Income Tax Appellate Tribunal - Chennai
Sri Balaji Educational & Charitable ... vs Assessee on 24 October, 2013
IN THE INCOME-TAX APPELLATE TRIBUNAL
'C' BENCH, CHENNAI.
Before Dr.O.K. Narayanan, Vice-President &
Shri V. Durga Rao, Judicial Member
I.T.A. No. 1644/Mds/2013
Sri Balaji Educational & The Commissioner of Income Tax,
rd
Charitable Public Trust, 3 Floor, Vs. Central III,
Jai Durga Complex, New No.60, Chennai.
1st Avenue, Ashok Nagar,
Chennai 600 083.
[PAN: AACTS1386D]
(Appellant) (Respondent)
Appellant by : Shri S.K. Tyagi, Advocate
Respondent by : Shri N. Sankaran, CIT
Date of Hearing : 24.10.2013
Date of pronouncement : 27.11.2013
ORDER
PER V. DURGA RAO, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order of the ld. Commissioner of Income Tax, Central III, Chennai dated 25.07.2013 rejecting claim of approval under section 80G(5) of the Income Tax Act.
2. Brief facts of the case are that the assessee is an educational and charitable public trust. It has been registered under section 12AA of the Income Tax Act, 1961 for the purpose of claiming exemption of 2 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 its income, when applied for charitable purposes. The assessee trust is running the following educational institutions, in pursuance to its objects:
i. Bharathiyar College of Engineering Technology, Karaikal. ii. Mahathma Gandhi Medical College, Pondicherry. iii. Indira Gandhi Institute of Dental Science, Pondicherry. iv. Kasturba Gandhi Nursing College, Pondicherry. v. Sri Venkateswara College of Education, Pondicherry. vi. Rajiv Gandhi College of Engineering & Tech. and others.
3. The assessee trust was registered as a public charitable trust vide Registration No. 1649 of 1996 in the office of the Registrar, Pondicherry. The trust was registered under section 12AA of the Income Tax Act vide order C.No.6162E(142)/97-98 dated 13.02.1998. The trust was approved under section 80G(5) of the Act by the ld. CIT, Pondicherry vide order C.No. 9165-E(236)/CIT/PDY/2004-05 dated 14.12.2004 for the period from 01.04.2001 to 31.03.2006. Thereafter, the aforesaid approval was renewed vide order C.No.9165-E(236)/CIT/ PDY/2006-07 dated 22.11.2006 for the period from 01.04.2006 to 31.03.2008.
4. Thereafter, the assessee trust filed an application in Form No. 10G dated 03.04.2008 seeking approval under section 80G(5) of the Act with effect from 01.04.2008. The application filed by the assessee 3 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 for seeking approval under section 80G(5) was rejected by the ld. CIT Central III, Chennai vide order dated 24.09.2008. Against the order of the ld. CIT dated 24.09.2008, the assessee had preferred an appeal before the ITAT and the ITAT in I.T.A. No. 2127/Mds/2008 vide order dated 11.09.2009, the appeal filed by the assessee trust for approval under section 80G(5) was dismissed. Against the order of the ITAT, the assessee had preferred an appeal before the Hon'ble Jurisdictional High Court and the Hon'ble High Court by its judgment in Tax Case (Appeal No. 131 of 2010 dated 03.06.2013 has held as under:
"8. Considering the facts that the order of rejection rested on the seized materials and non-furnishing of the copies of the same to the assessee relating to the search under section 132 of the Act on 13.08.2007, in fairness to the contention of the assessee with regard to non-compliance of the principles of natural justice, the matter is remanded back to the Commissioner of Income Tax, Central III, Chennai for de novo consideration in accordance with law."
5. When the matter was pending before the Hon'ble Jurisdictional High Court, the assessee trust had filed second application dated 09.01.2013 for approval under section 80G(5) before the ld. CIT Central III, Chennai. The ld. CIT, after calling for clarification on certain issues, has rejected the application of the assessee for grant of approval under section 80G(5) of the Act vide order 15.07.2013. Against the order of the ld. CIT dated 15.07.2013 in respect of second 4 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 application made by the assessee on 09.01.2013, the present appeal is preferred before the Tribunal.
6. The ld. Counsel for the assessee has submitted that • the ld. CIT has traversed much beyond the scope of the enquiry under section 80G(5) of the Act, when the assessee is enjoying the benefit under section 12A of the Act, the ld. CIT has no power to question the object of the trust;
• the issue of capitation fee received by the assessee has no relevance to the Income Tax, 1961;
• the impugned order of the ld. CIT has also misconceived and grossly erroneous, as all the conditions laid down under section 80G(5) of the Act stood fully satisfied in the case of the assessee trust.
7 On the other hand, the ld. DR strongly supported the order passed by the ld. CIT and submitted that the assessee was collecting capitation fee from the students and claiming exemption under section 12A and also claiming approval under section 80G(5), which is not permissible in the eyes of law. He has submitted that in the course of search, the assessee himself had admitted that it had been collecting the capitation fees. He further submitted that during the course of 5 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 search, the search team found cash about Rs.44 lakhs in the bed room of the Chairman. Therefore, the assessee is collecting capitation fee and keeping it in his house which not permissible in the eyes of law. The assessee has failed to furnish details of the donors before the ld. CIT.
8. We have heard both sides, perused the materials on record. Originally, the assessee trust filed an application in Form No. 10G dated 03.04.2008 seeking approval under section 80G(5) of the Act with effect from 01.04.2008. The ld. CIT, vide order dated 24.09.2008 rejected the application of the assessee trust. On appeal before the Tribunal, the Tribunal in I.T.A. No. 2127/Mds/2008 vide order dated 11.09.2009 confirmed the order of the ld. CIT. The assessee has preferred appeal before the Hon'ble Jurisdictional High Court and during the pendency of the appeal before the Hon'ble High Court, the assessee has filed second application before the ld. CIT for grant of approval under section 80G(5) of the Act.
9. The assessee has claimed benefit under section 80G(5) of the Act. Under section 80G(5), the following conditions are to be satisfied: 6 I.T.A. No.1644
No.1644/M/ 1644/M/13 /M/13 (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 :--
(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA)] or clause (23C)] of section 10 :
Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if--
(a) the institution or fund maintains separate books of account in respect of such business;
(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and
(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;
(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 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 recognised 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] xxxxxxxxxxxxxx 7 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13
10. It appears that while reading of the provisions of section 80G(5), one of the conditions that the institution has to maintain receipts and expenditure.
11. In the present case, the ld. CIT passed a detailed order, one of the reasons given by the ld. CIT for rejection of 80G(5) is that the assessee had been receiving capitation fees and therefore not eligible. So far as this aspect is concerned, the Tribunal has examined the entire fact and held in its order [I.T.A. Nos. 1476 to 1482/Mds/2010 for the assessment year 2002-03 to 2008-09] that there is no evidence on record to show that the assessee had accepted capitation fee against the allotment of seats. Therefore, the objection raised by the ld. CiT in this aspect is rejected.
12. The another issue raised by the assessee to grant 80G(5) is concerned, during the course of search `.44 lakhs was found and seized from the residence of the Chairman of the assessee trust. So far as this aspect is concerned, the Tribunal has observed that the assessee is running a petrol pump and the turnover of the petrol pump was more than `.30 crores. The Tribunal has observed that the sum of 8 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 `.44 lakhs has been explained as income of the Chairman of the assessee trust and the said amount has been offered for taxation in the return of income filed by the Chairman in the regular course.
13. In so far as fulfilling the conditions as laid down under section 80G(5) is concerned, the ld. CIT by letter dated 27.06.2013 [paper book page Nos. 6 to 8] specifically asked the assessee that as per clause (iv) of section 80G(5) of the Act, certain receipts have not been reflected in books of accounts and called for explanation from the assessee. In response to that, the assessee had submitted its reply dated 09.07.2013 by stating that "the enquiry by the ld. CIT under section 80G(5)(vi) of the Act cannot extend to the actual computation of income under the assessments that have been framed or likely to be framed. The enquiry relates to whether the trust is registered under section 12A, whether it is a trust wholly for charitable purposes or religious purposes and whether the income received by it is entitled to be considered under section 11 of the Act. Such enquiry does not go beyond that whether the income received by the trust for any assessment year was actually included in the taxable income in the past year or not". For the above preposition, the assessee had relied on two decisions viz., N.N. Desai Charitable Trust vs. CIT [2000] 246 9 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 ITR 452 (Guj.) and Sonepat Hindu Educational and Charitable Society v. CIT [2005] 278 ITR 262 (P&H). The ld. CIT, after considering the explanation of the assessee in page No.6 of her order gave a finding that with regard to voluntary contribution received by the assessee, the Assessing Officer has noticed that many vouchers did not have requisite details of donors and it is a clear violation of sub-section (i),
(ii) and (iv) to section 80G(5) of the Act.
14. The case law relied on by the assessee in the case of Sonepat Hindu Educational and Charitable Society v. CIT (supra), while dealing with the application under section 80G(5), the scope of enquiry by the ld. CIT extends to eligibility of application to exemption under various provisions referred to in the sub-section, but not to actual computation of income under the Act. The Registration of an institution under section 12A by itself is sufficient proof that the institution has created or established for charitable or religious purposes.
15. Further, the case law relied on by the assessee in the case of N.N. Desai Charitable Trust vs. CIT (supra), the Hon'ble Gujarat High Court has observed that "the authorities examining the question whether the funds or institution is eligible to be certified for the 10 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 purposes of section 80G is not to act as an assessing Officer. Once the applicant trust was registered under section 12A and was granted approval under section 80G(5) and also renewed thereafter, the ld. CIT was not justified in refusing for renewal of approval on the ground that the income of the applicant trust was likely to be included in the taxable income for not complying with the requirement of section 11 of the Act.
16. These two above judgements of Hon'ble Gujarat High Court as well as Hon'ble High Court of Punjab & Haryana, have no application to the facts of the present case. In this case, the ld. CIT has show- caused the assessee with regard to fulfilment of conditions as required under sub-section (iv) of section 80G(5) of the Act. The assessee, without answering to the objections raised by the ld. CIT, it has replied that the investigation/enquiry by the ld. CIT is beyond the scope of section 80G(5). The case law relied by the assessee before the ld. CIT has no relevance to the objections raised by the ld. CIT. A plain reading of section 80G(5)(iv) shows that the institution has to maintain regular books of its receipts. When the assessee claims an approval under section 80G(5) , it is bounden duty on the part of the assessee to produce relevant details before the Assessing Officer/CIT with regard 11 I.T.A. No.1644 No.1644/M/ 1644/M/13 /M/13 to donation received by the assessee, the details such as name of the donor, amount received, address, PAN number etc. In view of the above, we direct the assessee to furnish all the details of voluntary donation received such as name of the parties/donors, address, PAN number, etc. to the ld. CIT for verification and direct the ld. CIT to comply with the directions of the Hon'ble Madras High Court in Tax Case (Appeal) No. 131 of 2010 dated 03.06.2013 if not complied and decide the issue in accordance with law after allowing sufficient opportunity of hearing to the assessee.
17. In the result, the appeal of the assessee is partly allowed for statistical purpose.
Order pronounced on Wednesday, the 27th of November, 2013 at Chennai.
Sd/- Sd/- (Dr. O.K. NARAYANAN) (V. DURGA RAO) VICE-PRESIDENT JUDICIAL MEMBER Chennai, Dated, the 27.11.2013 Vm/- To: The assessee/A.O./CIT(A)/CIT/D.R.