M/s Maharaja Aggarsain Charitable Trust, V. Commissiner of income Tax, Chandigarh

ITA 1073/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6745 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 13-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP DAHIYA
• Keywords: Charitable institution; Set aside
• Section: 12AA; 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.1073/CHD/2016 (ASSESSMENT YEAR : 2016-17) M/S MAHARAJA AGGARSAIN VS. THE COMMISSIONER OF CHARITABLE TRUST, WARD NO.5, INCOME-TAX(EXEMPTIONS), KHANAURI, DISTRICT-SANGRUR. CHANDIGARH. PAN: AABTM3112E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIBHOR GARG RESPONDENT BY : SHRI SANDEEP DAHIYA, CIT DR DATE OF HEARING :26.07.2017 DATE OF PRONOUNCEMENT :17.10.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL FILED BY THE ASSESSEE HAS BEEN PREFERRE D AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(EXEMPTIONS), CHANDIGARH (HEREINAFTER REFERRED T O AS CIT(E)) DENYING APPROVAL U/S 80G(5)(VI) OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT DATED 30.7.2016 RELAT ING TO ASSESSMENT YEAR 2016-17. 2. BRIEFLY STATED, THE ASSESSEE HAD FILED AN APPLIC ATION FOR APPROVAL IN FORM NO.10G ON 21.1.2016. THE ASSESSEE WAS REGISTERED AS A CHARITABLE TRUST U/S 12AA OF THE AC T VIDE ORDER DATED 23.12.2005. THE LD.CIT(E) DENIED APPRO VAL FOR THE REASON THAT THE ASSESSEE TRUST DID NOT FULFILL THE FOREMOST REQUIREMENT WHICH WAS TO BE SATISFIED BY I T FOR BEING ELIGIBLE FOR GRANT OF APPROVAL U/S 80G(5) I.E . BEING ESTABLISHED SOLELY FOR CHARITABLE PURPOSE. THE LD. CIT(E) 2 STATED THAT ATLEAST 3 OF 5 PURPOSES FOR WHICH THE A SSESSEE HAD BEEN ESTABLISHED HAD RELIGIOUS CONTOURS, WHICH WAS IN CONTRAVENTION TO THE PROVISIONS OF SECTION 80G(5)(I II) OF THE ACT AND WAS ALSO HIT BY EXPLANATION-3 TO SUB-SECTIO N (5) OF SECTION 80G, WHICH PRECLUDES PURPOSES OF RELIGIOUS NATURE FROM THE COVERAGE OF CHARITABLE PURPOSE. THE LD.CI T(E) ALSO DENIED APPROVAL FOR THE REASON THAT THE ASSESSEE TR UST WAS SPENDING MEAGRE AMOUNT ON ITS CHARITABLE ACTIVITIES . 3. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED PR ESENT APPEAL BEFORE US RAISING FOLLOWING GROUNDS: 1. THAT THE IMPUGNED ORDER IS BAD ON FACTS AND LAW. 2. THAT THE CIT (EXEMPTIONS) HAS WRONGLY AND ILLEGALLY REJECTED THE APPLICATION FILED U/S 80G(5)(VI) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE APPELLANT CRAVES PERMISSION TO ADD, AMEND, ELUCIDATE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 4. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE STATED THAT BOTH THE CONTENTIONS OF TH E LD.CIT(E) THAT THE PURPOSE FOR WHICH THE ASSESSEE T RUST WAS ESTABLISHED WAS RELIGIOUS AND WAS THAT IT WAS SPEND ING MEAGRE AMOUNT ON CHARITABLE ACTIVITIES WAS MISPLACE D. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE OBJECTS OF THE TRUST AS REPRODUCED IN THE ORDER OF THE LD.CIT( E) ALSO AT PAGE 3 AS UNDER: (A) TRUST WILL WORK UNDER THE GUIDELINES OF AGROHA VIKAS TRUST, AGROHA (HARYANA) AND FULFIL THE AIMS OF AGRO HA VIKAS TRUST & MAHARAJ AGARSEIN. 3 TO ARRANGE AND CELEBRATE MAHARAJA AGARSAIN JAYANTE EVERY YEAR AND TO PROPAGATE AND INCULCATE THE RELIGIO US FEELINGS BROTHERHOOD AND NATIONALISM AMONGST THE AGGARWAL COMMUNITY. (B) TO DEVELOP AND INCULCATE SOUND, MORAL , RELIGIOUS AND NATIONAL CHARACTER IN YOUNGER GENERATION. (C) TO ARRANGE RELIGIOUS DISCOURSES, TEACHINGS, BROTH ERHOOD, NATIONALISM, AND GENERAL UPLIFT OF MANKIND, TO BUILD MORAL FIBER AND DEVELOP HEALTHY SOCIETY AND HARMONY AMONGST PUBLIC IN GENERAL. (D) TO HELP THE NEEDY AND POOR CHILDREN FOR THEIR ED UCATION. (E) TO OPEN AND RUN CHARITABLE DISPENSARIES AND HOSPITALS FOR PUBLIC IN GENERAL ETC. 5. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THEREFR OM THAT THE THREE OBJECTS WHICH AS PER THE LD.CIT(E) H AS RELIGIOUS CONTOURS BEING (A), (B) AND (C) OBJECTS D ID NOT PROMOTE ANY PARTICULAR RELIGION OR CASTE BUT BENEFI TED THE ENTIRE PUBLIC AT LARGE. THE LD. COUNSEL FOR ASSESS EE POINTED THAT THE OBJECT AT CLAUSE (A) WAS ONLY TO CELEBRATE AGARSAIN JAYANTI EVERY YEAR AND TO PROPAGATE AND INCULCATE T HE RELIGIOUS FEELINGS, BROTHERHOOD AND NATIONALISM AMO NGST THE AGGARWAL COMMUNITY. SO ALSO THE OBJECTS AT CLAUSES (B) AND (C) WERE INTENDED ONLY TO DEVELOP GOOD CHARACTER AM ONG YOUNGER GENERATION AND TO DEVELOP HEALTHY SOCIETY A ND HARMONY AMONGST PUBLIC IN GENERAL BY TEACHINGS, BROTHERHOOD, NATIONALISM. THE LD. COUNSEL FOR ASSE SSEE THEREAFTER DREW OUR ATTENTION TO SECTION 80G(5) SUB -CLAUSE (III) WHICH AS PER THE LD.CIT(E) THE ASSESSEE HAD CONTRAVENED AND THUS WAS NOT ELIGIBLE FOR APPROVAL U/S 80G(5) OF THE ACT. THE SAID CLAUSE READS AS UNDER: 80G(5)(III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO BE FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. 4 6. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT NO NE OF THE OBJECTS POINTED OUT BY THE LD.CIT(E) I.E. (A), (B) AND (C) BENEFITED ANY PARTICULAR COMMUNITY BUT WAS FOR DEVE LOPING GOOD CHARACTERISTICS IN THE YOUNGER GENERATION AND FOR DEVELOPING HEALTHY SOCIETY AT LARGE. THE LD. COUNS EL FOR ASSESSEE POINTED OUT THAT EVEN CELEBRATION OF MAHAR AJA AGARSAIN JAYANTI WAS NOT CONFINED TO THE AGGARWAL COMMUNITY ONLY BUT ENVELOPED THE PUBLIC AT LARGE IN ITS CELEBRATION. THUS THE LD. COUNSEL FOR ASSESSEE STA TED THAT NONE OF THE CLAUSES OF THE OBJECTS OF THE ASSESSEE SOCIETY WAS FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COM MUNITY OR CASTE AND THIS CONTENTION OF THE LD. COUNSEL FOR AS SESSEE, THEREFORE, WAS INCORRECT. THE LD. COUNSEL FOR ASSE SSEE THEREAFTER DREW OUR ATTENTION TO THE EXPLANATION-3 OF SECTION 80G(5), WHICH READS AS UNDER: EXPLANATION 3.- IN THIS SECTION,' CHARITABLE PURPOSE' DOES NOT INCLUDE ANY PURPOSE THE WHOLE OR SUBSTANTIALLY THE WHOLE OF WHICH IS OF A RELIGIOUS NATURE. 7. THE LD. COUNSEL FOR ASSESSEE STATED THAT NONE OF THE OBJECTS OF THE ASSESSEE SOCIETY OF THE ASSESSEE SOC IETY, MORE SPECIFICALLY THOSE STATED AT CLAUSES (A), (B) AND ( C) OF THE ACT COULD BE SAID TO BE OF A RELIGIOUS NATURE AS POINTE D OUT ABOVE. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, ST ATED THAT THE ASSESSEE WAS NOT EVEN HIT BY EXPLANATION-3 OF S ECTION 80G(5) OF THE ACT. THE LD. COUNSEL FOR ASSESSEE, T HEREFORE, CONTENDED THAT THE ASSESSEE SOCIETY WAS ESTABLISHED FOR A CHARITABLE PURPOSE AND NOT FOR THE PURPOSE OF BENEF ITING ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE AND WAS THUS 5 ELIGIBLE FOR GRANT OF APPROVAL U/S 80G(5) OF THE AC T. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF UMAID CHARITABLE TRUST VS. UNION OF INDIA & OTHERS REPORTED IN 307 ITR 226 WHEREIN THE LD. COUNSEL FOR ASSESSEE SPECIFICALLY D REW OUR ATTENTION TO PARA 13 OF THE ORDER WHICH STATED THAT TO SERVE AS A CHARITABLE PURPOSE IT IS NOT NECESSARY THAT TH E OBJECTS MUST BE TO SERVE THE WHOLE OF MANKIND OR ALL PERSON S LIVING IN COUNTRY. 8. THEREAFTER THE LD.COUNSEL FOR THE ASSESSEE STATE D THAT IT WAS INCORRECT THAT THE ASSESSEE HAD BEEN SPENDIN G ONLY A FRACTION OF ITS TOTAL RECEIPTS ON CHARITABLE ACTIVI TIES. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE FINANCIAL STATEMENT OF THE ASSESSEE SOCIETY FOR THE YEARS END INGS 31.3.2012, 31.3.2013, 31.3.2014 AND 31.3.2015 PLACE D AT PAGE NOS.81 TO 113 AND POINTED OUT THAT IT HAD BEEN SPENDING CONSISTENTLY ON ITS STATED OBJECTS AND DEP LOYING THE REVENUE GENERATED IN ACCUMULATING ASSETS FOR TH E PURPOSE OF ITS CHARITABLE OBJECTS. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE ASSESSEE WAS NOT KEEP ING ITS SURPLUS UNUTILIZED IN CASH OR FDRS. THE LD. COUNSE L FOR ASSESSEE FURTHER POINTED OUT THAT THE CONTENTION OF THE LD.CIT(E) THAT MAJOR PORTION WAS BEING SPENT ON SAL ARY DOES NOT GO AGAINST THE ASSESSEE SINCE SALARIES WERE BEI NG PAID TO THE STAFF WHO WERE INVOLVED IN RUNNING THE CHARI TABLE TRUST AND THE MEDICAL FACILITIES BEING PROVIDED BY IT WHICH WAS ESSENTIAL EXPENDITURE AND FURTHER POINTED OUT T HAT EVEN 6 THE EXPENSES TO THE TUNE OF 25% OF THE TOTAL EXPENS ES CANNOT BE SAID TO BE MEAGRE ON CHARITABLE PURPOSE. THE LD. COUNSEL FOR ASSESSEE ALSO DREW OUR ATTENTION TO VAR IOUS ACTIVITIES CARRIED OUT BY THE ASSESSEE SOCIETY AT L ESS THAN NORMAL RATE LIKE PROVIDING LABORATORY TESTING FACIL ITIES AT LESS THAN MARKET PRICE, CONDUCTING FREE OPERATION O F EYES, ETC., PLACED AT PAGE NOS.114 TO 130 OF THE PAPER BO OK. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, STATED THAT TH E ASSESSEE TRUST WAS INDULGING PRIMARILY IN CHARITABLE ACTIVIT IES ONLY. 9. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE LD.CIT(E) AND STATED THAT CELEBRATING AGARS AIN JAYANTEE AND PROMOTING FEELING OF BROTHERHOOD AMONG AGGARWAL COMMUNITY TANTAMOUNT TO BENEFITING A PARTI CULAR CASTE/COMMUNITY WHICH WAS IN VIOLATION OF THE CONDI TIONS SPECIFIED U/S80G(5)(III) OF THE ACT. THE LD. DR AL SO POINTED OUT THAT UNDOUBTEDLY THE ASSESSEE WAS SPENDING MEAG RE AMOUNT ON CHARITABLE ACTIVITIES AND THUS WAS NOT EN TITLED TO GRANT OF APPROVAL U/S 80G(5) OF THE ACT. 10. WE HAVE HEARD BOTH THE PARTIES, GONE THROUGH TH E ORDERS OF THE AUTHORITIES BELOW AND ALSO PERUSED TH E DOCUMENTS TO WHICH OUR ATTENTION WAS DRAWN. WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. UNDOUBTEDLY, THE APPROVAL U/S 80G(5) IS GRANTED TO INSTITUTIONS OR FUNDS WHICH ARE ESTABLISHED FOR CHA RITABLE PURPOSE AND IT RULES OUT FUNDS OR INSTITUTIONS WHIC H ARE ESTABLISHED FOR THE BENEFIT OF A PARTICULAR RELIGIO US COMMUNITY OR CASTE OR OBJECTS WHICH ARE OF RELIGIOU S NATURE. 7 CONSIDERING THE OBJECTS OF THE ASSESSEE SOCIETY FRO M THIS ANGLE WE FIND THAT NONE OF THE OBJECTS OF THE ASSES SEE CARRY A RELIGIOUS CONTOUR OR ARE FOR THE BENEFIT OF ANY P ARTICULAR COMMUNITY OR CASTE. AS FOR THE OBJECT AT CLAUSE (A) OF FULFILLING THE AIMS OF AGROHA VIKAS TRUST & MAHARAJ A AGARSEIN IT HAS NOT BEEN SHOWN TO US AS TO HOW IT B ENEFITS ONLY THE AGARWAL COMMUNITY. FURHER, AS RIGHTLY POI NTED OUT BY THE LD. COUNSEL FOR ASSESSEE, PROPAGATING AND INCULCATING RELIGIOUS FEELINGS, BROTHERHOOD AND NAT IONALISM AMONG AGGARWAL COMMUNITY ONLY AIM AT BRINGING TOGET HER MEMBERS OF THE AGARWAL COMMUNITY AND DEVELOPING FEE LING OF NATIONALISM AMONGST THEM WHICH BENEFITS THE SOCI ETY AT LARGE AND CANNOT BE SAID TO BE EITHER BENEFITING AG GARWAL COMMUNITY ONLY NOR BEING IN THE NATURE OF RELIGIOUS PURPOSE. AS FOR THE OBJECT OF CELEBRATION OF AGARSA IN JAYANTI ,IT DEFINITELY DOES NOT HAVE A RELIGIOUS CONTOUR AN D THE LD.COUNSEL FOR THE ASSESSEE HAS EMPHASIZED THAT THE CELEBRATIONS INVOLVE THE PUBLIC AT LARGE THEREFORE WE FAIL TO UNDERSTAND AS TO HOW THE SAID OBJECT IS FOR THE BEN EFIT OF A PARTICULAR COMMUNITY ONLY. MOREOVER ONLY ONE OBJECT OUT OF SEVERAL OBJECTS CANNOT GIVE A RELIGIOUS OR COMMUNAL COLOUR TO THE ASSESSEE SOCIETY. THE REST OF THE OBJECTS AI MED AT DEVELOPING THE MORAL FABRIC OF THE SOCIETY, HELP P OOR AND NEEDY CHILDREN IN THEIR EDUCATION AND RUNNING CHARI TABLE DISPENSARIES AND HOSPITALS FOR THE PUBLIC AT LARGE ARE ALL CHARITABLE ACTIVITIES FOR THE BENEFIT OF THE GENERA L PUBLIC. THE LD.COUNSEL HAS EVEN DEMONSTRATED CARRYING OUT T HE SAME IN THE PRECEDING YEARS BY WAY OF DOCUMENTS FIL ED 8 SHOWING CONDUCTING FREE EYE OPERATIONS AND CARRYING OUT MEDICAL TESTS AT SUBSIDIZED RATES WHICH HAS NOT BEE N CONTROVERTED BY THE REVENUE. WE ALSO FIND ,ON PERUS ING THE FINANCIAL STATEMENTS OF THE ASSESSEE SOCIETY FOR TH E PRECEDING THREE YEARS I.E. YEAR ENDING ON 31-03-13, 31-03-14 & 31-03-15 THAT ALL EXPENDITURES INCURRED ARE ONLY IN THE CONTEXT OF RUNNING ITS CHARIABLE DISPENSARY BY WAY OF PURCHASING MEDICINES, PAYING STAFF SALARY AND INCUR RING MISC. EXPENSES ONLY. NO EXPENDITURE EXPLICITLY BENE FITTING THE AGGARWAL COMMUNITY HAS BEEN INCURRED BY THE ASS ESSEE. THEREFORE WE FIND NO MERIT IN THE CONTENTION OF THE REVENUE THAT THE OBJECTS OF THE ASSESSEE SOCIETY HAD RELIGI OUS CONTOURS AND WERE BENEFITTING A PARTICULAR COMMUNIT Y ONLY. 11. FURTHER THE CONTENTION OF THE REVENUE THAT THE ASSESSEE WAS SPENDING ONLY A SMALL PORTION OF ITS R ECEIPTS ON THE STATED CHARITABLE ACTIVITIES IS AGAIN WE FIN D FACTUALLY INCORRECT. THE SAID FINDING, WE FIND, HAS BEEN ARR IVED AT AFTER EXCLUDING THE SPEND ON SALARY, WHICH AS PER T HE LD.CIT(E) IS NOT A CHARITABLE ACTIVITY. BUT CONSIDE RING THE FACT THAT THE ASSESSEE IS CARRYING OUT NUMBER OF CH ARITABLE ACTIVITIES AS STATED IN ITS OBJECTS WHICH INCLUDES RUNNING THE CHARITABLE DISPENSARIES AND HOSPITALS FOR THE P UBLIC IN GENERAL, THE MANNING OF THE SAID DISPENSARIES BY A DEQUATE PERSONNEL AND ALSO THE REQUIREMENT OF STAFF FOR MAN AGING THE AFFAIRS OF THE SOCIETY ARE BASIC AND ESSENTIAL EXPENDITURE WHICH ARE TO BE CONSIDERED TO HAVE BEEN INCURRED IN THE COURSE OF CARRYING OUT ITS CHARITAB LE 9 ACTIVITIES ALONE AND, THEREFORE, STAFF SALARY PAID ON ACCOUNT OF THE SAME CANNOT BE TREATED AS BEING EXPENSES NOT RELATED TO THE CHARITABLE ACTIVITY OF THE ASSESSEE CONCERN. IN SUCH CIRCUMSTANCES, THE EXPENSES INCURRED ON STAFF SALAR Y ARE ALSO TO BE TREATED AS PART OF CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE AND CONSIDERING THE SAME, THEREFORE , THE QUANTUM OF EXPENDITURE INCURRED BY THE ASSESSEE ON ITS ACTIVITIES TAKES A QUANTUM JUMP AND THUS THE FINDIN GS OF LD.CIT(E) THAT THE ASSESSEE HAS INCURRED MEAGRE INC OME ON ITS STATED CHARITABLE EXPENSES GETS NEGATED. 12. IN VIEW OF THE SAME, WE SET ASIDE THE ORDER OF THE LD.CIT(E) AND DIRECT THAT THE ASSESSEE BE GRANTED A PPROVAL U/S 80G(5)(III) OF THE ACT. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 10