9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (8) TMI 230 - HC - Income TaxRegistration u/s 80G (5) (vi) - charitable activities and utilization of funds - deduction out of total income on donation to be made available to donors on the basis of such registration - infirmity in the submission of the income-tax return and Form-10B was not submitted - donations utilized for construction of Public Library. HELD THAT - As in the case of Sonepat Hindu Education and Charitable Society 2005 (5) TMI 52 - PUNJAB AND HARYANA HIGH COURT we find that there is sufficient substance in the arguments advanced by learned Senior counsel for the petitioner society. The judgement passed in Kirti Chand Tarawati Charitable Society 1998 (3) TMI 113 - DELHI HIGH COURT was on the facts of said case. As it cannot be said that the law has been laid down that investment by a charitable organisation for public purposes, which are incidently for the charitable purposes, cannot be a ground to deny registration u/s 80G. Neither in the report submitted by the ACIT, Circle, Panipat, nor in the impugned order, passed by respondent No. 1 CIT, there is a categoric discussion or specific finding that the donations/funds received by the petitioner society have been utilised for any profit, personal gains or any other purposes. In the said report dated 17.03.2006, which has been primarily relied upon by respondent No. 1 CIT while passing the impugned order, only prime allegation against the petitioner society is that the proofs of the expenses made by it have not been produced or the books of accounts have not been properly maintained. This Court finds that the use of donations/funds by renowned Society/Trust already working for the charitable purposes, should not be discarded from seeking exemption merely on technicalities, such as production of the receipts/entries. Position could be said differently had there been any allegation of using the donations/funds for personal gains, profits or otherwise. Even there is no specific finding recorded by respondent No. 1 CIT that the petitioner society has failed to meet out its aims and objects. Neither, there is any denial, nor any adverse observation in regard to the exemption/renewal granted from time to time to the petitioner society under the provisions of law i.e. Section 80G (5) (vi) of the 1961 Act. As also not denied that except for the period in question, ever before, renewal under the said provision of law i.e. Section 80G was rejected. Grant of registration/exemption u/s 80G in favour of the petitioner society, right from 1974 is also an admitted position. The view point expressed by this Court is fortified with the observations made by this Court in the case of Sonepat Hindu Education and Charitable Society 2005 (5) TMI 52 - PUNJAB AND HARYANA HIGH COURT the relevant portion of which has already been noticed and reproduced hereabove. As noticed that the petitioner Society continuously enjoyed registration u/s 12AA and comes within the definition of charitable Society/Trust/Establishment as defined in the Income-tax Act, 1961. Merely because there is an infirmity in the submission of the income-tax return and Form-10B was not submitted, would not result in presumption that the petitioner Society is not performing charitable functions. From the contentions, which have been placed on record and the same having not been denied by the respondents, we are satisfied that the entire donations and the amount received by the petitioner Society are solely utilized for the purpose of charitable functions. In the opinion of this Court, the construction of Public Library would also form part of charitable function and any work done with the same purpose has to be noticed for granting exemption u/s 80G of the 1961 Act. It was also submitted that certain sources of donations could not be traced, however, the same would not in any manner deprive the petitioner Society for getting exemption under Section 80G of the 1961 Act and, for such donations alone the matter can be examined separately. We also deal with the argument raised by learned counsel for the revenue that there is an alternative remedy of appeal before the ITAT against the impugned order of the CIT. We find that this writ petition was filed in the year 2006 and it would be travesty of justice if, we relegate the petitioner Society after about 18 years to avail the alternative remedy by filing an appeal before the ITAT. Orders passed by respondent No. 1 CIT is hereby quashed/set aside and direct the respondents to reconsider the application of the petitioner Society and proceed to grant renewal of registration under Section 80G (5) (vi) of the 1961 Act. Accordingly, the writ petition is allowed.
Issues Involved:
1. Denial of registration under Section 80G (5) (vi) of the Income Tax Act, 1961. 2. Compliance with statutory requirements under Section 11(2) and Section 11(5) of the Income Tax Act. 3. Genuineness of charitable activities and utilization of funds. 4. Alternative remedy of appeal before ITAT. Detailed Analysis: 1. Denial of Registration under Section 80G (5) (vi): The petitioner, a registered society engaged in charitable activities, challenged the order dated 20.03.2006 by the Commissioner of Income Tax (CIT), Karnal, denying them registration under Section 80G (5) (vi) of the Income Tax Act, 1961. The petitioner argued that they had been granted such registration since 1974, which was renewed multiple times, and their income had consistently been exempted from tax under Section 12AA of the Act. The CIT, however, concluded that the petitioner failed to utilize the required 85% of its income towards charitable activities, instead accumulating funds in fixed assets and immovable properties. 2. Compliance with Statutory Requirements under Section 11(2) and Section 11(5): The CIT noted that the petitioner did not comply with Section 11(2) of the Act, which mandates applying 85% of income to charitable purposes. The petitioner admitted to an oversight in not enclosing Form No. 10B with their return of income. Additionally, the CIT found that the petitioner did not properly invest surplus funds as required under Section 11(5). Despite claims of investments in FDRs, the petitioner failed to reconcile these amounts and provide details of income or interest gained. 3. Genuineness of Charitable Activities and Utilization of Funds: The CIT's investigation, supported by a report from the Assistant Commissioner of Income Tax, revealed several discrepancies. These included incomplete donation receipts, lack of donor details, and unverified expenses. The CIT concluded that the society was not genuinely engaged in charitable activities, as there was insufficient evidence of the utilization of donations for their intended purposes. The petitioner argued that their activities were consistent with their aims and objectives and that previous renewals of Section 80G registration supported their claim. 4. Alternative Remedy of Appeal before ITAT: The revenue's counsel argued that the petitioner had an alternative remedy of appealing to the ITAT. However, the court noted that the writ petition had been pending for 18 years, and relegating the petitioner to an alternative remedy at this stage would be unjust. The court decided to address the merits of the case directly. Court's Findings: The court found substance in the petitioner's arguments, emphasizing that technicalities should not overshadow the genuine charitable work of the society. The court noted that there was no specific finding of funds being used for personal gains or non-charitable purposes. The court referenced the judgment in Sonepat Hindu Education and Charitable Society v. Commissioner of Income Tax, which supported the petitioner's case, stating that the CIT should not deny approval based on mere technicalities if the society's objectives were charitable. Conclusion: The court quashed the impugned order dated 20.03.2006 by the CIT and directed the respondents to reconsider the petitioner's application for renewal of registration under Section 80G (5) (vi) of the Income Tax Act. The writ petition was allowed, and the court emphasized that the construction of a public library by the petitioner should be considered a charitable activity. The court also dismissed the argument of an alternative remedy due to the prolonged duration of the case.
|
