G.S.SANDHAWALIA, J. - (1.) THE present appeal is directed against the order dt. 29th Jan., 2010 passed by the Income-tax Appellate Tribunal, Delhi Bench 'F', New Delhi (hereinafter referred to as "the Tribunal") wherein the ITA No. 4485/Del/2009 filed by the respondent was allowed and the Tribunal while allowing the appeal directed the Commissioner of Income-tax, Faridabad (for short "the CIT") to grant approval under S. 80G to the assessee. The CIT while rejecting the application of the assessee vide order dt. 9th Oct., 2009 had based its order on the ground that respondent-society which is established on 24th Feb., 2001 and filed an application for renewal/exemption under S. 80G on 15th April, 2009 was generating huge surpluses year after year and making capital expenditure for the assets of the school out of this income. It was further noticed by the CIT that the application of funds was to be till 85 per cent and the assessee was permitted to accumulate only 15 per cent of the receipts in normal course and the application of funds during financial years 2006-07, 2007-08 and 2008-09 fell short of the prescribed percentage in these years and since the assessee was applying its income towards building and assets in the form of construction of school building or purchase of bus, therefore, it was not charitable purpose. The CIT further noticed that the intimation in Form 10 of r. 17 of the IT Rules, 1962 (hereinafter referred to as "the Rules) had not been made to the AO and by placing reliance on the case of Municipal Corporation of Delhi vs. Children Book Trust (1992) 3 SCC 390 and the case of CIT vs. Queen's Educational Society/CIT vs. St. Pauls Sr. Secondary School (2009) 223 CTR (Uttarakhand) 395 : (2009) 319 ITR 160 (Uttarakhand) held that there was violation of S. 11(2) of the IT Act, 1961 (hereinafter referred to as "the Act") and rejected the claim of the society.
(2.) ON appeal filed by the respondent-society, the Tribunal has noticed the income in the hands of the assessee and that the assessee is entitled for depreciation and reproduced the aims and objects of the society to hold that the assessee has incurred expenditure for construction of school building during said financial years and for acquiring the bus for transportation of the children and held that the said activity was within the aims and objects of the assessee's educational society and if the depreciation and capital expenditure is deducted out of the gross receipt shown in the chart reproduced by the CIT, the surplus in the hands of the society comes to a negative figure. Accordingly, it was held that question of intimation in Form 10 was not required to be submitted before the CIT and since the assessee was also enjoying exemption under S. 12AA of the Act, the CIT was not justified in denying the approval under S. 80G of the Act. The Revenue aggrieved against the said order of the Tribunal has in the present appeal framed the following substantial question of law which in its opinion requires adjudication by this Court : "Whether, on the facts and in the circumstances of the case, the learned Tribunal was right in law in granting approval under S. 80G of the IT Act, 1961 even though the applicant-society seeking exemption is applying its income towards investment in the fixed assets like purchase of buses and construction of school building (which) are the properties of the society and may be connected with the imparting of education but the same has been constructed and purchased out of income from imparting the education with a view to expand the institution and to earn more income and is contrary to the decision of the Hon'ble Supreme Court in the case of Municipal Corporation of Delhi vs. Children Book Trust (1992) 3 SCC 390 and decision of the Hon'ble Uttarakhand High Court in the case of CIT vs. Queen's Educational Society/CIT vs. St. Pauls Sr. Secondary School (2009) 223 CTR (Uttarakhand) 395 : (2009) 319 ITR 160 (Uttarakhand) ?"
(3.) A reading of the r. 11AA of the IT Rules, 1962, goes to show that application for approval of any institution under cl. (vi) of sub-s. (5) of S. 80G should be in Form 10G and the following documents are necessary as per cl. (2) of the said rule : "(i) Copy of registration granted under S. 12A or copy of notification issued under S. 10(23) or 10(23C); (ii) Notices on activities of institution or fund since its inception or during the last three years, whichever is less; (iii) Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less; (3) The CIT may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund. (4) Where the CIT is satisfied that all the conditions laid down in cls. (i) to (iv) of sub-s. (5) of S. 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid. (5) Where the CIT is satisfied that one or more of the conditions laid down in cls. (i) to (v) of sub-s. (5) of s. 80G are not fulfilled, he shall reject the application for approval after recording the reasons for such rejection in writing : Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard. (6) The time-limit within which the CIT shall pass an order either granting the approval or rejecting the application shall not exceed six months from the date on which such application was made : Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the CIT under sub-r. (3) shall be excluded." ;