Income Tax Appellate Tribunal - Chandigarh
Mela Singh Memorial Trust, Yamunanagar vs Cit(E), Chandigarh on 10 May, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी ", च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा गु&ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.987/Chd/2018
(Under Section 80G(5))
Mela Singh Memorial Trust, बनाम The C.I.T.(E),
Yamuna Nagar. Chandigarh.
थायी लेखा सं./PAN NO: A A B T M 9 9 7 0 A
नधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Adv.
राज व क ओर से/ Revenue by : Shri G.S.Phani Kishore, CIT DR
सन
ु वाई क तार ख/Date of Hearing : 08.05.2019
उदघोषणा क तार ख/Date of Pronouncement:10.05.2019
आदे श/ORDER
Per Anna pur na Gupt a, Account ant Mem ber Th e p re se nt a p pe a l h a s be e n p ref e r re d by the a ss e ssee a ga i n st th e or de r d a te d 3 1 .5 . 2 01 8 of th e C omm i ss ion e r of I n co me Ta x ( Exe mp tio ns) , C h a nd i ga r h [h e re i n a fte r r e fe r re d to a s C I T( E) ] a ga i ns t th e de ni a l of a pp r ova l u /s 8 0 G (5 ) (v i) of t he I n co me Ta x Ac t, 1 9 6 1 (h e re in a fte r re fe rre d to a s "Ac t") .
2. Brief facts of the case are that an application in Form 10G was filed by the applicant/assessee on 2 ITA No.987/Chd/2018 U/s 80G(5) 21.11.2017 to the CI T(E), seeking approval u/s 80G of the Act. THE CIT(E) noted that the applicant/assessee had been granted registration as a charitable Trust u/s 12AA of the Act vide order dated 18.9.2008 by the CI T, Panchkula. He further noted that the applicant/assessee was running two institutes under the name and style "Guru Nanak Institute of Technology" and Guru Nanak Institute of Management"
a n d t h a t i t s sta te d a i ms a nd obj e c ts we re to pr omote a n d d e ve l op Ed uc a tion, Emp l oy me nt, S ci e n ce & Te c hn ol ogy: to e s ta b li sh s ch ool (s ) col l e ge s, I n sti tu ti ons , U ni ve r s ity, C h a r ita b l e H osp ita ls a n d ot he r ins tit uti on s, A gr ic ul tur e a n d a l li e d Re se a r ch C e n tre s in cl ud i ng o rg a ni c f a r min g, En tr e p re ne u rs hip d e ve l op me n t, Ed u ca ti on a l O rg a ni z a tio ns and op e n i ng hosp i ta l s for wel fa r e of the soci e t y; to co ll a b or a te a n d c oop e r a te w i th othe r p r of e s si ona l b od ie s, S oci e tie s and wi th e d uc a ti ona l and r e se a r ch i n sti tu tio ns h a vi ng s imi l a r o bj e c ts. The re a fter ne ce s sa r y i nf orma ti on w a s ca l l e d f or to e xa min e t he ass e ss /a pp l i ca n ts c la i m f or a p p r ova l u/s 8 0 G ( 5 ) o f th e A ct and th e Ld. C I T( E ) f oun d tha t i t w a s n ot a fi t ca s e f or g ra n ti ng a p p r ova l f or t he fo ll ow i ng r e a s ons :3 ITA No.987/Chd/2018
U/s 80G(5)
a) Th a t th e a pp l ic an t/a ss e ss ee w a s h a vi n g a n a s su re d fee s s tr uc ture a nd ta k i n g a n y ot h e r re ce i p t apart from wh a t h a s be e n a l low e d by re gula tin g a g e n cie s w oul d ha v e a be a r i ng on i ts c ha r i ta b le cha r a c te r .
b) t ha t i t h a d a l a r ge a ss e t b a se w hi ch d i d n ot j u sti fy ta k in g d on a ti on ,h a vi ng n e ve r sou gh t d on a ti ons i n t he pa s t.
c) Th a t th e a p p l ic a nt a cc e p te d fee s in c a sh w hi ch w as not d e p osi te d i n b a nk .
d) Th a t i t i n te n d e d to r un a Va r i dh A sh ra m w hi ch w as not a s p e r i ts s tate d ob je ct.
