TMI Blog2009 (6) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... d the requisite conditions for the grant of approval applied for. In his report, the AO did not recommend the case for renewal. The learned CIT observed that the assessee society had marked "no" against Col. 11 (i) of the application against the question as to if the assessee was carrying out any business. "NA" had been marked by the assessee against column No. 11 (2) of the application, wherein it had been enquired if the assessee's business was incidental to the attainment of its profits. The learned CIT observed that this meant that the assessee had verified in its application that it was neither practicing any business incidental to its aims and objects, nor was it carrying on any other business; that however, in its reply dt. 22nd Aug., 2008, the assessee, at point No. 13, had stated that income from trust business was available for application for charitable purposes and in point No. 18, it had been stated that the trust was running a homeopathic clinic which was incidental to its aims and objects and that depreciation had been claimed on the assets used for running of this homeopathic clinic only; that from this, it was evident that the trust had been practicing homeopathic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee had not complied with the provisions of s. 80G(5)(i) and it did not deserve approval under the said section; that the assessee had claimed to have made donations to three societies, but it had failed to show that the societies were registered under s. 12AA of the Act, as public charitable entities, moreover, donations made to Gaushalas were not covered in the aims and objects of the assessee trust, as serving cows and animals was not covered by the aims and objects of the assessee trust; and that the principle of res judicata does not apply to income-tax proceedings, so that the fact that the assessee had already received approval upto 31st March, 2008 did not make any difference. In this manner, the application of the assessee was rejected by the learned CIT. Aggrieved, the assessee is in appeal before us. 3. The learned counsel for the assessee, challenging the order under appeal, has submitted that the assessee had been in existence since 1981; that it was registered under s. 12AA of the Act; that exemption under s. 80G of the Act had been regularly granted to the assessee; that the learned CIT rejected the assessee's application on wholly irrelevant grounds; that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us by the learned counsel for the assessee, the assessee has shown depreciation expenses. It has been argued that if the assessee has no business of homeopathy, depreciation cannot be allowed to the assessee. The learned Departmental Representative has asserted that all these show that the assessee is in fact doing the business of homeopathy. Even the assessee, as noted by the learned CIT admits this fact. It is only that the assessee contends that this business is not a business but the activity is being carried out for charity. The learned Departmental Representative has placed reliance on Ganjam Nagappa Son Trust vs. Director of IT (Exemption) (2004) 187 CTR (Kar) 311 : (2004) 269 ITR 59 (Kar). The learned Departmental Representative has lastly requested for the appeal of the assessee to be dismissed. 5. We have heard the parties and have perused the material on record. The issue is as to whether the activity of homeopathic dispensary carried on by the assessee does or does not fall within the definition of "charitable purpose" as defined under s. 2(15) of the IT Act. Sec. 2(15), as applicable, states that: "'Charitable purpose' includes relief to poor, education, medica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the same time, if he is satisfied that the objects of the trust, as set out in the deed of declaration, were charitable, then having regard to the object of the provision, the approval should not be denied on mere technicalities. As a matter of fact, the power to grant or negative the claim for approval is coupled with a duty. The CIT has not found that the objects of the petitioner-society, established in India, as set out in its memorandum of association, are not for a charitable purpose or that the society is not carrying on its activities in furtherance of its objects. As a matter of fact, registration of an institution under s. 12A(a) by itself is a sufficient proof of the fact that the trust or the institution concerned is created or established for charitable or religious purposes. In view of the fact that the petitioner had enjoyed approval under s. 80G from the year 1991 to 31st March, 1999, i.e., even after the amendment of its objects on 17th Sept., 1999 and after the insertion of cl. (vi) w.e.f. 1st Oct., 1991, the CIT was not justified in holding that either fresh registration under s. 12A(a) was required or the memorandum should have been amended as per the procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time, attention and labour of a person normally with the object of making profit. No such object of the assessee has been established. That being so, the assessee's receipts from its activity of dispensing homeopathic medicine for a token consideration cannot at all be termed as the assessee's 'income being profits and gains of business' within the meaning of the proviso to s. 80G(5)(i) of the IT Act. Rather, it amounts to an object by way of 'medical relief as defined in s. 2(15) of the Act. And therefore, the said proviso does not get attracted. Now once this is so, the requirements under the proviso to s. 80G(5)(i) do not come into play. As such, the homeopathic dispensary not being a business of the assessee, the assessee was not required to maintain separate books of account in respect thereof. It was also not debarred from using the donations made to it for the purposes of the homeopathic dispensary. Accordingly, it rightly did not issue any certificate to its donors in this regard. 9. In N.N. Desai Charitable Trust vs. CIT (2001) 165 CTR (Guj) 116 : (2000) 246 ITR 452 (Guj), dealing with the issue of renewal of recognition of an institution, etc. under s. 80G of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department has itself stated that it is the proviso to s. 80G(5)(vi) which is material and that the conditions thereunder have not been fulfilled by the assessee. This, however, is found to be incorrect. 14. Sec. 80G(5)(i) states that where an institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of ss. 11 and 12 or cl. (23AA) or cl. (23C) of s. 10A of the Act. If the conditions laid down in the proviso to s. 80G(5) are not fulfilled, however, such income is liable to be included in the total income of the institution. In the present case, as noted hereinabove, the assessee is not found to have violated the conditions laid down in the proviso to s. 80G(5). That being so, it is the main s. 80G(5) which is applicable and not the proviso to the said section. Rule 11AA(4) of the Rules thus does not act in any manner detrimental to the assessee. 15. Coming to the contention on behalf of the Department that if the assessee was not carrying on a business of homeopathic dispensary, no depreciation could be allowed to it, the learned counsel for the assessee has placed reliance on ITO vs. Trustees of Marathi Mission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anizations; and that the purpose of s. 80G of the IT Act is not for further promoting the commercial activities. On facts it was observed that the authority dealing with the application for renewal under s. 80G, noticed, inter alia, withdrawal of substantial amounts and use thereof thereafter, withdrawal of Rs. 9 lakhs for purchasing the site in cash, non-availability of the signature on the sponsorship agreement and availability of programs only to a certain few persons. It was on these facts that the authority was not satisfied of any charitable activity being carried on by the applicant. The authority had been dissatisfied with the way in which the things were conducted by the trust by using musical concerts to further its business interests. The Hon'ble High Court found the order of the authority to be based as material available on record. It was observed that no contrary material had been placed to dislodge these factual findings. 20. In the present case, the facts are entirely at variance from those present in Ganjam Nagappa Son Trust vs. Director of IT (Exemption). Here, the assessee has not been shown to have carried on any business, nor has it been shown to have done ..... X X X X Extracts X X X X X X X X Extracts X X X X
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