Veera Devi Ramchandra Vs ITO Exemption (ITAT Jodhpur)
Summary: The Jodhpur Bench of the Income Tax Appellate Tribunal considered two appeals filed by Veera Devi Ramchandra Jhanwar Charitable Trust against separate orders of the Commissioner of Income-tax (Exemption), Jaipur, rejecting its applications for registration under section 12AB and approval under section 80G(5) of the Income-tax Act, 1961. Both appeals arose from the same facts and were disposed of through a consolidated order.
The assessee is a public charitable trust constituted through a Trust Deed dated 11.11.2011 and registered with the Sub-Registrar, Nokha. It had earlier obtained registration under section 12AA by order dated 22.02.2012 with effect from 11.11.2011. Its principal charitable activity is running “Veera Seva Sadan Dharamshala” at P.B.M. Hospital, Bikaner, primarily to provide accommodation and allied facilities to poor and needy patients undergoing treatment at the hospital and their attendants. The Dharamshala operates on a “No Profit No Loss” basis and collects only subsidised room/user charges from beneficiaries.
During proceedings on the applications, the CIT(E) required the assessee to furnish registration under the Rajasthan Public Trust Act, 1959 (“RPT Act”) or establish that it was exempt from such registration. The assessee relied specifically on section 77(1) of the RPT Act, contending that the statutory exemption applied because of the manner in which the Dharamshala was administered and controlled by Government authorities. The CIT(E), however, rejected the applications, noting, among other things, that the trust collected room-rent/user charges, did not receive Government grants, had private trustees and was not registered under the RPT Act. The rejection of the section 80G application followed substantially from the same premise.
Before the Tribunal, the assessee submitted that the Dharamshala was not an independent private establishment but had been established and operated pursuant to an MOU dated 28.12.2011 with S.P. Medical College, Bikaner, a State Government institution. The MOU provided for a Management Committee having substantial Government representation, headed by the Principal of S.P. Medical College/P.B.M. Hospital and including representatives of the District Collector, Government/local authority officials and the assessee-trust. The assessee also relied upon Government supervision, monitoring and inspection and contended that it had no unfettered discretion regarding room rent or user charges.
The Tribunal identified the core issue as whether the absence of RPT Act registration could constitute non-compliance with another law for purposes of sections 12AB and 80G without first deciding whether the RPT Act applied to the assessee at all. The Tribunal observed that an enquiry into compliance with another enactment necessarily presupposes that the enactment is applicable to the particular trust.
The Tribunal considered section 77(1) of the RPT Act significant because it provides that the Act does not apply to a public trust administered by an agency acting under the control of the State Government or by any local authority. Therefore, after the assessee specifically invoked section 77(1) and produced the MOU, Management Committee constitution and material concerning Government supervision, the CIT(E) was required first to determine whether the trust’s administration fell within the statutory expression “administered by any agency acting under the control of the State Government.”
The Tribunal held that the considerations adopted in the impugned orders did not answer that statutory test. Receipt of Government grants was not the test contemplated by section 77(1), while the fact that trustees were private persons was not conclusive. Likewise, collection of subsidised room rent or user charges could not determine the question of Government control. What mattered was the actual legal and administrative mechanism governing the activity and the nature and extent of Government control.
The Tribunal found that the material prima facie showed substantial Government involvement: the facility operated with a Government medical institution; its Management Committee was headed by the Principal of S.P. Medical College/P.B.M. Hospital; Government officials were represented; important administrative and financial matters were subject to the supervisory mechanism; and the Dharamshala served patients and attendants of the Government hospital on a “No Profit No Loss” basis.
The Tribunal also noted that there was no categorical finding that the assessee’s objects were non-charitable or that its activities were non-genuine. Providing subsidised accommodation and facilities to patients and attendants in the precincts of a Government hospital had an evident nexus with relief to the poor and medical relief. Mere recovery of regulated or subsidised charges to sustain such a facility, particularly where it was required to operate on a no-profit-no-loss basis, could not by itself destroy its charitable character.
The assessee relied upon the Rajasthan High Court decision in Deewan Singh & Ors. v. State of Rajasthan & Ors., AIR 1997 Raj 129, in support of its contention concerning the statutory exclusion under section 77. The Tribunal accepted that registration under the RPT Act could not be insisted upon without first examining whether the assessee fell within the exclusion under section 77(1).
Accordingly, in ITA No. 867/Jodh/2026 concerning section 12AB registration, the Tribunal did not sustain the rejection merely for want of RPT Act registration. It restored the limited issue to the CIT(E) for examination with reference to the MOU dated 28.12.2011, constitution and functioning of the Management Committee, relevant Government orders, monitoring/inspection records and other material. If the assessee was found covered by section 77(1), RPT Act registration was not to be insisted upon as a condition for section 12AB registration, after which the application was to be decided in accordance with law.
For ITA No. 868/Jodh/2026 concerning section 80G(5), the Tribunal held that the rejection was intrinsically connected with the section 12AB rejection and proceeded substantially on the same RPT Act premise. The order was therefore also set aside and the application restored for fresh consideration on its own statutory parameters after adjudication of the section 12AB issue. The assessee was to receive due and effective opportunity of hearing in both proceedings.
The Tribunal clarified that the remand did not authorise a roving enquiry into matters that had not been found adverse to the assessee. The specific issue was the alleged non-registration under the RPT Act and the assessee’s claim of statutory exclusion under section 77(1). Both appeals were consequently allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. The aforesaid appeals have been filed by the assessee, Veera Devi Ramchandra Jhanwar Charitable Trust, against the separate impugned orders passed by the learned Commissioner of Income-tax (Exemption), Jaipur [“Ld. CIT(E)”], whereby the assessee’s applications seeking registration under section 12AB and approval under section 80G(5) of the Income-tax Act, 1961 have been rejected. Since both the appeals arise from the same set of facts and the fate of the application under section 80G is substantially connected with the application under section 12AB, both the appeals were heard together and are being disposed of by this consolidated order.
2. The brief facts are that the assessee is a public charitable trust constituted vide Trust Deed dated 11.11.2011 and registered with the Sub-Registrar, Nokha. It was earlier granted registration under section 12AA vide order dated 22.02.2012 with effect from 11.11.2011. The principal charitable activity of the assessee is running of “Veera Seva Sadan Dharamshala” at P.B.M. Hospital, Bikaner, primarily for providing accommodation and allied facilities to poor and needy patients undergoing treatment in the hospital and their attendants. The Dharamshala is stated to be operated on a “No Profit No Loss” basis and only subsidised room/user charges, as approved under the governing administrative arrangement, are collected from the beneficiaries.
3. The assessee had filed applications for registration under section 12AB and approval under section 80G(5). During the course of proceedings, the Ld. CIT(E) required the assessee to furnish registration under the Rajasthan Public Trust Act, 1959 (“RPT Act”) or establish that it was exempt from such registration. The assessee specifically pleaded that, having regard to the manner in which the Dharamshala is administered and controlled by the Government authorities, its case falls within the statutory exemption contained in section 77(1) of the RPT Act. However, the Ld. CIT(E) rejected the applications, inter alia, observing that the assessee was earning room-rent/user charges, was not receiving Government grants, its trustees were private persons and it had not obtained registration under the RPT Act. Consequently, the assessee’s claim for approval under section 80G was also rejected.
4. Before us, the learned counsel submitted that the entire approach of the Ld. CIT(E) proceeds on an erroneous understanding of section 77(1) of the RPT Act. He submitted that the assessee does not operate the Dharamshala as an independent private establishment. The Dharamshala has been established and is being operated pursuant to an MOU dated 28.12.2011 entered into with S.P. Medical College, Bikaner, a State Government institution. Our attention was drawn to the MOU and, in particular, to the constitution of the Management Committee and the administrative framework governing the Dharamshala.
5. From the material placed before us, it is seen that the Management Committee contemplated under the MOU has substantial representation of Government authorities. The Committee is headed by the Principal of S.P. Medical College/P.B.M. Hospital and includes representatives of the District Collector, Bikaner, concerned Government/local authority officials and representatives of the assessee-trust. Important matters concerning administration, construction, finances and functioning of the Dharamshala are governed by the said framework. The MOU further stipulates that the Dharamshala is to be operated for public welfare on a “No Profit No Loss” basis.
6. It was further submitted that the functioning of the Dharamshala is monitored and inspected by the concerned Government authorities/Rajasthan Medicare Relief Society and that the assessee does not possess any unfettered discretion in determining the room rent or user charges. According to the learned counsel, subsidised charges recovered from patients and their attendants are merely incidental to the operation and maintenance of the facility and cannot either negate its charitable character or establish absence of Government control. It was further contended that neither receipt of Government grants nor Government ownership of the trust is a condition prescribed under section 77(1).
7. We have heard the parties and perused the material placed on record. The core issue requiring adjudication is whether the absence of registration under the RPT Act could, in the peculiar facts of the present case, have been treated as sufficient non-compliance of another law for rejecting the assessee’s applications under sections 12AB and 80G, without first examining its specific plea that the RPT Act itself does not apply to it by virtue of the statutory exclusion contained in section 77(1).
8. Section 12AB permits examination of compliance with requirements of any other law for the time being in force which are material for achieving the objects of the trust or institution. Likewise, while considering approval under section 80G, the competent authority is required to examine the statutory conditions prescribed thereunder, including genuineness of activities and compliance with applicable law material for achieving its objects. (Income Tax India) However, such an enquiry necessarily presupposes that the requirement under the other enactment is applicable to the particular trust. A registration under another enactment cannot be insisted upon without first determining whether that enactment, by its own terms, applies to the applicant.
9. In this background, section 77(1) of the Rajasthan Public Trust Act assumes significance. It provides that nothing contained in the said Act shall apply to a public trust administered by any agency acting under the control of the State Government or by any local authority. Thus, once the assessee had specifically invoked section 77(1) and had placed material in the form of the MOU, constitution of the Management Committee and documents concerning Government supervision and monitoring, the first question which the Ld. CIT(E) was required to address was whether the assessee’s administration falls within the statutory expression “administered by any agency acting under the control of the State Government.” Unless this question was determined against the assessee, mere absence of registration under the RPT Act could not ipso facto be treated as non-compliance with law.
10. In our opinion, the considerations adopted in the impugned orders do not answer this statutory test. Whether the assessee receives Government grants is not the test contemplated under section 77(1). Likewise, the fact that the trustees are private persons cannot by itself be conclusive. What is material is the actual legal and administrative mechanism governing the activity and the nature and extent of governmental control over its administration. Equally, collection of subsidised room rent or user charges cannot determine this question. Source of receipts and administrative control operate in altogether different spheres.
11. In the present case, the material placed before us prima facie shows substantial governmental involvement in the functioning of the Dharamshala. The facility operates in conjunction with a Government medical institution; the Management Committee is headed by the Principal of S.P. Medical College/P.B.M. Hospital; Government officials are represented therein; important administrative and financial matters are governed by the prescribed supervisory mechanism; and the Dharamshala exists primarily to provide accommodation and allied facilities to patients undergoing treatment at the Government hospital and their attendants. The MOU also specifically contemplates its functioning on a “No Profit No Loss” basis. These are material circumstances which could not have been brushed aside merely on the ground that the assessee does not receive Government grants.
12. There is another significant aspect. There is no categorical finding in the impugned orders that the objects of the assessee are non-charitable or that the activities actually carried on by it are non-genuine. The activity of providing subsidised accommodation and facilities to patients and their attendants in the precincts of a Government hospital has an evident nexus with relief to the poor and medical relief. Mere recovery of regulated or subsidised charges for sustaining such facility, particularly when it is required to operate on a no-profit-no-loss basis, cannot, without anything more, denude the activity of its charitable character.
13. The learned counsel has also relied upon the judgment of the Hon’ble Rajasthan High Court in Deewan Singh & Ors. v. State of Rajasthan & Ors., AIR 1997 Raj 129, in support of the contention that the registration provisions of the RPT Act cannot be considered de hors the statutory exclusion contained in section 77. Thus, the obligation to obtain registration under the RPT Act cannot be assumed without first examining whether the assessee falls within the exclusion contemplated under section 77(1).
14. The fundamental infirmity in the impugned orders, therefore, lies in the very sequence of the statutory enquiry. The Ld. CIT(E) has proceeded from the absence of RPT registration to infer non-compliance, whereas the anterior question was whether such registration was legally required at all. Where applicability of an enactment itself is excluded upon satisfaction of a statutory condition, absence of registration under that enactment cannot become a ground for rejection unless the claim of such statutory exclusion is first examined and negatived on facts and in law.
15. Insofar as ITA No. 867/Jodh/2026 relating to registration under section 12AB is concerned, we are therefore unable to sustain the rejection merely for want of registration under the Rajasthan Public Trust Act. At the same time, since applicability of section 77(1) depends upon the precise administrative and controlling mechanism and the relevant contemporaneous records, we deem it appropriate to restore this limited aspect to the file of the Ld. CIT(E). He shall examine the assessee’s claim under section 77(1) with reference to the MOU dated 28.12.2011, constitution and functioning of the Management Committee, relevant Government orders, monitoring/inspection records and such other material as may be placed before him. If the assessee is found to be covered by section 77(1), registration under the RPT Act shall not be insisted upon as a condition for registration under section 12AB, and the application shall thereafter be decided in accordance with law keeping in view our observations hereinabove.
16. Coming to ITA No. 868/Jodh/2026 relating to approval under section 80G(5), the rejection thereof is intrinsically connected with the rejection of registration under section 12AB and proceeds substantially on the same premise of alleged non-compliance with the RPT Act. Section 80G contains its own statutory conditions governing approval of charitable institutions, and the application is required to be considered on those parameters. (Income Tax India) Once the very foundation regarding alleged non-compliance with the RPT Act requires reconsideration in the light of section 77(1), the order rejecting approval under section 80G cannot independently survive on that premise.
17. Accordingly, the impugned order in ITA No. 868/Jodh/2026 is also set aside and the application for approval under section 80G is restored to the file of the Ld. CIT(E). After adjudicating the assessee’s claim under section 12AB in terms of our directions above, the Ld. CIT(E) shall consider the application under section 80G afresh on its own statutory parameters. If the conditions prescribed under section 80G stand fulfilled, approval shall be granted in accordance with law. Needless to say, the assessee shall be afforded due and effective opportunity of hearing in both the proceedings.
18. We may clarify that the restoration should not be understood as permitting a roving enquiry into matters which were never found adverse to the assessee. The principal issue which led to rejection is the alleged non-registration under the Rajasthan Public Trust Act and the assessee’s specific claim of statutory exclusion under section 77(1). That claim has to be examined in its correct statutory perspective and on the basis of the actual administrative framework rather than on considerations such as absence of Government grants or mere presence of private trustees, which are not determinative of the statutory test.
19. Accordingly, the impugned orders in ITA Nos. 867 & 868/Jodh/2026 are set aside and both the applications are restored to the file of the Ld. CIT(E) for fresh adjudication in terms of our directions hereinabove.
20. In the result, ITA No. 867/Jodh/2026 and ITA No. 868/Jodh/2026 are allowed for statistical purposes.
Order pronounced in the open court on 13/08/2026.