Th e r e l e va n t fi ndi n gs of th e Ld . C IT( E) a t p a r a s 8 to 1 0 of h is or d e r a re a s un de r :
"8. On 28.05.2018 Sh. Gaurav Gandhi, C.A. counsel for the applicant attended this office and filed reply in response to above noted queries. As regard the rationale for donations when there is no history of donations in the past, applicant stated that it is running educational institutions and receiving fees and development fund from student and upto date the same was sufficient enough to meet the relating expenses but during the last F.Y. applicant has a deficit of Rs.45.46 lakhs and to cover this deficit and future deficit it requires donations. This contention of the applicant Is not acceptable because allowing donations to professional institutions would lead to an open acknowledgement/acceptance in respect of capitation fees etc. a facet that has been negated by the judiciall authorities. This can't be allowed in a case which has been operating on the basis of an assured fee structure. Further the applicant failed to highlight the cogent reason of sudden deficit in the F.Y. 2016-17, when in the preceeding years applicant was into huge income/profits. The predominant purpose of the 4 ITA No.987/Chd/2018 U/s 80G(5) applicant has been running education and engineering courses. Allowing exemption of donations to such entities may be contrary to thumbs down accorded by the judiciary on such practices in case of institutions impartin g professional degrees. The institution as it is based on a fee structure and taking of any other receipts apart from what has been allowed by the regulating agencies may have a bearing on their claimed charitable purpose on the basis of which 12AA registration has been given. The fact that the applicant has already created large asset base (financed by the public money of the society) as also that it has ample current assets further impinge on the rationale for seeking approval u/s 80G. The issue is also impinged by the fact that applicant is in practice of keeping the receipts out of the banking channel and in response to specific query in this regard applicant has merely stated students are coming from rural background and their parents being agriculturist they find it easy to deal in cash this contention is certainly not acceptable when the receipts of the applicant are in crores.
9. Further, the contention o the applicant that it intends to construct Vridh Ashram for whom it has assured donations by NRIs and corporate group under CSR is not acceptable in the absence of any confirmations from the NRI concerned and ii: at all the contention of the applicant is accepted then also applicant is not legally entitled to take donations from outside India in the absence of any FCRA clearance/registration, it's also clear that opening of Vridh Aashram is not as per the objects specified in the Memorandum of the applicant trust. The assessee has claimed that it is in the process of updating its memorandum to include this as an object, In the present however, the absence of the object to open a Vridh Aashram impinges on the quest for attaining approval, for exemption of donations. Moreover the same would also entail a re-look into registration granted earlier u/s 12AA as per the provisions of the Act. Moreover the claims that one NRI. who is having his ancestral roots in the area visited Us campus and showed interest in opening of a. Vridh Aashram on the vacant land of the applicant trust are not backed up by any documentary evidence. This intention of the applicant is beyond the scope of the objects on the basis of which applicant was given the registration u/s 12AA and to that extent not tenable for the present.5 ITA No.987/Chd/2018
U/s 80G(5)
10. Keeping in view all of above it is safe to conclude that applicant has failed to discharge its onus to prove its claim for approval u/s 80G. The real purpose for seeking exemptions to donations i.e. construction of 'Vridh Aashram' is not brought out in the absence of the proposed activity from the objects clause as also the lack of FCRA clearance for seeking donations from abroad. In the light of the above, I have no option but to proceed on merits and deny the approval to the applicant u/s 80G of Income Tax Act, 1961."
4. Agg ri e ve d b y the s a me t he a sse s see h a s c ome up i n a p p e a l be f ore us r a i si n g t he f oll owi ng gr ou nd s :
"1. That the CIT (Exemption), Chandigarh has erred in rejecting the application for grant of registration U/s 80G of the Act. On the basis that the assessee is charging fees for running the educational institution and in the circumstances does not require funds or has not received the donations in the past. The condition for granting exemption u/s 80G is that assessee is genuinely working for charitable purposes and has provided all the necessary documents as specified in the law. Providing education is charitable activity as defined u/s 2(15) and does not change into non charitable activity even if fees is charged provided it is not for the purpose of profits. The assessee has complied with all the conditions of the law.
2. That the rejection of registration U/s 80G by the CIT (Exemption) on the ground of addition in fixed assets and increasing the fixed asset base is not a valid objection as these fixed assets are being used only for the purposes of educational institutions and imparting education to the students which are charitable in nature as defined u/s 2(15) and thus is also application of the funds for charitable purpose and has been allowed to the assessee as application of charitable purposes in various income tax assessments.
3. That the finding of CIT (Exemptions) about taking benefit is totally bad in law as the same had been claimed from eh balance sheet which has been prepared as per accounting norms(which requires compulsory charging of 6 ITA No.987/Chd/2018 U/s 80G(5) depreciation). But the depreciation was not taken as application of funds in statement of assessable income for calculation of application of income. Thus assessee has complied with the amendment in law as on 01.04.2015.
4. That the objection of the CIT (Exemption) as per Para 6 of the order with regard to the purpose of seeking approval after the gap of 10 years is bad in law as no time limit has been prescribed under law for application and query regarding the same was raised from the assessee.
5. That the objection of the CIT (Exemption) with regard to non submission of assurances from corporate sector and NRl donees is devoid of any valid reasons and which is not a requirement for exemption u/s 80G granting.
6. That the denial of registration U/s 80G is against the facts and circumstances of the case.
7. That the appellant craves for permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal."
5. At th e out set i t w a s a d mit te d by t he Ld . c oun se l for a ss e s see th a t al l th e g ro un ds e x ce p t gr oun d N o. 6 were a r gu me n ta ti ve an d, the re fo re , on l y g r oun d N o. 6 w a s t o be ta k e n u p for a dj ud i ca t ion . The r e a fte r the Ld . cou ns e l f or a ss e s see c on te nd e d t ha t n one of th e re a s ons g iv e n by t he C I T( E) w e r e v a li d for d e n ia l of a ppr ov a l u /s 8 0 G( 5 ) (v i) of t he Ac t. I t w a s p oin te d ou t th a t onl y th e ch a r it a b le cha r a c te r of th e a sse ssee t rust w a s t o be l ooke d i nt o for the p ur p ose s of gr a n t of a pp r ov a l a n d thi s i n th e pre se n t ca se w a s not i n d is p ute s in ce th e a pp l i ca n t/a ss e ssee ha d been g r a nte d 7 ITA No.987/Chd/2018 U/s 80G(5) r e gi s tr a tio n a s a ch a r it a bl e tr ust u/s 12 A A of th e Ac t a n d w a s be in g a sse sse d a s ca r r yi ng out ch a r it a bl e acti vi ti e s for a ss e s sme n t ye a r 2 0 14 -1 5 u/s 1 43 ( 3 ) of t he Act. Th e Ld . co un se l f or a s ses se e c onte n de d th a t th e a p pr ov a l cou ld not h a ve bee n de nied for the r e a s on tha t i t w a s ch a r g i ng fe e s for r un ni n g e d uca tiona l i n sti tu te si nce it i s ob vi ous tha t ca r r yi ng ou t a n y a c tiv it ie s i n vol ve d in cu rri n g co st b ot h c ap ita l a s we l l a s r e ve nue fo r whi ch f ee s ha ve to b e ch a r ge d. Th e Ld . cou ns e l f or a s se sse e co nte nde d th a t th e a p p li ca n t/a s se s see ne e d not to ju sti f y ta k i n g d on a ti ons f or th e p u rp ose of gr a nt of a p p r ova l u /s 8 0 G ( 5 )( vi ) o f the Act a n d , the re f ore, the de ni a l of a p p r ova l f or th e re a so n tha t sin ce i t h a d a la r ge a s se t b a se th e re was no va l id r e a son for ta k i ng d on a ti on, was not j us tif i e d . Th e Ld . cou ns e l for a ss e s see fu rt he r p oi nt e d out th a t th e de n i al of a p pr ov a l for th e re a s on tha t t he a p p li ca n t/a s se s see i nte nde d op en in g a Vr id h A s hr a m wh i ch w a s n ot a s pe r hi s st a te d ob je c ts w a s a l so n ot j us ti fi e d s in ce i t wa s ju st a p ro po sa l a n d a s a n d w he n the a sse ss ee d i d go a b out op e ni ng V r id h A sh r a m i t w oul d a c cor d i ngl y a me n d i ts b ye l a w s. Th e Ld . c oun se l f or a s se sse e , the re f ore , c ont e n de d th a t th e Ld . C I T( E) ha d r e je c te d i ts a pp r ov a l f or n o va l i d 8 ITA No.987/Chd/2018 U/s 80G(5) r e a s on and re que s te d th a t the or de r of the Ld .C I T( E) , th e re f ore , be se t a si d e .
