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TMI Blog2009 (9) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. CIT [ 1999 (5) TMI 11 - GUJARAT HIGH COURT] held that in respect of registration u/s. 80G, the scope of enquiry will be confined to finding out if the institution satisfies prescribed conditions stated in sub-cls. (i) to (v) of s. 80G. It does not extend to actual assessment of institution. The phrase used in sub-cl. (i) of sub-s. (5) of s. 80G is that where the institution or fund derives any income, such income would not be liable to inclusion in its total income . the trust is not actually held eligible for exemption u/ss. 11 and 12. As per s. 11, income derived from property held under trust to the extent to which such income is applied for charitable or religious purposes in India or to the extent of accumulation within certain limitation is not to be included in the total income of the trust or institution. Thus, even though the assessee receives fees for imparting education and the education being charitable purposes defined in s. 2(15) without any condition, such income would not be liable to inclusion to the extent to which such income is applied for charitable purposes in India. Education is per se charitable purpose as defined in s. 2(15). The same will be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has been established for purpose of establishing educational institution and spreading education. The society had been granted registration under s. 12AA of the Act on 23rd Feb., 2006 w.e.f. 1st April, 2005 by the learned CIT, Rohtak. However, on appeal, the Tribunal vide order dt. 5th April, 2007 had also directed to condone the delay in filing of application and re-decide the application under s. 12AA/12A of the Act. Accordingly, vide order dt. 27th June, 2008, the learned CIT had held that registration under s. 12AA of the Act is allowed to the assessee w.e.f. 29th Sept., 1980. The income of the appellant society has been held to be exempt, as is evident from the orders of assessment under s. 143(3) of the Act for asst. yrs. 2004-05 to 2006-07. 3. The learned CIT rejected the application for approval under s. 80G(5)(vi) of the Act on the following basis: A. That appellant society does not deserve the charitable status which is the premost requirement for approval under s. 80G(5)(vi) of the Act. In support of the above, he has stated the following reasons: (a) That the criteria of aid in necessitous circumstances for the benefit of the needy people who cannot pay fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... generating. B. That the only specified source of income of the appellant society for claiming exemption is voluntary contribution under s. 12(1) r/w s. 11(1)(a) since society has been claiming its income under the head Income from other sources . In his opinion, the balance income is a non-specified income under ss. 11 and 12 of the Act and, liable to be included in taxable income of the appellant society. C. That there is regular practice to deposit surplus cash in the bank after more than reasonable time of 24 hours and keeping in personal custody. D. That in light of the minutes of the proceedings, he is of the opinion that activities of the appellant society are not genuine and all activities are not for charitable activities. E. That application in Form 10G has not been properly filled in the learned CIT relied on following judicial pronouncements: (a) Kirti Chand Tarawati Charitable Trust vs. Director of IT (Exemption) Ors. (1999) 152 CTR (Del) 322 : (1998) 232 ITR 11 (Del); (b) Ganjam Nagappa Son Trust vs. Director of IT (Exemption) (2004) 187 CTR (Kar) 311 : (2004) 269 ITR 59 (Kar); and (e) CIT vs. Queens' Educational Society (2009) 223 CTR (Ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at p. 270 that scope of inquiry under s. 80G extends to eligibility of income and not to actual computation of income under the Act. It has been further held that for that purpose too, what has to be examined is: (a) Whether the applicant is registered under s. 12A? (b) Whether it is a trust wholly for charitable purposes? and (c) Whether the income received by the trust would be liable to be considered under s. 11 of the Act? It is further submitted that identical view has been expressed in the case of N.N. Desai Charitable Trust vs. CIT (2001) 165 CTR (Guj) 116 : (2000) 246 ITR 452 (Guj) at p. 458, it has been held as under: Examining from this angle, we find that for applicability of ss. 11 and 12, what is required is that such trust must have moved an application for registration under s. 12A and registered for that purpose. Once a trust is registered under s. 12A, its income from property, which includes donations whether covered under s. 11(1)(d) or under s. 12 such donations are deemed to be income from property, is not to be included in its total income under s. 11 or s. 12. The enquiry under s. 80G(5) cannot go beyond that. Applying the above, it is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure 3,30,62,621/- 3,51,15,091/- 5,12,59,063/- Capital Expenditure 1,03,36,784/- 66,66,508/- 84,19,401/- Total (B) 4,33,99,405/- 4,17,81,599/- 5,96,78,464/- Surplus (C) = (A)-(B) 17,79,342/- 73,26,008 47,53,421/- Surplus/%age of Total Receipts (3.93%) (14.19%) (7.37%) Assessed at nil income under s. 143(3) of the Act. In all the years surplus as percentage of total receipts is less than 15 per cent of total receipts, therefore entire income is eligible for exemption. This submission is being made without prejudice to the basic contention that actual computation of income is beyond the scope of enquiry under s. 80G(5) of the Act. It is further submitted that educational activities carried on by the appellant society are not incidental business to the attai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments has not been properly filled is also misplaced since audited accounts give the amount and mode of investment, therefore, it cannot be said even on this basis that Form 10G has not been properly filled in. As regards observations in para 9, same are factually misconceived, as it is not a case of renewal of registration but a case of fresh registration. The judgments relied upon are on facts distinguishable. For instance, i.e., registration in case of Kirti Chand Tarawati Charitable Trust vs. Director of IT (Exemption) Ors. was denied an amount collected from donor was utilized for setting up a religious temple. So far as case of Ganjam Nagappa Son Trust vs. Director of IT (Exemption) the trust was found to be a tool for furtherance of trade interest of a commercial organization. Both the above judgments are therefore inapplicable as in the case of appellant society, amounts have been utilized for charitable purpose i.e., education. The judgment of Uttaranchal High Court in the case of Queen Educational Society, the same too is inapplicable as it has been rendered in the context of s. 10(23C)(vi) of the Act. 5. The learned Departmental Representative Shri Nikhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; (vi) in relation to donations made after the 31st March, 1992, the institution or fund is for the time being approved by the CIT in accordance with the rules made in this behalf; and (vii) where any institution or fund had been approved under cl. (vi) for the previous year beginning on the 1st April, 2007 and ending on the 31st March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to cl. (15) of s. 2, be deemed to have been- (a) established for charitable purposes for the previous year beginning on the 1st April, 2008 and ending on the 31st March, 2009; and (b) approved under the said cl. (vi) for the previous year beginning on the 1st April, 2008 and ending on the 31st March, 2009. As per sub-cl. (vi) of sub-s. (5) of s. 80G, for recognition the trust is required to be approved by the CIT in accordance with the rules made in this behalf. The ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parting education and such object is charitable purpose within the definition of charitable purpose as specified in s. 2(15) of the Act. The condition prescribed in sub-cl. (iv) of sub-s. (5) of s. 80G is that the institution or fund maintains regular accounts of its expenditure is also complied with. The condition in sub-cl. (v) of sub-s. (5) of s. 80G is that the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1960, is also complied with as the assessee is registered under the Societies Registration Act, 1860 vide certificate dl. 29th Sept., 1980. From the above it is clear that all the conditions laid down in r. 11AA i.e., conditions laid down in sub-cls. (i) to (v) of sub-s. (5) of s. 80G are fulfilled. When the assessee trust was granted registration under s. 12AA, it is a testimony to the fact that the trust is established for charitable purposes. Hon'ble Punjab High Court which has the jurisdiction in this case in the case of Sonepat Hindu Educational Charitable Society vs. CIT held as under: In construing the purpose of a trust, for the purposes of approval under s. 80G of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable purposes defined in s. 2(15) of the Act without any condition, such income would not be liable to inclusion to the extent to which such income is applied for charitable purposes in India. Education is per se charitable purpose as defined in s. 2(15) of the Act. The same will be charitable purpose irrespective of the fact that for imparting education, the assessee charges fees. There is no condition to hold that to become charitable purposes in respect of imparting education, the same should be imparted freely or without charging any fees. So long as imparting such education is not for the benefit of any particular religion. community or caste as envisaged in sub-cl. (iii) of sub-s. (5) of s. 80G, the assessee cannot be denied exemption. In the impugned order the learned CIT has given much weightage to the fact that the assessee charges fees for imparting education and since by charging fees, the benefit is not extended to 80 per cent of the public who are below poverty line or that the education is not imparted free of cost. The trust or fund which imparts education without charging fees will qualify for exemption under ss. 11 and 12 but that does not mean that other trusts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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