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TMI Blog2011 (8) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... of charitable activities, proof for filing of Form No. 10 for Financial Years 2005-06 to 2007-08 as there was surplus for these years and proof for showing huge amount as other sources, etc. Before the Commissioner of Income-tax, it was stated by the assessee that the Trust was running an educational institution and conduced various courses and all the students from the economically weaker sect ions enjoyed Economically Backward Class facility. It was further stated that as the Trust had incured more than 85% of the income during the Financial Years 2005-06 to 2007-08, Form No. 10 for such period was not filed. As to the query regarding 'other sources', it was stated that many types of fees were included under the head 'income from other sources' and fees used to be paid by the students directly in the bank. The Commissioner of Income-tax was not impressed with the submissions of the assessee and consequently, he rejected the assessee's application in Form No. 10G seeking approval under sect ion 80G of the Act by observing as follows: "However, the case of the society was under scrutiny for AY 2007-08 and during the assessment proceedings, the AO, viz. the Addl. CIT, Ahmednagar Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in observing that the assessment proceedings for assessment year 2007-08 had shown that assessee violated section 13(1)(c) and was, therefore, not eligible for deduction under sections 11 &12 of the Act and under these circumstances the approval under section 80G was rightly denied. The leaned Departmental Representative has also submitted that the appeal of the assessee against assessment order was pending before the Commissioner of Income-tax (Appeals), but it is evident that when the Commissioner of Income-tax was examining the application for approval under section 80G, the assessee has been denied the exemption under section 11 & 12 of the Act by the Assessing Officer for the relevant period. 5. We have carefully considered the rival submissions, perused the orders of the authorities below and other material on record. In this case, the assessee is a Society registered and incorporated in April 1969 which is engaged in carrying on educational activities. The assessee is registered as a charitable institution in terms of section 12A of the Act with the Commissioner of Income-tax w.e.f. 5.7.2001. The assessee was also granted recognition under section 80G of the Act by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donations received by it will not be used, directly or indirectly, for the purposes of such business." 6. Factually, it emerges that in the course of assessment proceedings for AY 07-08, the Assessing Officer noticed that the Society was running educational institutions. In its campus at Ahmednagar, the Society had provided accommodation to one Dr R J Barnabas, who is the Principal and also a Trustee. According to the Assessing Officer, assessee had granted a benefit to a person referred to in section 13(3) of the Act and therefore having regard to 13(1)(c)(ii), the assessee was not entitled to the exemption under section 11 or 12 of the Act. The assessee has submitted before us that there is no violation of section 13(1)(c) of the Act. We find that the action of the Assessing Officer for assessment year 2007-08 is a subject matter of appeal which is pending before the Commissioner of Income-tax (Appeals), and thus it would not be appropriate to dwell further on the merits of such controversy. The only proposition that is required to be addressed by us at the present stage is the eligibility of the assessee to seek renewal of recognition under section 80G having regard to the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Before embarking on analyzing the provisions of sub-section (5) of section 80G, one must notice that section 80G does not relate to assessment of the trust or the institution whose incomes are not liable to be include in the computation of taxable income under various provisions of the Act referred therein. Primarily, section 80G is related to giving deduction in respect of the 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. "It is also to be noticed that whether the income of an institution or find would ultimately be liable to inclusion in its total income at the close of the assessment year or not cannot be determined at the time of making of the donation. The eligibility of the donation for deduction has to be considered with reference to the point of time at which donation is made and not with respect to the point of time at which donation is made and not with respect to the time in future depending on assessments of the done. That is where the use of the verb in future tense "would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been provided by the statute, there has been no alteration in the substantive provision, that is to say, entitlement of the donor to claim deduction depends on the eligibility of the done to claim exemption of its income on the date when donation is made. Examining from this angle, we find that for applicability of sections 11 and 12, what is required is that such trust must have moved an application for registration under section 12A and registered for that purpose. Once a trust is registered under section 12A, its income from property, which includes donations whether covered under section 11(1)(d) or under section 12 such donations are deemed to be income from property, is not to be included in its total income under section 11 or section 12. The enquiry under section 80G(5) cannot go beyond that." "The actual assessment of the trust and its actual liability to tax in accordance with the provisions of sections 11 and 12 and 12A has no bearing on the claim of the donors for whose benefit approval is accorded. Explanation 2 to section 80G(5) which tells in no uncertain terms that a deduction to which the assessee is entitled in respect of the donation made to an institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. 9. To the similar effect is also the decision of our co-ordinate bench in the case of Shikashan Prasarak Mandali (supra). In this case also, the Commissioner of Income-tax denied recognition under section 80G for the reason that the exemption under sections 11 & 12 had been denied to the assessee in the assessment proceedings. As per the Bench, such objection would not ipso facto militate against denial of recognition under section 80G as long as in principle and on a prima facie basis assessee complied with the conditions set out in section 80G(5)(i) to (v) of the Act. 10. Having regard to the aforesaid observations of the Hon'ble Gujarat High Court, in our view, in the present case the objection raised by the Commissioner of Income-tax to deny the recognition under section 80G is founded on irrelevant considerations by embarking upon an exercise which is only in the realm of assessment proceedings. In the present case, undeniably the assessee is registered under section 12A of the Act and such registration continues. In this view of the matter, in our view, the assessee fulfils the condition prescribed under clause (i) of section 80G(5) of the Act. There being no othe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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