Indian Leather Technologists' Association, Kolkata V. CIT(Exemption), Kolkata , Kolkata

ITA 1634/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6103 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 12-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PIJUSH DE
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 10

Judgement Text

1 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) BEFORE . . , /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M.BALAGANESH, AM] I.T.A. NO. 1634/KOL/2017 ASSESSMENT YEAR: INDIAN LEATHER TECHNOLOGISTS ASSOCIATION (PAN: AAATI3153L) VS. COMMISSIONER OF INCOME-TAX (EXPEMPTION), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 03.07.2018 DATE OF PRONOUNCEMENT 11.07.2018 FOR THE APPELLANT SHRI PIJUSH DE, FCA FOR THE RESPONDENT SHRI SALLONG YADEN, ADDL. CIT ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(E), KOLKATA DATED 25.04.2017. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS AGAINST TH E ACTION OF LD. CIT(E) IN REJECTING THE ASSESSEES APPLICATION FOR APPROVAL U/S. 80G(5) (VI) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE ASSOC IATION CAME INTO EXISTENCE ON 14.08.1957. THE ASSESSEE ASSOCIATION GOT REGISTERE D U/S. 12A OF THE ACT ON 27.07.1991. THEREAFTER, THE ASSESSEE FILED AN APPLICATION FOR A PPROVAL U/S. 80G OF THE ACT ON 28.10.2016. THE LD. CIT(E) FOUND FROM THE ORIGINAL COMPUTATION OF INCOME THAT THE ASSESSEE HAS CLAIMED DEFICIT OF RS.19,58,428/- IN AY 2014-15 AND RS. 41,64,952/- IN AY 2007-08, TOTALING TO RS.61,23,380/- WHICH HAVE BEEN CARRIED FORWARD TO AY 2015-16. HOWEVER, ACCORDING TO LD. CIT(E), IN THE CASE OF CHARITABLE TRUSTS THE CONCEPT OF BROUGHT FORWARD LOSSES DO NOT EXIST. HE, THEREFORE, FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. HARPRASAD & CO. P. LTD. (1975) 99 I TR 118 (SC) DISALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF BROUGHT FORWARD OF EXCES S OF EXPENDITURE AMOUNTING TO 2 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, RS.61,23,380/- OVER INCOME WITH THE INCOME OF AY 20 15-16 AND THE LD. CIT(E) AFTER CONSIDERING THE ASSESSEES SUBMISSION AND ON PERUSA L OF BOOKS OF ACCOUNT OF THE ASSESSEE FOUND THAT TRUST FAILED IN MAKING EXPENDITURE TO TH E EXTENT OF 85% OF ITS INCOME, WHICH ACCORDING TO HIM WAS NECESSARY AS PER THE PROVISION OF SECTION 80G(5) OF THE ACT AND THUS HE REJECTED THE ASSESSEES APPLICATION SEEKING APPR OVAL U/S. 80G OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE ASSOCIATION CAME I NTO EXISTENCE ON 14.08.1957. THE ASSESSEE ASSOCIATION GOT REGISTERED U/S. 12A OF THE ACT ON 27.07.1991. THEREAFTER, THE ASSESSEE FILED AN APPLICATION FOR APPROVAL U/S. 80G OF THE ACT ON 28.10.2016. THE LD. CIT(E) FOUND FROM THE ORIGINAL COMPUTATION OF INCOM E THAT THE ASSESSEE HAS CLAIMED DEFICIT OF RS.19,58,428/- IN AY 2014-15 AND RS. 41,64,952/- IN AY 2007-08, TOTALING TO RS.61,23,380/- WHICH HAVE BEEN CARRIED FORWARD TO A Y 2015-16. HOWEVER, ACCORDING TO LD. CIT(E), IN THE CASE OF CHARITABLE TRUSTS THE CO NCEPT OF BROUGHT FORWARD LOSSES DO NOT EXIST. HE, THEREFORE, FOLLOWING THE JUDGMENT OF HO NBLE SUPREME COURT IN THE CASE OF CIT VS. HARPRASAD & CO. P. LTD. (1975) 99 ITR 118 (SC) DISALLOWED THE CLAIM OF THE ASSESSEE IN RESPECT OF BROUGHT FORWARD OF EXCESS OF EXPENDITURE AMOUNTING TO RS.61,23,380/- OVER INCOME WITH THE INCOME OF AY 2015-16. BEFORE THE LD . CIT(E) ASSESSEES SUBMISSION WAS THAT THE JUDGMENT OF HONBLE SUPREME COURT IN THE C ASE OF HARPRASAD & CO. PVT. LTD., SUPRA IS INAPPLICABLE TO THE ASSESSEES CASE BECAUSE IN T HAT CASE ASSESSEE WAS A PRIVATE LIMITED COMPANY GOVERNED BY CHAPTER IVD OF THE ACT WHERE MA IN ISSUE WAS WHETHER CARRY FORWARD OF CAPITAL LOSS INCURRED IN THE YEAR WHEN CAPITAL G AINS IS NOT EXIGIBLE TO TAX, COULD BE SET OFF AGAINST CAPITAL GAINS IN SUBSEQUENT YEAR, WHEREAS T HE PRESENT ASSESSEE IS A CHARITABLE INSTITUTION REGISTERED U/S. 12A OF THE ACT. THE LD . CIT(E) AFTER CONSIDERING THE ASSESSEES SUBMISSION AND ON PERUSAL OF BOOKS OF ACCOUNT OF TH E ASSESSEE FOUND THAT TRUST FAILED IN MAKING EXPENDITURE TO THE EXTENT OF 85% OF ITS INCO ME, WHICH ACCORDING TO THE AUTHORITY WAS NECESSARY AS PER THE PROVISION OF SECTION 80G(5 ) OF THE ACT AND THUS HE REJECTED THE ASSESSEES APPLICATION SEEKING APPROVAL U/S. 80G OF THE ACT. WE THUS NOTE THAT THERE IS ABSOLUTELY NO ALLEGATION BY THE LD. CIT(E) THAT THE ASSESSEE HAS NOT FULFILLED ANY OF THE CONDITIONS OF CLAUSE (I) TO (V) OF SECTION 80G(5) O F THE ACT. FURTHERMORE, WE NOTE THAT ASSESSEE IS ENJOYING SECTION 12A REGISTRATION. 3 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, 5. THE QUESTION THAT ARISES FOR CONSIDERATION IS WH ETHER THE REASON CITED BY THE LD CIT(E) JUSTIFIES DENIAL OF APPROVAL UNDER SECTION 8 0G(5) OF THE ACT. 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 N OT FULFILLED, HE SHALL REJECT THE APPLICATION FOR APPROVAL AFTER RECORDING HIS REASONS FOR SUCH R EJECTION. IN THE INSTANT CASE, THE APPELLANT HAS BEEN DULY REGISTERED UNDER SECTION 12A WHICH SH OWS 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 12A, THE FIR ST CONDITION REGARDING ESTABLISHMENT OF INSTITUTION FOR CHARITABLE PURPOSES IS FULFILLED. R EGARDING 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. NOW ,ONCE, T HE 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 MOR E OF THE CONDITIONS SPECIFIED IN SECTION 80G(5) WHICH IS NOT THE CASE BEFORE US. 6. SIMILAR ISSUE OF DENIAL OF APPROVAL UNDER SECTIO N 80G(5) ON THE REASON THAT ASSESSEE FAILED IN MAKING EXPENDITURE TO THE EXTENT OF 85% O F ITS INCOME WAS RAISED BEFORE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. PUJYA SHR I JALARAMBAPA & MATUSHRI VIRBAIMA CHARITABLE TRUST (2015) 55 TAXMANN.COM 52 (GUJ) WHE REIN THE HONBLE HIGH COURT HAS OBSERVED IN PARA 4, 5 AND 6 AS UNDER: 4. AT THE OUTSET, MR. DESAI, LEARNED ADVOCATE FOR T HE APPELLANT, VERY FAIRLY INVITED OUR ATTENTION TO A DECISION OF THIS COURT RENDERED IN T AX APPEAL NO. 306 OF 2014 AND THE ALLIED MATTERS, WHEREIN, THIS COURT ANSWERED THE VERY SAME ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY OBSERVING AS UNDER IN PARA-7 THEREOF; '7.0. HEARD THE LEARNED ADVOCATES FOR THE RESPECTIV E PARTIES AT LENGTH AND PERUSED THE ORDER PASSED BY THE LEARNED COMMISSIONER AS WELL AS IMPUGNED JUDGMENT AND ORDER PASSED BY THE LEARNED TRIBUNAL. AT THE OUTSET, IT I S REQUIRED TO BE NOTED THAT THE QUESTION IS WITH RESPECT TO THE RECOGNITION APPROVA L UNDER SECTION 80G(5) OF THE ACT TO THE RESPECTIVE ASSESSEE TRUST. THE SAME WAS REFUSED BY THE COMMISSIONER BY OBSERVING THAT TRUST FAILED IN MAKING EXPENDITURE TO THE EXTE NT OF 85% OF ITS INCOME WHICH IS REQUIRED AS PER CLAUSE (I) OF SUBSECTION (5) OF SEC TION 80G OF THE ACT. HOWEVER, IT IS REQUIRED TO BE NOTED AND IT IS NOT IN DISPUTE THAT AS SUCH MAIN OBJECT OF THE TRUST AS PER TRUST DEED ARE EDUCATIONAL, SOCIAL ACTIVITIES, MEDI CAL ETC. THEREFORE, THE SHORT QUESTION WHICH IS POSED FOR CONSIDERATION OF THIS COURT IS W HETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE LEARNED TRIBUNAL HAS COMM ITTED ANY ERROR IN QUASHING AND SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER REJECTING THE APPLICATION MADE BY 4 