Haryana Saraswati Hertiage, Panchkula V. Commissiner of income Tax (Exemption), Chandigarh

ITA 1213/CHANDI/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1218 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGJIVAN KUMAR GARG
• Assessee Lawyers: B K NOHARIA
• Keywords: Business income; Charitable institution; Opportunity of being heard
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHA, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 1213/CHD/2016 UNDER SECTION 12AA HARYANA SARASWATI HERITAGE VS. CIT(EXEMPTION), DEVELOPMENT BOARD SCO 217 CR BUILDING 5 TH FLOOR 1 ST FLOOR SECTOR 14, SECTOR-17E,CHANDIGARH PANCHKULA -134113 PAN NO. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. B.K. NOHARIA, CA DEPARTMENT BY: SHRI. JAGJIVAN KUMAR GARG, CIT(DR) DATE OF HEARING : 03/06/2019 DATE OF PRONOUNCEMENT : 04/06/2019 O R D E R PER N.K. SAINI, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 26/09/2016 OF LD. CIT(E)-, CHANDIGARH. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE REJECTION OF APPLICATION MOVED BY THE ASSESSEE FOR GRANT OF REGI STRATION UNDER SECTION 12A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS ACT). 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE IS AN ONGOING ENTITY IN OPERATION SINCE 12/10/2015 AND FURNISHED THE APPLIC ATION IN FORM NO. 10A FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT IN THE OFFICE OF LD. CIT(E), CHANDIGARH. 4. THE LD. CIT(E) DISCUSSED THE AIMS AND OBJECTIVES OF THE SOCIETY IN PARA 2 OF THE IMPUGNED ORDER AND THE PROVISIONS OF THE SECTIO N 12AA OF THE ACT IN PARA 3 TO 5 OF THE AFORESAID ORDER. THE LD. CIT(E) ASKED THE ASSESSEE TO FURNISH CERTAIN DOCUMENTS / CLARIFICATIONS. HE MENTIONED THE QUERIE S AND RESPONSE RECEIVED FROM THE ASSESSEE IN PARA 6 OF THE IMPUGNED ORDER W HICH READ AS UNDER: I. THE PAPERS REVEAL THAT THE APPLICANT HAS BEEN CONST ITUTED AS A BOARD. THE RELEVANT ACT'S DETAILS UNDER WHICH THE BOARD HA S BEEN CONSTITUTED MAY BE PROVIDED. IF THAT BE THE CASE YOU ARE ALSO REQUIRED TO EXPLAIN WHY APPLICATION 2 UNDER THE RELEVANT PROVISIONS OF CHAPTER III OF THE IT. ACT, 1961 HAS NOT BEEN MADE? AS REGARDS THE APPLICANT HAS BEEN CONSTITUTED AS A BOARD IS INCORRECT. IN FACT IT IS THE NAME OF THE SOCIETY WHICH IS REGISTE RED UNDER THE HARYANA REGISTRATION AND REGULATION OF SOCIETIES ACT, 2012 AND COPY OF THE CERTIFICATE DATED 05.09.2015 IS ATTACHED HEREWITH FOR YOUR GOOD SELF. THE SOCIETY WAS NOTIFIED BY THE GOVERNMENT OF HARYANA VIDE NOTIFICATION DATE D 12.10.2015 AND A COPY OF THE NOTIFICATION WAS SUBMITTED TO YOUR GOOD SELF ON 09.09.2016. AS REGARDS APPLICATION UNDER CHAPTER III OF THE ACT IT IS SUBM ITTED THAT THE APPLICANT APPLIED FOR REGISTRATION U/S 12AA OF THE ACT WHICH IS COVER ED UNDER CHAPTER 111 OF THE INCOME TAX ACT, 1961. II. NOTWITHSTANDING THE ABOVE, YOU ARE REQUIRED TO EXPLAIN THE RATIONALE BEHIND CREATION OF THE SOCIETY AND THE STATED OBJEC TS BEHIND THE SAID CREATION. YOU MAY PROVIDE DETAILS OF THE CATEGORY, ENVISAGED BY THE SOCIETY'S REGISTRATION ACT, 1860, UNDER WHICH THE SAME HAS BEEN REGISTERED . A CLEAR EXPOSITION MAY BE MADE HOW THE STATED OBJECTS GET COVERED BY THE D EFINITION OF CHARITABLE PURPOSES ENVISAGED BY SECTION 2(15) OF THE I.T. ACT . WHAT IS THE CHARITY BEING DONE AND WHO ARE INTENDED BENEFICIARIES? AS REGARDS RATIONALE BEHIND THE CREATION OF THE SOC IETY IS TO PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HI STORIC INTEREST COVERED UNDER SECTION 2(15) OF THE INCOME TAX ACT, 1961. IT IS CL ARIFIED THAT AFTER 2012 ALL SOCIETIES ARE REGISTERED UNDER THE MODIFIED ACT OF 2012. THE CHARITY BEING DONE BY THE SOCIETY HAS ALREADY BEEN EXPLAINED IN PARA 1 OF MY SUBMISSION DATED 09.09.2016. III. FURTHER, YOU ARE REQUIRED TO FURNISH DETAILS O F INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSE AS ENVISAGED U/S 11 OF THE I .T. ACT AND INCOME OF INSTITUTION FROM CONTRIBUTIONS AS ENVISAGED U/S 12 OF THE I.T. ACT THAT ARE SOUGHT TO BE EXEMPTED. AS REGARDS DETAIL OF INCOME FROM PROPERTY HELD FOR CHARITABLE PURPOSE AS ENVISAGES U/S 11 OF THE ACT IT IS SUBMITTED THAT TI LL 31.03.2016 THE APPLICANT HAS RECEIVED RS. 301 LAKHS AS GRANT IN AID FROM GOVERNM ENT OF HARYANA AND RS. 1,951/- AS INTEREST FROM THE SAID FUNDS PARKED IN T HE BANK. THE APPLICANT IS AT THE BEGINNING OF THE ACTIVITIES AND EXPECTED TO RECEIVE INCOME FROM THE GRANT IN AID HELP AS PROPERTY FOR CHARITABLE PURPOSE. ACCORDINGL Y IT HAS APPLIED FOR THE REGISTRATION U/S 12AA OF THE ACT. IV. YOU MAY FILE DETAILS OF THE LEVEL OF FINANCIAL ASSISTANCE THAT IS RECEIVED FROM THE GOVERNMENT AND THE WAY THE SAME HAS BEEN U TILIZED FOR THE STATED PURPOSES. CAN THE SAME BE CONSTRUED IN ANY WAY TO B E VOLUNTARY DONATIONS? ARE THERE INSTANCES OF GENERATION OF INCOME FROM TH E ACTIVITIES OF THE SOCIETY THAT NEEDS TO BE EXEMPTED? AS REGARDS DETAILS OF LEVEL OF FINANCIAL ASSISTANCE THAT IS RECEIVED FROM GOVERNMENT AND THE WAY THE SAME HAS BEEN UTILIZED F OR THE STATED PURPOSES I HAVE SUBMITTED THE SAME VIDE PARA 2 OF MY SUBMISSIO N DATED 09.09.2016. IT IS A CORPUS FUND AS IT CAN BE UTILIZED ONLY FOR SARASWAT I HERITAGE REGARDED AS A MONUMENT. YES THE APPLICANTS EXPECT GENERATION OF I NCOME FROM THE ACTIVITIES OF THE SOCIETY THAT NEEDS TO BE EXEMPTED WHICH WILL NO T BE A BUSINESS INCOME FROM ACTIVITY OF TRADE OR COMMERCE BUT VOLUNTARILY CONTR IBUTION ETC. V. PLEASE ELUCIDATE HOW THE FUNCTIONS OF THE SO CIETY ARE CONTROLLED BY THE GOVERNMENT. WHICH IS THE CONTROLLING MINISTRY WITHI N THE STATE GOVERNMENT? THE CONTROLLING MINISTRY WILL BE CULTURAL AFFAIR AN D THE CHAIRMAN OF THE APPLICANT IS CHIEF MINISTER OF HARYANA AS PER CLAUS E 6 OF THE BYE-LAWS OF THE NOTIFICATION DATE 12.10.2016. VI. YOU ARE REQUIRED TO ELUCIDATE WHETHER THE SOCIE TY IS AUTHORIZED TO TAKE DECISIONS INDEPENDENT OF THE GOVERNMENT. IF YES, PL EASE EXPLAIN HOW. INSTANCE MAY BE CITED. AS REGARDS THE APPLICANT IS GUIDED AND AUTHORIZED B Y CLAUSE 7 OF THE BYE- LAWS AS PER NOTIFICATION DATED 12,10.2015. 3 VII. THE COMPOSITION OF THE SOCIETY REVEALS THAT T HE SAME IS DRAWN MAINLY FROM THE GOVERNMENT SET-UP. THERE IS SEEMINGLY NO REPRESENTA TION FROM THE INTENDED BENEFICIARIES NEITHER ARE THE EXPERTS IN THE FIELD ASSOCIATED. IN THIS LIGHT THE COMPOSITION IS RESTRICTIVE AND NOT ENURING TO THE B ENEFIT OF THE GENERAL PUBLIC. THIS PRESUMPTION MAY BE REBUTTED. IT IS CORRECT THAT THE APPLICANT IS A GOVERNMENT SE T UP AND THERE IS NO DEBAR IN THE INCOME TAX ACT, 1961 FROM SUCH SET UP. IT IS PERTINENT TO NOTE THAT GOVERNMENT OFFICIAL ARE FOR THE GENERAL PUBLIC WELF ARE AND THE MAIN OBJECT OF THE APPLICANT IS REJUVENATION OF SARASVATI RIVER AN D IS A MONUMENT OF HISTORIC INTEREST WHICH IS TO BE USED BY THE GENERAL PUBLIC AT LARGE BEING A HERITAGE OF SARASWATI. 5. THE LD.CIT(E) REJECTED THE APPLICATION MOVED BY THE ASSESSEE BY OBSERVING THAT NO EVIDENCE HAD EITHER BEEN PROVIDED HOW SARASWATI HERITAGE FALLS UNDER ANY OF THREE CATEGORIES NAMELY MONUMENT , PLACE OR OBJECTS AND IT HAD BEEN NOTIFIED AS THE MONUMENT. THE LD. CIT(E) WHILE REJECTING THE APPLICATION MOVED BY THE ASSESSEE OBSERVED IN PARA 9 & 10 OF THE IMPUGNED ORDER AS UNDER: 9. IN THE INSTANT CASE IT IS CLEAR THAT THE SOCIETY IS NOT FREE FROM GOVERNMENTAL CONTROL GIVEN ITS COMPOSITION AND FINANCES. THIS IS FURTHER CORROBORATED BY LACK OF A SPECIFIC ANSWER ABOUT THE INCOME OF THE APPLICANT THAT IS SOUGHT TO BE EXEMPTED. IT HAS BEEN CLAIMED THAT THE GRANTS-IN-AI D PROVIDED BY THE GOVERNMENT SHALL BE THE INCOME OF THE SOCIETY. 'GRA NT-IN-AID' IS A TRANSFER OF MONEY FROM THE FEDERAL GOVERNMENT/ STATE GOVERNMENT TO A STATE GOVERNMENT /LOCAL GOVERNMENT OR INDIVIDUAL PERSON FOR THE PURP OSES OF FUNDING A SPECIFIC PROJECT OR PROGRAM. GRANTS IN AIDS CANNOT BY ANY ST RETCH OF IMAGINATION BE CONSTRUED AS VOLUNTARY DONATIONS AS SPECIFIED IN SE CTION 12 OF THE I.T. ACT. FURTHER, THERE ARE NO INDICATIONS THAT THE GRANTS IN AID ARE TO ACT AS CORPUS OF THE SOCIETY HAVING A PERMANENT CHARACTER FROM WHICH INCOME WOUL D ACCRUE TO THE SOCIETY TO AN EXTENT THAT WOULD BE SUFFICIENT FOR ACHIEVING ITS MANDATE. THAT THE SAID GRANT IS NOT CORPUS (AS HAS BEEN CLAIMED IN THE APP LICANT'S RESPONSE) IS EXEMPLIFIED BY THE FACT THAT IT IS KEPT AS CASH BAL ANCE IN THE BANK AND ALSO UTILIZED PARTLY IN THE FORM OF DEVOLUTION TO DISTRI CT LEVEL ORGANIZATIONS FOR HOLDING CULTURAL FUNCTIONS ALBEIT CLAIMED TO BE RELATED TO SARASVATI HERITAGE DEVELOPMENT. CORPUS IS A FUND THAT IS AKIN TO THE C APITAL OF AN ORGANIZATION SOME SORT OF A PERMANENT FUND WHICH CAN BE UTILIZED FOR EARNING INCOME TO REDEEM THE BODY'S FUNCTIONS BUT NOT TO BE UTILIZED FOR DAY TO DAY FUNCTIONS AND WHICH CAN BE UTILIZED ONLY IN EXTREME CIRCUMSTANCES. CLEARLY THE RE IS NO INCOME AS PER THE SCHEME OF SECTIONS 11, 12 OR 13 OF THE ACT THAT COU LD BE EXEMPTED SUBSEQUENT TO 12A REGISTRATION. 10. IN LIGHT OF ALL OF THE ABOVE, THE STATED AIMS A ND OBJECTS ARE NOT HELD TO BE CHARITABLE AND COVERED BY THE PROVISIONS OF SECTION 2(15) OF THE ACT. THE COMPOSITION OF THE SOCIETY, IN THE PRESENT, IS HELD NOT TO BE REPRESENTATIVE AND BROAD-BASED. MOREOVER, REDEEMING GOVERNMENT'S STATU TORY FUNCTIONS THROUGH A SOCIETY (EVEN THOUGH THOSE NECESSARILY HAVE WELFARE IMPERATIVES) CANNOT BE CLAIMED TO BE CHARITY. THE APPLICATION UNDER SECTIO N 12A FOR GRANT OF REGISTRATION IS ACCORDINGLY REJECTED. 6. NOW THE ASSESSEE IS IN APPEAL. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(E) HAD NOT APPRECIATE THE FACTS IN RIGHT PERSPECTIVE AND WRONG LY MENTIONED THAT THE DOCUMENTS / EVIDENCE WERE NOT PRODUCED BEFORE HIM. IT WAS STATED THAT ALL THE 4 DETAILS ASKED BY THE LD. CIT(E) WERE FURNISHED, HOW EVER THE SAME WERE NOT APPRECIATED IN RIGHT PERSPECTIVE BY THE LD. CIT(E). REFERENCE WAS MADE TO PAGE NOS. 1 TO 107 OF THE ASSESSEES COMPILATION. IT WAS EMPHASIZED THAT THE NOTIFICATION OF ARCHEOLOGICAL SITE ON THE BANK OF S ARASWATI RIVER IS PLACED AT PAGE NO. 100 TO 107 OF THE ASSESSEES PAPER BOOK. IT WAS ACCORDINGLY SUBMITTED THAT THE LD. CIT(E) WAS NOT JUSTIFIED IN REJECTING THE APPLICATION MOVED BY THE ASSESSEE FOR REGISTRATION UNDER SECTION 12A OF THE ACT. 8. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR STRONGLY SUPPORTED THE ORDER OF THE LD. CIT(E) AND REITERATED THE OBSERVATIONS MADE THE REIN. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, IT IS NOTICED THAT THE LD. CIT(E) IN PARA 7 OF THE IMPUGNED ORDER MENTIONED TH AT RESPONSE TO THE QUERIES BY THE ASSESSEE HAD BEEN EXAMINED. HOWEVER, IT IS N OT BROUGHT ON RECORD WHAT WAS THE RESPONSE OF THE ASSESSEE AND HOW THE EXPLAN ATION WAS NOT PLAUSIBLE. THE LD. CIT(E) HAS ALSO MENTIONED THAT THE NECESSAR Y EVIDENCE RELATING TO THE NOTIFICATION HAS NOT BEEN PROVIDED ON THE CONTRARY THE STAND OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT ALL THE DETAILS WERE FURN ISHED BEFORE THE LD. CIT(E) WHO HAD NOT TAKEN COGNIZANCE OF THE SAID DOCUMENTS, REF ERENCE WAS MADE TO PAGE NOS. 1 TO 107 OF THE ASSESSEES PAPER BOOK WHI CH ARE THE VARIOUS DOCUMENTS RELATING TO CERTIFICATE FOR REGISTRATION WITH THE REGISTRAR OF THE ASSESSEE DT. 05/09/2015, VARIOUS OTHER NOTIFICATION INCLUDING THE NOTIFICATION OF ARCHEOLOGICAL SITE ON THE BANK OF SARASWATI RIVER E TC. WE THEREFORE BY CONSIDERING THE CONTRADICTORY STAND TAKEN BY THE LD . CIT(E) AND THE LD. COUNSEL FOR THE ASSESSEE DEEM IT APPROPRIATE TO REMAND THIS CASE BACK TO THE FILE OF THE LD. CIT(E) TO BE DECIDED AFRESH IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 04/06/201 9 ) SD/- SD/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT DATED : 04/06/2019 AG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR