2012 (8) TMI 553

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....order of the Director of Income-tax(Exemption) is bad in law and facts of the case. 1. The action of the Director of Income-tax(Exemption) is arbitrary in refusing to grant exemption u/s. 80G, without appreciating the activities of the Peetham properly. 2. Your appellant, therefore prays for granting exemption u/s. 80G as claimed." 3. During the course of the proceedings before us, learned counsel for the assessee, Shri S.Rama Rao read out the contents of the impugned order dated 25.2.2010 of the Director of Income tax(Exemption), Hyderabad and mentioned that there are essentially 3-4 objections raised by the Director for denial of the assessee's request for approval under S.80G of the Act. 4. Dealing with the first objection of....

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.... the applicability of clause (ii) of Explanation 2 of S.80G and the restriction of 5% mentioned in the capital of the Trust provided therein, which were not raised or considered by the Director of Income-tax (Exemption), Hyderabad, and hence the matter can now be referred back to the file of the Director of Income-tax (Exemption), for re-adjudication of the matter afresh in the light of the said Explanation and after giving reasonable opportunity of hearing to the assessee. 6. The Learned Departmental Representative for the Revenue mentioned by stating that the relationship of 5% vis-à-vis capital account needs to be examined in the year in which such investment vis-a-vis the size of capital account of that year. 7. On careful ....

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.... stating that charging fee by Shri Sharma from the Trust for conducting classes, and offering rent for the premises taken on rent would be deemed as adequate consideration or other compensation. Further in this regard, learned counsel mentioned that this kind of calculations in fact were not mentioned by the Trust deed. In reality, it does not make any difference, as long as the Trust is not put to any loss, if the charges are paid on equitable basis by the trust to Shri Sharma vis-à-vis the rents payable by him for the premises taken by him on hire. 9. After hearing in reply, the Learned Departmental Representative on this aspect of the objection raised by the Director of Income-tax(Exemption) in the impugned order, we find merit....

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....iving due opportunity of hearing to the assessee. 11. The last issue raised by the assessee relates to the Director of Income-tax(Exemption)'s finding in para 3(iv) of the Act. The said para reads as under- "3...... (iv) Further, the assessee is also carrying on the business in the trust premises. The trust is selling medicines, books & compact discs. The said sale proceeds are reflected in the P&L account for the financial year ended on 31.03.2009. The activity of selling CDs, medicines and books is systematic and is in the nature of business. Thus, the assessee is also covered by the proviso to Section 2(15) of the I.T. Act. Thus, the assessee is not a charitable institution, which is a pre-requisite for according recognition u/s....