If assessee had claimed certain depreciation to which it was not entitled, recognition under section 80G cannot be denied
CASE LAWS DETAILS
DECIDED BY: ITAT, Delhi Bench `G’, Delhi, IN THE CASE OF: Shri Lalita Ashram Trust v. CIT, APPEAL NO: ITA No. 4440 (Del) of 2009, DECIDED ON April 30, 2010
5. We have heard both the parties and gone through the material available on record. There is no dispute that the trust has been granted registration under section 12-A since its inception and had been enjoying the benefit of registration section 80-G upto 31st March, 2009. Under section 80-G of the Act, a deduction is allowed to an assessee while computing his total income in respect of donations referred to in sub section (2) of section 80-G. Clause (iv) of clause (a) of sub section (2) of section 80-G talks about the donations to any institution or college, which is established in India for a charitable purpose and fulfills the conditions specified in sub section (5) of section 80-G of the Act, namely, (i) where the institution for fund derives any income, such income would not be liable to be inclusion in his total income under provisions of section 11 and 12 or clause 23-AA or clause 23-C of section 10 subject to conditions specified in proviso to this clause; (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; and (v) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules made in this behalf.
5.1 Sub section 5B contains non-obstante clause, according to which where an institution or fund incurs expenditure during any previous year which is of a religious nature for an amount not exceeding 5 per cent of its total income in that previous year shall be deemed to be an institution or fund to which the provisions of this section shall apply. It means where the asscssee incurs any expenditure exceeding 5 per cent of its total income on religious purposes, the benefit of section 80-G will not be available. Explanation- 3 to section 80-G defines the scope of charitable purpose and means that charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. Therefore, where the expenditure has been incurred by the assessee for religious purposes either under clause (ii) of sub-section (5) or under Explanation 3 any of the purpose the whole or substantially, the whole of it of which is of a religious nature, the trust or institution will not qualify for recognition under section 80G of the Act. Therefore, under sub section (5) if the expenditure incurred on a religious nature is less than 5 per cent, the benefit of section 80G will be available to the assessee. In the instant case, the income received from Gaushala is at Rs.22,30,771/-. The assessee had received income by way of interest at Rs.26,38,214/-. Thus, the total income of the assessee during the year was at Rs.48,68,989/-. The assessee has incurred expenditure of Rs.2,40,167/- on Mandir Pooja, the expenditure of religious nature is thus 4.93 per cent, which is less than 5 per cent. Therefore, the contention of the Id. Commissioner that the assessee has incurred more than 5 per cent expenditure of religious nature is not correct. It appears he has taken the net income from Gaushala at Rs. 12,79,269/- and interest income of Rs.26,38,218/- for the purpose of computation of expenditure incurred on Mandir Pooja. Therefore, the benefit of section 80-G of the Act cannot be denied on this ground.
6. As regards the other issues, that the assessee had claimed double deduction in respect of same assets or the income had not been applied to the extent of 85 per cent of the income for the objects of the trust would not be relevant at the time of granting of registration or renewal of registration under section 80-G of the Act. Hon’ble Punjab & Haryana High Court in the case of Sonepat Hindu Educational & Charitable Society (supra) has held that in construing the purpose of a trust for the purposes of approval under section 80-G of the I. T. Act, 1961 it is important to find out the real purpose of establishing the trust rather than just relying on the objects, memorandum and articles or the trust deed of the Trust. If the commissioner is satisfied that the objects of the trust are charitable, approval should not be denied on mere technicalities. Registration of an institution under section 12-A of the Act is sufficient to of its being established for charitable purposes. In the instant case the objects of the trust are charitable in nature and accordingly the Id. Commissioner was not justified on denying the continuation of registration under section 80-G when the assessee had enjoyed such benefit for last 25 years.
7. Hon’ble Gujarat High Court in the case of N. N. Desai Charitable Trust (supra) has held that the Id. Commissioner of Income-tax cannot act as assessing officer. The enquiry should be confined to find out if the institution satisfies the prescribed conditions. The actual assessment of the institution would not affect the claim for registration under section 80-G of the Act. Likewise, ITAT, Lucknow Bench in the case of Kalyanam Karoti has held that neither in the main sub section (5) nor Rules made thereunder, there is any provision to refuse recognition or continuation thereof only on the ground that particulars donors are not provided by the institution for fund, non-availability of particulars may empower the AO to invoke section 115-BBC read with section 13(7) which are affective from 1/04/2007 while making the assessment of the society. But so far as the recognition under section 80-G(5) is concerned, they have no role to play.
8. If the facts of the case are tested on the ratio of aforesaid decisions, in our considered opinion, the Id. Commissioner cannot deny renewal of registration on the ground that the assessee had claimed double deduction in respect of depreciation as well as capital expenditure i or had not applied the requisite income for the objects. If the assessee had claimed certain depreciation to which it was not entitled the recognition under section 80-G cannot be denied. As regards the maintenance of locker, the Id. Commissioner has not brought any material on record that any undisclosed income of the trust was kept in such lockers. The lockers may be necessary for keeping the valuables of the trust. It does not mean that the locker was maintained for the purpose of keeping un-accounted income of the trust. The presumption on the part of the Id. CIT, in our considered opinion, is without any basis. In view of the above discussion, we are of the considered opinion that the Id. Commissioner was not justified in refusing the continuation of registration under section 80-G of the Act. The objects of the trust are charitable in nature. The activities of the trust are also charitable in character. The trust has been registered under section 12-A of the Act for last 25 years. Therefore, continuation of registration has not been rightly refused by the Id. CIT. We accordingly are of the view that registration under section 80-G of the Act should be allowed to assessee. We, therefore, set aside the order of the Id. Commissioner of Income-tax refusing the registration and direct the Id. Commissioner to allow the registration under section 80-G of the Act for the period applied by the assessee.