Income Tax Appellate Tribunal - Chandigarh
District Red Cross Society, Fatehgarh ... vs Cit (Exemptions), Chandigarh on 21 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.141/Chd/2017
(Assessment Year : 2016-17)
District Red Cross Society, Vs. The CIT (Exemptions),
Mini Secretariat, Chandigarh.
Fatehgarh Sahb.
P A N : AAATD8819J
(Appellant) (Respondent)
Appellant by : Shri Rakesh Cajla
Respondent by : Shri Gulshan Rai, DR
Date of hearing : 16.08.2017
Date of Pronouncement : 21.09.2017
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d e r of L d . C o m m i s s i o n e r o f I n co m e Ta x ( Ex e m p t i o n s) ( h e r e i n a ft e r r e fer r e d to as L d.C I T( E ) , ) Ch a n d i g a r h dated 3 0 . 1 1 . 2 0 16 r e l at i n g t o a s s e s s me n t y e a r 2 0 1 6 - 17 d e n y i ng a p p r o v a l u n d er s e c t i o n 8 0 G ( 5) ( vi ) o f t h e I n c o me Ta x A c t , 1 9 6 1 ( i n s h o r t ' th e A c t ' ) .
2. Th e L d . CI T( E ) h as denied a p p rov a l h o l di n g th at the a s s e s s e e s o c i e t y w a s n o t e s ta b l i sh e d f o r c h ar i t a b l e p u r p ose s i n c e i t w a s e xp e n d i n g o n l y a v e r y s m a l l p o rt i o n o f i t s receipts in the form of d o n at i o n , to w a r d s c h a r i t a b le a c t i v i t i e s . A l s o th e a p p r o va l w a s d e n i e d fo r t h e re a s o n t h at t h e L d . CI T( E ) f ou n d t h a t t h e as s e s s e e s o c i e t y h a d l a r g e u n u t i l i z ed f u n d s i n t h e f o r m o f FD R s w h i c h sh o we d t h a t t h e m a i n e m p h as i s o f t h e s o ci e t y wa s a c c u m u l a t i o n o f f u n ds 2 a n d n o t ut i l i z at i o n f o r t he o b j e cts o f t h e s o c i e t y . L d . CI T( E ) a l s o h e l d t h a t th e h u g e q ua n t um o f F D R ' s p r e cl u d e d a ny r e q u i r e m en t o f t h e s o c i e t y to s e e k d o n a t i on s to f u n d i t s activities. Th e re l e v a n t fi n d i n gs o f t h e L d. CI T( E ) a t p a r a 3- 5 o f t h e o r d e r a re a s u n d er :
"3. Before delving any further it is necessary to highlight the extant provisions and judicial interpretations vis-a-vis 80G(5)(vi).For approval as per the provisions of section 80G(5)(vi), the first and foremost requirement which the institution or fund has to satisfy is-'if it is established in India for a charitable purpose'. The conditions contemplated by clauses (i) to (vi) of section 80G(5) are the conditions which the institution or the fund must additionally fulfil so as to be entitled to the approval by the Commissioner. The enquiry 'if it is established for a charitable purpose' is not confined and limited only to the contents of the instrument constituting the trust. For the purpose of construing the purpose of a trust one need not remain necessarily confined to the objects of the trust as set out in the deed of declaration. The real purpose of establishment of a trust has to be found out and spelled out. 'Purpose means that which one sets before him to accomplish or attend, an intention or aim, object, plan, project; the term is synonymous with the ends sought and an object to attain, an intention, etc. One cannot be* prepared to place any such interpretation on the language implied in section 80G so as to uphold an obligation on the part of the Commissioner to grant an approval to a trust merely by looking at the instrument creating the trust and shutting his eyes towards the activities actually carried out by it.
4.1 On perusal of documents on record, it is observed that a major portion i.e. 29.64%, 22.77% and 34% of the total receipts have been spent on salary for the financial year 2013-14, 2014-15 and 2015-16 respectively. The year wise donation received and utilization of the same as extracted from the financial statements of financial year 2013-14 to 2015-16 is tabulated as under:3
F.Y. (Utilization) Donation Reed. 2013-14 2014-15 2015-16 9,06,600/- 36,96,900/- 31,08,650/-
Utilization Head Help for treatment 63,000/- 59,913/- 2,94,166/-
Medicines 2,627/- 29,846/- -
Blood Donation Camp 5,040/- - -
Colt/ accidental Victim 26,000/- - -
World Red Cross day - - 1,152/-
Patient Care Taker - - 14,500/-
Hospital visit 3,480/- - -
Hearing Aid - 8,40,406/- 17,375/-
Aid to poor 1,000/- 3,926/- -
Sewing Machines for poor 42,523/- - 88,401/-
Tri Cycle for handicapped 47,150/- - 90,600/-
Wheel Chair 8,500/- 11,200/- 83,900/-
For Iraq Victim - 31,700/- -
Total 1,02,720/- 9,76,991/- 5,90,094/-
The applicant has submitted register records of distribution of approximately 162 Sewing Machines, 44 Wheel Chairs and 78 tri- Cycles for the period 2013-14 to 2015-16.
4.2 The data in the above mentioned table reveals that only 11.3%, 26.42% and 18.98% out of the total donations received have been utilized for the objects of the society during financial year 2013-14, 2014-15 and 2015-16 respectively. This is a clear indicator of donations not being utilized for the purposes for which the same were made. Important areas of support are witnessed to have been allocated meagre amounts. The only substantial expenditure during the last three years is Rs. 8.40 lacs on hearing aids in financial year 2014-15. The same has abruptly dwindled down to Rs. 17,315/- in F.Y. 2015-16. This is a clear indicator of ad-hoc functioning of the society with no long term perspective and a systematic approach. One off activities does not redeem the society's endeavours towards a goal on a constant basis.
5. At the same time, the applicant society has shown an asset of Rs. 72,93,735/-, 79,71,652/- and Rs.84,10,135/- in the form of FDRs in the Balance sheet of Financial year 2013-14, 2014-15 and 2015-16 respectively. The main emphasis of the society appears to be accumulation of asset in the form of FDRs rather than utilization of the donations for the objects of the 4 society. The purpose of legislature to include this section in the act is to promote and encourage people for making donations to the societies/trusts which otherwise lacks funds for performing charitable activities. On the contrary, the society has large accumulated balances in the form of FDR and cash which could well nigh be spent on its expansion projects. A case for seeking donations would be made once the accumulated balances fall short of the requirements. This clearly mars the very purpose of seeking donations from the general public.
5. Given the above, the applicant society does not measure up to the legislative intent that allows donations to be free from exigibility of taxes. In the present, it is felt that a case for seeking donations would be made out once the accumulated balances fall short of the requirements. Therefore, I am of the opinion that the applicant does not qualify for the grant of approval u/s 80G(5)(vi) of the I.T. Act, 1961 and hence the application is rejected."
3. A g g r i e v e d b y t he s a m e , t h e a ss e s s e e h a s f i l ed t h e p r e s e n t ap p e a l be f o r e u s r a i s i ng fo l l o w i n g g r o u n ds:
1. That the order of the Ld. Commissioner of Income Tax (Exemption), Chandigarh is bad in law and against facts of the case.
2. That Ld. Commissioner of Income Tax (Exemption), Chandigarh is not justified in rejecting the application for grant of approval u/s 80G, where it has been established beyond any iota of doubt that the society is for charitable purposes.
3. That the Ld. Commissioner of Income Tax (Exemption), Chandigarh is erred in rejecting the application wherein all the terms& conditions has been fulfilled and genuineness was proved.5
4. That the Ld. Commissioner of Income Tax (A), Patiala is not justified in rejecting the application mainly on the ground that the society has the accumulated balances and donations can be sought once the accumulated balances falls short of the requirements.
5. The appellant Craves leave to add, amend or delete any of the ground (s) of appeal before it is finally heard."
4. D u r i n g t he c o u rse o f h e a ri n g b ef or e u s , t he L d . c ou n s e l f o r a s s e s se e c h al l e n g e d t he d e n i a l o f a p p r ov a l ra i s i n g t h e f o l l o w i ng c o n t en ti o n s :
1) Th a t i t f u l f i l l e d a l l t h e c o n di t i o ns s t i p u l a te d u / s 8 0 G ( 5 ) ( vi ) r e ad wi t h t h e pr e s c r i b ed R u l e s .
2) Th a t h a v i n g b e en c e r t i f i e d a s a c h a r i t a b l e s oc i e t y u / s 1 2 A A o f t h e A c t , t h e L d . CI T( E ) c o u l d n o t h ave h e l d t h a t t h e pu r p o s e o f e s t a bl i s h m e n t o f t h e a s s e s s e e s o c i e t y w a s n o t ch a r i t abl e .
3) Th a t t h e L d . C I T( E ) h a s g i v e n n o f i n d i n g t h a t t he a s s e s s e e s oc i e t y w a s c a r r y i ng o u t a n y a c t i v i t y w h i c h w a s n o n - ch a r i t a b l e i n n at ur e .
5. Th e L d . c o u n s e l f o r a s s e s s e e fur t h e r r e l i e d u p on t h e o r d e r o f t h e H o n 'b l e j u r i s d i c t i o n a l H i g h C ou r t i n th e c a s e o f S o n e p a t H i n du E d u c a t i o na l & Ch a r i t a b l e So c i e t y V s . C I T & A n o t h e r r ep o r t ed i n 2 7 8 I TR 2 6 2 i n s u p p o rt of i t s a b o v e c o n t e n t i on .
6. Th e L d . D R , o n th e o t h e r h an d , su p p o r t e d th e o r de r o f the L d . CI T( E ) and stated that the L d . CI T( E ) had g i v en f a c t u a l a nd c a t eg o r i c a l f i n d i n g s t h a t t h e a s se s s ee s o c i e t y w a s s p en d i n g me a g r e su m s on i t s c h a ri t a b l e p ur p o s e a nd , 6 t h e r e f o r e, i t c a nn o t b e s a i d t h a t t h e as s e s s ee s oc i e t y was e s t a b l i s he d f o r c h a r i t a b l e p u r p os e , w h i c h wa s t he p r i m a r y c o n d i t i o n t o b e fu l f i l l e d f o r b e i ng e l i g i bl e f or a pp r o v a l u/s 8 0 G ( 5 ) ( vi ) o f t h e A c t . Th e L d . D R f u r t h e r p o i nte d o u t t h e c a t e g o r i ca l f i n di n g s of the Ld .C I T( E ) t h at the assessee society had a cc u m u l a t e d h ug e funds to the tune of a p p r o x i m at e l y Rs . 8 0 l a c s w h i c h w a s l y i n g u n ut i l i z e d i n F D R s a n d s t a te d t h a t w h e n s u c h h u g e f u n d s w e re a v a i l a b l e w i t h a s s e s s ee s o c i e t y , t h e re w as n o r e q u i r e m en t f o r t h e assessee s o ci e t y to seek donation for the purpose of c a r r y i n g o ut c h ar i t a b l e a ct i v i t i e s. Th e L d . D R r e l i e d u p o n t h e o r de r o f t h e H o n ' b l e H i g h C ou r t o f P a t n a i n th e c a s e o f V i s h w a B ud h a P a r i s h a d Vs . CI T r e p o r t e d i n 13 9 Ta x m a n 3 8 5 i n s u pp o r t o f i t s c on t e n t i on t h a t w he r e t he a s s e s s ee had made v er y low e x p e n di t ur e out of t ot a l donation r e c e i v e d i t w a s no t e n t i t l e d t o a pp r o v a l u /s 8 0 G ( 5) ( v i ) o f t h e Act.
7. W e h a v e h ea r d th e c o n t e nt i o n s of b o t h t h e p a r t i es a n d p e r u s e d t h e o r de r s o f t h e a u t ho r i t i e s b e l o w . Th e i s s u e b e f o r e us i s de n i a l o f a pp r o v a l u /s 8 0 G ( 5 ) ( v i ) of t he A c t a nd t h e r e a s o n s f o r d e n i a l w h i c h e me r g e f r o m t he o rd e r o f t h e L d . CI T( E ) a r e t wo f o l d ;
i ) t h a t t h e a s se s s e e s o c i e t y i s n o t e s t a b l i s h ed f o r c h a r i t a b l e p u rp os e , w h i ch i s t h e p r i m a r y c o n di t i o n t o b e f u l f i l l e d by a n i n s t i t u t i o n se e k i n g a pp r o v a l u / s 8 0 G ( 5 ) ( vi ) o f th e A c t a n d t he r e a so n f o r a rr i v i n g at t h i s c o n c l u s i on i s t he f a c t t h a t t h e a s s e s s e e s o c i et y h a s 7 been s p en d i n g very l i tt l e am ou n t of its do na t i o n r e c e i v e d t o w a r ds c h a r i t a bl e a c ti v i t i e s ;
i i ) t h a t t h e a sse s s e e s o c i et y ha s h u g e a c c u mu l a t e d u n u t i l i z ed f u n ds i n t h e f o r m of FD R s w h i c h s h o ws t h a t i t s m a i n e m p h a si s i s n o t o n u ti l i z i n g i t s f u n d s f or i t s stated a c ti v i t i e s but a c c u m ul at i n g the s am e and f u r t h e r t h e hu g e q u a n t u m s h o ws t h a t t h e s o c i et y d o e s n o t r e q ui r e d ona t i o n t o f u e l i t s c h a r i t a b l e a c t i v i ti e s .
