Construction Of Public Library Forms Part Of Charitable Function, Eligible For Section 80G Exemption: Punjab & Haryana High Court

The Punjab and Haryana High Court has held that the construction of public libraries forms part of a charitable function and is eligible for the exemption under Section 80G of the Income Tax Act.

The bench of Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth has observed that the ancillary work, which may be carried out by the society for the purpose of enhancing education, would also be treated as work done for charitable purposes. The amount of Rs. 30,00,000/- has been utilized for construction of the public library, and it would have to be treated as work done for charitable purposes.

The petitioner/assessee is a society duly registered under the Societies Registration Act, 1860, and engaged in social/charitable activities, especially for the welfare of downtrodden, poor, and destitute sections of the society.

The petitioner society claimed that it had also been granted a 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.

The petitioner society has also been granted registration in terms of Section 12AA because, since its inception, the petitioner society has been carrying out charitable activities in terms of Section 11 read with Section 2(15). Accordingly, right from the very beginning, the income of the petitioner society had been exempted from tax.

The CIT reached the conclusion that the petitioner society has generated a surplus of Rs. 1,14,89,798/- as of 31.03.2005, out of Rs. 2,08,01,259/- collected or received. The petitioner society has failed to utilize the receipts towards charitable activities, as envisaged in its aims and objectives.

The CIT declined the request made by the petitioner society by saying that it is not carrying on any charitable activity as the genuineness of the donations and their use could not be proved by the petitioner society. Therefore, the request for renewal of exemption under Section 80G(5) was rejected.

The assessee contended that there is nothing to doubt with the charitable working of the petitioner society, concluding that the receipts are not for the purpose of using the amount for meeting out the aims and objects of the society.

The court noted that the petitioner society continuously enjoyed registration under Section 12AA of the 1961 Act and comes within the definition of charitable society/trust/Establishment as defined in the Income- Tax Act, 1961. Merely because there is an infirmity in the submission of the income-tax return and Form-10B was not submitted, would not result in the presumption that the petitioner—the – Society is not performing charitable functions.

The court, while allowing the petition, stated that the writ petition was filed in the year 2006, and it would be a travesty of justice if the petitioner—the – Society is relegated after about 18 years to avail the alternative remedy by filing an appeal before the ITAT.

Counsel For Petitioner: Pankaj Jain

Counsel For Respondent: Amanpreet Singh

Case Title: Mumukshu Mandal (Regd.) Shri Geeta Mandir, Panipat Versus Commissioner of Income Tax, Karnal and another

Case No.: CWP-8617-2006 (O&M)

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