The Commissioner Of Income Tax, Rohtak v. Gaur Brahmin Vidya Pracharini Sabha, Gaukaran Road, Rohtak

of 2010(O&M) **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No. 759of 2010(O&M) Date of decision: 3.10.2011 The Commissioner of Income Tax, Rohtak ...Petitioner Versus Gaur Brahmin Vidya Pracharini Sabha, Gaukaran Road, Rohtak ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr. Inderpreet Singh, Advocate G.S.SANDHAWALIA, J. **** Civil Misc. Nos.25090-91-CII of 2010. For the reasons mentioned in the applications, delay in refilingas well in filing the appeal is condoned. The Civil Misc. Applications are allowed. ITA No.759 of 2010 The present appeal is directed against the order dated11.9.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'B',New Delhi (hereinafter referred to as “the Tribunal”) wherein the ITANo.1905/Del/2009 filed by the respondent was allowed and the Tribunal setaside the order of the Commissioner of Income-tax, Rohtak by whichapplication filed by the respondent under Section 80G(5) (vi) of the IncomeTax Act, 1961 (hereinafter referred to as “the Act”) dated 13.10.2008 wasrejected. The Commissioner of Income, Rohtak while rejecting the saidapplication based its order on the ground that respondent society which is **** running five educational institutions, namely, (i) Gaur Brahaman CentralSchool, (ii) Gaur Brahaman Degree College, (iii) All India Gaur BrahamanCollege of Education, (iv) All India Gaur Brahaman Sanskrit College and(v) Gaur Brahaman Aayurvedic College and was charging fee in the rangeof ` 36,000/- to `1 lac and, therefore, it was not a charitable purpose. TheCommissioner of Income Tax has relied upon the table wherein percentageof profit was reflected from 20.44% to 28.49% and came to the conclusionthat the respondent was enhancing the earning capacity of the institutionsthrough acquisition of the buildings and fixed assets and not fulfilling anynoble objects. On appeal filed by the respondent, the Tribunal has noticedthat society was registered way back on March 17,1923 with the Registrar,Joint Stock Companies, Punjab at Lahore for the purpose of spreadingeducation without any distinction of caste and creed by establishingeducational institutions. Thereafter, appellant was registered on 29.9.1980under the Societies Registration Act, 1860. The Tribunal also noticed thatvide order dated 27.6.2008, the Commissioner of Income Tax has heldthat the assessee is entitled for registration under Section 12AA of the Actwith effect from 29.9.1980 and has been running educational institutionssince then and merely if the surplus arises as a result of charitableactivities, it cannot be held that appellant is not a charitable institution. The Tribunal has further held that as per provisions underSection 80G(5) read with Rule 11AA of the Income Tax Rules, 1962 forgranting registration, the Commissioner needs to be satisfied that thecondition laid down in clause (i) to (v) of sub-sections (5) of section 80Gare fulfilled. There is no dispute that the application for approval in Form10G along with required documents has been filed and as per assessmentof the last three years, it was seen that though the assessee derived **** income yet such income was held not liable to inclusion in total income asper Sections 11 and 12 of the Act. Reference has also been made toSection 2(15) of the Act to hold that the education is per se charitablepurpose irrespective of the fact that for imparting education, the assesseecharges fee and there is no condition to hold that to become eligible forcharitable purposes in respect of imparting education, the same should beimparted freely or without charging any fee. The Revenue aggrieved against the said order of the Tribunalhas in the present appeal framed the following substantial questions of lawwhich in its opinion require adjudication by this Court:- **** income yet such income was held not liable to inclusion in total income asper Sections 11 and 12 of the Act. Reference has also been made toSection 2(15) of the Act to hold that the education is per se charitablepurpose irrespective of the fact that for imparting education, the assesseecharges fee and there is no condition to hold that to become eligible forcharitable purposes in respect of imparting education, the same should beimparted freely or without charging any fee. The Revenue aggrieved against the said order of the Tribunalhas in the present appeal framed the following substantial questions of lawwhich in its opinion require adjudication by this Court:- “(i).Whether the Hon'ble