8. C o m i n g t o th e re a s o n fo r de n y i n g a p p ro v a l , t ha t t he a s s e s s e e s o ci e t y w a s n o t e s t a b l i sh e d f o r c h a r i t a bl e p u r p o s e , w e f i n d t h a t t h e L d . CI T( E ) r e s t ed h i s c a s e o n th e f a c t u a l p r e m i s e t ha t t he a s s e s s e e s o c i et y h a s b e e n s p en d i n g v e r y l i t t l e a m o un t o f t o t a l d o n a t i o n s r e c e i v e d o n i ts c h a r i t a b l e activities i.e. 11.3%, 2 6 . 42 % and 18.98% during the financial y e a rs 2 0 1 3 - 14 , 2014-15, and 2015-16 r e s p e c t i ve l y , w h i l e a t t h e s a m e t i m e i t h a s b e e n s p e n d i n g 2 9 . 6 4 % , 22 . 7 7 % a n d 3 4 % of i t s t o t a l r ec e i p t s of s a l a r y i n t h e s e y ea r s . Th e L d . CI T( E ) has h e l d th a t th es e f i g u re s i n d i c a t e t h a t t he d o n a t i on s h a d n o t b e en u t i l i ze d f o r th e p u r p o s e f or w h i ch t h e y w e r e m a de a n d t h e i m p o r ta n t a r e as o f s u p p o r t w e re g e t t i n g o n l y me ag r e a m o u n t s . Th e L d . CI T( E ) has also p o i n te d out that the assessee s oc i e t y h ad a c c u m u l a te d FDRS a m o u nt i n g to R s . 72, 9 3 , 7 3 5 / -, R s . 7 9 , 7 1 ,6 5 2 / - an d R s . 8 4 , 1 0, 1 3 5/ - i n f i n a n ci a l ye a r s 2 0 1 3 - 1 4 , 2 0 1 4 - 1 5 a n d 2 0 1 5 - 1 6 r e s p e ct i v e l y . Th e L d . C I T( E ) h a s o n t h i s b a s i s h el d t h a t t h e m a i n e m p h a s i s o f t he a s s e s s ee s o c i e t y a pp e a r s t o b e a c c u m ul a ti o n o f f u n d s ra th e r t h a n 8 u t i l i z a ti o n . I t i s f o r t h i s r e a s o n th a t t h e L d . CI T( E ) h a s h e l d that the real purpose of the assessee s o c i et y is not charitable.
9. Th e f a c t s , a s p oi n t e d o u t b y the L d . CI T( E ) , h a ve n o t been disputed or c o n t r o v e rt e d by the Ld. counsel for assessee. Th e only c o n t e n t i on of the Ld. co u n s e l for a s s e s s e e i s t h at e v e n i f t h e e x p e n d i t ur e o n c h a r i t a b le activities carried out by it are meagre in comparison to the t o t a l d o n a t i o n r ec e i v e d , i t d o e s no t t a k e a w a y t h e f a c t t h a t t h e a s s e s se e s oc i e t y i s s ti l l c ar r y i n g o u t on l y c h a r i t a b l e activities. Th e L d . c o u ns e l fo r a s s e s s e e l a i d em p h a s i s o n t h e f a c t t h a t t he r e i s n o f i n d i ng t h a t a n y n o n -c h a r i t a b l e a c t i v i t i e s w er e be i n g c a rr i e d o u t b y t h e a s s e s se e a n d i t w as a l s o e m p h a si z e d t h a t t h e f a c t t ha t t h e a s s e s s ee s o c i e t y h a d b e e n g r a n t e d cer t i f i c a te u / s 1 2A A o f t h e A c t es t a b l i s h es t h a t t h e a ss e s s ee s o c i e t y wa s s et u p f o r c h a ri t a bl e p u r p o s e only.
10. W e a r e n o t i n ag r e e m e n t w i t h th e c o n t e nt i o n s o f t he Ld. counsel for assessee. I n s t i t u t i on s / F u nd s s e e k i ng a p p r o v a l u / s 8 0G ( 5 ) ( v i ) o f t he Ac t a r e r eq u i r e d t o f u l f i l l a basic co n d i t i o n that they h a ve been e s t a bl i sh e d for a c h a r i t a b l e p u rp os e w h i ch i s c l e ar l y s p el t o ut i n th e s e c ti o n i t s e l f wh i c h st a t es a s u n d er :
80G (1) In computing the total income by an assessee, there shall be deducted , in accordance with and subject to the provisions of this section,---
......................................................................................9
(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:--
......................................................................................
11. In the p r e se n t case, u n d i s p ut e d l y the charitable n a t u r e o f t h e ob j e c t s o f t h e a ss e s s e e s o ci e t y ar e n o t i n doubt. I t i s o n l y v i s - à - v i s t h e a c tu a l a c t i v i t y c ar r i e d o u t b y t h e a s s e s s ee s o ci e t y w h i c h h a s l e a d t h e L d . CI T( E ) t o h o l d t h a t i t h a s no t be e n e s t ab l i s h ed fo r c h a r i t a b l e p u rp o s e . A nd to this e x t en t we a g r ee w i th the Ld CI T( E ) that the d e t e r m i n at i o n of the e s t a b l i sh m e n t of the society for c h a r i t a b l e p u r p os e c a n n o t b e c o n f i n e d a n d l i m i te d t o t h e o b j e c t s o f t h e s oc i e t y a n d t h e r e al p u r p o s e o f e s t ab l i s h m e n t of a society has to be found out by examining the actual a c t i v i t i e s c a rr i e d o u t b y i t .
12. I n t h e p re s e n t c a s e i t i s n o t d e n i e d t ha t a s se s s ee s o c i e t y i s sp e n di n g n o t m o r e o f a v e r a ge 2 0 % o f i t s t o t al donation t o w a rds charity w hi l e at t he s a me time it is spending approximately 30% of its to t a l d on a t i o n on salaries. C o m b i n e d w i t h t he a bo v e , t h e f ac t t h at o v e r t he y e a r s t h e a s s e s se e h a s a cc u m u l at e d h u g e f u n d s to t h e t u ne o f a p p r o x . R s. 8 0 l a c s i n F DR ' s , g l a r i n g l y p o i nt s t o t h e f a ct t h a t t he a ss e s se e s o c i e t y i s sp e n d i n g m i n i sc ul e a m o un t t o w a r d s i t s s ta te d o b j e c t s w h i l e i t i s e m p h a s i z i n g m o r e o n a c c u m u l a ti n g i ts f u n d s .I t i s no t t h e c a s e o f t h e Ld . C o u n s e l f o r t h e a s s es s ee t h a t t h e a c c um u l a t i o n w a s ma d e f o r a s p e c i f i c p u r p os e r e l a t e d t o t h e o b j e c t s o f t he so c i e t y . Th e p a t t e r n o f s pe n d o f t h e s o c i e t y o ve r t h e y e a r s t he re f o r e d o e s 10 n o t i n s p i r e c o n fi d e n c e i n t h e c h ar i t a b l e i n t en t o f t h e s o c i e t y a n d l e a d s t o t he c o n c l u s i on t h a t i t i s m o r e i n c l i n ed t o w a r d s a c c u m u l a ti n g i ts f u n d s c o l l e c ted b y w a y o f d o n a t i o n a n d spending m o r e o f i t o n a c t i v i t i es o t h e r t h a n ch ar i t a b l e . F o r h o l d i n g t h a t t he a s s e ss e e s o c i e t y i s n o t e s t ab l i s h e d f or c h a r i t a b l e p u rp os e , w e h o l d , t ha t t h i s f i n di n g i s s u f f i c i e nt a n d i t i s n o t r e q u i r e d t h a t t h e a s s e s s e e s o ci e t y s h o u l d b e f o u n d c a r r yi n g ou t a n y n o n - c h ari t a b l e a c t i v i t y t o a r r i v e a t t h e c o n cl u s i o n t h a t i t i s n ot e s t a b l i s he d f or c h a r i t a b l e p u r p o s e . Th e H on ' b l e P a t na h i g h c o u r t i n th e c a se o f V i s h w a B u d h a Pa r i s h a d ( s u p r a ) , w h i ch wa s r e l i e d up o n by t h e L d. D R , h a s d i s m i s se d t h e w r i t p e t i t i o n f i l e d b y t he a s s e s s e e a g a i n s t th e r e j ec t i o n o f ap p r o v al u / s 8 0 G ( 5 ) ( v i ) o f t h e A c t stating that t h e f i n d i n g o f th e CI T t h a t t h e i ns t i tu t i o n h a d m a d e v e r y l o w e x p e n s e s o u t of th e t o t a l d o na t i on r e c e i v e d did not w ar r a nt any i n t er f e r en c e with th e or d e r . Th e r e l e v a n t f i n d i ng s o f t h e H o n ' b l e Hi g h C o u r t a r e as u n d e r :
" 1 . The present writ application has been filed by the petitioner challenging the order dt. 17th Dec., 1999, passed by the CIT, by which the application filed by him for renewal of exemption under s. 80G(5) of the IT Act, 1961, has been rejected after coming to a definite finding that the institution has made very low expenses out of the total donation received under s. 80G(5) of the Act.
2. After perusal of the materials on record, this Court does not find any reason to interfere with the order in exercise of writ jurisdiction. Accordingly, this writ application is dismissed."
13. E v e n t h e H o n 'b l e A l l a h a b a d H i g h C o u r t , i n t he c as e o f V i s h a l Kh a n n a Pu b l i c Ch a r i t a bl e Tr u s t r e p o rt e d i n 3 5 6 I TR 4 4 3 h a s h e l d th a t m e a g e r s p en d o n c h a r i ta b l e p u r p o s e s d i s e n t i tl e s a s se ss e e s t o g ra n t o f a p p r o v a l u / s 80 G ( 5 ) ( v i ) . I n t h e s a i d c a s e t h e Ho n ' b l e H i gh C o u r t f ou n d t h a t w hi l e 11 the Tr u s t was spending m e ag er amounts on its stated charitable a c t i vi t i e s , it was di v e r t i n g m a jo r portion of d o n a t i o n s r ec e i ve d i n c o n s t r u c t i n g a c o m m e r c i a l s h o p p i ng c o m p l e x . I n t h i s b a c k g r o u n d th e c o u r t h e l d t ha t t h e Tr u s t had been r i g ht l y denied a p pr o v a l u /s 8 0 G( 5 ) ( v i ) . The r e l e v a n t f i n d i ng s a r e a s un d e r :
"We have considered the rival submission of the counsel for the parties. It is not in dispute that the petitioner-Trust was created by trust deed dated 24.2.1998, a copy whereof has been filed as Annexure-1 to the writ petition.
17. The object of the Trust is to construct, establish, maintain and support charitable hospital, nursing home and dispensaries, to provide educational and vocational support to the poor and needy, to give monetary help to the poor, and the blind and crippled persons, to give money to the persons affected by flood and other natural calamity etc. The original corpus at the time of settlement was Rs. 5000/-only and over the years, it had multiplied several times on account of donations received by the Trust. According to the finding recorded in the impugned order, the corpus donation received by the Trust upto 31.5.2005 was Rs. 5,33,000/-. Most of it was utilized in constructing the shopping complex. The balance sheet as on 31.5.2005 further reflects that an amount of Rs. 7,96,821/-has been spent on construction. On the other hand, the petitioner had applied only meager amount of its income for running homeopathic dispensary. Though petitioner is making tall claims of dispensing medicines free of cost, but it had spent small amount of Rs. 12,325/- on medicines in the year 2004-05 and Rs.9490/- on medicines during the period of 2003-04.
18. The facts which remain undisputed and to which this Court cannot shut its eyes are as follows:-
(a) The petitioner-Trust when it was formed had a corpus of Rs. 5000/-only. It claims to have started a homeopathic clinic from 2 rooms on the ground floor of premises No. 33/70-72, Topi Bazar, Chowk, Kanpur and which was made available to it free of cost by its owner Sri Shivji Behari Trust.
(b) It took at lease roof of the said building by lease deed dated 9.3.1998. The lease deed specifically recites that the demise of the roof to the petitioner-Trust was in order to enable to it to construct or run a public charitable dispensary.
However, the roof of the building was not utilized for constructing any dispensary or clinic but a commercial complex having 12 shops.
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(c) The petitioner-Trust after constructing first floor entered into another lease agreement dated 9.3.2002 whereby the roof of the first floor of the building was demised in its favour giving right to construct a charitable dispensary. Again, no such constructions were made and, admittedly, on the second floor two halls and one store room were constructed.
(d) Admittedly, till date, the entire so called charitable activities of the petitioner-Trust remained confined to two rooms on the ground floor of premises No 33/70-72, Topi Bazar, Chowk, Kanpur which were admittedly made available to it free of cost since the Trust came into existence. Thus admitted fact of record reveals that there has been no expansion of any charitable activities.
(e) On the other hand, the petitioner-Trust under the guise of constructing a Homeopathic hospital and dispensary has rather constructed shopping complex and major part of it has already been let out.
(f) The petitioner-Trust also does not dispute that its expenditure on medicines during successive years had remained static and also could not place any material to show that the figures mentioned in the impugned order relating to the expenditure made in the name of charity ia in any manner perverse.
19. In view of these facts, the CIT has rightly came to the conclusion that under the guise of carrying out charitable activities after obtaining exemption under section 80-G, the petitioner Trust had, in fact, diverted major part of donation received by it till 31.3.2005 in constructing a shopping complex. In these circumstances, the CIT rightly concluded that the petitioner-Trust has mis- utilized the donation received by it on the strength of exemption under section 80-G. Construction of shopping complex cannot be said to be a business incidental to the attainment of the object of the Trust but is being persued as the main activity, under the cloak of carrying out charity. Funds received in the name of charity have been utilised in attainment of a commercial mission.
20. This court also concurs with the findings recorded in this regard by the CIT, as the petitioner has failed to show that facts and figures mentioned in the impugned order are in any manner against the record or are perverse.
21. The counsel for the petitioner during course of his argument has placed reliance on the decision of the Apex Court in CIT Vs. Thanthi Trust (2001) 247 ITR 785 wherein the Apex Court has held that in case the business income is utilized by the Trust for achieving the genuine objects of the Trust, it is covered under section 11 (4A) of the Act. He also relied on the decision in Commissioner of Income Tax v. Janakiammal Ayyandar Trust, reported in (2005) 277 ITR 274, wherein it has been held that a business whose income 13 is utilized by the Trust or the institution for achieving the objectives of the Trust, is exempted if such business is incidental to the attainment of the objectives of the Trust or institution. On the other hand, Sri Tripathi has placed reliance on the judgement reported in (2003) 264 ITR 357 (Patna) Vishwa Buddha Parishad Vs. CIT, in which in similar circumstances, the writ court has declined to interfere with the order refusing renewal of exemption under section 80-G on the ground that the institution has made very low expenses out of total donation received by it. He also placed reliance on (2003) 264 ITR 481 (Patna) Madani Musafir Khana Welfare Society v. CIT in which the application for renewal of exemption under section 80-G was rejected on the ground that the institution has constructed a shopping complex and had not carried other charitable work.
22. There can be no dispute to the broad proposition of law that construction of a commercial building by itself cannot be a factor to refuse renewal under section 80-G of the Act. However, it depends upon the facts and circumstances of each case. In the instant case, a cogent and categorical finding has been recorded in the impugned order that although huge amount has been received as donation by the Trust during the previous years, but amount spent for the charitable purposes is merely an eye wash.
23. The explanation given by the petitioner-Trust in para 23 of the writ petition that it had to confine its charitable activities to the ground floor of the building on account of compulsion, is not worthy of credence. The petitioner had stated that it is unable shift to the first and second floor of the accommodation constructed by it on account of the fact that the patients visiting are old and feeble and it will be difficult for them to climb the stairs for consulting the doctor. No such explanation was given by the petitioner before the CIT and it is on the face of it, after thought. Further, it is apparently false, as in the two lease deeds, the petitioner had repeatedly mentioned that the lease is being obtained for construction of a homeopathic hospital and clinic. The first lease is of the year 1998 and the other one of the year 2002 i.e. after a gap of four years. In case it was so , as is being claimed by the petitioner, there was no occasion for the petitioner to obtain another lease after 4 years of the execution of the first lease deed, with the specific recital that the construction thereunder will be of a charitable hospital. It is thus evident on the face of record that the petitioner has only indulged in completing paper work for the purpose of obtaining exemption under section 80-G of the Act so that it may continue to obtain donations under the guise of charity and utilize the same for commercial ventures. It is in these facts and circumstances, that the CIT was fully justified in holding that the activities being carried on by the petitioner-Trust cannot be said to be for charitable purpose and had rightly withdrawn the exemption granted under section 80-G of the Act.
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24. In so far as the challenge the notice under section 12A (3) of the Act is concerned, suffice it to say that it is merely a show cause notice and challenge to it at this stage is premature. It is open to the petitioner to file its reply to the show cause notice against purposed action before the CIT and in such proceedings it is open to the petitioner to produce all such evidence which may justify its claim for continuation of its registration as a charitable institution. In similar circumstances, challenge to such notice has been held to be premature in the judgement reported in (2002) 256 ITR 277 Madhya Pradesh MadhyanVs. CIT.
25. In view of the discussion made above, the instant writ petition is dismissed with liberty to the petitioner to file its reply to the show cause notice dated 4.10.2006 for cancelling registration certificate under section 12-A of the Act and which shall be decided by the CIT in accordance with law taking into consideration the objections and the evidence, if any, led by the petitioner in this regard, without being influenced by either the finding recorded in the order dated 4.10.2006 refusing to grant exemption under section 80-G of the Act or the findings recorded in the present judgement.
26. Subject to above, the writ petition is dismissed."
14. I n t h e p r e se n t ca s e a l s o th e f a c tu a l f i n d i ng i s t ha t t he a s s e s s e e so c i e t y i s s p e n d i ng m ea g e r s u m s o n i t s c h a r i t a b l e a c t i v i t i e s w hi l e i t i s a c c u m u l a t i ng h u g e f u n d s i n t h e f o rm o f F D R ' s f o r n o r h y m e o r r e a s o n . Th e d e c i s i o n o f t h e H o n ' b l e Allahbad High Court, t h e re f o r e, s q u a r e l y a pp l i e s t o t h e p r e s e n t ca s e .
15. M o r e o v e r t he H on ' b l e j u r i sd i c t i on a l H i g h C o u r t i n t h e c a s e o f A ma n S hi v M a n d i r Tr u s t v s CI T r e p o r t e d i n 2 9 6 I TR 4 1 5 h a s v i e w e d th e a c c um u l a t i o n o f fu n d s a d v e r se l y a g ai n st the a s s e s s ee an d upheld the denial of a pp r o v a l u /s 8 0 G ( 5 ) ( vi ) f o r the s a m e r e as o n . Th e r e l e v a n t f i nd i n g s o f th e H o n ' b l e Hi g h C ou r t a r e as u n d er "3. Learned counsel for the assessee submitted that the authorities have gone wrong in rejecting the claim of the assessee merely because the assessee had kept the collected amount in fixed deposits in the bank as the same does not change the nature of the assessee from being a charitable 15 trust. The amount was being collected for purchase of land, etc. However, he could not dispute the fact that out of collection nothing was spent during the last five years on any of the charitable purposes. Even collection of money from low paid employees, which is said to be voluntary, also did not sound to reason. It was also found that the application filed by the assessee was delayed by more than four years. Not only this, huge amount of fixed deposits was found in the name of trustee, who had later approached the Settlement Commission, obviously admitting his guilt. Keeping in view the totality of circumstances and the intention and conduct of the assessee including the managing trustee, the claim made by the assessee was not found to be genuine. The same plea, which was rejected by both the authorities below has been advanced by the counsel for the assessee. However, at the time of hearing, learned counsel for the assessee could not substantiate any of the pleas raised by him to persuade this Court to take a view different from what has been taken by the Tribunal on appreciation of material on record. The findings are in no manner perverse.
4. Accordingly, while concurring with the reasoning recorded by the authorities below, we do not find any merit in the appeal and dismiss the same."
16. Th e c o n t e n t i o n of t h e Ld C o u ns e l f o r t he a s s es s e e t h a t s i n c e t h e s o c i et y f u l f i l s a l l c o nd i t i o n s s p e ci f i e d u n d e r t h e A c t f o r g r a nt o f a p p r o v a l , m e ri t s n o c o n si d e r a ti o n i n vi e w of t h e f a c t t h a t w e h a v e u p he l d t he f i n d i n gs o f t h e L d . CI T( E ) t h a t t h e a s s es se e s o c i et y h ad f a i l e d t o f u l f i l l t h e b as i c condition of having been es t a b l i s h ed for c h a r i t a b le p u r p o s e . Th e r e l i a n c e p l a c e d by t h e L d C o u n s e l f o r t h e assessee in the case of Sonepat Hindu is misplaced since t h e s a i d c a s e i s d i s t i n gu i s h a bl e o n f a ct s . I n t he s a i d c a s e t h e H o n ' bl e H i gh C o u r t ha d h e l d t h a t t he a s s e ss e e h a v i ng b e e n g r an t e d r eg i s t r a t i o n u / s 12 A , d e n i a l of a pp r o v a l u/ s 80G on mere te c h n i c a l i t i e s w as not wa r r a n ted . In th e p r e s e n t c a se e vi d e n t l y t h e de n i a l o f a p p r o v al i s n o t o n a c c o u n t of m e r e t e c h n i c a l i t i e s . I n f a c t t h er e i s cl ea r f i n d i ng , w h i c h w e ha v e u p h e l d t h at t h e a s s e s s e e s o c i e t y h a s n ot 16 b e e n e s ta b l i s hed f o r ch a r i t ab l e p u r p o s es . Th u s t h e sa i d d e c i s i o n i s o f n o a s s i s t a n ce t o th e a s s e s s e e.
17. I n v i e w o f t h e a b o v e , w e c o n c u r th a t t h e L d . CI T( E ) t h a t the a s s e s se e s oc i e t y was no t e s t a b l i s he d for charitable p u r p o s e a nd h e nc e w a s n o t e n t i tl e d t o g r a nt o f a pp r o v a l u /s 8 0 G ( 5 ) ( vi ) o f t h e A c t .
18. In the r es u l t , the a p p e al of the a s s e ss e e s ta n ds dismissed O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 21 s t September, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh