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TMI Blog2020 (9) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... hich activity is also (i.e., besides section 11), exempt u/s. 10(23C)(va) of the Act; and (c) Agro Division, yielding agricultural income, exempt u/s. 10(1). 2.2 It had applied for and had been granted approval u/s. 80G(5)(vi) on 20.12.2005, which was effective from 01.4.2005 to 31.03.2008 (PB pg. 45). It sought approval there-under again vide application in the prescribed Form on 04.6.2018. It is the denial of this approval which has led to the instant appeal by it before the Tribunal. The reasons stated in the impugned order for refusing to grant approval u/s. 80G(5)(vi) are as under: (paras 6 & 7 of the impugned order) (a) The assessee is generating huge surpluses from year to year. Neither any justification for the same has been given, nor, resultantly, is there any need for seeking approval u/s.80G. The surplus from the three principal activities for preceding three years is tabulated as under: (Amount in Rs. lacs) Particulars/years 2015-16 2016-17 2017-18 Total Hospital Division 19.25 61.39 65.85 146.49 School Division 45.65 58.34 40.42 144.41 Agricultural Division 180.92 194.45 187.63 563.00 Total 245.82 314.18 293.90 853.90 (b) The agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: "80G. Deduction in respect of donations to certain funds, charitable institutions, etc. (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,- (i) in a case where the aggregate of the sums specified in sub-section (2) includes any sum or sums of the nature specified in sub-clause (i) or .... , an amount equal to the whole of the sum or, as the case may be, sums of such nature plus fifty per cent of the balance of such aggregate; and (ii) in any other case, an amount equal to fifty per cent of the aggregate of the sums specified in sub-section (2). (2) ....(4) (5) This section applies to donations to any institution 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 :- (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10 : Provided that where an institution or fund derives any income, being prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation issued under section 10(23) or 10(23C); (ii) Notes on activities of institution or fund since its inception or during the last three years, whichever is less; (iii) Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less. (3) The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund. (4) Where the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid. (5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing: Provided that no order of rejection of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions, as well as its' counsel, Sh. Gupta, during hearing, both the capital expenditure and repayment of loan is only an application of income. In the normal, mercantile or commercial sense, applicable to charitable institutions, income implies excess of revenue receipt over revenue expenditure, and that is what the ld. CIT(E) is referring to when he speaks of 'surplus'. It is this 'surplus', income by definition, which, upon being applied for capital expenditure incurred, or repayment of borrowing made, for charitable purpose/es, that is exempt u/s. 11. However, as also argued without prejudice (para 2.3(b)), how is the generation of surplus violative of the conditions of s. 80G(5)((i) to (v)? It is rather only when there is a surplus (or income by definition) that it could be applied for a charitable purpose, qualifying for exemption u/s. 11. The question of carrying any activity in the nature of trade, commerce or business, is applicable only to the residuary class, i.e., 'advancement of any other object of general public utility', and not to the other categories of charitable purpose, as defined u/s. 2(15), viz. education, medical relief, etc. There could be an angle of genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. Needless to add, he shall do so per a speaking order and after allowing reasonable opportunity of being heard to the assessee. The ld. CIT(E) shall, as explained hereinbefore, record his satisfaction qua each of the conditions specified in clauses (i) to (v) of sec. 80G(5) or, as case may be, specify reason/s for his non-satisfaction of any of the said conditions. 3.5 We may, before closing, also advert to the assessee's argument of the amended law, i.e., w.e.f. 1.10.2009, mandating an automatic renewal of the approvals expiring before 1.10.2009, an assertion made with reference to the Board Circular 5/2010, dated 3.6.2010 (PB pgs. 211-212). We can hardly agree. The amended law being effective from 1.10.2009, it is only the approvals granted on or after 1.10.2009 which would be governed by the amended law, omitting the time limitation to which an approval u/s. 80G(5)(vi) was prior thereto (01.10.2009), subject. Approvals granted before this date would be governed by the extant law. The same shall therefore, on expiry, be subject to renewal, and where so renewed, extend in perpetuity. The words "will have to be renewed" in the Board Circular only implies that these appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/2020, so that there was impliedly no other surviving objection, and that the same must be regarded as accepted by the Revenue; the ld. CIT(E) himself having not raised any specific issue with regard to the said receipt, i.e., beyond merely recording the fact of the volume and nature of the said receipts in his order. Though he clarified, on being asked, if he thereby questions the competence of the Tribunal to so inquire, he would submit in the negative. However, an issue in this respect having been raised during hearing, with Sh. Gupta expressing his reservation in the matter, which he stated may be noted, it therefore becomes incumbent on us to clarify this aspect of the matter as well. On being further queried during hearing about the status w.r.t. sec.13(3) of the party/s paying the said sums, Sh. Gupta would sumbit that Premavati College of Nursing paying Rs. 4.80 lacs per annum (as Education Associate Share) is not covered u/s. 13(3), though could not state of any material on record to exhibit so, or of any explanation by the assessee qua the said transactions, for which reference was also made by us to the appellant's written submissions before the ld. CIT(E)(PB pgs. 152 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Tribunal to direct the ld. CIT(E) to examine the transactions under reference (from the stand point of the satisfaction or otherwise of the conditions precedent for the grant of approval u/s. 80G(5)(vi)), the Tribunal is the final fact finding authority under the Act. Though the case law in the matter is legion, we may, for authority, refer to the decision in CIT vs. Walchand & Co. (P.) Ltd. [1967] 65 ITR 381 (SC), explaining that the Tribunal is to deal with and determine all questions which arise out of the subject matter of an appeal, in light of the evidence and consistently with the justice of the case. Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963, clearly states that the Tribunal is, in arriving at its decision, not confined to the grounds set forth in the memorandum of appeal (or taken with its' leave), though shall give opportunity of hearing on any ground or matter considered pertinent by it. The Apex Court in Hukumchand Mills Ltd. vs. CIT [1967] 63 ITR 232 (SC) explained that r.11 of the Appellate Tribunal Rules is not exhaustive of the powers of the Tribunal. The said decision was, among others, considered in Ahmedabad Electricity Co. Ltd. vs. CIT [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke of their rights in the matter, but the correct legal position that is relevant (CIT v. C. Parak & Co. (India) Ltd. [1956] 29 ITR 661 (SC); Kedernath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC)), there is, we find, no clear finding in the absence of examination of facts by the competent authority in the instant case. We are not, we may at the cost of repetition state, expressing any opinion except to, on being called upon to, state the position of law which endorses our decision to, on finding the facts indeterminate, require examination thereof. We may though issue a note of caution. A finding as to the non-genuineness of activity/s cannot be lightly issued, particularly considering that the applicant-trust has a long history, and the matter is to be decided on an objective assessment of the obtaining facts. The onus thereof is on the Revenue. That apart, adequacy of consideration entails the technical subject of valuation. The same is therefore to be approached with utmost care, and finding/s issued on a consideration of the totality of the facts and circumstances of the case, on the touchstone of reasonability. The onus to establish and justify its' claim of adequacy, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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