Mannulal Jagannath Das Trust Hospital, Jabalpur V. Commissioner of Income Tax (E), Bhopal

ITA 13/JAB/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7120 (ITAT-JABALPUR)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 07-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Keywords: Charitable institution; Opportunity of being heard; Competent authority; Revenue expenditure; Capital expenditure; Set aside
• Section: 80G; 12A; 12AA; 13; 12; 10; 11

Judgement Text

I.T.A NO.13/JAB/2019 1 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR BEFORE S/SHRI NRS GANESAN, JUDICIAL MEMBER & SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 13/JAB/2019 ASSESSMENT YEAR: N.A. MANNULAL JAGANNATH DAS TRUST HOSPITAL, 1414, DIXITPURA, JABALPUR (MP) 482002 (PAN: AAATM 4586B) VS. COMMISSIONER OF INCOME TAX(E), METRO WALK BUILDING, E-5, ARERA COLONY, BITTAN MARKET, BHOPAL - 462016 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ANIL GUPTA, CA RESPONDENT BY SHRI H.P.MEENA, CIT-DR DATE OF HEARING 23/07/2020 DATE OF PRONOUNCEMENT 07/09/2020 ORDER PER SANJAY ARORA, AM: THIS APPEAL BY THE ASSESSEE AGITATING THE ORDER UN DER SECTION 80G (5)(VI) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) B Y THE COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL (CIT(E) FOR SHORT) DATED 30.01.2019 REJECTING ITS APPLICATION FOR APPROVAL THERE-UNDER. 2.1 IT MAY BE RELEVANT TO SET OUT THE BACKGROUND FA CTS OF THE CASE. THE ASSESSEE- APPLICANT, A TRUST CREATED VIDE TRUST DEED DATED 17 .3.1952, IS REGISTERED UNDER M.P. PUBLIC TRUST ACT, 1951. IT IS ALSO REGISTERED AS A CHARITABLE INSTITUTION U/S. 12AA OF THE ACT VIDE ORDER DATED 26.7.1994. IT IS RUNNING T HREE SEPARATE DIVISIONS, AS: I.T.A NO.13/JAB/2019 2 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) (A) HOSPITAL DIVISION, I.E., MEDICAL RELIEF, INCOME OF WHICH IS SUBJECT TO (ON APPLICATION) EXEMPTION U/S. 11 OF THE ACT; (B) SCHOOL DIVISION, I.E., EDUCATION, INCOME FROM W HICH ACTIVITY IS ALSO (I.E., BESIDES SECTION 11), EXEMPT U/S. 10(23C)(VA) OF THE ACT; AND (C) AGRO DIVISION, YIELDING AGRICULTURAL INCOME, EX EMPT U/S. 10(1). 2.2 IT HAD APPLIED FOR AND HAD BEEN GRANTED APPROVA L U/S. 80G(5)(VI) ON 20.12.2005, WHICH WAS EFFECTIVE FROM 01.4.2005 TO 3 1.03.2008 (PB PG. 45). IT SOUGHT APPROVAL THERE-UNDER AGAIN VIDE APPLICATION IN THE PRESCRIBED FORM ON 04.6.2018. IT IS THE DENIAL OF THIS APPROVAL WHICH HAS LED TO THE INSTANT APPEAL BY IT BEFORE THE TRIBUNAL. THE REASONS STATED IN THE IMPU GNED ORDER FOR REFUSING TO GRANT APPROVAL U/S. 80G(5)(VI) ARE AS UNDER: (PARAS 6 & 7 OF THE IMPUGNED ORDER) (A) THE ASSESSEE IS GENERATING HUGE SURPLUSES FROM YEAR TO YEAR. NEITHER ANY JUSTIFICATION FOR THE SAME HAS BEEN GIVEN, NOR, RES ULTANTLY, IS THERE ANY NEED FOR SEEKING APPROVAL U/S.80G. THE SURPLUS FROM THE THRE E PRINCIPAL ACTIVITIES FOR PRECEDING THREE YEARS IS TABULATED AS UNDER: (AMOUNT IN RS. LACS) PARTICULARS/YEARS 2015-16 2016-17 2017-18 TOTAL HOSPITAL DIVISION 19.25 61.39 65.85 146.49 SCHOOL DIVISION 45.65 58.34 40.42 144.41 AGRICULTURAL DIVISION 180.92 194.45 187.63 563.00 TOTAL 245.82 314.18 293.90 853.90 (B) THE AGRICULTURAL INCOME IS NOT ON ACCOUNT OF AN Y AGRICULTURAL ACTIVITY PER SE, BUT BY RENTING ITS LAND AND, THUS, IN THE NATURE COMME RCIAL ACTIVITY YIELDING SURPLUS TO THE TUNE OF 98% OF THE GROSS RECEIPT, WITH THAT FOR FINANCIAL YEAR 2016-17 IN FACT EXCEEDING THE GROSS RECEIPT (RS.192.81 LACS) ITSELF . SIMILARLY, THE SURPLUS FROM THE OTHER ACTIVITIES IS IN THE RANGE OF 27% TO 33% (OF THE GROSS RECEIPT). THE SAME ALSO INCLUDES RECEIPT BY WAY OF MEDICAL ASSOCIATE SHARE AND EDUCATION ASSOCIATE I.T.A NO.13/JAB/2019 3 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) SHARE, FOR USE OF ITS FACILITY BY ITS ASSOCIATE CONCERNS, VIZ. PREMAVATI COLLEGE OF NURSING, THE RECEIPT FROM WHICH FOR THREE STATED YE ARS IS AT AN AGGREGATE OF RS.178.65 LACS. THE SAID RECEIPT IS AGAIN IN THE NA TURE OF RENT INCOME, FOR USE OF THE ASSESSEES FACILITIES BY ANOTHER, AND NOT FROM ANY CHARITABLE ACTIVITY BY IT. (C) HENCE THE REFUSAL TO GRANT APPROVAL. 