RADHIKA SEVA SANSTHAN TRUST, Jaipur V. CIT, Jaipur

ITA 1065/JPR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59558 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 07-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJEEV SOGANI CAAR
• Keywords: Charitable institution; Competent authority
• Section: 80G; 12A; 12AA; 12; 11; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBU NAL JAIPUR BENCHE S A, JAIPUR BEFORE S/SHRI R.K. GUPTA, JM AND SANJAY ARORA, AM I.T.A NOS. 1065 & 1066/JP/2011 ASSESSMENT YEAR: NOT APPLICABLE RADHIKA SEVA SANSTHAN 3-N, MANGAL MARG, CHHATRASAL NAGAR, MALVIYA NAGAR, JAIPUR [PAN: AABTR 6762M] VS. THE CIT-II, JAIPUR (ASSESSEEAPPELLANT) (REVENUE RESPONDENT) ASSESSEE BY SHRI RAJEEV SOGANI, CA-AR REVENUE BY SHRI SUNIL MATHUR, CIT-DR DATE OF HEARING 15/03/2012 DATE OF PRONOUNCEMENT 26/03/2012 O R D E R PER SANJAY ARORA, AM: THESE ARE A SET OF TWO APPEALS BY THE ASSESSEE, A TRUST CREATED BY A TRUST DEED DATED 26-08-2010, AGITATING THE REJECTION OF ITS APPLICAT ION FOR REGISTRATION U/S. 12AA OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT), AS WELL AS DENIAL OF APPROVAL U/S. 80G(5)(VI) OF THE ACT, BY THE COMMISSIONER OF INCOME TAX-II, J AIPUR (CIT FOR SHORT) VIDE SEPARATE ORDERS OF EVEN DATE, I.E., 04-11-2011. 2. IT WOULD BE RELEVANT TO RECOUNT THE BACKGROU ND FACTS OF THE CASE. THE ASEESEE-TRUST HAD APPLIED FOR THE SAID REGISTRATION ON AN EARLIER DATE AS WELL, WHICH STOOD REJECTED BY THE LD. CIT VIDE HIS ORDER DATED 02-05-2011 FOR THE REA SON THAT OBJECT CLAUSE 4(A) OF THE TRUST DEED INCLUDED AN OBJECT OF A RELIGIOUS NATURE. THAT IS, THE OBJECTS OF THE TRUST BEING PARTLY CHARITABLE AND PARTLY RELIGIOUS, ITS APPLICATION F OR REGISTRATION U/S. 12AA OF THE ACT WAS REJECTED. THE ASSESSEE-TRUST, IN VIEW OF THE SAID O BJECTION BY THE REVENUE, `AMENDED ITS OBJECT CLAUSE 4(A) BY DELETING THE WORD DHARMIK ( MEANING `RELIGIOUS) OCCURRING 2 THEREIN, WHICH WAS INFERRED AS LENDING A RELIGIOUS CHARACTER TO THE INSTITUTION. A FRESH APPLICATION U/S. 12AA OF THE ACT WAS ACCORDINGLY MA DE IN FORM 10A ON 30-05-2011. THE LD CIT, HOWEVER, FOUND THAT THE AMENDMENT TO TH E OBJECT CLAUSE OF THE TRUST DEED WAS NOT VALID AS THE SAME HAD BEEN EFFECTED BY PASSING A RESOLUTION OF THE BOARD OF TRUSTEES ON 06-05-2011. CLAUSE 10 OF THE TRUST DEED, WHICH I S THE ONLY PROVISION IN THE DEED QUA AMENDMENT, ONLY PROVIDES FOR AMENDMENT IN THE RULES FOR THE PROPER MANAGEMENT OF THE TRUST, CONSIDERING ITS OBJECTS AND ACTIVITIES. THAT IS, THE SAID CLAUSE DOES NOT AUTHORIZE THE BOARD TO CHANGE THE OBJECTS OF THE TRUST AS DEFINED IN THE TRUST DEED. FURTHER, THE SAME, IN LAW, COULD ONLY BE EFFECTED THROUGH A COURT OF LAW BY SATISFYING THE REQUIREMENT OF SEC. 92 (3) OF THE CIVIL PROCEDURE CODE, 1908, AS HELD B Y THE HONBLE APEX COURT IN THE CASE OF TRUSTEES OF H.E.H. THE NIZAMS PILGRIMAGE MONEY TRU ST VS. CIT (2000) 243 ITR 676 (SC). THE RELIANCE BY THE ASSESSEE ON THE PROVISION S OF THE INDIAN TRUST ACT, 1882 WOULD BE OF NO ASSISTANCE TO IT AS THE SAID ACT DID NOT A PPLY TO A PUBLIC CHARITABLE TRUST, AS THE ASSESSEEE, BUT ONLY TO A PRIVATE TRUST. THE APPLICA TION U/S. 80G(5) WAS ALSO REJECTED; REGISTRATION U/S. 12A BEING A PRE-REQUISITE FOR THE GRANT OF APPROVAL U/S. 80G(5)(VI) OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . 3.1 BEFORE US, THE MAIN ARGUMENT OF THE LD. AR F OR THE ASSESSEE WAS THAT THERE IS NOTHING IN THE PROVISIONS OF CHAPTER III OF THE ACT WHICH WOULD INDICATE THAT THE OBJECTS OF THE TRUST HAVE TO BE NECESSARILY EITHER WHOLLY C HARITABLE OR WHOLLY RELIGIOUS IN NATURE, I.E., WHICH OPERATES TO PRECLUDE THE CO-EXISTENCE O F CHARITABLE AND RELIGIOUS OBJECTS. RELIANCE WAS PLACED FOR THE PURPOSE ON THE DECISION IN THE CASE OF ADDL. CIT VS. A.A. BIBIJIWALA TRUST (1975) 100 ITR 516 (GUJ.), WHEREIN IT STANDS CATEG ORICALLY HELD THAT SO LONG AS NO PART OF THE INCOME OR CORPUS OF THE TRUS T COULD BE UTILIZED FOR A PURPOSE WHICH IS NEITHER CHARITABLE NOR RELIGIOUS, EXEMPTION U/S. 11(1)(A) OF THE ACT WOULD BE AVAILABLE TO IT. IN FACT, THE REGISTRATION IN CASE OF ANOTHER TRUST, I.E., SHERMAL SONA DEVI CHARITABLE TRUST , DULY REGISTRATION U/S. 12A OF THE ACT, WAS ALSO SOUGHT TO BE SIMILARLY WITHDRAWN ON THE SAME GROUND BY THE OFFICE OF THE SAME COMPETENT AUTHORITY VIDE ITS OFFICE LETTER DATED 17-10-2011 (COPY ON RECORD/PB PAGE 6-7). HOWEVER, O N THE SAID DECISION BEING BROUGHT TO HIS NOTICE, THE LD CIT DROPPED THE PROCEEDINGS U/S. 12AA (3) VIDE HIS ORDER DATED 13- 3 12-2011 (COPY ON RECORD/PB PG. 8). AS REGARDS THE A PPROVAL U/S. 80G OF THE ACT, SEC. 80G(5B) ITSELF PERMITS THE EXPENDITURE ON AN ACTIVI TY OF RELIGIOUS NATURE TO THE EXTENT OF FIVE PERCENT (OF THE INCOME FOR THE YEAR). CLEARLY, THEREFORE, THE LAW ENVISAGES CO- EXISTENCE AND, RESULTANTLY, THE PURSUANCE OF OBJECT S WHICH ARE PARTLY CHARITABLE AND PARTLY RELIGIOUS IN NATURE. THE IMPUGNED ORDERS WERE, THER EFORE, PRAYED FOR BEING VACATED, AND ISSUING APPROPRIATE DIRECTIONS. 3.2 THE LD. CIT-DR, ON THE OTHER HAND, WOULD C ONTEND THAT THE ASSESSEES APPEALS ARE NOT MAINTAINABLE. THIS IS AS THE PRESENT APPEAL IS NOT AGAINST THE ORDER U/S. 12AA(3) DATED 02-05-2011, BUT AGAINST THE SUBSEQUENT ORDER DATED 04-11-2011. THE ASSESSEES ARGUMENTS AS ASSUMED BEFORE THE BENCH CONTEST THE R EASONS STATED IN THE ORDER DATED 02- 05-2011, WHICH IN FACT STANDS ACCEPTED BY IT, AMEND ING THE OBJECT CLAUSE 4(A) BY DELETING THE OBJECTIONABLE WORD DHARMIK OCCURRING THEREIN. AS SUCH, THE ARGUMENT ADVANCED IS MISPLACED. NO INFIRMITY IN THE IMPUGNED ORDER U/S. 12AA OF THE ACT HAS BEEN ADVANCED BY THE ASSESSEE EITHER BEFORE THE COMPETENT AUTHORI TY OR BEFORE THE BENCH. THE ORDER U/S. 80G(5)(VI) IS ESSENTIALLY CONSEQUENTIAL. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. 4.1 THE IMPUGNED ORDER U/S. 12AA(3), AS WELL AS THE ARGUMENT ADVANCED BY THE LD. DR, WHICH COULD NOT BE REBUTTED BY THE LD. AR DURING HE ARING IN SPITE OF BEING CALLED UPON TO DO SO BY THE BENCH, ARE WITHOUT DOUBT VALID. HOWEVE R, THAT WOULD ONLY IMPLY THAT THE ASSESSEES OBJECT CLAUSE 4(A), WHICH ALONE STANDS O BJECTED TO BY THE REVENUE ON ACCOUNT OF THE WORD DHARMIK SPECIFIED THEREIN, CONTINUES TO FORM PART THEREOF. RESTORING, IN CONSEQUENCE, THE ASSESSEES CASE TO ITS ORIGINAL PO SITION, I.E., OF THE VALIDITY OR OTHERWISE IN LAW OF THE CO-EXISTENCE OF CHARITABLE AND RELIGI OUS OBJECTS. THERE IS IN FACT NO DOUBT THAT THE AMENDMENT TO ITS OBJECT CLAUSE WAS OUTSIDE THE COMPETENCE OF THE BOARD (OF TRUSTEES), AS POINTED OUT BY THE LD. CIT (ALSO REFE R CIT V. PALGHAT SHADI MAHAL TRUST (2002) 254 ITR 212 (SC)], BESIDES EVEN THE MANNER O F ITS DOING BEING IMPRESSIBLE IN LAW, AND TOWARD WHICH THE LD. CIT HAS REFERRED TO THE DE CISION IN THE CASE OF TRUSTEES OF 4 H.E.H. THE NIZAMS PILGRIMAGE MONEY TRUST VS. CIT (SUPRA), AGAIN, TO NO REBUTTAL BY THE LD. AR. THAT BEING THE CASE, THE REVENUES ONLY OBJECTION, I.E., APART FROM THE MERITS OF THE ASSESSEES CASE, AS PROJECTED BEFORE US, IS THAT IT HAD ACTUALLY COMPLIED WITH THE ORDER DATED 02-05-2011. BUT THEN, COULD THE DEPARTMENT BE ALLOWED TO BLOW H OT AND COLD AT THE SAME TIME, I.E., TO CONTEND THAT THE CHANGE (IN THE OBJECT CLAUSE) IS NOT VALID AND, AT THE SAME TIME, OBJECT TO THE ASSESSEE PLEADING ITS CASE ON MERITS ON THE BASIS OF THE PRE- AMENDED OBJECTS ? NO DOUBT, THE SAME WOULD GIVE RISE TO A QUESTION OR ISSUE OF DELAY; THERE BEING APPARENTLY NO CHALLENGE TO THE ORDER DA TED 02/5/2011 BY THE LD. CIT. HOWEVER, THE VERY NARRATION OF THE EVENTS, AS AFORE -STATED, WOULD BEAR OUT AND, THUS, CONVEY THE ASSESSEES BONA FIDES IN THE MATTER. THERE IS NO PRESUMPTION IN LAW THAT EVERYONE KNOWS THE LAW (REFER: MOTILAL PADAMPAT SUGAR MILLS V. STATE OF UTTAR PRAD ESH (1979) 118 ITR 326 (SC)). IT IS APPARENT THAT THE A SSESSEE WAS NEITHER AWARE OF THE DECISION BY THE HON'BLE APEX COURT IN RELATION TO T HE MANNER IN WHICH THE AMENDMENT IS TO BE CARRIED OUT, WHICH IT SOUGHT TO DO, IN FACT WITH ALACRITY, NOR EVEN THAT IT IS IN LAW PERMISSIBLE TO RETAIN OBJECTS BEARING CHARITABLE AN D RELIGIOUS NATURE IN ITS CHARTER, I.E., AS HELD BY THE HIGHER COURTS OF LAW. THE DELAY IN CHAL LENGING THE DENIAL OF REGISTRATION U/S. 12A OF THE ACT WITHIN THE PRESCRIBED TIME IN THE PR ESENT CASE, THUS, DESERVES TO BE CONDONED. ON MERITS, EVEN AS CLARIFIED DURING HEARI NG BY THE BENCH, THE ONLY PROHIBITION IN THIS REGARD IS CONTAINED IN SEC. 13(1)(B) OF THE ACT, WHICH EXCLUDES A TRUST OR INSTITUTION CREATED OR ESTABLISHED FOR THE BENEFIT OF ANY PARTI CULAR RELIGIOUS COMMUNITY OR CASTE (SAVE AS LISTED IN EXPLANATION 2 TO THE SECTION), PROVIDING THAT EXEMPTION U/SS. 11 AND 12 WOULD NOT APPLY TO SUCH A CASE. THE SAME IS ADMITTEDLY NO T APPLICABLE IN THE INSTANT CASE. THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISION IN THE CASE OF ADDL. CIT VS. A.A. BIBIJIWALA TRUST (SUPRA) AS WELL AS BY THE SAID COURT IN CIT V. BARKATE SAIFIYAH SOCIETY (1995) 213 ITR 492 (GUJ.). IN FACT, THE TRIBUNAL (C OCHIN BENCH), VIDE ITS THIRD MEMBER DECISION IN THE CASE OF THE SOCIETY OF PRESENTATION SISTERS V. ITO (2009) 121 ITD 422 (COCHIN)(TM), HAS HELD LIKEWISE, AND WHICH, BEING B Y A THIRD MEMBER, IS, IN VIEW OF THE DECISION IN THE CASE DY. CIT V. OMAN INTERNATIONAL BANK SAOG , 100 ITD 285 (MUM.)(SB), BINDING ON THE DIVISION BENCHES OF THE TRIBUNAL. THE SAID THIRD MEMBER 5 DECISION IN FACT STANDS SINCE CONFIRMED BY THE HON' BLE HIGH COURT OF KERALA. THE COCHIN BENCH OF THE TRIBUNAL HAS BEEN CONSISTENTLY TAKING THIS VIEW, FOR WHICH REFERENCE TO ITS DECISION IN THE CASE OF KASYAPA VEDA RESEARCH FOUNDATION VS. CIT, CALICUT (2011) 131 ITD 370 (COCHIN) [ALSO: 11 ITR (TRIB) 468] WOULD AL SO BE RELEVANT. THE REVENUES OBJECTION IN THIS REGARD IS, THUS, WITHOUT THE SANC TION OF LAW. WE DECIDE ACCORDINGLY. 4.2 AS REGARDS THE ORDER U/S. 80G(5)(VI); AGAIN , AS CLARIFIED BY THE BENCH DURING HEARING, THE ASSESSEE IS DIRECTLY HIT BY THE PROVIS ION OF SECTION 80G(5)(II) READ WITH EXPLANATION 3 TO THE SECTION. AS EXPLAINED BY THE HON'BLE APEX C OURT IN THE CASE OF CIT VS. UPPER GANGES SUGAR MILS LTD. (1997) 227 ITR 578 (SC), THE SAID EXPLANATION 3 DOES NOT REQUIRE AN ASCERTAINMENT WHETHER THE WHOLE OR SUBST ANTIALLY THE WHOLE OF THE INSTITUTION OR FUNDS CHARITABLE PURPOSE IS OF A RELIGIOUS NATURE; IT ONLY REQUIRED ASCERTAINING WHETHER ONE PURPOSE WITHIN THE INSTITUTIONS OR FUNDS OVER ALL CHARITABLE PURPOSE IS WHOLLY, OR SUBSTANTIALLY WHOLLY, OF A RELIGIOUS NATURE, AS THE OBJECT `DHARMIK INDEED IS. THERE IS NOTHING IN THE OBJECT CLAUSE TO RESTRICT THE OPERAT ION OF THE WORD DHARMIK, WHICH ITSELF DENOTES `RELIGIOUS, OCCURRING IN THE OBJECT CLAUSE 4(A), WHICH WE HAVE FOUND TO CONTINUE TO FORM PART THEREOF. THE ARGUMENT BY THE LD. AR WI TH REFERENCE TO SUB-SECTION (5B) OF S. 80G, WHICH OPERATES TO OVERRIDE S. 80G(5)(II) AND EXPLANATION 3 TO THE SECTION, IS TO NO EFFECT. THIS IS FOR THE SIMPLE REASON THAT THERE IS NOTHING IN THE OBJECT CLAUSE TO INDICATE A BAR ON THE ASSESSEE-TRUST, LIMITING THE EXPENDITURE ON RELIGIOUS OBJECTS TO 5% OF THE TOTAL INCOME FOR A PARTICULAR YEAR. THE ASSESSEES CLAIM FOR APPROVAL U/S. 80G(5)(VI) IS, THUS, NOT SUSTAINABLE IN LAW. WE, ACCORDINGLY, UPHOLD THE IMPUGNED ORDER DENYING THE APPROVAL THERE-UNDER, THOUGH FOR A DIFFERENT SET OF REASONS. WE DECIDE ACCORDINGLY. 6 5. IN THE RESULT, THE ASSESSEES SUCCEEDS IN IT S APPEAL IN ITA NO. 1065/JP/2011, WHILE FAILS IN ITS APPEAL IN ITA NO.1066/JP/2011. SD/- SD/- (R.K. GUPTA) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: JAIPUR DATED: MARCH 26 , 2012 *MISHRA COPY TO: 1. RADHIKA SEVA SANSTHAN TRUST, JAIPUR 2. THE CIT-II, JAIPUR 3. THE D.R., I.T.A.T. 4. GUARD FILE (ITA NOS.1065 & 1066/JP/2011) . . B Y ORDER (ASSI STANT REGISTRAR) ITAT, JAIPUR BENCHES