M/s Embassy Charitable Trust , Bangalore V. Commissioner of Income Tax (Exemptions) , Bangalore

ITA 110/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6166 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 18-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C SUND ARA R AO
• Assessee Lawyers: S VENKATRAM
• Keywords: Charitable institution; Condonation of delay
• Section: 80G; 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI G. MANJUNATHA , ACCOUNTANT MEMBER ITA NO S . 110 & 111 /BANG/2019 ASSESSMENT YEAR : N.A. M/S EMBASSY CHARITABLE TRUST, ROYAL OAKS, EMBASSY GOLF LINKS BUSINESS PARK, OFF INTERMEDIATE RING ROAD, BANGALORE 560 037. PAN: AAATE 8866G VS. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS), BANGALORE. APP ELL ANT RESPONDENT APPELLANT BY : SHRI S. VENKAT RAM , CA R E SPONDENT BY : SHRI C. SUND ARA R AO, CIT(DR) DATE OF HEARING : 14 . 03.2019 DATE OF PRONOUNCEMENT : 15 .0 3 .201 9 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER ITA NO.110/BANG/2019 & ITA NO.111/BANG2019 ARE TW O APPEALS BY THE ASSESSEE AGAINST TWO ORDERS BOTH DATED 28.9.201 8 OF CIT(EXEMPTIONS), BANGALORE REFUSING APPROVAL U/S.80G(5)(VI) OF THE I NCOME TAX ACT, 1961 (ACT) AND REGISTRATION U/S.12AA(1)(B)(II) OF THE AC T RESPECTIVELY. 2. THERE IS A DELAY OF ABOUT 52 DAYS IN FILING BOTH THESE APPEALS BY THE ASSESSEE. IN AN APPLICATION FOR CONDONATION OF DEL AY IN FILING THE APPEALS, IT HAS BEEN EXPLAINED THAT THE IMPUGNED ORDERS WERE SE RVED ON THE ITA NOS. 110& 111/BANG/2019 PAGE 2 OF 6 ASSESSEE ON 28.9.2018 AND THEREFORE THE APPEALS BEF ORE THE TRIBUNAL AGAINST THOSE ORDERS OUGHT TO HAVE BEEN FILED WITHI N 60 DAYS OF RECEIPT OF ORDER IN TERMS OF SEC.253 OF THE ACT. IT APPEARS T HAT THE ASSESSEE WAS NOT AWARE OF THE FACT THAT THE IMPUGNED ORDERS WERE APP EALABLE AND APPROACHED A CONSULTANT TO MAKE ANOTHER APPLICATION FOR GRANT OF REGISTRATION U/S.12AA AND 80G OF THE ACT. HE ADVISE D THAT APPEAL CAN BE FILED AGAINST THE IMPUGNED ORDERS BEFORE THE TRIBUN AL. THEREUPON, THESE APPEALS WERE FILED BY THE ASSESSEE BEFORE THE TRIBU NAL ON 18.1.2019 RESULTING IN A DELAY OF 52 DAYS IN FILING THE APPEA LS. 3. WE HAVE CONSIDERED THE REASONS GIVEN IN THE PETI TION FOR CONDONATION OF DELAY IN FILING APPEALS WHICH IS DUL Y SUPPORTED BY AN AFFIDAVIT OF P.R. RAMAKRISHNAN, ONE OF THE TRUSTEE OF THE ASSESSEE. UNDER SIMILAR CIRCUMSTANCES, DELAY IN FILING APPEAL WAS C ONDONED BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF UNITED CHRISTMAS CELEBRATIONS COMMITTEE CHARITABLE TRUST VS. ITO (2017) 83 TAXMAN N.COM 293 (MADRAS) & HOSANNA MINISTRIES VS. ITO (2017) 80 TAXMANN.COM 173 (MADRAS) . WE ARE OF THE VIEW THAT THE DELAY IN FILLING THE APPEA L IS NOT DELIBERATE OR WANTON, BUT DUE TO BONA FIDE CIRCUMSTANCES SET OUT ABOVE. WE THEREFORE CONDONE THE DELAY IN FILING THE APPEALS. 4. FIRST WE SHALL TAKE UP FOR CONSIDERATION ITA NO. 111/BANG/2019, APPEAL OF THE ASSESSEE AGAINST REFUSAL OF REGISTRAT ION U/S.12AA OF THE ACT. 5. THE ASSESSEE IS A TRUST WHICH CAME INTO EXISTENC E PURSUANT TO A REGISTERED DEED OF TRUST DATED 21.2.2018 EXECUTED B Y M/S. EMBASSY PROPERTY DEVELOPMENTS PRIVATE LIMITED. THE MAIN OB JECTS FOR WHICH THE TRUST WAS CREATED FOR THE PURPOSE OF ADVANCEMENT OF EDUCATIONAL OBJECTS OR PURPOSES. CLAUSE 2(B) OF THE TRUST DEED PROVIDE S THAT THE TRUSTEES AT THEIR DISCRETION USE THE FUND WHOLLY OR IN PART OR PARTS ON SUCH PUBLIC ITA NOS. 110& 111/BANG/2019 PAGE 3 OF 6 EDUCATIONAL PURPOSES INCLUDING SPIRITUAL ACTIVITIES WHICH ARE BEYOND ANY SPECIFIC RELIGION, RESEARCH IN HUMAN CONSCIOUSNESS, WELL BEING AND EDUCATION OF MENTALLY RETARDED CHILDREN ADULTS, RES EARCH IN COLLECTIVE AND COMMUNITY LIVING IN HARMONY, UNITY AND PEACE AND AN Y PURPOSE THAT THE LAW AND PROVISIONS OF INCOME TAX ACT, 1961 REGARD AS ED UCATIONAL PURPOSE. 6. THE ASSESSEE MADE APPLICATIONS ON 20.3.2018 FOR GRANT OF REGISTRATION U/S.12A OF THE ACT IN FORM NO.10A AND FOR GRANT OF APPROVAL U/S.80G OF THE ACT IN FORM NO. 10G. THE CIT(E) BY LETTER DATED 29.8.2018 CALLED UPON THE ASSESSEE TO PRODUCE CERTAIN DOCUMEN TS SUCH AS PROOF OF CHARITABLE ACTIVITIES HAVING BEEN CARRIED OUT SINCE INCEPTION OF THE TRUST, BANK ACCOUNT STATEMENT, LIST OF DONORS AND DEFICIEN CIES REGARDING CERTAIN CLAUSES IN THE TRUST DEED WHICH MAY REQUIRE MODIFIC ATION. THE ASSESSEE DULY COMPLIED AND FILED THE NECESSARY DETAILS. NEC ESSARY AMENDMENTS TO THE TRUST DEED WERE CARRIED OUT AND THE AMENDED TRU ST DEED WAS ALSO FILED. 7. THE CIT(E) IN THE IMPUGNED ORDER REJECTING APPLI CATION FOR GRANT OF REGISTRATION U/S.12A OF THE ACT OBSERVED THAT THE A UTHOR OF THE TRUST WAS A PROPERTY DEVELOPER AND ENGAGED IN COMMERCIAL ACTIVI TIES. ACCORDING TO THE CIT(E), CLAUSE 3 (I) & (II) OF THE TRUST DEED PROV IDED THAT THE TRUST SHALL ERECT, CONSTRUCT AND MAINTAIN TOWNSHIP AND HOUSING AND THEREFORE THE TRUST WAS NOT FORMED WITH CHARITABLE MOTIVE, BUT WITH COM MERCIAL INTENTION. ON THE ABOVE REASON GIVEN FOR REJECTION OF REGISTRATIO N, THE LEARNED COUNSEL FOR THE ASSESSEE HAS POINTED OUT THAT THE RELEVANT CLAU SE HAS TO BE READ IN CONJUNCTION WITH THE PREAMBLE IN CLAUSE-3 OF THE TR UST DEED WHICH CLEARLY LAYS DOWN THAT THE ABOVE ACTIVITIES WERE TO BE CARR IED OUT IN FURTHERANCE OF THE OBJECT OF PROVIDING EDUCATION. THE CIT(E), IN O UR VIEW, HAS OVERLOOKED THE FACT THAT ALL ACTIVITIES SPRING FROM AND ARE TO BE READ IN CONJUNCTION WITH CLAUSE 2 (B) OF THE DEED OF TRUST, WHICH WE HAVE EX TRACTED IN THE EARLIER PART OF THIS ORDER. ITA NOS. 110& 111/BANG/2019 PAGE 4 OF 6 8. ANOTHER REASON GIVEN BY THE CIT(E) FOR REJECTING APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S.12A OF THE A CT WAS THAT CLAUSE 3 (V) OF THE TRUST DEED PERMITTED THE ASSESSEE TO ESTABLISH, PROMOTE ANY INDUSTRIAL AND COMMERCIAL ACTIVITY WITH A CONDITION THAT THE P ROCEEDS FROM SUCH ACTIVITIES SHOULD BE UTILIZED FOR SUPPORTING EDUCAT IONAL ACTIVITIES. ACCORDING TO THE CIT(E), THE ABOVE CLAUSE SHOWED THAT THE OBJ ECTS OF THE ASSESSEE WERE NOT CHARITABLE WITHIN THE MEANING OF SEC.2(15) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTE NTION TO A DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF DIT(E) VS. JITO CHENNAI CHAPTER (2012) 17 TAXMANN.COM 261 (MADRAS) WHEREIN THE HONBLE MADRAS HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL WHICH H ELD THAT REGISTRATION CANNOT BE REFUSED ON THE GROUND OF INCIDENTAL OBJEC TS TO ATTAINMENT OF MAIN OBJECTS BEING COMMERCIAL IN NATURE. 9. THE NEXT REASON GIVEN BY THE CIT(E) FOR DENYING BENEFIT OF REGISTRATION WAS THAT UNDER CLAUSE-5 OF THE DEED OF TRUST THE TRUSTEES HAD POWERS TO SELL AND CONVERT TRUST FUNDS INTO ANY OTH ER PROPERTY PROVIDED THE TRUSTEES ARE AUTHORIZED TO HOLD SUCH PROPERTY IN AC CORDANCE WITH THE OBJECTS OF THE TRUST. SUCH A CLAUSE GIVES ABSOLUTE POWERS TO THE TRUSTEE WHICH WILL RESULT IN TRUST ENGAGING IN NON-GENUINE ACTIVITIES. ON THE ABOVE OBJECTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS RIGHTLY SUBMITTED THAT THE SAID CLAUSE GIVES POWER TO THE TRUSTEE ONLY FOR THE OBJECTS OF THE TRUST AND AT THE STAGE OF REGISTRATION IT CANNOT BE SAID THAT THERE WAS A POSSIBILITY OF MISUSE AND THEREFORE REGISTRATION CANNOT BE GRAN TED. 10. WE ARE OF THE VIEW THAT NONE OF THE REASONS GIV EN FOR REFUSING REGISTRATION TO THE ASSESSEE ARE ACCEPTABLE. THE O BJECTS OF THE ASSESSEE ARE CHARITABLE IN NATURE BEING SOLELY FOR THE PURPO SE OF EDUCATION AND ALL ACTIVITIES SPRING FROM AND ARE TO BE READ IN CONJUN CTION WITH CLAUSE 2 (B) OF THE DEED OF TRUST, WHICH WE HAVE EXTRACTED IN THE E ARLIER PART OF THIS ORDER. ITA NOS. 110& 111/BANG/2019 PAGE 5 OF 6 THERE ARE SUFFICIENT SAFEGUARDS IN THE ACT IN THE E VENT OF THE OBJECT NOT BEING CARRIED OUT IN ACCORDANCE WITH THE DEED OF TR UST OR WHEREVER THERE IS PERSONAL BENEFIT. THERE IS NOTHING BROUGHT ON RECO RD BY THE CIT(E) TO SHOW THE OBJECTS OF THE ASSESSEE ARE NOT CHARITABLE OR T HAT ITS ACTIVITIES ARE NOT GENUINE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE BEEN GRANTED REGISTRATION U/S.12AA OF THE A CT. WE DIRECT THAT THE REGISTRATION U/S.12A BEING ALLOWED TO BE ASSESSEE. 11. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT(E) VS. D.R. RANKA CHARITABLE TRUST (2018) 100 TAXMANN.COM 371(K ARN ) HAS LAID DOWN THAT AT THE TIME GRANT OF REGISTRATION U/S.12A THE CHARITABLE OBJECT OF THE ASSESSEE AND GENUINENESS OF ITS ACTIVITIES HAS TO B E SEEN AND IT IS ONLY IN ASSESSMENT THE ACTUAL ACTIVITIES, WHETHER CHARITABL E OR NOT, HAS TO BE SEEN. SIMILARLY, IN THE CASE OF CIT VS. A.S. KUPPURAJU BROTHERS CHARITABLE FOUNDATION TRUST (2012) 17 TAXMANN.COM 242 (KARN) IT WAS HELD THAT REGISTRATION CANNOT BE REFUSED ON THE GROUND THAT T HE MAIN PURPOSE OF CREATION OF THE TRUST WAS FOR SOME ULTERIOR PURPOSE . THE ABOVE DECISIONS SUPPORT OUR CONCLUSIONS THAT THE ASSESSEE SHOULD BE ALLOWED THE BENEFIT OF REGISTRATION U/S.12A OF THE ACT. MOREOVER, GRANT OF REGISTRATION U/S 12A OF THE ACT, DOES NOT AUTOMATICALLY ENABLE AN ASSESSEE TO CLAIM EXEMPTION U/S 11 & 12 OF THE ACT. THE AO EVEN IN A CASE, WHERE A TRUST OR CHARITABLE ORGANIZATION FOR WHICH REGISTRATION U/S 12A OF THE ACT SUBSISTS HAS TO GO IN TO THE QUESTION, AS TO WHETHER THE INCOME HAS BEEN APPLIED FOR CHARITABLE PURPOSES AND TO THE EXTENT CONTEMPLATED BY SEC.11 & 12 OF THE ACT. EVEN IN A CASE, WHERE THE TRUST OR CHARITABLE ORGANIZATI ON APPLIES ITS INCOME FOR CHARITABLE PURPOSES, BUT DOES NOT HAVE REGISTRATION U/S 12A OF THE ACT, SUCH TRUST OR CHARITABLE ORGANIZATION CANNOT CLAIM THE B ENEFIT OF SEC.11 & 12 OF THE ACT. THUS, THIS APPEAL BY THE ASSESSEE IS ALL OWED. ITA NOS. 110& 111/BANG/2019 PAGE 6 OF 6 12. AS FAR AS ITA NO.110/BANG/2019 IS CONCERNED, TH E SAME IS IN RELATION TO REFUSAL OF APPLICATION FOR GRANT OF APP ROVAL TO THE ASSESSEE U/S.80G OF THE ACT. THE ONLY REASON FOR NOT ACCORD ING APPROVAL WAS THAT THE ASSESSEES APPLICATION OR GRANT OF REGISTRATION U/S.12A WAS NOT GRANTED. NOW THAT THE REGISTRATION U/S.12A OF THE ACT HAS BE EN DIRECTED TO BE ALLOWED, AS A CONSEQUENCE THE APPROVAL U/S.80-G OF THE ACT SHOULD ALSO BE ALLOWED. WE HOLD AND DIRECT ACCORDINGLY. 14. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF MARCH, 2019. SD/- SD/- ( G. MANJUNATHA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 15 TH MARCH, 2019. / D ESAI S MURTHY / COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. C IT(A ) 5. DR, ITAT, BANGALORE. 6. GUAR D FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.