Tribunal was justified in law indirecting the Commissioner of Income Tax to grant approvalu/s 80G(5)(vi) of the Income Tax when incomes derived by thesociety are includible in its total income and its activities arenot genuine as required under Rule 11AA of the Income TaxRules, 1962?directing the Commissioner of Income Tax to grant approvalu/s 80G(5)(vi) of the Income Tax when incomes derived by thesociety are includible in its total income and its activities arenot genuine as required under Rule 11AA of the Income TaxRules, 1962? (ii).Whether income derived by a society registered u/s12AA of the Income Tax Act is not includible in its total incomefor the purpose of approval u/s 80G(5)(vi) of the Income TaxAct when it regularly charges fee for imparting education ineducational institutions and does not show the incometherefrom u/s 11 (4A) of the Income Tax Act i.e. income froman incidental business?12AA of the Income Tax Act is not includible in its total incomefor the purpose of approval u/s 80G(5)(vi) of the Income TaxAct when it regularly charges fee for imparting education ineducational institutions and does not show the incometherefrom u/s 11 (4A) of the Income Tax Act i.e. income froman incidental business? (iii)Whether the Hon'ble ITAT was justified in law indirecting to the CIT to allow approval u/s 80G(5)(vi) of theIncome Tax ignoring the findings recorded by the CIT on thebasis of the documents called for u/s 11AA of the Income TaxAct that applicant was having incomes of the nature not **** specified u/s 11 & thus includible in its total income,maintaining no dissolution clause in Memorandum & Articlesof Association attracting clause (ii) of 5 of 80G, keeping cashunauthorisedly in hand for more than normal period of 24hours & spent money on non-charitable activities? (iv)Whether the Hon'ble ITAT was justified in law in holdingwithout determining the 'property held under trust' in the caseof the applicant society that 'income from property held undertrust' would be exempted u/s 1 & 12 of the Income Tax Act?” A perusal of the Rule 11AA of the Income Tax Rules, 1962 goesto show that application for approval of any institution under Clause (vi) ofsub-section (5) of Section 80G should be in Form 10G and the followingdocuments are necessary as per clause (2) of the said Rule. “(i)Copy of registration granted under section 12A or copyof notification issued under section 10(23) or 10(23C); (ii)Notices on activities of institution or fund since itsinception or during the last three years, whichever is less; (iii)Copies of accounts of the institution or fund since itsinception or during the last three years, whichever is less; (3)The commissioner may call for such further documentsor information from the institution or fund or cause suchinquiries to be made as he may deem necessary in order tosatisfy himself about the genuineness of the activities of suchinstitution or fund. (4)Where the Commissioner is satisfied that all theconditions laid down in clauses (i) to (iv) of sub-section (5) ofsection 80G are fulfilled by the institution or fund, he shallrecord such satisfaction in writing and grant approval to the **** institution or fund specifying the assessment year or years forwhich the approval is valid. (iii)Copies of accounts of the institution or fund since itsinception or during the last three years, whichever is less; (3)The commissioner may call for such further documentsor information from the institution or fund or cause suchinquiries to be made as he may deem necessary in order tosatisfy himself about the genuineness of the activities of suchinstitution or fund. (4)Where the Commissioner is satisfied that all theconditions laid down in clauses (i) to (iv) of sub-section (5) ofsection 80G are fulfilled by the institution or fund, he shallrecord such satisfaction in writing and grant approval to the **** institution or fund specifying the assessment year or years forwhich the approval is valid. (5)Where the Commissioner is satisfied that one or more ofthe conditions laid down in clauses (i) to (v) of sub-section (5)of section 80G are not fulfilled, he shall reject the applicationfor approval after recording the reasons for such rejection inwriting. Provided that no order of rejection of an application shall bepassed without giving the institution or fund an opportunity ofbeing heard. (6)The time limit within which the Commissioner shall passan order either granting the approval or rejecting theapplication shall not exceed six months from the date on whichsuch application was made. Provided that in computing the period of six months, any timetaken by the applicant in not complying with the directions ofthe Commissioner under sub-rule (3) shall be excluded.” A perusal of the above goes to show that the discretion of theCommissioner is to consider whether the conditions prescribed above aresatisfied from the application. This Court inSonepat Hindu Educationaland Charitable Society Vs. Commissioner of Income Tax and another (2005) 278 ITR 262 (P&H) has held that where the petitioner society hasbeen regularly allowed exemption under Section 80G and especially whereit is registered under Section 12A for charitable purposes then the positionhas to be sustained and not changed in subsequent years without anysufficient proof that the institution is not carrying its activities in furtheranceof its object. The relevant observations of the Division Bench inSonepatHindu Educational and Charitable Society’scase (supra) are as under:- **** “We have no hesitation in holding that the scope of enquiry bythe Commissioner, while dealing with the application underSection 80G(5)(vi) of the Act, extends to eligibility to exemptionunder various provisions of the Act, referred to in that sub-section, but not to actual computation of Income under the Act,particularly when a society or a trust is claiming exemptionsunder sections 11 and 12 and not under section 10 of the Act.It needs little emphasis that the enquiry for the said purpsoerelates to whether the applicant is registered under section12A; whether it is a trust wholly for charitable purposes andwhether the income received by it is liable to be consideredunder section 11 of the Act. The enquiry whether at the end ofthe previous year, the donor will be able to sustain a claimbecause of non-fulfillment of some conditions by him woulddepend at the close of the relevant previous year, as it is notpossible to predicate these conditions in praesenti when thedonation is made.” Whether mere making of profit would be ground to deny registrationonce the objects of the society are for charitable purpose and especially inthe present case where five educational institutions are being run by therespondent which is registered since 29.9.1980 under the SocietiesRegistration Act, 1860, and solely because the respondent was chargingfees and was getting surplus would not be a reason to deny registration inview of the binding precedent in Pinegrove International CharitableTrust Vs. Union of India (UOI) and others(2010) 327 ITR 73 (P&H) Whether mere making of profit would be ground to deny registrationonce the objects of the society are for charitable purpose and especially inthe present case where five educational institutions are being run by therespondent which is registered since 29.9.1980 under the SocietiesRegistration Act, 1860, and solely because the respondent was chargingfees and was getting surplus would not be a reason to deny registration inview of the binding precedent in Pinegrove International CharitableTrust Vs. Union of India (UOI) and others(2010) 327 ITR 73 (P&H) That in the said case a Division Bench of this Court whileexamining the provisions of Section 10 (23C) (vi) of the Act and afterconsidering the judgments of Hon’ble Supreme Court Court inCIT (Addl.) **** v. SuratArt Silk Cloth Manufacturers Association, [1980] 121 ITR 1 (SC) andAditanar Educational Institution v.Additional Commissionerof Income-tax, [1997] 224 ITR 310has held that merely if an institution ismaking a profit it would not render itself ineligible for registration under theprovisions of Section 10 (23C) (vi) of the Act. The said principle can alsobe fully applied to the facts and circumstances of the present case. Merely, because there are some surplus with the respondent, this shouldnot be a ground to deny the registration under Section 80G (5)(vi) of theAct. Even otherwise Proviso 2 of (15) of the Act also mentions thatassessee should not carry activities in the name of trade, commerce andbusiness. Since as a matter of fact, the Tribunal has found that theconditions laid down Rule 11AA of the Income Tax Rules, 1962 have alsobeen complied with in the present case and held that the Trust is eligiblefor registration under Section 80G(5)(vi) of the Act, therefore, nosubstantial question of law as contended in the present appeal arises fordetermination by this Court. Order dated 11.9.2009 whereby the Tribunalheld that assessee trust is eligible for registration is upheld. Accordingly, the present appeal is dismissed. (G.S.SANDHAWALIA) Judge October 03, 2011Pka (HEMANT GUPTA) Judge