2.3 THE ASSESSEES CASE DISPUTING THE SAID REFUSAL IS ALONG THE FOLLOWING LINES: (A) THE SURPLUS DOES NOT TAKE INTO ACCOUNT CAPITAL EXPENDITURE OR REPAYMENT OF LOAN/S BY THE ASSESSEE, CONSIDERING WHICH THERE IS IN FACT NET DEFICIENCY. (B) WITHOUT PREJUDICE, SURPLUS ITSELF IS NO CRITERI A FOR DENIAL OF APPROVAL U/S. 80G(5)(VI), WHICH IS TO BE IN TERMS OF RULE 11AA, F OR WHICH REFERENCE WAS MADE DURING HEARING TO CIT V. RAJMALA EDUCATION SOCIETY [2012] 65 DTR 307 (P&H) AND ADDL. CIT V. SURAT ART SILK CLOTH MFRS. ASS . [1980] 121 ITR 1 (SC). (C) IN VIEW OF THE AMENDMENT TO SECTION 80G(5) BY F INANCE (NO.2) ACT, 2009, W.E.F. 1.10.2009, AN APPROVAL U/S. 80G(5)(VI) IS TO , UNLESS SPECIFICALLY WITHDRAWN, EXTEND IN PERPETUITY. APPROVALS EXPIRING BEFORE 1.1 0.2009, EVEN AS EXPLAINED BY THE BOARD CIRCULAR NO.5/2010, DATED 03.6.2010, WILL HAVE TO BE RENEWED, AND UPON RENEWAL, UNLESS SPECIFICALLY WITHDRAWN, BE VALID IN PERPETUITY. THAT IS TO SAY, FOR CASES AS A PRESENT ONE, WHERE THE APPROVAL EXPIRES BEFORE 01.10.2009, THE SAME SHALL HAVE TO BE NECESSARILY RENEWED. (D) IN ANY CASE, THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, I.E., THE LAW QUA THE GRANT OF APPROVAL OR THE NATURE OF THE ASSESSE ES ACTIVITY, APPROVAL COULD NOT BE VALIDLY DENIED. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. I.T.A NO.13/JAB/2019 4 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) 3.1 IT IS CLEAR THAT THE DECISION TO APPROVE, OR NO T SO, BY THE COMPETENT AUTHORITY, IS GOVERNED BY LAW, I.E., SECTION 80G(5)(VI) READ W ITH RULE 11AA, WHICH, IN THE RELEVANT PART, READ AS UNDER: 80G. DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS, ETC. (1) IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, T HERE SHALL BE DEDUCTED, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, (I) IN A CASE WHERE THE AGGREGATE OF THE SUMS SPEC IFIED IN SUB-SECTION (2) INCLUDES ANY SUM OR SUMS OF THE NATURE SPECIFIED IN SUB-CLAUSE (I) OR . , AN AMOUNT EQUAL TO THE WHOLE OF THE SUM OR, AS THE CASE MAY BE, SUMS OF SUCH NATURE PLU S FIFTY PER CENT OF THE BALANCE OF SUCH AGGREGATE; AND (II) IN ANY OTHER CASE, AN AMOUNT EQUAL TO FIFTY P ER CENT OF THE AGGREGATE OF THE SUMS SPECIFIED IN SUB-SECTION (2). (2) .(4) (5) THIS SECTION APPLIES TO DONATIONS TO ANY INSTI TUTION OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB-SECTION (2), ONLY IF IT IS ESTABL ISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF IT FULFILS THE FOLLOWING CONDITIONS, NAMELY : (I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCO ME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTIONS 11 AND 12 OR CLAUSE (23AA) OR CLAUSE (23C) OF SECTION 10 : PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCO ME, 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 BO OKS 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 MA KING 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 A NY 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 PURPOS E; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCO UNTS OF ITS RECEIPTS AND EXPENDITURE; (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED A S 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 RECOGNIZED BY THE GOVERNMENT OR BY A UNIVERSITY EST ABLISHED BY LAW, OR AFFILIATED TO ANY I.T.A NO.13/JAB/2019 5 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) UNIVERSITY ESTABLISHED BY LAW, OR IS AN INSTITUTION FINANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTHORITY; (VI) IN RELATION TO DONATIONS MADE AFTER THE 31ST D AY OF MARCH, 1992, THE INSTITUTION OR FUND IS FOR THE TIME BEING APPROVED BY THE PRINCIPAL COMMISSION ER OR COMMISSIONER; RULE 11AA: REQUIREMENTS FOR APPROVAL OF AN INSTITUTION OR FUND UNDER SECTION 80G . (1) THE APPLICATION FOR APPROVAL OF ANY INSTITUTION OR FUND UNDER CLAUSE (VI) OF SUB-SECTION (5) OF SECTION 80G SHALL BE IN FORM NO. 10G AND SHALL BE M ADE IN TRIPLICATE. (2) THE APPLICATION SHALL BE ACCOMPANIED BY THE FOL LOWING DOCUMENTS, NAMELY: (I) COPY OF REGISTRATION GRANTED UNDER SECTION 12A OR COPY OF NOTIFICATION ISSUED UNDER SECTION 10(23) OR 10(23C); (II) NOTES ON ACTIVITIES OF INSTITUTION OR FUND SIN CE ITS INCEPTION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS; (III) COPIES OF ACCOUNTS OF THE INSTITUTION OR FUND SINCE ITS INCEPTION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS. (3) THE COMMISSIONER MAY CALL FOR SUCH FURTHER DOCU MENTS OR INFORMATION FROM THE INSTITUTION OR FUND OR CAUSE SUCH INQUIRIES TO BE MADE AS HE MAY D EEM NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF SUCH INS TITUTION OR FUND. (4) WHERE THE COMMISSIONER IS SATISFIED THAT ALL TH E CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G ARE FULFILLED BY THE INSTITUTION OR FUND, HE SHALL RECORD SUCH SATISFACTION IN WRITING AND GRANT APPROVAL TO THE I NSTITUTION OR FUND SPECIFYING THE ASSESSMENT YEAR OR YEARS FOR WHICH THE APPROVAL IS VALID. (5) WHERE THE COMMISSIONER IS SATISFIED THAT ONE OR MORE OF THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G ARE NO T FULFILLED, HE SHALL REJECT THE APPLICATION FOR APPROVAL, AFTER RECORDING THE REASONS FOR SUCH REJE CTION IN WRITING: PROVIDED THAT NO ORDER OF REJECTION OF AN APPLICATI ON SHALL BE PASSED WITHOUT GIVING THE INSTITUTION OR FUND AN OPPORTUNITY OF BEING HEARD. (6) THE TIME-LIMIT, WITHIN WHICH THE COMMISSIONER S HALL PASS AN ORDER EITHER GRANTING THE APPROVAL OR REJECTING THE APPLICATION SHALL NOT EXC EED SIX MONTHS FROM THE END OF THE MONTH IN WHICH SUCH APPLICATION WAS MADE: PROVIDED THAT IN COMPUTING THE PERIOD OF SIX MONTHS , ANY TIME TAKEN BY THE APPLICANT IN NOT COMPLYING WITH THE DIRECTIONS OF THE COMMISSIONER U NDER SUB-RULE (3) SHALL BE EXCLUDED. 3.2 THE ORDER GRANTING APPROVAL, OR REJECTING IT, I S TO BE IN WRITING, CONTAINING SATISFACTION OR, AS THE CASE MAY BE, SPECIFYING THE REASON/S FOR BEING NOT SATISFIED I.T.A NO.13/JAB/2019 6 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) WITH THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G. FURTHER, CLEARLY, THEREFORE, NON-SATISFACTION OF EV EN ONE CONDITION DISENTITLES THE ASSESSEE-APPLICANT FOR APPROVAL, VALIDATING ITS RE JECTION. A BARE READING OF THE IMPUGNED ORDER DOES NOT, HOWEVER, SHOW AS TO WHICH OF THE CONDITIONS SPECIFIED IN CLAUSES (I) TO (V) OF SECTION 80G(5) IS NOT SATISFI ED. THERE CAN BE, AFTER ALL, NO DEEMED SATISFACTION OF THE SAID CONDITIONS. THE IMP UGNED ORDER CANNOT THEREFORE BE SAID TO SATISFY THE PARAMETERS FOR EITHER AN ACCEPT ANCE OR REJECTION OF THE ASSESSEES APPLICATION FOR APPROVAL. AND, ACCORDINGLY, AT THE OUTSET WARRANTS BEING SET ASIDE, AND THE MATTER REMITTED BACK TO THE FILE OF THE COM PETENT AUTHORITY TO ISSUE AN ORDER IN ACCORDANCE WITH LAW, I.E., CLEARLY STATING, ALON G WITH REASON/S, AS TO WHICH OF THE SAID CONDITIONS IS NOT SATISFIED. HOWEVER, THE MOOT POINT IS: WHY SHOULD AN ASSESSEE SUFFER IF IT HAS FURNISHED ALL THE DETAILS /EXPLANATIONS SOUGHT BY THE COMPETENT AUTHORITY, FOR THE LATTER NOT SETTING OUT HIS ORDER IN THE MANNER CONTEMPLATED BY LAW ? WE, THEREFORE, EXAMINE THE IMPUGNED ORDER ON THE BASIS OF THE REASONS FOR DENIAL RECORDED BY THE LD. CIT(E), WITH A VIEW TO ASCERTAIN WHICH OF THE CONDITIONS (SET OUT IN S.80G(5)(I) TO (V)) ARE NOT SATISFIED, ALONG WITH REASON/S THEREFOR. IT WAS ON THIS BASIS THAT THE HEARING IN THE MATTER WAS PROCEEDED WITH. 3.3 TOWARD THIS, THE FIRST REASON STATED IN THE IMP UGNED ORDER IS THE GENERATION OF HUGE SURPLUSES, YEAR AFTER YEAR, BY THE ASSESSEE , WHO CLAIMS THAT THERE IS IN FACT NO SURPLUS IF THE CAPITAL EXPENDITURE AND REPAYMENT OF LOAN/S IS TAKEN INTO ACCOUNT. WITHOUT DOUBT, EVEN AS ADMITTED BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS, AS WELL AS ITS COUNSEL, SH. GUPTA, DURING HEARING, BOTH TH E CAPITAL EXPENDITURE AND REPAYMENT OF LOAN IS ONLY AN APPLICATION OF INCOME. IN THE NORMAL, MERCANTILE OR COMMERCIAL SENSE, APPLICABLE TO CHARITABLE INSTITUT IONS, INCOME IMPLIES EXCESS OF REVENUE RECEIPT OVER REVENUE EXPENDITURE, AND THAT IS WHAT THE LD. CIT(E) IS REFERRING TO WHEN HE SPEAKS OF SURPLUS. IT IS THI S SURPLUS, INCOME BY DEFINITION, WHICH, UPON BEING APPLIED FOR CAPITAL EXPENDITURE I NCURRED, OR REPAYMENT OF I.T.A NO.13/JAB/2019 7 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) BORROWING MADE, FOR CHARITABLE PURPOSE/ES, THAT IS EXEMPT U/S. 11. HOWEVER, AS ALSO ARGUED WITHOUT PREJUDICE (PARA 2.3(B)), HOW IS THE GENERATION OF SURPLUS VIOLATIVE OF THE CONDITIONS OF S. 80G(5)((I) TO (V) ? IT IS RATHER ONLY WHEN THERE IS A SURPLUS (OR INCOME BY DEFINITION) THAT IT COULD BE APPLIED FOR A CHARITABLE PURPOSE, QUALIFYING FOR EXEMPTION U/S. 11. THE QUESTION OF CARRYING ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, IS APPLICABLE ONLY TO THE RES IDUARY CLASS, I.E., ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, AND NOT TO THE OTHER CATEGORIES OF CHARITABLE PURPOSE, AS DEFINED U/S. 2(15), VIZ. EDU CATION, MEDICAL RELIEF, ETC. THERE COULD BE AN ANGLE OF GENUINENESS AS WELL INASMUCH A S INCOME COULD ONLY BE AT A NORMATIVE LEVEL OF RECEIPT, SO THAT ANY INCOME BEYO ND THE SAME MAY INDICATE, OR AT LEAST PRIMA FACIE , NON-GENUINENESS OF THE RECEIPT ITSELF. IN THIS RE GARD, 98% OF THE AGRICULTURAL RECEIPT AS INCOME WAS EXPLAINED BY SHR I GUPTA, TO BE ON ACCOUNT OF ABSENCE OF AGRICULTURAL ACTIVITY; THE RECEIPT BEING BY WAY OF RENT, ADMITTING OF VERY LOW EXPENDITURE. WHERE, THEN, IS THE SCOPE FOR THE ACTIVITY BEING REGARDED AS COMMERCIAL ON THAT SCORE? THE INCOME COMPONENT AT 2 7% TO 33% FOR OTHER DIVISIONS COULD BE RELEVANT ONLY WHERE IT CAN SAID TO EXCEED, RATHER BY FAR, OF THE NORMATIVE LEVEL, NOT DEFINED OR DELINEATED. THE OBJ ECTION OF SURPLUS OR COMMERCIAL ACTIVITY BY THE LD. CIT(E) IS THUS NOT VALID. THE O BJECTION FAILS. 3.4 THE NEXT OBJECTION BY THE LD. CIT(E) IS WITH RE GARD TO THE RECEIPT BY WAY OF MEDICAL ASSOCIATE SHARE AND EDUCATION ASSOCIATE SHARE AT AN AGGREGATE OF RS.178.65 LAKHS AND RS.14.40 LAKHS RESPECTIVELY FOR THE PRECEDING THREE YEARS, I.E., F.YS. 2015-16 TO 2017-18. THE SAME, WITHOUT DOUBT, CONSTITUTES A SUBSTANTIAL PART OF THE SURPLUS OF THE HOSPITAL DIVISION. MORE IMPORTAN TLY, THE QUESTION IS AS TO THE NATURE OF THE RECEIPT. AS EXPLAINED, IT REPRESENTS A CHARGE FOR THE USE OF THE ASSESSEES FACILITY (I.E., HOSPITAL DIVISION AND SC HOOL DIVISION) BY ITS ASSOCIATE CONCERN/S, VIZ. PREMAVATI COLLEGE OF NURSING. THE QUESTION, TO OUR MIND, THAT ARISES IS IF, BEING A CONSIDERATION FOR USE OF ITS PROPERTY BY ITS ASSOCIATE CONCERN/S, IS THE CONSIDERATION ADEQUATE ? THIS IS AS WHERE NOT SO, SECTION 13(2)(A) R/W S. 13(1) I.T.A NO.13/JAB/2019 8 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) SHALL OPERATE TO EXCLUDE SECTIONS 11 AND 12, RESULT ING IN CONTRAVENTION OF THE CONDITION OF SECTION 80G(5)(I). YES, THE ENTITY/S U SING THE FACILITY MAY NOT BE COVERED U/S. 13(3), FOR S. 13 TO APPLY, BUT THERE I S NEITHER ANY EXPLANATION BY THE ASSESSEE NOR ANY FINDING BY THE LD. CIT(E) QUA THIS. FURTHER, THERE IS ALSO THE ANGLE OF GENUINENESS. A MORE THAN ADEQUATE COMPENSATION C OULD, ON THE OTHER HAND, IMPLY ROUTING OF PERHAPS TAXABLE INCOME INTO THE CO FFERS OF THE ASSESSEE FOR BEING CLAIMED EXEMPT. THAT IS, NON-ADEQUACY IS IMPERMISSI BLE EVEN IN THE CASE OF AN EXCESS OR OVERCHARGE WHERE THE PAYER ENTITY IS GENE RATING TAXABLE INCOME, AND IRRESPECTIVE OF WHETHER IT IS COVERED U/S. 13(3) OR NOT. THERE BEING NO FINDING QUA THIS ASPECT, THE MATTER IS SET ASIDE TO THE FILE OF THE LD. CIT(E) FOR THE SAME. NEEDLESS TO ADD, HE SHALL DO SO PER A SPEAKING ORDE R AND AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LD. CIT(E) SHALL, AS EXPLAINED HEREINBEFORE, RECORD HIS SATISFACTION QUA EACH OF THE CONDITIONS SPECIFIED IN CLAUSES (I) TO (V) OF SEC. 80G(5) OR, AS CASE MAY BE, SPECI FY REASON/S FOR HIS NON-SATISFACTION OF ANY OF THE SAID CONDITIONS. 3.5 WE MAY, BEFORE CLOSING, ALSO ADVERT TO THE ASSE SSEES ARGUMENT OF THE AMENDED LAW, I.E., W.E.F. 1.10.2009, MANDATING AN A UTOMATIC RENEWAL OF THE APPROVALS EXPIRING BEFORE 1.10.2009, AN ASSERTION M ADE WITH REFERENCE TO THE BOARD CIRCULAR 5/2010, DATED 3.6.2010 (PB PGS. 211-212). WE CAN HARDLY AGREE. THE AMENDED LAW BEING EFFECTIVE FROM 1.10.2009, IT IS O NLY THE APPROVALS GRANTED ON OR AFTER 1.10.2009 WHICH WOULD BE GOVERNED BY THE AMEN DED LAW, OMITTING THE TIME LIMITATION TO WHICH AN APPROVAL U/S. 80G(5)(VI) WAS PRIOR THERETO (01.10.2009), SUBJECT. APPROVALS GRANTED BEFORE THIS DATE WOULD B E GOVERNED BY THE EXTANT LAW. THE SAME SHALL THEREFORE, ON EXPIRY, BE SUBJECT TO RENEWAL, AND WHERE SO RENEWED, EXTEND IN PERPETUITY. THE WORDS WILL HAVE TO BE RE NEWED IN THE BOARD CIRCULAR ONLY IMPLIES THAT THESE APPROVALS WILL HAVE TO BE, ON EXPIRY, NECESSARILY RENEWED. NOT SO READING WOULD IMPLY THE EVEN APPROVALS GRANT ED BEFORE 1.10.2009 WOULD OPERATE IN PERPETUITY, I.E., GIVE A RETROSPECTIVE O PERATION TO THE AMENDMENT, WHICH I.T.A NO.13/JAB/2019 9 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) IS CLEARLY PROSPECTIVE, EVEN AS CLARIFIED PER THE B OARD CIRCULAR. IN FACT, THE SAID APPROVALS EXPIRE ONLY BECAUSE THEY CONTINUE TO BE G OVERNED BY THE EARLIER, UNAMENDED LAW . WHY, THE ASSESSEE ADMITTEDLY DID NOT ENJOY ANY AP PROVAL U/S. 80G(5)(VI) FOR THE PERIOD COMMENCING 01.4.2008, I.E ., IMMEDIATELY AFTER THE EXPIRY OF THE EARLIER APPROVAL ON 31.3.2008, AND HAD TO AP PLY FOR RENEWAL AFRESH. THE QUESTION OF WITHDRAWAL SHALL ARISE ONLY WHERE THERE HAS BEEN A RENEWAL, DENIED IN THE INSTANT CASE. THE DECISION IN SRI D.J. SHAH FOUNDATION VS. DIT (E) [2010] 46 DTR 81 (KOL), RELIED UPON BY THE ASSESSEE TO CANVASS ITS A RGUMENT, DOES NOT ADVANCE OR SUPPORT ITS CASE IN ANY MANNER. THE TRIBUNAL IN TH AT CASE ONLY CONFIRMS THAT THE APPROVAL GRANTED ON OR AFTER 01.10.2009 CANNOT BE S UBJECT TO TIME LIMITATION, EVEN THOUGH THE RELEVANT RULE (R.11AA(4)), EMPOWERING TH E COMMISSIONER TO SPECIFY THE YEARS FOR WHICH THE APPROVAL IS TO BE VALID, REMAIN S UNCHANGED, I.E., EVEN AFTER 30.9.2009. THE APPROVAL CERTIFICATE DIRECTED TO BE MODIFIED BY THE TRIBUNAL WAS DATED 29.4.2010, I.E., ISSUED AFTER 01.10.2009 AND, THUS, GOVERNED BY THE AMENDED LAW. THE SAID DECISION NOWHERE CONTRADICTS, AND IS RATHER SUPPORTIVE OF THE VIEW HEREINBEFORE EXPRESSED. THE RELIANCE PLACED THEREON IS MISPLACED. 3.6 WE ALSO CONSIDER IT NECESSARY TO, BEFORE PARTIN G, RECORD AN INCIDENCE OF THE HEARING IN THE INSTANT CASE. THE MATTER WAS INITIAL LY HEARD ON 17/7/2020, WITH THE BENCH INDICATING ITS SATISFACTION WITH THE UNTENABI LITY OF THE GROUNDS OF SURPLUS AND OF COMMERCIAL ACTIVITY STATED IN THE IMPUGNED ORDER, WHICH WERE CLAIMED TO BE THE ONLY OBJECTION/S RAISED THEREBY BY THE LD. CIT(E). ON, HOWEVER, THE SUBSEQUENT DISCOVERY OF THE FACTUM OF MEDICAL ASSO CIATE SHARE AND EDUCATION ASSOCIATE SHARE FORMING PART OF THE RECEIPT OF THE HOSPITAL & SCHOOL DIVISION IN NO INSUBSTANTIAL SUMS, AS WELL AS OF THE SAME BEING EXPLAINED TO BE A CHARGE FOR THE USE OF THE APPLICANT-TRUSTS FACILITIES BY ITS ASS OCIATE CONCERN/S, THE MATTER WAS PUT UP FOR HEARING THE PARTIES THEREON. SH. GUPTA WOULD OBJECT, STATING THAT NO SUCH I.T.A NO.13/JAB/2019 10 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) OBJECTION WAS RAISED BY THE LD. CIT-DR WHEN THE MAT TER WAS HEARD, I.E., ON 17/7/2020, SO THAT THERE WAS IMPLIEDLY NO OTHER SUR VIVING OBJECTION, AND THAT THE SAME MUST BE REGARDED AS ACCEPTED BY THE REVENUE; THE LD. CIT(E) HIMSELF HAVING NOT RAISED ANY SPECIFIC ISSUE WITH REGARD TO THE SA ID RECEIPT, I.E., BEYOND MERELY RECORDING THE FACT OF THE VOLUME AND NATURE OF THE SAID RECEIPTS IN HIS ORDER. THOUGH HE CLARIFIED, ON BEING ASKED, IF HE THEREBY QUESTIONS THE COMPETENCE OF THE TRIBUNAL TO SO INQUIRE, HE WOULD SUBMIT IN THE NEGA TIVE. HOWEVER, AN ISSUE IN THIS RESPECT HAVING BEEN RAISED DURING HEARING, WITH SH. GUPTA EXPRESSING HIS RESERVATION IN THE MATTER, WHICH HE STATED MAY BE N OTED, IT THEREFORE BECOMES INCUMBENT ON US TO CLARIFY THIS ASPECT OF THE MATTE R AS WELL. ON BEING FURTHER QUERIED DURING HEARING ABOUT THE STATUS W.R.T. SEC.13(3) OF THE PARTY/S PAYING THE SAID SUMS, SH. GUPTA WOULD S UMBIT THAT PREMAVATI COLLEGE OF NURSING PAYING RS.4.80 LACS PER ANNUM (AS EDUCAT ION ASSOCIATE SHARE) IS NOT COVERED U/S. 13(3), THOUGH COULD NOT STATE OF ANY M ATERIAL ON RECORD TO EXHIBIT SO, OR OF ANY EXPLANATION BY THE ASSESSEE QUA THE SAID TRANSACTIONS, FOR WHICH REFERENCE WAS ALSO MADE BY US TO THE APPELLANTS WRITTEN SUBM ISSIONS BEFORE THE LD. CIT(E)(PB PGS. 152-153). HE WAS ALSO UNABLE TO STAT E THE IDENTITY OF THE PERSON/S PAYING THE MEDICAL ASSOCIATE SHARE (WHICH IS AT A N AGGREGATE OF RS. 178.65 LACS). IN THIS REGARD, IT MAY BE AT THE OUTSET CLARIFIED THAT THE VERY FACT THAT THE LD. CIT(E) HAS IN HIS ORDER NOT ISSUED ANY CLEAR FINDING QUA THE SAID TRANSACTIONS, IS ITSELF A GROUND ENOUGH FOR US TO RESTORE THE MATTER BACK TO HIS FILE FOR EXAMINATION THEREOF FROM THE STANDPOINT OF WHETHER THE SAME IS, OR IS N OT, VIOLATIVE OF ANY OF THE CONDITIONS PRECEDENT FOR THE GRANT OF AN APPROVAL U /S.80G(5)(VI). AS ALSO OBSERVED DURING HEARING, A GRANT OR DENIAL OF APPROVAL U/S. 80G HAS TO BE WITHIN THE PARAMETERS OF S.80G(5)(VI) R/W R. 11AA. IT IS, THER EFORE, INCUMBENT ON THE COMPETENT/SANCTIONING AUTHORITY TO RECORD HIS SATIS FACTION OR OTHERWISE WITH EACH OF THE CONDITIONS SPECIFIED IN S. 80G(5)(I TO V) (R.11 AA(4) & (5)). IN ADDITION, HE HAS TO BE ALSO SATISFIED AS TO THE GENUINENESS OF THE A CTIVITIES OF THE APPLICANT (R. I.T.A NO.13/JAB/2019 11 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) 11AA(3)). THIS IS A POSITIVE REQUIREMENT SET OUT IN THE PROVISION, WHICH ACCORDS WITH THE SETTLED LAW THAT A SANCTION