The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Uddan Ek Meetha Sapna Society, Gurgaon

ITA No.63 of 2018 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.63 of 2018 Decided on : 08.10.2018 The Commissioner of Income Tax (Exemptions), Chandigarh Versus ....... Appellant M/s Uddan Ek Meetha Sapna Society, Gurgaon...... Respondent CORAM : HON'BLE MR. JUSTICE AJAY KUMAR MITTAL, JUDGEHON'BLE MR. JUSTICE AVNEESH JHINGAN, JUDGE Present :Mr. Denesh Goyal, Senior Standing Counselfor the appellant. * * * AVNEESH JHINGAN, J. The revenue has filed the present appeal under Section 260A ofIncome Tax Act, 1961 (for brevity, 'the Act') against the order dated24.07.2017 of Income Tax Appellate Tribunal, New Delhi (hereinafterreferred to as 'ITAT') passed in ITA No.1081/DEL/2015, allowing the appealof the assessee-society. 2.As per the appellant, following substantial questions of law arise for consideration in the present appeal:- i) Whether on the facts and circumstances of the case, theHon'ble ITAT has erred in directing the approval to beaccorded instead of reverting it back for re-examinationfollowing the spirit of judgment by the Hon'ble AllahabadHigh Court in appeal No.112 of 2013 in the case of CIT Vs.A.R. Trust as per which the Hon'ble ITAT does not havepowers to direct registration even though the averred decisionHon'ble ITAT has erred in directing the approval to beaccorded instead of reverting it back for re-examinationfollowing the spirit of judgment by the Hon'ble AllahabadHigh Court in appeal No.112 of 2013 in the case of CIT Vs.A.R. Trust as per which the Hon'ble ITAT does not havepowers to direct registration even though the averred decision ITA No.63 of 2018 -2- was in respect of 12AA matters? ii) Whether on the facts and in the circumstances of the case theHon'ble ITAT is not perverse in holding that the CIT has notgiven valid reasons while not granting approval to theapplicant and thereby directing to grant approval u/s 80G tothe applicant whereas the CIT had given clear findings thatthe applicant had utilised its generic objects to focus mainlyon organizing fund raising events via sale of art work purelyon commercial principles and further that the applicant hasbeen accepting donations on the pretext of sale of paintings?Hon'ble ITAT is not perverse in holding that the CIT has notgiven valid reasons while not granting approval to theapplicant and thereby directing to grant approval u/s 80G tothe applicant whereas the CIT had given clear findings thatthe applicant had utilised its generic objects to focus mainlyon organizing fund raising events via sale of art work purelyon commercial principles and further that the applicant hasbeen accepting donations on the pretext of sale of paintings? iii) Whether on the facts and in the circumstances of the case theHon'ble ITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring thestatutory condition that 12AA registration is merely apre-condition for entities to be eligible for approval u/s80G(5)?Hon'ble ITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring thestatutory condition that 12AA registration is merely apre-condition for entities to be eligible for approval u/s80G(5)? iii) Whether on the facts and in the circumstances of the case theHon'ble ITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring thestatutory condition that 12AA registration is merely apre-condition for entities to be eligible for approval u/s80G(5)?Hon'ble ITAT has erred in placing reliance on the fact of theassessee having 12AA registration and by ignoring thestatutory condition that 12AA registration is merely apre-condition for entities to be eligible for approval u/s80G(5)? iv) Whether on the facts and in the circumstances of the case,the order of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore, perverse?3.The assessee-society was duly registered under Section 12AAof the Act. The assessee-society apart from other objects was engaged inproviding training of art and painting to under privileged children. Anapplication under Section 80G(5)(vi) of the Act was made on 25.06.2014.The Commissioner of Income Tax (Exemption), Chandigarh (for brevity, the'CIT(E)') rejected the application vide order dated 19.12.2014. The groundsof rejection were that the assessee-society was engaged in sale of art work - ITA No.63 of 2018 3- and the same cannot be treated as charity. Moreover, the receipt booksmaintained by the society shows receipts of donations but no address ofdonors had been mentioned. Further, the donations and amount receivedfrom sale of art have been intermingled to give it a colour of charity. 