Mandd Sobhan, Mangalore V. CIT, Mangalore

ITA 118/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9508 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-08-2009
• Assessment Year: 2008-2009
• Appeal Filed On: 17-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: V SRINIVASAN
• Keywords: Charitable institution
• Section: 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.118/BANG/2009 ASSESSMENT YEAR : 2008-09 MANDD SOBHANN, KALAANGANN, MAKALE SHAKTHINAGAR, MANGALORE 575 016. : APPELLANT VS. THE COMMISSIONER OF INCOME-TAX, MANGALORE. : RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN RESPONDENT BY : SHRI JASON P. BOAZ O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL PREFERRED BY MANDD SOBHANN THE ASSESS EE TRUST IS DIRECTED AGAINST THE REJECTION FOR RENEWAL OF RECOG NITION U/S 80G OF THE ACT BY THE LD.CIT, MANGALORE. 2. THOUGH THE ASSESSEE-TRUST HAS RAISED THREE GROUNDS , THE ESSENCE AND CRUX OF ITS GRIEVANCE IS MAINLY DIRECTED AGAINS T THE REFUSAL TO GRANT RECOGNITION (SIC) RENEWAL OF RECOGNITION U/S 80G OF THE ACT. ITA NO.118/BANG/09 PAGE 2 OF 6 3. THE ASSESSEE-TRUST HAD FURNISHED ITS APPLICATIO N U/S 80G OF THE ACT FOR RENEWAL OF RECOGNITION. THE CIT, VIDE HIS COMM UNICATION DATED 29/12/2008, PROPOSED TO REJECT THE TRUSTS APPLICAT ION FOR RENEWAL IN CONFORMITY WITH THE AMENDED PROVISIONS OF S. 2(15) OF THE ACT THAT AS PER THE TRUSTS INCOME AND EXPENDITURE STATEMEN T, THE TRUST HAS RECEIVED INCOME FROM PROGRAMMES AND SHOWS CONDUCTED , OTHER INCOME AND KALANGAN INCOME RECEIVED ETC, DURING THE PERIOD ENDING 31.3.2006, 31.3.2007 AND 31.3.2008 RESPECTIVELY AND IT SEEMS TO BE IN THE NATURE OF TRADE AND BUSINESS. 3.1. AFTER DUE CONSIDERATION OF THE ASSESSEE-TRUST S SPIRITED ARGUMENT THAT THE TRUST WAS FORMED WITH THE PRIMARY OBJECTS OF PRESERVING AND PROMOTING KONKANI CULTURE AND THE FUNDS RAISED MAIN LY THROUGH DONATIONS, GRANTS AND SUBSIDY, COLLECTION FROM CHARITY SHOWS E TC., AND THAT NO ACTIVITY WAS CARRIED ON IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, THE CIT IN HIS ORDER DATED:20/1/2009, HAD OBSERVED THUS THE INCOME FROM COLLECTION OF CHARITY SHOWS, INCOM E FROM PROGRAMME AND SHOWS CONDUCTED, OTHER INCOME AND KAL AANGANN INCOME RECEIVED ETC. IS IN THE NATURE OF TRADE AND NOT TREATED AS CHARITABLE ACTIVITY. THE TRUST FALLS OUTSIDE THE P URVIEW OF CHARITABLE PURPOSE AS PER THE AMENDED PROVISIONS OF CLAUSE (1 5) OF SECTION 2 OF I.T. ACT FOR THE REASONS MENTIONED IN PARA NO.3 ABOVE, THEREFORE, THE ASSESSEE TRUST IS NOT ELIGIBLE FOR RENEWAL OF R ECOGNITION U/S 80G AND, ACCORDINGLY, THE APPLICATION FOR RECOGNITION U /S 80G IS HEREBY REJECTED. 4. AGGRIEVED, THE ASSESSEE-TRUST HAS COME UP WITH T HE PRESENT APPEAL. IT WAS VEHEMENTLY ARGUED THAT THE ASSESSEE IS A CHA RITABLE ORGANIZATION CARRYING ON THE CHARITABLE ACTIVITIES, ON THE BASIS OF WHICH, THE REVENUE HAD GRANTED RECOGNITION UP-TO 31/3/2008. THE PRIMARY O BJECT OF THE ASSESSEE TRUST WAS TO PRESERVE AND PROMOTE KONKANI CULTURE A MONGST THE KONKANI SPEAKING PEOPLE IRRESPECTIVE OF CASTE, CREED AND RE LIGION AND ALSO FOR ITA NO.118/BANG/09 PAGE 3 OF 6 PROMOTION OF CHARITY AND SERVICE IN THE FIELD OF CU LTURE BESIDES OTHER OBJECTS AS REDUCED IN THE MEMORANDUM OF ASSOCIATION. IT WA S, FURTHER, CONTENDED THAT THE MAIN SOURCES OF FUNDS OF ASSESSEE TRUST WE RE THROUGH DONATIONS, GRANTS AND SUBSIDY FROM GOVERNMENT, MEMBERSHIP FEES FROM THE MEMBERS OF THE PUBLIC, BESIDES FROM CONDUCTING CHARITY SHOW S ETC., THESE ACTIVITIES OF THE ASSESSEE TRUST, IT WAS SUBMITTED, CANNOT BE TERMED AS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AS ALLEGED BY THE CI T IN HIS IMPUGNED ORDER. IN CONCLUSION, IT WAS PLEADED THAT THE MAIN OBJECT OF THE ASSESSEE- TRUST WAS IN THE NATURE OF SERVICE AND ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY WITHOUT ANY PROFIT MOTIVE AND, THEREFORE, THE OBJECTS ARE CHARITABLE WITHIN THE AMBIT OF S. 2(15) OF THE ACT. 5. WE HAVE DULY CONSIDERED THE ARGUMENTS PUT-FORTH BY THE LD. A.R. THE VIEW OF THE LD. D.R PRESENT, DURING THE COURSE OF HEARING, WAS HEARD. WE HAVE ALSO PERUSED THE RELEVANT RECORDS AND THE P APER-BOOK FURNISHED BY THE LD. A R WHICH CONTAINED BALANCE-SHEET, INCOM E AND EXPENDITURE ACCOUNTS, RECEIPTS AND PAYMENTS ACCOUNTS ETC., OF 1 TO 45 PAGES. 5.1. IT COULD BE SEEN FROM THE INCOME AND EXPENDIT URE STATEMENT(S) THAT A LION SHARE OF EXPENSES HAVE BEEN INCURRED BY THE APPELLANT TOWARDS CONDUCTING PROGRAMMES AND SHOWS PROPAGATING THE HER ITAGE OF KONKANI CULTURE, CULTURAL SHOWS ETC. WHICH CANNOT BE TERM ED AS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS AS MADE BY THE CIT. W HEN COLLECTIONS DERIVED FROM SUCH CHARITY SHOWS AND OTHER PROGRAMME S HAVE SINCE BEEN PUMPED INTO PROPAGATING THE CULTURAL HERITAGE OF KO NKANI AND SPENT FOR PUBLIC UTILITY - NOT FOR ANY INDIVIDUAL(S) - CONDUC TING OF SUCH SHOWS WITHOUT ITA NO.118/BANG/09 PAGE 4 OF 6 ANY PROFIT-MOTIVE, WE ARE OF THE CONSIDERED VIEW, I T CANNOT BE CALLED BY ANY STRETCH OF IMAGINATION AS IN THE NATURE OF TRADE. IT IS PERTINENT TO MENTION HERE THAT THE AMENDED PROVISIONS OF SECTION 2(15) O F THE ACT HAD COME INTO FORCE W.E.F. 1.4.2009 WHEREIN THE PROVISO WAS INTRODUCED BARRING ANY ACTIVITY FROM THE SCOPE OF CHARITABLE PURPOSE IF IT INVOLVES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, AND IF ANY PAYMENT IS RECEIVED IN THE NATURE OF CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF ITS NATURE, APPLICATION OR RETENTION OF SUCH REC EIPT BEING IMMATERIAL, WITH RESPECT TO THE FOURTH LIMB OF THE SECTION 2(15) VIZ ., ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THUS WHEN ANY PAYMENT IS RECEIVED ON AN ACTIVITY AND SUCH ACTIVITY FALLS WITH IN THE AMBIT OF TRADE, COMMERCE OR BUSINESS OR SERVICE IN RELATION TO SUCH ACTIVITY, O NLY THEN, IT IS EXCLUDED FROM THE SCOPE OF CHARITABLE PURPOSE IN THE CATEGORY THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THEREFORE T HE ESSENTIAL INGREDIENTS TO REMOVE AN ACTIVITY FROM THE SCOPE OF CHARITABLE PU RPOSE WITH RESPECT TO THE 4 TH LIMP OF SECTION 2(15) VIZ. ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY ARE WHEN RECEIPTS INTERLINKED WITH AN ACTIVITY OF TRADE, BUSINESS, COMMERCE ETC. IN THE CASE BEFORE US NONE OF THE ACTIVITY CONDUCTED BY THE TRUST COULD BE TERMED AS ACTIVITY IN THE NATURE OF TRADE, BUSINESS OR COMMERCE. MOREOVER IT WOULD NOT BE GENE RALLY POSSIBLE TO CONDUCT ANY ACTIVITY WITHOUT GENERATING REVENUE TO SOURCE SUCH ACTIVITY AND THEREFORE WHEN REVENUE IS GENERATED TO SOURCE AN AC TIVITY NOT IN THE NATURE OF TRADE, BUSINESS, COMMERCE ETC., THE RIGOR OF THE PROVISO TO SECTION 2(15) WILL NOT BE ATTRACTED. THE ACT ITSELF IS CLEAR ON T HIS REGARD. ITA NO.118/BANG/09 PAGE 5 OF 6 5.2. THERE IS A STRONG FORCE IN THE OBJECTION RAIS ED BY THE ASSESSEE-TRUSTS COMMUNICATION DATED 16/1/2009 BEFO RE THE LD. CIT THAT THE TRUST WAS FORMED WITH THE PRIMARY OBJECTS OF PR ESERVING AND PROMOTING KONKANI CULTURE AND THE FUNDS RAISED MAINLY THROUGH DONATIONS, GRANTS AND SUBSIDY, COLLECTIONS THROUGH CHARITY SHOWS ETC. AND THAT NO ACTIVITY WAS CARRIED ON IN THE NATURE OF TRADE, COMMERCE AND BUS INESS. ON A PERUSAL OF THE ACCOUNTS FURNISHED BY THE ASSESSEE TRUST, WE CO ULD NOT FIND THAT IT HAD INDULGED IN THE ACTIVITIES OF A TRADE WITH A SOLE PURPOSE OF MAKING A PROFIT. FROM THE STATEMENT OF AFFAIRS OF THE TRUST, IT IS A PPARENT THAT THE APPELLANT TRUST HAS EXPENDED MORE THAN THE FUNDS RAISED FOR C ONDUCTING ITS ACTIVITIES. 5.3. IN OVERALL FACTS AND CIRCUMSTANCES OF THE ISS UE, WE ARE OF THE UNANIMOUS VIEW THAT THE ISSUE SHOULD BE REMITTED BA CK ON THE FILE OF THE CIT WITH A DIRECTION TO CONSIDER THE APPLICATION OF THE ASSESSEE TRUST FOR RENEWAL OF RECOGNITION U/S 80G OF THE ACT, AFRESH. WHILE DOING SO, THE LD.CIT SHALL KEEP IN VIEW THE OBSERVATIONS OF THIS BENCH REFERRED SUPRA. 6. IN THE RESULT, THE ASSESSEE TRUSTS APPEAL IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPTEMBER 2009. SD/- SD/- ( K.P.T. THANGAL) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH SEPTEMBER, 2009. DS/- ITA NO.118/BANG/09 PAGE 6 OF 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.