Rajasthan H.C : The Tribunal was justified in law in directing to grant approval u/s.80G(5) to the respondent despite the fact that the trust does not fulfill the conditions u/s.80G(5)(i) of the Act

High Court Of Rajasthan

CIT vs. Maharaja Sawai Man Singh-II, Museum Trust

Section 80G(5)(vi)

K.S. Jhaveri & Inderjeet Singh, JJ.

D.B. Income Tax Appeal No. 100 / 2014

13th July, 2017

Counsel Appeared:

Prateek Kedawat, K.D. Mathur for R.B. Mathur for the Appellant. : Siddharth Ranka for the Respondent.

ORDER:

By way of this appeal, the appellant-department has challenged the judgment and order passed by the Tribunal whereby the Tribunal has allowed the appeal of the assessee reversing the finding of the CIT (A).

This Court while admitting the appeal on 10.03.2015 has framed the following substantial questions of law:

“(i) Whether in the facts and circumstances of the case, the Tribunal was justified in law in directing to grant approval u/s.80G(5) to the respondent despite the fact that the trust does not fulfill the conditions u/s.80G(5)(i) of the Act.

(ii) Whether in the facts and circumstances of the case, the Tribunal was justified in law in directing to grant approval u/s.80G(5) to the respondent despite the fact that the activities of the trust cannot be said to be charitable.

(iii) Whether in the facts and circumstances of the case, the Tribunal was justified in law in allowing the appeal of the respondent assessee and directing the approval of exemption u/s.80G(5) when activity of running of school is entire independent and has no connection with the Museum.”

3. Counsel for the appellant has taken us to the order passed by the CIT(A), Jaipur whereby the CIT(A) has rightly dismissed the application for grant of exemption u/s 80 G(5)

(vi) of the assessee. While refusing the benefits under Section 80G(5)(vi), the CIT(A) has observed as under:

“3.1 It is clear on perusal of various clauses of trust deed and objects of the trust that the trust was created for the purpose of up keep and maintenance of the museum containing the pictures, paintings, portraits, works of art, several caskets, silver ware, china ware, glass ware, cut glass, books of arts, ornaments pieces, rugs, antics, curiors, manuscripts and other collection of articles and things of City Palace, Jaipur entrusted to the said trust. These articles and things collectively have been referred to as “said collection” or “presents” in the trust deed.

3.2 It is observed that apart from running of the museum, the trust started running a school named Maharaja Sawai Bhawani Singh School, in Jagatpura, Jaipur as a unit of this trust from F.Y.2007-08. This activity of running of school is not covered under the objects of the trust given in the trust deed. Therefore, the activity of running school cannot be held under the trust because as per the trust deed, the trust was not authorized for this activity of running school.

3.3. On being confronted to the A.R. of the assessee, it was submitted by the A.R. that clause 22 of the trust deed authorizes the trustees to use immovable property of the trust for the purpose of any scheme of charity. Running of School is a charitable activity and therefore, running of school is covedred under the trust deed. The contention of assessee was considered but not found acceptable. Relevant extract of para-22 of the trust deed is reproduced as under:- “……it shall also be lawful for the trustees to permit an a immovable property for being part of the trust fund to be held used and enjoyed for the purpose of any scheme of charity or other purpose of these presents including the office of the trustees and their officials and employees for the purpose of these presents as also the residence of such of the employees, the trustee consider necessary for the purpose of these presents.

3.4. The A.R. of the assessee has misrepresented the above para. In the para, the phrase “for the purpose of these presents” have been used at two places, which restricts the scope of words “for scheme of charity or other purpose”and stipulates that whatever activity is done, it must be for the purpose of presents i.e. collection of the museum. This para-22 authorizes the activity only, which is for the purpose of collection of museum and has relation with the collection of museum and not any other activity. The activity of running school is entirely independent activity and is not at all related to the collection of museum. So, the assessee cannot take shelter of above para-22 for authorizing the activity of running school by the trust deed.

3.5. In view of the above discussion, it becomes clear that the activity of running school is not covered under the objects of the trust and this activity cannot be held under the trust.”

4. However, the Tribunal while reversing the same, has observed in para 2.4 and 2.5. which reads as under:

“2.4 We have heard the rival submissions and have carefully perused the entire material on record. Both parties have taken same stand as it was taken before the ld. CIT. The ld. AR has also filed the paper book alongwith detailed written submission to support the bolster appellant case. We have carefully examined the written submission and we have also gone through the objects of the trust as available in the trust deed and in the light of relevant provision of the Act. It is found that the trust stands registered u/s 12A of the Act. Therefore , there cannot be two opinions and the ld CIT cannot dispute the fact that the objects of the trust are not charitable in nature. Having observed as above, we are satisfied that in clause 20 of the trust deed, the trust is permitted to carry on any scheme or charity and it is not restricted to display of Museum Artifacts. ‘’It shall also be lawful for the Trustee to permit any immovable property forming part of the Trust Fund to be held used and enjoyed for the purpose of any scheme of charity or other purpose of these presents. The school is an unit of the trust and its establishment is in accordance with the trust deed and has been recognized by the Charity Department also.’’

2.5 The section 80G(5) of the Income-tax Act, 1961 reads as under:‘’(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :— [(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 3[* * *] 4[5[***]] 6[or clause (23AA)] 7[or clause (23C)] of section 10 : [Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if —

(a) the institution or fund maintains separate books of account in respect of such business;

(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and

(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;]]

(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;

(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;

(iv) the institution or fund maintains regular accounts of its receipts and expenditure; 9[* * *]

(v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 2510 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority; [(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules15 made in this behalf

(vii) where any institution or fund had been approved under clause

(vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the proviso of clause (15) of section 2, be deemed to have been

(a) established for charitable purposes for the previous year beginning on the Ist day of April,2008 and ending on the 31st day of March,2009 and

(b) approved under the said cause (vi) for the previous year beginning on the Ist day of April, 2008 and ending on the 31st day of Mach, 2009 ]’’ This section describes deduction in respect of donations to certain funds, charitable institution etc. Section 80G(5) lays down certain conditions for getting approval after it falls in sub-clause (ib) of clause (a) of sub-section

2. In our considered opinion, the assessee falls under this sub-clause and also 6 fulfils all the conditions laid down in sec 80G(5) of the Act. Accordingly, we do not find any reason for not grating approval u/s 80G(5) of the Act. The observations made by the ld. CIT are not correct. Any income drawn by the appellant trust cannot be included in its total income under the provision of section 11 and 12 or clause (23AA) or clause (23C) of section 10. As a result, we allow appeal of the appellant trust and direct the ld. CIT to grant approval to it u/s 80G(5) of the Act as has been prayed by the appellant trust.”

We have heard learned counsel for the parties.

Taking into account that the activities which are carried out by the respondent is covered under Section 80G(5)(vi) inasmuch as the education will be a part of charitable activities. However, in view of the provisions of Section 2(15) of the Income Tax Act and the factum of registration under Section 12A right from 1977, it will be suffice to answer all the issues in favour of the assessee.

In that view of the matter, the appeal of the department is dismissed.

[Citation : 405 ITR 478]