9911796707
TMI Blog2025 (1) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust Deed, the objects of the petitioner-Trust are as under:- "4. The objects of the Trust are affording medical relief, and encouraging medical research and for that purpose:- i) to assist, contribute and augment the development and maintenance of the Post Graduate Institute of Medical Education and Research, Chandigarh, grant research stipends, scholarship or provide help to deserving faculty members, trainees and/or patients therein; ii) to maintain, establish, finance, subsidise, exclusively or partly, or give grants-in-aid, recurring or otherwise for the maintenance of hospitals, clinics, dispensaries, nursery schools or other establishments of like nature; and iii) to assist, subsidise, contribute foreign travel in furtherance of or advance of medical sciences (research) in all its branches; Provided that the funds made available to the said Postgraduate Institute or any other society may be subject to such conditions as to accounting or for being spent on specified objects as the Trustees may from time to time think fit to impose. Provided, however, that any contribution by the Trustees to any other Trust, society, institutions, fund, scheme, or project, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether with statements of accounts of receipts and expenditure." Further, while endorsing copy of the certificate dated 19/21.05.1997 (Annexure P-2), to the Income-tax Officer, Ward-10, Chandigarh, it was mentioned as under:- "2. The Income-tax Officer, Ward-10, Chandigarh. He should verify and satisfy himself with the annual statements which will be submitted by the applicant that it continues to fulfill the conditions of section 80-G and, instructions issued by the Board from time to time." 4. While considering the application for renewal of exemption under Section 80G of the 1961 Act and the income tax returns for the Assessment Year 1996-97, the Commissioner of Income-tax, Chandigarh (respondent No. 1 in CWP-350-2000) issued a show cause notice dated 17.02.1999 (Annexure P-21), to the petitioner-Trust, inter alia, mentioning therein that it was noticed that the petitioner-Trust was not working for the objects for which it was created, as a hospital was being run on the 4th floor of SCO 52-54, Sector 17, Chandigarh and on the first floor of the said building an organisation by the name of 'Chandigarh Medical Center' was being run, wherein a large number of doctors were carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing all the facilities, the petitioner-Trust suffer loss, which is met from the income from other sources. Besides this, the petitioner-Trust engage the services of Junior Doctors, two Specialist of Medical and Radiology, nurses and other staff for running its center. Further, it was submitted that the petitioner-Trust approached the PGI for establishing the Center for Tropical Medicines and Communicable Diseases and for this purpose proposed to provide a sum of Rs. 50,00,000/- per annum to the PGI. This proposal was under consideration of the PGI and Ministry of Health, Government of India. So far as giving of donation to Sardarni Uttam Kaur Education Society, Village and Post Office Sarai Naga, Faridkot, it was explained that the said organization is duly registered and recognized by the Income-tax Department under Section 12A and it has also been granted certificate under Section 80G of the 1961 Act. The donation was given to it for the purpose of setting up an Educational Institution, which is covered under Clause 4(ii) of the Objects of the petitioner-Trust. Thus, it was requested by the petitioner-Trust not to take any action for cancellation of registration under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the applicant Trust has not done anything towards achieving the objects of the Trust i.e. it has neither afforded medical relief nor it has encouraged medical research in any manner. The renewal for exemption u/s 80G is given for the future, i.e. for the period yet to come and that is to enable the Institution/Trust to carry on with the activities. From the evidence on the record, it has been established that the applicant in the previous years has not devoted itself either for charitable work or for the furtherance of the objects of the trust. In fact, the income of the Trust was subjected to tax for the year 1996-97. Since the trust has not applied itself for furtherance of objects in earlier years and keeping this in view, the continuation of approval of exemption u/s 80G is denied and the application of the applicant is, therefore, rejected." 8. By filing a written statement, respondents defended the impugned order dated 24.09.1999 (Annexure P-8), asserting that predominate objects of the petitioner-Trust was to earn profit and it has not done anything charitable in nature. The impugned order has been passed in accordance with law only after issuing show cause notices and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eparate petition i.e. CWP No. 1311 of 2000, the petitioner-Trust has sought quashing of notice dated 31.08.1999 (Annexure P-10), issued by the Income Tax Officer, Ward 2(1), Chandigarh, mentioning that the income chargeable to tax for the assessment year 1995- 96 of the petitioner-Trust has escaped assessment within the meaning of Section 147 of the 1961 Act, therefore, it was proposed to assess/reassess/ re-complete the income/loss/depreciation allowance for the said assessment year. The petitioner-Trust was asked to file a return in the prescribed form, within 30 days from the date of service of said notice. Other than this, the petitioner-Trust also challenged another show cause notice dated 11.01.2000 (Annexure P-13), as to why donation made to Sardarni Uttam Kaur Educational Society by the petitioner-Trust be not disallowed. 10. We have examined the record before us, and also heard the counsel from both the sides. 11. Vide registration Certificate No.Judl/Reg.CR/73-74/6-T/37157, dated 12.02.1976, petitioner - Trust was issued a registration certificate by the Commissioner of Income Tax, Patiala, under Section 12-A(a) of the IT Act. Looking at the object of this Trust, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under one roof; (b) The Trust has given donations to various organizations. 15. While examining both the issues, respondents have discussed the donations of Rs.26,12,500/- and Rs.29,51,871/-, which were given to the institution namely; Sardarni Uttam Kaur Educational Society. In this view, Assessing Officer (A.O.) has noticed that object of the Trust do not permit the trustees to apply the income for donations to other trusts and thus, action of the trustees was held to be illegal. Only on this basis, the Assessing Officer drew its' conclusion that neither any charitable work was done by the Trust nor any medical relief or encroachment of medical research has been provided for the last many years. While saying so, it took note of donations made during the Assessment Year 1992-93 to 1997-98 and found that except two donations for the Assessment Year 1995-96 and 1996-97. In all other areas, the donations are very meager. Thus raised its demand about these two donations only. Probably, while raising suspicion, the Assessing Officer failed in noticing the amount of the cross receipt during these years, which are Rs.3,54,46,069/- and Rs.59,83,090/-, respectively. 16. The gross amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical ground, was found unsustainable. The relevant finding recorded therein is as under:- "16. We are of the opinion that, in view of the fact that the petitioner had enjoyed approval under section 80G of the Act from the year 1991 to March 31, 1999, i.e., even after the amendment of its objects on September 17, 1999, and after the insertion of clause (vi) with effect from October 1, 1991, the Commissioner was not justified in holding that either fresh registration under section 12A(a) of the Act was required or the memorandum should have been amended as per the procedure laid down in section 92 of the Code of Civil Procedure. In Radhasoami Satsang v. Commissioner of Income Tax, (1992) 193 ITR 321 their Lordships of the Supreme Court, inter alia, observed that though strictly speaking, res judicata does not apply to income-tax proceedings, where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be, at all, appropriate to allow the position to be changed in a subsequent year. We feel that these observations are quite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it is stated that the application for claiming exemption under the said provision is also pending for the past few years. 19. For the foregoing reasons, we are of the view that the impugned order of the Commissioner refusing approval to the petitioner-society under section 80G of the Act is founded on irrelevant considerations and, therefore, cannot be sustained. Consequently, we allow the writ petition ; make the rule absolute, quash the impugned order and direct the Commissioner to take a fresh decision on the petitioner's application in accordance with law. There will, however, be no order as to costs." 18. Similarly, Delhi High Court, in the case of Kirti Chand Tarawati Charitable Trust v. Director of Income Tax (Exemptions) and others, (1998) 232 ITR 11, observed as under:- "12. It follows that while dealing with a tax law the realities, and not devices and subterfuges, have to be seen. The vision cannot be permitted to be blurred by the blinkers of colourable devices and dubious methods. 13. Shri C.S. Aggarwal, learned counsel for the petitioner, submitted that for the purpose of determining charitable purpose of the Trust, the respondents should have confine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot even remotely be called charitable, and yet the donations made to the Trust would enjoy exemption. The authority conferred with power to grant exemption is not debarred from finding out the real purpose as distinguished from the ostensible purpose and if it may find that the purpose of the trust was other than charitable then nothing debars the authority from denying the approval. 16. Once a trust has approval from the Commissioner, the trust can persuade the donors into making donations. The donors would be persuaded to make such donations influenced by the approval unmindful of the fact that their donations were going to be utilised for religious purpose as distinguished from charitable purpose- the distinction which the Parliament has chosen to keep in view while framing Section 80G. Purpose of establishment- the real purpose as distinguished from the ostensible purpose- is germane to the enquiry which the Commissioner has to hold while granting approval under Section 80G(5)(vi). We are not prepared to place any such interpretation on the language implied in Section 80G so as to uphold an obligation on the part of the Commissioner to grant an approval to a trust merely by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enth Schedule, the states have undoubted power to enact on the subject of charities: "28. Charities and charitable institutions, charitable and religious endowments and religious institutions." The A.P. Charities Act provides a statutory regulatory framework in regard to activities of charitable institutions in the state. Sections 72-74 deal with surplus funds and their treatment; Sections 75-77 deal with properties of trusts and charitable institutions and restrictions on transfers. These and other provisions enable the State, which is concerned in the proper administration of such organizations, to ensure that they are managed efficiently without misfeasance. They also contain provisions to protect the interests of trusts, especially funds and properties. 70. In view of the above discussion, it is held that charitable institutions and societies, which may be regulated by other state laws, have to comply with them-just as in the case of laws regulating education (at all levels). Compliance with or registration under those laws, are also a relevant consideration which can legitimately weigh with the Commissioner or other concerned authority, while deciding applications for ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or `incidental' to the imparting education. Such income can properly fall under the other heads of income. 74. In R.R.M Educational Society's appeal before this court, the charitable status of the appellant within Section 10(23C) was denied inter alia on the ground that the institution was not merely imparting education but also was running hostels. It is clarified that providing hostel facilities to pupils would be an activity incidental to imparting education. It is unclear from the record whether R.R.M Educational Society was providing hostel facility only to its students or to others as well. If the institution provided hostel and allied facilities (such as catering etc.) only to its students, that activity would clearly be `incidental' to the objective of imparting education. 75. The last ground urged was with respect to the refusal by the Commissioner to register certain institutions who had amended their objectives. This court is of the opinion that the impugned judgment cannot be faulted with in rejecting the challenge by the appellant societies and trusts, because the requirement of trust or societies applying for registration or approval under the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The observations made in American Hotel (supra) suggest that the Commissioner could not call for the records and that the examination of such accounts would be at the stage of assessment. Whilst that reasoning undoubtedly applies to newly set up charities, trusts etc. the proviso under Section 10(23C) is not confined to newly set up trusts - it also applies to existing ones. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. g. It is held that wherever registration of trust or charities is obligatory under state or local laws, the concerned trust, society, other institution etc. seeking approval under Section 10(23C) should also comply with provisions of such state laws. This would enable the Commissioner or concerned authority to ascertain the genuineness of the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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