TaxTMI 
TaxTMI 
2024 (8) TMI 230
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly registered under the Societies Registration Act, 1860, vide Registration Certificate No. 45 of 1973-74, dated 2.11.1973 (Annexure P-6), and engaged in the social/charitable activities, especially for the welfare of downtrodden, poor and destitute sections of the society. It is claimed that the petitioner Society had also been granted certificate by the Income Tax Department, since 1974, regarding its entitlement for deduction under Section 80G of the 1961 Act, which was further renewed from time to time. To fortify this assertion, the petitioner Society has placed on record letters dated 19.9.1984, 9.5.1988, 4/5.2.1993, 8/9.2.1999 and 18/23.9.2002, as Annexure P-3 (Colly) with the writ petition. 3. The petitioner Society has also been granted registration in terms of Section 12AA of the 1961 Act, because since its inception, the petitioner Society was carrying out charitable activities in terms of Section 11 read with Section 2(15) of the 1961 Act. Accordingly, right from the very beginning, the income of the petitioner Society had been exempted from tax. In this regard, copies of various returns showing nil taxable income, as well as assessment orders passed under Section 14....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the pass book/bank statement of PNB account No. 16024 alongwith purpose of loan taken. viii) Where the donations are substantial such as Rs. 1,31,000/- vide receipt No. 1120 dated 8.2.2005 by Dr. Neelima Sangla, Chandigarh and source PAN of the donor is not given nor confirmation from the donor has been filed, the society is requested to produce confirmations from donors in respect of donations exceeding Rs. 10,000/-." 6. Thereupon, respondent No. 1 - CIT reached to the conclusion that the petitioner - society has generated a surplus of Rs.1,14,89,798/- as on 31.03.2005, out of Rs.2,08,01,259/- collected/received during the year and failed in utilising the receipts towards charitable activities, as envisaged in its aims and objectives. During the course of hearing before respondent No. 1 - CIT, the petitioner - society has shown its income and expenditure for the period from 2002-03 to 2004-05, as under:- Period Income Expenditure Surplus 2002-03 1,69,01,578 88,76,446 80,25,132 2003-04 1,68,65,156 88,90,935 79,74,221 2004-05 2,08,01,259 93,11,461 1,14,89,798 It has been noticed by respondent No. 1 - CIT that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed on 17.2.2006 for compliance on 27.2.2006. On 27.2.2006, neither any one attended nor reply filed. Accordingly, summons u/s 131 of the Act were issued on 28.2.2006 for compliance on 7.3.2006 at 10.30 AM for producing account books and vouchers for the financial year 2003-04 and 2004-05. However, the compliance to the summons, S/Sh. Ravinder Mehta, Advocate attended alongwith Ram Kishan Phagwal and produced account books/vouchers for the financial year 2004-05 which have been examined. iii) That during the year under consideration, the assessee society did not comply the provisions of section 11(2) of the Act under which there is statutory liability of the assessee society to apply 85% of its income to charitable or religious purposes in India during the previous year. The assessee was required to furnish information in Form No. 10B with the return of Income and to have given in writing to the AO that income accumulated, set apart shall be utilized particular purpose In prescribed manner but the assessee society failed to do so which it has admitted in its reply dated 4.1.2006 para 4 wherein contended as under:- "4. Intimation about accumulation u/s 11(2) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usal of ledgers maintained for all the three branches was also revealed that in regard to donations received, no names and address of donors mentioned in 'particular' column and only date CB folio and amount have been mentioned. vi) That the assessee society has made construction during the year for which the bills raised by the contractors or other bills pertaining to construction not produced for verification. Ledger account of Luxman Stone Center examined. During the year Rs. 37200/- paid to him and on 31.3.2005 his account was credited with the same amount by transfer entry by making Nil balance. No bills raised by this person. Similarly, the ledger account of M/s Sumitra Builders was debited with payments of various amounts on various dates during the year totaling to Rs. 26,72,029/- at the close of the year. However, in this account also there was nil balance on 31.3.2005 with the following credit entries: - Date Particulars LF Credit (Rs) 1.4.2004 Opening balance 998415 31.3.2005 by bill 367 92029 31.3.2005 by bill 367 2585000 The assessee society neither maintained bill number stated to be rais....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he petitioner - society is before this Court by challenging the order dated 20.03.2006 (Annexure P-1), passed by respondent No. 1 - CIT. 9. While challenging the impugned order, Mr. Pankaj Jain, learned Senior counsel submitted that the petitioner - society is admittedly registered under Section 12AA of the 1961 Act, which is meant for registration of the Society/Establishment/Trust working of which is meant for social welfare. Therefore, primarily there is no such reason for the respondents to disbelieve the expenditure made by the petitioner - society from the donations received by it from time to time. Further submits that the petitioner - society is also registered under the Societies Registration Act, 1860, with specified aims and objects since 24.08.1978. As per the aims and objects, the petitioner - society is meant to work for establishment of educational institutions, dharmshalas, goshalas, orphanage homes for destitute, old age and infirm people, as well as other objects of general public utilities, not involving any activity for profit. After registration under the Societies Registration Act, for the purpose of seeking exemption under the 1961 Act, the petitione....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were charitable, then having regard to the object of the provision, the approval should not be denied on mere technicalities. As a matter of fact, the power to grant or negative the claim for approval is coupled with a duty. We may now examine the case in hand on the touchstone of the aforenoted broad principles. In the instant case, the CIT has not found that the objects of the petitioner-society, established in India, as set out in its memorandum of association, are not for a charitable purpose or that the society is not carrying on its activities in furtherance of its objects. As a matter of fact, registration of an institution under Section 12A (a) of the Act by itself is a sufficient proof of the fact that the trust or the institution concerned is created or established for charitable or religious purposes......" For the foregoing reasons, we are of the view that the impugned order of the CIT refusing approval to the petitioner-society under Section 80G of the Act is founded on irrelevant considerations and, therefore, cannot be sustained. Consequently, we allow the writ petition, make the rule absolute, quash the impugned order and direct the CIT to take a fresh dec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mption under Section 80G of the 1961 Act was denied. Learned counsel for the revenue has relied upon judgement of Delhi High Court in the case of Kirti Chand Tarawati Charitable Society v. Director of Income-tax (Exemption) and others, 232 ITR 11 (1998). Thus, there cannot be anything to declare that the order is not worth to sustain. 14. After hearing both the sides in detail and especially by going through the report dated 17.03.2006, submitted by the Assistant Commissioner of Income Tax, Circle, Panipat, coupled with the judgement rendered by this Court in the case of Sonepat Hindu Education and Charitable Society (supra), we find that there is sufficient substance in the arguments advanced by learned Senior counsel for the petitioner - society. The judgement passed by the Delhi High Court in Kirti Chand Tarawati Charitable Society (supra) was on the facts of said case. However, it cannot be said that the law has been laid down that investment by a charitable organisation for public purposes, which are incidently for the charitable purposes, cannot be a ground to deny registration under Section 80G of the 1961 Act. 15. Neither in the report dated 17.03.2006, submitted b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner - Society is not performing charitable functions. From the contentions, which have been placed on record and the same having not been denied by the respondents, we are satisfied that the entire donations and the amount received by the petitioner - Society are solely utilized for the purpose of charitable functions. In the opinion of this Court, the construction of Public Library would also form part of charitable function and any work done with the same purpose has to be noticed for granting exemption under Section 80G of the 1961 Act. It was also submitted that certain sources of donations could not be traced, however, the same would not in any manner deprive the petitioner - Society for getting exemption under Section 80G of the 1961 Act and, for such donations alone the matter can be examined separately. 18. We also find that recently Hon'ble the Supreme Court while considering the requirement of continuing registration for an educational trust, in the case of M/s New Noble Educational Society v. Chief Commissioner of Income-tax, (2023) 6 SCC 649, has proceeded to hold that the word 'solely' would also mean that the ancillary work which may be carried out by the Society ....