M/s. Sundaram Foundation, CHENNAI V. DIT, CHENNAI

ITA 763/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4699 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2011
• Appeal Filed By: Assessee
• Bench Allotted: D
• Assessment Year: misc
• Appeal Filed On: 27-04-2011
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR STAND ING
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. ITA NOS.762 & 763(MDS)/2011 M/S. SUNDARAM FOUNDATION, C/O CNGSN & ASSOCIATES, AGASTYAR MANOR NEW NO.20, OLD NO.13, RAJA STREET, T.NAGAR, CHENNAI-600 017. PAN AAJTS4721M. VS. DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.RAMAKRISHNAN, C.A. RESPONDENT BY: SHRI K.E.B.RENGARAJAN, JR. STANDI NG COUNSEL. O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE TWO APPEALS ARE FILED BY THE ASSESSEE, PRAY ING FOR REGISTRATION UNDER SECTION 12AA AND APPROVAL UNDER SECTION 80G OF THE INCOME-TAX ACT, 1961. - - ITA NOS.762 & 763 OF 2011 2 2. THE APPLICATIONS FILED BY THE ASSESSEE TO AVAIL REGISTRATION UNDER SECTION 12AA AND APPROVAL UNDER SECTION 80G WERE REJECTED BY THE DIRECTOR OF INCOME-TAX(EXEMPTI ONS) FOR THE REASON STATED IN HIS ORDER, WHICH IS REPRODUCED BEL OW:- SHRI K.C.SUNDARAM, AUTHOR AND MANAGING TRUSTEE APPEARED ON 12-01-2011, 24-01-2011 AND 31-01-2011 AND SUBMITTED REPLY. THE TRUST HAS INFORMED THAT I T HAS AVAILED LOAN OF ` . 25,00,000. OUT OF THIS, ` . 7,00,000 HAS BEEN DONATED TO DR. MUTHUKUMAR INSTITUTE OF ACUPUNCTURE AND HOSPITAL, CHENNAI-35 WHICH IS A PRI VATE BODY AND NOT RECOGNISED AS A CHARITABLE INSTITUTION UNDER THE INCOME-TAX ACT. SUCH ACTIVITY IS NOT PERMISSIB LE AND HENCE THE INSTITUTION DOES NOT QUALIFY FOR REGISTRA TION. AS THE AMOUNT IS GIVEN IN FORM OF DONATION TO A PRIVAT E INSTITUTION SUCH DONATION CANNOT BE SAID AS MONEY S PENT TOWARDS CHARITABLE OBJECTS. AS THERE IS ALWAYS A POSSIBILITY OF MISUTILISATION OF SUCH DONATION BY T HE MANAGERS OF DONEE, IT CANNOT BE SAID THAT THE ASSES SEE TRUST IS EXISTING FOR CHARITABLE PURPOSES. PERUSAL OF - - ITA NOS.762 & 763 OF 2011 3 PAPERS FILED REVEALS THAT THE DONE IS DR. MUTHUKUMA R INSTITUTE OF ACUPUNCTURE AND HOSPITAL, AFFILIATED W ITH NINE NEEDLE COLLEGE OF TCM, SHANXI, CHINA. THE STATUS O F SUCH FOREIGN INSTITUTION IS NOT KNOWN. AS THE ACTIVITIES ARE NOT IN CONFORMITY WITH DEFINI TION OF CHARITABLE OBJECT U/S 2(15), THE APPLICATION FILED FOR REGISTRATION U/S 12AA IS HEREBY REJECTED AND THE REGISTRATION IS NOT GRANTED. APPROVAL U/S 80G IS A LSO NOT GRANTED AND THE APPLICATION FILED IS HEREBY REJECTE D. 3. THE ASSESSEE IS AGGRIEVED AND THEREFORE IN APPE AL BEFORE US. WE HEARD SHRI B.RAMAKRISHNAN, THE LEARN ED CHARTERED ACCOUNTANT APPEARING FOR THE ASSESSEE AND SHRI K.E.B.RENGARAJAN, THE LEARNED STANDING COUNSEL APPE ARING FOR THE REVENUE. 4. THE TRUST IS ESTABLISHED WITH THE OBJECT OF REN DERING SERVICES IN THE FIELD OF MEDICAL RELIEF. THE OBJEC T OF THE ASSESSEE TRUST AS SUCH, THEREFORE, IS NOT OBJECTIONABLE. TH E DIRECTOR OF INCOME-TAX(EXEMPTIONS) HAS REJECTED THE CLAIM OF TH E ASSESSEE - - ITA NOS.762 & 763 OF 2011 4 ON THE GROUND THAT THE ASSESSEE HAS DONATED A SUM O F ` . 7 LAKHS TO DR. MUTHUKUMAR INSTITUTE OF ACUPUNCTURE AND HOSP ITAL, WHICH IS A PRIVATE INSTITUTION AND ALSO THE DONATION WAS MADE OUT OF A LOAN OF ` .25 LAKHS BORROWED BY THE ASSESSEE TRUST. WHEN WE EXAMINE THE REASON STATED BY THE AUTHORITY, WE FIND THAT THE REASON POINTED OUT MAY NOT BE SUSTAINABLE IN LAW. 5. FIRST OF ALL THE AMOUNT OF ` .7 LAKHS WAS DONATED TO DR. MUTHUKUMAR INSTITUTE OF ACUPUNCTURE AND HOSPITA L OUT OF A LOAN OF ` .25 LAKHS AVAILED BY THE ASSESSEE. LOAN IS NOT INC OME. THEREFORE, THE DONATION OF ` .7LKHS MADE BY THE ASSESSEE TRUST IS TO BE SEEN AS AN APPROPRIATION FROM THE LOAN AND NO T FROM ANY INCOME, FOR WHICH THE ASSESSEE HAS SOUGHT EXEMPTION UNDER SECTION 11. THEREFORE, THE QUESTION WHETHER THE AS SESSEE HAS APPLIED THE FUNDS FOR CHARITABLE PURPOSES TO AVAIL THE BENEFIT OF SECTION11 DOES NOT ARISE IN THE PRESENT CASE. SECO NDLY, THE ASSESSEE HAS SOUGHT FOR APPROVAL UNDER SECTION 80G NOT FOR GETTING ANY DEDUCTION FOR THE DONATION MADE TO OTHE RS BUT TO CANVASS DONATION FROM OUTSIDERS AS THE OUTSIDERS WI LL GET THE BENEFIT OF TAX DEDUCTION IF THE ASSESSEE IS APPROVE D UNDER - - ITA NOS.762 & 763 OF 2011 5 SECTION 80G. THEREFORE, AS A MATTER OF FACT, THE D ONATION OF ` . 7 LAKHS MADE BY THE ASSESSEE DOES NOT DEFEAT THE CLAIMS MADE BY THE ASSESSEE UNDER SECTIONS 12AA AND 80G. 6. IT IS ALSO TO BE SEEN THAT THERE IS NO RESTRICT ION WHILE APPLYING FUNDS FOR CHARITABLE PURPOSES THAT THE FUN D SHOULD NOT BE GIVEN TO PRIVATE INSTITUTIONS. IF THE PRIVATE I NSTITUTION IS ALSO ENGAGED IN CHARITABLE ACTIVITIES, THE AMOUNT GIVEN BY AN ASSESSEE TO SUCH AN INSTITUTION CANNOT BE DENIED TH E BENEFIT OF SECTION 11 ONLY ON THE GROUND THAT THE DONATION WAS GIVEN TO A PRIVATE INSTITUTION. IT IS TO BE SEEN THAT WHEN A CHARITABLE SOCIETY IS DISPENSING CHARITABLE ACTIVITIES, EVEN THOUGH TH E BENEFICIARIES ARE COMMON PUBLIC, THEY ARE ALL PRIVATE PERSONS. T HERE IS NO RULE THAT ONLY CHARITABLE INSTITUTIONS SHOULD AVAIL THE BENEFIT OF THE ACTIVITIES CARRIED ON BY ANOTHER CHARITABLE INSTITU TION. 7. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, WE FIND THAT THE DIRECTOR OF INCOME-TAX(EXEMP TIONS) IS NOT JUSTIFIED IN REJECTING THE APPLICATIONS FILED BY TH E ASSESSEE. THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) AT CHENNAI IS DI RECTED TO - - ITA NOS.762 & 763 OF 2011 6 GRANT THE ASSESSEE REGISTRATION UNDER SECTION 12AA AND ACCORD APPROVAL UNDER SECTION 80G. THE QUESTION OF DEFACT O EXEMPTION UNDER SECTION 11 AND BENEFIT OF SECTION 80G MAY BE EVALUATED BY THE ASSESSING AUTHORITY IN THE COURSE OF ASSESSM ENT. 8. IN RESULT THESE TWO APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 13 TH DAY OF JULY, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 13 TH JULY, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.