Federation of Democratic Voice, G B Nagar V. CIT(Exemption), Lucknow

ITA 1372/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9018 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 27-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Keywords: Charitable institution; Set aside
• Section: 12A; 12AA; 201; 13; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B : NEW DELHI) BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.1372/DEL./2018 FEDERATION OF DEMOCRATIC VOICE, VS. CIT (EXEMPTION ), FLAT NO.C-203, D.P.S. HOUSING SOCIETY, LUCKNOW. PLOT A 100/2, SECTOR 51, NOIDA, GAUTAM BUDDHA NAGAR 201 307 (U.P.) (PAN : AADCF1233A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. YADAV, ADVOCATE REVENUE BY : MS. NIDHI SRIVASTAVA, CIT DR DATE OF HEARING : 29.07.2021 DATE OF ORDER : 11.08.2021 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, FEDERATION OF DEMOCRATIC VOICE (HEREINAF TER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 02.01.2018 PASSE D BY THE COMMISSIONER OF INCOME-TAX (EXEMPTION), LUCKNOW ON THE GROUNDS INTER ALIA THAT :- ITA NO.1372/DEL./2018 2 1. THAT THE LD. CIT (E) HAS ERRED IN REJECTING THE APPLICATION OF THE APPELLANT TO REGISTER THE TRUST U /S 12AA OF THE INCOME TAX ACT. 2. THAT THE LD. CIT (E) HAS ERRED IN REJECTING THE APPLICATION OF THE APPELLANT TO REGISTER THE TRUST U /S 12AA OF THE INCOME TAX ACT ON IRRELEVANT GROUNDS. 3. THAT THE LD. CIT (E) HAS ERRED ON FACTS AS WELL AS IN LAW BY ERRONEOUSLY CONCLUDING THAT THE COMPANY HAS VIOL ATED SECTION 13(1)(C) READ WITH SECTION 13(3) OF THE INC OME TAX ACT, 1961. 4. THAT THE LD. CIT (E) HAS ERRED ON FACTS AS WELL AS IN LAW BY ERRONEOUSLY CONCLUDING THAT THE COMPANY HAS FAIL ED TO CONDUCT / CHARITABLE ACTIVITIES AND HAS IGNORED / F AILED TO CONSIDER THE FACTS AND EVIDENCE ON RECORD IN RESPEC T OF THE CHARITABLE ACTIVITIES CONDUCTED BY THE COMPANY. 5. THAT THE LD. CIT (E) HAS ERRED ON FACTS AS WELL AS IN LAW AS HAS FAILED TO PROVIDE THE COMPANY A REASONABLE O PPORTUNITY OF BEING HEARD BY WAY OF SHOW CAUSE NOTICE FOR DEFE NDING ITS CASE AGAINST THE OBSERVATIONS MADE IN THE IMPUGNED ASSESSMENT ORDER. 6. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE, FEDERATION OF D EMOCRATIC VOICE, BEING A COMPANY REGISTERED UNDER SECTION 8 O F THE COMPANIES ACT, 1956 ENGAGED INTO THE DISSEMINATION OF ITS CHARITABLE ACTIVITIES MOVED AN APPLICATION DATED 08 .07.2017 FOR REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX A CT, 1961 (FOR SHORT THE ACT) BEFORE THE LD. CIT(E) . LD. CIT( E) HAS DECLINED THE REGISTRATION SOUGHT FOR BY THE ASSESSEE U/S 12AA OF THE ACT ON TWO GROUNDS : (I) SINCE THE APPLICANT COMPANY HAS CAME INTO EXISTENCE ITA NO.1372/DEL./2018 3 ON 13.06.2017 IT FAILED TO CARRY OUT CHARITABLE ACT IVITIES DURING THIS PERIOD AND EXCEPT FOR RECITAL OF CHARITABLE OBJECTS , NOTHING CONCRETE HAS BEEN DONE BY THE ASSESSEE TRUST IN THE FIELD OF CHARITY; AND (II) ONE SHRI SEEMAT DADWAL BEING DIRECTOR HAS BEEN FOUN D TO HAVE RECEIVED A SALARY OF RS.40,000/- PER MONTH AND THER EBY INVOKED THE PROVISIONS CONTAINED U/S 13(1)(C) READ WITH SECTION 13(3) OF THE ACT. 3. FEELING AGGRIEVED, THE ASSESSEE COMPANY HAS COME UP BEFORE THE TRIBUNAL BY CHALLENGING THE IMPUGNED ORDER PASS ED BY LD. CIT(E) BY WAY OF FILING THE PRESENT APPEAL . 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, ASSESSEE COMPANY BEING REGISTERED U/S 8 OF THE COMPANIES ACT, 2013 CAME INTO EXISTENCE ON 13.06.20 17 AND FILED THE APPLICATION FOR REGISTRATION U/S 12A (A) OF THE ACT ON 08.07.2017. IT IS ALSO NOT IN DISPUTE THAT LD. CIT (E) HAS NOT DISPUTED THE OBJECTS OF THE ASSESSEE TRUST BEING CH ARITABLE IN NATURE. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE TRUST HAS B EEN PAYING SALARY OFRS.40,000/- PER MONTH TO ONE OF ITS DIRECTORS, SH RI SEEMAT DADWAL. IT IS ALSO NOT IN DISPUTE THAT ASSESSEE CO MPANY HAS BEEN ITA NO.1372/DEL./2018 4 GRANTED LICENCE BEING A COMPANY REGISTERED U/S 8 OF THE COMPANIES ACT, 2013 BY THE REGISTRAR OF COMPANIES AND AS PER CLAUSE 6 OF THE LICENCE, AVAILABLE AT PAGE 33 OF THE PAPER BOOK, AS SESSEE COMPANY IS WITHIN ITS RIGHT TO PAY REMUNERATION TO ANY OF I TS MEMBERS IN RETURN OF THE SERVICES RENDERED BY HIM. 6. WHEN WE EXAMINE THE ORDER PASSED BY THE LD. CIT (E) IN THE LIGHT OF THE UNDISPUTED FACTS NARRATED IN PRECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT REGISTRATION U/S 12AA OF T HE ACT CANNOT BE DECLINED MERELY ON THE GROUND THAT THE ASSESSEE COM PANY HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES PARTICULARLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEREIN ASSESSEE COMPANY HAS FILED APPLICATION FOR REGISTRATION WITHIN ONE MONTH OF IT S INCORPORATION BECAUSE THERE IS NO SUCH CONDITION LAID DOWN UNDER THE ACT TO SEEK REGISTRATION U/S 12A WITHIN THE SPECIFIED PERIOD OF INCORPORATION OF SECTION 8 COMPANY. 7. WHEN LD. CIT (E) HAS NOT DISPUTED THE CHARITABLE OBJECTS OF THE ASSESSEE COMPANY DECLINING THE REGISTRATION FOR THE REASON THAT THE ASSESSEE COMPANY HAS NOT CARRIED OUT ANY CHARIT ABLE ACTIVITIES IS NOT PERMISSIBLE UNDER LAW. MOREOVER, REGISTRATION U/S 12AA OF THE ACT IS REQUIRED TO CARRY OUT CHARITABLE ACTIVITIES TO FURTHER GET BENEFIT U/S 11 OF THE ACT. ALL THESE FACTS ARE REQ UIRED TO BE EXAMINED DURING ASSESSMENT PROCEEDINGS. ITA NO.1372/DEL./2018 5 8. HONBLE HIGH COURT OF KARNATAKA IN CASE OF DIRECTOR OF INCOME TAX (EXEMPTIONS) VS. MEENAKSHI AMMA ENDOWMEN T TRUST (2013) 354 ITR 0219 DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE TRUST BY RETURNING FOLLOWING FINDINGS :- 6. A TRUST COULD BE FORMED TODAY AND WITHIN A WEE K REGISTRATION UNDER SECTION 12A COULD BE SOUGHT AS T HERE IS NO PROHIBITION UNDER THE ACT SEEKING SUCH REGISTRATION . THE ACTIVITIES OF THE TRUST HAVE TO BE CONSIDERED IF SU CH REGISTRATION IS SOUGHT MUCH LATER THAN THE FORMATION OF THE TRUST O R AFTER EXPIRY OF THE EARLIER REGISTRATION GRANTED IN FAVOUR OF TH E TRUST. THEREFORE IN A CASE OF THIS NATURE WHERE THE TRUST HAS APPROACHED THE AUTHORITY FOR REGISTRATION UNDER SECTION 12A WI THIN A SPAN OF EIGHT MONTHS OF ITS FORMATION, THE ABOVE-MENTIONED CRITERIA NAMELY, THE OBJECTS OF THE TRUST FOR WHICH IT WAS F ORMED WILL HAVE TO BE EXAMINED TO BE SATISFIED ABOUT ITS GENUINENES S AND ACTIVITIES OF THE TRUST CANNOT BE THE CRITERION, SINCE IT IS Y ET TO COMMENCE ITS ACTIVITIES. 9. SECOND GROUND DECLINING THE REGISTRATION U/S 11 & 12AA OF THE ACT TAKEN BY LD. CIT (E) IS THAT ONE OF ITS DIR ECTORS FOUND TO HAVE RECEIVED SALARY OF RS.40,000/- PER MONTH AND T HEREBY INVOKED THE PROVISIONS CONTAINED U/S 13(1)(C) & 13 (3) OF T HE ACT. FIRST OF ALL, WHEN ASSESSEE TRUST BEING A COMPANY REGISTERED U/S 8 OF THE COMPANIES ACT, 2013 IS PERMITTED TO PAY THE PRUDENT REMUNERATION IN GOOD FAITH FOR THE SERVICES RENDERED BY A MEMBER , IT IS NO GROUND TO DECLINE THE REGISTRATION. AT THE SAME TIME, THI S ISSUE CAN BE TAKEN CARE OF AT THE TIME OF GRANTING BENEFIT, IF A NY, U/S 11 OF THE ACT DURING THE ASSESSMENT PROCEEDINGS. ITA NO.1372/DEL./2018 6 10. HONBLE ALLAHABAD HIGH COURT IN CASE OF HARDAYAL CHARITABLE AND EDUCATION TRUST VS. CIT 355 ITR 534 (ALL.) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESS EE BY RETURNING FOLLOWING FINDINGS :- THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL THE HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF R EGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, WHICH IS NECESSARY FOR CLAIMING EXEMPTION UNDER SECTION 11 AND 12 OF T HE ACT, THE COMMISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE I N THE PROCESS OF ITS INITIATION. WHERE A TRUST, SET UP TO ACHIEVE IT S OBJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION, IS IN THE PRO CESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATI ONS, THE REGISTRATION UNDER SECTION 12AA CANNOT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHA RITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE ON LY THE GENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WHICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMIS SIONER OF INCOME TAX AT SUCH PRELIMINARY STAGE SHOULD BE REST RICTED TO GENUINENESS OF THE OBJECTS AND NOT THE ACTIVITIES U NLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CAN NOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12 AA OF THE ACT AND THUS AT THAT SUCH INITIAL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGIST RATION MAY BE REFUSED. 11. HONBLE ALLAHABAD HIGH COURT IN CASE CITED AS CIT (E) VS. YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMENT AUTHORITY (2017) 395 ITR 18 (ALL.) WHILE DISCUSSING THE SCOPE OF SECTIONS 11 & 12 OF THE ACT HAS HELD THAT IT IS NOT WITHIN THE PURVI EW OF COMMISSIONER TO EXAMINE WHETHER THE ASSESSEE WAS EN TITLED TO EXEMPTION U/S 11 OR 12 SINCE THAT WAS WITHIN THE JU RISDICTION OF AO AND NOT THE COMMISSIONER (E). HONBLE HIGH COURT F URTHER HELD ITA NO.1372/DEL./2018 7 THAT, A BODY OR INSTITUTION WHICH IS FUNCTIONING FOR ADVA NCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY AND WHOSE ACTIVIT IES ARE NOT IN THE NATURE OF TRADE, BUSINESS OR COMMERCE OR SHEER PROF IT MAKING, IS ENTITLED TO CLAIM ITSELF TO BE CONSTITUTED FOR 'CHA RITABLE PURPOSES' AND SEEK REGISTRATION UNDER SECTION 12A(1) OF THE I NCOME-TAX ACT, 1961. CHARITABLE PURPOSE PRIMARILY MEANS THAT THE P REDOMINANT OBJECT MUST BE TO PROMOTE WELFARE OF GENERAL PUBLIC . AN ANCILLARY ACTIVITY, IF ANY, TO THAT GENERAL ONE PERFORMED BY THE INSTITUTION WOULD NOT RENDER SUCH INSTITUTION 'NON-CHARITABLE'. 12. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW INTER ALIA THAT WHEN CHARITABLE OBJ ECTS TO BE UNDERTAKEN BY THE ASSESSEE TRUST ARE NOT IN DISPUTE , ASSESSEE COMPANY CANNOT BE EXPECTED TO START ITS CHARITABLE ACTIVITIES WITHIN A PERIOD OF ABOUT 2 MONTHS; THAT TO GET THE BENEFIT OF SECTIONS 11 & 12 OF THE ACT, REGISTRATION U/S 12AA IS NECESSARY; THAT SO FAR ISSUE AS TO PAYING REMUNERATION OF RS.40,000/- TO ONE OF ITS DIRECTORS IS CONCERNED IT CAN BE DECIDED DURING THE ASSESSMENT P ROCEEDINGS WHILE EXAMINING THE BENEFIT U/SS 11 & 12 OF THE ACT , THE IMPUGNED ORDER PASSED BY THE LD. CIT (E) IS NOT SUSTAINABLE IN THE EYES OF LAW. MOREOVER, LD. CIT(E) IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES AT THE STAGE OF REGISTRATION, WHICH CAN BE WELL TAK EN CARE OF BY THE AO DURING THE ASSESSMENT PROCEEDINGS AND AT THIS ST AGE, ONLY ITA NO.1372/DEL./2018 8 GENUINENESS OF THE OBJECTS HAS TO BE EXAMINED BY TH E LD. CIT(E) WHICH HE HAS NOT DISPUTED IN THIS CASE. SO, IMPUGN ED ORDER PASSED BY THE LD. CIT (E) IS SET ASIDE. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED DIRECTING THE LD. CIT (E) T O ACCORD REGISTRATION U/S 12AA OF THE ACT TO THE ASSESSEE. ORDER PRONOUNCED IN OPEN COURT ON THIS 11 TH DAY OF AUGUST , 2021. SD/- SD/- (ANIL CHATURVEDI) (KULDIP SINGH ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 11 TH DAY OF AUGUST, 2021 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), LUCKNOW. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.