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TMI Blog2025 (1) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... the Society for the purpose of enhancing education, would also be treated as work for charitable purposes. The order is based only on assumptions and there is not supportive evidence, collective or discussed in that regard. For the impugned action, we are also unable to find that until some action is taken by the respondents by saying that it does not deserve any registration because of failure to meet out the objects mentioned in clause 8 of the registration, targeting the donations alleging the same to be against the object, would not satisfy us. There would not be any dispute to the effect that the petitioner Trust runs only one Chhuttani Medical Centre . Therefore, the donations made to it cannot be doubted merely for the reason that the donations in other years are of smaller amount. Respondents have not taken note of the fact that the petitioner Trust had been making donations to Sardarni Uttam Kaur Charitable Society, which is also registered u/s 12-A and had been granted exemption u/s 80-G. Neither from the record, nor anything pointed out by the respondents that their action is in pursuance to the complaint from any person/organization/society, to which the medical servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds made available to the said Postgraduate Institute or any other society may be subject to such conditions as to accounting or for being spent on specified objects as the Trustees may from time to time think fit to impose. Provided, however, that any contribution by the Trustees to any other Trust, society, institutions, fund, scheme, or project, having as its sole objects all or any of the aforesaid objects shall mean furtherance of the objects of this Trust. Provided, always, that no part of the income or corpus of the Trust shall be applied directly or indirectly for the benefit of the Founders or their relatives or other persons specified in section 13 of the Income-tax Act, 1961, as amended from time to time or in any other law governing Trusts. Provided, always, that should any of the objects above mentioned fall outside the scope of exemption from income-tax under the law for the time being in force in India or of the provisions of any other tax law relating to public trusts, the Founders in their life time and thereafter the Trustees may, by a supplementary deed, delete any of the objects, or any part of them from the object of the Trust, so, however, that the nature of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner-Trust was not working for the objects for which it was created, as a hospital was being run on the 4th floor of SCO 52-54, Sector 17, Chandigarh and on the first floor of the said building an organisation by the name of Chandigarh Medical Center was being run, wherein a large number of doctors were carrying out their private practices by using the facility, building and manpower of the Trust and in return they used to pay to the Trust either a fix amount per month or fixed percentage of their receipt. This arrangement between the doctors and the petitioner-Trust amounted to take the premises of the Trust on rent and carrying private practice. Thus, no charitable work was being carried out. In the said show cause notice, it was further pointed that the petitioner-Trust had donated Rs. 29,00,000/- to a society, namely, Sardarni Uttam Kaur Charitable Society, and its objects (as per Trust Deed of said society) were not in any way connected with the objects of the petitioner- Trust. Apart this, by citing details of other donations made by the petitioner- Trust to other Societies and PGI etc., it was concluded that the petitioner- Trust was utilizing the interest income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate under Section 80G of the 1961 Act. The donation was given to it for the purpose of setting up an Educational Institution, which is covered under Clause 4(ii) of the Objects of the petitioner-Trust. Thus, it was requested by the petitioner-Trust not to take any action for cancellation of registration under Section 12A of the 1961 Act. 6. Respondent No. 1 (in CWP-350-2000) sought further information and documents from the petitioner-Trust, vide letter dated 01.03.1999 (Annexure P-4), to which a detailed reply dated 09.03.1999 (Annexure P-5), was furnished by the petitioner-Trust. However, not satisfied with the reply, again a show cause notice dated 19.03.1999 (Annexure P-6) was issued calling upon the petitioner-Trust as to why registration under Section 12A of the 1961 Act be not cancelled. Reply to the show cause notice was filed on 24.03.1999 (Annexure P-7) by the petitioner-Trust by highlighting that the activities being performed by it are in consonance with the objects. In support of the submissions made in its reply, the petitioner-Trust placed reliance on the judgments in the cases of M.A. Namzie Endownment v. CIT, (1998) 174 ITR 58, 72 73; Bihar Institute of Mining an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , respondents defended the impugned order dated 24.09.1999 (Annexure P-8), asserting that predominate objects of the petitioner-Trust was to earn profit and it has not done anything charitable in nature. The impugned order has been passed in accordance with law only after issuing show cause notices and affording due opportunity of hearing. Throughout, the petitioner-Trust failed to adduce any evidence to establish that it has been providing low cost medical aid to the public of Chandigarh and surrounding States of Himachal, Punjab and Haryana. Not a single rupee was spent by the petitioner-Trust on medical research. Only in one year, it has donated a sum of Rs.30,000/- to the PGI, Chandigarh, whereas donation to the tune of Rs.29,00,000/- and Rs.25,00,000/- respectively were made to Sardarni Uttam Kaur Education Society during two financial years i.e. 1994-95 and 1995-96 (Assessment Years 1995-96 and 1996-97), which have been utilised by Sardarni Uttam Kaur Education Society for further financing in the companies owned/belonging to the family members of the President Vice-President of the said society. It has also been pointed out that the trustees of the Sardarni Uttam Kaur Educat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel from both the sides. 11. Vide registration Certificate No.Judl/Reg.CR/73-74/6-T/37157, dated 12.02.1976, petitioner Trust was issued a registration certificate by the Commissioner of Income Tax, Patiala, under Section 12-A(a) of the IT Act. Looking at the object of this Trust, it was exempted from the purview of Income Tax Act under Section 80-G for the year 1993 to 1997. Object of the Trust was to provide quality, but with low cost medical aid to the public of Chandigarh and surrounding States i.e. Punjab and Haryana. It is also contended that the object was to provide basic as well as specialized medical care under one roof, so as to provide free/subsidized medical aid and diagnostic facilities to the deserving patients, who were not in a capacity to pay the higher expenses. In the premises of the petitioner Trust and to achieve its object one Chhuttani Medical Centre was also running there to provide quality and low cost medical aid to the patients at no profit and no loss basis. As per the contention, it had been running in losses also. 12. From the pleadings, we find that on raising questions by the respondents in the year 1999 certain explanations were submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ager. Thus raised its demand about these two donations only. Probably, while raising suspicion, the Assessing Officer failed in noticing the amount of the cross receipt during these years, which are Rs.3,54,46,069/- and Rs.59,83,090/-, respectively. 16. The gross amount received and the donations made by the petitioner Trust, as discussed in the impugned order is as under:- Asstt. Year Cross Receipt (Amt. in Rs.) Donation (Amt. in Rs.) 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 11,42,062/- 17,30,549/- 22,56,884/- 3,54,46,069/- 59,83,090/- 99,91,384/- 21,626/- 41,043/- 64,558/- 26,12,500/-* 29,51,871/-* 15,000/- 17. We find that for drawing such a conclusion, the order is based only on assumptions and there is not supportive evidence, collective or discussed in that regard. For the impugned action, we are also unable to find that until some action is taken by the respondents by saying that it does not deserve any registration because of failure to meet out the objects mentioned in clause 8 of the registration, targeting the donations alleging the same to be against the object, would not satisfy us. There would not be any dispute to the effect that the petitioner Trust runs only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to be sustained by not challenging the order, it would not be, at all, appropriate to allow the position to be changed in a subsequent year. We feel that these observations are quite apposite in the present case. The ratio of the decision of the apex court in Nizam s case (2000) 243 ITR 676 is not attracted in this case. 17. As regards the question whether the petitioner s income would be liable to be included in its 5 / 6 LAW FINDER Submitted By: Hon ble Mr.Justice Sanjay Vashisth PDF downloaded from the online archives of Chawla Publications(P) Ltd. total income under the provisions of sections 11 and 12 of the Act, a bare perusal of the said provisions would show that there are various factors, like the nature of contributions ; the quantum of income set apart and accumulated for application in future for specified purposes which would require consideration to determine whether the income derived by such trust or society would be liable to be included in the total income. It will thus be not possible, to determine on the date when a donation is made for deduction under section 80G, as to what will be the position as on the end of the relevant previous year of the society or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the petitioner, submitted that for the purpose of determining charitable purpose of the Trust, the respondents should have confined their attention and scope of scrutiny only to the purposes as set out in the deed of Trust without digressing to actual activities carried on by the Trust. It was also submitted that the scheme underlying the relevant provisions of the Income-tax Act shows that the legislative intent is to grant the donations made to a charitable trust exemption from payment of income tax and if a donor makes donations to a trust with charitable purpose as spelled out from the objects set out in the deed of trust then the donations must enjoy exemption though in the event of the donation being misused or misutilised for purposes other than charitable, the Trust may be liable to assessment under the appropriate provisions and may also face penal consequences; however, this has nothing to do with the grant of recognition under Section 80G of the Act, submitted the learned counsel. We are not impressed. 14. It is not disputed that the objects of the Trust as set out in the deed of declaration are charitable. However, on-the-spot enquiry conducted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implied in Section 80G so as to uphold an obligation on the part of the Commissioner to grant an approval to a trust merely by looking at the instrument creating the Trust and shutting its eyes towards the activities actually carried out by it. 17. The second contention of the learned counsel for the petitioner also deserves to be discarded. Having received donations for charitable purposes, instead of being spent on charity, are utilised for investing so as to earn the returns thereon and utilise the same for purposes other than charitable (religious in the case at hand). Obviously the donations are being utilised for purposes other than charity though indirectly. 18. We are, therefore, of the opinion that no fault can be found with the impugned order of the respondent denying renewal of recognition under Section 80G of the Income-tax Act, 1961 to the petitioner Trust for the period 1.4.1996 onwards. The petition is devoid of merit and liable to be dismissed. It is dismissed accordingly though without any order as to the costs. 19. We also find that recently, Hon ble Apex Court while considering the requirement of continuing the registration for an Educational Trust, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately weigh with the Commissioner or other concerned authority, while deciding applications for approval under Section 10 (23C). 71. This reasoning equally applies especially in Section 11(4A) which speaks of profits incidental which specifies that exemption in relation to income or trust of an institution which are profits or means of business cannot be exempted `unless the business is incidental, trust or as the case may be institution and separate books of accounts are maintained by such trusts or institution in respect of such business . Thus, the underlying objective of seventh proviso to Section 10(23C) and of Section 11(4A) are identical. These have to be read in the light of the main provision which spells out the conditions for exemption under Section 10(23C) - the same conditions would apply equally to the other sub-clauses of Section 10(23C) that deal with education, medical institution, hospitals etc. 72. What then is `incidental business activity in relation to education? Imparting education through schools, colleges and other such institutions would be per se charity. Apart from that there could be activities incidental to providing education. One example is of text b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying for registration or approval under the provisos to Section 10(23)(C) spell out a specific time (before 30 September). As the High Court has observed, there is no provision to extend such a deadline. In the circumstances for the concerned year, the reasoning of the High Court in refusing to interfere with the concerned authorities decisions to approve or reject the registration of the institution, is hereby affirmed. 76. The conclusions of this court are summarized as follows: a. It is held that the requirement of the charitable institution, society or trust etc., to `solely engage itself in education or educational activities, and not engage in any activity of profit, means that such institutions cannot have objects which are unrelated to education. In other words, all objects of the society, trust etc., must relate to imparting education or be in relation to educational activities. b. Where the objective of the institution appears to be profit-oriented, such institutions would not be entitled to approval under Section 10(23C) of the IT Act. At the same time, where surplus accrues in a given year or set of years per se, it is not a bar, provided such surplus is generated in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ety etc. This reasoning is reinforced by the recent insertion of another proviso of Section 10(23C) with effect from 01.04.2021. 77. In a knowledge based, information driven society, true wealth is education -and access to it. Every social order accommodates, and even cherishes, charitable endeavour, since it is impelled by the desire to give back, what one has taken or benefitted from society. Our Constitution reflects a value which equates education with charity. That it is to be treated as neither business, trade, nor commerce, has been declared by one of the most authoritative pronouncements of this court in T.M.A Pai Foundation (supra). The interpretation of education being the `sole object of every trust or organization which seeks to propagate it, through this decision, accords with the constitutional understanding and, what is more, maintains its pristine and unsullied nature. 78. In the light of the foregoing discussion, the assessees appeals fail. It is however clarified that their claim for approval or registration would have to be considered in the light of subsequent events, if any, disclosed in fresh applications made in that regard. This court is further of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X
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