C I T vs. SHRI GURU NANAK DEV CHARITABLE EYES HOSPITAL

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 29.12.2006, Annexure A.2 passed by the Income Tax Appellate Tribunal, Chandigarh (in short, “the Tribunal”) in ITA No.565/Chandi/2005, claiming following substantial question of law:- “Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in allowing registration to the trust under Section 12AA which was refused by the Commissioner of Income Tax, Karnal?

The facts in brief relevant for adjudication of the controversy involved as narrated in the appeal may be noticed. The assessee trust was created on 8.4.2004 and was registered with the Sub Registrar, Pehowa on GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh 9.4.2004. It applied for registration under section 12AA of the Act vide application dated 3.9.2004. The case of the assessee was fixed for hearing by the Commissioner of Income Tax, Karnal (CIT). The assessee-trust was asked to produce its books of account and original trust deed for verification. However, the original trust deed was not produced by the trust. Further, from perusal of copy of OPD fee account, it was noticed that the functioning of the hospital came into operation w.e.f 26.5.2004 and as per advertisement through hand bills, full fledged treatment was started w.e.f 26.5.2004 whereas only an amount of ` 56,100/- was available with the trust as on 26.5.2004. Thereafter, during the period from June 2004 to August 2004, receipt of huge donations amounting to ` 22,69,603/- was shown only with a view to explain the undisclosed investment in plant and machinery made on or before 26.5.2004. Further, during the course of examination of books of account,it was noticed that the trust had shown to have received substantial donations in cash which were supported only by receipts issued by the donee trust and no independent evidence was produced. Accordingly, the trust was asked to produce the donors from whom donations of ` 19000/- and above were received alongwith necessary evidence regarding holding of agricultural land by such donors and their source of withdrawals but the trust failed to produce the documentary evidence required to establish the financial capacity of the donors. As such the genuineness of the alleged heavy donations shown by the trust remained unproved. Therefore, vide order dated 30.3.2005, Annexure A.1, registration under section 12AA of the Act was refused to the trust by the CIT. Aggrieved by the order, the assessee filed appeal before the Tribunal. Vide order dated GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh 29.12.2006, Annexure A.2, the Tribunal allowed the appeal. Hence the present appeal by the revenue.

We have heard learned counsel for the appellant and perused the record.

Learned counsel for the revenue submitted that as per Rule 17A of the Income Tax Rules, 1962 (in short, “the Rules”), original trust deed was required to be produced for registration which was not done by the assessee. Even the CIT had also recorded objection for non production of original trust deed in her order. It was also urged that the assessee was charging fees and huge donations were collected. Thus, it could not be said that the assessee trust was genuine and established for charitable purposes. Learned counsel supported the order passed by the CIT refusing to register the assessee trust.

After hearing learned counsel for the appellant, we do not find any merit in the appeal.

It would be apposite to refer to Rule 17A of the Rules:- “17A. An application under clause (aa) of sub-section (1) of section 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form No. 10A and shall be accompanied by the following documents, namely :— (a) where the trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof; and where the trust is created, or the institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof: Provided that if the instrument or document in original cannot GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh conveniently be produced, it shall be open to the Commissioner to accept a certified copy in lieu of the original; (b) where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which such accounts have been made up.”

According to the aforesaid rule, the application for registration of charitable or religious trusts etc. is to be accompanied with the trust deed in original where the trust is created under the instrument. However, under the Proviso, where it cannot be conveniently produced, the Commissioner can accept a certified copy in lieu of the original. Secondly where the trust or institution has been in existence during any year or years prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years are to be produced. Thus, the requirement of original trust deed cannot be held to be sine qua non for grant of registration as the CIT is empowered to dispense with the same. In the present case, the CIT had declined registration on the ground that no original trust deed was produced alongwith application for registration. However, a perusal of the order of the CIT shows that the objectives of the trust had been referred to at page 9 of the paper book, which read thus:- “To construct building and establish an Eye and General hospital and educational institutions in memory of Shri Guru Nanak Dev Ji; To establish a Library and Museum showing revolutionary life GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh of Gurus and Martyrs. To extend financial help to orphan/poor students staying for higher education in Kurukshetra University.” This fact has also been noticed by the Tribunal in its order. Once that is so, the reasons given by the CIT for refusing to registrar on the ground that the original deed was not produced cannot be held to be justified. A perusal of the order of the Tribunal shows that no such argument was raised by the revenue before it. At the time of registration of a trust or institution, the procedure prescribed under section 12AA(1) of the Act has to be followed whereunder, it is only the objectives and genuineness of the activities of the trust or the institution which are required to be examined. So far as collection of money or donations is concerned, that is not required to be examined at the stage of registration of the trust. As per requirements of Section 11(1) (a) of the Act, the receipt of money and spending of amount for charitable purposes is to be scrutinized at the time of the assessment.

It would be profitable to refer to the findings recorded by the Tribunal in paras 8 and 9 of its order dated 29.12.2006, Annexure A.2 which read thus:- “8.We have considered both the aspects which have been gone into by the Commissioner and are of the view that the scope of inquiry at this stage did not require the Commissioner to examine the impugned issues at all. Regarding the unproved nature of donation, in our view this is an aspect which falls entirely in the realm of assessment proceedings. It is the Assessing Officer who has exclusive juri iction to examine the matter relating to the efficacy of the donations received by the assessee in the course of GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh assessment proceedings. As we have noted earlier, the Commissioner is to confine himself to making enquiries regarding genuineness of the activities of the applicant and to opine whether or not the objects of the applicant are charitable or not. Infact, in so far as regarding the activities of the applicant is concerned, the Commissioner herself noticed that the assessee has been established to carry out the following objectives: “To construct building and establish an Eye and general hospital and educational institutions in memory of Shri Guru Nanak Dev Ji; To establish a Library and Museum showing revolutionary life of Gurus and Martyrs. To extend financial help to orphan/poor students staying for higher education in Kurukshetra University.” The Commissioner herself further noticed that the assessee has been carrying out the activities of an Eye Hospital. Apart from the aforesaid observations, we do not find any adverse comments by the Commissioner which would indicate that the assessee has carried out activities which are not in consonance with the objects for which it has been set up. From the correspondence available as also from the facts noted by the Commissioner in her order, we are satisfied that the assessee is having objects which are in consonance with the provisions of section 2(15) of the Act and therefore the same qualify to be of charitable purpose as referred to in Section 2(15) of the Act. Even regarding the doubt entertained by the Commissioner regarding the starting of the hospital on 26.5.2004 and alleged non availability of adequate funds to start the hospital, on this aspect also, we do not find any reasons to deny the registration to the assessee. The assessee has explained that the hospital was started with the help of one Dr. M.L.Arora, who was a leading Eye Surgeon of the area. GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh The hospital was started with the equipment acquired on trial basis by Dr. M.L.Arora himself and partly funded with the finance of the assessee. In any case, even if the doubt of the Commissioner is to be taken to its logical end, the same in our view is required to be examined at the stage of assessment proceedings, which is the entire prerogative of the Assessing Officer. It is only at the time of the assessment proceedings that the Assessing Officer will examine this aspect of the matter when the assessee claims tax benefits and exemptions outlined in Sections 11 and 12 of the Act.The observations of the Commissioner regarding the above doubts at best may be relevant at that stage for consideration of the Assessing Officer. So, however, the same does not fall within the scope of powers of the Commissioner at the time of examining the requirements of registration of the trust under Section 12AA of the Act. As a reiteration we again say that the powers of the Commissioner under Section 12AA are restricted to examine as to whether or not the applicant who has moved application for registration under Section 12A of the Act is actually carrying on the activities which are genuine and secondly whether the objects of the applicant are in consonance with the requirements of Sections 11 to 13 of the Act. In the instant case, as we have noted earlier, the Commissioner having examined the application and having made enquiry exceeded her juri iction in examining issues which fall beyond the purview of requirements of registration under Section 12AA of the Act.

On the basis of the above discussion, we conclude by holding that the assessee is entitled to get registration under Section 12AA of the Act for the Commissioner has not expressed any doubt either on the objects of the Trust and nor is there any material to doubt the genuineness of the activities of the assessee trust. Therefore, we direct the learned Commissioner to grant registration. As a matter of passing, we may also mention that our aforesaid direction however will not GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh come in the way of the Assessing Officer who is free to examine the case of the assessee for exemption under Sections 11 to 13 of the Act in accordance with law.”

In view of the above, the substantial question of law is answered against the revenue and in favour of the assessee. Consequently, finding no merit in the appeal, the same is hereby dismissed. (Ajay Kumar Mittal) Judge July 02, 2014 (Jaspal Singh) 'gs' Judge GURBAX SINGH 2014.08.16 12:16 integrity of this document High Court Chandigarh