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TMI Blog2014 (8) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... de the order passed by the Commissioner refusing to grant recognition u/s 80G(5) of the Act to the respective assessee trust – Decided against revenue. - Tax Appeal No.306 of 2014, Tax Appeal No.409 of 2014, Tax Appeal No.416 of 2014 - - - Dated:- 6-8-2014 - M. R. Shah And K. J. Thaker,JJ. For the Petitioner : Mr. Pranav G. Desai For the Respondent : Mr. Tushar P. Hemani, Ms. vaibhavi K. Parikh JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1.0. As common question of law and facts arise in all these appeals, they are disposed for by this common order. 2.0. Feeling aggrieved and dissatisfied with the impugned order passed by the learned Income Tax Appellate Tribunal, Rajkot Bench, Rajkot (hereinafter referred to as the Tribunal ) dated 22.11.2013 passed in ITA No.402/RJT/2013, by which, learned Tribunal has allowed the said appeal preferred by the respondentassessee and has quashed and set aside the order passed by the Commissioner of Income Tax, RajkotI and has directed him to grant the recognition under Section 80G(5) of the Income Tax Act, 1961 to the assessee truest, the revenue has preferred present Tax Appeal No. 306 of 2014 with the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notice dated 12.2.2013 calling certain details in respect of its application. In order to verify the facts stated in the application, the trust was asked to produce trust deed, books of accounts, relevant vouchers, donation book and minutes book in original. That on perusal of books of accounts for FY 201112 it was found that trust failed in making expenditure to the extent of 85% of its income, which according to the authority was necessary as per the provision of Section 80G(5) of the Act. That the authority was of the view that as the trust has failed in complying with the requirements for approval under Section 80G as laid down under Section 80G(5) of the Act and Rule 11AA of the I.T. Rules, 1962, the Commissioner of Income Tax, Rajkot(I) rejected the application submitted by the assessee seeking approval under Section 80G(5) of the Act. 4.1. Feeling aggrieved and dissatisfied with the order passed by the Commissioner rejecting the application made by the assessee seeking approval under Section 80G(5) of the Act, the assessee trust preferred appeal before the learned Tribunal and by impugned judgment and order and considering the decision of the Punjab and Haryana H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Commissioner to grant recognition under Section 80G(5) of the Act to the assessee trust. 6.0. Shri Tushar Hemani, learned advocate for the respondent trust in Tax Appeal Nos. 306 of 2014 and 409 of 2014 has submitted that as such the question raised in the present appeal is squarely covered by the decision of the Division Bench of this Court in the case of N.N. Desai Charitable Trust vs. Commissioner of Income Tax reported in 2000 (246) ITR 546 as well as decision of the the Punjab and Haryana High Court in the case of O.P.Jindal Global University (supra). It is submitted that in the case of M.M. Desai Charitable Trust (supra) the Division Bench has held that while considering certification of the institution for purpose of Section 80G of the Act, the authority granting approval cannot act as an Assessing Authority and the inquiry should be confined to finding out if institution satisfies prescribed conditions. It is submitted that therefore, no error has been committed by the learned Tribunal in quashing and setting aside the order passed by the Commissioner and consequently directing the Commissioner to grant recognition under Section 80G(5) of the Act to the respective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income of the trust for the purposes of the trust, therefore, the income of the assessee was liable to be included in the taxable income and the assessee did not fulfill the condition of s. 80G(5)(i) of the Act. It would be apposite here to reproduce the relevant provisions of s. 80G(5)(i) of the Act. Where the institution or fund derives any income such income would not be liable to inclusion in its total income under the provisions of ss. 11 and 12 [or clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) of s. 10 . Before embarking on analysing the provisions of subs. (5) of s. 11(1), one must notice that s. 11(1) does not relate to assessment of the trust or the institution whose income are not liable to be included in the computation of taxable income under various provisions of the Act referred therein. Primarily, s. 11(1) is related to giving deduction in respect of donations made by a person who, but for this provision, would not be eligible for such deduction because the donations are not ordinarily considered to be expenses incurred for the purpose of earning income and liable to be deducted therefrom. Since all donations generally are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s. 11(1), appears to us, is to the eligibility of the institution or the fund to claim that its income is not liable to be included in computation of total income. The two are different concepts. First, whether an institution or fund is such whose income is not liable to be included in the computation of total income it depends on its status or character. The second is actual assessment of income, which necessarily takes place in future after donation is received by the donee on fulfilment of other conditions about application of income by the eligible trusts, which in the very nature of things can operate only after receipt of income. The actual extent of exclusion from or inclusion in the computation of total income, the receipts of such institution or fund, depends on fulfilment of further conditions which may or may not exist at the close of the year and has no direct relation to the purpose with which the provision is made. The latter falls in the realm of the assessment of the trust, institution or fund which derives income which is not ordinarily includible in its total income. The liability to assessment is not affected by issuance of recognition certificate or approval c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not includible in the income of the trust. It may be further observed that merely because the accumulation of the income from property exceeds 25 per cent it does not result in inclusion of the entire income in the taxable income of the assessee. The two conditions speak out, firstly, that income derived from property to the extent to which such income is applied to such purposes in India is not to be included in the computation of total income and it is only where there is accumulation of income, such accumulation exceeds 25 per cent shall not be liable to be exempt from income but in case accumulation is restricted to 25 per cent even accumulation is not to be included in the computation of total taxable income. That too is not in absolute terms. In that regard subs. (2) of s. 11 points out certain conditions and contingencies in which that limit is also relaxed. We need not dilate here in detail on this aspect. This we have noticed only for the purpose of showing, firstly, that as on the date when donation is made which is the relevant date for the purposes of claim of donor to deduction under s. 11(1) it is not possible to point out what shall be the exact state of affairs tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent referred to in clause (h) of subs. (2) of s. 13. Likewise, the institution or fund whose income is not to be included in the taxable income of the recipient under provisions of s. 10, namely, clause (22) or clause (22A) or clause (23) or clause (23AA) or clause (23C) would go to show that these clauses identified different institutions for the purpose of granting exemptions, some of which require approval by publication in Official Gazette, some of which require to bear a particular character or the like. Once that character or the condition is fulfilled, s. 10 operates. For illustration, under clause 22, as it was in force upto 31st March, 1999, any income of a university or other educational institution existing solely for educational purposes and not for purposes of profit was not to be included in total income. Now, if an approval is sought by such institution what the approving Authority can seek to enquire is whether the applicant university or educational institution which is solely existing for educational purposes, and whether its purpose is not to earn profit. Under clause (23) exemption is in respect of income of an association or institution established in India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of nonfulfilment of some conditions by him as to applicability or accumulation of income, as it is not possible to predicate that in praesenti when donation is made. As we have noticed above, that question would depend upon the facts existing at the close of the assessment year and at the time of considering the application it cannot be examined in the light of what is going to happen in pending assessments in respect of which approval certificate was already existing and assessment of which would not affect the donations made to the trust during that year. 8.0. Similar view has been expressed by the Punjab and Haryana High Court in the case of O.P.Jindal Global University (supra). Applying the ratio of the aforesaid decisions to the facts of the case on hand, it cannot be said that the learned Tribunal has committed any error in quashing and setting aside the order passed by the Commissioner refusing to grant recognition under Section 80G(5) of the Act to the respective assessee trust. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, the question raised in the present appeals is answered against the revenue and in favo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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