Ita/180/2010 Of D R Ranka Charitable Trust v. The Director Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUON THE 20 DAY OF NOVEMBER, 201383 BEFORE. THE HON'BLE MR. JUSTICE RAVI MALIMATH AND THE HON'BLE MR.JUSTICE K.NATARAJAN | INCOME TAX APPEAL NO.180 OF 2010 BETWEEN: D.R.RANKA CHARITABLE TRUSTNO.532, 2 FLOOR, BRINDAVAN BUILDING,|DUDI MARKET, AVENUE ROAD,BENGALURU - 560 OO2,(REPRESENTED BY ITS TRUSTEE,SRI PRAKASH RANKA, _AGED ABOUT 55 YEARS,| SON OF SRI D.R.RANKA). ..» APPELLANT| (BY SRI K.K.CHAYTHANYA, ADVOCATE) AND THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BENGALURU. ~.. RESPONDENT| (BY SRI K.V.ARAVIND, ADVOCATE) | THIS|INCOMETAXAPPEAL|ISFILEDUNDER|SECTION 260A OF THE INCOME-TAX ACT, 1961 ARISING|OUT OF ORDER DATED 18.02.2010 PASSED IN ITA.NO.925/BNG/2010, FOR THE ASSESSMENT YEAR 2009-2010,PRAYING TO|FORMULATETHE|SUBSTANTIAL|QUESTIONS OF LAW STATED THEREIN; ALLOW THE|APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT.BENGALURUINLTA]NO.925/BNG/2010,DATED18.02.7010. AK AK THIS INCOME TAX APPEAL COMING ON FORHEARING THIS DAY, RAVI MALIMATH J., DELIVERED THE.FOLLOWING: JUDGMENT Tne assessee is a charitable Trust. It was grantedregistration under Section 12-A of the Income Tax Act,1961on 21-7-1986. It was also granted recognition underSection 80-G (5)(vi) of the Act Income Tax Act, for the year2005-2006, 2006-2007, 2007-2008. Returns were beingfiled regularly. On 1-1-2009 the assessee filed anapplication in Form 80-G of the Income Tax Act, 1961seeking renewal of the recognition. The Director of IncomeTax,(Exemptions) rejected tne application. Aggrieved bythe same, the assessee preferred an appeal before the| Tribunal. §$Thne Tribunal by its order vide Annexure-Aexpressed a doubt whether tne assessee is entitled even forthe benefit under Section 11-A and therefore the matter wasremanded. On remand, the Commissioner passed an order. on 31-8-2009 rejecting the application for renewal ofrecognition under Section 80-G. Aggrieved by the same,the assessee preferred an appeal before the Tribunal. TheTribunal dismissed the appeal. Hence, this appeal. By theorder dated 8-11-2010 the appeal was admitted to considerthe following four substantial questions of law:- dh).Whetner on tne facts and in tnecircumstances.of|the.CaSe€,theHonourableTribunal was right in law in holding that the|Appellate Trust is not eligible for renewal of approval under Section 80G? il)Whether on the facts and in the.circumstances of the case, the Tribunal was right|in law failing to hold that the Appellant Trust is eligible for automatic renewal of approval under|section 80G? ih)Whether on the facts and in the.circumstances of the case, the Tribunal was right|in perversely holding that the Appellant Trust was|not engaged in cnaritable activity? iv)Whether on the facts and in the’circumstances of the case, the Tribunal was right|in law in directing tne lower authority to relook at|the registration granted under section 12A and|thereby exceeding the jurisdiction of section|254(1)?2- Tne learned counsels submit thnat tne substantialquestions of law require to be re-framed. We Nave heard)learned counsels on the same. On Nearing learned|counsels, we are of the view that the following substantialquestion of law arises for consideration: aeWhonetneOn|the.factsana circumstances of the case, the Tribunal was right in law in holding that the Appellate Trust is not eligible for renewal of approval under Section 80G?” Tne learned counsel for the assessee contends tnatthe Commissioner committed a gross error in rejecting the|application for renewal. JInat the Commissioner placed|rellaance on tne conditions as laid down under Section 80G(5)(ii) and came to the conclusion that the income was.)not being used for charitable purposes. Therefore, theCommissioner neld tnat there is an absence of charitable|activity. That the activity of the Trust is not in consonancewith the objects of the Trust. That only some percentage|of the income is used fora charitable purpose. | aeWhonetneOn|the.factsana circumstances of the case, the Tribunal was right in law in holding that the Appellate Trust is not eligible for renewal of approval under Section 80G?” Tne learned counsel for the assessee contends tnatthe Commissioner committed a gross error in rejecting the|application for renewal. JInat the Commissioner placed|rellaance on tne conditions as laid down under Section 80G(5)(ii) and came to the conclusion that the income was.)not being used for charitable purposes. Therefore, theCommissioner neld tnat there is an absence of charitable|activity. That the activity of the Trust is not in consonancewith the objects of the Trust. That only some percentage|of the income is used fora charitable purpose. | 2.Tne jearned counsel for the revenue contenadstnat wnat is being used by the assessee towards the object|of the Trust is very miniscule. That most of the income,that is used is only as a result of letting-out of the building, for business purposes. That it is not the object oftne Trust atall. ‘3.Tne same is countered py the learned counselfor the assessee on the ground that the condition as)specified in Section 80-G(5)(ii) postulates that incomecould be used for charitable purposes. Tnat letting out of)the property is not barred by law. That the figures asnarrated in the order of tne Commissioner its not tnecomplete reflection of facts. He places reliance on thereturns filed which would indicate that Rs.16,15,8/78/- wasrepaid for the current year towards repayment of theprincipal amount of the loan borrowed for the financial|year 2005-06 and for that Rs.9,19,422/- is paid towardsinterest. Tne income used is Rs.26,10,821/-. Tne|deduction made is Rs.7,61,000/-. Therefore, the finding ofthe Commissioner is not appropriate in view of thematerial on record. Jnat tne factum of repaying the)principal has not been considered by the Commissioner. | 4Be that as it may, we are of the considered.view that tne consideration of tnese factors when ansapplication for renewal has been made cannot be theconsiderations before the authority. The only condition)that requires to be fulfilled for the purposes of seeking.renewal are as specified under Section 80-G(5)(il) and the|clauses narrated therein. That none of the clauses iIn/Section 80-G(5)(ii) would be said to be applicable herein.It only postulates that any income derived from the)charitable trust may be used for charitable purpose.Therefore, the rejection of the application is inappropriate.However, we are of the considered view that this'consideration can only be made, during the assessment)proceedings. The question whether renewal is justified ornot, is not necessary to be considered at this stage. The.applicability of the income of the assessee whether it is forcharitable purposes or not are all questions of fact andnecessarily can be gone into by the assessing authority at)the time of assessing the income of the assessee. Therefore, it is needless to state that the assessingautnority snail look into all the material placed in order to)ensure that the income is used for a charitable purpose in.accordance witn law. Under these circumstances, the substantial question of law is answered by holding that the Tribunal was not)right in law in holding that the appellant Trust was not)eligible for renewal for approval under Section 80-G.| Consequently, the order of the Tribunal is set aside. The)substantial question of law is accordingly answered. | Tne appeal is disposed off accordingly. SD/- SD/- JUDGE | JUDGE rsk/-