid till 31.3.2003 and later on renewal of the approval under the said section was granted vide order dated 9.9.2003 from 1.4.2003 to 31.3.2006, again vide order dated 7.12.2006 from 1.4.2006 to 31.3.2008 and finally vide order dated 16.9.2008 from 1.4.2008 to 31.3.2010 by the ld. Commissioner of Income Tax-I, Lucknow. The copies of the said orders are placed at pages 41, 40 and 39 respectively of the assessee's paper book. Earlier as per provisions contained in clause (vi) to sub-section (5) of section 80G, the approval was to be granted by the ld. Commissioner of Income Tax in accordance with Rules prescribed in Rule 12AA of the Income-tax Rule, 1962 and as per the proviso to section 80G(5)(vi) of the Act, the approval was to be renewed from time to time. However, considering the hardship, the Legislature in all its wisdom has sought to omit this proviso 0n 1.10.2009 vide its Finance (No.2) Act, 2009. Therefore now approval once granted shall continue to be valid in perpetuity. In the instant case, the approval was granted to the assessee upto 31.3.2010, therefore, in view of the aforesaid omission of the proviso to section 80G(5)(vi) of the Act vide Finance (No.2) Act, 2009, the approval once granted shall continue to be valid in perpetuity. The memo explaining the provisions in Finance (No.2) Bill, 2009 as reported in 314 ITR 193 (St.) at page 194 reads as under:-
"This amendment will take effect from 1st day of April, 2009 and shall accordingly, apply in relation to assessment year 2009-10 only.
Further as per clause (vi) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso 8 I.T.A. No.4727/D/2011 to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval.
Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner.
Therefore, it is proposed to omit the proviso to clause (vi) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfied that the activities of such institution or fund are not genuine or are not being carried out in accordance with the objects of the institution or fund. This amendment will take effect from 1st day of October, 2009. Accordingly, existing approvals expiring on or after 1st October, 2009 shall be deemed to. have been "extended in perpetuity unless specifically withdrawn. However, in case of approvals expiring before 1st October, 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn."
11. From the above it is crystal clear that the approval once granted u/s. 80G(5)(vi) of the Act shall continue in perpetuity. It is also noticed that the CBDT issued its circular No.5 being "Explanatory circular for Finance (No.2) Act, 2009" and para 29.7 of the said Circular reads as under:-
"29.7 Applicability - This amendment has been made applicable w.e.f. 1st October 2009. Accordingly, existing st approvals expiring on or after 1 October 2009 will be deemed to have been extended in perpetuity unless specially withdrawn. However, in case of approvals expiring before 1st October 2009, these will have to be renewed and once renewed these shall continue to be valid in perpetuity, unless specifically withdrawn."
12. The aforesaid Circular is in favour of the assessee and even if the assessee by ignorance or inadvertently filed an application for 9 I.T.A. No.4727/D/2011 renewal, the CIT was required to decide the same in accordance with the amended provisions. As regards to the contention of the ld. D.R. that the provisions contained in 293C of the Act enables the CIT to withdraw approval is concerned, it is noticed that the said section has been inserted by the Finance (No.2) Act, 2009 w.e.f. 1.10.2009 i.e. from the date on which provisions of section 80G(5)(vi) has been withdrawn, the provisions contained in 293C read as under:-
"293C. Where the Central Government or the Board or an income-tax authority, who has been conferred upon the power under any provision of this Act to grant any approval to any assessee, the Central Government or the Board or such authority may, notwithstanding that a provision to withdraw such approval has not been specifically provided for in such provision, withdraw such approval at any time :
Provided that the Central Government or Board or income-tax authority shall, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the assessee concerned, at anytime, withdraw the approval after recording the reasons for doing so.]"
13. From the proviso attached to the section 293C of the Act, it is crystal clear that even if any Income-tax Authority wants to withdraw approval, he shall issue a show cause notice against the proposed withdrawal to the assessee concerned and after giving a reasonable opportunity of being heard shall withdraw approval after recording reasons for doing so. The use of the word "shall" in the aforesaid proviso makes it mandatory for Commissioner of Income-tax to issue a show cause notice to the assessee against the proposed withdrawal of approval granted u/s. 80G(5) of the Act. However, in the present case no such show cause notice has been issued to the assessee. Therefore, we do not see any merit in this contention of the lad that the provisions contained in section 293C of the Act enables the ld.
Commissioner of Income Tax to withdraw approval. We, therefore, considering the totality of the facts as discussed hereinabove are of the view that the ld. Commissioner of Income Tax was not justified in withdrawing approval once granted because the Legislature in all its wisdom has sought to omit this proviso to section 80G(5)(vi) of the Act and after omission of the said proviso, the approval once granted shall continue to be valid in perpetuity unless and until a show cause notice is issued by the concerned CIT showing his intention to withdraw already granted such approval. However, in the 10 I.T.A. No.4727/D/2011 instance case, the CIT without issuing any such notice has withdrawn approval. We, therefore, set aside the impugned order of the ld. Commissioner of Income Tax and accordingly approval u/s. 80G(5) of the Act already granted to the assessee shall continue unless and until the concerned authority take appropriate action in accordance with law.
6.1 Following the aforesaid decision ,Kolkata Bench in the case of Lions Club Calcutta Hastings Vs. DIT(E) in I.T.A. no.2019/Kol/2010 concluded that the renewal of exemption u/s 80G(5)(vi) cannot be denied to the assessee, having valid approval upto 31st March, 2010 .
6.2 Thus, in the light of view taken by the ITAT in their aforesaid decisions also, especially when the assessee trust before us had already been granted approval u/s 80G(5)(vi) of the Act until 31st March, 2011, the DIT(E) was not justified in refusing the approval.
7. In view of the foregoing, especially when the ld. DR did not bring to our notice any contrary decision or any other material justifying denial of approval, we have no hesitation in concluding that the ld. DIT(E) was not justified in denying renewal of approval u/s 80G(5)(vi) of the Act. Therefore, ground nos.1 to 3 in the appeal are allowed. As a corollary, ground no.4 in the appeal becomes academic and does not survive for adjudication , particularly when the ld. AR on behalf of the assessee trust did not make any submissions before us on this ground. Therefore, ground No.4 of the appeal is dismissed.
8. No other submission or argument was made before us.
9.. In result, appeal is partly allowed.
Order pronounced in Open Court
Sd/- Sd/-
(R.P. TOLANI) (A.N. PAHUJA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
11 I.T.A. No.4727/D/2011
Copy of the Order forwarded to:-
1. Inder Sharma Foundation Suite 101-103, First Floor, Kanchanjunga Building,New Delhi
2. Director of Income Tax (Exemption), New Delhi.
3. The DR, ITAT,'C' Bench, New Delhi
4. Guard File.
By Order, Deputy/Asstt.Registrar ITAT, Delhi