Abhilasha Parents Association for the Welfare of the Mentally Handicapped Children, Hyd, Hyderabad V. CIT(Exemptions), Hyd, Hyderabad

ITA 1064/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9736 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 01-08-2016
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 12; 12A; 12AA; 44AB; 22

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ITA NO. 1064/HYD/2016 ASSESSMENT YEAR: 2016-17 ABHILASHA PARENTS ASSOCIATION FOR THE WELFARE OF THE MENTALLY HANDICAPPED CHILDREN, HYDERABAD PAN AAATA7677D VS. THE CIT (E), HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI A.V RAGHURAM REVENUE BY : SHRI P. CHANDRA SEKHAR DATE OF HEARING : 16-02-2017 DATE OF PRONOUNCEMENT : 22-02-2017 ORDER PER G. PAVAN KUMAR, J.M.: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE CIT(EXEMPTIONS) IN F. NO. CIT(E)/70(11)/12A/201 5-16 PASSED U/S 12AA(1)(B)(II) OF THE IT ACT DATED 31.05 .2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LD. CIT(E) ES ERRONEOUS BOTH ON FACTS AND LAW TO THE EXTENT IT IS PREJUDICIAL TO THE ASSESSEE . 2. THE LD. CIT(E) ERRED IN REJECTING THE APPLICATIO N FILED IN FORM NO. 10A FOR REGISTRATION U/S 12 A ON THE GROUN D THAT THE SOCIETY IS CARRYING ON BUSINESS. 3. THE LD. CIT(E) ORDER REJECTING U/S 12A IS WITHOU T APPRECIATION OF THE FACTS IN PROPER PERSPECTIVE AND FURTHER ERRONEOUS IN HOLDING THAT THE SOCIETY EXISTS FOR CO MMERCIAL PURPOSES IN SPITE OF SUBMISSION OF FACTS THAT THE T HINGS ARE 2 ITA NO. 1064/HYD/2016 ARTICLES SOLD ARE MADE BY HANDICAPPED CHILDREN DURI NG THEIR TRAINING TO MAKE THEM SELF DEPENDENT. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN ASSOCIATION FOR THE WELFARE OF THE MENTALLY HANDICA PPED CHILDREN AND REGISTERED UNDER REGISTRAR OF SOCIETIE S HYDERABAD VIDE REGISTRATION NO. 1681/94, DATED 12.04.1994. THE MAIN OBJECTS OF THE SOCIETY BEING A NON- PROFIT VOLUNTARY ORGANIZATION FOR THE BENEFIT OF M ENTALLY HANDICAPPED CHILDREN OF ALL SECTION OF THE SOCIETY AND SUBSEQUENTLY MADE APPLICATION IN FORM 10A FOR REGISTRATION UNDER 12AA OF THE ACT WITH THE CIT(EXEMPTIONS) ON 30-11-2015. 3. THE LD. AR OF THE ASSESSEE APPEARED AND FILED TH E INFORMATION AND EXPLAINED THAT THE SOCIETY IS FORME D FOR THE WELFARE AND ALL-ROUND DEVELOPMENT OF MENTALLY CHALL ENGED CHILDREN AND PROVIDES TRAINING AND REHABILITATE THE MENTALLY HANDICAPPED CHILDREN BY TAPPING THEIR INNE R TALENTS AND SKILLS. FURTHER TO DEVELOP SELF CONFID ENCE AND MAKE CHILDREN SELF RELIANT TO LIVE A NORMAL LIFE IN SOCIETY AND SELF EMPOWERED. THE LD. CIT(EXEMPTIONS) ON PER USAL OF THE INFORMATION FILED WITH APPLICATION IN FORM N O. 10A, FOUND ON PERUSAL OF INCOME & EXPENDITURE ACCOUNT TH E SOCIETY IS HAVING INCOME FROM VARIOUS SOURCES BEING SALE OF ROTI, WHEAT FLOUR, SCOOTER PARKING FEE, SUMMER CAPS , X-RAY COVERS, PAPER PLATES, PRINTING JOB WORKS, PEP NEWS AND SEWING MACHINE JOB WORKS AND SEVERAL OTHER WORKS AN D CAME TO A CONCLUSION THAT THE SOCIETY IS EXISTED FO R CONDUCTING THE COMMERCIAL BUSINESS ACTIVITIES AND D OES 3 ITA NO. 1064/HYD/2016 NOT FALL WITHIN THE DEFINITION OF CHARITABLE PURPOS ES AND OBSERVED THE ACTIVITIES CONDUCTED BY THE SOCIETY AR E IN VIOLATION OF ITS AIMS AND OBJECTS AND THE NO SEPAR ATE BOOKS OF ACCOUNT ARE MAINTAINED. FURTHER THE ACCOU NTS ARE NOT AUDITED U/S 44AB OF THE ACT. THE LD. CIT(EXEMPTIONS) RELIED ON THE PROVISIONS OF SEC 12AA(1)(B)(II) OF THE ACT, AND WAS NOT SATISFIED WI TH THE GENUINENESS OF CONDUCT OF ACTIVITIES AND REJECTED T HE REGISTRATION UNDER 12AA OF THE IT ACT VIDE ORDER DA TED 31- 05-2016. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL. 4. BEFORE US THE LD. AR OF THE ASSESSEE REITERATED THE SUBMISSIONS WITH THE DOCUMENTS FURNISHED BEFORE THE CIT(EXEMPTIONS) EXPLAINING THE AIMS AND OBJECTS AND FILED PAPER BOOK CONTAINING THE FINANCIAL STATEMENTS, MEMORANDUM OF ASSOCIATION OF BYE-LAWS, LIST OF DONA TIONS CERTIFICATE OF REGISTRATION OF WELFARE OF DISABLED AND SENIOR CITIZENS DEPARTMENT AND EXHAUSTIVE DETAILED NOTE WI TH PHOTOGRAPHS ON ACTIVITIES OF THE SOCIETY. THE LD. AR EMPHASIZED ON AIMS AND OBJECTS FOR THE WELFARE OF T HE MENTALLY CHALLENGED CHILDRENS OVERALL DEVELOPMENT, TRAINING, REHABILITATION ON AND SELF CONFIDENCE. T HE INCOME EARNED IS ONLY INCIDENTAL FOR ACHIEVING THE MAIN OB JECTS OF THE SOCIETY. THE ASSESSEE IS MAINTAINING THE BOOKS OF ACCOUNTS AND ACCOUNTS ARE AUDITED EVERY YEAR. THE APPLICATION IN FORM NO. 10A FOR REGISTRATION U/S 1 2A OF THE IT ACT WAS REJECTED BY CIT(EXEMPTIONS) WITHOUT CONS IDERING THE BASIC FACTS AND ACTIVITIES CONDUCTED FOR MENTAL LY HANDICAPPED CHILDREN AND PRAYED FOR GRANTING REGIST RATION UNDER 12AA OF THE IT ACT.. 4 ITA NO. 1064/HYD/2016 5. PER CONTRA THE LD. DR RELIED ON THE ORDER OF THE CIT(EXEMPTIONS) AND ARGUED ON THE PROVISIONS OF SEC 2(15) OF THE IT ACT AND THE EXPLAINED THAT THE ACTIVITIES OF THE SOCIETY DOES NOT SATISFY THE MAIN LIMB OF SEC 2(15) OF THE IT ACT BUT COME UNDER ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND AGGREGATE VALUE OF RECEI PTS FROM THE ACTIVITIES ARE MORE THAN 25 LAKHS, HENCE THE AC COUNTS ARE NOT CHARITABLE AND OPPOSED TO THE GROUNDS. 6. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD. THE LD. AR'S SOLE SUBSTANTIVE GROUND BE ING REJECTION OF APPLICATION FORM NO. 10A FOR REGISTRAT ION U/S 12AA OF THE IT ACT. WHERE THE CIT(EXEMPTIONS) HAS ASSUMED THE ACTIVITIES ARE IN THE NATURE OF BUSINES S. THE LD. AR DREW OUR ATTENTION TO THE PAPER BOOK AT PAGE 5 CONTAINING THE AIMS AND OBJECTS AND THE SOCIETY WA S REGISTERED IN 1994 FOR CARRYING ON ITS OBJECTS FOR THE BENEFIT OF MENTALLY HANDICAPPED CHILDREN. THE CHILDREN ARE TRAINED TO SUPPORT AND EARN LIVELYHOOD BY PARTICIPATING IN THE TRAINING PROGRAMS AND INCREASE THEIR IQ LEVELS. THE SOCIETY SUPPLY THE PRODUCTS MADE BY THE MENTALLY CHALLENGE D CHILDREN IN THE MARKET AT THE REASONABLE PRICE AND THE INCOME GENERATED ON SUCH PRODUCTS ARE UTILIZED FOR EMPOWERMENT AND ACHIEVEMENT OF OBJECTS OF THE SOCIE TY WITHOUT PROFIT MOTIVE. THE LD. AR FURNISHED DETAI LED NOTE ON THE ACTIVITIES CONDUCTED BY THE SOCIETY. WE ON P ERUSAL OF ACTIVITIES AT PAGE NO. 46 TO 78, FOUND THAT THE ASS ESSEE SOCIETY HAS FILED PHOTOGRAPHS OF THE WORKS AND TRAI NING CONDUCTED FOR THE MENTALLY CHALLENGED CHILDREN BEIN G FRAME PACKING, COMPUTER EDUCATION, PAINTING, CANDLE MAKIN G, GARDENING. AND THESE WORKS WERE APPRECIATED AND AW ARDS 5 ITA NO. 1064/HYD/2016 WERE CONFERRED TO THE MENTALLY HANDICAPPED CHILDREN , AND ALSO PARTICIPATE IN THE YOGA AND MEDITATION CLASSES , WHEREAS GIRL CHILDREN ARE ALSO TRAINED FOR WORKING IN KITCHEN AND MANY OTHER SKILLED WORKS WHICH ARE UND ER TAKEN TO ENHANCE THE TALENT AND TO IMPROVE SELF CON FIDENCE. 7. THE LD. AR SUBMITTED THAT THE PROFIT IS ONLY INC IDENTAL TO MAIN OBJECT AND REFERRED TO THE AUDITED ACCOUNTS STATEMENTS AT PAGE NO. 30 TO 44 OF THE PAPER BOOK, WHERE INCOME FROM THE ACTIVITIES ARE INCURRED ON WELFARE OF MENTALLY HANDICAPPED CHILDREN AND SUPPORTED WITH JURISDICTIONAL HIGH COURT DECISION OF CIT VS VIJAY AVANI EDUCATIONAL TRUST 349 ITR 280(AP). WHERE IT WAS HE LD THAT THE TRUST IS ENTITLED TO EXEMPTION WHERE IT PUBLIS HES MAGAZINES DEALING WITH EDUCATION WHICH WERE ANCILLA RY TO MAIN OBJECTS OF RUNNING EDUCATIONAL INSTITUTIONS. IN APPLYING THE SAME PRINCIPLES / RATIO THE ASSESSEE S OCIETY WAS FORMED FOR THE WELFARE OF MENTALLY HANDICAPPED CHILDREN AND THE EXPENDITURE IS INCURRED ON THE CH ILDREN TO ENHANCE AND TRAIN THEIR SKILLS AND ALSO PROVIDED TRAINING IN PRODUCTS MAKING WHICH ARE SOLD AT REASONABLE PRI CE IN THE MARKET. WHERE INCOME GENERATED ON SALE OF PR ODUCT IS ONLY INCIDENTAL TO THE MAIN OBJECT. THE LD. AR REFERRED TO THE RULE 17A OF IT RULES IN RESPECT OF MAINTENANCE OF ACCOUNTS, WHICH THE SOCIETY HAS COM PLIED. WE FOUND THE LD. CIT(EXEMPTIONS) HAS VIEWED THE SOC IETY FROM THE BUSINESS ACTIVITY ANGLE ONLY. WHEREAS THE ASSOCIATION/SOCIETY REQUIRED FUNDS TO TAKE CARE THE MENTALLY HANDICAPPED CHILDREN WHICH IS GREATEST SER VICE RENDERED TO THE HUMANITY. THE LD. CIT(EXEMPTIONS) OBSERVED THAT THE SOCIETY HAS NOT PROVED THE GENUIN ENESS 6 ITA NO. 1064/HYD/2016 OF THE ACTIVITY. BUT WE ON PERUSAL OF THE PAPER BO OK AND DETAILS OF ACTIVITIES REFERRED AT PAGE 46 TO 78 OF THE PAPER BOOK ARE SATISFIED THAT THE SOCIETY IS WORKING FOR THE BENEFIT OF MENTALLY HANDICAPPED CHILDREN AND GENUINENESS CA NNOT BE DOUBTED. WE ARE OF THE OPINION THAT THE REVENU E SHALL VERIFY THE DOCUMENTS AND SHALL WEIGH THE BENEFIT WH ICH THIS SOCIETY IS PROVIDED TO MENTALLY HANDICAPPED CH ILDREN AND FURTHER THE CIT(EXEMPTIONS) IS NOT JUSTIFIED IN REJECTING THE REGISTRATION UNDER 12A ASSUMING THE ACTIVITIES ARE COMMERCIAL IN NATURE AND LACK GENUINENESS. THE LD. AR HAS VERY EMPHATICALLY EXPLAINED THE ACTIVITIES ALON G WITH PHOTOGRAPHS WHICH CANNOT BE DISBELIEVED. ACCORDING LY IN THE INTEREST OF THE JUSTICE WE SET ASIDE THE ORDER OF THE CIT(EXEMPTIONS) AND DIRECT THE REGISTRATION UNDER 1 2A OF THE IT ACT AS PER THE PROVISIONS OF LAW AND SHALL P ROVIDE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIA TE WITH MATERIAL INFORMATION BEFORE THE CIT(EXEMPTIONS) AND THE ASSESSEE SHALL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER. 8. IN THE RESULT THE ASSESSEES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 22 ND FEBRUARY, 2017. SD/- SD/- (B. RAMAKOTAIAH) (G.PAVAN KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 22 ND FEBRUARY, 2017 7 ITA NO. 1064/HYD/2016 KRK 1) ABHILASHA ASSOCIATION C/O K. VESANTKUMAR, A.V. RAGH U RAM, P. VINOD, M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500 001. 2) CIT(E) HYDERABAD 3) ITO(E) -II, WARD-3, HYDERABAD 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., H YDERABAD. 5) GUARD FILE