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TMI Blog2011 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, was duly obtained from the office of the Director of Town & Country Planning, SDO, Public Works Department and local Gram Panchayat, etc - Even if the land was obtained through registered gift deed itself is not a good ground for denying exemption to the assessee. Hence, all the necessary requirements under rule 11AA(4) and conditions of section 80G(5)(i) to (v) are satisfied, therefore, the learned CIT ought to have granted approval under section 80G(2)(iv) of the Act to the assessee - Accordingly, set aside the order of the learned CIT and direct him to grant approval under section 80G of the Act to the assessee. - ITA NO.609/IND./2010 - - - Dated:- 9-3-2011 - ORDER This appeal has been preferred by the assessee against the order dated 9th September, 2010 passed by the Commissioner of Income-tax, Indore, holding that running of school is not a charitable activity and as such the assessee is not entitled to approval under section 80G(5) of the Act. 2. We have heard Shri S.S. Deshpande, ld. Counsel for the assessee and Shri P.K. Mitra, learned Senior Departmental Representative. The crux of arguments on behalf of the assessee is that the assessee trust is registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The submissions of the assessee before the learned CIT are reproduced hereunder :- "(ii) After getting registration, Society started surveying the present status of education in various villages in Khargone Distt. The result of the survey prompted it to start its activities from Bhiakangaon Tehsil. The land was acquired through purchases and also got in gift in village viz. Kadata which is approx 4 KM away from tahsil place Bhikangaon. The land was got registered in the name of applicant society (copy of land documents are enclosed with Registered valuer s report) (3) All the 7 members of governing Board/Director themselves first contributed money in the form of membership fee, donation and also interest free loans to proceed further for construction the school building. Later on many Donors from agriculture community, businessmen, etc. joined hands and made generous contribution to construct the building. Within a record time of almost one year society could complete the construction work and could start running school w.e.f. 1/7/2010 (list of donors already filed along with previous submission). (4) As is apparent from the object clause of the memorandum, society works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 3 of the letter, in last but one para, the society has made it clear that the object of the society has to impart quality education to the students and not to provide education free of cost as a part of its so called charitable activities. So far as a the question of serving the country and Govt. in implementing the Right to Education Act, 2009 is concerned, firstly there is no provision in IT Act under which a society claiming to implement the Right to Education Act, 2009 is automatically entitled for approval under section 80G of the IT Act. Secondly, as per provisions of Right to Education Act, 2009 free education is to be imparted to each and every child up to the age of 14 years. Thus, not only the society has failed to comply with the requirements of section 80G, it has also violated the provisions of Right to Education Act, 2009 by charging fees from the children below the age of 14 years. As such, the claim of the applicant society for registration under section 80G(5) is based on a clear breach of the Right to Education Act, 2009 by the applicant society itself. 11. After having consideration of the aforesaid provision of law and submission made by the assessee I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been duly complied with. To properly adjudicate the issue in appeal, it is necessary to first appreciate the scheme of the Act so far as approval under section 80G is concerned. Section 80G(2)(a)(iv) provides that in computing the total income of the assessee, in accordance with the provisions of the said section, there shall be deducted, an amount equivalent to 50% of any sum paid by the assessee in the previous year, as a donation, to any fund or any institution other than the ones specified in section 80G, to which this section applies. Section 80G(5)(vi) provides that that in order to be eligible for deduction under section 80G(2)(a)(iv), the institution or fund to which the amount is paid as donation, it is for the time being approval by the CIT in accordance with rules framed in this behalf. Rule 11AA of the IT Rules provides for requirements for approval of any institution or fund under section 80G. An institution or fund seeking approval under section 80G is to move an application to the learned CIT concerned, in the prescribed proforma and along with copy of (a) registration granted under section 12A or copy of notification issued under section 10(23) or section 10(23C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law or is an institution financed wholly or in part by the Government or a local authority. 7. A plain look at the provisions of section 80G of the Act read with rule 11AA of the IT Rules, thus makes it clear that the decision whether to grant or not to grant approval under section 80G essentially rest on the satisfaction of the learned CIT that the above five conditions are satisfied by the applicant. Each case must, therefore, be examined on the touchstone of aforementioned five tests which are fairly objective and unambiguous. I also find that under rule 11AA(3) the learned CIT has the power to recall for such further information and documents and to have such inquiries conducted, as he considered appropriate to satisfy himself about "genuineness of activities of trust or institution" but then there is no further elaboration about the connotations of expression "genuineness". In this context, that criteria does not find any place in the tests on which the learned CIT must satisfy himself before granting the approval under section 80G. 8. At this stage, it is noted that the learned CIT vide order dated 29.1.2010 (page 45 of the paper book) has already granted registration un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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; [* * *] (vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf [; and] [* * *] (vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso to clause (15) of section 2, be deemed to have been (a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and (b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009.]" 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the whole or any part of the income or assets or the institution or fund for any purposes other than the charitable purposes. That can ofcourse be done by examining the provisions in instrument and rules of the institution. The assessee has duly furnished the documents before the learned CIT and no such discrepancy was noted therein, thus the provisions of section 80G(5)(iii) are also satisfied. The next situation is to be ensured that the institution or fund is not express to be for the benefit of any particular religious community or caste. That is not the case before me, therefore, there is no dispute on that aspect. As regards the requirements of section 80G(5)(iv) all that is to be seen is that the assessee maintains accounts of its receipts and expenditure. No such discrepancy was pointed out before me by the revenue, therefore, since all the requirements and correctness of the accounting treatment are fulfilled by the assessee, therefore, it cannot be said that the assessee has manipulated its accounts as the books of account are duly maintained and were produced before the learned CIT. The copy of registration certificate granted under section 12AA issued by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /600 per month charged from other capable sections of the society (This list along with charged fee from them was also filed before the learned CIT). During hearing, it was also claimed that a well qualified staff was employed by the assessee to impart quality education on good salary basis. The contention of the learned CIT that the assessee trust mainly incurred expenses for building construction which is about Rs. 34 lacs itself is not a good ground for denying exemption because a good building is also the basic requirement for the healthy environment for the students. Even otherwise if, at a later stage, it is found that the assessee is involved in "commercial considerations" contrary to the objects of the assessee society, the department is free to take appropriate action in accordance with law. So far as the contention of the revenue regarding conversion of agricultural land for commercial use (here for constructing school building) is concerned, it supports the case of the assessee as the permission for such conversion, for constructing the school building, was duly obtained from the office of the Director of Town Country Planning, SDO, Public Works Department and local Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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