Commissioner Of Income Tax-Exemption, Jaipur, Jaipur v. Mata Padmawati Shyamdaya Charitable Trust

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Income Tax Appeal No. 165/2018 Commissioner Of Income Tax-Exemption, Jaipur, Jaipur ----Appellant Versus Mata Padmawati Shyamdaya Charitable Trust, 28, Sadar Bazar,Sriganganagar. ----Respondent For Appellant(s) : Mr. K.K. Bissa HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE MR. JUSTICE DINESH MEHTA Per Dinesh Mehta, J :- Judgment 04/12/2018 The appellant – Commissioner, Income Tax has preferred thepresent appeal under Section 260A of the Income Tax Act, 1961(hereinafter referred to as “the Act of 1961”) questioning thelegality of the order dated 20.02.2018 passed by Income TaxAppellate Tribunal, Jodhpur Bench, Jodhpur (hereinafter referredto as “the Tribunal”) contending that it involves followingsubstantial question of law to be adjudicated by this Court :- “Whether on the facts and in circumstances of thecase and in law, the ld. ITAT is justified in allowingapproval u/s 80G(5) notwithstanding that theapplicant has not commenced any charitable activityas per its objects in last three years?” The factual matrix within the precincts of proposed questionof law unfolds as under :- The respondent assessee is a trust, which applied forrequisite approval under Section 80G(5)(vi) of the Act of 1961 on30.03.2017. Respondent’s application came to be rejected by thecompetent authority, namely Commissioner of Income Tax(Exemption), vide its order dated 21.08.2017. While decliningrespondent’s request for grant of approval, the Commissionerobserved that though the assessee Trust had come into being on16.03.2010, but it has not carried out any significant charitableactivities, hence grant of exemption at that stage was not in thefitness of things. The respondent Trust challenged the aforesaid order of theCommissioner (Exemption) by way of filing an appeal before theTribunal. The above referred appeal of the respondent Trust has beenallowed by the Tribunal vide its order dated 20.02.2018. Whileallowing the appeal, the Tribunal observed that the assessee hasearned bank interest to the tune of Rs.17,028/-, Rs.36,865/- andRs.98,868/- respectively for last three years and out of which, theTrust has given a donation of Rs.41,000/- to Apna Ghar AashramSamiti, (a Trust having exemption under Section 80G of the Act of1961), the same cannot be said to be insignificant. It was alsoobserved that when the assessee did not have the requisite funds,it cannot be expected to carry out charitable activities beyond theavailability of the funds. Impugning the said order of the Tribunal, Mr. Bissa, learnedcounsel for the Department argued that the respondent assessee,which was registered in the year 2010, has neither carried out anycharitable activities nor has it carried out the objects, for which itwas formed. In wake of the facts noticed by the authorities, Mr. Bissa contended that grant of approval in such cases, would becontrary to the very purpose and object of Section 80G of the Actof 1961 and that the Commissioner (Exemption) had rightlyrejected petitioner’s request for grant of approval. He submittedthat in the present set of facts, the question as proposed deservesto be answered in revenue’s favour and the order of the Tribunaldeserves to be reversed. We have heard Mr. Bissa and perused the material availableon record. However, insistence of learned counsel for the revenuecould not persuade us to take a view different than the one takenby the Tribunal. According to us, an assessee can neither be expected tospend higher amount than its income nor can it be expected toelongate its feet beyond its blanket. The amount of Rs.41,000/-,which the respondent Trust has spent during the period of threeyears cannot be said to be insufficient, considering itsincome/receipts for the corresponding period. In the present facts, it was absolutely erroneous on the partof the Commissioner to infer that the Trust has failed to carry outits objects. We have heard Mr. Bissa and perused the material availableon record. However, insistence of learned counsel for the revenuecould not persuade us to take a view different than the one takenby the Tribunal. According to us, an assessee can neither be expected tospend higher amount than its income nor can it be expected toelongate its feet beyond its blanket. The amount of Rs.41,000/-,which the respondent Trust has spent during the period of threeyears cannot be said to be insufficient, considering itsincome/receipts for the corresponding period. In the present facts, it was absolutely erroneous on the partof the Commissioner to infer that the Trust has failed to carry outits objects. For the purpose of proper appreciation of the question involved in the present appeal, it would be apt to test the validityof the orders impugned on the anvil of Section 80G(5)(vi) of theAct read with Rule 11AA of the Income Tax Rules, the relevantextracts whereof are being re-produced hereinbelow :- “Section 80G. Deduction in respect of donationsto certain funds, charitable institutions, etc.— … … … … … … … … … (5) This section applies to donations to any institutionor fund referred to in subclause (iv) of clause (a) ofsub-section (2), only if it is established in India for acharitable purpose and if it fulfills the followingconditions, namely :— (i) where the institution or fund derives any income,such income would not be liable to inclusion in itstotal income under the provisions of sections 11 and12 [or clause (23AA)] [or clause (23C)] of section 10:[Provided that where an institution or fund derivesany income, being profits and gains of business, thecondition that such income would not be liable toinclusion in its total income under the provisions ofsection 11 shall not apply in relation to such income, if— (a) the institution or fund maintains separate booksof account in respect of such business; (b) the donations made to the institution or fund arenot used by it, directly or indirectly, for the purposesof such business; and (c) the institution or fund issues to a person makingthe donation a certificate to the effect that itmaintains separate books of account in respect ofsuch business and that the donations received by itwill not be used, directly or indirectly, for thepurposes of such business;]] (ii) the instrument under which the institution or fundis constituted does not, or the rules governing theinstitution or fund do not, contain any provision forthe transfer or application at any time of the whole orany part of the income or assets of the institution orfund for any purpose other than a charitable purpose;(iii) the institution or fund is not expressed to be forthe benefit of any particular religious community orcaste; (iv) the institution or fund maintains regular accountsof its receipts and expenditure; (v) the institution or fund is either constituted as apublic charitable trust or is registered under theSocieties Registration Act, 1860 (21 of 1860), or underany law corresponding to that Act in force in any partof India or under section 25 of the Companies Act,1956 (1 of 1956), or is a University established by law,or is any other educational institution recognised bythe Government or by a University established by law,or affiliated to any University established by law, or isan institution financed wholly or in part by theGovernment or a local authority; (vi) in relation to donations made after the 31st dayof March, 1992, the institution or fund is for the timebeing approved by the Commissioner in accordancewith the rules made in this behalf [; and] Rule 11AA. (1) The application for approval of anyinstitution or fund under clause (vi) of sub-section (5)of section 80G shall be in Form No. 10G and shall bemade in triplicate. (2) The application shall be accompanied by thefollowing documents, namely :— (i) Copy of registration granted under section 12A (vi) in relation to donations made after the 31st dayof March, 1992, the institution or fund is for the timebeing approved by the Commissioner in accordancewith the rules made in this behalf [; and] Rule 11AA. (1) The application for approval of anyinstitution or fund under clause (vi) of sub-section (5)of section 80G shall be in Form No. 10G and shall bemade in triplicate. (2) The application shall be accompanied by thefollowing documents, namely :— (i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10 (23C) ;(23) or 10 (23C) ; (ii) Notes on activities of institution or fund since its inception or during the last three years,whichever is less;whichever is less; (iii) Copies of accounts of the institution or fundsince its inception or during the last three years,whichever is less. (3) The Commissioner may call for such furtherdocuments or information from the institution or funddocuments or information from the institution or fund or cause such inquiries to be made as he may deemnecessary in order to satisfy himself about thegenuineness of the activities of such institution orfund. (4) Where the Commissioner is satisfied that all the-conditions laid down in clauses (i ) to (v ) of subsection(5) of section 80G are fulfilled by the institution orfund, he shall record such satisfaction in writing andgrant approval to the institution or fund specifying theassessment year or years for which the approval isvalid. (5) Where the Commissioner is satisfied that one ormore of the conditions laid down in clauses (i) to (v) ofsub-section (5) of section 80G are not fulfilled, he shallreject the application for approval, after recording thereasons for such rejection in writing : Provided that no order of rejection of an applicationshall be passed without giving the institution or fundan opportunity of being heard. (6) The time limit within which the Commissioner shallpass an order either granting the approval or rejectingthe application shall not exceed six months from the[end of the month in] which such application wasmade : Provided that in computing the period of six months,any time taken by the applicant in not complying withthe directions of the Commissioner under sub-rule (3)shall be excluded.] An appraisal of the scheme of Section 80G of the Act, andRule 11AA, more particularly sub-rule (4) thereof clearly suggeststhat an application of the Trust for grant of approval under Section80G(5)(vi) of the Act can be turned down only if the trust fails to carry out its objects and/or violates the conditions encapsulated inClause (i) to (v) of Section 80G(5) of the Act of 1961. Neither the Commissioner (Exemption) has recorded anyfinding nor the counsel for the Revenue has brought to fore, anybreach of the conditions enumerated in clause (i) to (v) of Section80G(5) of the Act; which is a precursor for refusal of the approvalunder Section 80G of the Act of 1961. Learned counsel for the appellant has neither pointed outany statutory provision nor has he cited any precedent, whichprovides or rules that in case the amount spent by a trust isinsignificant, its request for approval under Section 80G of the Actdeserves to be rejected. We neither find any error in the judgment nor do we find anyquestion of law, much less substantial question involved in thepresent appeal. The appeal is, hence, dismissed. (DINESH MEHTA),J (SANGEET LODHA),J 27-Arun/PS