Income Tax Officer Ward-1 , Bagalkot V. Shri Shankrappa Mallappa Mantri , Bagalkot

ITA 1333/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4684 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 12-06-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DARSHAN BORA
• Assessee Lawyers: DEVA RATHNA KUMAR K
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.215/BANG/2018 ASSESSMENT YEAR : 2017-18 OLA FOUNDATION ECONOMIC LAWS PRACTICE ROCKLINES CENTRE, 6 TH FLOOR, NO.54, RICHMOND ROAD, BENGALURU. VS. THE COMMISSIONER OF INCOME-TAX (EXEMPTIONS), BENGALURU. APPELLANT RESPONDENT APPELLANT BY : SHRI DARSHAN BORA, C.A RESPONDENT BY : SHRI DEVA RATHNA KUMAR K, CIT DATE OF HEARING : 22.10.2018 DATE OF PRONOUNCEMENT : .10.2018 O R D E R - PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 24.11.2017 OF THE CIT(EXEMPTIONS), BANGALORE RECEIP T OF AN APPLICATION FILED BY THE ASSESSEE FOR GRANT OF APPROVAL U/S 80G (5)(VI) OF THE INCOME-TAX ACT 1961 ( THE ACT). 2. THE ASSESSEE IS A CHARITABLE TRUST. THE TRUST C AME TO EXISTENCE PURSUANT TO DEED OF TRUST DATED 14/12/2016. THE OB JECTS OF THE TRUST WAS MAINLY TO PROVIDE EDUCATION. THE ASSESEE MADE AN A PPLICATION TO THE CIT(EXEMPTION), BANGALORE ON 16/5/2017 FOR GRANT OF REGISTRATION U/S 12A OF ITA NO.215/BANG/2018 PAGE 2 OF 9 THE ACT AND AN APPLICATION SEEKING APPROVAL U/S 80G OF THE ACT. THE CIT(E), BANGALORE GRANTED REGISTRATION U/S 12A OF T HE ACT BY ORDER DATED 24/11/2017. THUS, THE CIT(E) WAS SATISFIED THAT TH E OBJECTS OF THE ASSESSEE ARE CHARITABLE IN NATURE WITHIN THE MEANIN G OF SEC. 2(15) OF THE ACT AND THAT THE ACTIVITIES OF THE TRUST WERE GENU INE. HOWEVER, IN RESPECT OF THE APPLICATION FOR GRANT OF APPROVAL U/S 80G OF TH E ACT, THE CIT(E) REJECTED THE APPLICATION FOR THE REASON THAT THE TRUST WAS F ORMED ON 14/12/2016 AND TILL 24/11/2017, WHEN THE CIT(E) PASSED THE IMPUGNE D ORDER, THE TRUST HAD NOT CARRIED OUT ANY ACTIVITIES. THE CIT(E) WAS, TH EREFORE, OF THE VIEW THAT GENUINENESS OF ACTIVITIES OF THE ASSESSEEE COULD NO T BE VERIFIED. THE CIT(E) ALSO OBSERVED IN THE IMPUGNED ORDER THAT THE ASSESSEE HAS TO PROVE WITH FINANCIAL STATEMENTS THAT IT HAD CARRIED OUT S UCH ACTIVITIES WHICH WERE CHARITABLE IN NATURE. THE CIT(E) IN THIS REGARD RE FERRED TO THE DECISION OF THE HONBLE KARNTAKA HIGH COURT IN THE CASE OF M/S GANJAN NAGAPPA & SON TRUST VS. DIT, 269 ITR 59 (KAR). THE CIT(E) ALSO MA DE A REFERENCE TO RULE 11AA TO SUB RULE (3) OF THE INCOME-TAX ACT RULES 19 62 (RULES) WHICH PROVIDES THAT FOR GRANT OF EXEMPTION, A TRUST HAS T O SATISFY THE CONDITION REGARDING GENUINENESS OF ITS ACTIVITIES. FOR THE AB OVE REASONS, THE CIT(E) REJECTED THE APPLICATION OF THE ASSESSEE FOR GRANT OF APPROVAL U/S 80(5)(VI) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE CIT(E), THE ASSESS EE HAS PREFERRED PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED FOR GRANT OF APPROVAL U/S 80G OF THE ACT. ( 5) THIS SECTION APPLIES TO DONATIONS TO ANY INSTITU TION 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 FOLLOWING CONDITIONS, NAMELY : ITA NO.215/BANG/2018 PAGE 3 OF 9 3. (I) WHERE THE INSTITUTION OR FUND DERIVES ANY IN COME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTIONS 11 AND 12 18 [***] 19 [***] OR CLAUSE (23AA) OR CLAUSE (23C) OF SECTION 10 : 4. PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIV ES ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, TH E CONDITION THAT SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCO ME, IF, - 5. (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE B OOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS ; 6. (B) THE DONATIONS MADE TO THE INSTITUTION OR FUN D ARE NOT USED BY IT, DIRECTLY OR INDIRECTLY, FOR THE PUR POSES OF SUCH BUSINESS ; AND 7. (C) THE INSTITUTION OR FUND ISSUES TO A PERSON M AKING THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MA INTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINE SS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE U SED, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES OF SUCH BU SINESS ; 8. (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT, OR THE RULES GOVERNING THE INSTITUTION OR FUND DO NOT, CONTAIN ANY PROVISION F OR THE TRANSFER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOSE ; 9. (III) THE INSTITUTION OR FUND IS NOT EXPRESSED T O BE FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY O R CASTE ; 10. (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCOUNTS OF ITS RECEIPTS AND EXPENDITURE; 11. (V) THE INSTITUTION OR FUND IS EITHER CONSTITUT ED AS A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860), OR U NDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY P ART OF INDIA OR UNDER SECTION 25 OF THE COMPANIES ACT, 1956 (1 OF 1956), OR IS A UNIVERSITY ESTABLISHED BY LAW, ITA NO.215/BANG/2018 PAGE 4 OF 9 OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGNISED BY THE GOVERNMENT OR BY A UNIVERSITY ESTABLISHED BY LA W, OR AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW, 20 [***] OR IS AN INSTITUTION FINANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTHORITY ; 21 [***] 4. THE LD COUNSEL FOR THE ASSESSEE HAS ALSO DRAWN O UR ATTENTION TO RULE 11AA(5) WHICH READS AS FOLLOWS:- (5) WHERE THE COMMISSIONER IS SATISFIED THAT ONE O R MORE OF THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G ARE NOT FULFILLED, H E SHALL REJECT THE APPLICATION FOR APPROVAL, AFTER RECORDIN G THE REASONS FOR SUCH REJECTION IN WRITING : 5. HE POINTED OUT THAT IN THE IMPUGNED ORDER THAT T HE CIT(E) HAS NOT SPELT OUT THE CONDITIONS MENTIONED IN SEC. 80G(5) WHICH HAS NOT BEEN FULFILLED BY THE ASSESSEE. HE POINTED OUT THAT THE CIT(E) HIMSELF HAS GRANTED REGISTRATION TO THE ASSESSEE U/S 12A OF TH E ACT AND, THEREFORE, THE CIT(E) WAS SATISFIED THAT THE OBJECTS OF THE TRUST WERE CHARITABLE AND THAT ITS ACTIVITIES WERE GENUINE. IN THESE CIRCUMSTANCES, T HE CIT(E) OUGHT TO HAVE GRANTED THE APPROVAL U/S 80G OF THE ACT TO THE ASSE SSEE. 6. THE LD COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE ITAT, JAIPUR IN THE CASE OF ANAND INCUBATION C ENTRE VS. CIT(E), JAIPUR 86 TAXMANN.COM 250 (JAIPUR TRIB), WHEREIN ON IDEN TICAL FACTS AS THE CASE OF THE ASSESSEE, THE TRIBUNAL HELD THAT REJECTION O F GRANT OF APPROVAL U/S 80G WAS NOT JUSTIFIED. THE FOLLOWING ARE THE OBSE RVATIONS OF THE TRIBUNAL:- 10. FURTHER, ON PERUSAL OF SECTION 8OG(5) AS WELL AS RULE 11AA, WHAT IS REQUIRED TO BE SEEN IS WHETHER THE INSTITUTION/FUND HAS BEEN ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE OR NOT. SECONDLY, IT LAYS DOWN C ERTAIN ADDITIONAL CONDITIONS UNDER CLAUSE (I) TO CLAUSE (V ) WHICH ITA NO.215/BANG/2018 PAGE 5 OF 9 ARE REQUIRED TO BE FULFILLED. RULE 11AA PROVIDES TH AT WHERE THE CIT IS SATISFIED THAT THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION 5 RE FULFILLED, THE CIT I S REQUIRED TO RECORD HIS SATISFACTION BEFORE GRANT OF APPROVAL UN DER SECTION 80G(VI). WHERE HOWEVER, THE CIT IS SATISFIE D THAT ONE OR MORE OF THE CONDITIONS ARE NOT FULFILLED, HE IS EMPOWERED TO REJECT THE APPLICATION FOR APPROVAL AF TER RECORDING THE REASONS FOR SUCH REJECTION. IN THE IN STANT CASE, THE APPELLANT HAS BEEN DULY REGISTERED UNDER SECTION 12AA WHICH SHOWS THAT ID CIT HAS ALREADY VERIFIED I TS OBJECTIVES AND ITS ESTABLISHMENT FOR CHARITABLE PUR POSES. REGARDING FULFILLMENT OF ADDITIONAL CONDITIONS SPEC IFIED IN CLAUSE (I) TO CLAUSE (V) OF SECTION 80G(5), WE FIND THAT THERE IS NO RECORDING OF SATISFACTION REGARDING NON-FULFI LLMENT OF ANY OF THE CONDITIONS SO SPECIFIED AND THE ID CIT(E ) HAS SUMMARILY REJECTED THE ASSESSEES APPLICATION. 7. THE LD COUNSEL FOR THE ASSESSEE ALSO DRAWN OUR A TTENTION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF DIT(E) VS. MEENAKSHI AMMA ENDOWMENT TRUST, 354 ITR 219 (KAR), WHEREIN THE HONBLE KARNATAKA HIGH COURT IN THE CONTEXT OF GRAN T OF APPROVAL U/S 12A OF THE ACT MADE AN OBSERVATION THAT WHERE TRUST HAS AP PROACHED THE AUTHORITY FOR REGISTRATION U/S 12A WITHIN SPAN OF 8 MONTH AF TER ITS FORMATION, OBJECTS OF THE TRUST HAVE TO BE EXAMINED AND THE AUTHORITI ES CANNOT INSIST ON PROOF OF ACTIVITIES OF THE TRUST AS TRUST WAS YET TO COM MENCE ITS ACTIVITIES. OUR ATTENTION WAS ALSO DRAWN TO THE DECISION OF THE ITA T, BANGALORE BENCH IN THE CASE OF ALL PEOPLE CHARITABLE TRUST VS. CIT(E ) IN ITA NOS. 1216 AND 1217/BANG/2015 ORDER DATED 30/12/2015 WHEREIN THIS TRIBUNAL APPLIED THE PRINCIPLES LAID DOWN IN THE CASE OF MEENAKSHI AMMA ENDOWMENT TRUST TRUST (SUPRA) IN THE CONTEXT OF GRANT OF REGISTRATI ON U/S 80G OF THE ACT. THE LD COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO T HE FACT THAT IN THE PRESENT CASE THE TRUST WAS FORMED ON 14/12/2016 AN D APPLICATION FOR GRANT OF REGISTRATION AND APPROVAL U/S 12A AND 80G RESPEC TIVELY WAS MADE ON ITA NO.215/BANG/2018 PAGE 6 OF 9 16/5/2017. HE SUBMITTED IN THESE CIRCUMSTANCES, TH E CIT(E) WAS NOT JUSTIFIED IN REFUSING TO GRANT APPROVAL U/S 80G OF THE ACT. 8. THE LD DR COUNSEL FOR THE ASSESSEE ON THE OTHER HAND POINTED OUT THAT IT WAS THE DUTY OF THE ASSESSEE TO SATISFY TH E CIT(E) REGARDING EXISTENCE OF CONDITIONS FOR GRANT OF APPROVAL U/S 8 0G OF THE ACT. IN THIS REGARD, HE POINTED OUT THAT THE ASSSESSEE HAD NOT D EMONSTRATED ACTIVITIES THAT IT UNDERTOOK AFTER ITS FORMATION AND IN THE CI RCUMSTANCES, THE REJECTION OF THE APPLICATION FOR GRANT OF APPROVAL U/S 80G W AS JUSTIFIED. HE PLACED RELIANCE ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF GANJAN NAGAPPA & SON TRUST (SUPRA). HE ALSO POINTE D OUT THAT EXAMINATION OF THE ACTIVITIES OF THE TRUST WAS NECE SSARY BEFORE APPROVAL CAN BE GRANTED U/S.80G OF THE ACT. 9. THE LD COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND SUBMITTED THAT THE DECISION IN THE CASE OF GANJAN NAGAPPA & SON TR UST (SUPRA) WAS NOT APPLICABLE TO THE PRESENT CASE FOR THE REASON THAT IN THE AFORESAID CASE, IT WAS THE CASE OF GRANT OF RENEWAL OF RECOGNITION U/S 80G. HE POINTED OUT THAT ON THE FACTS OF THE CASE SAID CASE, THE CIT(E ) FOUND THAT THE ASSESSEE HAD DONE SEVERAL ACTS WARRANTING NO RENEWAL LIKE W ITHDRAWAL OF SUBSTANTIAL AMOUNT AND USE OF THE SAME FOR NON CHARITABLE PURPO SES. HE POINTED OUT IN THE PRESENT CASE NO SUCH FACTS WERE PRESENT AND IN THE CIRCUMSTANCES THE ACTION OF THE CIT(E) IN REFUSING GRANT OF REGISTRAT ION IS NOT JUSTIFIED. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. IT IS NOT IN DISPUTE THAT THE CIT(E) HIMSELF HAS GRANTED REGISTR ATION TO THE ASSESSEE U/S 12A OF THE ACT AND THEREFORE, THE CIT(E) WAS SATISF IED THAT THE OBJECTS OF THE TRUST WERE CHARITABLE AND THAT ITS ACTIVITIES W ERE GENUINE AS THIS IS A CONDITION FOR GRANT OF REGISTRATION U/S.12A OF THE ACT. AS PER THE REQUIREMENTS OF RULE 11AA(5) OF THE RULES, IT IS IN CUMBENT ON THE PART OF THE CIT(E) TO SPELL OUT THE CONDITIONS MENTIONED IN SEC. 80G(5) WHICH HAS ITA NO.215/BANG/2018 PAGE 7 OF 9 NOT BEEN FULFILLED BY THE ASSESSEE. THEREFORE IT C AN BE SAFELY CONCLUDED THAT THE ONLY REASON ASSIGNED BY THE CIT(E) FOR NOT GRANTING APPROVAL U/S.80G OF THE ACT IS THE ABSENCE OF ACTIVITIES OF THE TRUST FROM THE DATE OF COMING INTO EXISTENCE OF THE TRUST. THE HONBLE KA RNATAKA HIGH COURT IN THE CASE OF DIT(E) VS. MEENAKSHI AMMA ENDOWMENT TRU ST, 354 ITR 219 (KAR), WHEREIN THE HONBLE KARNATAKA HIGH COURT IN THE CONTEXT OF GRANT OF APPROVAL U/S 12A OF THE ACT MADE AN OBSERVATION THA T WHERE TRUST HAS APPROACHED THE AUTHORITY FOR REGISTRATION U/S 12A WITHIN SPAN OF 8 MONTH AFTER ITS FORMATION, OBJECTS OF THE TRUST HAVE TO BE EXAMINED AND THE AUTHORITIES CANNOT INSIST ON PROOF OF ACTIVITIES OF THE TRUST AS TRUST WAS YET TO COMMENCE ITS ACTIVITIES. ITAT, BANGALORE BENCH IN THE CASE OF ALL PEOPLE CHARITABLE TRUST VS. CIT(E) IN ITA NOS. 1216 AND 12 17/BANG/2015 ORDER DATED 30/12/2015 HAS APPLIED THE PRINCIPLES LAID DO WN IN THE CASE OF MEENAKSHI AMMA ENDOWMENT TRUST TRUST (SUPRA) IN THE CONTEXT OF GRANT OF REGISTRATION U/S 80G OF THE ACT. IN THE PRESENT CA SE THE TRUST WAS FORMED ON 14/12/2016 AND APPLICATION FOR GRANT OF REGISTRATI ON AND APPROVAL U/S 12A AND 80G RESPECTIVELY WAS MADE ON 16/5/2017. THEREF ORE THE CIT(E) WAS NOT JUSTIFIED IN BASING HIS CONCLUSION FOR REJECTIN G APPROVAL U/S.80G OF THE ACT ON THE GROUND OF ABSENCE OF ACTIVITIES OF THE T RUST. ITAT, JAIPUR IN THE CASE OF ANAND INCUBATION CENTRE VS. CIT(E), JAIPUR 86 TAXMANN.COM 250 (JAIPUR TRIB), ON IDENTICAL FACTS AS THE CASE OF THE ASSESSEE, THE TRIBUNAL HELD THAT REJECTION OF GRANT OF APPROVAL U/S 80G WA S NOT JUSTIFIED. KEEPING IN MIND THE AFORESAID DECISIONS AND THE FACTS OF TH E PRESENT CASE, WE ARE OF THE VIEW THAT THE CIT(E) OUGHT TO HAVE GRANTED THE APPROVAL U/S.80G(5) OF THE ACT. WE ACCORDINGLY DIRECT THAT THE APPROVAL U /S.80G OF THE ACT BE GRANTED TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS A LLOWED. ITA NO.215/BANG/2018 PAGE 8 OF 9 PRONOUNCED IN THE OPEN COURT ON THIS 26TH DAY OF OCTOBER, 2018. SD/- S D/- ( INTURI RAMA RAO) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 26 TH OCTOBER, 2018 / VMS / COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE ITA NO.215/BANG/2018 PAGE 9 OF 9 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..