Mahor Vaish (Mahajan) Sewa Sansthan, Agra V. C.I.T.-II, Agra

ITA 111/AGR/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5926 (ITAT-AGRA)
• Duration Of Justice: 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-06-2014
• Assessment Year: misc
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJI T SINGH
• Assessee Lawyers: RAKESH JAIN
• Keywords: Charitable institution
• Section: 80G; 12A; 12

Judgement Text

I.T.A. NO.: 111/AGRA/2014 ASSESSMENT YEAR: NOT SPECIFIED PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA [CORAM : BHAVNESH SAINI JM AND PRAMOD KUMAR AM] I.T.A. NO.:111/AGRA/2014 ASSESSMENT YEAR: --- MAHOR VAISH (MAHAJAN) SEWA SANSTHAN .APPELLANT B 786, KAMLA NAGAR, AGRA [PAN: AACTM8743N] VS. COMMISSIONER OF INCOME TAX II AGRA ..RESP ONDENT APPEARANCES BY: RAKESH JAIN, FOR THE APPELLANT INDERJIT SINGH, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 10, 2014 DATE OF PRONOUNCING THE ORDER : JUNE 30, 2014 O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 30 TH APRIL 2014, PASSED BY LEARNED COMMISSIONER OF INCOME TAX-II AGRA, DECLINING GRANT OF APPROVAL FOR THE PURPOSES OF SECTION 80 G OF THE INCOME TAX ACT, 1961. 2. THE APPLICATION WAS DECLINED BY THE LEARNED COMM ISSIONER ON THE SHORT GROUND THAT SINCE THE ASSESSEE INSTITUTION HAS SPENT RS 49,54,0 00, FOR PURCHASE OF LAND AND CONSTRUCTION OF A COMMUNITY HALL, THE USE OF SUCH A COMMUNITY HA LL FOR COMMERCIAL PURPOSES CANNOT BE RULED OUT. LEARNED COMMISSIONER HAS ALSO OBSERVED T HAT ONLY AN AMOUNT OF RS 10,240 HAS BEEN SHOWN TO HAVE BEEN SPENT ON ORPHANAGE EXPENSE S AND THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE OF ANY SIGNIFICANT CHARITABLE ACTIVITY. WITH THESE OBSERVATIONS, HAVING NOTED THAT ALMOST ENTIRE FUNDS HAVE BEEN USED TOWAR DS CONSTRUCTION OF COMMUNITY HALL AND THAT THE APPLICANT DOES NOT FULFIL CONDITIONS LAID DOWN IN CLAUSE (I) TO (V) OF SUB SECTION (5) OF SECTION 80 G, LEARNED COMMISSIONER REJECTED THE APP LICATION. THE ASSESSEE IS AGGRIEVED OF THE STAND OF THE LEARNED COMMISSIONER, AND IS IN AP PEAL BEFORE US. I.T.A. NO.: 111/AGRA/2014 ASSESSMENT YEAR: NOT SPECIFIED PAGE 2 OF 5 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 4. WE FIND THAT THAT THE REQUIREMENT FOR GRANT OF A PPROVAL IS SET OUT UNDER RULE 11 AA OF THE INCOME TAX RULES WHICH PROVIDES AS FOLLOWS : REQUIREMENTS FOR APPROVAL OF AN INSTITUTION OR FUND UNDER SECTION 80G. (1) THE APPLICATION FOR APPROVAL OF ANY INSTITUTION OR FUND UNDER CLAUSE (VI) OF SUB-SECTION (5) OF SECTION 80G SHALL BE IN FORM NO. 10G AND SHALL BE MADE IN TRIPLICATE. (2) THE APPLICATION SHALL BE ACCOMPANIED BY THE FOL LOWING DOCUMENTS, NAMELY : (I) COPY OF REGISTRATION GRANTED UNDER SECTION 12A OR COPY OF NOTIFICATION ISSUED UNDER SECTION 10(23) OR 10(23C); (II) NOTES ON ACTIVITIES OF INSTITUTION OR FUND SIN CE ITS INCEPTION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS; (III) COPIES OF ACCOUNTS OF THE INSTITUTION OR FUND SINCE ITS INCEPTION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS. (3) THE COMMISSIONER MAY CALL FOR SUCH FURTHER DOCU MENTS OR INFORMATION FROM THE INSTITUTION OR FUND OR CAUSE SUCH INQUIRIES TO BE MADE AS HE MAY DEEM NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF THE ACTIVITIES OF SUCH INSTITUTION OR FUND. (4) WHERE THE COMMISSIONER IS SATISFIED THAT ALL TH E CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80 G ARE FULFILLED BY THE INSTITUTION OR FUND, HE SHALL RECORD SUCH SATISFACTION IN WRITI NG AND GRANT APPROVAL TO THE INSTITUTION OR FUND SPECIFYING THE ASSESSMENT YEAR OR YEARS FOR WHICH THE APPROVAL IS VALID. (5) WHERE THE COMMISSIONER IS SATISFIED THAT ONE OR MORE OF THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SE CTION 80G ARE NOT FULFILLED, HE SHALL REJECT THE APPLICATION FOR APPROVAL, AFTER RE CORDING THE REASONS FOR SUCH REJECTION IN WRITING: PROVIDED THAT NO ORDER OF REJECTION OF AN APPLICATI ON SHALL BE PASSED WITHOUT GIVING THE INSTITUTION OR FUND AN OPPORTUNITY OF BE ING HEARD. (6) THE TIME-LIMIT, WITHIN WHICH THE COMMISSIONER S HALL PASS AN ORDER EITHER GRANTING THE APPROVAL OR REJECTING THE APPLICATION SHALL NOT EXCEED SIX MONTHS FROM THE DATE ON WHICH SUCH APPLICATION WAS MADE: PROVIDED THAT IN COMPUTING THE PERIOD OF SIX MONTHS , ANY TIME TAKEN BY THE APPLICANT IN NOT COMPLYING WITH THE DIRECTIONS OF T HE COMMISSIONER UNDER SUB- RULE (3) SHALL BE EXCLUDED. I.T.A. NO.: 111/AGRA/2014 ASSESSMENT YEAR: NOT SPECIFIED PAGE 3 OF 5 5. IT IS ALSO USEFUL TO TAKE A LOOK AT THE SCOPE OF SECTION 80 G (5) , WHICH FOR READY REFERENCE, IS REPRODUCED BELOW : (5) THIS SECTION APPLIES TO DONATIONS TO ANY INSTIT UTION OR FUND REFERRED TO IN SUB- CLAUSE (IV) OF CLAUSE (A) OF SUB- SECTION (2), ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF IT FULFILS THE FOLL OWING CONDITIONS, NAMELY:-- (I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME, S UCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE P ROVISIONS OF SECTIONS 11 AND 12 OR CLAUSE (22) OR CLAUSE (22A) OR CLAUSE (23) OR CLAUSE (23AA)] 5 OR CLAUSE (23C)] OF SECTION 10: PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, THE CONDITION THAT SUCH INCO ME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 1 1 SHALL NOT APPLY IN RELATION TO SUCH INCOME, IF,- (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOK S OF ACCOUNT IN RESPECT OF SUCH BUSINESS; (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND A RE NOT USED BY IT, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES OF SUCH BUSINESS; AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKI NG THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARATE BOOKS OF A CCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE USED, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES OF SUCH BUSINESS; (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED- DOES NOT, OR THE RULES GOVERNING THE INSTITUTION OR FUND DO N OT, CONTAIN ANY PROVISION FOR THE TRANSFER OF APPLICATION AT ANY TIME OF THE WHOL E OR ANY PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE O THER THAN A CHARITABLE PURPOSE; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCO UNTS OF ITS RECEIPTS AND EXPENDITURE; (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED A S A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 18 608 (21 OF 1860 ), OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY P ART OF INDIA OR UNDER SECTION 25 OF THE COMPANIES ACT, 19569 (1 OF 1956 ), OR IS A UNIVERSITY ESTABLISHED BY LAW, OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGN ISED BY THE GOVERNMENT OR BY A UNIVERSITY ESTABLISHED BY LAW, OR AFFILIATED TO A NY UNIVERSITY ESTABLISHED BY LAW, 10 OR IS AN INSTITUTION APPROVED BY THE CENTRAL GOVER NMENT FOR THE I.T.A. NO.: 111/AGRA/2014 ASSESSMENT YEAR: NOT SPECIFIED PAGE 4 OF 5 PURPOSES OF CLAUSE (23) OF SECTION 10,] OR IS AN IN STITUTION FINANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTHORITY; AND (VI) IN RELATION TO DONATIONS MADE AFTER THE 31ST DAY O F MARCH, 1992 , THE INSTITUTION OR FUND IS FOR THE TIME BEING APPROVED BY THE COMMISSIONER IN ACCORDANCE WITH THE RULES 3 MADE IN THIS BEHALF: PR OVIDED THAT ANY APPROVAL SHALL HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS , NOT EXCEEDING FIVE ASSESSMENT YEARS, AS MAY BE SPECIFIED IN THE APPROV AL. 6. IT IS THUS CLEAR THAT SO FAR AS POSSIBILITY OF D OING ANY COMMERCIAL ACTIVITY IS CONCERNED, WHICH IS SUBSTANCE OF LEARNED COMMISSIONERS REJECT ION OF APPLICATION, THERE IS NOTHING IN SECTION 80 G (5) WHICH CAN JUSTIFY REJECTION OF APP LICATION ON THAT BASIS. ALL THAT SECTION 80G(5)(I) STATES IS THAT WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDE R THE PROVISIONS OF SECTIONS 11 AND 12 OR CLAUSE (22) OR CLAUSE (22A) OR CLAUSE (23) OR CLAUSE (23AA)] OR CLAUSE (23C)] OF SECTION 10. THERE ARE CERTAIN OTHER FINE POINTS ON THIS ISSUE B UT THERE IS NO NEED TO GO INTO ALL THOSE ISSUES AS UNDISPUTEDLY, THERE IS NO SUCH INCOME ON THE FACTS OF THIS CASE. THERE MAY BE A POSSIBILITY OF ENGAGING IN A COMMERCIAL ACTIVITY , WITH THE HELP OF COMMUNITY CENTRE THE ASSESSEE IS BUILDING, BUT THIS POSSIBILITY, EVEN IF THAT BE SO, CANNOT BE REASON ENOUGH TO DECLINE THE APPLICATION FOR REGISTRATION UNDER SECT ION 80 G. LEARNED COMMISSIONERS ACTION IS A CLASSIC EXAMPLE OF PROCEEDING ON THE BASIS OF SUR MISES AND CONJECTURES AND ON THE BASIS OF IRRELEVANT CONSIDERATIONS. WHAT COMMISSIONER NEE DS TO DO IN SUCH CASES IS VERY WELL ELABORATED UPON IN RULE 11 AA REPRODUCED EARLIER IN THIS ORDER. LEARNED COMMISSIONER, SHOULD, INTER ALIA, EXAMINE (I) COPY OF REGISTRATIO N GRANTED UNDER SECTION 12A OR COPY OF NOTIFICATION ISSUED UNDER SECTION 10(23) OR 10(23C) ; (II) NOTES ON ACTIVITIES OF INSTITUTION OR FUND SINCE ITS INCEPTION OR DURING THE LAST THREE Y EARS, WHICHEVER IS LESS; AND (III) COPIES OF ACCOUNTS OF THE INSTITUTION OR FUND SINCE ITS INCEP TION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS. IN CASE LEARNED COMMISSIONER IS NOT SATISF IED WITH SUCH MATERIAL, IT IS OPEN TO HIM TO CALL FOR SUCH FURTHER DOCUMENTS OR INFORMATION FROM THE INSTITUTION OR FUND OR CAUSE SUCH INQUIRIES TO BE MADE AS HE MAY DEEM NECESSARY IN OR DER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF SUCH INSTITUTION O R FUND. IN THE IMPUGNED ORDER, HOWEVER, THERE IS NOT EVEN A WHISPER ABOUT THE NOTE ON ACTIV ITIES ON THE INSTITUTION NOR ON WHY IS THE LEARNED COMMISSIONER NOT SATISFIED ABOUT FACTS SET OUT IN THESE NOTES AND OTHER INFORMATION SUBMITTED BY THE ASSESSEE INSTITUTION. THE ASSESSEE HAS FILED ALL THESE DETAILS BEFORE US AS WELL, BUT WE ARE NOT REALLY INCLINED TO DEAL WITH A LL THESE ASPECTS OF THE MATTER AT THIS STAGE. IN OUR CONSIDERED VIEW, THE RIGHT COURSE OF ACTION IS TO REMIT THE MATTER TO THE FILE OF THE LEARNED COMMISSIONER FOR FRESH ADJUDICATION IN THE LIGHT OF THE LEGAL POSITION, INCLUDING AS SET OUT I.T.A. NO.: 111/AGRA/2014 ASSESSMENT YEAR: NOT SPECIFIED PAGE 5 OF 5 ABOVE, BY WAY OF A SPEAKING ORDER AND AFTER GIVING YET ANOTHER OPPORTUNITY OF HEARING TO THE ASSESSEE. WE DIRECT SO. 7. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT TODAY ON 30 TH DAY OF JUNE, 2014. SD/- SD/- BHAVNESH SAINI PRA MOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AGRA, THE 30 TH DAY OF JUNE, 2014. COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA