Commissioner Of Income Tax, Jaipur-Ii, Jaipur v. M/S Maharaja Sawai Man Singh-Ii, Museum Trust, City Palace, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 100 / 2014 COMMISSIONER OF INCOME TAX, JAIPUR-II, JAIPUR ----Appellant Versus M/S MAHARAJA SAWAI MAN SINGH-II, MUSEUM TRUST, CITY PALACE, JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. Prateek Kedawat, Mr. K.D. Mathur for Mr. R.B. Mathur For Respondent(s) : Mr. Siddharth Ranka _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 13/07/2017 1.By way of this appeal, the appellant-department haschallenged the judgment and order passed by the Tribunalwhereby the Tribunal has allowed the appeal of the assesseereversing the finding of the CIT (A). 2.This Court while admitting the appeal on 10.03.2015 hasframed the following substantial questions of law:- “(i) Whether in the facts and circumstances of thecase, the Tribunal was justified in law in directing togrant approval u/s.80G(5) to the respondent despitethe fact that the trust does not fulfill the conditionsu/s.80G(5)(i) of the Act. (ii)Whether in the facts and circumstances of thecase, the Tribunal was justified in law in directing togrant approval u/s.80G(5) to the respondent despitethe fact that the activities of the trust cannot be saidto be charitable. (iii)Whether in the facts and circumstances of the case, the Tribunal was justified in law in allowing theappeal of the respondent assessee and directing theapproval of exemption u/s.80G(5) when activity ofrunning of school is entire independent and has noconnection with the Museum.” 3.Counsel for the appellant has taken us to the order passedby the CIT(A), Jaipur whereby the CIT(A) has rightly dismissedthe application for grant of exemption u/s 80G(5)(vi) of the assessee. While refusing the benefits under Section80G(5)(vi), the CIT(A) has observed as under:- “3.1 It is clear on perusal of various clauses of trustdeed and objects of the trust that the trust wascreated for the purpose of up keep and maintenance ofthe museum containing the pictures, paintings,portraits, works of art, several caskets, silver ware,china ware, glass ware, cut glass, books of arts,ornaments pieces, rugs, antics, curiors, manuscriptsand other collection of articles and things of CityPalace, Jaipur entrusted to the said trust. Thesearticles and things collectively have been referred to as“said collection” or “presents” in the trust deed. 3.2It is observed that apart from running of themuseum, the trust started running a school namedMaharaja Sawai Bhawani Singh School, in Jagatpura,Jaipur as a unit of this trust from F.Y.2007-08. Thisactivity of running of school is not covered under theobjects of the trust given in the trust deed. Therefore,the activity of running school cannot be held under thetrust because as per the trust deed, the trust was notauthorized for this activity of running school. 3.3. On being confronted to the A.R. of the assessee,it was submitted by the A.R. that clause 22 of the trustdeed authorizes the trustees to use immovableproperty of the trust for the purpose of any scheme ofcharity. Running of School is a charitable activity andtherefore, running of school is covedred under thetrust deed. The contention of assessee was consideredbut not found acceptable. Relevant extract of para-22of the trust deed is reproduced as under:- “…...it shall also be lawful for the trustees topermit an a immovable property for being part of thetrust fund to be held used and enjoyed for the purposeof any scheme of charity or other purpose of thesepresents including the office of the trustees and theirofficials and employees for the purpose of these presentsas also the residence of such of theemployees, the trustee consider necessary for thepurpose of these presents. “…...it shall also be lawful for the trustees topermit an a immovable property for being part of thetrust fund to be held used and enjoyed for the purposeof any scheme of charity or other purpose of thesepresents including the office of the trustees and theirofficials and employees for the purpose of these presentsas also the residence of such of theemployees, the trustee consider necessary for thepurpose of these presents. 3.4The A.R. of the assessee has misrepresented theabove para. In the para, the phrase “for the purposeof these presents” have been used at two places,which restricts the scope of words “for scheme ofcharity or other purpose” and stipulates thatwhatever activity is done, it must be for the purpose ofpresents i.e. collection of the museum. This para-22authorizes the activity only, which is for the purpose ofcollection of museum and has relation with thecollection of museum and not any other activity. Theactivity of running school is entirely independentactivity and is not at all related to the collection ofmuseum. So, the assessee cannot take shelter ofabove para-22 for authorizing the activity of runningschool by the trust deed. 3.5In view of the above discussion, it becomes clearthat the activity of running school is not covered underthe objects of the trust and this activity cannot be heldunder the trust.” 4.However, the Tribunal while reversing the same, hasobserved in para 2.4 and 2.5. which reads as under:- “2.4 We have heard the rival submissions and havecarefully perused the entire material on record. Bothparties have taken same stand as it was taken beforethe ld. CIT. The ld. AR has also filed the paper bookalongwith detailed written submission to support thebolster appellant case. We have carefully examined thewritten submission and we have also gone through theobjects of the trust as available in the trust deed andin the light of relevant provision of the Act. It is foundthat the trust stands registered u/s 12A of the Act.Therefore , there cannot be two opinions and the ldCIT cannot dispute the fact that the objects of thetrust are not charitable in nature. Having observed asabove, we are satisfied that in clause 20 of the trustdeed, the trust is permitted to carry on any scheme orcharity and it is not restricted to display of MuseumArtifacts. ‘’It shall also be lawful for the Trustee to permit anyimmovable property forming part of the Trust Fund tobe held used and enjoyed for the purpose of anyscheme of charity or other purpose of these presents. The school is an unit of the trust and its establishmentis in accordance with the trust deed and has been recognized by the Charity Department also.’’ 2.5 The section 80G(5) of the Income-tax Act, 1961reads as under:- ‘’(5) This section applies to donations to any institutionor fund referred to in sub-clause (iv) of clause (a) ofsub-section (2), only if it is established in India for acharitable purpose and if it fulfils the followingconditions, namely :— [(i) where the institution or fund derives any income,such income would not be liable to inclusion in its totalincome under the provisions of sections 11 and 12 3[** *] 4[5[***]] 6[or clause (23AA)] 7[or clause (23C)]of section 10 : [Provided that where an institution or fund derives anyincome, 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 books ofaccount in respect of such business; (b) the donations made to the institution or fund arenot used by it, directly or indirectly, for the purposes ofsuch business; and [(i) where the institution or fund derives any income,such income would not be liable to inclusion in its totalincome under the provisions of sections 11 and 12 3[** *] 4[5[***]] 6[or clause (23AA)] 7[or clause (23C)]of section 10 : [Provided that where an institution or fund derives anyincome, 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 books ofaccount in respect of such business; (b) the donations made to the institution or fund arenot used by it, directly or indirectly, for the purposes ofsuch business; and (c) the institution or fund issues to a person makingthe donation a certificate to the effect that it maintainsseparate books of account in respect of such businessand that the donations received by it will not be used,directly or indirectly, for the purposes of suchbusiness;]] (ii) the instrument under which the institution or fundis constituted does not, or the rules governing theinstitution or fund do not, contain any provision for thetransfer or application at any time of the whole or anypart of the income or assets of the institution or fundfor 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; 9[* * *] (v) the institution or fund is either constituted as apublic charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or underany law corresponding to that Act in force in any partof India or under section 2510 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 rules15 made in this behalf (vii) where any institution or fund had been approvedunder clause (vi) for the previous year beginning on the 1st day ofApril, 2007 and ending on the 31st day of March,2008, such institution or fund shall, for the purposes ofthis section and notwithstanding anything contained inthe proviso of clause (15) of section 2, be deemed tohave been- (a) established for charitable purposes for the previousyear beginning on the Ist day of April,2008 and endingon the 31st day of March,2009 and (b) approved under the said cause (vi) for the previousyear beginning on the Ist day of April, 2008 andending on the 31st day of Mach, 2009 ]’’ This section describes deduction in respect ofdonations to certain funds, charitable institution etc.Section 80G(5) lays down certain conditions for gettingapproval after it falls in sub-clause (ib) of clause (a) ofsub-section 2. In our considered opinion, the assesseefalls under this sub-clause and also 6 fulfils all theconditions laid down in sec 80G(5) of the Act.Accordingly, we do not find any reason for not gratingapproval u/s 80G(5) of the Act. The observations madeby the ld. CIT are not correct. Any income drawn bythe appellant trust cannot be included in its totalincome under the provision of section 11 and 12 orclause (23AA) or clause (23C) of section 10. As aresult, we allow appeal of the appellant trust anddirect the ld. CIT to grant approval to it u/s 80G(5) ofthe Act as has been prayed by the appellant trust.” 5.We have heard learned counsel for the parties. 6.Taking into account that the activities which are carried out 5.We have heard learned counsel for the parties. 6.Taking into account that the activities which are carried out by the respondent is covered under Section 80G(5)(vi) inasmuchas the education will be a part of charitable activities. However, inview of the provisions of Section 2(15) of the Income Tax Act andthe factum of registration under Section 12A right from 1977, itwill be suffice to answer all the issues in favour of the assessee. 7.In that view of the matter, the appeal of the department isdismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Pdaiya/121