9911796707
TMI Blog2024 (1) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... is a heighted apprehension. In any case, Ld. AR has shown, with the help of audited financial statements, that till now the trust has not made any such loan to a related or favourable party. If the trust makes any such loan in future, the law provides for forfeiture of exemption u/s 13 which in case of necessity, can be invoked by authorities. Looking into these aspects, we do not find any merit in the objection raised by Ld. CIT(E). Since the sole objection raised by Ld. CIT(E) is dissolved, we order the Ld. CIT(E) to consider the application of assessee and pass a needful order granting registration u/s 12AB as applied for. Registration u/s 80GB - Since objection, as noted for registration u/s 12AB stands dissolved, it stands dissolved for section 80G also. We find that the assessee s case is directly covered by two decisions relied upon by Ld. AR, namely (i) KVC Trust [ 2011 (3) TMI 121 - ITAT, CHENNAI] and (ii) Mishri Lal Gordhan Lal Batra Charitable Trust [ 2007 (12) TMI 200 - RAJASTHAN HIGH COURT] . DR is not able to show any reason for non-applicability of these decisions or to show any contrary decision holding the field. Therefore, following the same view, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout being responsible or accountable for any loss caused thereby . [Emphasis supplied] 4. Ld. AR submitted that the CIT(E) has objected above clause with the reasoning that words without being responsible or accountable for any loss caused thereby occurring therein permits the trustees to divert the funds of assessee-trust in the names of loans to any related or favourable party without any accountability or responsibility. The CIT(E) has relying upon certain decisions concluded that if one of the object of trust is not charitable or religious in nature and the trust-deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption u/s 11 of the act would not be available. Ld. AR submitted that this objection of CIT(E) is the only basis for rejection of assessee s application which needs to be addressed. 5. Then, Ld. AR opposed the viewpoint taken by CIT(E) on several counts as under: (i) It is submitted that a careful reading of aforesaid Clause 4(p) of trust-deed clearly reveals that the trustees can give loans for any of the above charitable purposes . This means, the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terests, for any of the above charitable purposes without being responsible or accountable for any loss caused thereby . The words for any of the above charitable purposes coming before the underlined words being relied upon by revenue, cannot be ignored. One cannot take out a part of the sentence and interpret, one has to read entire verdict of a sentence. Otherwise, it becomes mis-reading. We find that in the said clause 4(p), it is clearly mentioned that the trustees can give loans for any of the above charitable purposes only. Therefore, the apprehension of revenue that the loans would be given to a related or favourable party is a heighted apprehension. In any case, Ld. AR has shown, with the help of audited financial statements, that till now the trust has not made any such loan to a related or favourable party. If the trust makes any such loan in future, the law provides for forfeiture of exemption u/s 13 which in case of necessity, can be invoked by authorities. Looking into these aspects, we do not find any merit in the objection raised by Ld. CIT(E). Since the sole objection raised by Ld. CIT(E) is dissolved, we order the Ld. CIT(E) to consider the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose ; (5B) Notwithstanding anything contained in clause (ii) of sub-section (5) and Explanation 3, an institution or fund which incurs expenditure, during any previous year, which is of a religious nature for an amount not exceeding five per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section apply. Explanation 3. In this section, charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature . 13. Ld. AR submitted that the CIT(E) has observed that there are three categories of trusts according to purposes, namely (i) charitable purposes, (ii) religious purposes, and (iii) religious-cum-charitable purposes. Out of these categories, only (i) category is eligible for approval u/s 80G, although all three categories are eligible for registration u/s 12AB. Ld. CIT(E) has further observed that the determination of religious expenditure upto 5% as prescribed in section 80G(5B) is also applicable only to category (i) i.e. purely charitable trusts. Therefore, according to CIT(E), the categories falling under (ii) and (iii) are not el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see authorized it to spend money for religious activity. According to him, the restrictive clause of 5% appearing in sub-section (5B) of section 80G would apply only if all the objects were of charitable nature. It is, therefore, necessary for us to look into the objects of the trust. Objects appearing in clause 5 of the trust deed 22-3-2010 run as under: XXX 6. There cannot be any doubt regarding the charitable nature of the various objects mentioned above, except for clause (xi). Clause (xi) does authorize the trustees to apply income of the trust for religious activities as they might mutually agree from time to time. A limit is specified, obviously to come within the ambit of sub-section (5B) of section 80G of the Act, which allowed religious spending not exceeding 5 per cent of the total income. The procedure for seeking approval specified in sub-clause (vi) of sub-section (5) of section 80G, is set out in Rule 11AA. Sub-Rule (4) of Rule 11AA clearly states that once the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled, he shall grant the approval, and if otherwise, he shall reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in whole, of religious nature. Assessee had by itself put a limitation for spending on religious activity, if at all it was spent for that purpose in future. In any case sub-rule (4) of Rule 11B mentions that the approval given under section 80G would be only for specific years mentioned and the approving authority had the discretion to grant or not to grant a renewal periodically based on applications were put up for this by the assessee. Similarly if we look at sub-section (3) of section 12AA of the Act, it gives power to the Commissioner to withdraw registration given under section 12AA of the Act if the activities of the institution or trust were not as per its' objects. Thus authorities who are vested with the powers to grant registration and approval, are also vested with the power to withdraw such registration or not to grant extension of approval given earlier. In these circumstances, we are of the opinion that the assessee was eligible for registration under section 12AA as well as approval under section 80G of the Act, and these were unjustly denied without taking the totality of the circumstances and objects of the assessee. We, therefore, quash the order of the DI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner has to consider the ratio between the total income of the trust and the expenditure actually incurred for religious purposes and only if the substantive part of the income, that is to say more than 5 per cent of total income is incurred for religious purposes the registration of trust/fund under section 80G can be refused on that ground. 5. With this premise, it is further submitted by the learned counsel for the petitioner that the petitioner shall be satisfied if the writ petition is disposed of with the direction to the Commissioner to consider the case of the petitioner-trust for renewal of its registration with effect from the insertion of sub-section (5B) uninfluenced by the impugned order of rejecting the renewal for the assessment years 1995-2000. In other words, the petitioner's application for renewal with effect from 1-4-2000, should be considered keeping in view of sub-section (5B) of section 80G. 6. These submissions appear to be justified in the light of the aforesaid provision. 7. Accordingly, the writ petition is disposed of with the direction that the petitioner's applications for renewal of registration with effect ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
