2010 (12) TMI 628 - HC - Income Tax

Court affirms approval for charitable activities, income exemption under Section 11(1)(a)

The Commissioner of Income Tax. Versus Sir Chhotu Ram Memorial Society.

The High Court dismissed the appeal, affirming the Tribunal's decision to grant approval under Section 80G(5)(vi) to the assessee based on the charitable ... Exemption u/s 80G(5)(vi) - Extension of registration u/s 80G - The assessee is submitted that assessee society was engaged in business and received income from property as also from publication of books and its income was not from property held under trust wholly for charitable or religious purposes - This submission cannot be accepted - Tribunal that mere fact that the assessee owned property and received rent thereof, was not enough to hold that the assessee was not carrying on charitable activities - The income received was for the objects of the trust and the amount realised from publication was nominal, as against the expenditure incurred on charitable activities - The said finding is not shown in any manner to be perverse - No substantial question of law arises - The appeal is dismissed. Issues:1. Interpretation of Section 80G(5)(vi) of the Income Tax Act for approval of exemption.2. Eligibility of a society for exemption under Section 11(1)(a) of the Income Tax Act.3. Compliance with conditions for approval under Section 80G(5)(vi) regarding services rendered.Analysis:Issue 1: The appeal was filed by the revenue under Section 260-A of the Income Tax Act, challenging the order of the Income Tax Appellate Tribunal regarding the approval under Section 80G(5)(vi). The Tribunal directed the Commissioner of Income Tax to grant renewal of approval under Section 80G(5)(vi) despite the conditions not being fulfilled by the applicant. The High Court examined the denial of approval by the CIT based on the business activities of the assessee, including letting out properties and publication. The Court held that income derived from property held under trust for charitable purposes, even if derived from letting out properties, could still be exempt under Section 11(1)(a) of the Act.Issue 2: The Court further analyzed the activities of the assessee related to donations, scholarships, and other charitable expenditures. It was noted that the assessee had been granted registration in earlier years for similar activities. The Court emphasized that the primary consideration for registration under Section 80G is whether the objects of the trust are charitable. Since the assessee's activities were found to be charitable and in line with previous registrations, there was no valid reason to deny the benefit of Section 80G to the assessee.Issue 3: The revenue argued that the society was engaged in business activities and did not qualify for exemption under Section 11(1)(a) as its income was not solely from property held under trust for charitable purposes. However, the Court rejected this argument, stating that the income received was for the trust's charitable objects, and the revenue generated from publication was nominal compared to the charitable expenditures. The Court upheld the Tribunal's finding that owning property and receiving rent did not disqualify the assessee from engaging in charitable activities, and no substantial question of law arose in this regard.In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to grant approval under Section 80G(5)(vi) to the assessee based on the charitable nature of its activities, despite the revenue's contentions regarding the income sources and compliance with conditions for approval.