CITY HOSPITAL CHARITABLE TRUST ,MANGALORE vs. COMMISSIONER OF INCOME TAX, EXEMPTIONS, BANGALORE

3.2 In view of the above, the application filed by the assessee trust in form 10AB dated 08.08.2024 for approval u/s. 80G of the Act was rejected and accordingly, the approval was cancelled by the ld. CIT(E) vide Order in Form 10AD dated 17.02.2025.

City Hospital Charitable Trust, Mangalore Page 5 of 10 5. Before us, the ld. A.R. of the assessee vehemently submitted that the ld. CIT(Exemptions) erred in rejecting the grant of approval u/s 80G of the Act especially having satisfied with the genuineness of the Trust and also having satisfied with the activity of the trust and granted registration u/s 12AB of the Act. The ld. A.R. of the assessee also submitted that for grant of approval u/s 80G of the Act, the ld. CIT(Exemptions) should only be satisfied about the genuineness of the activity of the trust and fulfillment of the conditions laid down in clause (i) to (v) of section 80G(5) of the Act. Further, the ld. A.R. of the assessee submitted that the fee receipts are the revenue generated out of the regular activities carried on by the institution and they have not been issued any certificate u/s. 80G like any other donations. Lastly, it was submitted that the ld. CIT(E) grossly erred in ignoring the Capital expenditure applied during the year as application as well as accumulation u/s. 11(1)(a) of the Act.

7.1 Now on going through the annexure to Form No.10AD dated 17.02.2025, we observed that the first contention for rejection by the ld. CIT(E) is that the assessee trust had reported surplus every year which was not utilized towards charitable purposes and they had been accumulated in FDs and received interest income. However, on the other hand the ld. AR of the assessee submitted that the ld. CIT(E) has grossly erred in ignoring the capital expenditure applied during the year as application of income u/s. 11(1) of the Act as well as accumulation of 15% of income from such property which shall not be included in the total income. On going through the Income & Expenditure A/c for last 3 years reproduced by the ld. CIT(E) we take a note of the fact that the assessee trust had applied substantial amount towards educational activities. We are of the considered opinion that the scope of enquiry by the ld. CIT(E) while dealing with the application for grant of approval u/s. 80G of the Act extends only to the satisfaction of the genuineness of the activities of such trust/institutions and the fulfillment of all the conditions laid down in clauses (i) to (v) of Section 80G(5) of the Act and not the actual computation of surplus. We are also of the opinion that the provisions of section 11 & 12 along with section 13 including application of fund by the charitable organization are to be examined during the course of assessment proceedings and not at the time of granting approval u/s 80G of the Act.

7.2 With regard to the observation of ld. CIT(E) that the private institutions like assessee trust are well funded by high fee receipts and management fee which undergoes an increase every year does not commensurately passed on in terms of tangible and intangible facilities, we are of the considered opinion that the ld. CIT(E) did not point out any specific circumstances under which the fees received had not been commensurately passed on in terms of tangible and intangible facilities. These are merely sweeping statement without any corroborative evidence. The ld. CIT(E) in her order did not even whisper about any activity of the trust to be non-genuine.

7.3 Now with regard to the fees receipts which are forming part of the total receipts, the ld. CIT(E) is of the view that these receipts do not fall within the purview of the donation u/s. 80G of the Act. The ld. AR on the other hand vehemently submitted that the ld. CIT(E) failed to comprehend the fact that assessee is not only receiving the tuition & hostel fee but also has receipts by way of donations / grants which are eligible for deductions u/s. 80G of the Act. The fee receipts are nothing but the revenue generated out of the regular activity carried on by the assessee trust and the assessee trust never granted 80G certificates on such fees receipts. We are of the considered opinion that mere fact of the assessee being an educational institution which received tuition & other fees along with hostel fees, the approval u/s 80G of the Act cannot be denied specially when it is established for the charitable purposes within the meaning of section 2(15) of the Act and the registration u/s 12A of the Act has already been granted after verifying the genuineness of the activities carried out by the Assessee trust. The issues, whether receipts in the form of tuition and other fees, hostel fees do not fall under the definition of donation are not at all relevant in the present case of the assessee trust.

7.4 We are of the clear opinion that, for the purpose of granting approval u/s 80G of the Act, the only relevant section is sub-sections (5). The ld. Commissioner (Exemptions) after receiving the application for granting approval u/s 80G of the Act shall call for such document or information and make such enquiry as he/she thinks necessary in order to satisfy himself/herself about the genuineness of the activity of such institution or fund and the fulfillment of all the conditions laid down in clause (i) to (v) as follows:

(5) This section applies to donations to any institution or fund referred to in sub- clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfills the following conditions, namely:-

(i)where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 [* * *] [ Certain words omitted by Act 21 of 1998, Section 29 (w.e.f. 1.4.1999).] [* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).] [or clause (23-AA) or clause (23-C)] [ Substituted by Act 11 of 1987, Section 35, for " or clause (23-C)" (w.e.f. 1.4.1988).] of section 10: [Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if-

(a)the institution or fund maintains separate books of account in respect of such business; (b)the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and (c)the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business; (ii)the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii)the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv)the institution or fund maintains regular accounts of its receipts and expenditure; ][*] [ The word " and" omitted by Act 32 of 1994, Section 24 (w.e.f. 1.4.1994).] (v)[ the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][* * *] [ Certain words omitted by Act 20 of 2002, Section 30 (w.e.f. 1.4.2003).][or is an institution financed wholly or in part by the Government or a local authority; ] [Inserted by Act 11 of 1983, Section 39 (w.e.f. 1.4.1984).][*] [ The word " and" omitted by Act 33 of 2009, Section 33 (w.e.f. 1.4.2009).] 7.5 In view of the above, we are of the opinion that at the time of granting of approval u/s 80G of the Act, the authority has to satisfy herself that the chartable institution is established in India for charitable purposes and the activities of the assessee trust are genuine and the assessee trust also fulfilled all the conditions as mentioned above. The ld. CIT(Exemptions) in our view has also not brought any material on record to show that the activities of the assessee trust are not genuine or the conditions as specified above are not fulfilled by the assessee trust.

7.6 In view of the above discussion, we allow the appeal of the assessee trust and direct the ld. CIT(Exemptions) to grant approval u/s 80G of the Act to the assessee trust as applied in form 10AB on 08.08.2024. It is ordered accordingly. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 17th June 2025