AKASHDEEP EDUCATION TRUST, NAVI MUMBAI V. CIT (E), MUMBAI

ITA 1371/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9029 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C TIWARI
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Charitable institution; Maximum Marginal Rate
• Section: 12A; 12AA; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO. 1371 /MUM/201 6 AKASHDEEP EDUCATION TRUST A - 202, BIG SPLASH, SECTOR - 17, VASHI, NAVI MUMBAI 400 703 PAN: AADTA 7115 K V. COMMISSIONER OF INCOME - TAX (EXEMPTIONS) 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUBODH RATNAPARKHI DEPARTMENT BY : SHRI S.C. TIWARI DATE OF HEARING : 09 .10.2018 DATE OF PRONOUNCEMENT : 12 .12 .2018 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX ( EXEMPTIONS), MUMBAI [HEREINAFTER IN SHORT LD.CIT(E)] DATED 29.01.2016 PASSED U/S. 12AA OF THE ACT REFUSING REGISTRATION TO THE ASSES SEE TRUST U/S. 12AA OF THE ACT. 2. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REGISTRATION U/S. 12AA WAS DENIED TO THE ASSESSEE MAINLY FOR FOLLOWING REASON S: - 2 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST (I) ASSESSEE TRUST RECEIVED LOAN/ DONATION FROM OTHER REGISTERED TRUST AND THE AFFAIRS OF THE TRUST ARE NOT BEING RUN IN TRANSPARENT MANNER AS THE LOANS WERE TRANSFERRED TO CORPUS FUND WITHOUT ANY AUTHORIZATION FROM THE DONOR . NO PROPER R ESOLUTIONS BY THE DONOR TRUST WERE FURNISHED AND THE RES OL UTION DATED 21.01.2016 WHICH WAS FURNISHED BY ASSESSEE INDICATES ONLY A N AFTERTHOUGHT . THE TRANSFER OF MONEY FROM ONE TRUST TO ANOTHER WAS AGAINST THE PROVISIONS OF INCOME TAX ACT AND LACKS GENUINE NESS. (II) THE FUNDS OF T H E TRUST HAVE BEEN USED BY THE TRUSTEE FOR GIVING DONATIONS TO LIONS CLUB ON HIS OWN NAME. (III) TRUST HAD FUNDED EDUCATION OF TWO CHILDREN WHO APPEARS TO BE RELATIVES OF THE TRUSTEE. LD. COUNSEL SUBMITTED THAT FOR THESE REASONS TH E LD.CIT(E) DENIED REGISTRATION TO THE ASSESSEE TRUST. 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT , THE LD.CIT(E) NEVER DOUBTED THE GENUINENESS OF THE OBJECTS OF THE TRUST AND THE REGISTRATION WAS DENIED ONLY FOR THE REASONS STATED ABOVE. L D. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT THE TIME OF REGISTRATION THE LD. C OMMISSIONER MAY LOOK INTO THE GENUINENESS OF THE ACTIVITIES CARRIED ON BY THE TRUST IN RESPECT OF ITS OBJECTS AND NOT AS TO WHETHER THE TRANSACTIONS 3 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST OF THE TRUST ARE ELIGIBLE FOR EXEMPTIONS OR NOT. HE PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTIONS: - (I) CIT - VS - CHAUDHARY SON PAL SINGH, [401ITR 509 (ALL) (2018)] (II) CIT - VS - RED ROSE SCHOOL, [212 CTR 394 (ALL) (2007)] (III) CIT - VS - SHIRDI SAI DARBAR CHARITABLE TRUST (DHARAMSHALA) [39 5 ITR 567 (P&H) (2017]) (IV) SREE ANJANEYA MEDICAL TRUST - VS - CIT [382 ITR 399 (KER) (2016)] (V) MATRU VANDANA TRUST - VS - DIT(E) [68 SOT275 (MUMBAI) ((URO) (2015)] (VI) B.S.A. COLLEGE - VS - CIT (E), LUCKNOW, [92 TAXMANN.COM 39 (AGRA - TRIB.) (2018)] 4. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. LD. DR SUBMITTED THAT THERE WAS PERSONA L DONATIONS MADE BY THE TRUST , T HEY ARE COMMON TRUSTS IN BOTH T HE DONOR SOCIETY AND THE ASSESSEE TRUST WHERE THE FUNDS WERE TRANSFERRED FROM SOCIETY TO THE ASSESSEE TRUST, THERE IS VIOLATION OF SECTION 13 IN ASSESSEES CASE. THEREFORE, THE CONDUCT OF THE ASSESSEE TRUST IS NOT GENUINE AND HENCE THE LD. CIT(E) RIGHTLY DENIED T HE REGISTRATION U/S. 12AA OF THE ACT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PLAIN READING OF THE ORDER OF THE LD. CIT(E), WE FIND THAT THE REGISTRATION U/S. 12AA WA S DENIED TO THE ASSESSEE TRUST FOR THE REA SON THAT THE ASSESSEE TRUST ACCEPTED DONATIONS FROM ANOTHER SOCIETY WITHOUT PROPER RESOLUTIONS . IT IS THE OBSERVATION OF THE LD. CIT(E) THAT THE TRUST EE S OF THE BOTH AKASHDEEP EDUCATION SOCIETY AND THE ASSESSEES TRUST AKASHDEEP EDUCATION TRUST ARE COMMON AND THEY ARE CONTROLLING BOTH THE ORGANIZATIONS AND THERE WAS TRANSFER OF MONEY FROM 4 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST ONE TRUST TO ANOTHER WHICH IS AGAINST THE PROVISIONS OF INCOME - TAX ACT AND T HEREFORE IT LACKS GENUINENESS. HE ALSO OBSERVED THAT T HE COLORABLE DEVISE WAS ADOPTED FOR TRANSFER AND SIPHON OF MONEY IN THE GUISE OF COMMERCIAL TRANSACTIONS. HE FURTHER OBSERVED THAT THERE WAS A DONATION BY THE ONE OF THE TRUST EE S TO LIONS CLUB AND THIS IS IN VIOLATION OF SECTION 13 OF THE INCOME - TAX ACT. FOR THESE R EASONS THE LD. CIT(E) DENIED THE REGISTRATION U/S. 12AA TO THE ASSESSEE TRUST. 6. IN THE CASE OF CIT V. CHAUDHARY SON PAL SINGH (SUPRA) HON'BLE ALLAHABAD HIGH COURT HELD AS UNDER: - THIS COURT IN THE CASE OF CIT V. WILSONIA COLLEGE SOCIETY ((SUPRA)) WHILE DE ALING WITH TA SIMILAR ISSUE HAD FOLLOWED AN EARLIER JUDGMENT OF THIS COURT IN THE CASE OF CIT V. RED ROSE SCHOOL REPORTED IN [2007] CTR (AL L.) 394 AND HAD HELD AS BELOW: 'WE HAVE PERUSED THE AFORESAID DECISION AND FIND THAT THE PROFIT EARNING OR MISUSE OF INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS ACTIVITIES MAY BE A GROUND FOR REFUSING EXEMPTION UNDER THE ACT WHICH IS A MATTER TO BE CONSIDERED AND DECIDED AT THE TI ME OF ASSESSMENT BUT AT THE TIME OF GRANT OF REGISTRATION IT IS INCUMBENT UPON THE REGISTERING AUTHORITY TO SEE IF THE ACTIVITIES OF SUCH INSTITUTION OR TRUST ARE IN CON SONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION AND ARE NOT A CAMOUFLAGE BUT A RE REAL, PURE AND SINCERE. IN THIS REGARD PARAGRAPH 21 OF THE AFORESAID DECISION WHICH IS RELEVANT IS REPRODUCED HEREINBELOW: 21. SECTION 12AA, WHICH LAYS DOWN THE PROCEDURE FOR REGISTRATION, DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER OF INCOME - TAX, W HILE CONSIDERING, THE APPLICATION, FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUIR ES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PROPOSED OBJECTS . THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION. THIS IS MORE EVIDENT IF WE SEE THE PROVISIONS OF SECTION 11, WHICH, WHILE EXEMPTING THE INCOME GIVEN IN ITS VARIOUS SUB - CLAUSES FROM BEING INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE 5 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST PERSON IN RECEI PT OF THE INCOME, FOR EXAMPLE, IN SUB - CLAUSE (1) SAYS 'INCOME DERIVED FROM PROPERTY HELD UNDER TRUS T WHOLLY FOR CHARITABLE OR RELI GIOUS PURPOSES, TO THE EXTENT TO. WHICH SUCH INCOME IS. APPLIED TO SUCH PURPOSES IN INDIA; AND WHERE ANY SUCH INCOME IS ACCUMU LATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTENT TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PE R CENT, OF THE INCOME FROM SUCH PROPERTY. ' 14. WE ARE IN AGREEMENT WITH THE AFORESAID VIEW. IN THAT VIEW, THE QUESTIONS, OF LAW ARE ANSWERED ACCORDINGLY. THE MATTER IS REMITTED TO THE COMMISSIONER OF THE INCOME - TAX TO DECIDE THE PETITIONER'S APPLICATION FOR EXEMPTION AFRESH, IN ACCORDA NCE WITH LAW KEEPING THE SCOPE OF INQUIRY LIMITED TO THE PROVISIONS UN DER SECTION 12AA OF THE ACT . 