Appell v. Seth Vinod Kumar Somani Charitable Trust, 14 New Shakti Nagar,Bathinda. (

2018.06.01 16:44 IN THE HIGH COURT OF PUNJAB AND HARYANA AT | CHANDIGARH. ITA No. 47 of 2018Date of decision: 15.5.2018| The Commissioner of Income Tax (Exemptions), Chandigarh .--.--Appell Vs. Seth Vinod Kumar Somani Charitable Trust, 14 New Shakti Nagar,Bathinda. (PAN No. ). ...Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTAL, ACTING CHIEF JUSTICE HON’ BLE MR. JUSTICE TEJINDER SINGH DHINDSA| Present: |Mr. Denesh Goyal, Senior Standing counsel for the | appellant- revenue. | Ajay Kumar Mittal,(ACJ) 1.The appellant-revenue has filed the instant appeal under Section.260A of the Income Tax Act, 1961 (in short, “the Act’) against the orderdated 11.08.2017, Annexure A.2, passed by the Income Tax AppellateTribunal, Amritsar Bench, Amritsar (in short, “the Tribunal’) in ITANo.570/Asr/2016, for the assessment year 2016-17, claiming followingsubstantial questions of law:-_ 1) Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT 1s right in directing the approval to be accorded instead of reverting 1t back for re-examination 1nthe light of its findings?| 11). Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT without giving any findings onits own Is right in treating a studied conclusion as flimsy? 111). Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT 1s right in ignoring the CIT’sfinding that the main focus of the assessee society was merelyon creation of land and building and one-off activities could notpass muster as systematic activities geared towards the objects? iv). Whether on the facts and in the circumstances of the caseand in law, the Hon’ble ITAT 1s right in placing reliance on thefact of the assessee was having |12AA registration and byignoring the statutory condition that I2AA registration 1smerely a pre-condition for approval u/s 80G(5)? v). Whether on the facts and circumstances of the case, theorder of the Appellate Tribunal is contrary to the evidence andmaterial on the record of the case and therefore, perverse’ v1). Whether on the facts and circumstances of the case, theorder of the case, the order of the Appellate Tribunal issuffering from non-application of mind and 1s unreasonable andarbitrary?” oOA few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed.An application was filed| by the respondent-assessee before Commissioner of Income Tax,(Exemptions) |CIT(E)| Chandigarh for grant of approval under Section80G(5)(v1) of the Act on 30.3.2016. Vide order dated 29.9.2016, AnnexureA.l, the said approval was denied by the CIT(E) inter alia holding thatapproximately 50% of donations was from the trustees themselves and thecontention of the applicant that the same was corpus donation for land building could not be accepted in the absence of documentary evidence. Itwas further observed that the main expenditure was on account of studentfees amounting toZL103275/- out of which a sum ofZL37,000/- was spent on|single child 1.e. Tania on different occasions such as payment of tuition feeto some Arora classes, payment at SSD Girls College, Bathinda. It wasrecorded that such acts did not qualify for charitable acts. Moreover, noevidence was provided as regards the identity of the students to whom helpwas being provided. It was also recorded that the main focus of the societywas only on creation of land and building. Aggrieved by the order, theassessee filed an appeal before the Tribunal. Vide order dated 11.8.2017,Annexure A.2, the Tribunal allowed the appeal on the ground that once theregistration under Section 12AA of the Act was in existence, the approvalunder Section 80G of the Act could not be denied on flimsy ground until andunless there was violation of the rules specified in that behalf. Hence theinstant appeal by the appellant-revenue. | 3 We have heard learned counsel for the appellant-revenue. | 3 We have heard learned counsel for the appellant-revenue. | 4Learned counsel for the revenue relied upon judgment of thisCourt inCIT vs. Gulab Devi Memorial Hospital Trust,(2017) 391 ITR 73|to contend that registration under Section 12AA of the Act by itself 1s notautomatic for granting approval under Section 80G of the Act. — 5.It would be apt to examine the case reported 1n|Gulab DeviMemorial Hospital Trust’scase (supra), on which heavy reliance has beenplaced by learned counsel for the revenue. In the said case, the assesseeclaimed registration under Section 12AA of the Act, which was granted.Simultaneously, exemption under Section 80G of the Act was also approved.Thereafter, the exemption under Section 80G of the Act continued to be granted year after year till the assessment year 2009-10. The assessee soughtexemption for the assessment years 2010-11 to 2014-15 through anapplication to the CIT(E) which was rejected on the ground that the assesseewas generating substantial surplus and was spending only a percentage forcharitable purposes. It was recorded that the assessee therein had deviatedfrom its charitable objects. After examining the relevant statutory provisionsand the case law on the point, it was held by this Court that grant ofexemption under Section 10(23C) and registration under Section I2ZAA ofthe Act in favour of an institution would be essential and persuasive factorfor the grant of exemption under Section 80G of the Act though that by itselfmay not be sufficient to do so. The proposition of law as noticed is wellrecognized. However, the facts of each case would govern the decision 1ngiven set of circumstances. | 6.)In the present case, the assessee had applied for registrationunder Section 12AA of the Act which was granted vide registration No. 531dated 30.11.2015 for the first time to the assessee. Thereafter, the assesseeapplied under Section 80G(5)(v1) of the Act seeking approval of CIT(E) on30.03.2016. The assessee claimed that it was established for following aimsand objects as recorded by CIT(E) in para 2 of the order dated 29.09.2016declining the approval:- “2. The stated aims and objects of the trust are to run, maintainor assist school, colleges or boarding houses and anyeducational or other institution for coaching, guidance,counseling or vocational training or to grant individualscholarships for poor, deserving and needy students forelementary and higher education in India. The society also aims.to run, maintain or assist any medical institution, nursing homeor clinics or to grant assistance to needy and indigent personsor assist school, colleges or boarding houses and anyeducational or other institution for coaching, guidance,counseling or vocational training or to grant individualscholarships for poor, deserving and needy students forelementary and higher education in India. The society also aims.to run, maintain or assist any medical institution, nursing homeor clinics or to grant assistance to needy and indigent persons for meeting the cost of medical treatment in India. The societyfurther aims to give financial or other assistance 1n kind by wayof distribution of books, notebooks, cloths, uniforms or mealfor the poor and indigent and to the persons suffer due tonatural calamities in India. The society also aims to acquireproperty for the sole use for public good by making it availablefor public purposes as for example, housing a library, readingroom, clinic, creche and/or as community hall to be availablefor public use such as training classes, seminars, discussion andother public functions for benefits of the community in generalincluding use as Dharamshalla or public park in India.” for meeting the cost of medical treatment in India. The societyfurther aims to give financial or other assistance 1n kind by wayof distribution of books, notebooks, cloths, uniforms or mealfor the poor and indigent and to the persons suffer due tonatural calamities in India. The society also aims to acquireproperty for the sole use for public good by making it availablefor public purposes as for example, housing a library, readingroom, clinic, creche and/or as community hall to be availablefor public use such as training classes, seminars, discussion andother public functions for benefits of the community in generalincluding use as Dharamshalla or public park in India.” JT.The CIT(E) declined the approvalunder Section 80(G)(5)(v1) ofthe Act to the respondent-assessee society vide order dated 29.09.2016 onthe ground that the activities of the respondent-society were not forcharitable purposes and 50% of the donations was from the trusteesthemselves in the absence of any documentary evidence. Further, the mainfocus of the respondent society was on creation of land and building. Thesaid decision was upset by the Tribunal which has now been assailed by therevenue before us. 8.|The facts have been discussed 1n extenso by CIT(E) 1n his orderand are being taken therefrom. The assessee society was granted registrationunder Section 12AA of the Act by the CIT(E) on 30.11.2015, meaningthereby, the CIT(E) was satisfied that the aims and objects of the assesseewere for charitable purposes. No action under Sub section (3) of Section12AA of the Act had been initiated by the same Officer for cancellation ofregistration of the assesse-society. Further, the assessee-society in the yearof its constitution had received 50% of the donations from the trusteesthemselves and had utilized the corpus donation for land and building.Ordinarily when an assessee-society 1s established in the initial years 1t may be required to set up its place of office from where 1t would operate and alsorequire building to carry on charitable activities therein. Purchase of landand building by itself would not be sufficient to conclude that the assessee 1sinvolved in non-charitable activities. CIT(E) before denying approval underSection 80G(5)(v1) of the Act was required to record a definite finding offact that the funds utilised for land and building was being utilised forprivate purposes and not for charitable purposes. The action of the assessee-society in such circumstances cannot be held to be for non-charitablepurposes. The CIT(E) had acted on mere suspicion and conjectures to denyapproval to the assessee-society. Further as per the Income ExpenditureAccount for the financial year 2015-16, an amount of41,03,275/- had been|Spent on account of student fees out of whichS|37,000/- had been spent on asingle child on different occasions. This was held to be not qualifying forcharitable acts done on a systematic regular basis. This is the result ofsuspicion alone. This being first year of operation after registration underSection 12AA of the Act which was accorded on 30.11.2015, the approachof CIT(E) declining approval under Section 80G(5)(v1) of the Act cannot besaid to reasonable and legally sustainable. Needless to say, in case insubsequent years, the revenue is Satisfied that the activities of therespondent-assessee are not qualified for charitable purposes, it shall be openfor the department to initiate action for cancellation of registration underSection 12AA of the Act and also for passing appropriate orders regardingapproval granted under Section 80G(5)(v1) of the Act in accordance withlaw. 9After hearing learned counsel for the appellant-revenue andperusing the record, we do not find any ground to differ with the view takenby the Tribunal. Learned counsel for the appellant-revenue has not been able to point out any error in the findings recorded by the Tribunal. Thus, nosubstantial question of law arises. Consequently, the appeal standsdismissed. (Ajay Kumar Mittal)Acting Chief Justice May 15, 2018Whether speaking/reasoned Whether reportable 9After hearing learned counsel for the appellant-revenue andperusing the record, we do not find any ground to differ with the view takenby the Tribunal. Learned counsel for the appellant-revenue has not been able to point out any error in the findings recorded by the Tribunal. Thus, nosubstantial question of law arises. Consequently, the appeal standsdismissed. (Ajay Kumar Mittal)Acting Chief Justice May 15, 2018Whether speaking/reasoned Whether reportable (Tejinder Singh Dhindhsa)JudgeYes.Yes