District Red Cross Society, Fatehgarh Sahib V. CIT (Exemptions), Chandigarh

ITA 141/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6855 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 17-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAI
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 201; 264; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.141/CHD/2017 (ASSESSMENT YEAR : 2016-17) DISTRICT RED CROSS SOCIETY, VS. THE CIT (EXEMPTIONS), MINI SECRETARIAT, CHANDIGARH. FATEHGARH SAHB. PAN: AAATD8819J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH CAJLA RESPONDENT BY : SHRI GULSHAN RAI, DR DATE OF HEARING : 16.08.2017 DATE OF PRONOUNCEMENT : 21.09.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (EXEMP TIONS) (HEREINAFTER REFERRED TO AS LD.CIT(E),) CHANDIGARH DATED 30.11.2016 RELATING TO ASSESSMENT YEAR 2016-17 DENY ING APPROVAL UNDER SECTION 80G(5)(VI) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE LD.CIT(E)HAS DENIED APPROVAL HOLDING THAT TH E ASSESSEE SOCIETY WAS NOT ESTABLISHED FOR CHARITABLE PURPOSE SINCE IT WAS EXPENDING ONLY A VERY SMALL PORTION OF ITS RECEIPTS IN THE FORM OF DONATION, TOWARDS CHARITABL E ACTIVITIES. ALSO THE APPROVAL WAS DENIED FOR THE REASON THAT THE LD.CIT(E) FOUND THAT THE ASSESSEE SOCIETY HAD L ARGE UNUTILIZED FUNDS IN THE FORM OF FDRS WHICH SHOWED T HAT THE MAIN EMPHASIS OF THE SOCIETY WAS ACCUMULATION OF FU NDS 2 AND NOT UTILIZATION FOR THE OBJECTS OF THE SOCIETY. LD.CIT(E) ALSO HELD THAT THE HUGE QUANTUM OF FDRS PRECLUDED ANY REQUIREMENT OF THE SOCIETY TO SEEK DONATIONS TO FUN D ITS ACTIVITIES. THE RELEVANT FINDINGS OF THE LD.CIT(E) AT PARA 3- 5 OF THE ORDER ARE AS UNDER: 3. BEFORE DELVING ANY FURTHER IT IS NECESSARY TO H IGHLIGHT THE EXTANT PROVISIONS AND JUDICIAL INTERPRETATIONS VIS-A -VIS 80G(5)(VI).FOR APPROVAL AS PER THE PROVISIONS OF SECTIO N 80G(5)(VI), THE FIRST AND FOREMOST REQUIREMENT WHICH THE INSTIT UTION OR FUND HAS TO SATISFY IS-'IF IT IS ESTABLISHED IN INDIA FOR A C HARITABLE PURPOSE'. THE CONDITIONS CONTEMPLATED BY CLAUSES (I) TO (VI) OF SECT ION 80G(5) ARE THE CONDITIONS WHICH THE INSTITUTION OR THE FUND MUST ADDITIONALLY FULFIL SO AS TO BE ENTITLED TO THE APPROVAL BY THE COMMISSIONER. THE ENQUIRY 'IF IT IS ESTABLISHED FOR A CHARITABLE PURPO SE' IS NOT CONFINED AND LIMITED ONLY TO THE CONTENTS OF THE INSTRUMENT C ONSTITUTING THE TRUST. FOR THE PURPOSE OF CONSTRUING THE PURPOSE OF A TRUST ONE NEED NOT REMAIN NECESSARILY CONFINED TO THE OBJECTS OF THE TRUST AS SET OUT IN THE DEED OF DECLARATION. THE REAL PURPOSE OF EST ABLISHMENT OF A TRUST HAS TO BE FOUND OUT AND SPELLED OUT. 'PURPOSE MEAN S THAT WHICH ONE SETS BEFORE HIM TO ACCOMPLISH OR ATTEND, AN INTE NTION OR AIM, OBJECT, PLAN, PROJECT; THE TERM IS SYNONYMOUS WITH THE ENDS SOUGHT AND AN OBJECT TO ATTAIN, AN INTENTION, ETC. ONE CANNO T BE* PREPARED TO PLACE ANY SUCH INTERPRETATION ON THE LANGUAGE IMP LIED IN SECTION 80G SO AS TO UPHOLD AN OBLIGATION ON THE PART OF THE COMMISSIONER TO GRANT AN APPROVAL TO A TRUST MERELY BY LOOKING AT THE INSTRUMENT CREATING THE TRUST AND SHUTTING HIS EYES T OWARDS THE ACTIVITIES ACTUALLY CARRIED OUT BY IT. 4.1 ON PERUSAL OF DOCUMENTS ON RECORD, IT IS OBSERVED T HAT A MAJOR PORTION I.E. 29.64%, 22.77% AND 34% OF THE TOTAL RECEIP TS HAVE BEEN SPENT ON SALARY FOR THE FINANCIAL YEAR 2013-14, 201 4-15 AND 2015-16 RESPECTIVELY. THE YEAR WISE DONATION RECEIVED AND UTILIZATION OF THE SAME AS EXTRACTED FROM THE FINANCIAL STATEMENTS OF FINANCIAL YEAR 2013-14 TO 2015-16 IS TABULATED AS UNDER: 3 F.Y. (UTILIZATION) 2013-14 2014-15 2015-16 DONATION REED. UTILIZATION HEAD 9,06,600/- 36,96,900/- 31,08,650/- HELP FOR TREATMENT 63,000/- 59,913/- 2,94,166/- MEDICINES 2,627/- 29,846/- - BLOOD