7. IN THE CASE OF CIT V. RED ROSE SCHOOL (SUPRA) HON'BLE HIGH COURT OF ALLAHABAD HELD AS UNDER: - 28. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UNDER SECTION 12AA , DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEAR FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY BUT IT ONLY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQUIRY BY THE CIT SHALL RE MAIN RESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICATION FOR REGISTRATION UNDER SECTION 12A , IS ACTUALLY IN THE ACTIVITIES WHICH ARE GENUINE. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEEPING IN MIND THE OBJECTS THEREOF, WHICH NECESSARILY MEANS THAT THE CIT SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. IN OTHER WORDS, IF ESTABLISHING AND RUNNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE - LAWS, IT HAS TO BE SATISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION IS BEING IMPARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNING SCHOOL IS A GENUINE ACTIVITY. TH E ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. 8. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. SHIRDI SAI DARBAR CHARITABLE TRUST (DHARAMSHALA) (SUPRA) HELD THAT THE CONDITIONS AS PROVIDED IN SECTION 13 O F THE I.T. ACT OR ELSEWHERE ARE TO BE SEEN BY THE ASSESSING OFFICER AT THE T IME OF ASSESSMENT PROCEEDINGS ON EARLI ER BASIS AND NOT BY THE LD.CIT WHILE GRANTING REGISTRATION U/S. 12AA OF THE ACT. 6 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST 9. THE HON'BLE KERALA HIGH COURT IN THE CASE OF SREE ANJANEYA MEDICAL TRUST V. CIT [ 382 ITR 399] HELD AS UNDER: - 10. IT IS CLEAR FROM A PLAIN READING OF SECTIONS 12A AND 12AA OF THE ACT THAT WHAT IS INTENDED THEREBY IS ONLY A REGISTRATION SIMPLICITER OF THE ENTITY OF A TRUST. THIS HAS BEEN MADE A CONDITION PRECEDENT FOR THE CLAIMING OF BENEFITS UNDER THE OTHER PROVISIONS OF THE ACT REGARDING EXEMPTION OF INCOME, CONTR IBUTION, ETC. NO EXAMINATION OF THE MODUS OF THE APPLICATION OF THE FUNDS OF THE TRUST OR AN EXAMINATION OF THE ETHICAL BACKGROUND OF ITS SETTLERS IS CALLED FOR WHILE CONSIDERING AN APPLICATION FOR REGISTRATION. THE STAGE FOR CONSIDERATION OF THE RELEVANCE OF THE OBJECT OF THE TRUST AND THE APPLICATION OF ITS FUNDS ARISES AT THE TIME OF THE ASSESSMENT. WHERE BENEFITS ARE CLAIMED BY ASSESSEES IN TERMS OF SECTIONS 11 AND 12 OF THE ACT, THE QUESTION AS TO THE NATURE OF SUCH CONTRIBUTION AND INCOME CAN BE LOOKE D INTO. AT THE TIME OF REGISTRATION OF THE TRUST, GOING BY THE BINDING JUDGMENTS OF THE APEX COURT, WHAT IS TO BE LOOKED INTO IS WHETHER THE TRUST IS A GENUINE ONE AND WHETHER IT IS A SHAM INSTITUTION FLOATED ONLY TO AVAIL THE BENEFITS OF EXEMPTION UNDER T HE ACT. THERE IS NO SUCH FINDING IN THE IMPUGNED ORDER. 10. THE AGRA BENCH OF ITAT IN THE CASE OF B.S.A COLLEGE V. CIT (E) (SUPRA) HELD AS UNDER: - 17. UNDER SECTION 12AA OF THE ACT, THE COMMISSIONER IS ENTITLED TO SEE AS TO WHETHER THE OBJECTS ARE CHARITABLE IN NATURE, AND ALSO TO SEE WHETHER THE ACTIVITIES I.T.A NO. 408/AGRA/2017 ARE GENUINE OR NOT. EXAMINATION OF THE GENUINENESS OF THE ACTIVITIES WOULD MEAN TO SEE THAT THE ACTIVITIES ARE NOT BY WAY OF CAMOUFLAGE OR BOGUS OR ARTIFICIAL AND WHETHER THESE ARE IN ACCORDANCE WITH THE OBJECTS OF THE INSTITUTION. THE SCOPE OF SUCH ENQUIRY DOES NOT EXTEND BEYOND THAT POINT. ON THE OTHER HAND, THE REGISTRATION GRANTED BY THE COMMISSIONER DOES NOT EXTEND ANY EXEMPTION TO AN INSTITUTION UNDER SECTION 11, EXCE PT TO THE FACT THAT SUCH REGISTRATION IS MANDATORY FOR CLAIMING EXEMPTION UNDER SECTION 11. MEANING THEREBY, EXEMPTION UNDER SECTION 11 CAN BE AVAILED OF BY INSTITUTIONS WHICH ARE GENUINELY ENGAGED IN 'CHARITABLE ACTIVITIES'. HOWEVER, BENEFIT OF SECTION 11 IS SUBJECT TO APPLICATION OF INCOME FOR CHARITABLE ACTIVITIES AND THE ASSESSING OFFICER IS WELL ENTITLED TO SEE WHETHER SUCH APPLICATION HAS BEEN DONE AND THE OTHER CONDITIONS OF SECTION 11 HAVE BEEN COMPLIED. THE ASSESSING OFFICER HAS TO SEE WHETHER EXEM PTION UNDER SECTION 11 IS BARRED BY APPLICATION OF SECTION 13. AN INSTITUTE, THOUGH REGISTERED UNDER SECTION 12AA, WOULD STILL BE TAXED ON THE INCOME WHICH HAS NOT BEEN APPLIED IN ACCORDANCE WITH SECTION 11, OR IN RESPECT OF WHICH SECTION 13 COMES INTO PLA Y. EVEN IN RESPECT OF INCOME HIT BY SECTION 13, OTHER PROVISIONS OF THE ACT REGARDING LEVY OF TAX ON MAXIMUM MARGINAL RATE WOULD COME INTO PLAY. THUS, THE REGISTRATION UNDER SECTION 12AA IS ONLY FAIT ACCOMPLI TO THE OBJECTS OF THE INSTITUTION ['ACIT VS. SU RAT CITY GYMKHANA', (2008) 300 ITR 214 (SC)]. THE ACTIVITIES OF AN INSTITUTION, THOUGH GENUINE AT THE TIME OF GRANT OF REGISTRATION, MAY NOT REMAIN SO DURING ITS LIFE - SPAN I.T.A NO. 408/AGRA/2017 AND THE REGISTRATION GRANTED TO IT CANNOT BE A LIFE - TIME GUA RANTEE THAT IT WOULD REMAIN SO. THAT IS WHY THE LAW ITSELF PRESCRIBES A PROCEDURE FOR WITHDRAWAL OF THE REGISTRATION GRANTED, IN APPROPRIATE CASES. 7 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST 18. IN VIEW OF THE ABOVE, WE HOLD THAT THE LD. CIT(E) HAS ERRED IN REJECTING THE ASSESSEE'S APPLICATION FOR REGISTRATION U/S 12AA OF THE IT ACT. THE IMPUGNED ORDER IS ACCORDINGLY REVERSED. THE LD. CIT(E) IS DIRECTED TO GRANT REGISTRATION TO THE ASSESSEE FORTHWITH. 11. AS COULD BE OBSERVED FROM THE ABOVE JUDICIAL PRONOUNCEMENTS , AT THE TIME OF REGISTRATION OF THE TRUST WHAT HAS TO BE SEEN BY THE LD. CIT(E) IS WHETHER THE OBJECTS ARE CHARITABLE IN NATURE AND WHETHER THE ACTIVITIES ARE GENUINE OR NOT AND THE E XAMINATION OF THE GENUINENESS OF THE ACTIVITIES WOULD MEAN TO SEE THAT TH E ACTIVITIES ARE NOT BY WAY OF CAMOUFLAGE OR BOGUS OR ARTIFICIAL AND WHETHER THESE ARE IN ACCORDANCE WITH THE OBJECTS OF THE TRUSTS. WHETHER THE ASSESSEE VIOLATED THE PROVISION OF SECTION 11 OR SECTION 13 HAS TO BE EXAMINED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT STAGE AND THESE ASPECTS HAVE NO RELEVANCE AT THE TIME OF EX AMINATION OF THE GENUINENESS OF THE OBJECTS AND ACTIVITIES OF THE TRUST WHILE GRANTING REGISTRATION . 12. ON A READING OF THE ORDER OF THE LD. CIT( E) NOTHING ADVERSE HAS BEEN POINTED OUT REGARDING THE OBJECTS OF THE SOCIETY. THE REGISTRATION WAS DENIED TO THE ASSESSEE ON OTHER CONSIDERATION S WITHOUT ANY ADVERSE FINDING THAT THE OBJECTS OF THE TRUST ARE NOT GENUINE. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS THE LD. CIT(E) IS NOT J USTIFIED IN DENYING THE EXEMPTION U/S. 12AA OF THE ACT TO THE ASSESSEE TRUST, HENCE WE DIRECT THE LD.CIT(E) TO GRANT REGISTRATION U/S. 12AA OF THE ACT TO THE ASSESSEE. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 8 ITA NO.1371/MUM/2016 AKASHDEEP EDUCATION TRUST ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH DECEMBER , 2018 SD/ - SD/ - ( RAJESH KUMAR ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 12 / 12 / 2018 GIRIDHAR , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM