M/s. A R Rural Energetic Trust, CHENNAI V. ITO, Madurai

ITA 113/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52072 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-11-2011
• Assessment Year: misc
• Appeal Filed On: 25-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: S SRIDHAR
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NOS. 112 & 113/MDS/2011 M/S A.R. RURAL ENERGETIC TRUST, 161, LIG COLONY, LAKE VIEW RD, K.K. NAGAR, MADURAI 625 020. PAN : AACTA7421K (APPELLANT) V. THE INCOME TAX OFFICER, WARD II(4), MADURAI. (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : DR. I. VI JAYAKUMAR, CIT-DR DATE OF HEARING : 03.11.2011 DATE OF PRONOUNCEMENT : 11.11.2011 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE. FIRST O NE IS THE APPEAL AGAINST DENIAL OF APPROVAL UNDER SECTION 80G OF INCOME-TAX ACT, 1961 (IN SHORT THE ACT). SECOND ONE IS AGAI NST DENIAL OF REGISTRATION UNDER SECTION 12AA OF THE ACT. I.T.A. NOS. 112 & 113/MDS/11 2 2. LD. CIT-I, MADURAI HAD DENIED THE ASSESSEE APPRO VAL UNDER SECTION 80G OF THE ACT FOR A REASON THAT ASSESSEE W AS NOT GIVEN REGISTRATION UNDER SECTION 12AA OF THE ACT. FOR DE NYING REGISTRATION UNDER SECTION 12AA OF THE ACT, THE REASON GIVEN BY LD. CIT WAS AS UNDER :- 3. THE APPLICANT TRUST WAS CREATED BY ONE DR. M. SRI NIVASAN, OF MADURAI, ALONG WITH FOUR OTHERS. DR. M. SRINIVA SAN WAS DECLARED AS THE FOUNDER-CUM-MANAGING TRUSTEE OF THE APPLICANT TRUST. IT IS OBSERVED FROM THE COPIES OF ACCOUNTS FILED FOR THE FINANCIAL YEAR ENDING 31.03.2010 THAT THE APPLICANT TRUST HAS SPENT MOST OF ITS RECEIPTS TOWARDS ADMINISTRATIVE E XPENSES. IT IS ALSO FOUND THAT THE MEDICAL RELIEF BILLS PRODUCED A RE IN THE NAME OF A.R. HOSPITAL P. LTD. OTHER EXPENSES ARE SELF-M ADE VOUCHERS. THOUGH THE APPLICANT TRUST CLAIMED TO HAVE CARRIED OUT CHARITABLE ACTIVITIES, IT DID NOT FILE ANY NOTES ON ACTIVITIES OR ANY DOCUMENT EVIDENCE TO PROVE ITS CLAIM. THEREFORE, T HE GENUINENESS OF THE EXISTENCE OR ITS CHARITABLE ACTI VITIES, IF ANY, CLAIMED TO HAVE BEEN CARRIED OUT IS NOT ESTABLISHED . THEREFORE, THE APPLICANT TRUST DID NOT FULFILL THE CONDITIONS FOR GRANT OF REGISTRATION U/S. 12AA OF THE ACT. 3. LEARNED A.R. SUBMITTED THAT ASSESSEE-TRUST WAS F OUNDED ONLY ON 8.1.2010 AND DURING THE SHORT PERIOD SINCE ITS F ORMATION, IT WAS ADMITTED BY LD. CIT HIMSELF THAT ASSESSEE HAD GIVEN MEDICAL RELIEF. AS PER THE LEARNED A.R., MEDICAL RELIEF WAS CHARITA BLE ACTIVITY. JUST BECAUSE SUBSTANTIAL PART OF ITS RECEIPTS WERE USED FOR MEETING I.T.A. NOS. 112 & 113/MDS/11 3 ADMINISTRATIVE EXPENSES, THE REGISTRATION UNDER SEC TION 12AA OF THE ACT COULD NOT HAVE BEEN DENIED. 4. PER CONTRA, LEARNED D.R. SUBMITTED THAT ASSESSEE HAD FAILED TO SUBMIT DETAILS OF ITS ACTIVITIES NOR ANY DOCUMENTAR Y PROOF OF THE CHARITABLE NATURE OF ITS ACTIVITIES. 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. LD. CIT IN HIS ORDER DATED 7.10.2010 DENYING REGIST RATION UNDER SECTION 12AA OF THE ACT, AT PARA 2 HAS ADMITTED THA T THE OBJECTS OF THE ASSESSEE WERE CHARITABLE IN NATURE. THE ONLY R EASON WHY HE DENIED THE REGISTRATION WAS THAT THE ACTIVITIES CAR RIED OUT WERE NOT GENUINE. IT IS TO BE NOTED THAT ASSESSEE WAS CREAT ED BY A TRUST DEED DATED 8.1.2010 AND DURING THE SHORT PERIOD OF NINE MONTHS, IT MIGHT NOT HAVE BEEN STARTED SUBSTANTIAL ACTIVITIES. BUT, NEVERTHELESS, LD. CIT HIMSELF HAS MENTIONED THAT MEDICAL RELIEF BILLS WERE PRODUCED BY THE ASSESSEE, BUT THESE WERE DISBELIEVED ONLY FOR A REASON THAT THE BILLS WERE IN THE NAME OF A HOSPITAL. JUST BECAUSE PART OF RECEIPTS WERE UTILIZED FOR ADMINISTRATIVE EXPENSES, IT COULD NOT BE CONCLUDED THAT ASSESSEE WAS DOING ANY NON-CHARITABLE ACTIVITY , ESPECIALLY SINCE I.T.A. NOS. 112 & 113/MDS/11 4 AT THE INITIAL STAGES OF AN ORGANIZATION, ADMINISTR ATIVE EXPENSES COULD BE A NOTCH HIGHER. ADMITTEDLY, ASSESSEE WAS NOT CA RRYING OUT ANY BUSINESS. THERE IS NO CASE FOR LD. CIT THAT THE AS SESSEE WAS NOT A GENUINE TRUST. THERE IS ALSO NO CASE FOR THE REVEN UE THAT NO ACTIVITY WAS CARRIED OUT BY THE ASSESSEE. IN CASE AT A LATE R POINT OF TIME, IF IT IS FOUND THAT ASSESSEE WAS CARRYING ON ACTIVITIES W HICH WERE NOT IN ACCORDANCE WITH ITS OBJECTS, LD. CIT HAS POWERS VES TED WITH HIM TO WITHDRAW THE REGISTRATION. WE ARE OF THE OPINION T HAT ASSESSEE WAS UNJUSTIFIABLY DENIED REGISTRATION UNDER SECTION 12A A OF THE ACT AS ALSO APPROVAL UNDER SECTION 80G OF THE ACT. FOR COMING TO THIS CONCLUSION, WE ARE FORTIFIED BY THE DECISION OF HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF DIT V. MEENAKSHI AMMA ENDOWMEN T TRUST (2011) 50 DTR 243 WHERE IT WAS HELD THAT ONE CANNOT EXPECT A TRUST TO CARRY OUT CHARITABLE ACTIVITY IMMEDIATELY ON ITS FORMATION AND CONCERNED AUTHORITY SHOULD NOT COME TO A CONCLUSION THAT TRUST WAS NOT INTENDING TO DO ANY CHARITABLE ACTIVITY. THEIR LORDSHIP ALSO HELD THAT NATURE OF ACTIVITIES OF A TRUST ARE TO BE CONS IDERED IF A REGISTRATION IS SOUGHT LONG AFTER FORMATION OF A TRUST OR AFTER EXPIRY OF THE EARLIER REGISTRATION. WE, THEREFORE, QUASH THE ORDERS OF L D. CIT DENYING THE I.T.A. NOS. 112 & 113/MDS/11 5 ASSESSEE REGISTRATION UNDER SECTION 12AA AND APPROV AL UNDER SECTION 80G OF THE ACT. LD. CIT IS DIRECTED TO GRA NT THE ASSESSEE REGISTRATION UNDER SECTION 12AA AND APPROVAL UNDER SECTION 80G OF THE ACT. 6. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED. THE ORDER WAS PRONOUNCED IN THE COURT ON 11 TH NOVEMBER, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 11 TH NOVEMBER, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT-I, MADURAI (4) D.R. (5) GUARD FILE