2002 (9) TMI 92 - HC - Income Tax

The petitioner is a charitable society - The petitioner is contesting order whereunder section 80G benefit was denied to the petitioner by the Commissioner on the ground that an amount of Rs. 25,000 received as donation was invested in a private company which disentitles the petitioner for exemption under section 13(1)(d) read with section 11(5) of the Income-tax Act. - It is to be confined to the facts of that case because it was found in that case that the trustees through whom the deposits had been made had paid up deposits in those institutions to the petitioner and so far as the petitioner was concerned, the technical breach ought not to have weighed with the Commissioner is the finding of the court. In any case going by the wording of section 80G, it makes it clear that unless a charitable trust or society qualifies for exemption under section 11 during the relevant year, it is not entitled to renewal of registration under section 80G. - In the circumstances, there is no ground to interfere. The original petition is dismissed.

Summary

Issues:
- Denial of exemption under section 80G for the year 1999-2000 due to investment in a private company disentitling the petitioner.
- Interpretation of section 13(1)(d) in relation to the violation of section 11(5) and denial of exemption under section 80G.
- Application of section 11(2)(b) and section 11(5) in determining eligibility for exemption under section 80G.
- Impact of the decisions of the Supreme Court and High Courts on the case.

Analysis:
The petitioner, a charitable society, lost its exemption under section 80G for the year 1999-2000 due to investing a donation of Rs. 25,000 in a private company, which was deemed a violation of section 13(1)(d) read with section 11(5) of the Income-tax Act. The Commissioner denied the exemption based on this investment, which was not permissible under the specified modes in section 11(5). The petitioner argued that since it had spent 75% of its income for charitable purposes during the relevant year, the provisions of section 11(2)(b) and section 11(5) should not apply. However, section 13(1)(d) imposes a mandatory condition that any unspent funds must be invested only in authorized securities as per section 11(5), making the entire balance of unspent income subject to this requirement.

The Court highlighted that while the decisions of the Supreme Court cited by the petitioner did not address section 13, the judgment of the Delhi High Court referred to exemption under section 11, not the renewal of certification under section 80G. The Gujarat High Court decision, relied on by the petitioner, was specific to a case of registration renewal under section 80G and was not directly applicable to the current case. The Court emphasized that for renewal of registration under section 80G, a charitable trust must qualify for exemption under section 11 during the relevant year, failing which renewal is not permitted.

In conclusion, the Court dismissed the original petition, affirming the denial of exemption under section 80G for the year 1999-2000 due to the investment in a private company violating section 13(1)(d) of the Income-tax Act. The judgment clarified the interplay between sections 11, 13, and 80G, emphasizing the mandatory requirement for charitable institutions to invest unspent funds only in authorized securities as per section 11(5) to maintain eligibility for exemptions.