Sri Mathuradasji Ayodhyabai Rathi Charitable Trust, Hyderabad V. DIT, Hyderabad

ITA 1067/HYD/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5834 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-03-2010
• Assessment Year: misc
• Appeal Filed On: 29-10-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H PHANI RAJU
• Assessee Lawyers: SIDDHARTH TOSHNIWAL
• Keywords: Gift; Charitable institution
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A' HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI ACCOUNTANT MEMBER ITA NO.1067/HYD/2009 ASST. YEAR : NIL SRI MAHURADASJI AYODHYABHAI RATHI CHARITABLE TRUST, HYDERABAD (PAN AAFTS 3414 F) VS THE DIRECTOR OF INCOME TAX (EXEMPTIONS), HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SIDDHARTH TOSHNIWAL RESPONDENT BY: H. PHANI RAJU, D.R. O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORD ER PASSED BY THE DIT(EXEMPTIONS), HYDERABAD DATED 15.10.20 09. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED AN APPLICATION UNDER SEC.80G (5) ON 20.4.2009 FOR RENEW AL OF APPROVAL U/S 80G. THE ASSESSEE WAS ACCORDED APPROVAL U/S 80G ON 9.10.20 07 W.E.F. 1.4.2007 TO 31.3.2009. THUS, THE PRESENT APPLICATION IS FOR RENEWAL OF THE BENEFIT . A DEED OF TRUST WAS MADE ON 23.8.2005 BY THE SETTLER DONATING A SUM OF RS.11 LAKHS. ON A PERUSAL OF THE TRU ST DEED, IT IS NOTICED THAT THERE ARE NO SPECIFIC OBJECTS OF THE TRUST. THE TRUST WAS CREATED FOR CHARITABLE OBJECTS AS DEFINED U/S 2(15) OF TH E IT ACT 1961. THE OBJECT AS STATED IN THE TRUST DEED IS REPRODUCED AS U NDER: THE TRUST IS CREATED FOR CHARITABLE OBJECTS AS DEF INED U/S 2(15) OF THE IT ACT., 1961. 2 3. SINCE, THERE ARE NO CLEAR OR SPECIFIC CHARITABLE OBJ ECTS WHICH CAN BE ASCERTAINED FROM THE TRUST DEED, THE DIT(E) DENIED THE APPROVAL U/S 80G OF THE IT ACT. 4. THE AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ORDER OF THE DIT(E) REFUSING TO GRANT RENEWAL OF APPROVAL IN TERMS OF S.80G(5) OF IT ACT, IS VERY MUCH BAD IN LAW, BOTH FROM THE POINT OF LAW AS WELL AS FROM POINT OF FACTS. 5. IT WAS SUBMITTED THAT THE REASON ASSIGNED BY THE LE ARNED DIT(E) THAT THERE IS NO SPECIFIC CHARITABLE OBJECTS MENTI ONED IN THE DEED OF TRUST, AND THEREFORE IN THE ABSENCE OF SUCH SPECIFIC CHAR ITABLE OBJECTIONS DONATION AND TRUST IS NOT ENTITLED TO DEDUCT IN TERMS OF S.80G (5). THIS CONCLUSION OF DIT(E) IS NOT PROPER 6. FURTHER, HE CONTENDED THAT THE CHARITABLE OBJECTS HAVE BEEN DULY SPECIFIED IN THE CLAUSE 3 OF THE DEED OF TRUST WH EREIN IT IS SPECIFICALLY MENTIONED THE TRUST IS CREATED FOR CHARITABL E OBJECTS AS DEFINED U/S 2(15) OF IT ACT, 1961 AND THEREFORE THER E CAN BE NO BETTER EVIDENCE TO PROVE THAT THE TRUST HAS SPECIFIED THE CHARI TABLE OBJECTS AND IN TURN THE DEFINITION IN SEC.2(15) ITSELF IT SPEAKS THA T CHARITABLE OBJECTS INCLUDES RELIEF OF POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER PUBLIC OBJECT OF GENERAL UTILITY. THEREFORE, I T STANDS ESTABLISHED THAT THE ASSESSEES TRUST IS VERY MUCH STANDS COVERED BY THE D EFINITION OF THE IT ACT U/S 2(15). 