Income Tax Appellate Tribunal - Delhi
Shri Lalita Ashram Trust, Rohtak vs Assessee on 20 January, 1987
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH "G" DELHI ]
BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RANJAN, AM
I. T. Appeal No. 4440 (Del) of 2009
Assessment year : ----
Shri Lalita Ashram Trust, Commissioner of Income-tax,
C/o. Navin Gupta, Adv.; Vs. R O H T A K.
Old Post Office Street,
R O H T A K - 124 001 [Haryana].
P A N / G I R No. AAA AS 0978 A.
( Appellant ) ( Respondent )
Assessee by : Shri Naveen Gupta, Adv.;
Department by : Shri B. Kishore, Sr. D. R.
O R D E R.
PER K. D. RANJAN, AM :
This appeal by the assessee arises out of the order of the ld. Commissioner of Income-tax, Rohtak against the order passed under section 80-G(5) of the I. T. Act. The facts of the case stated in brief are that the assessee trust was constituted on 14/10/1986. The trust was registered under section 12-A of the Act vide registration dated 20/01/1987. Thereafter the assessee trust was given registration under section 80-G, the latest renewal was dated 26th May, 2006 for the period 1/4/2004 to 31st March, 2009.
2I. T. Appeal No. 4440 (Del) of 2009
2. The assessee trust vide application dated 21st April, 2009 in prescribed form No. 10-G sought renewal of registration under section 80-G(5) of the Act. The ld. Commissioner of Income-tax noted that in financial years 2005-06 to 2007-08 the assessee has claimed exemption under section 11 in respect of application of funds on fixed assets. The trust had also claimed depreciation on capital assets, which were acquired by it. The ld. CIT, therefore, was of the view that the assessee had claimed double deduction one account of application of funds on fixed assets and the other on account of depreciation. The ld. CIT relying on the decision of Hon'ble Supreme Court in the case of Escorts Ltd. & Others Vs. Union of India & Others 99 ITR 44 (SC) observed that double deduction in regard to the same business outgoings was not intended by the legislature unless clearly expressed. He was, therefore, of the opinion that the depreciation claimed by the assessee would be includible in its total income. Since the assessee had claimed double deduction, this would disqualify the trust for approval under section 80-G(5)(vi) of the I. T. Act, 1961 due to non-compliance of clause (i) of sub-section 5 of section 80-G of the Act.
3. The ld. Commissioner further noted that the assessee was collecting anonymous donations. The details submitted showed that Rs.6,42,800/- was collected in financial year 2006-07 for which receipts were issued without giving any name and address of donors. He was of the opinion that anonymous donations were treated as specific donations in spite of the fact the names and address of donors were not there on the receipts issued by the trust. Such donations were liable to be included in the total income and will be taxed at the rate of 30 per cent under section 115-BBC(1)(i) of the Act with effect from 1/04/2007. The ld. CIT further noted that the assessee trust had incurred an expense of Rs.2,40,167/- on Mandir Pooja during the year ended 31st March, 2008, which exceeded 5 per cent of the total income of the trust. Therefore, provisions of section 80-G(5) of the Act were not applicable to the facts of the case. He further noted that the trust was required to spend 85 per cent of income for claim of exemption under section 11 of the Act. In financial year 2005-06 the application of income was less than 85 per cent of the income even after giving the credit of Rs.13,08,978/- incurred towards fixed assets of the trust. He also noted that the balance sheets as on 31st March, 2006; 31st March, 2007 and 31st March, 2008 revealed that the trust had claimed to have received corpus donation at Rs.95,23,746/-, Rs.58,70,172/- and Rs.40,60,456/- respectively, but could not 3 I. T. Appeal No. 4440 (Del) of 2009 produce even a single piece of paper as specific direction from the respective corpus donors as per section 11(1)(b) of the Act. He was, therefore, of the view that the trust had diverted the funds which should have been spent to the extent of 85 per cent for the welfare of the general public towards corpus. The assessee was asked to furnish the reply, but no such reply was given. The ld. Commissioner further noted that a locker for the trust was opened in Allahabad Bank, Brindavan in the name of three trustees. It means the modes of investment of funds of the trust were not transparent as per provisions of section 11(5) of the Act. He was of the view that the contents of locker were includible in the income of the trust and were taxable under section 13(1)(d)(i) of the Act which disqualified the trust for approval under section 80-G(5). The ld. CIT further noted that exemption or renewal of a trust is not automatic and has to be allowed only after looking into the facts and circumstances of each case. He placed reliance on the decision of Hon'ble Delhi High Court in the case of Kirti Chand Tarawati Charitable Trust Vs. DIT [Exemption] 232 ITR 11 (Del). He also placed reliance on the decision of Hon'ble Karnataka High Court in the case of Gajamnagappa & Sons Society Vs. Director of Income-tax (E) 269 ITR 59 (Kar.) wherein it has been held that grant of exemption was subject to the satisfaction of the authority with regard to the renewal. The ld. Commissioner accordingly was of the view that the trust was not entitled for renewal of exemption under section 80-G read with rule 11-AA of the I. T. Rules, 1962.
4. Before us, the ld. AR of the assessee submitted that at the time of grant of registration the ld. Commissioner is not supposed to act as assessing officer. What is to be seen at the time of renewal of registration under section 80-G is whether the objects and activities of the trust were charitable. The trust was registered under section 12-A in 1986 and registration had been granted under section 80-G for several years till 31st March, 2009. As regards the expenditure incurred on Mandir Pooja, it has been submitted that the ld. CIT has considered the net income from Gaushala whereas the actual income from Gaushala was Rs.22,30,771/-. If the donations received in Gaushala is taken with interest receipt the total income comes to Rs.48,68,989/-. The expenditure on Mandir Pooja at Rs.2,43,450/- thus comes to 4.93 per cent which is less than 5 per cent specified under section 80-G(5) of the Act. As regards the application of income and other objections, the ld. AR of the assessee submitted that such an objection cannot be made at 4 I. T. Appeal No. 4440 (Del) of 2009 the time of renewal of registration. He placed reliance on the decision of ITAT, Lucknow Bench in the case of Kalyanam Karoti Vs. CIT 123 I.T.D. 370 wherein it has been held that while granting recognition under section 80-G(5) or continuation thereof, the Commissioner has only to seek whether the society fulfills conditions laid down in clauses (i) to (v) of section 80-G(5) and not whether certain receipts i.e. voluntarily donations are properly explained or not. He also placed reliance on the decision of Hon'ble Punjab & Haryana High Court in the case of Sonepat Hindu Educational & Charitable Society Vs. CIT 278 ITR 262 for the proposition that where objects of the society are charitable the registration cannot be denied. He also placed on the decision of Hon'ble Gujarat High Court in the case of N. N. Desai Charitable Trust Vs. CIT 246 ITR 452 for the proposition that the authority granting approval cannot act as assessing authority. The enquiry should be confined to find out if the institution satisfied the prescribed conditions. The actual assessment of the institution would not affect claim for recognition under section 80- G of the Act. On the other hand, the ld. Sr. DR strongly supported the order of the ld. Commissioner rejecting the refusal of registration under section 80-G of the Act.
5. We have heard both the parties and gone through the material available on record. There is no dispute that the trust has been granted registration under section 12-A since its inception and had been enjoying the benefit of registration section 80-G upto 31st March, 2009. Under section 80-G of the Act, a deduction is allowed to an assessee while computing his total income in respect of donations referred to in sub section (2) of section 80-G. Clause (iv) of clause (a) of sub section (2) of section 80-G talks about the donations to any institution or college, which is established in India for a charitable purpose and fulfills the conditions specified in sub section (5) of section 80-G of the Act, namely, (i) where the institution for fund derives any income, such income would not be liable to be inclusion in his total income under provisions of section 11 and 12 or clause 23-AA or clause 23-C of section 10 subject to conditions specified in proviso to this clause; (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 5 I. T. Appeal No. 4440 (Del) of 2009 institution or fund maintains regular accounts of its receipts and expenditure; (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 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognized 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; and (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.
5.1 Sub section 5B contains non-obstante clause, according to which where an institution or fund incurs expenditure during any previous year which is of a religious nature for an amount not exceeding 5 per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section shall apply. It means where the assessee incurs any expenditure exceeding 5 per cent of its total income on religious purposes, the benefit of section 80-G will not be available. Explanation- 3 to section 80-G defines the scope of charitable purpose and means that charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. Therefore, where the expenditure has been incurred by the assessee for religious purposes either under clause (ii) of sub-section (5) or under Explanation 3 any of the purpose the whole or substantially, the whole of it of which is of a religious nature, the trust or institution will not qualify for recognition under section 80G of the Act. Therefore, under sub section (5) if the expenditure incurred on a religious nature is less than 5 per cent, the benefit of section 80G will be available to the assessee. In the instant case, the income received from Gaushala is at Rs.22,30,771/-. The assessee had received income by way of interest at Rs.26,38,214/-. Thus, the total income of the assessee during the year was at Rs.48,68,989/-. The assessee has incurred expenditure of Rs.2,40,167/- on Mandir Pooja, the expenditure of religious nature is thus 4.93 per cent, which is less than 5 per cent. Therefore, the contention of the ld. Commissioner that the assessee has incurred more than 5 per cent expenditure of religious nature is not correct. It appears he has taken the net income from Gaushala at Rs.12,79,269/- and interest income of Rs.26,38,218/- for the purpose of computation 6 I. T. Appeal No. 4440 (Del) of 2009 of expenditure incurred on Mandir Pooja. Therefore, the benefit of section 80-G of the Act cannot be denied on this ground.
6. As regards the other issues, that the assessee had claimed double deduction in respect of same assets or the income had not been applied to the extent of 85 per cent of the income for the objects of the trust would not be relevant at the time of granting of registration or renewal of registration under section 80-G of the Act. Hon'ble Punjab & Haryana High Court in the case of Sonepat Hindu Educational & Charitable Society (supra) has held that in construing the purpose of a trust for the purposes of approval under section 80-G of the I. T. Act, 1961 it is important to find out the real purpose of establishing the trust rather than just relying on the objects, memorandum and articles or the trust deed of the Trust. If the commissioner is satisfied that the objects of the trust are charitable, approval should not be denied on mere technicalities. Registration of an institution under section 12-A of the Act is sufficient to of its being established for charitable purposes. In the instant case the objects of the trust are charitable in nature and accordingly the ld. Commissioner was not justified on denying the continuation of registration under section 80-G when the assessee had enjoyed such benefit for last 25 years.
7. Hon'ble Gujarat High Court in the case of N. N. Desai Charitable Trust (supra) has held that the ld. Commissioner of Income-tax cannot act as assessing officer. The enquiry should be confined to find out if the institution satisfies the prescribed conditions. The actual assessment of the institution would not affect the claim for registration under section 80-G of the Act.
Likewise, ITAT, Lucknow Bench in the case of Kalyanam Karoti has held that neither in the main sub section (5) nor Rules made thereunder, there is any provision to refuse recognition or continuation thereof only on the ground that particulars of donors are not provided by the institution for fund, non-availability of particulars may empower the AO to invoke section 115-BBC read with section 13(7) which are affective from 1/04/2007 while making the assessment of the society. But so far as the recognition under section 80-G(5) is concerned, they have no role to play.
7I. T. Appeal No. 4440 (Del) of 2009
8. If the facts of the case are tested on the ratio of aforesaid decisions, in our considered opinion, the ld. Commissioner cannot deny the renewal of registration on the ground that the assessee had claimed double deduction in respect of depreciation as well as capital expenditure or had not applied the requisite income for the objects. If the assessee had claimed certain depreciation to which it was not entitled the recognition under section 80-G cannot be denied. As regards the maintenance of locker, the ld. Commissioner has not brought any material on record that any undisclosed income of the trust was kept in such lockers. The lockers may be necessary for keeping the valuables of the trust. It does not mean that the locker was maintained for the purpose of keeping un-accounted income of the trust. The presumption on the part of the ld. CIT, in our considered opinion, is without any basis. In view of the above discussion, we are of the considered opinion that the ld. Commissioner was not justified in refusing the continuation of registration under section 80-G of the Act. The objects of the trust are charitable in nature. The activities of the trust are also charitable in character. The trust has been registered under section 12-A of the Act for last 25 years. Therefore, continuation of registration has not been rightly refused by the ld. CIT. We accordingly are of the view that registration under section 80- G of the Act should be allowed to assessee. We, therefore, set aside the order of the ld. Commissioner of Income-tax refusing the registration and direct the ld. Commissioner to allow the registration under section 80-G of the Act for the period applied by the assessee.
9. In the result, the appeal filed by the assessee is allowed.
Pronounced in the open court on : 30th April, 2010.
Sd/- Sd/-
[ RAJPAL YADAV ] [ K. D. RANJAN ]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : _30th April, 2010.
*MEHTA*
8
I. T. Appeal No. 4440 (Del) of 2009
" Copy of the order forwarded to : -
1. Appellant.
2. Respondent.
3. CIT,
4. CIT (Appeals),
5. DR, ITAT, NEW DELHI.
True Copy. By Order.
Assistant Registrar, ITAT. "