Income-tax Appeal No. 759 of 2010(O&M) -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No. 759 of 2010(O&M) Date of decision: 3.10.2011 The Commissioner of Income Tax, Rohtak ...Petitioner Versus Gaur Brahmin Vidya Pracharini Sabha, Gaukaran Road, Rohtak ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr. Inderpreet Singh, Advocate **** G.S.SANDHAWALIA, J. Civil Misc. Nos.25090-91-CII of 2010. For the reasons mentioned in the applications, delay in refiling as well in filing the appeal is condoned. The Civil Misc. Applications are allowed. ITA No.759 of 2010 The present appeal is directed against the order dated 11.9.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'B', New Delhi (hereinafter referred to as “the Tribunal”) wherein the ITA No.1905/Del/2009 filed by the respondent was allowed and the Tribunal set aside the order of the Commissioner of Income-tax, Rohtak by which application filed by the respondent under Section 80G(5) (vi) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 13.10.2008 was rejected. The Commissioner of Income, Rohtak while rejecting the said application based its order on the ground that respondent society which is Income-tax Appeal No. 759 of 2010(O&M) -2- **** running five educational institutions, namely, (i) Gaur Brahaman Central School, (ii) Gaur Brahaman Degree College, (iii) All India Gaur Brahaman College of Education, (iv) All India Gaur Brahaman Sanskrit College and (v) Gaur Brahaman Aayurvedic College and was charging fee in the range of ` 36,000/- to ` 1 lac and, therefore, it was not a charitable purpose. The Commissioner of Income Tax has relied upon the table wherein percentage of profit was reflected from 20.44% to 28.49% and came to the conclusion that the respondent was enhancing the earning capacity of the institutions through acquisition of the buildings and fixed assets and not fulfilling any noble objects. On appeal filed by the respondent, the Tribunal has noticed that society was registered way back on March 17,1923 with the Registrar, Joint Stock Companies, Punjab at Lahore for the purpose of spreading education without any distinction of caste and creed by establishing educational institutions. Thereafter, appellant was registered on 29.9.1980 under the Societies Registration Act, 1860. The Tribunal also noticed that vide order dated 27.6.2008, the Commissioner of Income Tax has held that the assessee is entitled for registration under Section 12AA of the Act with effect from 29.9.1980 and has been running educational institutions since then and merely if the surplus arises as a result of charitable activities, it cannot be held that appellant is not a charitable institution. The Tribunal has further held that as per provisions under Section 80G(5) read with Rule 11AA of the Income Tax Rules, 1962 for granting registration, the Commissioner needs to be satisfied that the condition laid down in clause (i) to (v) of sub-sections (5) of section 80G are fulfilled. There is no dispute that the application for approval in Form 10G along with required documents has been filed and as per assessment of the last three years, it was seen that though the assessee derived Income-tax Appeal No. 759 of 2010(O&M) -3- **** income yet such income was held not liable to inclusion in total income as per Sections 11 and 12 of the Act. Reference has also been made to Section 2(15) of the Act to hold that the education is per se charitable purpose irrespective of the fact that for imparting education, the assessee charges fee and there is no condition to hold that to become eligible for charitable purposes in respect of imparting education, the same should be imparted freely or without charging any fee. The Revenue aggrieved against the said order of the Tribunal has in the present appeal framed the following substantial questions of law which in its opinion require adjudication by this Court:- “(i). Whether the Hon'ble Tribunal was justified in law in directing the Commissioner of Income Tax to grant approval u/s 80G(5)(vi) of the Income Tax when incomes derived by the society are includible in its total income and its activities are not genuine as required under Rule 11AA of the Income Tax Rules, 1962? (ii). Whether income derived by a society registered u/s 12AA of the Income Tax Act is not includible in its total income for the purpose of approval u/s 80G(5)(vi) of the Income Tax Act when it regularly charges fee for imparting education in educational institutions and does not show the income therefrom u/s 11 (4A) of the Income Tax Act i.e. income from an incidental business? (iii) Whether the Hon'ble ITAT was justified in law in directing to the CIT to allow approval u/s 80G(5)(vi) of the Income Tax ignoring the findings recorded by the CIT on the basis of the documents called for u/s 11AA of the Income Tax Act that applicant was having incomes of the nature not Income-tax Appeal No. 759 of 2010(O&M) -4- **** specified u/s 11 & thus includible in its total income, maintaining no dissolution clause in Memorandum & Articles of Association attracting clause (ii) of 5 of 80G, keeping cash unauthorisedly in hand for more than normal period of 24 hours & spent money on non-charitable activities? (iv) Whether the Hon'ble ITAT was justified in law in holding without determining the 'property held under trust' in the case of the applicant society that 'income from property held under trust' would be exempted u/s 1 & 12 of the Income Tax Act?” A perusal of the Rule 11AA of the Income Tax Rules, 1962 goes to show that application for approval of any institution under Clause (vi) of sub-section (5) of Section 80G should be in Form 10G and the following documents are necessary as per clause (2) of the said Rule. “(i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C); (ii) Notices 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 (iv) 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 Income-tax Appeal No. 759 of 2010(O&M) -5- **** 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 an application shall be passed without giving the institution or fund an opportunity of being heard. (6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the date on which such application was made. Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.” A perusal of the above goes to show that the discretion of the Commissioner is to consider whether the conditions prescribed above are satisfied from the application. This Court in Sonepat Hindu Educational and Charitable Society Vs. Commissioner of Income Tax and another (2005) 278 ITR 262 (P&H) has held that where the petitioner society has been regularly allowed exemption under Section 80G and especially where it is registered under Section 12A for charitable purposes then the position has to be sustained and not changed in subsequent years without any sufficient proof that the institution is not carrying its activities in furtherance of its object. The relevant observations of the Division Bench in Sonepat Hindu Educational and Charitable Society’s case (supra) are as under:- Income-tax Appeal No. 759 of 2010(O&M) -6- **** “We have no hesitation in holding that the scope of enquiry by the Commissioner, while dealing with the application under Section 80G(5)(vi) of the Act, extends to eligibility to exemption under various provisions of the Act, referred to in that sub- section, but not to actual computation of Income under the Act, particularly when a society or a trust is claiming exemptions under sections 11 and 12 and not under section 10 of the Act. It needs little emphasis that the enquiry for the said purpsoe relates to whether the applicant is registered under section 12A; whether it is a trust wholly for charitable purposes and whether the income received by it is liable to be considered under section 11 of the Act. The enquiry whether at the end of the previous year, the donor will be able to sustain a claim because of non-fulfillment of some conditions by him would depend at the close of the relevant previous year, as it is not possible to predicate these conditions in praesenti when the donation is made.” Whether mere making of profit would be ground to deny registration once the objects of the society are for charitable purpose and especially in the present case where five educational institutions are being run by the respondent which is registered since 29.9.1980 under the Societies Registration Act, 1860, and solely because the respondent was charging fees and was getting surplus would not be a reason to deny registration in view of the binding precedent in Pinegrove International Charitable Trust Vs. Union of India (UOI) and others (2010) 327 ITR 73 (P&H) That in the said case a Division Bench of this Court while examining the provisions of Section 10 (23C) (vi) of the Act and after considering the judgments of Hon’ble Supreme Court Court in CIT (Addl.) Income-tax Appeal No. 759 of 2010(O&M) -7- **** v. Surat Art Silk Cloth Manufacturers Association, [1980] 121 ITR 1 (SC) and Aditanar Educational Institution v.Additional Commissioner of Income-tax, [1997] 224 ITR 310 has held that merely if an institution is making a profit it would not render itself ineligible for registration under the provisions of Section 10 (23C) (vi) of the Act. The said principle can also be fully applied to the facts and circumstances of the present case. Merely, because there are some surplus with the respondent, this should not be a ground to deny the registration under Section 80G (5)(vi) of the Act. Even otherwise Proviso 2 of (15) of the Act also mentions that assessee should not carry activities in the name of trade, commerce and business. Since as a matter of fact, the Tribunal has found that the conditions laid down Rule 11AA of the Income Tax Rules, 1962 have also been complied with in the present case and held that the Trust is eligible for registration under Section 80G(5)(vi) of the Act, therefore, no substantial question of law as contended in the present appeal arises for determination by this Court. Order dated 11.9.2009 whereby the Tribunal held that assessee trust is eligible for registration is upheld. Accordingly, the present appeal is dismissed. (G.S.SANDHAWALIA) Judge October 03, 2011 (HEMANT GUPTA) Pka Judge