SUMMARY OF CASE LAW When the assessee-society was granted registration under section 12AA, it is a t estimony to the fact

that the society is established for charitable purposes as defined in section 2(15); the same will be charitable purposes irrespective of t he fact that for imparting education, the assessee charges fees; there is no con dition to hold that to become charitable purposes in respect of imparting educat ion, the same should be imparted freely or without charging any fees; so long as imparting such education is not for the benefit of any particular religion, com munity or caste as envisaged in sub-clause (iii) of sub-section (5) of section 8 0G, the assessee cannot be denied exemption. CASE LAW DETAILS Decided by: ITAT, DELHI BENCH `B : NEW DELHI, In The case of: Gaur Brahmin Vidya Pracharini Sabha v. CIT, Appeal No.: ITA No. 1905/Del/2009, Decided on: Septembe r 11, 2009 RELEVANT PARAGRAPH 6. We have carefully considered the relevant facts, arguments advanced and the case laws cited. The assessee is seeking registration under section 80G (5) of the Act. Section 80G(5) is extracted hereunder:(5) This section applies to donations to any institution or fund referred to in s ub-clause (iv) of clause (a) of sub-section (2), only if it is established in In dia for a charitable purpose and if it fulfils the following conditions, namely : [(/) 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 or clause (23AA)] [or clause (23Q] of section 10 : [Provided that where an institution or fund derives any income, being profits an d gains of business, the condition that such income would not be liable to inclu sion in its total income under the provisions of section 11 shall not apply in r elation to such income, if (a) the institution or fund maintains separate books of account in respect o f such business; (b) the donations made to the institution or fund are not used by it, directly o r 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 respec t of such business and that the donations received by it will not be used, direc tly 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 fo r 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 pu rpose; (iii) the institution or fund is not expressed to be for the benefit of any part icular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expe nditure;

(v) the institution or fund is either constituted as a public charitable trust o r is registered under the Societies Registration Act, 1860 (21 of 1860), or unde r any law corresponding to that Act in force in any part of India or under secti on 25 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 loca l authority; (vi) in relation to donations made after the 31st day of March, 1992, the instit ution or fund is for the time being approved by the Commissioner in accordance w ith the rules^ made in this behalf and (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 sectio n and notwithstanding anything contained in the proviso to clause (15) of sectio n 2, be deemed to have been, (a) established for charitable purposes for the previous year beginn ing on the 1st day of April, 2008 and ending on the 31 st day of March, 2009; an d (b) approved under the said clause (vi) for the previous year beginni ng on the 1st day of April, 2008 and ending on the 31st day of March, 2009. As per sub-clause (vi) of sub-section (5) of section 80G, for recognition the tr ust is required to be approved by the Commissioner in accordance with the Rules made in this behalf. The Rules are Rule 11AA prescribed in this regard. As per R ule 11AA, the assessee is required to make an application in Form No.lOG. The ap plication shall be accompanied by the following documents:(1) Copy of Registration granted under section 12A or copy of Notific ation issued under section 10(23) or 10(23C) of the Act; (2) Notes on activities of institution since its inception or during the last 3 years whichever is less. (3) Copies of accounts of the institution since its inception or duri ng the last 3 years whichever is less. The Commissioner is empowered to call for such further documents or information or calls such enquiries in order to satisfy himself about the genuineness of the activities of the institution. If the Commissioner is satisfied that the condit ion laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfil led, he shall record such satisfaction and grant approval. If he is not so satis fied, he shall reject the application after recording the reasons. Thus as per t he provision of section 80G(5) read with Rule 11AA for granting registration, th e Commissioner needs to be satisfied that the condition laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled. In the present case the re is no dispute that the application for approval has been filed in Form No. lO G along with the documents required to be accompanied thereto. Sub-clause (i) of subsection (5) of section 80G requires that where the institution or fund derive s any income, such income would not be liable to inclusion in its total income u nder the provisions of sections 11 and 12 of the Act. The assessee is registered under section 12AA of the Act. Even as per the assessment of the last 3 years i t is seen that though the assessee derives income, such income was held not liab le to inclusion in total income as per sections 11 and 12 of the Act. Thus sub-c lause (i) is satisfied.

As per sub-clause (ii) of sub-section (5) of section 80G, the instrument under w hich 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 applicati on at any time of the whole or any part of its income or assets for any purpose other than a charitable purpose. Admittedly there is no clause or rule governing the institution which contains any provision for the transfer or application of its income or assets for any purpose other than a charitable purpose. The only object of the assessee trust is imparting education and such object is charitabl e purpose within the definition of Charitable purpose as specified in section 2(15 ) of the-Act. The condition prescribed in sub-clause (iv) of section (5) of section 80G is tha t the institution or fund maintains regular accounts of its expenditure is also complied with. The condition in sub-clause (v) of sub-section (5) of section 80G is that the in stitution or fund is either constituted as a public charitable trust or is regis tered under the Societies Registration Act, 1960, is also complied with as the a ssessee is registered under the Societies Registration Act, 1860 vide certificat e dated 29th September, 1980. From the above it is clear that all the conditions laid down in Rule 11AA i.e. c ondition laid down in sub-clauses (i) to (v) of sub-section (5) of section 80G a re fulfilled. When the assessee trust was granted registration under section 12A A, it is a testimony to the fact that the trust is established for charitable pu rposes. Hon ble Punjab & High Court which is the jurisdiction in this case in the case of Sonepat Hindu Educational and Charitable Society vs. CIT, 278ITR 262 hel d as underlain construing the purpose of a trust, for the purposes of approval u nder section 80G of the Income-tax Act, 1961, it is important to find out the re al purpose of establishing the trust rather than just relying on the objects, me morandum and articles or the trust deed of the trust. If the Commissioner is sat isfied that the objects of the trust are charitable, approval should not be deni ed on mere technicalities. Registration of an institution under section 12A of the act is sufficient proof of it being established for charitable purposes. It is not possible to determine, on the date on which the donation is made under section 80G, if the trust, which has sought approval under the said section, ha s fulfilled its conditions at the close of the relevant previous year. Res judicata can be applied in income-tax proceedings when a fundamental aspect has prevailed through different assessment years without being challenged one wa y or the other. In such cases it is not appropriate to change the position in a subsequent year. (Emphasis supplied) There is no denial of fact that the assessee institution is registered under Soc ieties Registration Act, 1860 as well as under section 12AA of the Income-tax Ac t. Even the assessments for Assessment Years 2004-05, 2005-06 and 2006-07 framed under section 143(3) revealed that the assessee trust is eligible for exemption under sections 11 & 12 of the Act. Hon ble Gujarat High Court in the case of N. N . Desai Charitable Trust vs. CIT, 246 1TR 452 held that in respect of registrati on under section 80G, the scope of enquiry will be confined to finding out if th e institution satisfies prescribed condition stated in sub-clauses (i) to (v) of section 80G. It does not extend to actual assessment of institution. The phrase used in sub-clause (i) of subsection (5) of section 80G is that where the instit ution or fund derives any income, such income would not be liable to inclusion i n its total income .

Thus what is to be seen is whether any income would not be liable to inclusion i n its total income and not whether because of certain defaults prescribed in sec tion 11 or 13, the trust is not actually held eligible for exemption under secti ons 11 & 12 of the Act. As per section 11 of the Act, income derived from proper ty held under trust to the extent to which such income is applied for charitable or religious purposes in India or to the extent of accumulation within certain limitation is not to be included in the total income of the trust or institution . Thus even though the assessee receives fees for imparting education and the ed ucation being charitable purposes defined in section 2(15) of the Act without an y condition. Such income would not be liable to inclusion to the extent to whi ch such income is applied for charitable purposes in India. Education is per s e charitable purposes as defined in section 2(15) of the Act. The same will be c haritable purposes irrespective of the fact that for imparting education, the as sessee charges fees. There is no condition to hold that to become charitable purposes in respect of imparting education, the same should be imparted freely o r without charging any fees. So long as imparting such education is not for the benefit of any particular religion, community or caste as envisaged in sub-claus e (iii) of sub-section (5) of section 80G^The assessee cannot be denied exemp tion. In the impugned- order the learned Commissioner has given much we ightage to the fact that the assessee charges fees for imparting education and s ince by charging fees, the benefit is not extended to 80% of the public who are below poverty line or that the education is not imparted free of cost. The tru st or fiind which imparts education without charging fees will qualify for exemp tion under sections 11 & 12 but that does not mean that other trusts which are c harging fees for imparting education will not be considered to be charitable pur poses. The act is contemplating exemption being granted to an eligible trust or institution in respect of its income. Thus it is manifested that only when th ere will be income, the claim of exemption will arise. In such a situation what the statute envisages is that there are all chances of trust or institution earn ing income by way of surplus so as to grant them exemption under sections 11 and 12 of the Act and subject to condition prescribed under section 11(5) and secti on 13 of the Act. If the trust or institution is not expected to earn surplus, there would not have been any question of allowing exemption from tax liability . When the Scheme of the act allows exemption from tax liability, the same can be only when it is envisaged that the trust or institution is likely to earn sur plus. Thus merely because from the activities in the nature of charitable purpo ses, the assessee makes surplus which is within the limitation prescribed under section 1 l(l)(a), there cannot be any ground to hold that the assessee is not c arrying on any charitable purposes so as to deny registration under section 80G( 5) of the Act. We find that the condition laid down in Rule 11AA as also in subclauses (i) to (v) of sub-section (5) of section 80G are complied with. The trus t is, therefore, eligible for registration under section 80G(5Xvi) of the Act. W e, therefore, direct the Commissioner to grant registration accordingly.