4.Aggrieved of the order of CIT(E), the assessee-society preferredan appeal before the Tribunal. The Tribunal allowed the appeal vide orderdated 24.07.2017 and directed CIT(E) to grant approval under Section 80G(5)(vi) of the Act. Hence the present appeal filed by the revenue. 5.Section 12AA(1) and Section 80G(5)(vi) of the Act read as under:- 12AA. Procedure for registration.—(1) ThePrincipal Commissioner or Commissioner, onreceipt of an application for registration of a trustor institution made under clause (a) or clause (aa)[or clause (ab)] of sub-section (1)] of section 12A,shall— (a) call for such documents or information fromthe trust or institution as he thinks necessary inorder to satisfy himself about the genuineness ofactivities of the trust or institution and may alsomake such inquiries as he may deem necessary inthis behalf; and (b) after satisfying himself about the objects of thetrust or institution and the genuineness of itsactivities, he;— (i) shall pass an order in writing registering thetrust or institution; (ii) shall, if he is not so satisfied, pass an order inwriting refusing to register the trust or institution,and a copy of such order shall be sent to theapplicant: ITA No.63 of 2018 -4- Section 80G(5)(vi): Deduction in respect ofdonations to certain funds, charitableinstitutions, etc. In computing the total income ofan assessee, there shall be deducted, inaccordance with and subject to the provisions ofthis Section:- XXXXXX (5) This Section applies to donations to anyinstitution or fund referred to in sub-clause (iv) ofclause (a) of sub-section (2), only if it isestablished in India for a charitable purpose andif it fulfills the following conditions, namely : XXXXXX (vi) in relation to donations made after the 31[st]day of March 1992, the institution or fund is forthe time being approved by the Commissioner inaccordance with the rules “made in this behalf. ITA No.63 of 2018 -4- Section 80G(5)(vi): Deduction in respect ofdonations to certain funds, charitableinstitutions, etc. In computing the total income ofan assessee, there shall be deducted, inaccordance with and subject to the provisions ofthis Section:- XXXXXX (5) This Section applies to donations to anyinstitution or fund referred to in sub-clause (iv) ofclause (a) of sub-section (2), only if it isestablished in India for a charitable purpose andif it fulfills the following conditions, namely : XXXXXX (vi) in relation to donations made after the 31[st]day of March 1992, the institution or fund is forthe time being approved by the Commissioner inaccordance with the rules “made in this behalf. 6.Section 12A of the Act provides conditions for applicability ofSections 11 and 12 of the Act. Section 12AA of the Act provides forprocedure of registration for availing the benefits under Section 12A of theAct. Under Section 12AA(1)(a) of the Act the Principal Commissioner or theCommissioner in order to satisfy himself about the genuineness of theactivities of the trust or institution can call for such document or informationas he deems necessary. If satisfied about genuineness of object, he passesthe order registering the trust or institution, otherwise rejects the application.Under Section 80G of the Act recognition is given to trust or institution forthe purpose that assessee giving donations to such institution becomesentitled to claim deduction of the amount donated. Sub Section 5 of Section80G of the Act stipulates the conditions for application of Section 80G of theAct to the donations made to any institution or fund referred to in sub clause (iv) of Clause (a) of Sub Section (2). 8.The Tribunal while allowing the appeal of the assessee recordedthe findings of fact that the representative of assessee-society appearedbefore CIT(E) with complete books of account and donation receipts etc. Itwas further held that the assessee submitted a list of donors containing theirnames and addresses. 9.The Tribunal took into consideration the fact that the assessee-society has already been granted registration under Section 12AA of the Actand its activities have been found to be charitable. It is pertinent to note thatwhile granting registration under Section 12AA of the Act, Commissioner ofIncome Tax, Faridabad considered the fact that the assessee-society wasengaged in providing training of art and painting to under privilegedchildren. It was further held that raising of funds from sale of art work wasonly incidental to main activity of the appellant. The Tribunal noted the factthat CIT(E) had not raised any question regarding the genuineness of theactivity of the assessee-society. The relevant findings recorded by theTribunal are extracted below:- “We have heard both the parties and perused therelevant records available with us, especially theimpugned order and the paper book filed by theAssessee. We find that the assessee's AR appearedbefore the Ld. CIT(E), Chandigarh along with thecomplete books of accounts, donation receiptbook, bill/vouchers for expenses, list of donorsbesides other documents requisitioned by Ld.C.I.T. (Exemptions) Chandigarh. We further findthat Ld. C.I.T. (Exemptions) Chandigarh in para3 of his impugned order has stated that thedonations are anonymous whereas assessee has - ITA No.63 of 2018 6- “We have heard both the parties and perused therelevant records available with us, especially theimpugned order and the paper book filed by theAssessee. We find that the assessee's AR appearedbefore the Ld. CIT(E), Chandigarh along with thecomplete books of accounts, donation receiptbook, bill/vouchers for expenses, list of donorsbesides other documents requisitioned by Ld.C.I.T. (Exemptions) Chandigarh. We further findthat Ld. C.I.T. (Exemptions) Chandigarh in para3 of his impugned order has stated that thedonations are anonymous whereas assessee has - ITA No.63 of 2018 6- submitted the list of donors containing theirnames and addresses. We note that how thedonations can be anonymous when list of donorshas been submitted, however, the same was notdemanded by him. It is noted that rejection ofapplication of assessee by Ld. C.I.T.(Exemptions) Chandigarh is without any validreason. We also noted that the second reason forrejection of application u/s. 80G of assessee ascited by Ld. C.I.T. (Exemptions) Chandigarh inpara 3 of his impugned order is regarding theactivities of the assessee. Ld. C.I.T. (Exemptions)Chandigarh was of the view that appellant is intobusiness of selling art work and rejected theapplication of appellant u/s. 80G(5)(vi) and didnot understand that appellant has been grantedregistration u/s. 12AA by Ld. C.I.T. Faridabad on30.06.2014. Ld. CIT(A) also failed to note thatwhile granting the registration u/s 12AA detailedscrutiny of activities of assessee were done by Ld.C.I.T. Faridabad which were of charitable innature. If the activities of appellant would nothave been charitable, registration u/s 12AAshould be denied to the appellant. On the samefinancial statements and Activity Report Ld. C.I.T.Faridabad granted registration u/s 12AA afterbeing satisfied that activities of appellant arecharitable in nature and for advancement of anyother object of general public utility. Onlydifference is that Ld. C.I.T. Faridabad made adetailed scrutiny even asked for details ofcharitable schools where appellant carry ondrawing classes for under privileged childrenwhereas Ld. C.I.T. (Exemptions) Chandigarh did - ITA No.63 of 2018 7- not find time to see the activity report, the name ofcharitable institutions etc. It is further noted thatno question with respect to activities of appellantwas raised by Ld. C.I.T. (Exemptions)Chandigarh and failed to understand the factthatg since appellant is engaged in training in theart of painting to under privileged children, someart work i.e. Painting is bound to be generated.Appellant used to organise awareness camps etc.to spread message among society and there suchart work is being displayed. Raising of funds fromsale of art work is only incidental to the mainactivity of appellant.” 10.No doubt registration under Section 12AA of the Act by itselfwould not entitle the assessee for approval under Section 80G of the Act butin the absence of any dispute regarding the aim and objects of the assesseeSociety, denial of approval under Section 80G of the Act cannot besustained. 11.Learned counsel for the appellant has neither been able to showthat the view taken by the Tribunal is erroneous nor produce any material onrecord to show that the view taken by the Tribunal is legally unsustainable.No substantial question of law arises. 12.Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE October 08, 2018 anju (AVNEESH JHINGAN) JUDGE Whether speaking/reasoned: Yes / NoWhether reportable :Yes / No