7. HE SUBMITTED THAT FURTHER THE ACTION OF THE LEARNE D DIT(E) IS MOST UNWARRANTED AND ILLEGAL IN AS MUCH AS ON THE BASIS O F THE SAME CLAUSE IN THE DEED OF TRUST, HIS TWO PREDECESSORS GRANTED THE APPROVAL IN TERMS OF S.80G(5) VIDE ORDER DATED 12.1.2006 AND ANO THER ORDER DATED 3 9.10.2007 AND LATER ORDER HAS GRANTED APPROVAL FROM 1.4.2007 TO 31.3.2009. THUS IN FACE OF THESE FACTS, THE DENIAL OF R ENEWAL OF APPROVAL BY THE PRESENT DIT(E) IS MOST UNWARRANTED, UNJUST AND I LLEGAL AND THIS FUNDAMENTAL FACT, HE TOTALLY IGNORED WHILE PASSING TH E ORDER UNDER APPEAL. EVEN OTHERWISE ALSO THE POWER OF FIXING THE PERIOD OF EXEMPTION IN ORDER U/S 80G(5) HAS BEEN OMITTED WHICH OTHERWISE IS AVAILABLE TO DITE UNDER PROVISO TO S.80G(5) WHICH HAS BEEN DELETED FROM 1.10.2009 BY FINANCE (NO.2) ACT, 2009 W.E.F. 1.10.2009. THEREF ORE, SINCE THE ORDER UNDER APPEAL IS DATED 15.10.2009, HE CANNOT MAK E SUCH AN ORDER IN VIEW OF THE DELETION OF THE PROVISO U/S 80G(5) W.E .F. 1.10.2009 AND FROM THIS POINT OF VIEW ALSO THE ORDER PASSED BY HIM IS VERY MUCH ILLEGAL. 8. IT IS ARGUED THAT, IT IS POLICY AND INTENTION O F THE GOVT. TO ENCOURAGE CHARITABLE/TRUSTS/INSTITUTIONS AND FOR WHICH PROVISO TO S.80G(5) HAS BEEN DELETED AND IN THE CIRCUMSTANCES THE A CTION OF DIT(E) TO IGNORE THIS FUNDAMENTAL FACT IS UNWARRANTED. FURTHER OBSERVATION OF THE DIT(E) THAT NATURE OF THE TRUST H AS TO BE DETERMINED WITH REFERENCE TO THE OBJECTS AND NOT ACTUALLY OF THE I NCOME AND HIS FURTHER OBSERVATION THAT NO EVIDENCE IS PLACED BEFORE H IM REGARDING THE EXPENDITURE INCURRED BY TRUST IS WRONG WHEN IN FACT TH E ASSESSEE HAS FILED COMPLETE DETAILS OF EXPENDITURE ALONG WITH THE RECEIPTS. THE ORDER OF THE DIT(E) IS FURTHER BAD IN LAW IN AS MUCH AS THE REGISTRATION GRANTED U/S 12AA HAS BEEN NOT WITHDRAWN, DESPITE SUCH POWER IS V ESTED IN HIM U/SUB.S 3 OF SEC.12AA. THEREFORE THIS IS PATENT CONTRAD ICTION FOR THE PURPOSES OF 80G(5), AND THE TRUST CONTINUES TO REMAIN CHA RITABLE BUT FOR THE PURPOSE OF S.80G(5) IT CEASES TO BE CHARITABLE, THER EFORE CONSIDERED FROM IN POINT OF VIEW THE ACTION OF THE DIT(E) IS OUT AND OUT ILLEGAL AND UNSUSTAINABLE IN LAW. 9. FURTHER HE RELIED ON THE FOLLOWING JUDGMENTS: 4 1. THAKUR DAS SHYAM SUNDER VS. ADDL.CIT (93 ITR 27) W HEREIN IT WAS HELD THAT THE DISCRETION VESTED IN A TRUSTEE TO SPE ND THE TRUST AMOUNT OVER CHARITIES WILL NOT AFFECT THE CHARACTER OF THE DEPOSIT. A TRUST FOR CHARITIES WITHOUT SPECIFYING ANY CHARITIE S AT ALL IS VALID. 2. CIT VS. SARDAR BAHADUR SARDAR INDRA SINGH TRUST (29 ITR 781) (CAL.) WHEREIN IT WAS HELD THAT TO THE RULE THAT THERE IS NO VALID TRUST UNLESS THE OBJECTS THEREOF ARE SPECIFIED, CHARITABL E TRUSTS ARE AN EXCEPTION. WITH REGARD TO THOSE TRUSTS, A GREAT DE AL OF LATITUDE IS PERMITTED AND THE RULE IS THAT PROVIDED THERE IS A CLEAR INTENTION TO MAKE A GIFT FOR CHARITY, THE TRUST IS NOT ALLOWED T O FAIL FOR UNCERTAINTY. 3. CHATURBHUJ VALLABHDAS VS. CIT (14 ITR 144) (BOM) WH EREIN IT WAS HELD THAT THE WORD CHARITY IF USED GENERALLY OR WITHOU T QUALIFICATIONS OR LIMITATIONS DENOTES PUBLIC CHARITY AND FALLS WITHIN THE DEFINITION OF CHARITABLE PURPOSE IN SEC.4(3) OF THE IT ACT. 4. ACIT VS. SURAT CITY GYMKHANA (300 ITR 214) (SC) WHE REIN IT WAS HELD THAT THE REGISTRATION OF A TRUST U/S 12A OF THE IT ACT, 1961 ONCE DONE IS FAIT ACCOMPLI AND THE ASSESSING OFFICER CAN NOT THEREAFTER MAKE FURTHER PROBE INTO THE OBJECTS OF THE TRUST. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMI TTED THAT THE OBJECTS HAVE BEEN DESCRIBED IN THE WIDE LANGUAGE. MERE REPETITION OF THE STATUTORY DEFINITION. THE TRUST DEED DOES NOT EV EN INDICATE THE MAJOR HEAD OF CHARITABLE PURPOSE FOR WHICH THE SETTLER HAD DONATED A SUM OF RS.11 LAKHS. MERELY STATING THAT THE TRUST IS E STABLISHED FOR A CHARITABLE PURPOSE MIGHT NOT BY ITSELF INDICATE WHETHER THE INTENTION IS EITHER RELIEF OF THE POOR OR EDUCATION OR MEDICAL REL IEF OR ANY OTHER OBJECT OF THE GENERAL PUBLIC UTILITY. MERELY STATING THAT T HE PURPOSE OF THE TRUST IS A CHARITABLE PURPOSE CANNOT PURSE GIVE ANY INDICATION THAT IT DOES NOT EXCLUDE THE OBJECT INVOLVING THE CARRYING OF ANY ACTIV ITY FOR PROFIT. NATURE OF TRUST HAS TO BE DETERMINED BY REFERENCE TO THE OBJECTS AND NO BY THE REFERENCE TO THE ACTUAL APPLICATION OF THE INCOM E OF THE TRUST. HE RELIED ON THE JUDGEMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF GANGABAI CHARITIES (197 ITR 416) AND NOT GRANTED TH E APPROVAL U/S 80G OF THE IT ACT. 5 11. FURTHER THE DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE WORD CHARITABLE IS OF VERY WIDE NATURE AND IT I S ONLY TO BE DECIDED BY HOLDING THAT EXPENDITURE INCURRED BY THE TRUST IS OF CHARITABLE NATURE OR NOT BY EXAMINING EACH OF THE EXPENDITURE INCURRED BY THE TRUST. AS OBSERVED EARLIER, THE NATURE OF THE TRUST HAS TO BE D ETERMINED BY THE REFERENCE TO THE OBJECTS AND NOT THE ACTUAL APPLICATION OF INCOME. FURTHER, NO EVIDENCE IS PLACED BEFORE REGARDING THE E XPENDITURE INCURRED BY IT. THE DETAILS OF DONATIONS INDICATE THAT THE ASSESSE E GAVE DONATIONS TO OTHER TRUSTS. THE OBJECTS OF THE TRUST ARE TOO WIDE . FURTHER, IT IS NOT A CHARITABLE INSTITUTION, AS DEFINED U/S 2(15) OF THE IT ACT, ONE OF THE CONDITIONS PRESCRIBED U/S 80G IS THAT THE INSTITUTION HAS T O BE CHARITABLE INSTITUTION. IT IS NOT A CHARITABLE INSTITUTION AS IT S OBJECTS ARE WIDE AND NOT SPECIFIC. THE WIDE LANGUAGE THAT HAS BEEN EMPLOYE D IN THE TRUST DEED DOES NOT MEET WITH THE REQUIREMENTS OF THE STATUT ORY EXEMPTIONS. HENCE THE ASSESSEE IS IN APPEAL BEFORE. 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, IN OUR OPINION THIS ISSUE COVERED A GAINST THE ASSESSEE BY THE JUDGEMENT OF THE HONBLE SUPREME COURT I N THE CASE OF GANGABAI CHARITIES VS. CIT & OTHERS (197 ITR 416)(SC) WHEREIN IT WAS HELD THAT : 'AFFIRMING THE DECISION OF THE HIGH COURT, THAT IT WAS NOT POSSIBLE TO CULL OUT IN CLEAR TERMS ANY SPECIFIC CHARITABLE OR RELIGIOUS BOUT FROM THE TRUST DEED TO CONCLUDE THAT THE TRUST WAS SET UP WHOLLY FOR RELIG IOUS OR CHARITABLE PURPOSES. THE 'RELIGIOUS, CHARITABLE, CULTURAL AND SOCIAL' PU RPOSES REFERRED TO IN THE DEED WERE NOT AVOWED AS THE OBJECTS OF THE TRUST, THEY W ERE ONLY THE OBJECTS OF THOSE WHO WISHES TO PUT THE TRUST PROPERTY TO USE. THERE WAS NO MENTION IN THE DEED AS TO HOW THE INCOME DERIVED FROM THE TRUS T PROPERTY WAS TO BE UTILIZED. THERE WAS NO MANDATE THAT THE INCOME WAS TO BE SPENT ON RELIGIOUS OR CHARITABLE PURPOSES. THEREFORE, THE TRUST DEED DID NOT MEET THE REQUIREMENTS OF SECTION 11(1) (A) AND THE INCOME OF THE TRUST WAS NOT EXEMPT FROM TAX.' 6 13. IN THIS CASE, THE OBJECT OF TRUST IS VERY VAGUE, L OOSELY WORDED AND NOT SPECIFIC REGARDING THE ACTIVITIES TO BE CARRIED ON BY THE ASSESSEE. IN SUCH CIRCUMSTANCES, THE DIT(EXEMPTIONS) IS JUSTIF IED IN REJECTING THE APPROVAL U/S 80G OF THE INCOME TAX ACT. THOUGH THE ASSESSEES COUNSEL RELIED ON VARIOUS JUDGMENTS IT CANNOT BE CONSIDERED AND THE APPROVAL U/S 80G(5) IS NOT AUTOMATIC, IT REQUI RES TO BE EXAMINED BY THE DIT(E). THE DIT(E) MAY NOT AWARE OF THE JUDGEMENT IN THE CASE OF 197 ITR 416 (SC) CITED (SUPRA) WHILE GRA NTING APPROVAL U/S 80G IN EARLIER YEARS. WHEN HE IS AWARE OF THE SUPREME COURT JUDGEMENT, HE IS BOUND TO FOLLOW THE SAME SINCE IT IS T HE LAW OF THE LAND ON THIS ISSUE. FURTHER, THE RATIO LAID DOWN BY THE SU PREME COURT IN SPECIAL LEAVE PETITION IS NOT A RATIO DECENDI TO FOLL OW. ACCORDINGLY WE DISMISS THE APPEAL OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT : 26 .3.2010 SD/- SD/- G.C. GUPTA CHANDRA POOJARI VICE PRESIDENT ACCOUNTANT MEMBER DATED THE 26 TH MARCH , 2010 COPY FORWARDED TO: SHRI K.L. RATHI, ADVOCATE, 3-5-144/5 EDEN GARDEN, HYDERABAD-500 001. THE DIT(E), HYDERABAD 3. DIT, HYDERABAD. 4. CIT, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. NP