Wp/24307/2004 Of Muslim Education Social Cultural Organisation (Mesco) v. The Director Of Incometax (Exemptions)

THE HON’BLE SRI JUSTICE B.SUDERSHAN REDDY AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO.24307 OF 2004 JUDGMENT : DATE : 01-08-2005 Between: Muslim Education Social Cultural Organization (MESCO) … Petitioner And The Director of Income Tax (Exemptions), “Olympic Bhavan” Inside Fateh Maidan Stadium, Basheer Bagh, Hyderabad And another …. Respondents The order, of the 1[st] respondent – Director of Income Tax (Exemptions), Hyderabaddated 15-7-2004, passed under Section 80G(5)(vi) of the Income Tax Act read withRule 11AA(5) of the Income Tax Rules, 1962, rejecting the application of thepetitioner and denying it continuance of approval under Section 80G(5)(vi) of theIncome Tax Act, is challenged in this writ petition. Muslim Education Social Cultural Organization (MESCO), the petitioner herein, is aninstitution registered under Section 12-A of the Income Tax Act, and under Section11(1)(a) its income from property, held for charitable purposes, was hitherto notbeing included in its total income. It was initially granted approval under Section 80-G of the Income Tax Act vide proceedings dated 25-10-1995 for a period of threeyears from 1-4-1995 to 31-3-1998 and the said approval was renewed for two 3 yearperiods up to 31-3-2004. The petitioner submitted its application on 12-2-2004seeking renewal of approval of exemption under Section 80 G of the Income Tax Actfor the period commencing from 1-4-2004. The 1[st] respondent passed the impugnedorder dated 15-7-2004 rejecting the petitioner’s application for renewal. The 1[st] respondent, on examination of the accounts of the petitioner’s society, notedthat substantial amounts to an extent of Rs.60,20,276-45 ps. had been parted withas payment of share in medical examination fees to one Dr.M.A.M.Khan and that no measures had been taken to recover these amounts from Dr.Khan. The 1[st]respondent disbelieved the contention of the petitioner – society that it wascontemplating action for recovery of the said amounts from Dr.Khan. The 1[st]respondent also noted that Dr.Khan, who was enriched at the expense of thesociety, was one of the founders of the society having held the designation ofSecretary at the time of its formation, that as one of the founders of the society and inhis capacity as Secretary of the Society, Dr.M.A.M.Khan was a member of theExecutive body and held wide powers concerning general administration,appointment and removal of employees, sanction of expenditure, legal matters etc.and that Dr.Khan was one of the signatories to the memorandum of association ofthe society, as one of its founders. The 1[st] respondent held that payment of substantial amounts as share inMedical examination fee to Dr.Khan, even after his resignation, was violative of theprovisions of Section 13(1)©(ii) and Section13(2) read with Section 13(3)(a) of theIncome Tax Act, that the payments in question were not in compliance with anymandatory term or rule governing the society, that the memorandum ofunderstanding entered into by the society was not in conformity with its constitutionand the rules enshrined therein and that the payments made under the saidmemorandum of understanding were in clear violation of the provisions underSection 13 of the Income Tax Act. The 1[st] respondent disbelieved the contention of the petitioner – society thatit was compelled to enter into a memorandum of understanding with Dr.M.A.M.Khanor that it was forced to make payments in accordance therewith. The 1[st] respondentalso held that the share in the funds belonging to the society was passed on toDr.Khan, which not only amounted to mis-utilization/misapplication of the society’sfunds and enrichment of an individual at the expense of the society, but was also inviolation of the provisions of Section 13 of the Income Tax Act. The 1[st] respondent disbelieved the contention of the petitioner – society thatit was compelled to enter into a memorandum of understanding with Dr.M.A.M.Khanor that it was forced to make payments in accordance therewith. The 1[st] respondentalso held that the share in the funds belonging to the society was passed on toDr.Khan, which not only amounted to mis-utilization/misapplication of the society’sfunds and enrichment of an individual at the expense of the society, but was also inviolation of the provisions of Section 13 of the Income Tax Act. Having regard to the irregularities and mis-utilization of funds and contravention ofprovisions of Section 13 of the Income Tax Act by the petitioner – society, the 1[st]respondent concluded that the income of the society had not been applied properlyand entirely for charitable purposes and that the provision of Section 11 of theIncome Tax Act did not operate so as to exclude this income, derived by thepetitioner – society, from its total income. As a result, the application filed by thepetitioner – society on 12-2-2004 was rejected by the 1[st] respondent andcontinuance of approval of exemption under Section 80-G of the Income Tax Actwas denied to them. Section 13(1)©(ii) of the Income Tax Act provides that nothing contained in Section11 or Section 12 shall operate so as to exclude from the total income of the previousyear of a trust established for charitable purposes or a charitable institution, any partof such income or any property of the trust or the institution which is, during theprevious year, used or applied directly or indirectly for the benefit of any personreferred to in sub-section (3). Under Section 13 (3), the persons referred to in clause© of sub-section (1) and sub-section (2) of Section 13 include the author of the trustor the founder of the institution. Section 80(G)(5) restricts the application of Section80-G to donations made to any institution or fund, only if it is established in India fora charitable purpose and fulfils the conditions prescribed therefor. The 1[st]respondent, in his order dated 15-7-2004, held that Dr.M.A.M.Khan was the founderof the petitioner – society and therefore payment of substantial amounts as share ofmedical examination fee to Dr.Khan was violative of the provisions of Section13(1)©(ii) and Section 13(2) read with Section 13(3)(a) of the Income Tax Act. Learned counsel for the petitioner sought to place reliance on certainproceedings dated 30.8.2000, (letter allegedly addressed by Dr.Khan to thepetitioner Society insisting that he shall be paid medical examination fee) andproceedings dated 18-8-2000, to contend that the petitioner was forced to make these payments to Dr.Khan. As referred to supra, the 1[st] respondent, for just andvalid reasons, disbelieved these contentions of the petitioner – society. Needless to state that this Court, in exercise of its Certiorari jurisdiction underArticle 226 of the Constitution of India, does not sit in appeal over decisions ofstatutory authorities nor would it re-appreciate or re-examine the adequacy orsufficiency of the evidence on record. It is only if the order is based on no evidence,the findings are perverse or there is an error apparent on the face of the record thatthe Certiorari jurisdiction of this Court can be invoked. The impugned order dated15-7-2004 is a reasoned order, setting forth in detail the reasons for rejecting theapplication of the petitioner and denying it continuance of approval of exemptionunder Section 80-G of the Income Tax Act, and as such does not call for anyinterference from this Court under Article 226 of the Constitution of India. Needless to state that this Court, in exercise of its Certiorari jurisdiction underArticle 226 of the Constitution of India, does not sit in appeal over decisions ofstatutory authorities nor would it re-appreciate or re-examine the adequacy orsufficiency of the evidence on record. It is only if the order is based on no evidence,the findings are perverse or there is an error apparent on the face of the record thatthe Certiorari jurisdiction of this Court can be invoked. The impugned order dated15-7-2004 is a reasoned order, setting forth in detail the reasons for rejecting theapplication of the petitioner and denying it continuance of approval of exemptionunder Section 80-G of the Income Tax Act, and as such does not call for anyinterference from this Court under Article 226 of the Constitution of India. It is also clear from the order of the 1[st] respondent dated 15-7-2004 that thefunds of the petitioner – society were mis-utilized and that serious irregularities werecommitted by the petitioner – society in contravention of the provisions of section 13of the Income Tax Act. In the light of these findings, this Court under Article 226 ofthe Constitution of India, in any event, would not exercise its discretion in favour ofthe petitioner – society. We see no reason to interfere with the order of the 1[st] respondent dated 15-7-2004. The writ petition fails and it is accordingly dismissed. No order as to costs. (B.SUDERSHAN REDDY,J) Dt. –06-2005. (RAMESH RANGANATHAN,J) THE HON’BLE SRI JUSTICE B.SUDERSHAN REDDYAND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION NO.24307 OF 2004