DONATION CAMP 5,040/- - - COLT/ ACCIDENTAL VICTIM 26,000/- - - WORLD RED CROSS DAY - - 1,152/- PATIENT CARE TAKER - - 14,500/- HOSPITAL VISIT 3,480/- - - HEARING AID - 8,40,406/- 17,375/- AID TO POOR 1,000/- 3,926/- - SEWING MACHINES FOR POOR 42,523/- - 88,401/- TRI CYCLE FOR HANDICAPPED 47,150/- - 90,600/- WHEEL CHAIR 8,500/- 11,200/- 83,900/- FOR IRAQ VICTIM - 31,700/- - TOTAL 1,02,720/- 9,76,991/- 5,90,094/- THE APPLICANT HAS SUBMITTED REGISTER RECOR DS OF DISTRIBUTION OF APPROXIMATELY 162 SEWING MACHINES, 44 WHEEL CHAI RS AND 78 TRI- CYCLES FOR THE PERIOD 2013-14 TO 2015-16. 4.2 THE DATA IN THE ABOVE MENTIONED TABLE REVEALS T HAT ONLY 11.3%, 26.42% AND 18.98% OUT OF THE TOTAL DONATIONS RECEIVED HAVE BEEN UTILIZED FOR THE OBJECTS OF THE SOCIETY DUR ING FINANCIAL YEAR 2013-14, 2014-15 AND 2015-16 RESPECTIVELY. THI S IS A CLEAR INDICATOR OF DONATIONS NOT BEING UTILIZED FOR THE P URPOSES FOR WHICH THE SAME WERE MADE. IMPORTANT AREAS OF SUPPOR T ARE WITNESSED TO HAVE BEEN ALLOCATED MEAGRE AMOUNTS. TH E ONLY SUBSTANTIAL EXPENDITURE DURING THE LAST THREE YEARS IS RS. 8.40 LACS ON HEARING AIDS IN FINANCIAL YEAR 2014-15. THE SAME HA S ABRUPTLY DWINDLED DOWN TO RS. 17,315/- IN F.Y. 2015-16. THIS IS A CLEAR INDICATOR OF AD-HOC FUNCTIONING OF THE SOCIETY WITH NO LONG TERM PERSPECTIVE AND A SYSTEMATIC APPROACH. ONE OFF ACTIV ITIES DOES NOT REDEEM THE SOCIETY'S ENDEAVOURS TOWARDS A GOAL ON A CONSTANT BASIS. 5. AT THE SAME TIME, THE APPLICANT SOCIETY H AS SHOWN AN ASSET OF RS. 72,93,735/-, 79,71,652/- AND RS.84,10, 135/- IN THE FORM OF FDRS IN THE BALANCE SHEET OF FINANCIAL YE AR 2013-14, 2014-15 AND 2015-16 RESPECTIVELY. THE MAIN EMPHASIS O F THE SOCIETY APPEARS TO BE ACCUMULATION OF ASSET IN THE F ORM OF FDRS RATHER THAN UTILIZATION OF THE DONATIONS FOR THE OB JECTS OF THE 4 SOCIETY. THE PURPOSE OF LEGISLATURE TO INCLUDE THIS SE CTION IN THE ACT IS TO PROMOTE AND ENCOURAGE PEOPLE FOR MAKING DO NATIONS TO THE SOCIETIES/TRUSTS WHICH OTHERWISE LACKS FUNDS FOR PERFORMING CHARITABLE ACTIVITIES. ON THE CONTRARY, THE SOCIETY HA S LARGE ACCUMULATED BALANCES IN THE FORM OF FDR AND CASH WH ICH COULD WELL NIGH BE SPENT ON ITS EXPANSION PROJECTS. A CASE FOR SEEKING DONATIONS WOULD BE MADE ONCE THE ACCUMULATED BALANCE S FALL SHORT OF THE REQUIREMENTS. THIS CLEARLY MARS THE VE RY PURPOSE OF SEEKING DONATIONS FROM THE GENERAL PUBLIC. 5. GIVEN THE ABOVE, THE APPLICANT SOCIETY DOES NOT MEASURE UP TO THE LEGISLATIVE INTENT THAT ALLOWS DONATIONS TO B E FREE FROM EXIGIBILITY OF TAXES. IN THE PRESENT, IT IS FELT THAT A CASE FOR SEEKING DONATIONS WOULD BE MADE OUT ONCE THE ACCUMULATED BAL ANCES FALL SHORT OF THE REQUIREMENTS. THEREFORE, I AM OF THE O PINION THAT THE APPLICANT DOES NOT QUALIFY FOR THE GRANT OF APPROVA L U/S 80G(5)(VI) OF THE I.T. ACT, 1961 AND HENCE THE APPL ICATION IS REJECTED. 3. AGGRIEVED BY THE SAME, THE ASSESSEE HAS FILED TH E PRESENT APPEAL BEFORE US RAISING FOLLOWING GROUNDS: 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (EXEMPTION), CHANDIGARH IS BAD IN LAW AND AGAINST F ACTS OF THE CASE. 2. THAT LD. COMMISSIONER OF INCOME TAX (EXEMPTION), CH ANDIGARH IS NOT JUSTIFIED IN REJECTING THE APPLICATION FOR GRANT OF APPROVAL U/S 80G, WHERE IT HAS BEEN ESTABLISHED BEYOND ANY IOTA OF DOUBT THAT THE SOCIETY IS FOR CHARITABLE PURPOSES. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (EXEMPTION) , CHANDIGARH IS ERRED IN REJECTING THE APPLICATION WHEREIN ALL THE TERMS& CONDITIONS HAS BEEN FULFILLED AND GENUINENESS WAS PROVED. 5 4. THAT THE LD. COMMISSIONER OF INCOME TAX (A), PATIALA IS NOT JUSTIFIED IN REJECTING THE APPLICATION MAINLY O N THE GROUND THAT THE SOCIETY HAS THE ACCUMULATED BALANCES AND DONATIONS CAN BE SOUGHT ONCE THE ACCUMULATED BALANCES FALLS SHORT OF THE REQUIREMENTS. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY OF THE GROUND (S) OF APPEAL BEFORE IT IS FINALLY HEARD. 4. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR ASSESSEE CHALLENGED THE DENIAL OF APPROVAL RAIS ING THE FOLLOWING CONTENTIONS: 1) THAT IT FULFILLED ALL THE CONDITIONS STIPULATED U/S 80G(5)(VI) READ WITH THE PRESCRIBED RULES. 2) THAT HAVING BEEN CERTIFIED AS A CHARITABLE SOCIE TY U/S 12AA OF THE ACT, THE LD.CIT(E) COULD NOT HAVE HELD THAT THE PURPOSE OF ESTABLISHMENT OF THE ASSESSEE SOCIETY WAS NOT CHARITABLE. 3) THAT THE LD.CIT(E) HAS GIVEN NO FINDING THAT THE ASSESSEE SOCIETY WAS CARRYING OUT ANY ACTIVITY WHICH WAS NON-CHARITABLE IN NATURE. 5. THE LD. COUNSEL FOR ASSESSEE FURTHER RELIED UPON THE ORDER OF THE HON'BLE JURISDICTIONAL HIGH COURT IN T HE CASE OF SONEPAT HINDU EDUCATIONAL & CHARITABLE SOCIETY VS. CIT & ANOTHER REPORTED IN 278 ITR 262 IN SUPPORT OF ITS A BOVE CONTENTION. 6. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORD ER OF THE LD.CIT(E) AND STATED THAT THE LD.CIT(E) HAD GIV EN FACTUAL AND CATEGORICAL FINDINGS THAT THE ASSESSEE SOCIETY WAS SPENDING MEAGRE SUMS ON ITS CHARITABLE PURPOSE AND, 6 THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE SOCI ETY WAS ESTABLISHED FOR CHARITABLE PURPOSE, WHICH WAS THE PRIMARY CONDITION TO BE FULFILLED FOR BEING ELIGIBLE FOR A PPROVAL U/S 80G(5)(VI) OF THE ACT. THE LD. DR FURTHER POINTED OUT THE CATEGORICAL FINDINGS OF THE LD.CIT(E) THAT THE ASSE SSEE SOCIETY HAD ACCUMULATED HUGE FUNDS TO THE TUNE OF APPROXIMATELY RS.80 LACS WHICH WAS LYING UNUTILIZED IN FDRS AND STATED THAT WHEN SUCH HUGE FUNDS WERE AVAI LABLE WITH ASSESSEE SOCIETY, THERE WAS NO REQUIREMENT FOR THE ASSESSEE SOCIETY TO SEEK DONATION FOR THE PURPOSE O F CARRYING OUT CHARITABLE ACTIVITIES. THE LD. DR REL IED UPON THE ORDER OF THE HON'BLE HIGH COURT OF PATNA IN THE CASE OF VISHWA BUDHA PARISHAD VS. CIT REPORTED IN 139 TAXMA N 385 IN SUPPORT OF ITS CONTENTION THAT WHERE THE ASS ESSEE HAD MADE VERY LOW EXPENDITURE OUT OF TOTAL DONATION RECEIVED IT WAS NOT ENTITLED TO APPROVAL U/S 80G(5) (VI) OF THE ACT. 7. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIE S AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE I SSUE BEFORE US IS DENIAL OF APPROVAL U/S 80G(5)(VI) OF T HE ACT AND THE REASONS FOR DENIAL WHICH EMERGE FROM THE ORDER OF THE LD.CIT(E) ARE TWO FOLD; I) THAT THE ASSESSEE SOCIETY IS NOT ESTABLISHED FOR CHARITABLE PURPOSE, WHICH IS THE PRIMARY CONDITION TO BE FULFILLED BY AN INSTITUTION SEEKING APPROVAL U/S 80G(5)(VI) OF THE ACT AND THE REASON FOR ARRIVING A T THIS CONCLUSION IS THE FACT THAT THE ASSESSEE SOCIETY HA S 7 BEEN SPENDING VERY LITTLE AMOUNT OF ITS DONATION RECEIVED TOWARDS CHARITABLE ACTIVITIES; II) THAT THE ASSESSEE SOCIETY HAS HUGE ACCUMULATED UNUTILIZED FUNDS IN THE FORM OF FDRS WHICH SHOWS TH AT ITS MAIN EMPHASIS IS NOT ON UTILIZING ITS FUNDS FOR ITS STATED ACTIVITIES BUT ACCUMULATING THE SAME AND FURTHER THE HUGE QUANTUM SHOWS THAT THE SOCIETY DOE S NOT REQUIRE DONATION TO FUEL ITS CHARITABLE ACTIVI TIES. 8. COMING TO THE REASON FOR DENYING APPROVAL, THAT THE ASSESSEE SOCIETY WAS NOT ESTABLISHED FOR CHARITABLE PURPOSE, WE FIND THAT THE LD.CIT(E) RESTED HIS CASE ON THE F ACTUAL PREMISE THAT THE ASSESSEE SOCIETY HAS BEEN SPENDING VERY LITTLE AMOUNT OF TOTAL DONATIONS RECEIVED ON ITS CH ARITABLE ACTIVITIES I.E. 11.3%, 26.42% AND 18.98% DURING THE FINANCIAL YEARS 2013-14, 2014-15, AND 2015-16 RESPECTIVELY, WHILE AT THE SAME TIME IT HAS BEEN SP ENDING 29.64%, 22.77% AND 34% OF ITS TOTAL RECEIPTS OF SAL ARY IN THESE YEARS. THE LD.CIT(E) HAS HELD THAT THESE FIG URES INDICATE THAT THE DONATIONS HAD NOT BEEN UTILIZED F OR THE PURPOSE FOR WHICH THEY WERE MADE AND THE IMPORTANT AREAS OF SUPPORT WERE GETTING ONLY MEAGRE AMOUNTS. THE LD .CIT(E) HAS ALSO POINTED OUT THAT THE ASSESSEE SOCIETY HAD ACCUMULATED FDRS AMOUNTING TO RS.72,93,735/-, RS.79,71,652/- AND RS.84,10,135/- IN FINANCIAL YEAR S 2013- 14, 2014-15 AND 2015-16 RESPECTIVELY. THE LD.CIT(E ) HAS ON THIS BASIS HELD THAT THE MAIN EMPHASIS OF THE AS SESSEE SOCIETY APPEARS TO BE ACCUMULATION OF FUNDS RATHER THAN 8 UTILIZATION. IT IS FOR THIS REASON THAT THE LD.CIT( E) HAS HELD THAT THE REAL PURPOSE OF THE ASSESSEE SOCIETY IS NO T CHARITABLE. 9. THE FACTS, AS POINTED OUT BY THE LD.CIT(E), HAVE NOT BEEN DISPUTED OR CONTROVERTED BY THE LD. COUNSEL FO R ASSESSEE. THE ONLY CONTENTION OF THE LD. COUNSEL F OR ASSESSEE IS THAT EVEN IF THE EXPENDITURE ON CHARIT ABLE ACTIVITIES CARRIED OUT BY IT ARE MEAGRE IN COMPARIS ON TO THE TOTAL DONATION RECEIVED, IT DOES NOT TAKE AWAY THE FACT THAT THE ASSESSEE SOCIETY IS STILL CARRYING OUT ONLY CHA RITABLE ACTIVITIES. THE LD. COUNSEL FOR ASSESSEE LAID EMPH ASIS ON THE FACT THAT THERE IS NO FINDING THAT ANY NON-CHAR ITABLE ACTIVITIES WERE BEING CARRIED OUT BY THE ASSESSEE A ND IT WAS ALSO EMPHASIZED THAT THE FACT THAT THE ASSESSEE SOC IETY HAD BEEN GRANTED CERTIFICATE U/S 12AA OF THE ACT ESTABL ISHES THAT THE ASSESSEE SOCIETY WAS SET UP FOR CHARITABLE PURPOSE ONLY. 10. WE ARE NOT IN AGREEMENT WITH THE CONTENTIONS OF THE LD. COUNSEL FOR ASSESSEE. INSTITUTIONS/FUNDS SEEKI NG APPROVAL U/S 80G(5)(VI) OF THE ACT ARE REQUIRED TO FULFILL A BASIC CONDITION THAT THEY HAVE BEEN ESTABLISHED FOR A CHARITABLE PURPOSE WHICH IS CLEARLY SPELT OUT IN TH E SECTION ITSELF WHICH STATES AS UNDER: 80G (1) IN COMPUTING THE TOTAL INCOME BY AN ASSESSEE , THERE SHALL BE DEDUCTED , IN ACCORDANCE WITH AND SUBJECT TO T HE PROVISIONS OF THIS SECTION,--- .. 9 (5) THIS SECTION APPLIES TO DONATIONS TO ANY INSTITUTIO N 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 FULFILS THE FOLLOWING CONDITIONS, NAMELY:-- .. 11. IN THE PRESENT CASE, UNDISPUTEDLY THE CHARITABL E NATURE OF THE OBJECTS OF THE ASSESSEE SOCIETY ARE N OT IN DOUBT. IT IS ONLY VIS--VIS THE ACTUAL ACTIVITY CA RRIED OUT BY THE ASSESSEE SOCIETY WHICH HAS LEAD THE LD.CIT(E) T O HOLD THAT IT HAS NOT BEEN ESTABLISHED FOR CHARITABLE PUR POSE. AND TO THIS EXTENT WE AGREE WITH THE LD CIT(E) THAT THE DETERMINATION OF THE ESTABLISHMENT OF THE SOCIETY FOR CHARITABLE PURPOSE CANNOT BE CONFINED AND LIMITED T O THE OBJECTS OF THE SOCIETY AND THE REAL PURPOSE OF ESTA BLISHMENT OF A SOCIETY HAS TO BE FOUND OUT BY EXAMINING THE A CTUAL ACTIVITIES CARRIED OUT BY IT. 12. IN THE PRESENT CASE IT IS NOT DENIED THAT ASSES SEE SOCIETY IS SPENDING NOT MORE OF AVERAGE 20% OF ITS TOTAL DONATION TOWARDS CHARITY WHILE AT THE SAME TIME IT IS SPENDING APPROXIMATELY 30% OF ITS TOTAL DONATION ON SALARIES. COMBINED WITH THE ABOVE, THE FACT THAT O VER THE YEARS THE ASSESSEE HAS ACCUMULATED HUGE FUNDS TO TH E TUNE OF APPROX. RS.80 LACS IN FDRS, GLARINGLY POINTS TO THE FACT THAT THE ASSESSEE SOCIETY IS SPENDING MINISCULE AMO UNT TOWARDS ITS STATED OBJECTS WHILE IT IS EMPHASIZING MORE ON ACCUMULATING ITS FUNDS .IT IS NOT THE CASE OF THE L D.COUNSEL FOR THE ASSESSEE THAT THE ACCUMULATION WAS MADE FOR A SPECIFIC PURPOSE RELATED TO THE OBJECTS OF THE SOCI ETY. THE PATTERN OF SPEND OF THE SOCIETY OVER THE YEARS THER EFORE DOES 10 NOT INSPIRE CONFIDENCE IN THE CHARITABLE INTENT OF THE SOCIETY AND LEADS TO THE CONCLUSION THAT IT IS MORE INCLINE D TOWARDS ACCUMULATING ITS FUNDS COLLECTED BY WAY OF DONATION AND SPENDING MORE OF IT ON ACTIVITIES OTHER THAN CHARI TABLE. FOR HOLDING THAT THE ASSESSEE SOCIETY IS NOT ESTABLISHE D FOR CHARITABLE PURPOSE, WE HOLD, THAT THIS FINDING IS SUFFICIENT AND IT IS NOT REQUIRED THAT THE ASSESSEE SOCIETY