Case Law Details

Case Name : M. J. Education Trust Vs. DIT (Exemptions) (ITAT Bangalore)
Appeal Number : Appeal No: ITA No. 890/Bang/2009
Date of Judgement/Order : 30/04/2010
Related Assessment Year :
Courts : All ITAT (5374) ITAT Bangalore (264)


M. J. Education Trust Vs. DIT (Exemptions),

APPEAL NO: ITA No. 890/Bang/2009,

DECIDED ON April 30, 2010


Per A. Mohan Alankamony, Accountant Member

This appeal is filed by the assessee against the order of DIT(Exemptions), Bangalore dated 03.07.2009 rejecting renewal of recognition u/s. 80G of the Income-tax Act, 1961.

2. The following effective grounds are raised in this appeal:

“I. On the facts and circumstances of” the case, the learned Director of Income-tax(E) erred in passing the order in the manner he did.

2. The Director of income -tax(E) ought to have appreciated that the Appellant institution is a charitable institution though running a institute and that the Appellant had satisfied the conditions required and ought to have renewed the recognition u/s. 80G of the Act.

3. The Director of Income-tax(E) ought to have appreciated that the Appellant had not violated any of the conditions laid down in Sec.80G(5)(i) to (v) of the Act and ought to have renewed the recognition as prayed for.

4. Without prejudice the non-availability of vouchers for certain expenditure having not been put to the Appellant for explanation, no adverse inference could be drawn more so to deny a valid claim for renewal of recognition u/s. 80G of the Act.

5. Without prejudice the Director of Income-tax(E) having found no defect from the books of accounts, ought to have granted the renewal of recognition u/s. 80G of the Act.”

3. The assessee trust is engaged in running an educational institution known as Silicon City College. An application for renewal of recognition u/s. 80G was filed on 10.12.2008. In order to verify the activities of the trust for charitable purpose and eligibility in terms of section 80G(5), DIT(E) called for certain details from the assessee. On verification of the relevant documents, books of accounts and receipts/payment vouchers, of the college and the trust. Id. DIT(E) noticed that certain vouchers for expenditure incurred were missing. For example, expenses debited under the head “computers” was Rs.87,000 in the books of the trust, whereas bills were produced only to the extent of Rs.45,931. Further on advertisement expenses of Rs.2,85,681/- incurred by Silicon City College, no vouchers were produced by the college. The Id. DIT(E) observed from the above, that the applicant does not meet the conditions laid down u/s. 80G(5)(i) to (iv) of the Act and by relying on the decisions of Karnataka High Court in the cases reported at 267 ITR 549 and 259 ITR 59, rejected the application for renewal of recognition u/s. 80G of the Act.

4. Aggrieved, the assessee trust is in appeal before the Tribunal. The Id. AR submitted that the trust’s main objects are only related to education i.e., spreading and promotion of educational institutions, colleges, deemed universities, hospitals, yoga, personality development, sports and educational activity, relief to the poor and destitutes, to conduct research in the areas of education, medicine, technology including biotechnology etc., and also to pursue any other objects of general public enlightenment/ utility in a wide sense. The trust had also complied with all the conditions laid down in the Act in order to enjoy 80G benefits. Ld. AR further submitted that the DIT (E)’s rejection for grating registration u/s. 80G of the Act only on the ground that, few bills relating to computer expenditure were missing and no vouchers were received by the trust from the college for payment of Rs. 2,85,000 towards advertisement charges met by the college will not amount to violations of section 80G(i) to (v) of the Act. It was prayed that DIT (E) may be directed to grant exemption u/s. 80G of the Act for the smooth functioning of the college/trust.

5. The Id. DR supported the order of the Id. DIT (E). Ld. DR pointed out that the trust had incurred expenditure for which proper vouchers were not produced for verification and therefore there could be misapplication of funds. Section 80G(5)(iv) clearly specifies that the institution or fund should maintain regular accounts of its receipts and expenditure. Ld. DR contended that the trust has violated these provisions and therefore not entitled to recognition u/s. 80G(5)(vi) of the Act.

6. We have heard the rival submissions and carefully perused the materials on record, the paper book submitted by the assessee containing 1 to 47 pages and the relevant case laws cited. The only grievance of the Revenue was that the assessee trust was able to produce vouchers to the extent of Rs.45,931 out of the total expenditure of Rs.87.000 being amount spent under the head ‘computers”, and, vouchers were also not available for Rs.2,85,681/- being the amount spent on advertisement by Silicon City College, a college under the management of the trust.

7. For granting recognition u/s. 80G(5)(vi) of the Act, the trust has to satisfy that, it is established in India for a charitable purpose and the provisions of section 80G(5)(i) to (vi) are to be additionally fulfilled. If on inquiry, it is established that the activities of the trust are not confined and limited to the objects of the trust and has violated provisions of 80G(5)(i) to (vi) of the Act, the renewal of recognition u/s. 80G can be denied. However, in the case on hand, Revenue has not established that the trust has deviated from the objects of the trust. Only certain minor irregularities of non-production of vouchers for few expenditure incurred by the trust have been pointed out by the Revenue.

8. On perusing the balance sheet, income & expenditure account and receipts & payment account submitted by the assessee trust, it is evident that the trust had not generated any income. The trust had received loans predominantly from its trustees and to a smaller extent from others. The opening cash and bank balance of the trust was also loan received by the trust from its trustees during the earlier year. Further there is nothing on record to show any malafide intentions on the part of the trustees. The absence of few vouchers will not change the basic characteristic of the trust or could it be inferred that the trust has deviated from its activities, which are not charitable in nature. There is no necessity for the trustees, on one hand to extend voluminous loans and on the other to siphon out funds to this meager extent.

9. Section 80G(5)(iv) do specify that the institution or fund has to maintain regular accounts of its expenditure. Accordingly the trust has maintained proper books of accounts and maintained records which are very much evident from the audit report and the certified copy of the balance sheet, income & expenditure account, receipt & payment account issued by the Chartered Accountant of the trust (pages nos. 21 to 29 of the paper book). It is also pertinent to note that the trust had been enjoying recognition u/s. 80G(5)(vi) of the Act since 20.12.2005, after being granted recognition u/s. 12AA(1)(b)(i) of the Act w.e.f. 14.1.2005.

10. Considering all these facts and circumstances of the case, we are of the opinion that the assessee trust deserve to be granted renewal, of recognition under section 80G(5)of the Act. It is ordered accordingly.

11 In the result, the appeal of the assessee is allowed. Pronounced in the open court on this 30th day of April, 2010.

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