Income Tax Appellate Tribunal - Chennai
Sundaram Foundation, Chennai vs Assessee on 13 July, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'D', CHENNAI
BEFORE
Dr. O.K.NARAYANAN, VICE PRESIDENT
and
SHRI HARI OM MARATHA, JUDICIAL MEMBER
.....
ITA Nos.762 & 763(Mds)/2011
M/s. Sundaram Foundation, Director of Income-tax
C/o CNGSN & Associates, (Exemptions),
"Agastyar Manor" Chennai.
New No.20, Old No.13, Vs.
Raja Street, T.Nagar,
Chennai-600 017.
PAN AAJTS4721M.
(Appellant) (Respondent)
Appellant by : Shri B.Ramakrishnan, C.A.
Respondent by: Shri K.E.B.Rengarajan, Jr. Standing Counsel.
ORDER
PER Dr.O.K.NARAYANAN, VICE-PRESIDENT:
These two appeals are filed by the assessee, praying for registration under section 12AA and approval under section 80G of the Income-tax Act, 1961.
-2 - ITA Nos.762 & 763 of 2011
2. The applications filed by the assessee to avail registration under section 12AA and approval under section 80G were rejected by the Director of Income-tax(Exemptions) for the reason stated in his order, which is reproduced below:-
"Shri K.C.Sundaram, Author and Managing Trustee appeared on 12-01-2011, 24-01-2011 and 31-01-2011 and submitted reply. The trust has informed that it has availed loan of `. 25,00,000. Out of this, `. 7,00,000 has been donated to Dr. Muthukumar Institute of Acupuncture and Hospital, Chennai-35 which is a private body and not recognised as a charitable institution under the Income-tax Act. Such activity is not permissible and hence the institution does not qualify for registration. As the amount is given in form of donation to a private institution such donation cannot be said as money spent towards charitable objects. As there is always a possibility of misutilisation of such donation by the managers of donee, it cannot be said that the assessee trust is existing for charitable purposes. Perusal of
-3 - ITA Nos.762 & 763 of 2011 papers filed reveals that the done is Dr. Muthukumar Institute of Acupuncture and Hospital, affiliated with Nine Needle College of TCM, Shanxi, China. The status of such foreign institution is not known.
As the activities are not in conformity with definition of charitable object u/s 2(15), the application filed for registration u/s 12AA is hereby rejected and the registration is not granted. Approval u/s 80G is also not granted and the application filed is hereby rejected."
3. The assessee is aggrieved and therefore in appeal before us. We heard Shri B.Ramakrishnan, the learned Chartered Accountant appearing for the assessee and Shri K.E.B.Rengarajan, the learned Standing Counsel appearing for the revenue.
4. The trust is established with the object of rendering services in the field of medical relief. The object of the assessee trust as such, therefore, is not objectionable. The Director of Income-tax(Exemptions) has rejected the claim of the assessee
-4 - ITA Nos.762 & 763 of 2011 on the ground that the assessee has donated a sum of `. 7 lakhs to Dr. Muthukumar Institute of Acupuncture and Hospital, which is a private institution and also the donation was made out of a loan of `.25 lakhs borrowed by the assessee trust. When we examine the reason stated by the authority, we find that the reason pointed out may not be sustainable in law.
5. First of all the amount of `.7 lakhs was donated to Dr. Muthukumar Institute of Acupuncture and Hospital out of a loan of `.25 lakhs availed by the assessee. Loan is not income. Therefore, the donation of `.7lkhs made by the assessee trust is to be seen as an appropriation from the loan and not from any income, for which the assessee has sought exemption under section 11. Therefore, the question whether the assessee has applied the funds for charitable purposes to avail the benefit of section11 does not arise in the present case. Secondly, the assessee has sought for approval under section 80G not for getting any deduction for the donation made to others but to canvass donation from outsiders as the outsiders will get the benefit of tax deduction if the assessee is approved under
-5 - ITA Nos.762 & 763 of 2011 section 80G. Therefore, as a matter of fact, the donation of `. 7 lakhs made by the assessee does not defeat the claims made by the assessee under sections 12AA and 80G.
6. It is also to be seen that there is no restriction while applying funds for charitable purposes that the fund should not be given to private institutions. If the private institution is also engaged in charitable activities, the amount given by an assessee to such an institution cannot be denied the benefit of section 11 only on the ground that the donation was given to a private institution. It is to be seen that when a charitable society is dispensing charitable activities, even though the beneficiaries are common public, they are all private persons. There is no rule that only charitable institutions should avail the benefit of the activities carried on by another charitable institution.
7. Therefore, in the facts and circumstances of the case, we find that the Director of Income-tax(Exemptions) is not justified in rejecting the applications filed by the assessee. The Director of Income-tax(Exemptions) at Chennai is directed to
-6 - ITA Nos.762 & 763 of 2011 grant the assessee registration under section 12AA and accord approval under section 80G. The question of defacto exemption under section 11 and benefit of section 80G may be evaluated by the assessing authority in the course of assessment.
8. In result these two appeals are allowed.
Order pronounced in the open Court at the time of hearing on Wednesday, the 13th day of July, 2011 at Chennai.
Sd/- Sd/-
(Hari Om Maratha) (Dr. O.K.Narayanan)
Judicial Member Vice-President
Chennai,
Dated the 13th July, 2011.
V.A.P.
Copy to: (1) Appellant
(2) Respondent
(3) CIT
(4) CIT(A)
(5) D.R.
(6) G.F.