IS A POSITIVE ACT ON THE PART OF THE AUTHORITY HAVING THE POWER TO SANCTION (MONTREAL STREET RAILWAY CO. VS. NORMANDIN, AIR 1917 PC 142, 144; JER & CO. VS. CIT [1966] 60 ITR 335, 340 (ALL). THE SAME STANDS ALSO EMPHASIZED AT PARA 29.6 OF THE BOARD CI RCULAR NO.5/2010, DATED 03.6.2010, REFERRED TO DURING HEARING, ALBEIT IN TH E CONTEXT OF WITHDRAWAL OF AN APPROVAL U/S. 80G(5). AS SUCH, WHENEVER THERE ARE C IRCUMSTANCES THAT MAY IMPINGE ADVERSELY ON THE GENUINENESS OF THE ACTIVITIES OF A N APPLICANT, THE COMPETENT AUTHORITY IS BY LAW OBLIGED TO EXAMINE THE SAME, AN D RECORD HIS FINDING/S BASED ON SATISFACTION (OR OTHERWISE) IN THIS REGARD, THE SAM E FORMING THE BASIS OF HIS DECISION TO GRANT, OR NOT SO, THE APPROVAL, IN EITHER CASE, AFTER HEARING THE APPLICANT. WE MAY NOT BE CONSTRUED HAVING IN ANY MANNER EXPRESSED ANY SATISFACTION OR, AS THE CASE MAY BE, DISSATISFACTION QUA THE GENUINENESS ASPECT OF THE ACTIVITIES IN THE IN STANT CASE. WE ARE ONLY STATING THE CLEAR POSITION OF LAW IN THE MATTER, WHICH HAS NOT BEEN OBSERVED. IT IS NOT THE SATISFACTION OR OTHERW ISE OF THE TRIBUNAL THAT THE LAW ENVISAGES, BUT OF THE COMPETENT AUTHORITY, EVEN AS, AS AN APPELLANT AUTHORITY, IT IS TO EXAMINE THE TENABILITY OF THE FACTUAL FINDINGS AS R ECORDED BY THE COMPETENT AUTHORITY. COMING TO THE ASPECT OF THE POWER OF THE TRIBUNAL T O DIRECT THE LD. CIT(E) TO EXAMINE THE TRANSACTIONS UNDER REFERENCE (FROM THE STAND POINT OF THE SATISFACTION OR OTHERWISE OF THE CONDITIONS PRECEDENT FOR THE GR ANT OF APPROVAL U/S. 80G(5)(VI)), THE TRIBUNAL IS THE FINAL FACT FINDING AUTHORITY UN DER THE ACT. THOUGH THE CASE LAW IN THE MATTER IS LEGION, WE MAY, FOR AUTHORITY, REF ER TO THE DECISION IN CIT VS. WALCHAND & CO. (P.) LTD. [1967] 65 ITR 381 (SC), EXPLAINING THAT THE TRIBU NAL IS TO DEAL WITH AND DETERMINE ALL QUESTIONS WHICH ARIS E OUT OF THE SUBJECT MATTER OF AN APPEAL, IN LIGHT OF THE EVIDENCE AND CONSISTENTLY W ITH THE JUSTICE OF THE CASE. RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 19 63, CLEARLY STATES THAT THE TRIBUNAL IS, IN ARRIVING AT ITS DECISION, NOT CONFI NED TO THE GROUNDS SET FORTH IN THE I.T.A NO.13/JAB/2019 12 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) MEMORANDUM OF APPEAL (OR TAKEN WITH ITS LEAVE), TH OUGH SHALL GIVE OPPORTUNITY OF HEARING ON ANY GROUND OR MATTER CONSIDERED PERTINEN T BY IT. THE APEX COURT IN HUKUMCHAND MILLS LTD. VS. CIT [1967] 63 ITR 232 (SC) EXPLAINED THAT R.11 OF THE APPELLATE TRIBUNAL RULES IS NOT EXHAUSTIVE OF THE P OWERS OF THE TRIBUNAL. THE SAID DECISION WAS, AMONG OTHERS, CONSIDERED IN AHMEDABAD ELECTRICITY CO. LTD. VS. CIT [1993] 199 ITR 351 (BOM)(FB), TO EXPLAIN THAT THE A PPELLATE PROCEEDINGS, BEING IN CONTINUATION OF THE ASSESSMENT PROCEEDINGS, IT IS T HE CORRECT ASSESSMENT OF INCOME AND, CONSEQUENTLY, DETERMINATION OF THE CORRECT TAX LIABILITY, THAT IS THE PREMISE AND THE END OBJECTIVE OF THE APPELLATE PROCEEDINGS. TAX PROCEEDINGS, OR PROCEEDINGS UNDER THE ACT, ARE, IT IS TRITE LAW, NOT IN THE NAT URE OF A LIS OR ADVERSARIAL PROCEEDINGS. THE TRIBUNAL AS AN APPELLATE COURT, BE ING OTHERWISE NOT BOUND BY THE ORDERS OF THE AUTHORITIES BELOW, IS DUTY BOUND TO, WHERE CIRCUMSTANCES SO WARRANT, DIRECT FOR DETERMINATION OF MATTERS THAT HAVE A DIR ECT BEARING ON THE SUBJECT MATTER OF APPEAL - IN THE INSTANT CASE, BEING THE ADMISSI BILITY OR OTHERWISE OF THE APPROVAL U/S.80G(5)(VI). IN THE FACTS OF THE CASE, THE LD. CIT(E), WHILE MAK ING HIS OBSERVATIONS QUA THE MEDICAL & EDUCATIONAL ASSOCIATE SHARE (AT PARA 6.2), WHICH HE CITES AS AMONG THE REASONS IN REJECTION OF APPROVAL AT PARA 7 OF H IS ORDER, DOES NOT TAKE THE MATTER TO ITS LOGICAL END. MATTERS CANNOT BE LEFT OPEN END ED, PARTICULARLY WHERE GERMANE, AND IT IS WHOLLY INCORRECT TO INFER THEREFROM HIS S ATISFACTION WITH THE OBTAINING STATE OF AFFAIRS. AS STATED EARLIER, ADEQUACY OF THE CONS IDERATION IMPINGES ON THE ELIGIBILITY U/S. 80G BOTH WAYS, I.E., WHERE SHORT A ND EVEN WHERE IN EXCESS AND, THEREFORE, IS A MATTER REQUIRING CAREFUL CONSIDERAT ION, WHICH WE FOUND COMPLETELY MISSING. WHY, THE TRIBUNAL IN D.R. RANKA CHARITABLE TRUST VS. CIT(E) [2010] 3 ITR (TRIB) 151 (BANG) HELD THE DENIAL OF REGISTRATI ON U/S. 80G AS JUSTIFIED IN CASE OF A TRUST ESTABLISHED FOR CARRYING MEDICAL AND EDUCAT IONAL ACTIVITIES WHERE IT WAS ENGAGED IN CONSTRUCTING BUILDING AND LETTING IT OUT TO EDUCATIONAL INSTITUTIONS, AND NOT UNDERTAKING CHARITABLE ACTIVITY. THERE WAS NO W HISPER OF THIS ASPECT OF THE I.T.A NO.13/JAB/2019 13 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) MATTER, NOTED BY THE LD. CIT(E) AT PARA 6.2 OF HIS ORDER, IN THE PLEADINGS BY THE PARTIES ON 17/7/2020. THE SAME, AS APPARENT FROM PA RA 7 THEREOF, AMONG OTHERS, WEIGHED IN HIS DECISION TO REFUSE APPROVAL U/S.80G( 5)(VI). SURE, HE OUGHT TO HAVE PROBED OR ENQUIRED FURTHER IN THE MATTER - IT HAVIN G A DIRECT BEARING ON THE SATISFACTION OF THE CONDITIONS PRECEDENT FOR GRANT OF APPROVAL, TAKING THE MATTER TO ITS LOGICAL END. BUT THEN THERE CAN BE NO DEEMED SA TISFACTION AND, BESIDES, THERE IS NO ESTOPPEL AGAINST LAW. THOUGH, IN LAW, IT IS NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN THE MATTER, BUT THE CORRECT LEGA L POSITION THAT IS RELEVANT ( CIT V. C. PARAK & CO. (INDIA) LTD . [1956] 29 ITR 661 (SC); KEDERNATH JUTE MFG. CO. LTD. V. CIT [1971] 82 ITR 363 (SC)), THERE IS, WE FIND, NO CLE AR FINDING IN THE ABSENCE OF EXAMINATION OF FACTS BY THE COMPETENT AUTHORITY IN THE INSTANT CASE. WE ARE NOT, WE MAY AT THE COST OF REPETITION STATE, EXPRESSING ANY OPINION EXCEPT TO, ON BEING CALLED UPON TO, STATE THE POSITION OF LAW WHICH END ORSES OUR DECISION TO, ON FINDING THE FACTS INDETERMINATE, REQUIRE EXAMINATION THEREO F. WE MAY THOUGH ISSUE A NOTE OF CAUTION. A FINDING AS TO THE NON-GENUINENESS OF ACTIVITY/S CANNOT BE LIGHTLY ISSUED, PARTICULARLY CONSIDERING THAT THE APPLICANT -TRUST HAS A LONG HISTORY, AND THE MATTER IS TO BE DECIDED ON AN OBJECTIVE ASSESSMENT OF THE OBTAINING FACTS. THE ONUS THEREOF IS ON THE REVENUE. THAT APART, ADEQUACY OF CONSIDERATION ENTAILS THE TECHNICAL SUBJECT OF VALUATION. THE SAME IS THEREFO RE TO BE APPROACHED WITH UTMOST CARE, AND FINDING/S ISSUED ON A CONSIDERATION OF TH E TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON THE TOUCHSTONE OF REA SONABILITY. THE ONUS TO ESTABLISH AND JUSTIFY ITS CLAIM OF ADEQUACY, WE MAY THOUGH C LARIFY, IS ON THE APPELLANT- APPLICANT INASMUCH AS THE SAME REPRESENTS A CONDITI ON PRECEDENT FOR THE GRANT OF EXEMPTION. AS REGARDS AGRICULTURAL INCOME, THE SAME IS EXEMPT U/S. 10(1), AND DOES NOT THEREFORE REQUIRE ITS APPLICATION FOR THE OBJEC TS OF TRUST FOR BEING CLAIMED EXEMPT, EVEN AS ARGUED BEFORE US. THE SAME, HOWEVER , IS TO UTILIZED ONLY FOR ITS PURPOSES, I.E., EITHER THE EXPENSES OF THE TRUSTS O R ITS OBJECTS. SO UTILIZED, IT GETS I.T.A NO.13/JAB/2019 14 MANNULAL JAGANNATH TRUST V. CIT (EXEMPTIONS) EITHER CONSUMED OR BECOMES THE TRUSTS PROPERTY, IN COME FROM WHICH IS EXEMPT UPON BEING APPLIED FOR CHARITABLE PURPOSES. 4. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON SEPTEMBER 07, 2020 UNDER RULE 3 4(4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 SD/- SD/- (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/09/2020 (*) AKS