COMMISSIONER OF INCOME TAX V. SIR CHHOTU RAM MEMORIAL SOCIETY

ITA/695/2010

AI Insights

The case revolves around the appeal by the Commissioner of Income Tax against the decision of the Income Tax Appellate Tribunal, which had granted the Sir Chhotu Ram Memorial Society approval for exemption under Section 80G(5)(vi) of the Income Tax Act. The main contention was whether the society's activities, such as letting out properties and publishing books, disqualified it from receiving such approval. The Tribunal had found that these activities were not conducted as a business and that the income generated was used for the society's charitable purposes. The High Court dismissed the appeal, agreeing with the Tribunal's findings.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 719282 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 14-12-2010
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: I P SINGH
• Keywords: Approval under section 80G; Approval under section 80G; Charitable Activities; Income from property; Income Tax; Renewal of approval; Publication of Books
• Section: 11(1)(a); 80G(5)(vi); 260-A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.695 of 2010 (O&M) Date of decision: 14.12.2010 The Commissioner of Income Tax. -----Appellant. Vs. Sir Chhotu Ram Memorial Society. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. I.P. Singh, Standing counsel for the Revenue. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 260-A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, New Delhi in I.T.A. No.3377/Del/2008 claiming following substantial questions of law:- “(i) Whether the Hon’ble Tribunal was justified in law in directing the Commissioner of Income Tax to grant renewal of approval u/s 80G(5)(vi) of the Income Tax when the conditions as stipulated under clause (i) of sub section (5) of section 80G of the Income Tax Act read with rule 11AA were not fulfilled by the applicant. I.T.A. No.695 of 2010 (ii) Whether the Hon’ble Tribunal was justified in law in directing the Commissioner of Income Tax to allow renewal of approval u/s 80G(5)(vi) when the society is not eligible for exemption u/s 11(1)(a) of the Income Tax Act in respect of the income from Properties as in the case of a trust in so far as the phrase ‘income from the property held under the trust’ goes. (iii) Whether for the purpose of the approval u/s 80G (5)(vi) of the Income Tax Act, the mere fact of the consideration received for the services rendered being less than the expenditure incurred is a sufficient compliance of clause (a), (b) & (c) of proviso to clause (i) of sub section (5) of section 80G of the Income Tax Act. 2. The assessee applied under Section 80G(5)(vi) of the Act seeking approval for exemption in respect of donations received by it. The CIT declined the approval but on appeal, the Tribunal upheld the plea of the assessee and granted approval as follows:- 3. We have heard both the parties and gone through the material available on record. Ltd. CIT has denied the extension of registration u/s 80G on the ground that the assessee was carrying on business of letting out properties, publication and also donating the amount to widows, granting scholarships etc. Under section 11(1)(a) of the Income Tax Act, 1961, income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied for the purpose of trust 2 I.T.A. No.695 of 2010 shall not be included in the total income of the assessee. The assessee owns properties which have been let out on rent. Letting out property on rent cannot be said that the assessee is engaged in the business of letting out. Letting out of the rooms and shop rent is income derived from the property and, therefore, the income earned from the property to the extent it is applied for the objects of the trust will not form part of the total income. Likewise, assessee is engaged in publication of books, newspapers, etc. the amount realized is a nominal as compared to expenditure incurred. For example in FY 2004-05, the assessee incurred Rs.1,00,966/- as against the sale from books etc. was Rs.11,840/- Likewise in FY 2005- 06, the expenditure incurred was Rs.38,000/- as against income of Rs.9,741/-. Similarly in FY 2006- 07, the expenditure was Rs.71,062/- as against income of Rs.8,940/-. Thus, from these details, it is clear that the assessee has realized a nominal amount as against the expenditure in the business for which separate books of account should be maintained. 4. Now, coming to the activities relating to donations made to widows, scholarships granted, Jayanti celebration etc. these are expenditure incurred for the objects of the trust. The assessee was granted registration on identical facts in earlier years. Therefore, we do not find any reason why the assessee should be denied the benefit of section 80G. It is not the case of the Revenue that assessee was found to have violated the provisions of sections 13 or 11. At the time of grant of registration, what is to be seen is whether the objects are charitable or 3 I.T.A. No.695 of 2010 not. Since, the assessee has been granted on identical facts, the object are charitable or not. Since, the assessee has been granted on identical facts, the registration in earlier years, we do not find any reason as to why the benefit of registration should be disallowed to the assessee......” 3. We have heard learned counsel for the appellant. 4. It is submitted that the assessee society was engaged in business and received income from property as also from publication of books and its income was not from property held under trust wholly for charitable or religious purposes. 5. This submission cannot be accepted. The finding recorded by the Tribunal that mere fact that the assessee owned property and received rent thereof, was not enough to hold that the assessee was not carrying on charitable activities. The income received was for the objects of the trust and the amount realised from publication was nominal, as against the expenditure incurred on charitable activities. The said finding is not shown in any manner to be perverse. 6. No substantial question of law arises. 7. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE December 14, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4 "