SH OULD BE FOUND CARRYING OUT ANY NON-CHARITABLE ACTIVITY TO A RRIVE AT THE CONCLUSION THAT IT IS NOT ESTABLISHED FOR CHARI TABLE PURPOSE. THE HONBLE PATNA HIGH COURT IN THE CASE O F VISHWA BUDHA PARISHAD (SUPRA), WHICH WAS RELIED UPON BY TH E LD. DR ,HAS DISMISSED THE WRIT PETITION FILED BY THE AS SESSEE AGAINST THE REJECTION OF APPROVAL U/S 80G(5)(VI) OF THE ACT STATING THAT THE FINDING OF THE CIT THAT THE INSTI TUTION HAD MADE VERY LOW EXPENSES OUT OF THE TOTAL DONATION RE CEIVED DID NOT WARRANT ANY INTERFERENCE WITH THE ORDER. T HE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT ARE AS UNDER: 1.THE PRESENT WRIT APPLICATION HAS BEEN FILED BY THE PETITIONER CHALLENGING THE ORDER DT. 17TH DEC., 1999, PASSED B Y THE CIT, BY WHICH THE APPLICATION FILED BY HIM FOR REN EWAL OF EXEMPTION UNDER S. 80G(5) OF THE IT ACT, 1961, HAS BEE N REJECTED AFTER COMING TO A DEFINITE FINDING THAT THE INSTITUTION HAS MADE VERY LOW EXPENSES OUT OF THE TOTAL DONATION RECEIVED UNDER S. 80G(5) OF THE ACT. 2. AFTER PERUSAL OF THE MATERIALS ON RECORD, THIS COURT D OES NOT FIND ANY REASON TO INTERFERE WITH THE ORDER IN EXERC ISE OF WRIT JURISDICTION. ACCORDINGLY, THIS WRIT APPLICATION IS DISMI SSED. 13. EVEN THE HONBLE ALLAHABAD HIGH COURT, IN THE C ASE OF VISHAL KHANNA PUBLIC CHARITABLE TRUST REPORTED IN 3 56 ITR 443 HAS HELD THAT MEAGER SPEND ON CHARITABLE PURPOS ES DISENTITLES ASSESSEES TO GRANT OF APPROVAL U/S 80 G (5)(VI). IN THE SAID CASE THE HONBLE HIGH COURT FOUND THAT WHILE 11 THE TRUST WAS SPENDING MEAGER AMOUNTS ON ITS STATED CHARITABLE ACTIVITIES, IT WAS DIVERTING MAJOR PORTI ON OF DONATIONS RECEIVED IN CONSTRUCTING A COMMERCIAL SHO PPING COMPLEX. IN THIS BACKGROUND THE COURT HELD THAT THE TRUST HAD BEEN RIGHTLY DENIED APPROVAL U/S 80G(5)(VI).THE RELEVANT FINDINGS ARE AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE COUNS EL FOR THE PARTIES. IT IS NOT IN DISPUTE THAT THE PETITIONER-T RUST WAS CREATED BY TRUST DEED DATED 24.2.1998, A COPY WHEREOF HAS BEEN FILED AS ANNEXURE-1 TO THE WRIT PETITION. 17. THE OBJECT OF THE TRUST IS TO CONSTRUCT, ESTABLIS H, MAINTAIN AND SUPPORT CHARITABLE HOSPITAL, NURSING HOME AND DISPENSARIES, TO PROVIDE EDUCATIONAL AND VOCATIONAL SU PPORT TO THE POOR AND NEEDY, TO GIVE MONETARY HELP TO THE POO R, AND THE BLIND AND CRIPPLED PERSONS, TO GIVE MONEY TO THE PERS ONS AFFECTED BY FLOOD AND OTHER NATURAL CALAMITY ETC. THE O RIGINAL CORPUS AT THE TIME OF SETTLEMENT WAS RS. 5000/-ONLY AND OVER THE YEARS, IT HAD MULTIPLIED SEVERAL TIMES ON ACCOUNT O F DONATIONS RECEIVED BY THE TRUST. ACCORDING TO THE FI NDING RECORDED IN THE IMPUGNED ORDER, THE CORPUS DONATION R ECEIVED BY THE TRUST UPTO 31.5.2005 WAS RS. 5,33,000/-. MOST OF IT WAS UTILIZED IN CONSTRUCTING THE SHOPPING COMPLEX. TH E BALANCE SHEET AS ON 31.5.2005 FURTHER REFLECTS THAT AN AMOUNT OF RS. 7,96,821/-HAS BEEN SPENT ON CONSTRUCTION. ON THE OTHER HAND, THE PETITIONER HAD APPLIED ONLY MEAGER AMOUNT OF ITS INCOME FOR RUNNING HOMEOPATHIC DISPENSARY. THOUGH PE TITIONER IS MAKING TALL CLAIMS OF DISPENSING MEDICINES FREE OF COST, BUT IT HAD SPENT SMALL AMOUNT OF RS. 12,325/- ON MEDICINES IN THE YEAR 2004-05 AND RS.9490/- ON MEDICINES DURING THE PER IOD OF 2003-04. 18. THE FACTS WHICH REMAIN UNDISPUTED AND TO WHICH T HIS COURT CANNOT SHUT ITS EYES ARE AS FOLLOWS:- (A) THE PETITIONER-TRUST WHEN IT WAS FORMED HAD A CORP US OF RS. 5000/-ONLY. IT CLAIMS TO HAVE STARTED A HOMEOPATHIC CLINIC FROM 2 ROOMS ON THE GROUND FLOOR OF PREMISES NO. 33/7 0-72, TOPI BAZAR, CHOWK, KANPUR AND WHICH WAS MADE AVAILAB LE TO IT FREE OF COST BY ITS OWNER SRI SHIVJI BEHARI TRUST. (B) IT TOOK AT LEASE ROOF OF THE SAID BUILDING BY LEAS E DEED DATED 9.3.1998. THE LEASE DEED SPECIFICALLY RECITES THAT THE DEMISE OF THE ROOF TO THE PETITIONER-TRUST WAS IN ORD ER TO ENABLE TO IT TO CONSTRUCT OR RUN A PUBLIC CHARITABLE DI SPENSARY. HOWEVER, THE ROOF OF THE BUILDING WAS NOT UTILIZED FO R CONSTRUCTING ANY DISPENSARY OR CLINIC BUT A COMMERC IAL COMPLEX HAVING 12 SHOPS. 12 (C) THE PETITIONER-TRUST AFTER CONSTRUCTING FIRST FLOOR ENTERED INTO ANOTHER LEASE AGREEMENT DATED 9.3.2002 WHEREBY THE ROO F OF THE FIRST FLOOR OF THE BUILDING WAS DEMISED IN ITS FAV OUR GIVING RIGHT TO CONSTRUCT A CHARITABLE DISPENSARY. AGAIN, NO SUCH CONSTRUCTIONS WERE MADE AND, ADMITTEDLY, ON THE SECOND FLOOR TWO HALLS AND ONE STORE ROOM WERE CONSTRUCTED. (D) ADMITTEDLY, TILL DATE, THE ENTIRE SO CALLED CHARITABLE ACTIVITIES OF THE PETITIONER-TRUST REMAINED CONFINED T O TWO ROOMS ON THE GROUND FLOOR OF PREMISES NO 33/70-72, TOP I BAZAR, CHOWK, KANPUR WHICH WERE ADMITTEDLY MADE AVAILAB LE TO IT FREE OF COST SINCE THE TRUST CAME INTO EXISTENC E. THUS ADMITTED FACT OF RECORD REVEALS THAT THERE HAS BEEN N O EXPANSION OF ANY CHARITABLE ACTIVITIES. (E) ON THE OTHER HAND, THE PETITIONER-TRUST UNDER THE G UISE OF CONSTRUCTING A HOMEOPATHIC HOSPITAL AND DISPENSARY H AS RATHER CONSTRUCTED SHOPPING COMPLEX AND MAJOR PART O F IT HAS ALREADY BEEN LET OUT. (F) THE PETITIONER-TRUST ALSO DOES NOT DISPUTE THAT ITS EXPENDITURE ON MEDICINES DURING SUCCESSIVE YEARS HA D REMAINED STATIC AND ALSO COULD NOT PLACE ANY MATERIAL T O SHOW THAT THE FIGURES MENTIONED IN THE IMPUGNED ORDER REL ATING TO THE EXPENDITURE MADE IN THE NAME OF CHARITY IA IN ANY MANNER PERVERSE. 19. IN VIEW OF THESE FACTS, THE CIT HAS RIGHTLY CAME TO THE CONCLUSION THAT UNDER THE GUISE OF CARRYING OUT CHAR ITABLE ACTIVITIES AFTER OBTAINING EXEMPTION UNDER SECTION 80 -G, THE PETITIONER TRUST HAD, IN FACT, DIVERTED MAJOR PART OF DONATION RECEIVED BY IT TILL 31.3.2005 IN CONSTRUCTING A SHOPPING COMPLEX. IN THESE CIRCUMSTANCES, THE CIT RIGHTLY CONCLUD ED THAT THE PETITIONER-TRUST HAS MIS- UTILIZED THE DONATI ON RECEIVED BY IT ON THE STRENGTH OF EXEMPTION UNDER S ECTION 80-G. CONSTRUCTION OF SHOPPING COMPLEX CANNOT BE SAID TO B E A BUSINESS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST BUT IS BEING PERSUED AS THE MAIN ACTIVITY, UNDER THE CLOAK OF CARRYING OUT CHARITY. FUNDS RECEIVED IN THE NAME OF CHARITY HAVE BEEN UTILISED IN ATTAINMENT OF A COMMERCIAL MISSION. 20. THIS COURT ALSO CONCURS WITH THE FINDINGS RECORDED IN THIS REGARD BY THE CIT, AS THE PETITIONER HAS FAILED TO SHO W THAT FACTS AND FIGURES MENTIONED IN THE IMPUGNED ORDER AR E IN ANY MANNER AGAINST THE RECORD OR ARE PERVERSE. 21. THE COUNSEL FOR THE PETITIONER DURING COURSE OF HI S ARGUMENT HAS PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN CIT VS. THANTHI TRUST (2001) 247 ITR 785 WHE REIN THE APEX COURT HAS HELD THAT IN CASE THE BUSINESS INCOM E IS UTILIZED BY THE TRUST FOR ACHIEVING THE GENUINE OBJ ECTS OF THE TRUST, IT IS COVERED UNDER SECTION 11 (4A) OF THE ACT. HE ALSO RELIED ON THE DECISION IN COMMISSIONER OF INCOME TAX V. JANAKIAMMAL AYYANDAR TRUST, REPORTED IN (2005) 277 ITR 274, WHEREIN IT HAS BEEN HELD THAT A BUSINESS WHOSE IN COME 13 IS UTILIZED BY THE TRUST OR THE INSTITUTION FOR ACHIE VING THE OBJECTIVES OF THE TRUST, IS EXEMPTED IF SUCH BUSINES S IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF TH E TRUST OR INSTITUTION. ON THE OTHER HAND, SRI TRIPATHI HAS PLACE D RELIANCE ON THE JUDGEMENT REPORTED IN (2003) 264 ITR 357 (PATN A) VISHWA BUDDHA PARISHAD VS. CIT, IN WHICH IN SIMILAR CIRCUMSTANCES, THE WRIT COURT HAS DECLINED TO INTERF ERE WITH THE ORDER REFUSING RENEWAL OF EXEMPTION UNDER SECTION 80 -G ON THE GROUND THAT THE INSTITUTION HAS MADE VERY LOW EXPENSE S OUT OF TOTAL DONATION RECEIVED BY IT. HE ALSO PLACED RELIANCE ON (2003) 264 ITR 481 (PATNA) MADANI MUSAFIR KHANA WELFARE SOC IETY V. CIT IN WHICH THE APPLICATION FOR RENEWAL OF EXEMPTI ON UNDER SECTION 80-G WAS REJECTED ON THE GROUND THAT THE INS TITUTION HAS CONSTRUCTED A SHOPPING COMPLEX AND HAD NOT CARRI ED OTHER CHARITABLE WORK. 22. THERE CAN BE NO DISPUTE TO THE BROAD PROPOSITIO N OF LAW THAT CONSTRUCTION OF A COMMERCIAL BUILDING BY I TSELF CANNOT BE A FACTOR TO REFUSE RENEWAL UNDER SECTION 80-G OF THE ACT. HOWEVER, IT DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH CASE. IN THE INSTANT CASE, A COGENT AND CATEGORICAL FINDING HAS BEEN RECORDED IN THE IMPUGNED ORDER THAT ALTHOUGH HUGE AMOUNT HAS BEEN RECEIVED AS DONATION BY THE TRUST DURING THE PREVIO US YEARS, BUT AMOUNT SPENT FOR THE CHARITABLE PURPOSES IS MERELY AN EYE WASH. 23. THE EXPLANATION GIVEN BY THE PETITIONER-TRUST IN P ARA 23 OF THE WRIT PETITION THAT IT HAD TO CONFINE ITS CHARITABLE ACTIVITIES TO THE GROUND FLOOR OF THE BUILDING ON ACCOUNT OF COM PULSION, IS NOT WORTHY OF CREDENCE. THE PETITIONER HAD STATED THA T IT IS UNABLE SHIFT TO THE FIRST AND SECOND FLOOR OF THE ACC OMMODATION CONSTRUCTED BY IT ON ACCOUNT OF THE FACT THAT THE PA TIENTS VISITING ARE OLD AND FEEBLE AND IT WILL BE DIFFICULT FOR THEM TO CLIMB THE STAIRS FOR CONSULTING THE DOCTOR. NO SUCH E XPLANATION WAS GIVEN BY THE PETITIONER BEFORE THE CIT AND IT IS ON THE FACE OF IT, AFTER THOUGHT. FURTHER, IT IS APPARENTLY FALSE, AS IN THE TWO LEASE DEEDS, THE PETITIONER HAD REPEATEDLY MENTION ED THAT THE LEASE IS BEING OBTAINED FOR CONSTRUCTION OF A HO MEOPATHIC HOSPITAL AND CLINIC. THE FIRST LEASE IS OF THE YEAR 1 998 AND THE OTHER ONE OF THE YEAR 2002 I.E. AFTER A GAP OF FOUR Y EARS. IN CASE IT WAS SO , AS IS BEING CLAIMED BY THE PETITIONER , THERE WAS NO OCCASION FOR THE PETITIONER TO OBTAIN ANOTHER LEASE AFTER 4 YEARS OF THE EXECUTION OF THE FIRST LEASE DEED, WIT H THE SPECIFIC RECITAL THAT THE CONSTRUCTION THEREUNDER WIL L BE OF A CHARITABLE HOSPITAL. IT IS THUS EVIDENT ON THE FACE OF R ECORD THAT THE PETITIONER HAS ONLY INDULGED IN COMPLETING PAPER W ORK FOR THE PURPOSE OF OBTAINING EXEMPTION UNDER SECTION 80-G OF THE ACT SO THAT IT MAY CONTINUE TO OBTAIN DONATIONS UNDE R THE GUISE OF CHARITY AND UTILIZE THE SAME FOR COMMERCIAL V ENTURES. IT IS IN THESE FACTS AND CIRCUMSTANCES, THAT THE CIT WAS FULLY JUSTIFIED IN HOLDING THAT THE ACTIVITIES BEING CARRIED ON BY THE PETITIONER-TRUST CANNOT BE SAID TO BE FOR CHARITABLE PU RPOSE AND HAD RIGHTLY WITHDRAWN THE EXEMPTION GRANTED UND ER SECTION 80-G OF THE ACT. 14 24. IN SO FAR AS THE CHALLENGE THE NOTICE UNDER SECTIO N 12A (3) OF THE ACT IS CONCERNED, SUFFICE IT TO SAY THAT IT IS MERELY A SHOW CAUSE NOTICE AND CHALLENGE TO IT AT THIS STAGE IS PREMATURE. IT IS OPEN TO THE PETITIONER TO FILE ITS REP LY TO THE SHOW CAUSE NOTICE AGAINST PURPOSED ACTION BEFORE THE CIT AND IN SUCH PROCEEDINGS IT IS OPEN TO THE PETITIONER TO P RODUCE ALL SUCH EVIDENCE WHICH MAY JUSTIFY ITS CLAIM FOR CONTIN UATION OF ITS REGISTRATION AS A CHARITABLE INSTITUTION. IN SIMILAR CIRCUMSTANCES, CHALLENGE TO SUCH NOTICE HAS BEEN HELD TO BE PREMATURE IN THE JUDGEMENT REPORTED IN (2002) 256 IT R 277 MADHYA PRADESH MADHYANVS. CIT. 25. IN VIEW OF THE DISCUSSION MADE ABOVE, THE INSTANT WRIT PETITION IS DISMISSED WITH LIBERTY TO THE PETITIONER T O FILE ITS REPLY TO THE SHOW CAUSE NOTICE DATED 4.10.2006 FOR CAN CELLING REGISTRATION CERTIFICATE UNDER SECTION 12-A OF THE A CT AND WHICH SHALL BE DECIDED BY THE CIT IN ACCORDANCE WITH LAW TAK ING INTO CONSIDERATION THE OBJECTIONS AND THE EVIDENCE, IF ANY , LED BY THE PETITIONER IN THIS REGARD, WITHOUT BEING INFLUENCED BY EITHER THE FINDING RECORDED IN THE ORDER DATED 4.10.2006 REF USING TO GRANT EXEMPTION UNDER SECTION 80-G OF THE ACT OR THE FINDINGS RECORDED IN THE PRESENT JUDGEMENT. 26. SUBJECT TO ABOVE, THE WRIT PETITION IS DISMISSED. 14. IN THE PRESENT CASE ALSO THE FACTUAL FINDING IS THAT THE ASSESSEE SOCIETY IS SPENDING MEAGER SUMS ON ITS CHA RITABLE ACTIVITIES WHILE IT IS ACCUMULATING HUGE FUNDS IN T HE FORM OF FDRS FOR NO RHYME OR REASON. THE DECISION OF THE H ONBLE ALLAHBAD HIGH COURT, THEREFORE, SQUARELY APPLIES TO THE PRESENT CASE. 15. MOREOVER THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF AMAN SHIV MANDIR TRUST VS CIT REPORTED IN 2 96 ITR 415 HAS VIEWED THE ACCUMULATION OF FUNDS ADVERSELY AGAINST THE ASSESSEE AND UPHELD THE DENIAL OF APPROVAL U/S 80G(5)(VI) FOR THE SAME REASON. THE RELEVANT FINDIN GS OF THE HONBLE HIGH COURT ARE AS UNDER 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AUTHORITIES HAVE GONE WRONG IN REJECTING THE CLAIM OF THE ASSESSEE MERELY BECAUSE THE ASSESSEE HAD KEPT THE C OLLECTED AMOUNT IN FIXED DEPOSITS IN THE BANK AS THE SAME DO ES NOT CHANGE THE NATURE OF THE ASSESSEE FROM BEING A CHAR ITABLE 15 TRUST. THE AMOUNT WAS BEING COLLECTED FOR PURCHASE OF LAND, ETC. HOWEVER, HE COULD NOT DISPUTE THE FACT THAT OUT OF COLLECTION NOTHING WAS SPENT DURING THE LAST FIVE YEA RS ON ANY OF THE CHARITABLE PURPOSES. EVEN COLLECTION OF MONEY FRO M LOW PAID EMPLOYEES, WHICH IS SAID TO BE VOLUNTARY, ALSO DID NOT SOUND TO REASON. IT WAS ALSO FOUND THAT THE APPLICATIO N FILED BY THE ASSESSEE WAS DELAYED BY MORE THAN FOUR YEARS . NOT ONLY THIS, HUGE AMOUNT OF FIXED DEPOSITS WAS FOUND IN THE NAME OF TRUSTEE, WHO HAD LATER APPROACHED THE SETTLEM ENT COMMISSION, OBVIOUSLY ADMITTING HIS GUILT. KEEPING IN VIEW THE TOTALITY OF CIRCUMSTANCES AND THE INTENTION AND CONDU CT OF THE ASSESSEE INCLUDING THE MANAGING TRUSTEE, THE CLAIM MAD E BY THE ASSESSEE WAS NOT FOUND TO BE GENUINE. THE SAME P LEA, WHICH WAS REJECTED BY BOTH THE AUTHORITIES BELOW HAS BEEN ADVANCED BY THE COUNSEL FOR THE ASSESSEE. HOWEVER, AT THE TIME OF HEARING, LEARNED COUNSEL FOR THE ASSESSEE COULD NOT SUBSTANTIATE ANY OF THE PLEAS RAISED BY HIM TO PERSUAD E THIS COURT TO TAKE A VIEW DIFFERENT FROM WHAT HAS BEEN T AKEN BY THE TRIBUNAL ON APPRECIATION OF MATERIAL ON RECORD. T HE FINDINGS ARE IN NO MANNER PERVERSE. 4. ACCORDINGLY, WHILE CONCURRING WITH THE REASONING RECO RDED BY THE AUTHORITIES BELOW, WE DO NOT FIND ANY MERIT IN THE APPEAL AND DISMISS THE SAME. 16. THE CONTENTION OF THE LD COUNSEL FOR THE ASSESS EE THAT SINCE THE SOCIETY FULFILS ALL CONDITIONS SPECIFIED UNDER THE ACT FOR GRANT OF APPROVAL, MERITS NO CONSIDERATION IN VIEW OF THE FACT THAT WE HAVE UPHELD THE FINDINGS OF THE LD .CIT(E) THAT THE ASSESSEE SOCIETY HAD FAILED TO FULFILL THE BASIC CONDITION OF HAVING BEEN ESTABLISHED FOR CHARITABL E PURPOSE. THE RELIANCE PLACED BY THE LD COUNSEL FOR THE ASSESSEE IN THE CASE OF SONEPAT HINDU IS MISPLACED SINCE THE SAID CASE IS DISTINGUISHABLE ON FACTS. IN THE S AID CASE THE HONBLE HIGH COURT HAD HELD THAT THE ASSESSEE H AVING BEEN GRANTED REGISTRATION U/S 12A ,DENIAL OF APPROV AL U/S 80G ON MERE TECHNICALITIES WAS NOT WARRANTED. IN TH E PRESENT CASE EVIDENTLY THE DENIAL OF APPROVAL IS NO T ON ACCOUNT OF MERE TECHNICALITIES. IN FACT THERE IS CL EAR FINDING, WHICH WE HAVE UPHELD THAT THE ASSESSEE SOCIETY HAS NOT 16 BEEN ESTABLISHED FOR CHARITABLE PURPOSES. THUS THE SAID DECISION IS OF NO ASSISTANCE TO THE ASSESSEE. 17. IN VIEW OF THE ABOVE, WE CONCUR THAT THE LD.CIT (E) THAT THE ASSESSEE SOCIETY WAS NOT ESTABLISHED FOR CHARIT ABLE PURPOSE AND HENCE WAS NOT ENTITLED TO GRANT OF APPR OVAL U/S 80G(5)(VI) OF THE ACT. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S DISMISSED ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 21 ST SEPTEMBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH