HARBHAGWAN DASS GULATI CHARITABLE TRUST ,CHANDIGARH vs. COMMISSIONER OF INCOME TAX, EXEMPTIONS, CHANDIGARH , CHANDIGARH

The ld. CIT (E) has cancelled the registration of the assessee on the basis that the assessee is primarily drawing its income from rental, Community Sarai, lodging, Dharamshala which constituted 89% of the revenue earned by the assessee. Secondly, it is the case of the assessee that assessee has given the donation/subscription/contribution to Ram Leela and Rafi Foundation which is for the purpose of displaying its name/advertisement. Lastly, it was case of the ld. CIT (E) that assessee has applied for allotment of two adjoining plots at Omaxe for the purpose of setting up of the Old Age Home. The ld. CIT (E) was of the opinion that the setting up of the Old Age Home is not permissible within the rules marked by the assessee and therefore, it cannot be said that the assessee is doing the activities within the four corners of the law which defines the ‘charitable purposes’.

The ld. AR had vehemently submitted that the assessee has regularly been enjoying the charitable character without any impediment for the last more than 30 years and there is no change of activities of the assessee. It was emphasized that the assessee was having the Dharamshala in prime location of Sector 33 of Chandigarh for the needy persons, including patients and attendants who were coming to Chandigarh for treatment from PGI. It was also submitted that the Dharamshala is meagerly

Per contra, ld. counsel for the assessee relied upon the orders passed by the lower authorities. It was submitted that the character of the assessee, though seems to be charitable with respect to providing the facilities but how are the sealings provided by the Act u/s 2(15) to a cap of Rs.20 lacs, is required to be examined. Further more, it was submitted that establishing of the Old Age Home does not fall within the realm of the ‘charitable activities’ as captured by the objects of the assessee. It was submitted that the amounts spent by the assessee to Ram Leela or the Rafi Foundation has been in the nature of advertisement and therefore, assessee is not entitled to the registration u/s 12A of the Act.

We have heard the rival submissions and carefully gone through the material available on record. The primary issue arising for consideration before us is whether the activities carried out by the assessee can be said to be non-genuine or not in accordance with the objects of the trust so as to justify cancellation of registration under the provisions of the Act.

It is an admitted position that the assessee trust has been enjoying charitable registration for the last more than three decades and no material has been brought on record by the revenue authorities to demonstrate that there has been any substantial change in the nature of activities undertaken by the assessee during the impugned period. The Dharamshala being operated by the assessee is admittedly catering to patients, attendants and needy persons visiting Chandigarh for medical purposes. Merely because certain nominal charges are being recovered from the beneficiaries for upkeep and maintenance of the facilities, the same cannot ipso facto convert the charitable activity into a commercial venture. The concept of charity under the Act does not mandate that services must necessarily be rendered free of cost. What is relevant is the predominant object and manner in which the activity is carried out.

We also find substance in the submissions advanced by the Ld. AR that the amount charged by the assessee is substantially lower than the prevailing market rates for similar facilities in the surrounding area. No material has been placed before us by the revenue authorities to establish that the assessee was operating with profit motive or diverting its income for non-charitable purposes. In our considered view, providing temporary accommodation at concessional rates to patients and attendants constitutes an activity advancing general public utility and squarely falls within the ambit of charitable purpose.

As mentioned hereinabove, there is no change in the activities of the assessee society/trust and the assessee continues to perform the same activities which it has been carrying out for the last more than 30 years. The activities of the assessee have consistently been examined by the Assessing Officer as well as by the earlier Ld. CIT(Exemption), and no fault or adverse material has ever been brought on record to demonstrate that the assessee was not carrying out charitable activities. In our considered opinion, once there is no change in the character of the activities and the activities of the assessee are predominantly directed towards providing accommodation at concessional and subsidized rates to the patients of PGI and other needy persons, then the ITA-627 & 628/CHD/2026 A.Y. 2026-27 7 same squarely fall within the ambit of charitable activities. Therefore, in our considered opinion, the Ld. CIT(Exemption) was not justified in denying the exemption/registration to the assessee.

As regards the proposed establishment of an Old Age Home, we are of the view that such activity is intrinsically charitable in nature. The objects of the trust cannot be interpreted in a narrow and pedantic manner so as to defeat the very purpose for which charitable institutions are created. The expression “other services”

With regard to the contributions made to Ram Leela and Rafi Foundation, though the revenue authorities have alleged that the same were in the nature of advertisement expenditure, no conclusive finding has been recorded to establish that the dominant purpose of such expenditure was purely commercial. In any case, isolated expenditure entries, unless shown to be fundamentally contrary to the objects of the trust, cannot constitute sufficient basis for cancellation of registration.

The power of cancellation of registration is a drastic power and can only be exercised where the activities of the trust are found to be non-genuine or not being carried out in accordance with the objects of the trust. In the present case, after considering the totality of facts and circumstances, we are unable to persuade ourselves to uphold the action of the Ld. CIT(E).

Accordingly, the orders passed by the Ld. CIT(E) cancelling the registration of the assessee trust are set aside and the registration granted to the assessee under section 12A/12AB of the Act is directed to be restored.

In the result, both the appeals of the assessee are allowed.