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Date of Pronouncement : 30.08.2017 O R D E R. PER I. C. SUDHIR, J. M. :
The assessee has impugned first appellate order on the following grounds :-
“ 1. That the learned Commissioner of I Tax Exemption wrongly and illegally reject the trust application for registration under 2 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – – section 80G of I. T. Act even after verifying the books of accounts and vouchers of all three years;
2. The Learned CIT erred in holding that the activities of the trust falls under religious nature and hence not charitable while the appellant trust submitted evidence of charitable activities carried on by it and on the similar ground the learned CIT Ghaziabad reject the assessee application u/s. 12AA of I. Tax Act and Honourable ITAT vide appeal order No. ITA 5238/DEL/2014 AY 2014-15 order dt. 24.09.2015 accept the trust appeal.
3. That the Trust doing the activities as per object of the trust deed, daily distribution of fruits biscuits to poor balika Vidhyala under the head of "Shri Krishna Nitya Sewa at Vrindavan" which comes under the Category of Charitable activity and not in the category of religious as held by the learned CIT.
4. That the learned commissioner of Income Tax Exemption has grossly erred ift holding membership fee contribution received by the trust from his member as income while there was no Income on Account of donation so membership contributions cannot be considered as donation for the purpose of limitation u/s. 80G(5B).
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5. That the finding of learned CIT is wrong that the trust diverting the funds into banks and generating profit by way of Interest on bank deposit and trust involved in activities which apparently are for profit making on commercial lines and are far away from the definition of the term of "Charitable purpose" while the trust does have not have any Bank FDR and not earned any Bank interest on Bank Deposits in last all previous years.
6. That in any case rejection of trust registration application u/s. 80G on the grounds as mentioned in the order is illegal and unjustified and registration u/s. 80G ought to be allowed to the trust.
7. That the appellant craves leave to add, amend, alter, delete or modify any ground of appeal at the time of hearing. ”
2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
3. The issue involved in the grounds is as to whether the ld. CIT (Exemption) was justified in refusing approval sought by the assessee under section 80G of the Act.
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4. In support of the grounds, the ld. AR made following submissions :-
“ 1. The present appeal is arising from the order of Ld CIT Exemption dated 15.09.2016.
The assessee is a trust engaged in the dissemination of its charitable objects. Assessee has got registration under section 12A vide order dated 13.01.2016. Certain dates which goes to the root of the matter are as under : -
Date Event Remarks
Order of ITAT at Page ITAT restored the matter to be No 117-120 of the filed of CIT for considering the 24.09.2015 Paper Book application 12 A of the assessee afresh.
The Ld. CIT Lucknow has granted Registration 13.01.2016 the certificate of 12 A to the Certificate at Page assessee. NO- 27-29 of the PB.
Assessee filed application before the Ld CIT Lucknow for the grant of 04.07.16 80 G (5) (VI) certificate.
CIT Exemption dismissed the 15.09.2016 application of the assessee and present appeal is arising from its order.
It is submitted that while rejecting the application of the assessee the Ld. CIT has alleged that assessee has utilized more than 5% of its total income for religious activities. Ld.
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CIT further alleged that assessee has diverted funds towards non charitable purposes by putting them into Bank and earned huge interest on these funds. At last CIT has dismissed the application of the assessee.
Submissions of the assessee are as under :-
It is submitted that both the above allegation of the CIT are baseless and contrary to the records in as much as in last three years there is no income to assessee in-fact records and return of income filed by the assessee would show that there is deficit in accounts of the assessee since expenditure incurred are higher from the receipts. The position of last three years is as under :-
Asst Year Members Total Deficit shown Subscription Expenses in ROI 2013-14 2,65,414 313913 48505 2014-15 203207 268595.85 65388.85 2015-16 283409 288387.70 4978 ...
The above chart would show that there is absolutely no income to assessee in last three years therefore the averment of the CIT that assessee has violated the provisions of section 80(G)(5B). It is submitted that expression used in this subsection is total income and perusal of the above chart would show that assessee has deficit in last three years and there is no income to assessee. Therefore the observation made by the CIT is factually incorrect.
6. It is next submitted that assessee has distributed fruits among the poor and needy people irrespective of their cast and religion. Assessee has termed this activity as “Shri Krishna Nitya sewa at Vrindavan”. The Ld CIT has wrongly interpreted this expression. It is submitted that factual position is that 6 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – –
the expression Shri Krishna has been used to denote the name of the trust and the rest of the expression is daily sewa at Vrindavan therefore the observation of the CIT that use of expression Shri Krishna denotes religious expenses is wrong.
7. It is next submitted that last observation of the CIT that expenses are in round figure is premature since it is the duty of the Assessing Officer to examine the veracity of the vouchers during the course of assessment proceedings.
8. It is next submitted that regarding the observation of the CIT that the objects of the trust are not charitable and activities are profit making is also contrary to the records because the assessee has been granted 12A on the same objects and activities therefore this allegation is also baseless.
It is submitted that assessee further seeks to rely on the following judgments wherein it has been held that “Authority examining the question whether a fund or institution is eligible to be certified for the purposes of s. 80G is not to act as an Assessing Officer; once the applicant trust was registered under section 12A.
b. 57 ITR 86(Del) c. N.N.Desai Vs CIT 452(Guj) d. Sonepat Hindu Educational and Charitable Society 278 ITR 262(P&H)
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It is submitted that recently Jodhpur Bench of the ITAT in the case of Hemdha Medi Resources Pvt Ltd Vs CIT reported in 159 ITD 627 (Jodh) has observed as under : -
“ On perusal of section 80G(5) as well as Rule 11AA, what is required to be seen is whether the institution/fund has been established in India for a charitable purpose or not. Secondly, it lays down certain additional conditions under clause (i) to clause (v) which are required to be fulfilled. Rule 11AA provides that where the CIT is satisfied that one or more of the conditions specified in clause (i) to clause (v) of section 80G(5) are not fulfilled, he shall reject the application for approval after recording his reasons for such rejection. In the instant case, the appellant has been duly registered under section 12AA which shows beyond any doubt that Id CIT has already verified the genuineness of the objects and its activities are not doubted by the CIT. Hence, having granted registration u/s 12AA, the first condition regarding establishment of institution for charitable purposes is fulfilled. Regarding satisfaction of additional conditions specified in clause (i) to clause (v) of section 80G(5), there is no dispute as apparent from the order of the Id CIT. As can be seen from Revenue's stand of rejection of earlier applications filed by the appellant, the approval under section 80G is closely linked to approval under section 12AA. Now once, the registration under section 12AA has been granted, the approval under section 80G should not be denied unless the case of the appellant falls under non-fulfillment of one or 8 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – – more of the conditions specified in section 80G(5) which is not the case before us. ”
The ld. CIT [DR], on the other hand, placed reliance on the order impugned, with this submission that placing photographs and banner on record by the assessee are not sufficient evidence to establish that the assessee is actually indulging in charitable activities. The assessee had exceeded 5% of total income for both financial years 2013-14 and 2014- 15 in spending on religious purposes and there was also deviation of funds as the amount of Rs.26,90,524/- was kept and he referred page No. 72 i.e. receipt and payment for the period from 1.04.2012 to 31.03.2013. He also placed reliance on the decision of Hon’ble High Court of Delhi in the case of Kirti Chand Tarawati Chand Trust Vs. Director of Income Tax (1998) 232 ITR 11 (Del.).
6.1 In rejoinder the ld. AR submitted that the above amount was kept for utilizing it in the objects of the society and it is not the case of the Revenue that amount was spent for any other purposes than the objects of the society. He also referred page No. 118 of the paper book i.e. part of the order dated 24.09.2015 of the Tribunal in the case of the assessee itself for the assessment year 2014-15 wherein the activities of 9 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – – the appellant society have been noted. He submitted further that the decision relied upon by the ld. CIT [DR] in the case of Kirti Chand Tarawati Chand Vs. DIT (supra) having distinguishable facts is not applicable in the case of present assessee.
6.2 Considering above submissions and material available on record, we find that the ld. CIT has denied the benefit of approval under section 80-G of the Act mainly on the basis that expenses of religious nature under the name “Sri Krishna Nit Sewa at Vrindaban” exceeded 5% of the total income for both financial years 2013-14 and 2014-15. In reply, the assessee had submitted vouchers showing expenditure incurred on fruits, biscuits etc. distributed at poor girl students of Guru Gangeshwar Raj Kanya Vidyala, Gandhi Marg, Vrindaban, amounting to around Rs.4,200/- per month with this submission that such expenditure cannot be treated to be spent on religious purpose. The ld. CIT did not accept the same as he disbelieved the vouchers on the basis that it was self drawn. We do not approve such approach of the ld. CIT because it is not his case that in the vouchers details were not given and in such a situation the appropriate approach of the ld. CIT should have been to examine the veracity of the details given in the said self-drawn
10 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – – vouchers instead he preferred to reject these out-rightly. The ld. CIT has also alleged that the appellant has failed to corroborate its claim of charitable activities, which in our view, is in contradiction to the observation made by the Tribunal vide its order dated 24.09.2015 in the case of assessee itself for the assessment year 2014-15 on the issue of validity of rejection of application moved under section 12AA by the assessee for registration and registration granted by the ld. CIT (Exemption) under section 12AA of the Act on 13.01.2016, whereas the order impugned has been passed on 15.09.2016. We thus find that it is not a case of assessee falling under non-fulfillment of the conditions specified in section 80G(5) of the Act as alleged by the ld. CIT to refuse the approval sought under section 80G of the Act by the assessee. The decision of Hon’ble Delhi High Court in the case of Kirti Chand Tarawati Chand Trust Vs. DIT (supra) relied upon by the ld. CIT [DR] having distinguishable facts is not helpful to the Revenue as in that case the purpose of the trust was other than charitable. The trust therein was engaged mainly in construction of religious temple wherein no charitable activity was being carried out and thus there was denial of renewal of recognition under section 80G(5) of the Act. We thus direct the ld. CIT to 11 I.T. Appeal No. 5325/Del/2016 Assessment Year : – – – grant approval under section 80G(5) of the Act as prayed for by the appellant. The grounds are accordingly allowed.
In result, appeal is allowed.
The order is pronounced in the Open Court on: 30th August, 2017.