The Commissioner Of Income Tax v. Sir Chhotu Ram Memorial Society

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.695 of 2010 (O&M)Date of decision: 14.12.2010 The Commissioner of Income Tax. Vs. Sir Chhotu Ram Memorial Society. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. I.P. Singh, Standing counselfor the Revenue. --- ADARSH KUMAR GOEL, J. 1.This appeal has been preferred by the revenue underSection 260-A of the Income Tax Act, 1961 (for short, “the Act”)against the order of the Income Tax Appellate Tribunal, NewDelhi in I.T.A. No.3377/Del/2008 claiming following substantialquestions of law:- “(i)Whether the Hon’ble Tribunal was justified inlaw in directing the Commissioner of IncomeTax to grant renewal of approval u/s 80G(5)(vi)of the Income Tax when the conditions asstipulated under clause (i) of sub section (5) ofsection 80G of the Income Tax Act read withrule 11AA were not fulfilled by the applicant. (ii)Whether the Hon’ble Tribunal was justified inlaw in directing the Commissioner of IncomeTax to allow renewal of approval u/s 80G(5)(vi)when the society is not eligible for exemption u/s11(1)(a) of the Income Tax Act in respect of theincome from Properties as in the case of a trustin so far as the phrase ‘income from theproperty held under the trust’ goes. law in directing the Commissioner of IncomeTax to allow renewal of approval u/s 80G(5)(vi)when the society is not eligible for exemption u/s11(1)(a) of the Income Tax Act in respect of theincome from Properties as in the case of a trustin so far as the phrase ‘income from theproperty held under the trust’ goes. (iii)Whether for the purpose of the approval u/s 80G(5)(vi) of the Income Tax Act, the mere fact ofthe consideration received for the servicesrendered being less than the expenditureincurred is a sufficient compliance of clause (a),(b) & (c) of proviso to clause (i) of sub section(5) of section 80G of the Income Tax Act. (5)(vi) of the Income Tax Act, the mere fact ofthe consideration received for the servicesrendered being less than the expenditureincurred is a sufficient compliance of clause (a),(b) & (c) of proviso to clause (i) of sub section(5) of section 80G of the Income Tax Act. 2. The assessee applied under Section 80G(5)(vi) of theAct seeking approval for exemption in respect of donationsreceived by it. The CIT declined the approval but on appeal, theTribunal upheld the plea of the assessee and granted approval asfollows:- 3. We have heard both the parties and gonethrough the material available on record. Ltd. CIT hasdenied the extension of registration u/s 80G on theground that the assessee was carrying on business ofletting out properties, publication and also donatingthe amount to widows, granting scholarships etc.Under section 11(1)(a) of the Income Tax Act, 1961,income derived from property held under trust whollyfor charitable or religious purposes to the extent towhich such income is applied for the purpose of trust 2. The assessee applied under Section 80G(5)(vi) of theAct seeking approval for exemption in respect of donationsreceived by it. The CIT declined the approval but on appeal, theTribunal upheld the plea of the assessee and granted approval asfollows:- 3. We have heard both the parties and gonethrough the material available on record. Ltd. CIT hasdenied the extension of registration u/s 80G on theground that the assessee was carrying on business ofletting out properties, publication and also donatingthe amount to widows, granting scholarships etc.Under section 11(1)(a) of the Income Tax Act, 1961,income derived from property held under trust whollyfor charitable or religious purposes to the extent towhich such income is applied for the purpose of trust shall not be included in the total income of theassessee. The assessee owns properties which havebeen let out on rent. Letting out property on rentcannot be said that the assessee is engaged in thebusiness of letting out. Letting out of the rooms andshop rent is income derived from the property and,therefore, the income earned from the property to theextent it is applied for the objects of the trust will notform part of the total income. Likewise, assessee isengaged in publication of books, newspapers, etc.the amount realized is a nominal as compared toexpenditure incurred. For example in FY 2004-05, theassessee incurred Rs.1,00,966/- as against the salefrom books etc. was Rs.11,840/- Likewise in FY 2005-06, the expenditure incurred was Rs.38,000/- asagainst income of Rs.9,741/-. Similarly in FY 2006-07, the expenditure was Rs.71,062/- as againstincome of Rs.8,940/-. Thus, from these details, it isclear that the assessee has realized a nominalamount as against the expenditure in the business forwhich separate books of account should bemaintained. 4.Now, coming to the activities relating todonations made to widows, scholarships granted,Jayanti celebration etc. these are expenditureincurred for the objects of the trust. The assesseewas granted registration on identical facts in earlieryears. Therefore, we do not find any reason why theassessee should be denied the benefit of section80G. It is not the case of the Revenue that assesseewas found to have violated the provisions of sections13 or 11. At the time of grant of registration, what isto be seen is whether the objects are charitable or not. Since, the assessee has been granted onidentical facts, the object are charitable or not. Since,the assessee has been granted on identical facts, theregistration in earlier years, we do not find any reasonas to why the benefit of registration should bedisallowed to the assessee......” 3. We have heard learned counsel for the appellant. 4. It is submitted that the assessee society was engagedin business and received income from property as also frompublication of books and its income was not from property heldunder trust wholly for charitable or religious purposes. 5. This submission cannot be accepted. The findingrecorded by the Tribunal that mere fact that the assessee ownedproperty and received rent thereof, was not enough to hold thatthe assessee was not carrying on charitable activities. Theincome received was for the objects of the trust and the amountrealised from publication was nominal, as against the expenditureincurred on charitable activities. The said finding is not shown inany manner to be perverse. 6. No substantial question of law arises. 7. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE December 14, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE