Income Tax Appellate Tribunal - Hyderabad
Sri Mathuradasji Ayodhyabai Rathi ... vs Assessee on 15 October, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A' HYDERABAD
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND
SHRI CHANDRA POOJARI ACCOUNTANT MEMBER
ITA No.1067/Hyd/2009 Asst. Year : NIL
Sri Mahuradasji Ayodhyabhai Vs The Director of Income Tax
Rathi Charitable Trust, Hyderabad (Exemptions), Hyderabad
(PAN AAFTS 3414 F)
(Appellant) (Respondent)
Appellant by: Shri Siddharth Toshniwal
Respondent by: H. Phani Raju, D.R.
ORDER
Per Chandra Poojari, Accountant Member:
This appeal by the assessee is directed against the order passed by the DIT(Exemptions), Hyderabad dated 15.10.2009.
2. The brief facts of the case are that the assessee filed an application under Sec.80G (5) on 20.4.2009 for renewal of approval u/s 80G. The assessee was accorded approval u/s 80G on 9.10.2007 w.e.f. 1.4.2007 to 31.3.2009. Thus, the present application is for renewal of the benefit . A deed of trust was made on 23.8.2005 by the settler donating a sum of Rs.11 lakhs. On a perusal of the trust deed, it is noticed that there are no specific objects of the trust. The trust was created for charitable objects as defined u/s 2(15) of the IT Act 1961. The object as stated in the trust deed is reproduced as under:
"The trust is created for charitable objects as defined u/s 2(15) of the IT Act., 1961.2
3. Since, there are no clear or specific charitable objects which can be ascertained from the trust deed, the DIT(E) denied the approval u/s 80G of the IT Act.
4. The Authorised Representative submitted that the order of the DIT(E) refusing to grant renewal of approval in terms of S.80G(5) of IT Act, is very much bad in law, both from the point of law as well as from point of facts.
5. It was submitted that the reason assigned by the learned DIT(E) that there is no specific charitable objects mentioned in the Deed of Trust, and therefore in the absence of such specific charitable objections donation and Trust is not entitled to deduct in terms of S.80G (5). This conclusion of DIT(E) is not proper
6. Further, he contended that the charitable objects have been duly specified in the Clause 3 of the deed of trust wherein it is specifically mentioned 'The trust is created for charitable objects as defined u/s 2(15) of IT Act, 1961' and therefore there can be no better evidence to prove that the Trust has specified the charitable objects and in turn the definition in sec.2(15) itself it speaks that charitable objects includes relief of poor, education, medical relief and advancement of any other public object of general utility. Therefore, it stands established that the assessee's Trust is very much stands covered by the definition of the IT Act u/s 2(15).
7. He submitted that further the action of the learned DIT(E) is most unwarranted and illegal in as much as on the basis of the same Clause in the deed of trust, his two predecessors granted the approval in terms of S.80G(5) vide order dated 12.1.2006 and another order dated 3 9.10.2007 and later order has granted approval from 1.4.2007 to 31.3.2009. Thus in face of these facts, the denial of renewal of approval by the present DIT(E) is most unwarranted, unjust and illegal and this fundamental fact, he totally ignored while passing the order under appeal. Even otherwise also the power of fixing the period of exemption in order u/s 80G(5) has been omitted which otherwise is available to DITE under Proviso to S.80G(5) which has been deleted from 1.10.2009 by Finance (No.2) Act, 2009 w.e.f. 1.10.2009. Therefore, since the order under appeal is dated 15.10.2009, he cannot make such an order in view of the deletion of the Proviso u/s 80G(5) w.e.f. 1.10.2009 and from this point of view also the order passed by him is very much illegal.
8. It is argued that, it is policy and intention of the govt. to encourage Charitable/Trusts/Institutions and for which Proviso to S.80G(5) has been deleted and in the circumstances the action of DIT(E) to ignore this fundamental fact is unwarranted. Further observation of the DIT(E) that nature of the trust has to be determined with reference to the objects and not actually of the income and his further observation that no evidence is placed before him regarding the expenditure incurred by trust is wrong when in fact the assessee has filed complete details of expenditure along with the receipts. The order of the DIT(E) is further bad in law in as much as the registration granted u/s 12AA has been not withdrawn, despite such power is vested in him u/sub.S 3 of Sec.12AA. Therefore this is patent contradiction for the purposes of 80G(5), and the Trust continues to remain charitable but for the purpose of S.80G(5) it ceases to be charitable, therefore considered from in point of view the action of the DIT(E) is out and out illegal and unsustainable in law.
9. Further he relied on the following judgments:
41. Thakur Das Shyam Sunder Vs. Addl.CIT (93 ITR 27) wherein it was held that the discretion vested in a trustee to spend the trust amount over charities will not affect the character of the deposit. A Trust for charities without specifying any charities at all is valid.
2. CIT Vs. Sardar Bahadur Sardar Indra Singh Trust (29 ITR 781) (Cal.) wherein it was held that to the rule that there is no valid trust unless the objects thereof are specified, charitable trusts are an exception. With regard to those trusts, a great deal of latitude is permitted and the rule is that provided there is a clear intention to make a gift for charity, the trust is not allowed to fail for uncertainty.
3. Chaturbhuj Vallabhdas Vs. CIT (14 ITR 144) (Bom) wherein it was held that the word 'Charity' if used generally or without qualifications or limitations denotes public charity and falls within the definition of 'charitable purpose' in Sec.4(3) of the IT Act.
4. ACIT Vs. Surat City Gymkhana (300 ITR 214) (SC) wherein it was held that the registration of a trust u/s 12A of the IT Act, 1961 once done is fait accompli and the assessing officer cannot thereafter make further probe into the objects of the trust.
10. The learned Departmental Representative submitted that the objects have been described in the wide language. Mere repetition of the statutory definition. The trust deed does not even indicate the major head of charitable purpose for which the settler had donated a sum of Rs.11 lakhs. Merely stating that the trust is established for a charitable purpose might not by itself indicate whether the intention is either relief of the poor or education or medical relief or any other object of the general public utility. Merely stating that the purpose of the trust is a charitable purpose cannot purse give any indication that it does not exclude the object involving the carrying of any activity for profit. Nature of trust has to be determined by reference to the objects and no by the reference to the actual application of the income of the trust. He relied on the judgement of the Hon'ble Supreme Court in the case of Gangabai Charities (197 ITR 416) and not granted the approval u/s 80G of the IT Act.
511. Further the Departmental Representative submitted that the word 'charitable' is of very wide nature and it is only to be decided by holding that expenditure incurred by the Trust is of charitable nature or not by examining each of the expenditure incurred by the Trust. As observed earlier, the nature of the trust has to be determined by the reference to the objects and not the actual application of income. Further, no evidence is placed before regarding the expenditure incurred by it. The details of donations indicate that the assessee gave donations to other trusts. The objects of the trust are too wide. Further, it is not a charitable institution, as defined u/s 2(15) of the IT Act, one of the conditions prescribed u/s 80G is that the institution has to be charitable institution. It is not a charitable institution as its objects are wide and not specific. The wide language that has been employed in the Trust Deed does not meet with the requirements of the statutory exemptions. Hence the assessee is in appeal before.
12. We have heard both the parties and perused the material on record. Admittedly, in our opinion this issue covered against the assessee by the judgement of the Hon'ble Supreme Court in the case of Gangabai Charities Vs. CIT & Others (197 ITR 416)(SC) wherein it was held that :
"Affirming the decision of the High Court, that it was not possible to cull out in clear terms any specific charitable or religious bout from the trust deed to conclude that the trust was set up wholly for religious or charitable purposes. The 'religious, charitable, cultural and social' purposes referred to in the deed were not avowed as the objects of the trust, they were only the objects of those who wishes to put the trust property to use. There was no mention in the deed as to how the income derived from the trust property was to be utilized. There was no mandate that the income was to be spent on religious or charitable purposes. Therefore, the trust deed did not meet the requirements of section 11(1) (a) and the income of the trust was not exempt from tax.' 6
13. In this case, the object of Trust is very vague, loosely worded and not specific regarding the activities to be carried on by the assessee. In such circumstances, the DIT(Exemptions) is justified in rejecting the approval u/s 80G of the Income Tax Act. Though the assessee's counsel relied on various judgments it cannot be considered and the approval u/s 80G(5) is not automatic, it requires to be examined by the DIT(E). The DIT(E) may not aware of the judgement in the case of 197 ITR 416 (SC) cited (supra) while granting approval u/s 80G in earlier years. When he is aware of the Supreme Court Judgement, he is bound to follow the same since it is the law of the land on this issue. Further, the ratio laid down by the Supreme Court in Special Leave Petition is not a ratio decendi to follow. Accordingly we dismiss the appeal of the assessee.
14. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court : 26 .3.2010
Sd/- sd/-
G.C. GUPTA CHANDRA POOJARI
VICE PRESIDENT ACCOUNTANT MEMBER
Dated the 26th March , 2010
Copy forwarded to:
Shri K.L. Rathi, Advocate, 3-5-144/5 Eden Garden, Hyderabad-500 001.
The DIT(E), Hyderabad
3. DIT, Hyderabad.
4. CIT, Hyderabad
5. The D.R., ITAT, Hyderabad.
Np