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, THE ASSESSEE TRUST SEEKING APPROVAL UNDER SECTION 8 0G(5) OF THE ACT AND HAS ERRED IN DIRECTING COMMISSIONER TO GRANT RECOGNITION UNDER S ECTION 80G(5) OF THE ACT? AS SUCH ISSUED INVOLVED IN THE PRESENT CASE IS NOW NOT RES INTEGRA IN VIEW OF THE DECISION OF THE DIVISION BENCH IN THE CASE OF N.N.DESAI CHAR ITABLE TRUST (SUPRA). WHILE CONSIDERING THE CERTIFICATION OF INSTITUTION FOR TH E PURPOSE OF SECTION 80G, THE DIVISION BENCH HAS SPECIFICALLY OBSERVED AND HELD THAT INQUI RY SHOULD BE CONFINED TO FINDING OUT IF INSTITUTION SATISFIES PRESCRIBED CONDITIONS AS MENTIONED IN SECTION 80G OF THE ACT. IN THE AFORESAID CASE ALSO THE COMMISSIONER RE FUSED THE APPLICATION FOR REGISTRATION UNDER SECTION 80G(5) OF THE ACT ON THE GROUND THAT IN THE PAST FOR SOME PERIOD THE PETITIONER HAD NOT APPLIED 75% OF THE IN COME OF THE TRUST FOR THE PURPOSE OF TRUST. WHILE CONSIDERING THE AFORESAID AND THE SCOP E OF THE INQUIRY AT THE TIME OF RECOGNITION UNDER SECTION 80G(5) OF THE ACT BY THE APPROPRIATE AUTHORITY, THE DIVISION BENCH HAS OBSERVED AND HELD AS UNDER: 'FROM THE AFORESAID IT APPEARS THAT THE SOLE GROUND THAT HAS PREVAILED WITH THE CIT IN REFUSING THE APPLICATION IS THAT BECAUSE IN THE PAST FOR SOME PERIOD THE PETITIONER HAS NOT APPLIED 75 PER CENT OF THE I NCOME OF THE TRUST FOR THE PURPOSES OF THE TRUST, THEREFORE, THE INCOME OF THE ASSESSEE WAS LIABLE TO BE INCLUDED IN THE TAXABLE INCOME AND THE ASSESSEE DID NOT FULFIL THE CONDITION OF S. 80G(5)(I) OF THE ACT. IT WOULD BE APPOSITE HERE TO REPRODUCE THE RELEVANT PROVISIONS OF S. 80G(5)(I) OF THE ACT. 'WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME S UCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE P ROVISIONS OF SS. 11 AND 12 [OR CLAUSE (22) OR CLAUSE (22A) OR CLAUSE (23) OR CLAUS E (23AA) OR CLAUSE (23C) OF S. 10'. BEFORE EMBARKING ON ANALYSING THE PROVISIONS OF SUB S.(5) OF S. 11(1), ONE MUST NOTICE THAT S. 11(1) DOES NOT RELATE TO ASSESSMENT OF THE TRUST OR THE INSTITUTION WHOSE INCOME ARE NOT LIABLE TO BE INCLUDED IN THE COMPUTATION OF TAXABLE INCOME UNDER VARIOUS PROVISIONS OF THE ACT REFERRED THEREIN. PRIMARILY, S. 11(1) IS RELATED TO GIVING DEDUCTION IN RESPECT OF DONATIONS MADE BY A PERSON WHO, BUT FOR THIS PROVISION, WOULD NOT BE ELIGIBLE FOR SUCH DEDUCTION BECAUSE THE DONA TIONS ARE NOT ORDINARILY CONSIDERED TO BE EXPENSES INCURRED FOR THE PURPOSE OF EARNING INCOME AND LIABLE TO BE DEDUCTED THEREFROM. SINCE ALL DONATIONS GENERALLY ARE NOT TR EATED ELIGIBLE FOR DEDUCTION, BUT ONLY SUCH DONATIONS AS ARE MADE TO FUNDS OR INSTITU TION NAMED IN SUBS. (2) OF S. 11(1) ARE ELIGIBLE FOR SUCH DEDUCTION AND AS NOTICED BY U S ABOVE, IT ALSO INCLUDES A GENERAL CLAUSE 'ANY FUND OR INSTITUTION TO WHICH THIS SECTI ON APPLIES' A PROVISION WAS NEEDED TO IDENTIFY THE TRUSTS OR FUNDS OR INSTITUTION NOT SPECIFICALLY NAMED IN STATUTE, BUT FELL IN THAT CATEGORY. THAT OBJECT WAS ACHIEVED BY ENACTING SUBS. (5) OF S. 11(1) WHICH HELPS IDENTIFY THE FUNDS OR INSTITUTIONS DONATION TO WHIC H QUALIFIES FOR DEDUCTION UNDER S. 11(1). IT PROVIDES THAT FUND OR INSTITUTION REFERRE D TO IN CLAUSE (2)(IV) ARE SUCH WHOSE INCOME WOULD NOT BE LIABLE TO BE INCLUDED IN ITS TO TAL INCOME UNDER THE PROVISIONS OF SS. 11 AND 12 OR CLAUSE (22) OR CLAUSE (22A) OR CLA USE (23) OR CLAUSE (23AA) OR CLAUSE (23C) OF S. 10. PRIOR TO INSERTION OF CLAUSE (VI), IT BEING NOT A STATUTORY REQUIREMENT, EVEN IN THE ABSENCE OF A CERTIFICATE UNDER S. 11(1) , IT WAS POSSIBLE FOR A DONOR TO SATISFY AN ITO INDEPENDENTLY ABOUT THE ELIGIBILITY OF DONATION MADE BY HIM FOR DEDUCTION. IT WAS IN ORDER TO KEEP A CHECK ON AN IN QUIRY INTO SUCH DETAILS WHICH MAY NOT BE POSSIBLE FOR EVERY DONOR TO HARNESS AND MAKE GOOD A CLAIM WHICH OTHERWISE HE IS LEGITIMATELY ENTITLED TO MAKE, AND ALSO TO RELIE VE ITO TO HOLD SUCH ENQUIRY IN RESPECT OF DONATIONS MADE TO SUCH INSTITUTION AT DIFFERENT LEVELS AND TO AVOID POSSIBILITY OF DIFFERENT CONCLUSIONS REACHED BY DIFFERENT OFFICERS IN RELATION TO DONATIONS MADE TO THE SAME FUND OR INSTITUTION, TO SIMPLIFY THE PROCEDURE , THE PROVISION WAS MADE FOR RECOGNISING, WHAT WAS, A PREVAILING PRACTICE BY MAK ING A STATUTORY PROVISION IN THAT REGARD. IT IS ALSO TO BE NOTICED THAT WHETHER THE I NCOME OF AN INSTITUTION OR FUND WOULD ULTIMATELY BE LIABLE TO INCLUSION IN ITS TOTAL INCO ME AT THE CLOSE OF ASSESSMENT YEAR OR 5 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, NOT CANNOT BE DETERMINED AT THE TIME OF MAKING OF D ONATION. THE ELIGIBILITY OF THE DONATION FOR DEDUCTION HAS TO BE CONSIDERED WITH RE FERENCE TO THE POINT OF TIME AT WHICH DONATION IS MADE AND NOT WITH RESPECT OF THE TIME IN FUTURE DEPENDING ON ASSESSMENT OF THE DONEE. THAT IS WHERE THE USE OF T HE VERB IN FUTURE TENSE 'WOULD' HAS BEEN USED AND NOT IN PRESENT OR PAST PERFECT TENSE SO AS TO TAKE INTO CONSIDERATION THE ACTUAL INCLUSION OR EXCLUSION OR THE EXTENT OF INCL USION OR EXCLUSION. THE DIRECT NEXUS OF CLAUSE (I) OF SUBS. (5) OF S. 11(1), APPEARS TO US, IS TO THE ELIGIBILITY OF THE INSTITUTION OR THE FUND TO CLAIM THAT ITS INCOME IS NOT LIABLE TO BE INCLUDED IN COMPUTATION OF TOTAL INCOME. THE TWO ARE DIFFERENT CONCEPTS. FIRST, WHET HER AN INSTITUTION OR FUND IS SUCH WHOSE INCOME IS NOT LIABLE TO BE INCLUDED IN THE CO MPUTATION OF TOTAL INCOME IT DEPENDS ON ITS STATUS OR CHARACTER. THE SECOND IS A CTUAL ASSESSMENT OF INCOME, WHICH NECESSARILY TAKES PLACE IN FUTURE AFTER DONATION IS RECEIVED BY THE DONEE ON FULFILLMENT OF OTHER CONDITIONS ABOUT APPLICATION OF INCOME BY THE ELIGIBLE TRUSTS, WHICH IN THE VERY NATURE OF THINGS CAN OPERATE ONLY AFTER RECEIP T OF INCOME. THE ACTUAL EXTENT OF EXCLUSION FROM OR INCLUSION IN THE COMPUTATION OF T OTAL INCOME, THE RECEIPTS OF SUCH INSTITUTION OR FUND, DEPENDS ON FULFILLMENT OF FURT HER CONDITIONS WHICH MAY OR MAY NOT EXIST AT THE CLOSE OF THE YEAR AND HAS NO DIRECT RE LATION TO THE PURPOSE WITH WHICH THE PROVISION IS MADE. THE LATTER FALLS IN THE REALM OF THE ASSESSMENT OF THE TRUST, INSTITUTION OR FUND WHICH DERIVES INCOME WHICH IS N OT ORDINARILY INCLUDIBLE IN ITS TOTAL INCOME. THE LIABILITY TO ASSESSMENT IS NOT AFFECTED BY ISSUANCE OF RECOGNITION CERTIFICATE OR APPROVAL CERTIFICATE ISSUED UNDER CL AUSE (VI) OF SUBS. (5) OF S. 11(1) NOR IT DEPENDS UPON THE FACT WHETHER DONOR IS ULTIMATELY G ETS DEDUCTION IN RESPECT OF SUCH DONATION. IT MAY BE RELEVANT TO TAKE COGNIZANCE THA T ALL DONATIONS ARE NOT IN THEIR ENTIRETY ELIGIBLE FOR DEDUCTION. THERE EXISTS A MAX IMUM LIMIT ALSO FOR SUCH ELIGIBILITY AND DONATIONS BEYOND SUCH LIMIT BY A PERSON MAY NOT GET DEDUCTION, EVEN IF IT IS TO AN APPROVED INSTITUTION UNDER S. 11(1). LIKEWISE, ACTU AL INCLUSION OF ANY INCOME IN THE ASSESSMENT OF THE DONEE AS TAXABLE INCOME, DOES NOT AFFECT THE ENTITLEMENT OF THE DONOR TO CLAIM DEDUCTION UNDER S. 11(1), IF ON THE DATE W HEN HE MADE THE DONATION THE CONDITIONS WERE FULFILLED. THAT WAS THE LAW BEFORE THE INSERTION OF CLAUSE (VI) AND APART FROM THE FACT THAT BY INTRODUCING CLAUSE (VI) WITH R. 11AA A METHOD OF PROVING THE ELIGIBILITY TO CLAIM DEDUCTION HAS BEEN PROVIDE D BY THE STATUTE, THERE HAS BEEN NO ALTERNATION IN THE SUBSTANTIVE PROVISION, THAT IS T O SAY, ENTITLEMENT OF THE DONOR TO CLAIM DEDUCTION DEPENDS ON THE ELIGIBILITY OF THE D ONEE TO CLAIM EXEMPTION OF ITS INCOME ON THE DATE WHEN DONATION IS MADE. EXAMINING FROM THIS ANGLE, WE FIND THAT FOR APPLICABILITY OF SS. 11 AND 12, WHAT IS REQUIRE D IS THAT SUCH TRUST MUST HAVE MOVED AN APPLICATION FOR REGISTRATION UNDER S. 12A AND RE GISTERED FOR THAT PURPOSE. ONCE A TRUST IS REGISTERED UNDER S. 12A, ITS INCOME FROM P ROPERTY, WHICH INCLUDES DONATIONS WHETHER COVERED UNDER S. 11(1)(D) OR UNDER S. 12 SU CH DONATIONS ARE DEEMED TO BE INCOME FROM PROPERTY, IS NOT TO BE INCLUDED IN ITS TOTAL INCOME UNDER S. 11 OR S. 12. THE EQUITY UNDER S. 80G(5) CANNOT GO BEYOND THAT. A PERUSAL OF S. 11 AND S. 12 WOULD DISCLOSE THAT IN COME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES UNDER A TRUST IS N OT INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSONS IN RECEIPT OF THE INCOME WHERE ANY SUCH INCOME HAS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PU RPOSES IN INDIA TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF 25 PER CENT OF THE INCOME FROM SUCH PROPERTY. IN CLAUSE (D) OF SUBS.(1 ) OF S. 11 INCOME IN THE FORM OF VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFIC DIRECT ION THAT THEY SHALL FOR PART OF THE CORPUS OF THE TRUST OR INSTITUTION, THAT IS TO SAY, DONATIONS MADE WITH DIRECTIONS THAT THE DONATION SHALL FORM PART OF CORPUS OF THE TRUST OR INSTITUTION ARE ALSO NOT INCLUDIBLE IN THE INCOME OF THE TRUST. IT MAY BE FURTHER OBSER VED THAT MERELY BECAUSE THE ACCUMULATION OF THE INCOME FROM PROPERTY EXCEEDS 25 PER CENT IT DOES NOT RESULT IN INCLUSION OF THE ENTIRE INCOME IN THE TAXABLE INCOM E OF THE ASSESSEE. THE TWO CONDITIONS SPEAK OUT, FIRSTLY, THAT INCOME DERIVED FROM PROPERTY TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA IS NOT TO BE INCLUDED IN THE COMPUTATION OF TOTAL INCOME AND IT IS ONLY WHERE TH ERE IS ACCUMULATION OF INCOME, SUCH ACCUMULATION EXCEEDS 25 PER CENT SHALL NOT BE LIABLE TO BE EXEMPT FROM INCOME 6 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, BUT IN CASE ACCUMULATION IS RESTRICTED TO 25 PER CE NT EVEN ACCUMULATION IS NOT TO BE INCLUDED IN THE COMPUTATION OF TOTAL TAXABLE INCOME . THAT TOO IS NOT IN ABSOLUTE TERMS. IN THAT REGARD SUBS. (2) OF S. 11 POINTS OUT CERTAI N CONDITIONS AND CONTINGENCIES IN WHICH THAT LIMIT IS ALSO RELAXED. WE NEED NOT DILAT E HERE IN DETAIL ON THIS ASPECT. THIS WE HAVE NOTICED ONLY FOR THE PURPOSE OF SHOWING, FI RSTLY, THAT AS ON THE DATE WHEN DONATION IS MADE WHICH IS THE RELEVANT DATE FOR THE PURPOSES OF CLAIM OF DONOR TO DEDUCTION UNDER S. 11(1) IT IS NOT POSSIBLE TO POIN T OUT WHAT SHALL BE THE EXACT STATE OF AFFAIRS THAT WILL EXIST AT THE CLOSE OF THE YEAR NO R IS IT POSSIBLE FOR THE PERSON CONSIDERING THE APPLICATION FOR APPROVAL, WHICH REQ UIRES TO CONSIDER WHETHER THE INCOME DERIVED BY SUCH TRUST WOULD NOT BE LIABLE TO BE INCLUDED IN ITS TOTAL INCOME, CAN DETERMINE, NOR AS ON THE DATE OF APPLICATION WH ETHER THE INCOME WHICH WILL HENCEFORTH BE DERIVED BY THE TRUST ASKING FOR APPRO VAL, IF IT IS OTHERWISE ELIGIBLE TO CLAIM EXEMPTION FROM THE INCLUSION OF SUCH INCOME I N THE TAXABLE INCOME, WOULD IN FACT BE ENTITLED TO SUSTAIN THAT CLAIM TO THE FULLE ST EXTENT OR NOT AT THE TIME OF ASSESSMENT. THAT IS THE JURISDICTION AND AUTHORITY OF THE AO TO ENQUIRE INTO AND MAKE APPROPRIATE ORDER AT THE TIME WHEN ASSESSMENT OF TH E TRUST IS BEING MADE. THE AUTHORITY EXAMINING THE QUESTION WHETHER A FUND OR INSTITUTION IS ELIGIBLE TO BE CERTIFIED FOR THE PURPOSES OF S. 11(1) IS NOT TO AC T AS AN AO AND PRONOUNCE UPON THE PENDING ASSESSMENTS. THE CIT, IN EXAMINING THIS ASP ECT, IN RESPECT OF PENDING ASSESSMENTS, IN OUR OPINION, EXCEEDED HIS JURISDICT ION WHILE CONSIDERING THE APPLICATION FOR APPROVAL. HE, AS A MATTER OF FACT, STEPPED INTO THE JURISDICTION OF THE AO, DECIDED UPON THE CLAIM OF THE ASSESSEE IN RESPE CT OF ITS ASSESSMENT OF INCOME THEN PENDING AND ACTED AS IF HE WAS THE AO DECIDING UPON THE ASSESSMENT OF THE TRUST. WHILE DWELLING ON THE MERITS OF PENDING ASSESSMENT HE FAILED TO CONSIDER THAT UPTO 31ST MARCH, 1998, THE TRUST HAS ALREADY ENJOYED APP ROVAL AND THE DONORS WHO HAD ALREADY MADE DONATIONS TO IT WOULD BE ENTITLED TO S UCH BENEFIT NOTWITHSTANDING THE FATE OF ASSESSMENT OF THE TRUST. THE ACTUAL ASSESSMENT O F THE TRUST AND ITS ACTUAL LIABILITY TO TAX IN ACCORDANCE WITH PROVISIONS OF S. 11 AND 12 A ND 12A HAS NO BEARING ON THE CLAIM OF THE DONORS FOR WHAT BENEFIT APPROVAL IS AC CORDED. EXPLANATION 2 TO S. 80G(5) WHICH TELLS IN NO UNCERTAIN TERMS THAT A DEDUCTION TO WHICH THE ASSESSEE IS ENTITLED IN RESPECT OF DONATION MADE TO AN INSTITUTION OR FUND TO WHICH SUBS. (5) APPLIES SHALL NOT BE DENIED MERELY ON EITHER OR BOTH THE FOLLOWING GR OUNDS, NAMELY, THAT ANY PART OF INCOME OF THE INSTITUTION OR FUND HAS BECOME CHARGE ABLE TO TAX DUE TO NONCOMPLIANCE WITH ANY OF THE PROVISIONS UNDER S. 11, S. 12 AND/O R S. 12AA AND UNDER CLAUSE (C) OF SUBS. (1) OF S. 13 THE EXEMPTION UNDER S. 11 OR 12 CAN BE DENIED TO AN INSTITUTION OR FUND IN RESPECT OF INCOME ACCRUING OR ARISING TO IT FROM ANY INVESTMENT REFERRED TO IN CLAUSE (H) OF SUBS. (2) OF S. 13. LIKEWISE, THE INSTITUTION OR FUND WHOSE INCOME IS N OT TO BE INCLUDED IN THE TAXABLE INCOME OF THE RECIPIENT UNDER PROVISIONS OF S. 10, NAMELY, CLAUSE (22) OR CLAUSE (22A) OR CLAUSE (23) OR CLAUSE (23AA) OR CLAUSE (23C) WOU LD GO TO SHOW THAT THESE CLAUSES IDENTIFIED DIFFERENT INSTITUTIONS FOR THE PURPOSE O F GRANTING EXEMPTIONS, SOME OF WHICH REQUIRE APPROVAL BY PUBLICATION IN OFFICIAL GAZETTE , SOME OF WHICH REQUIRE TO BEAR A PARTICULAR CHARACTER OR THE LIKE. ONCE THAT CHARACT ER OR THE CONDITION IS FULFILLED, S. 10 OPERATES. FOR ILLUSTRATION, UNDER CLAUSE 22, AS IT WAS IN FORCE UPTO 31ST MARCH, 1999, ANY INCOME OF A UNIVERSITY OR OTHER EDUCATIONAL INS TITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT WAS NOT TO BE INCLUDED IN TOTAL INCOME. NOW, IF AN APPROVAL IS SOUGHT BY SUCH INSTI TUTION WHAT THE APPROVING AUTHORITY CAN SEEK TO ENQUIRE IS WHETHER THE APPLIC ANT UNIVERSITY OR EDUCATIONAL INSTITUTION WHICH IS SOLELY EXISTING FOR EDUCATIONA L PURPOSES, AND WHETHER ITS PURPOSE IS NOT TO EARN PROFIT. UNDER CLAUSE (23) EXEMPTION IS IN RESPECT OF INCOME OF AN ASSOCIATION OR INSTITUTION ESTABLISHED IN INDIA WHI CH MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT IN THE OFFICIAL GAZETTE HAVING REGARD TO THE FACT THAT THE ASSOCIATION OR INSTITUTION HAS AS ITS OBJECT THE CONTROL, SUPERVIS ION, REGULATION OR ENCOURAGEMENT IN INDIA OF THE GAMES OF CRICKET, HOCKEY, FOOTBALL, TE NNIS OR SUCH OTHER GAMES OR SPORTS AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN THIS BEHALF. THE APPLICATION FOR APPROVAL IN RESPECT OF ANY SUCH INSTITUTION, IF IT FALLS WITHIN 7 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, CLAUSE (IV) OF SUBS. (2) OF S.80G, AN ENQUIRY BY TH E CIT COULD ONLY EXTEND TO FIND OUT WHETHER THE ASSOCIATION OR INSTITUTION IS SO NOTIFI ED UNDER S. 10(23). IT CANNOT BY ITSELF EXAMINE THE VALIDITY OR CORRECTNESS OF NOTIFICATION NOR CAN IT GRANT APPROVAL EVEN IF HE CONCLUDES THAT SUCH INSTITUTION EXISTS FOR THE