6. Th e Ld . DR r e l i e d u p on th e or de r of the Ld .C I T( E).
7. We ha ve gone th r oug h th e or de r of the Ld .C I T( E ) a n d h a ve a l so he a r d the a r gu me n ts of b oth th e p a r tie s. W e fi nd me r i t in t he c onte nt ion of the Ld. c oun se l fo r a ss e s see . F or th e p u rp ose o f g ra nt of a pp r ov a l u/s 80 G ( 5) ( vi ) of t he Ac t the n e ce ssa r y c ond iti on s to be fu lfi ll e d a re a s l a id d ow n in se cti on 8 0 G( 5 ) of t he Ac t a n d Rul e 1 1 AA o f the I nc ome Ta x Ru le s, 1 9 6 2, . Se cti on 8 0 G( 5 ) of t he Ac t re a d s a s un de r :
"(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :--
[(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 2[* * *] 3[4[***]] 5[or clause (23AA)] 6[or clause (23C)] of section 10 :
[Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if--
(a) the institution or fund maintains separate books of account in respect of such business;
(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and 9 ITA No.987/Chd/2018 U/s 80G(5)
(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;]]
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
(iv) the institution or fund maintains regular accounts of its receipts and expenditure; 8[* * *]
(v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 259 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, [[***]] or is an institution financed wholly or in part by the Government or a local authority; [***] [(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf [; and] [(vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been,--
(a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and 10 ITA No.987/Chd/2018 U/s 80G(5)
(b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009.]"
Ru le 1 1 AA of the I nc ome Ta x Ru l e s, 1 96 2 , r e a d s a s u nd e r :
11AA . (1) The application for approval of any institution or fund under clause (vi) of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in triplicate.
(2) The application shall be accompanied by the following documents, namely :--
(i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C) ;
(ii) Notes on activities of institution or fund since its inception or during the last three years, whichever is less ;
(iii) Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less.
(3) The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund.
(4) Where the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid.
(5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing :
Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard.11 ITA No.987/Chd/2018
U/s 80G(5) (6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the [end of the month in] which such application was made :
Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.]"
8. C le a r ly, for the p ur p os e of gr a n t of a p p r ova l w ha t i s to b e se e n b y the C om mi ss ion e r is t ha t the i ns tit uti on o r f und se e k i ng a pp r ov a l i s e sta b l i she d fo r c ha r i ta b l e p urp os e a n d i s ge nu ine l y c a r r ying out the a ct iv it ie s of the i nsti tu ti on or f un ds a nd f ur ther th a t i t f ul fi l ls a l l th e c on di ti ons l a id d ow n in cl a us e s (i ) to (v ) of se c ti on 8 0G ( 5 ) of th e Ac t. The co nd i tio ns sp e ci fie d i n the se cti on a re p ri ma r i ly to th e e f fe ct th a t the C o mmi ss i one r has to e ns ure th a t the F u nd or I n st itu ti on see kin g a p p r ova l i s a p p r op ri a te ly consti tu te d a s sp e ci fie d i n su b cl a us e ( v) , i s n ot for t he be ne fi t of a ny p a r ti cul a r re li gi ou s com mun i ty or c a ste a n d i s f or me d f or t he p ur p ose of a n d i s ge n ui ne l y c a r ry in g out ch a r it a b le a ct iv it ie s. Th e C o m mi ssi on e r h a s to r e cor d th e f ul fi l lme n t of a l l t he co nd i tio ns i n wri ti n g a nd the re af te r g ra n t a p p r ova l . I n t he p r e se nt ca se , we f in d , the Ld .C IT( E) ha s n ot con si d e re d t he a p p li ca t ion of th e a sse sse e in a cc or d a nc e w i th tha t p r e sc r ibe d un de r th e A ct a nd the Rul e s re a d a l on gw i th it . We f in d tha t the re is no fi nd i ng in t he e n tire or de r vi s a v is the 12 ITA No.987/Chd/2018 U/s 80G(5) ge nu ine ne s s of th e a cti vi ties ca r r i e d ou t by t he a p p li ca n t/a s se s see . Al l the f i nd i ng s of t he Ld . C I T( E) w he the r r e ga rd i ng no r e a son be in g gi v e n b y t he a pp l i ca n t for s e e k i ng d on a tio ns con si d e r in g th a t i t h ad e n ough f un d s, or tha t it w a s r e ce iv i ng fees i n ca s h, o r th a t it i nte nde d op e nin g a v r id h a sh r a m w hi ch w a s n ot i ts ob je ct, d o n ot i mp in ge o n i ts ch a r i ta b le c ha r act e r or th e ge nu in e ne ss of th e a cti vi ti e s ca r r i e d ou t by it . Th e s e c tion d oe s n ot state th a t t he a p p li ca n t ha s to j ust if y ta k in g do na ti on s. S imi l a r ly h ow r e ce i vi ng fe e s i n c a sh i mp in ge s its ch a r it a bl e cha r a cte r , we f a il t o u nd e r st and , i n the a b se nc e o f a ny fi n di ng t ha t su ch ca s h r e ce i pt s we re n ot be i ng r e c or de d in i ts b ook s of a cc oun ts . A l so t he vi si on /p l a n of th e a p p li c a nt/a s se s se e to un d e r ta ke a pr oj e c t i n the f ut ur e of ope n i ng v r id h a sh r a m ca n n ot b e th e rea so n f or d e n yi n g a p pr ov a l a s be in g n ot p a rt of it s st a te d ob je ct, si n ce a s r igh tl y p oi nt e d out b y t he Ld .C o un se l f or t he a sse s see , th e a s se sse e ha s n ot u nd e rt a ken th e a cti vi ty a nd it c a nn ot be de nie d app r ov a l fo r co nte mpl a ti n g c a r r yi ng ou t i n th e fu tu re a n a cti vi ty not a s p e r i ts sta te d ob je ct s s in ce i t c a n v e r y we ll mo di f y i ts ob je cts w he n d oi ng so .
13 ITA No.987/Chd/2018
U/s 80G(5) I n vie w of th e a bo ve , i n the a b se nce of a n y fi nd i ng of t he Ld .C I T(E ), a s r e q ui r e d b y la w fo r gr a n ti ng a p p r ova l u/s 8 0 G of th e Ac t, r e ga rd i ng th e ch a r it a bl e ch a r a cte r and ge nu ine ne s s of th e a cti vi ties ca r r i e d ou t by t he a ss e s see /a pp l i ca n t, we con si de r i t fi t t o re st ore th e i ss ue b a ck to th e Ld. C I T( E) to re con si d e r the a p p l ic ati on of t he a ss e s see a f re sh a n d th e re a f te r pa ss a n or de r i n a cco rd a n ce w i th la w . We ma y a dd tha t th e a s se sse e be gi v e n due op p or tun i ty of he a r in g in thi s r e gar d .
9. I n the r e su lt , th e a pp e a l of the a sse ssee a l lowe d f or st a ti sti ca l p u rp os e s .
O r d e r p r on o u n ce d i n t h e O p e n C o u r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग&ु ता
(SANJAY GARG) (ANNAPURNA GUPTA)
याय क सद य/Judicial Member लेखा सद य/Accountant Member
*दनांक /Dated: 10th May, 2019
*रती*
आदे श क ( त)ल*प अ+े*षत/ Copy of the order forwarded to :
1. अपीलाथ,/ The Appellant
2. (-यथ,/ The Respondent
3. आयकर आय.
ु त/ CIT
4. आयकर आय.
ु त (अपील)/ The CIT(A)
5. *वभागीय ( त न1ध, आयकर अपील य आ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar