M/s Dream & Beauty Chartitable Trust (Regd), Ludhiana V. CIT, Ludhiana

ITA 1013/CHANDI/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80938 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-10-2014
• Assessment Year: 2011-2012
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Charitable institution; Cancellation of registration; Capital expenditure
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1013/CHD/2011 ASSESSMENT YEAR: 2011-12 M/S DREAM & BEAUTY V THE CIT, CHARITABLE TRUST (REGD.), CIRCLE I, B-XXXI-419/4, INDIRA COLONY, LUDHIANA. CHANDIGARH ROAD, LUDHIANA. PAN: AAATD5608F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SMT. JYOTI KUMARI DATE OF HEARING : 14.10.2014 DATE OF PRONOUNCEMENT : 17.10.2014 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LD. LD. COMMISSIONER OF INCOME TAX-I, LUDHIANA DATED 24 .08.2011 REJECTING THE APPLICATION FOR RENEWAL OF EXEMPTION UNDER SECTION 80G OF THE INCOME TAX ACT ON THE FOLLOWING GROUNDS : 1. THAT THE LD. CIT - I, LUDHIANA HAS ERRED IN REJECTING THE APPLICATION OF THE APPELLANT TRUST FOR THE GRANT OF RENEWAL OF EXEMPTION U/S 8QG OF THE INCOME TAX ACT, 1961 BY NOT CONSIDERING THE FACT THAT THE TR UST WAS REGISTERED AND HAD BEEN GRANTED REGISTRATION U/S 12M(1)(B)(1)OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT -I, LUDHIANA HAS ERRED IN GIVING HIS FINDINGS THAT THE TRUST DOES NOT FULFILL THE CONDIT IONS NECESSARY FOR RENEWAL OF EXEMPTION U/S 80G(5) READ WITH RULE 11AA(5) OF THE INCOME TAX ACT, 1962 WHERE AS THE TRUST HAD ALREADY BEEN GRANTED EXEMPTION UNDER T HE SAID SECTION IN THE EARLIER YEARS. 2 3. THAT THE LD. GT HAS NOT CONSIDERED THE FACTS THAT TH E TRUST WAS REGISTERED WITH THE SUB-REGISTRAR (REVENUE) AS A TRUST AND TRUST WAS ALSO REGISTERED UNDER THE SOCIETY REGULATION ACT, 1860 AND ALSO WAS GRANTED REGISTRAT ION U/S 12AA(1)(B)(1) OF THE INCOME TAX ACT, 1961 BY THE HON'BLE CIT -I, LUDHIANA. 4. THAT THE LD. CIT-I HAS ERRED IN GIVING HIS FINDINGS THAT THERE IS UNILATERAL CHANGE BY AMENDMENT OF THE TRUST ON 09/07/1999 WHICH WAS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE LD. GT - I HAS ALSO ERRED IN REACHING THE CONCLUSION THAT THE PROPERTY OF THE TRUST IS NOT APP LIED TO THE EXTENT OF 85% TO THE STATED OBJECTS OF THE APPELLANT. 6. THAT OUR DETAILED SUBMISSIONS HAS NOT BEEN CONSIDERED PROPERLY BEFORE DISPOSING OF OUR APPL ICATION FOR THE GRANT OF RENEWAL OF EXEMPTION U/S 80G OF THE INCOME TAX ACT, 1961 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE TRUST WAS ESTABLISHED ON 01.02.1996 AND HAS BEEN GRANTED REGISTRATION UNDER SECTION 12A AS WELL AS UNDER SEC TION 80G OF THE INCOME TAX ACT. THE ASSESSEE, THEREAFTER FILED APPLICATION FOR RENEWAL OF EXEMPTION UNDER SECTION 80G OF THE A CT. THE LD. COMMISSIONER OF INCOME TAX ASKED THE ASSESSEE TO FU RNISH CERTAIN INFORMATION/DOCUMENTS ALONGWITH BOOKS OF AC COUNT. THE ASSESSEE FILED REPLY BEFORE LD. COMMISSIONER OF INC OME TAX AND PRODUCED THE RELEVANT DOCUMENTS. THE ASSESSEE WAS DIRECTED TO EXPLAIN WHY THE TRUST HAS BEEN REGISTERED UNDER SOC IETIES REGISTRATION ACT, 1860 WHEN IT WAS ALREADY REGISTER ED WITH SUB REGISTRAR AS A TRUST. THE SOCIETY CANNOT BE TAKEN T O THE COURT FOR CRIMINAL BREACH OF TRUST BY THE TRUSTEES. RULES AND REGULATIONS SPEAKS OF A SUPPLEMENTARY DEED AND SOME TRUSTEES HAVE BEEN CHANGED/DROPPED AND NEW ONE HAVE BEEN COP ED. HOW THE FOREIGN INCOME IS EXEMPT ? THE ASSESSEE FILED REPLY TO THE SAME. IT IS NOT IN DISPUTE THAT EARLIER REGISTRATI ON UNDER SECTION 3 12AA HAS BEEN GRANTED TO THE ASSESSEE ALONGWITH APP ROVAL UNDER SECTION 80G OF THE INCOME TAX ACT. THE LD. COMMISS IONER OF INCOME TAX, HOWEVER WAS NOT SATISFIED WITH THE EXPL ANATION OF THE ASSESSEE THAT ASSESSEE WAS REGISTERED WITH THE REGISTRAR OF SOCIETIES AS WELL AS WITH REGISTRAR OF TRUST AND TH AT THERE IS A CHANGE IN THE TRUSTEES BY SUPPLEMENTARY DEED. THE LD. COMMISSIONER OF INCOME TAX ALSO SCRUTINIZED THE ACC OUNTS OF THE ASSESSEE FOR THE YEAR ENDING 31.03.2008, 31.03.2009 AND 31.03.2010 AND FOUND THAT CAPITAL EXPENDITURE IS MO RE THAN 80%. THE LD. COMMISSIONER OF INCOME TAX, CONSIDERI NG THE ISSUE IN DETAIL CONCLUDED IN PARA 20 OF THE IMPUGNED ORDE R THAT PROPERTY OF THE TRUST IS NOT APPLIED TO THE EXTENT OF 85% TO THE STATED OBJECT AND THAT THERE IS A UNILATERAL CHANGE BY AMENDMENT OF THE TRUST ON 09.07.1999 WHEN THE TRUST PROPERTY INCLUDED MAINLY FIXED ASSETS AND THAT THIS ENTITY W AS CREATED FOR VESTED INTEREST OF A FEW PROMOTERS. IT WAS, THEREF ORE, FOUND THAT THE ASSESSEE SOCIETY DID NOT FULFILL THE CONDITIONS OF SECTION 80G(5) OF THE INCOME TAX ACT AND ACCORDINGLY, IT WA S DIRECTED THAT ASSESSEE CANNOT BE ALLOWED TO CONTINUE WITH EX EMPTION UNDER SECTION 80G(5) OF THE INCOME TAX ACT AND ACCO RDINGLY, APPLICATION FOR RENEWAL WAS REJECTED. IN OTHER WOR DS, THE EXEMPTION ALREADY GRANTED HAS BEEN WITHDRAWN. 3. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND REFER RED TO PAPER BOOK-77 AND 78 TO EXPLAIN THE OBJECTS OF THE ASSESS EE TO PROVIDE FOOD FOR DESTITUTES AND HOSPITAL FACILITY TO POOR A ND NEEDY. HE HAS SUBMITTED THAT REGISTRATION UNDER SECTION 12A H AVE ALREADY 4 BEEN GRANTED TO THE ASSESSEE ALONGWITH APPROVAL UND ER SECTION 80G OF THE INCOME TAX ACT AND NO CHANGE IN FACTS WE RE FOUND AS WERE CONSIDERED EARLIER. THE LD. COMMISSIONER OF I NCOME TAX ON THE SAME FACTS ISSUED SHOW CAUSE NOTICE FOR REVIE W OF THE REGISTRATION ALREADY GRANTED UNDER SECTION 12AA OF THE INCOME TAX ACT BUT ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, DROPPED/FILED THE PROCEEDINGS VIDE ORDER DATED 31.03.2013, COPY OF THE SAME IS FILED AT PAGE 1 OF IIND PAPER BOOK. HE HAS SUBMITTED THAT THE OBJECTS OF THE ASS ESSMENT TRUST ARE SAME AND SUPPLEMENTARY TRUST DEED WAS EXECUTED AS PER REQUIREMENT OF THE REVENUE DEPARTMENT AT THE TIME O F GRANT OF REGISTRATION UNDER SECTION 12A AND THERE IS NO CHAN GE IN THE OBJECTS OF THE ASSESSMENT TRUST. HE HAS SUBMITTED THAT ASSESSEE RECEIVED FOREIGN DONATIONS WITH APPROVAL OF THE GOV ERNMENT WHICH IS MENTIONED IN THE INCOME AND EXPENDITURE AC COUNT. THEREFORE, THERE IS NO FOREIGN INCOME IN THE CASE O F THE ASSESSEE. HE HAS SUBMITTED THAT THE COMPLETE DETAILS WERE FIL ED BEFORE THE AUTHORITIES BELOW AND THERE IS NO BAR IN GETTING TH E ASSESSEE TRUST REGISTERED WITH THE REGISTRAR OF SOCIETIES AS WELL. HE HAS SUBMITTED THAT AFTER AMENDMENT IN THE ACT AND ISSUE OF THE BOARDS CIRCULAR, THE EXEMPTION UNDER SECTION 80G(5 ) IS PERMANENT IN NATURE AND CANNOT BE WITHDRAWN WITHOUT ISSUING SHOW CAUSE NOTICE IN TERMS OF THE STATUTORY PROVISI ONS IN THE MANNER PRESCRIBED BY LAW. HE HAS RELIED UPON DECIS ION OF ITAT CHANDIGARH BENCH IN THE CASE OF BHOLA BHANDARI CHAR ITABLE TRUST V CIT-I, LUDHIANA IN ITA 140/CHD/2012 DATED 1 7.05.2012 IN WHICH THE TRIBUNAL FOLLOWING ITS EARLIER DECISIO N AND CBDT CIRCULAR HELD THAT THE APPROVAL UNDER SECTION 80G(5 ) OF THE ACT 5 ALREADY GRANTED TO THE ASSESSEE SHALL CONTINUE UNLE SS AND UNTIL THE CONCERN AUTHORITY TAKES APPROPRIATE ACTION IN A CCORDANCE WITH LAW. HE HAS SUBMITTED THAT THE SAID DECISION IS CONFIRMED BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V BHOLA BHANDARI CHARITABLE TRUST IN ITA 238/2012 DAT ED 30.01.2013 IN WHICH IT WAS HELD THAT ONCE THE STATU TE HAS GIVEN PERPETUITY TO THE EXEMPTIONS GRANTED UNDER SECTION 80G(5) OF THE ACT, THE SAME CANNOT BE WITHDRAWN WITHOUT BEING SHO W CAUSE NOTICE IN TERMS OF THE STATUTORY PROVISIONS IN THE MANNER PRESCRIBED BY LAW. HE HAS, THEREFORE, SUBMITTED TH AT THE LD. COMMISSIONER OF INCOME TAX SHOULD NOT HAVE WITHDRAW N THE EXEMPTION GRANTED TO THE ASSESSEE AND SHOULD HAVE C ONTINUED WITH THE SAME. 4. ON THE OTHER HAND, LD. DR RELIED UPON IMPUGNED O RDER AND SUBMITTED THAT SECTION 293C OF THE ACT PROVIDES POW ER TO WITHDRAW THE APPROVAL WHICH IS GENERAL IN NATURE AN D AS SUCH LD. COMMISSIONER OF INCOME TAX CORRECTLY WITHDRAWN THE APPROVAL GRANTED UNDER SECTION 80G(5) OF THE ACT. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT ASS ESSEE TRUST IS ALREADY GRANTED REGISTRATION UNDER SECTION 12AA OF THE ACT WHICH CONTINUES IN FAVOUR OF THE ASSESSEE. IT IS ALSO NO T IN DISPUTE THAT APPROVAL UNDER SECTION 80G(5) WAS GRANTED TO T HE ASSESSEE VIDE ORDER DATED 01.12.2006 FOR THE ASSESSMENT YEAR S 2007-08 TO 2008-09. THE SAME WAS EXTENDED FOR ASSESSMENT Y EARS 2009-10, 2010-11 AND 2011-12 VIDE ORDER DATED 9/11. 09.2008. COPIES OF THE SAME ARE FILED IN THE PAPER BOOK. HO N'BLE PUNJAB 6 & HARYANA HIGH COURT IN THE CASE OF CIT V SHRI VISH AV NAMDHARI SANGAT 354 ITR 33 HELD AS UNDER : THE PROVISIONS OF SECTION 80G OF THE INCOME-TAX AC T, 1961, WERE AMENDED SO AS TO DISPENSE WITH THE PERIODIC RENEWAL OF THE EXEMPTIONS. SUCH STATUTORY PROVISIONS WERE CLARIFIE D BY CIRCULAR NO. 5 OF 201 0 1 AND CIRCULAR NO. 7 OF 201 0 ISSUED BY THE CENTRAL B OARD OF DIRECT TAXES. ONCE THE STATUTE HAS GIVEN PERPETUITY TO THE EXEMPTIONS GRANTED UNDER SECTION 80G(5) OF THE ACT, THE APPROV AL CANNOT BE WITHDRAWN WITHOUT ISSUING SHOW-CAUSE NOTICE IN TERM S OF THE STATUTORY PROVISIONS IN THE MANNER PRESCRIBED BY LAW. 7. THE ASSESSEE, IN VIEW OF THE ABOVE JUDGEMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT, NEED NOT TO MAKE A REQ UEST FOR EXTENSION OF THE APPROVAL UNDER SECTION 80G OF THE ACT. THE SAME WOULD HAVE BEEN CONTINUED AND COULD HAVE BEEN WITHDRAWN BY THE LD. COMMISSIONER OF INCOME TAX ONL Y IN ACCORDANCE WITH LAW. HOWEVER, IN THIS CASE, AS IS SEEN, LD. COMMISSIONER OF INCOME TAX HAS NOT EXERCISED ANY PO WER FOR WITHDRAWAL OF THE APPROVAL ALREADY GRANTED UNDER SE CTION 80G(5) OF THE INCOME TAX ACT IN THE CASE OF THE ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX MERELY ON THE APPLICATIO N OF ASSESSEE FOR RENEWAL OF EXEMPTION UNDER SECTION 80G PASSED THE IMPUGNED ORDER. THIS REASON ITSELF IS SUFFICIENT T O SET ASIDE AND QUASH THE IMPUGNED ORDER. WE MAY ALSO NOTE HERE TH AT LD. COMMISSIONER OF INCOME TAX NOTED CERTAIN IRRELEVANT REASONS FOR REJECTING THE APPLICATION FOR RENEWAL SUCH AS THAT WHY ASSESSEE TRUST IS REGISTERED BOTH WITH REGISTRAR OF TRUSTS A ND REGISTRAR OF SOCIETIES. SUCH IS NOT A REQUIREMENT UNDER SECTION 80G(5) OF THE INCOME TAX ACT. FURTHER, LD. COMMISSIONER OF INCOME TAX NOTED THAT THERE IS A CHANGE IN THE TRUSTEES, SUCH IS ALS O NOT A REASON TO DISBELIEVE THE EXPLANATION OF ASSESSEE. THE LD. COMMISSIONER OF INCOME TAX ALSO SCRUTINIZED THE ACCOUNTS OF THE ASSESSEE FOR 7 THE YEAR ENDING ON MARCH,2008, 2009 AND 2010 AND H ELD THAT THE CAPITAL EXPENDITURE IS MORE THAN 80%. SUCH REA SONS WERE NOT RELEVANT FOR REJECTING THE APPLICATION FOR RENE WAL OF THE EXEMPTION BECAUSE FOR THOSE ASSESSMENT YEARS, ASSES SEE HAD ALREADY BEEN GRANTED APPROVAL U/S 80G(5) OF THE ACT . THE CHANGE IN THE TRUSTEES PERTAIN TO THE TIME THE REGI STRATION UNDER SECTION 12AA AND APPROVAL UNDER SECTION 80G WERE GR ANTED TO THE ASSESSEE. FURTHER, ASSESSEE HAD RECEIVED FOREI GN DONATION WITH THE APPROVAL OF THE GOVERNMENT AS EXPLAINED (C OPIES FILED). THEREFORE, THERE IS NO INCOME IN THE NATURE OF FORE IGN INCOME. THE TRUST DEED WAS AMENDED BY ADDING SUPPLEMENTARY TRUST DEED WHICH WAS DONE AS PER REQUIREMENT ISSUED BY TH E REVENUE DEPARTMENT AT THE TIME OF GRANT OF REGISTRATION UND ER SECTION 12AA OF THE ACT AND WOULD NOT CHANGE THE AIMS AND O BJECTS OF THE ASSESSEE TRUST. IT MAY ALSO BE NOTED HERE THAT AFTER PASSING OF THE IMPUGNED ORDER ON 24.08.2011, LD. COMMISSION ER OF INCOME TAX ALSO ISSUED SHOW CAUSE NOTICE ON 14.11.2 011 FOR REVIEW OF REGISTRATION GRANTED UNDER SECTION 12AA O F THE ACT. COPY OF THE NOTICE IS PLACED ON RECORD. THE LD. CO MMISSIONER OF INCOME TAX NOTED ALMOST THE SAME FACTS WHICH HAVE B EEN NOTED IN THE IMPUGNED ORDER FOR CANCELLATION OF THE REGIS TRATION UNDER SECTION 12AA OF THE ACT. HOWEVER, THE LD. COMMISSI ONER OF INCOME TAX, LATER ON FILED THESE PROCEEDINGS AND DR OPPED THE CANCELLATION OF REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') VIDE ORDER DATED 31.03.2013. THESE FACTS CLEARLY MAKES OUT A CASE THAT ASSESSEE WAS ENTITLED TO RENEWAL OF EXEMPTION AS PER BOARDS CIRCULAR BEC AUSE THERE WERE NO CHANGES IN THE FACTS AND CIRCUMSTANCES OF T HE CASE AND 8 LD. COMMISSIONER OF INCOME TAX SHOULD NOT HAVE REJE CTED THE APPLICATION OF THE ASSESSEE FOR RENEWAL. AS NOTED ABOVE, THERE WAS NO NEED FOR THE ASSESSEE TO MAKE FRESH APPLICAT ION IN WRITING FOR RENEWAL OF THE EXEMPTION BECAUSE IT WAS PERPETUITY IN NATURE. IN THIS VIEW OF THE MATTER AND CONSIDERING THE JUDGEMENTS CITED ABOVE, WE ARE OF THE VIEW THE LD. COMMISSIONER OF INCOME TAX SHOULD NOT HAVE REJECTED THE APPLICAT ION OF THE ASSESSEE IN THE MANNER AS STATED IN THE IMPUGNED OR DER. THEREFORE, THE IMPUGNED ORDER CANNOT BE SURVIVED IN LAW. WE MAY ALSO NOTE HERE THAT LD. COMMISSIONER OF INCOME TAX HAS NOT INITIATED ANY PROCEEDINGS INDEPENDENTLY AGAINST THE ASSESSEE FOR WITHDRAWAL OF APPROVAL IN ACCORDANCE WITH LAW OR IN ACCORDANCE WITH STATUTORY PROVISIONS. WE, THEREFORE, SET ASID E THE IMPUGNED ORDER AND QUASH THE SAME AND DIRECT LD. COMMISSIONE R OF INCOME TAX TO CONTINUE WITH THE APPROVAL UNDER SECT ION 80G(5) OF THE INCOME TAX ACT IN ACCORDANCE WITH LAW IN CAS E OF ASSESSEE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER,2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH OCTOBER,2014. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH