Income Tax Appellate Tribunal - Bangalore
Shri.Yathiraja Ramanuja Trust, ... vs Assessee on 28 November, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH 'B'
BEFORE SHRI N.L.KALRA, ACCOUNTANT MEMBER
and
SHRI GEORGE GEORGE, K, JUDICIAL MEMBER
ITA No.80(Bang)/2009
Sri Yathiraja Ramanuja Trust,
Yathiraja Mutt Bldg.,
No.199, 2nd Main Road (Sampige Road),
Malleswaram, Bangalore. .... Appellant
Vs.
Director of Income-tax (Exemption)
Bangalore. .... Respondent
Appellant by : Shri D.Vinay.
Respondent by : Smt.Swati S.Patil.
O R D E R
Per GEORGE GEORGE K, JM :
This appeal by the assessee is directed against the order of the learned Director of Income-tax (Exemption) ['DIT(E)' for short] dated 28-11-2008.
2. In this appeal 12 grounds are raised, all the grounds relate to the issue of learned DIT(E)'s refusal to renew the approval u/s 80G(5)(vi) of the Income-tax Act, 1961 ["the Act"
for short].
3. Brief facts of the case are as follows: The assessee-
trust was established by Trust Deed dated 27-1-1993. The assessee-trust filed application on 9-5-2008 seeking renewal of ITA 80/B/2009 Page 2 of 7 approval u/s 80G of the Act. Certain deficiencies were found in the document filed along with application. Hence, by letter dated 9-7-2009, ITO (E) called for details. Further to show cause notice, assessee-trust filed details. Assessee-trust was requested to file its explanation in support of its claim. Since assessee's Trust Deed did not comply with the details, learned DIT(E) passed order refusing to renew the approval u/s 80G by holding thus:
a. "The activity of the trust to conduct tutorial classes for various courses at best could be considered as tuitions provided to the students. This is not an activity which falls within the purview of education under the definition of charitable as per section 2(15) of the IT Act. This activity of the trust is commercial in nature and does not fall within the purview of education as defined by the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust vs. CIT (1975) 101 ITR 234.
b. The object of the trust to publish periodicals, news letters etc.is an activity being dissemination of knowledge which falls under the category general public utility. This activity of trust is commercial in nature in view of the insertion of proviso to section 2(15) of the IT Act.
c. The object of the trust to construct, maintain, run temples is an activity which is religious in nature and such activity undertaken by a charitable trust is contravention to section 13(1)(b) of the IT Act.
d. The object of the trust to construct, manage, run kalyana Mantapa, community centres for ITA 80/B/2009 Page 3 of 7 conducting seminars, marriages and other social functions is an activity which is commercial in nature. This activity has been rightly decided by the Hon'ble High Court in the case of CIT vs. Halai Nemon Association reported in 243 ITR 439 to be computed under the head business. The applicant trust in its account furnished along with the application also shows Hall rent received on account of this activity."
4. Aggrieved by the order of the DIT(E), assessee is in appeal before us. Learned counsel for assessee sought to rebut the findings/points raised by the DIT(E) while refusing renewal of approval u/s 80G of the Act and the same are reproduced below:
Sl. Contentions of the Submissions before the No. DIT(E) for rejection of ITAT approval u/s 80G
1. Clause 'F' of the Trust The Hon'ble HC of Karnataka Deed - Tutorial classes in the following cases has amounts to tuitions to held that imparting education students and does not fall in different fields is within the purview of educational activity:
education. Relies on the 139 ITR 226 - decision in 101 ITR Ecumenical Christian 234(SC) -Lok Shikshana Centre vs. CIT Trust 150 ITR 142 - CIT vs. Saraswath Poor Students Fund 225 ITR 1010 (SC) Thiagarajar Charities Vs. Addl. CIT & Anr.
2. Clause 'I of the Trust Deed In the following cases, courts
- publishing have held that dissemination periodicals/news letters of knowledge for the benefit etc., amounts to of general public amounts to dissemination of charitable activity.
knowledge which falls under the category of 134 ITR 421(All) - Ganga general public utility and Prasad Verma Memorial thus commercial in nature Society Vs. CIT and outside the purview of ITA 80/B/2009 Page 4 of 7 s.2(15) of the Act. 258 ITR 548(Raj) - CIT vs. Jodhpur Chartered Accountants Society.
3. Clause 'J' of the trust deed In the case of CIT vs. Pullikal
- To construct, maintain, Medical Foundation, 210 ITR run temples is religious in 299 (Ker) para 16 it was nature and such activity noted that charitable activity undertaken by a charitable includes religious activity.
trust is in contravention to Even as per Black's Law s.13(1)(b) of the Act. Dictionary, 6th Edition -
Charitable activity includes religious activity, but not exclusive religious teaching.
Further, in the instant trust, there is no restriction based on caste, red or religion and is for public at large. There is no contravention of s.13(1)(b) also.
4. Object of the trust to In the following cases, it was construct, manage, run held that merely because kalyana Mantaps, rent is received by the trust, community centres is exemption u/s 11 cannot be commercial in nature as denied.
held in 243 ITR 439 in CIT vs. Halai Nemon 300 ITR 365 (Mad) CIT vs. Association. Further DIT Sri Rao Bahadur Adk mentions that the Dharmaraja Educational accounts of the trust Charity Trust. shows hall rent received.
Further, in the case of CIT vs. Sengunthar Thirumana Mandapam reported in 298 ITR 330 (Mad), it was held that construction of Kalyana Mantap and letting out to local people satisfied the charitable object even though the trust had not diverted the accumulated fund for any other charitable purpose.
On the other hand, learned DR supported the findings of the learned DIT(E).
5. We have heard rival submissions and perused material on record. Finance (No.2) Bill, 2009 (314 ITR (St.) 148 & 149) ITA 80/B/2009 Page 5 of 7 has proposed to omit the proviso to section 80G(5)(vi) of the Act.
Notes on Clauses on Finance (No.2) Bill, 2009 explains the effect of proposed omission and the same is reproduced below for the sake of clarity:
"Clause 33 of the Bill seeks to amend section 80G of the Income-tax Act, relating to deductions in respect of donations to certain funds, charitable institutions, etc. The existing proviso to clause (vi) of sub-section (5) of said section provides that the approval granted by the Commissioner to any institution or fund shall have the effect for such number of assessment year nor exceeding five assessment years, as may be specified in the approval.
The proposed amendment seeks to omit the proviso to clause (vi) of sub-section (5) of section 80G so as to do away with the time limit specified in the aforesaid proviso.
The proposed amendment will take effect from 1st day of October, 2009.
The existing provisions contained in sub-section (5) of the said section provides that the deduction under sub-section (1) is available to donations made to any institution or fund if it is established for a charitable purpose and it fulfils such other conditions as are specified. Clause (15) of section 2 of the said Act defines 'charitable purpose' to include relief of the poor, education, medical relief and the advancement of any other object of general public utility. However, the proviso to the said clause provides that 'advancement of any other object of general public utility shall not be a ITA 80/B/2009 Page 6 of 7 charitable purpose if it involves the carrying on of (i) any activity in the nature of trade, commerce or business; or
(ii) any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of a use or application or retention of the income from any such activity.
The proposed amendment seeks to provide that if any institution or fund had been approved under clause
(vi) of sub-section (5) of section 80G 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 aforesaid 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; (b) approved under said clause
(vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March,2009.
This amendment will take effect retrospectively from 1st April 2009 and will, accordingly, apply in relation to assessment year 2009-2010 only."
(emphasis ours) In the instant case, assessee has been granted 80G approval up to 31-3-2008 by the order of the DIT(E) dated 8-12-2006.
Hence, the proposed amendment will have application in assessee's case. More over, assessee has not been heard in the matter and hence, there is violation of principles of natural justice. Assessee's letter dated 27-11-2008, wherein assessee's explanation has been detailed, has not been considered by the ITA 80/B/2009 Page 7 of 7 DIT(E) while passing the order on 28-11-2008. From this point of view also, order of the DIT(E) requires re-examination.
Accordingly, we restore the matter to the file of the DIT(E) for fresh consideration.
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 13th August, 2009.
Sd/- Sd/-
(N.L.Kalra) (George George K)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Bangalore:
D a t e d : 13th August,2009.
Eks*
Copy to :
1 Appellant
2 Respondent
3 CIT
4 DR, ITAT, Bangalore.
5 Guard file (1+1)
By Order
Assistant Registrar, ITAT, Bangalore.