CMSN Charitable Trust, Hyderabad V. DIT (Exemptions), Hyderabad

ITA 1010/HYD/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1320 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 26-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: P MURALI MOHANA RAO
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.1010/HYD/2012 : ASSESSMENT YEAR 2011-2012 CMSN CHARITABLE TRUST, HYDERABAD (PAN AABTM 9304 Q) V/S ASST. DIRECTOR OF INCOME- TAX(EXEMPTION), HYDERABAD . (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.MURALIMOHANA RAO RESPONDENT BY : SMT. AMISHA S.GUPT DATE OF HEARING 16.01.2013 DATE OF PRONOUNCEMENT 22.02.2013 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE DIRECTOR OF INCOME-TAX(EXEMPTION) HYDERABAD DAT ED 31.5.2012. PASSED UNDER S.12AA(1)(B)(II) OF THE INCOME-TAX ACT , 1961. 2. ASSESSEES GRIEVANCE IN THIS APPEAL IS WITH RE GARD TO REJECTION OF THE ASSESSEES APPLICATION FOR REGISTRATION UNDE R S.12AA OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED AN APPLICATION IN FORM NO.10A ON 30.11.2011, SEEKING R EGISTRATION UNDER S.12AA OF THE ACT. THE SAID APPLICATION WAS REJECT ED BY TEHE DIRECTOR OF INCOME-TAX(EXEMPTION) VIDE ORDER DATED 30.6.2011. ON APPEAL AGAINST THE SAME, THIS TRIBUNAL, VIDE ITS ORDER DATED 28.6. 2012 IN ITA NOL1912/HYD/2011 FOR ASSESSMENT YEAR 2011-12, HAS S ET ASIDE THE MATTER TO THE FILE OF THE DIRECTOR OF INCOME-TAX(EX EMPTION) FOR FRESH ADJUDICATION ON THE APPLICATION OF THE ASSESSEE IN FORM NO.10A, WITH THE FOLLOWING OBSERVATIONS- ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 2 4. WE HEARD THE PARTIES. WE FIND THAT THE DIRECT OR OF INCOME-TAX(EXEMPTION) HAS NOT PASSED A SPEAKING ORD ER, BUT REJECTED THE APPLICATION OF THE ASSESSEE OBSERVING THAT THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT, BI LLS, VOUCHERS, BANK STATEMENTS, DETAILS OF DONATIONS, CONTRIBUTION S RECEIVED ETC., THOUGH THE ASSESSEE WAS REQUESTED TO FURNISH THE SA ME. LEARNED COUNSEL FOR THE ASSESSEE, WHILE PLEADING ABOUT THE INADEQUATE OPPORTUNITY OF HEARING PROVIDED BY THE DIRECTOR OF INCOME- TAX(EXEMPTION), HAS MADE A STATEMENT AT BAR THAT TH E RELEVANT BOOKS OF ACCOUNT, BILLS, VOUCHERS AND OTHER DOCUMEN TS AS REQUESTED BY THE DIRECTOR OF INCOME-TAX(EXEMPTION), WOULD BE FURNISHED IF ONE MORE OPPORTUNITY OF HEARING IS GIV EN TO IT TO PUT FORTH ITS CASE BEFORE THE DIRECTOR OF INCOME-TAX(EX EMPTION). CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTERESTS OF JUSTICE, WE FIND IT FAIR AND PROPER TO SET ASIDE THE IMPUGNED ORDER OF THE DIRECTOR OF INCOME-TAX(EXEMPT ION) AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO ADJUDICATE UPON THE APPLICATION OF THE ASSESSEE UNDER S.12AA OF THE ACT AFRESH, IN ACCORDANCE WITH LAW, BY PASSING A SPEAKING ORDER AN D AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ASSESSEE IS DIRECTED TO FURNISH REQUISITE DETAILS BEFORE THE DI RECTOR OF INCOME- TAX(EXEMPTION) FOR PROPER ADJUDICATION IN THE MATTE R. 4. CONSEQUENT TO THE ORDER OF THE TRIBUNAL, THE D IRECTOR OF INCOME-TAX(EXEMPTION) ONCE AGAIN TOOK UP THE ISSUE AND IN THE COURSE OF SECOND ROUND OF PROCEEDINGS, ISSUED A QUESTIONNAIRE VIDE LETTER DATED 22.2.2012 TO THE ASSESSEE, REQUESTING THE ASSESSEE TO FURNISH DETAILS ON SPECIFIC POINTS AND PRODUCE BOOKS OF ACCOUNT, BILLS AND VOUCHERS, FOR VERIFICATION. 5. THOUGH THE LEARNED AUTHORISED REPRESENTATIVE F OR THE ASSESSEE FILED REPLY AND REQUISITE INFORMATION IN R ESPONSE TO THE QUESTIONNAIRE, THE DIRECTOR OF INCOME-TAX(EXEMPTIO N) ON GOING THROUGH THE VARIOUS DOCUMENTS FILED AND THE INFORMATION FUR NISHED, WAS NOT SATISFIED AND WAS OF THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR REGISTRATION UNDER S.12AA OF THE ACT. IN THE FIRS T PLACE, HE NOTED THAT THE APPLICATION OF THE ASSESSEE IN FORM NO10A IS DE FECTIVE IN AS MUCH AS THE SAME IS NOT AS PER THE STATUTORY PRO FORMA GIVE N IN THE INCOME-TAX RULES, 1962. FURTHER, HE OBSERVED THAT WHEN THE TRU ST IS SHOWN AS CREATED ON 3.4.2009, THE ASSESSEE HAS NOT FURNISHED COPIES OF ACCOUNTS OF THE PRECEDING TWO ACCOUNTING YEARS, FILING OF WHICH ALONGWITH THE SAID ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 3 APPLICATION WAS MANDATORY AS PER RULE 16A(B) OF THE INCOME-TAX RULES, 1962. HE FURTHER NOTED THAT WHILE AS PER THE APPLI CATION IN FORM NO.10A, DATE OF CREATION OF THE TRUST IS 3.4.2009, AS PER T HE TRUST DEED FILED ALONGWITH THE APPLICATION ITSELF, THE DEED WAS EXEC UTED ON 9.12.2010. HE WONDERED HOW IN VIEW OF DOCUMENT STATED TO BE MADE ON 9.12.2010, TRUST WAS CREATED ON 3.4.2009 AS STATED IN THE APPL ICATION IN FORM NO.10A. THE OTHER OBJECTIONS OF THE DIRECTOR OF IN COME-TAX(EXEMPTION) CONTAINED IN PARAS 2.1. TO 2.4 OF THE IMPUGNED ORDE R READ AS FOLLOWS- 2.1 ..FURTHER, AS PER THE TRUST DEED, THE SAME WA S EXECUTED BETWEEN FOUR PERSONS STATED TO BE TRUSTEES, ALL OF WHOM ARE FOUND TO BE CLOSE FAMILY MEMBERS. FURTHER, WHEN IN THAT D EED, IT IS MENTIONED THAT THE TRUST SHALL BE CALLED CMSN CHARI TABLE TRUST, IN PARA 1.(III) AT PAGE 2 OF THAT DEED, IT IS MENTIONE D THAT THE TRUST HAS COMMENCED ITS BUSINESS WITH EFFECT FROM 3.4.200 9. FROM SUCH PARTICULAR MENTION, IT SHOWS THAT, ACTUALLY THERE W AS NO CHARITABLE ORGANIZATION ON THAT DATE IE, 3.4.2009, BUT AN ORGA NIZATION WHICH WAS DOING SOME BUSINESS ON THAT DATE. FROM SUCH VE RY ADMISSION REGARDING DOING BUSINESS, W.E.F. 3.4.2009, IT SHOWS THAT THERE WAS ACTUALLY NO CHARITABLE ORGANIZATION IN THIS CASE. 2.2 FURTHER, WHILE CLARIFYING ABOUT BOARD OF TRUST EES AND MEMBERS, UNDER PARA IV AT PAGE 4, IT IS MENTIONED T HAT THE ADMINISTRATION OF TRUST SHALL VEST IN THE BOARD OF TRUSTEES AND MEMBERS AND IT IS FURTHER MENTIONED THAT THE SHALL NOT BE, AT ANY TIME LESS THAN TWO AND MORE THAN SIX TRUSTEES/MEMBE RS. HOWEVER, AGAIN UNDER THAT PARA, AT POINT NNO.III, I T IS MENTIONED THAT THE TRUSTEE HERETO SHALL HAVE POWER TO CO-OPT OTHER MEMBERS OR REMOVE ANY OF THE MEMBERS BY A RESOLUTION PASSED AT THE MEETING OF THE TRUSTEES, SO, HOWEVER, THAT THEIR NU MBER INCLUSIVE OF THE FOUNDER-TRUSTEES SHALL NOT EXCEED FIVE. FROM THIS VERY STIPULATION, IT SHOWS THAT THE MAXIMUM NUMBER OF PE RSONS TO THE BOARD OF TRUSTEES INCLUDING CO-OPTED MEMBER, SHALL BE FIVE, WHEREAS, EARLIER IN THAT PARA AT POINT NO.(I), IT I S M ENTIONED THAT THERE SHALL NOT BE MORE THAN SIX TRUSTEES/MEMBERS. UNDER SUCH ANOMALOUS SITUATION, IT SHOWS THAT NO VALID TRUST D EED HAS BEEN CREATED IN THIS CASE. FURTHER, IN THAT POINT NO.III , IT IS MENTIONED THAT SUCH CO-OPTED MEMBERS SHALL HAVE A TENURE OF T WO YEARS AND SHALL AUTOMATICALLY RETIRE UPON COMPLETION OF TWO Y EARS AS A MEMBER. UNDER PARA (V) RELATING TO CESSATION OF M EMBERSHIP OF BOARD OF TRUSTEES/MEMBER, IT IS MENTIONED THAT A CO -OPTED MEMBER SHALL CEASE TO BE A TRUSTEE UPON EXPIRY OF T WO YEARS FORM THE DATE OF CO-OPTION, IN CASE. IT IS FURTHER MENT IONED THAT HE/SHE IS NOT CO-OPTED FOR A FURTHER TURN. FROM THE SAME, IT SHOWS THAT THE FOUR TRUSTEES WHO ARE CLOSE FAMILY M EM BERS IN THIS CASE HAVE EXCLUSIVE DISCRETION AND POWER IN APPOINTING ANY M EMBER TO THE TRUST. SUCH MEMBER HAS NO REAL ROLE/POWER IN THE A FFAIRS OF THE SAID TRUST. FURTHER, UNDER PARA (VI) PERTAINING TO MEETING OF THE BOARD, IT IS MENTIONED THAT THE MEETING OF THE TRUS TEES AND ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 4 MEMBERS SHALL BE CONDUCTED AT SUCH INTERVALS AS ARE NECESSARY. AS MAY BE SEEN, THERE IS NO CLARITY ABOUT THE PERIO DICITY OF MEETINGS OF THE BOARD OF TRUSTEES. RATHER, THE MEET INGS OF THE BOARD ARE TO BE HELD AS PER THE DISCRETION OF SUCH TRUSTEES. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT A VALID PUBLIC CHARITABLE TRUST HAS BEEN CREATED IN THIS CASE. FUR THER, THOUGH AT PAGE NO.9 OF THE SAID DEED, THERE IS SIGNATURE OF T WO PERSONS, AS WITNESSES, THEIR ADDRESSES HAVE NOT BEEN FURNISHED/ INDICATED THEREIN. 2.3 FURTHER CLARIFYING ABOUT THE ACTIVITIES, IN TH E NOTE FURNISHED BY THE ABOVE TRUST, IT IS SUBMITTED HAT T HE TRUST DURING THE FINANCIAL YEAR 2010-11 AND 2011-12 HAD CONSTRUC TION OF HOUSES SITUATED IN SY. NO.550 & 551 OF POTLADURTHI VILLAGE, YERRAGUNTLA MANDAL, KADAPA DIST., ANDHRA PRADESH. F URTHER, THOUGH IT IS STATED THAT THE TRUST HANDED OVER THE HOUSES FOR WEAKER NEEDY PEOPLE AND FURNISHED PHOTO COPIES OF A LLOTM ENT LETTERS FOR DIFFERENT HOUSES IN FAVOUR OF DIFFERENT PERSONS, ALMOST ALL ISSUED ON THE SAME DATE I.E. 21.12.2010, IT HAS NOT BEEN EXPLAINED AS TO HOW THE ASSESSEE TRUST HAS MADE SU CH CONSTRUCTIONS FOR THOSE PERSONS. IT HAS NOT BEEN E XPLAINED AS TO HOW THOSE PERSONS APPROACHED THE ABOVE TRUST FOR CO NSTRUCTION OF HOUSE FOR THEM. FURTHER, IN THE INCOM E & EXPENDITURE ACCOUNT FOR THE YEAR ENDED ON 31.03.2010, BENEFICIARIES CONTRIB UTION IS SHOWN AS RS.56,68,700/-. HOWEVER, NO SCHEDULE OR BREAK-U P OF THE SAME HAS BEEN FURNISHED. FURTHER, THOUGH IN THAT ACCOUN T, TRUSTEES CONTRIBUTION AND OTHER VOLUNTARY CONTRIBUTIONS ARE SHOWN AT RS.14,00,000 AND RS.34,56,300 RESPECTIVELY, THE REQ UIRED COMPLETE DETAILS AS PER QUERY NO.8 OF THAT QUESTION NAIRE, HAVE NOT BEEN FURNISHED. SIMILAR DETAILS IN RESPECT OF TRUS TEES CONTRIBUTIONS AND OTHER VOLUNTARY CONTRIBUTIONS PERTAINING TO AC COUNTING YEAR 31-3-2011 HAVE NOT BEEN FURNISHED. IT MAY BE CLARI FIED HERE THAT VIDE QUERY NO.8, IT WAS ASKED TO FURNISH DETAILS OF DONATIONS AND CONTRIBUTIONS RECEIVED WITH FULL ADDRESSES, NAMES, DATE AND MODE OF SUCH RECEIPTS. THOUGH, THE ASSESSEE TRUST HAS FU RNISHED CERTAIN STATEMENTS SHOWING NAMES OF DIFFERENT PERSONS THEIR ADDRESSES AND DIFFERENT AMOUNTS SHOWN AGAINST EACH ONE OF THE M, IT HAS NOT FURNISHED THE DESIRED INFORMATION WITH REGARD TO DA TE AND MODE OF SUCH RECEIPTS. 2.4 FURTHER, THE ABOVE TRUST HAS NOT FURNISHED CO MPLETE BANK STATEMENT SINCE INCEPTION. THE COPY OF BANK AC COUNT FURNISHED MAINTAINED IN ING VYSYA BANK LTD., PERTAI NS TO ONLY THE PERIOD FROM 4.1.2011 TO 31.3.2011. THUS, FOR THE ABOVE REASONS, THE DIRECTOR OF INCOME -TAX(EXEMPTION) REJECTED THE APPLICATION OF THE ASSESSEE FOR REGIST RATION UNDER S.12AA OF THE ACT. 6. AGGRIEVED BY THE ABOVE ORDER OF THE DIRECTOR O F INCOME- TAX(EXEMPTION), ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 5 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIRECTOR OF INCOME-TAX(EXEMPTION) WAS NOT CORRECT I N OBSERVING THAT THE APPLICATION FORM FILED BY THE ASSESSEE FOR REGISTRA TION IN FORM 10A UNDER S.12AA IS DEFECTIVE AND NOT AS PER STATUTORY PRO FO RMA. IT IS SUBMITTED IN THIS CONTEXT THAT THE MISTAKES POINTED OUT ARE MERE LY PROCEDURAL AND CURABLE, GIVEN AN OPPORTUNITY BY THE CONCERNED AUTH ORITY, AND ON THAT COUNT, APPLICATION FOR REGISTRATION CANNOT BE REJEC TED. IT IS FURTHER SUBMITTED THAT THE DIRECTOR HAS NOT CONSIDERED ALL THE INFORMATION WHICH WAS FURNISHED AS PER THE QUESTIONNAIRE, THOUGH THE ASSESSEE HAS FURNISHED THE INCOME & EXPENDITURE ACCOUNT AND BALA NCE SHEET AND OTHER SUPPORTING DOCUMENTS IN SUPPORT OF ITS CLAIM FOR EX EMPTION UNDER S.12AA FOR ASSESSMENT YEAR 2011-12, AND AS SUCH THE DIRECT OR OF INCOME- TAX(EXEMPTION) WAS NOT JUSTIFIED IN REJECTING THE R EQUEST OF THE ASSESSEE FOR REGISTRATION. IT IS ALSO SUBMITTED THAT THE DI RECTOR OF INCOME- TAX(EXEMPTION) HAS NOT GIVEN SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE REQUISITE INFORMATION/DOCUMENTS. IN SUPP ORT OF THESE CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE H AS PLACED RELIANCE ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN DHARMA SANSTHAPAK SANGH (NIYAS) V/S. CIT (2008)118 TTJ(DEL) 823, WHER EIN IT HAS BEEN HELD THAT SO LONG AS THE OBJECTS OF THE TRUST ARE CHARIT ABLE IN NATURE, CARRYING ON OF CHARITABLE ACTIVITY AT THE STAGE OF COMMENCEM ENT IS NOT RELEVANT TO DECIDE WHETHER SUCH TRUST/INSTITUTION IS ENTITLED F OR REGISTRATION. HE ALSO PLACED RELIANCE ON ANOTHER DECISION OF THE DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF AGGARWAL MITRA MANDAL TRUST V/S. DIRECT OR OF INCOME- TAX(EXEMPTION) (106 ITD 533)-DEL., WHEREIN IT HAS B EEN HELD THAT UNDER S.12AA, THE POWERS OF DIRECTOR OF INCOME-TAX(EXEMPT ION) ARE LIMITED TO MAKE ENQUIRIES WITH A VIEW ONLY TO SATISFY HIMSELF ABOUT GENUINENESS OF ACTIVITIES AND OBJECT OF THE TRUST AND APPLICATION OF S.13 FALLS WITHIN THE EXCLUSIVE DOMAIN OF THE ASSESSING OFFICER AND REGIS TRATION CANNOT BE ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 6 REFUSED ON THE GROUND OF VIOLATION OF THE PROVISION S OF S.13(1)(B) OF THE ACT. 8. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND, STRONGLY RELYING THE IMPUGNED ORDER OF THE DIRECTOR OF INCOME- TAX(EXEMPTION), SUBMITTED THAT IN VIEW OF THE DETAI LED REASONS DISCUSSED BY THE DIRECTOR OF INCOME-TAX(EXEMPTION) IN THE IMP UGNED ORDER, DENIAL OF REGISTRATION UNDER S.12AA TO THE ASSESSEE IS VER Y MUCH JUSTIFIED. HE ALSO SUBMITTED THAT AFTER INSERTION OF SECTION 12AA W.E.F. 1.4.1997, THE DIRECTOR OF INCOME-TAX(EXEMPTION) IS EMPOWERED TO E NQUIRE ABOUT THE ACTIVITIES OF THE ASSESSEE BEFORE PASSING THE ORDER GRANTING REGISTRATION. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE FIRST QUESTION ARISIN G FOR OUR CONSIDERATION IN THIS APPEAL RELATES TO THE SCOPE OF ENQUIRY BY THE DIT(E) U/S. 12AA OF THE ACT. WE ARE IN AGREEMENT WITH THE LEARNED DEPARTM ENTAL REPRESENTATIVE THAT AFTER INSERTION OF SECTION 12AA W.E.F. 1.4.199 7, THE DIT(E) IS EMPOWERED TO ENQUIRE ABOUT THE ACTIVITIES OF THE AS SESSEE BEFORE PASSING THE ORDER. THERE MAY BE CASES WHERE APPLICATION IS MADE AFTER THE COMMENCEMENT OF ACTIVITIES BY THE ASSESSEE TRUST. IN SUCH CASES THE DIT(E) IS JUSTIFIED TO ENQUIRE ABOUT THE ACTIVITIES . HOWEVER, WHERE NO ACTIVITY IS COMMENCED, THE QUESTION OF MAKING ANY E NQUIRY REGARDING ANY ACTIVITY BY THE DIT(E) WOULD NOT ARISE. THE NATURE OF ENQUIRY WOULD DEPEND ON THE FACTS OF EACH CASE. HENCE THE CONTEN TION OF THE LEARNED COUNSEL THAT SCOPE OF THE POWERS OF THE DIRECTOR I S LIMITED TO ASCERTAINING ONLY WHETHER THE OBJECTS ARE CHARITABLE OR NOT CANN OT BE ACCEPTED. 10. THE NEXT QUESTION FOR OUR CONSIDERATION IS WH ETHER ON THE FACTS AND IN LAW, THE REGISTRATION U/S. 12AA OF THE ACT CAN BE REFUSED TO THE ASSESSEE. FOR THE PURPOSE OF SECTIONS 11 AND 1 2, THE WORD ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 7 'CHARITABLE PURPOSE' HAS BEEN DEFINED IN SECTION 2( 15) OF THE ACT WHICH READS AS FOLLOWS: . 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WAT ERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLAC ES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEM ENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS [TWENTY-FIVE LAKH RUPEES] OR LESS IN TH E PREVIOUS YEAR;]' 11. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF SURAT ART SILK & CLOTH MFRS. ASSOCIATION (121 ITR 1) AS UNDER: 'IT IS NOW WELL SETTLED AS A RESULT OF THE DECISION OF THIS COURT IN DHARMADEEPTI VS. CIT 1978 CTR (SC) 120 : (1978) 114 ITR 454 (SC), THAT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' QUALIFY OR GOVERN ONLY THE LAST HEAD OF CHARITABLE PURPOSE AND NOT THE EARLIER THREE HEADS. WHERE, THE REFORE, THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, THE REQUIREMENT OF THE DEFINITION O F 'CHARITABLE PURPOSE' WOULD BE FULLY SATISFIED, EVEN IF AN ACTIV ITY FOR PROFIT IS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PURPOSE OF THE TRUST OR INSTITUTION.' 12. AT THIS STAGE IT IS ALSO PERTINENT TO NOTE TH AT THE CLAUSE 'NOT INVOLVING CARRYING ANY ACTIVITIES OF PROFIT' WERE OMITTED FROM THIS DEFINITION BY THE LEGISLATURE BY FINANCE ACT, 1983 W.E.F. 1 ST APRIL, 1983. THEREFORE, AFTER SUCH OMISSION, THE ELEMENT OF PROF IT CANNOT BE EXCLUDED FROM THE DEFINITION 'CHARITABLE PURPOSES'. U/S. 2( 15) OF THE ACT. 13. AN INSTITUTION CARRYING ON CHARITABLE ACTIVIT IES CAN CLAIM EXEMPTION U/SS. 11 AND 12 AS ELEMENT OF PROFIT IS N OT EXCLUDED BY THE ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 8 LEGISLATURE. THE REASON IS OBVIOUS BECAUSE OF FINA NCIAL AFFAIRS OF SUCH INSTITUTION ARE WELL CONTROLLED BY THE PROVISIONS O F SECTIONS 11 AND 13 OF THE ACT. SECTION 11 CLEARLY PROVIDES THAT IN ORDER TO CLAIM EXEMPTION SUCH INSTITUTION MUST APPLY 75% OF ITS INCOME FOR C HARITABLE PURPOSES. THE SURPLUS IF ANY HAS TO BE INVESTED IN SPECIFIED BONDS. FURTHER, EXEMPTION CAN BE DENIED IF THE PROVISIONS OF SECTIO N 13 ARE VIOLATED. THEREFORE, IF THERE IS ANY VIOLATION OF EITHER SECT ION 11 OR SECTION 13, THEN, THE PROFITS OF SUCH INSTITUTION WOULD BE TAXABLE. FURTHER THE FACT THAT, ONLY 75% OF THE INCOME IS TO BE APPLIED FOR CHARITA BLE PURPOSES ITSELF SHOWS THAT ELEMENT OF PROFIT IS NOT EXCLUDED FROM T HE DEFINITION OF CHARITABLE PURPOSE FOR THE PURPOSE OF SECTIONS 11 A ND 12. BECAUSE SOME PROFIT HAS BEEN EARNED BY AN INSTITUTION REGISTRATI ON U/S. 12AA CANNOT BE DENIED SO LONG AS PROVISIONS OF SECTIONS 11, 12 AND 12AA ARE COMPLIED WITH. SO LONG AS IT IS ESTABLISHED THAT INCOME OF THE ASSESSEE SOCIETY HAS BEEN APPLIED FOR THE PURPOSE OF CHARITABLE ACTIVITI ES IN TERMS OF SECTION 11(2) AND THERE IS NO VIOLATION OF SECTION 13, THE ASSESSEE WOULD BE ENTITLED TO ENJOY THE BENEFIT OF REGISTRATION U/S. 12AA OF THE ACT. 14. UNDER BOTH THE CATEGORIES MENTIONED ABOVE, T HE SOCIETIES/TRUSTS CREATED WITH THE SOLE OBJECT TO AD VANCE THE CAUSE OF CHARITABLE ACTIVITIES WOULD BECOME ENTITLED FOR REG ISTRATION UNDER S.12AA. IN THE PRESENT CASE, THE CIT(A) HAS NOTED CERTAIN D ISCREPANCIES IN THE TRUST DEED WITH REGARD TO THE FOLLOWING ASPECTS - (I) IN POINT (I) IT IS MENTIONED THAT THERE SHALL NOT B E MORE THAN SIX TRUSTEES/MEMBERS. (II) IN POINT (III), IT IS MENTIONED THAT SUCH CO-OPTED MEMBERS SHALL HAVE A TENURE OF TWO YEARS AND SHALL AUTOMATI CALLY RETIRE UPON COMPLETION OF TWO YEARS AS A MEMBER. (III) UNDER PARA (V) RELATING TO CESSATION OF MEMBERSHIP OF BOARD OF TRUSTEES/MEMBER, IT IS MENTIONED THAT CO-OPTED M EMBERS ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 9 SHALL CEASE TO BE A TRUSTEE UPON EXPIRY OF TWO YEAR S FROM THE DATE OF CO-OPTION. IT IS ALSO NOTED THAT THE ASSESSEE HAS FAILED TO FU RNISH CERTAIN INFORMATION WITH REGARD TO CONTRIBUTION COLLECTED BY THE ASSESS EE, IN SPITE OF RECEIVING THE QUESTIONNAIRE ISSUED BY THE DIRECTOR OF INCOME- TAX(EXEMPTION). CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, AND CONSIDERING THE PLEA OF THE ASSESSEE FOR ONE MORE REASONABLE OPPORTUNITY TO RECTIFY THE DISCREPANCIES AND FURNIS H THE REQUISITE INFORMATION CALLED FOR, AND KEEPING IN MIND THE END S OF JUSTICE, WE SET ASIDE THE IMPUGNED ORDER OF THE DIRECTOR OF INCOME- TAX(EXEMPTION), AND RESTORE THE MATTER TO THE FILE OF THE DIRECTOR OF I NCOME-TAX(EXEMPTION) WITH A DIRECTION TO REDECIDE AFRESH THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER S.12AA, AFTER GIVING ONCE AGAIN REASONABLE OPPORTUNITY TO RECTIFY THE DISCREPANCIES POINTED OUT IN THE TRU ST DEED, AND TO FURNISH THE DETAILS AS REQUISITIONED BY THE DIRECTOR OF INC OME-TAX(EXEMPTION) AND TO SUBSTANTIATE ITS CASE. ON THE ASSESSEE FURNISH ING THE REQUISITE INFORMATION AND RECTIFYING THE DISCREPANCIES IN THE TRUST DEED POINTED OUT, THE DIRECTOR OF INCOME-TAX(EXEMPTION), IF SATISFIED WITH THE CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE, SHALL GRANT REGISTRATION APPLIED FOR BY THE ASSESSEE. THE ASSESSEE IS DIRECTED TO COOPE RATE IN THE EARLY DISPOSAL OF THE MATTER, BY PROPER COMPLIANCE WITH T HE NOTICES/LETTERS OF THE DIRECTOR OF INCOME-TAX(EXEMPTION), AS OTHERWISE , THE DIRECTOR OF INCOME-TAX(EXEMPTION) WOULD BE AT LIBERTY TO DRAW H IS OWN INFERENCES AND DISPOSE OF THE MATTER ACCORDINGLY. THE DIRECTO R OF INCOME- TAX(EXEMPTION) IS DIRECTED TO EXAMINE THE APPLICATI ON OF THE ASSESSEE FOR REGISTRATION UNDER S.12AA OF THE ACT AFRESH, AND PA SS APPROPRIATE SPEAKING ORDER IN ACCORDANCE WITH LAW AND AFTER GIV ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO.1010/HYD/12 CMSN CHARITABLE TRUST, HYDERABAD 10 15. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 22.2.2013 SD/ - (ASHA VIJAYARAGHAVAN ) SD/ - (CHANDRA POOJARI) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- 22 ND FEBRUARY, 2013 COPY FORWARDED TO: 1. CMSN CHARITABLE TRUST, C/O. M/S.P.MURALI & CO., CHARTERED ACCOUNTANTS, 6-3-6755/2/3, 1ST FLOOR, SOMAJIGUDA, HYDERABAD-82 2. DIRECTOR OF INCOME - TAX(EXEMPTION) HYDERABAD 3. 4. ASSTT. DIRECTOR OF INCOME - TAX(EXEMPTION) HYDERABAD THE DEPARTMENTAL REPRESENTATIVE, ITAT HYDERABAD B.V.S.