PURP OSES MENTIONED IN SUBS. (23), IF NOTIFICATION BY CENTRAL GOVERNMENT IS NOT ISSUED IN THAT REGARD. THAT IS DEMONSTRATIVE OF THE SCOPE OF ENQUIRY BY THE CIT WHILE ENQUIRING THE EXISTENCE OF CONDITION UNDER S. 80G(5)(I). THAT EXTENDS TO ELIGIBILITY TO EXEMPTION UNDER VARIOUS PROVISIONS OF THE IT ACT REFERRED TO IN THAT SUBSECTION, BUT NOT TO ACTU AL ASSESSMENT WHICH DEPENDS ON FULFILLMENT OF FURTHER CONDITIONS BY THE ELIGIBLE I NSTITUTIONS, TRUSTS OR FUNDS. IN NONE OF THESE CASES INQUIRY OF THE CIT UNDER S. 80G(5)(VI) EXTEND TO THE ACTUAL COMPUTATION OF INCOME UNDER THE ASSESSMENT THAT IS LIKELY TO BE FR AMED. WE SEE NO REASON THAT SUCH EXERCISE CAN BE TAKEN IN RESPECT OF A TRUST WHICH I S CLAIMING EXEMPTION NOT UNDER S. 10 BUT UNDER S. 11 AND 12 OF THE ACT, ONCE THE CIT FIN DS THAT THE PERSON WHO IS CLAIMING APPROVAL IS THE ASSESSEE WHO CLAIMED HIS INCOME NOT LIABLE TO BE INCLUDED IN TAXABLE INCOME UNDER S. 11 OR 12. THE ENQUIRY RELATES TO WH ETHER IT IS REGISTERED UNDER S. 12A, WHETHER IT IS A TRUST WHOLLY FOR CHARITABLE PURPOSE S OR RELIGIOUS PURPOSES, AND WHETHER INCOME RECEIVED BY IT IS LIABLE TO BE CONSIDERED UN DER S. 11, BUT IT DOES NOT GO BEYOND THAT TO EXAMINE AS AN AO WHETHER THE INCOME RECEIVE D BY IT AT THE CLOSE OF ANY PARTICULAR YEAR OR YEARS WAS OR WAS NOT ACTUALLY BE INCLUDED IN TAXABLE INCOME IN THE PAST. THIS CONSIDERATION MUST BE WHETHER THE INCOME RECEIVABLE BY IT WILL OR WILL NOT BE LIABLE TO BE CONSIDERED FOR EXCLUSION UNDER S. 1 1. SUCH ENQUIRY OBVIOUSLY CANNOT INCLUDE IN ENQUIRY WHETHER AT THE CLOSE OF PREVIOUS YEAR THE DONEE WILL ACTUALLY BE ABLE TO SUSTAIN SUCH CLAIM BECAUSE OF FULFILLMENT O F SOME CONDITIONS BY HIM AS TO APPLICABILITY OR ACCUMULATION OF INCOME, AS IT IS N OT POSSIBLE TO PREDICATE THAT IN PRAESENTI WHEN DONATION IS MADE. AS WE HAVE NOTICED ABOVE, THAT QUESTION WOULD DEPEND UPON THE FACTS EXISTING AT THE CLOSE OF THE ASSESSMENT YEAR AND AT THE TIME OF CONSIDERING THE APPLICATION IT CANNOT BE EXAMINED I N THE LIGHT OF WHAT IS GOING TO HAPPEN IN PENDING ASSESSMENTS IN RESPECT OF WHICH A PPROVAL CERTIFICATE WAS ALREADY EXISTING AND ASSESSMENT OF WHICH WOULD NOT AFFECT T HE DONATIONS MADE TO THE TRUST DURING THAT YEAR.' 5. MR. DESAI, HOWEVER, SUBMITTED THAT THE AFORESAID DECISION WOULD NOT APPLY TO THE FACTS OF THE CASE ON HAND, AND THEREFORE, THE TRIBUNAL ERRED IN PASSING THE IMPUGNED ORDER. HE, FURTHER, SUBMITTED THAT THE TRIBUNAL OUGHT TO HAVE APPRECIATED THE FACT THAT THE PRINCIPLE WHICH WILL APPLY AT THE TIME OF REGISTRATION OF A TRUST U NDER SECTION 12AA OF THE ACT DOES NOT APPLY IN SAME MANNER, WHILE RECOGNIZING THE DONATIONS MAD E TO IT. HE, THEN, SUBMITTED THAT FOR THE PURPOSE OF BENEFIT OF SECTION 80G, IT IS NECESSARY THAT NO INCOME UNDER EITHER SECTION 11 OR SECTION 12 IS INCLUDED IN THE TOTAL INCOME OF THE T RUST. HE, THEN, LASTLY SUBMITTED THAT THE TRIBUNAL OUGHT TO HAVE APPRECIATED THE FACT THAT TH E ASSESSEE HAD NOT SPENT NEARLY 85 PER CENT OF THE AMOUNT TOWARDS THE OBJECT OF THE TRUST. HE, THEREFORE, SUBMITTED THAT THE APPEAL BE ALLOWED. 6. HAVING HEARD THE LEARNED COUNSEL FOR THE APPELLA NT - REVENUE AND HAVING GONE THROUGH THE MATERIAL ON RECORD INCLUDING THE ORDERS PASSED BY T HE CIT(A) AS WELL AS THE TRIBUNAL, WE ARE UNABLE TO ACCEPT THE SUBMISSION MADE BY MR. DESAI T HAT THE DECISION OF THIS COURT, AS REFERRED HEREIN ABOVE, WOULD NOT APPLY TO THE CASE ON HAND. IT IS WELL SETTLED POSITION OF LAW THAT AT THE TIME OF GRANTING APPROVAL UNDER SECTION 80G OF THE ACT, WHAT IS TO BE EXAMINED IS THE OBJECT OF THE TRUST AND SO FAR AS THE ASPECT OF INCOME IS CON CERNED, SAME CAN BE VERY WELL EXAMINED BY THE AO AT THE TIME OF FRAMING ASSESSMENT. HOWEVER, IN THE CASE ON HAND, THE ASSESSEE-TRUST WAS REFUSED RECOGNITION ONLY ON THE GROUND THAT THE ASSESSEE - TRUST HAD NOT SPENT 85 PER CENT OF THE AMOUNT TOWARDS THE OBJECTS OF THE TRUST. THE TRIBUNAL, WHILE PASSING THE IMPUGNED ORDER, RELIED ON A DECISION OF THE PUNJAB AND HARYA NA HIGH COURT IN 'CIT V. SURYA EDUCATIONAL AND CHARITABLE TRUST' [2011] 203 TAXMAN N 53/15 TAXMANN.COM 123 WHEREIN, THE HIGH COURT HELD THAT AT THE STAGE OF REGISTRATION U NDER SECTION 12AA OF THE ACT, THE EXTENT AND NATURE OF ACTIVITIES ARE NOT REQUIRED TO BE EXAMINE D AND THE SAME IS REQUIRED TO BE EXAMINED IN ASSESSMENT PROCEEDINGS. SIMILAR VIEW IS TAKEN BY THIS COURT IN TAX APPEAL NO. 306 OF 2014 AND THE ALLIED MATTERS. IN VIEW OF THE ABOVE DISCUS SION, WE ARE OF THE OPINION THAT THE TRIBUNAL 8 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, COMMITTED NO ERROR IN ISSUING DIRECTION TO GRANT RE COGNITION TO THE RESPONDENT - TRUST UNDER SECTION 80G(5) OF THE ACT. SINCE, THE ISSUE IS SQUA RELY COVERED BY THE AFORESAID DECISIONS, WE REFRAIN OURSELVES FROM MAKING ANY FURTHER OBSERVATI ONS. 7. WE NOTE THAT AT THE TIME OF GRANTING APPROVAL U /S 80G OF THE ACT ONLY OBJECT OF TRUST IS REQUIRED TO BE EXAMINED AND, THEREFORE, ASSESSEE S APPLICATION SEEKING APPROVAL U/S. 80G(5) OF THE ACT COULD NOT BE REJECTED ON GROUND T HAT IT FAILED TO INCUR EXPENDITURE TO THE EXTENT OF 85% OF ITS INCOME DURING RELEVANT YEAR. WE NOTE THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHREE GOVINDBHAI JETHALAL NATHAVANI CHAR ITABLE TRUST (2014) 49 TAXMANN.COM 171 (GUJ) WHEREIN THE HONBLE HIGH COURT DISMISSED THE REVENUES APPEAL VIDE PARA 8 OF ITS ORDER ON THE QUESTION AS TO WHETHER AT TIME OF GRANTING APPROVAL OF EXEMPTION U /S. 80G, ONLY OBJECT OF TRUST IS REQUIRED TO BE EXAMINED AN D, THEREFORE, ASSESSEES APPLICATION SEEKING APPROVAL U/S. 80G(5) COULD NOT BE REJECTED ON GROUND THAT IT FAILED TO INCUR EXPENDITURE TO EXTENT OF 85% OF ITS INCOME DURING R ELEVANT YEAR , WHICH IS AS UNDER: 8. SIMILAR VIEW HAS BEEN EXPRESSED BY THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF O.P. JINDAL GLOBAL UNIVERSITY (SUPRA). APPLYING TH E RATIO OF THE AFORESAID DECISIONS TO THE FACTS OF THE CASE ON HAND, IT CANNOT BE SAID THAT T HE LEARNED TRIBUNAL HAS COMMITTED ANY ERROR IN QUASHING AND SETTING ASIDE THE ORDER PASSE D BY THE COMMISSIONER REFUSING TO GRANT RECOGNITION UNDER SECTION 80G(5) OF THE ACT TO THE RESPECTIVE ASSESSEE TRUST. WE ARE IN COMPLETE AGREEMENT WITH THE VIEW TAKEN BY THE LEARN ED TRIBUNAL. UNDER THE CIRCUMSTANCES, THE QUESTION RAISED IN THE PRESENT A PPEALS IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE TRUST. 8. SO, RESPECTFULLY FOLLOWING THE ORDER OF THE H ONBLE GUJARAT HIGH COURT AND IN THE ABSENCE OF ANY CHANGE OF FACTS OR IN LAW HAS BEEN B ROUGHT BEFORE US BY THE LD. DR, WE ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE LD. CIT(E) TO GRANT APPROVAL U/S. 80G(5) OF THE ACT IN FAVOUR OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 11/07/201 8 SD/- SD/- (M. BALAGANESH) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11TH JULY, 2018 JD.(SR.P.S.) 9 ITA NO. 1634/KOL/2017 INDIAN LEATHER TECHNOLOGISTS ASSOCIATION, COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT INDIAN LEATHER TECHNOLOGISTS ASSOCIATIO N, SANJOY BHAVAN (3 RD FLOOR), 44, SHANTI PALLY, KASBA, (BESIDE KASBA STATE BUS DEPOT) , KOLKATA-700 107. 2 RESPONDENT CIT(EXEMPTION), KOLKATA. 3 DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY