M/s Carmel Health Service Society, Adilabad V. Income Tax Officer, Mancherial

ITA 1287/HYD/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6207 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2016
• Assessment Year: misc
• Appeal Filed On: 03-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M JAGDISH BABU
• Assessee Lawyers: J RAJESWAR
• Keywords: Charitable institution
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1287/HYD/2014 M/S CARMEL HEALTH SERVICE SOCIETY, MANCHERIAL PO, ADILABAD DISTRICT. PAN AABTC 3844R VS. DIRECTOR OF INCOME-TAX (EXEMPTIONS), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI J. RAJESWAR REVENUE BY : SHRI M. JAGDISH BABU DATE OF HEARING 06-09-2016 DATE OF PRONOUNCEMENT 14-09-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE DIT(EXEMPTIONS), HYDERABAD DATED 29/04/2014. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A SOCIETY, WHICH IS REGISTERED UNDER ANDHRA PRADESH SOCIETY R EGISTRATION ACT, 35 OF 2001(76 OF 2012), HAS FILED AN APPLICATION IN FORM NO.10A ON 23-10-2013, SEEKING REGISTRATION U/S.12AA OF THE IN COME TAX ACT, 1961 (REFERRED TO AS 'THE ACT' IN SHORT). IN VIEW O F THE SAID APPLICATION, A QUESTIONNAIRE WAS ISSUED VIDE LETTER DATED 31-01- 2014 REQUESTING THE APPLICANT SOCIETY TO PRODUCE ITS ORIGINAL MEMOR ANDUM AND ARTICLES OF ASSOCIATION, FURNISH DETAILED REPLY ON SPECIFIC POINTS AND TO PRODUCE ITS BOOKS OF ACCOUNT, BILLS/ VOUCHERS AND B ANK STATEMENT ETC FOR DIFFERENT ACCOUNTING YEARS FOR VERIFICATION. IN RESPONSE TO SAME, ASSESSEE FILED REPLY TO THE SAID QUESTIONNAIRE AND OTHER INFORMATION. 2 ITA NO. 1287/HYD/14 M/S CARMEL HEALTH SERVICE SOCIETY, MANCHERIAL 3. DURING THE COURSE OF PROCEEDINGS IT WAS FOUND T HAT THE APPLICANT SOCIETY HAS MADE AMENDMENT TO THE OBJECTS OF THE SO CIETY IN ITS MEMORANDUM OF ASSOCIATION. THE AMENDED OBJECT CLAUS E 11 READS AS UNDER: '11. TO PROVIDE ASSISTANCE TO APPROVED FUNDING AGEN CIES IN VERIFICATION OF FINANCIAL STATEMENTS AND PROGRESS R EPORTS OF THE VOLUNTARY ORGANISATION, PERTAINING TO THE SAID DEVE LOPMENT PROJECTS AND PROGRAMME IN INDIA. ' 3.1 THE DIT(E) OBSERVED THAT THE ABOVE OBJECT IS NO T CHARITABLE IN NATURE. IN FACT, SUCH AMENDED OBJECT INCORPORATED B Y THE ASSESSEE SOCIETY IN ITS MEMORANDUM OF ASSOCIATION, IS NON-CH ARITABLE. UNDER THESE CIRCUMSTANCES, AS THE ASSESSEE SOCIETY IS HAV ING OBJECTS OF BOTH CHARITABLE AND NON-CHARITABLE NATURE, IT WILL NOT BE ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT AND CONSEQUENTLY, IT WI LL NOT BE ELIGIBLE FOR REGISTRATION U/S.12A OF THE ACT. 3.2 THE DIT(E) RELIED UPON THE DECISION OF THE HON BLE SUPREME COURT IN YOGIRAJ CHARITY TRUST VS CIT (103 ITR 777) , WHEREIN, IT WAS HELD THAT, IF NO DEFINITE PART OF THE PROPERTY OR I TS INCOME IS ALLOCATED TO CHARITABLE PURPOSES AND IT WOULD BE OPEN TO THE TRUSTEES TO APPLY THE WHOLE INCOME TO , ANY OF THE NON-CHARITABLE OBJ ECTS, NO EXEMPTION CAN BE CLAIMED. ACCORDINGLY, DIT(E) DENIED GRANT OF REGISTRATION U/S 12AA OF THE ACT AND THE APPLICATION FILED BY THE AS SESSEE IN FORM NO. 10A WAS ALSO REJECTED. 4. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US R AISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN APPRECIATING THE FACTS ~ CIRCUMSTANCES OF THE APPEL LANT'S CASE PROPERLY. 2. THE ORDER OF LEARNED DIRECTOR OF INCOME TAX (EXE MPTIONS) REFUSING TO GRANT REGISTRATION U/S 12AA OF THE INCO ME TAX ACT, 1961 IS BAD IN LAW AND NOT BASED ON THE FACTS AND C IRCUMSTANCES OF THE APPELLANT'S CASE. 3 ITA NO. 1287/HYD/14 M/S CARMEL HEALTH SERVICE SOCIETY, MANCHERIAL 3. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN DECIDING THE OBJECT CLAUSE 11 OF MEMORANDUM OF ASSO CIATION AS 'NON-CHARITABLE' AND THEREFORE NOT ELIGIBLE FOR EXE MPTION U/S 11 OF THE ACT AND CONSEQUENTLY, THE APPELLANT IS NOT ELIG IBLE FOR REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961. 4. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN HOLDING THE ANCILLARY AND INCIDENTAL OBJECT CLAUSE 11 OF MEMORANDUM OF ASSOCIATION, WHICH MERELY EXTENDS THE SCOPE OF MAIN CLAUSES 1 TO 10, AS DISTINCT AND SEPARATE CLAU SE AND DECIDING IT AS 'NON-CHARITABLE' 5. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN DECIDING THE ANCILLARY AND INCIDENTAL OBJECT CLAUSE 11 OF MEMORANDUM OF ASSOCIATION AS 'NON-CHARITABLE' WHILE HOLDING THE MAIN CLAUSES 1 TO 10 AS 'CHARITABLE'. 6. WITHOUT ANY PREJUDICE TO THE ABOVE GROUNDS, THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED AND B ECOME PREJUDICIAL IN REFUSING TO GRANT REGISTRATION U/S 1 2AA OF THE INCOME TAX ACT, 1961 TO THE APPELLANT BASED ON THE NATURE (NON- CHARITABLE) OF ONE INCIDENTAL AND ANCILLARY CLAUSE WHEN HE IS SATISFIED WITH THE NATURE (CHARITABLE) OF ALL THE R EMAINING CLAUSES REPRESENTING THE PRIMARY AND DOMINANT OBJECTS OF TH E APPELLANT. 7. ANY OTHER GROUND OR GROUNDS THAT MAY BE URGED BY THE APPELLANT AND/OR HIS COUNSEL AT THE TIME OF PRESENT ING THE CASE BEFORE THE HON'BLE BENCH WITH PRIOR PERMISSION. 5. BEFORE US, THE ASSESSEE FILED A PETITION FOR ADM ISSION OF ADDITIONAL DOCUMENTS, WHICH ARE AS UNDER: 1. MEMORANDUM OF ASSOCIATION OF CARMEL HEALTH SER VICE SOCIETY 2. RULES AND REGULATIONS OF CARMEL HEALTH SERVICE SOCIETY 3. APPLICATION FOR REGISTRATION CERTIFICATE U/S 12 AA OF THE IT ACT. 4. AMENDMENT OF DOCUMENTS OF MOA DATED 20/02/2016, WHEREIN THE PROPOSED TO AMENDMENT TO THE EXISTING CLAUSE 1 1 UNDER IV AIMS AND OBJECTIVES OF THE SOCIETY, IS AS UNDER: PROPOSED: (11) TO PROMOTE AND ASSIST OR AID IN THE PROMOTION OF THE PHYSICAL, MATERIAL, EDUCATIONAL, INTELLECTUA L, SPIRITUAL, MORAL AND CIVIC WELFARE OF THE PEOPLE IRRESPECTIVE OF CAS TE, CREED, COLOUR, COMMUNITY, RELIGION, RACE OR LANGUAGE. 4 ITA NO. 1287/HYD/14 M/S CARMEL HEALTH SERVICE SOCIETY, MANCHERIAL EXISTING: (11) TO PROVIDE ASSISTANCE TO APPROVED FUNDING AGENCIES IN VERIFICATION OF FINANCIAL STATEMENTS AN D PROGRESS REPORTS OF THE VOLUNTARY ORGANISATION, PERTAINING T O THE SAID DEVELOPMENT PROJECTS AND PROGRAMME IN INDIA. 5.1 THE AR OF THE ASSESSEE SUBMITTED THAT THE ABOVE DOCUMENTS MAY BE ADMITTED AS THEY ARE IMPORTANT DOCUMENTS FOR THE PURPOSE OF ADJUDICATION OF THE MATTER. 6. LD. DR RELIED ON THE ORDER OF DIT(E). 7. CONSIDERED THE SUBMISSIONS OF BOTH THE COUNSELS AND PERUSED THE MATERIAL FACTS ON RECORD. AS THE SAID DOCUMENTS ARE MATERIAL TO ADJUDICATE THE APPEAL OF THE ASSESSEE, WE HEREBY AD MIT THE SAME. AS PER THE ORDER OF DIT(E), THE EXISTING OBJECT CLAUSE 11 IS A NON- CHARITABLE ONE, ACCORDINGLY, HE DENIED THE REGISTRA TION U/S 12A TO THE ASSESSEE. SUBSEQUENT TO REJECTION OF FORM 10A, THE ASSESSEE HAS AMENDED THE EXISTING CLAUSE 11 AS MENTIONED IN THE DOCUMENTS FILED BEFORE US. THEREFORE, WE FIND IT APPROPRIATE TO REM IT THE MATTER BACK TO THE FILE OF THE DIT(E) WITH A DIRECTION TO EXAMINE THE DOCUMENTS FILED BY THE ASSESSEE AND GRANT REGISTRATION U/S 12A TO T HE ASSESSEE IN ACCORDANCE WITH LAW AFTER PROVIDING REASONABLE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2016. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 14 TH SEPTEMBER, 2016 KV 5 ITA NO. 1287/HYD/14 M/S CARMEL HEALTH SERVICE SOCIETY, MANCHERIAL COPY TO:- 1) M/S CARMEL HEALTH SERVICE SOCIETY, CHRISTU JYOT HI PROVINCIAL HOUSE, H.NO. 1-235, ACC, MANCHERIAL PO, ADILABA D DIST. TELENGANA - 504209 2) ITO, MANCHERIAL 3) DIT(E), HYDERABAD 4 DDIT(E), HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE