The Kurni Daivachara Sanghan, V. DIT (Exemptions), Hyderabad

ITA 1384/HYD/2013

• Counselvise Citation: 138422514 RSA 2013
• Duration Of Justice: 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 24-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PALLAVI AGARWAL
• Assessee Lawyers: D BALAJI
• Keywords: Charitable institution
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER SL.NO. ITA NO. APPELLANT RESPONDENT 1 1384/H/13 THE KURNI DAIVACHARA SANGHAM, YEMMIGANUR PAN AADAT21141 THE DIRECTOR OF INCOME-TAX, (EXEMPTIONS), HYDERABAD. ASSESSEE BY : SHRI D. BALAJI REVENUE BY : SMT. PALLAVI AGARWAL DATE OF HEARING 05-08-2014 DATE OF PRONOUNCEMENT 28-08-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30/08/2013 PASSED BY THE DIT(E), HYDERABAD REJECTIN G ASSESSEES APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. 2. BRIEFLY THE FACTS ARE, ASSESSEE IS A SOCIETY REG ISTERED UNDER THE SOCIETIES REGISTRATION ACT. THE SOCIETY WAS CREATED PRIMARILY WITH THE OBJECT FOR UPLIFTMENT OF THE PEOPLE OF KURNI CASTE, WHO ARE NOTIFIED BY THE GOVT. OF INDIA AS BELONGING TO A BACKWARD CLASS . FOR ACHIEVING ITS OBJECT, ASSESSEE UNDERTAKES VARIOUS CHARITABLE ACTI VITIES LIKE DEVELOPMENT AND MAINTENANCE OF GRAVE YARD, PROVIDIN G FACILITIES FOR TRANSPORTING DEAD BODIES TO GRAVE YARD, PROVIDING S ERVICES OF GONDAS 2 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM TO BEREAVED FAMILIES, OPERATING COMMUNITY HALL AT NOMINAL RENT OR FOR FREE TO BE USED FOR PERFORMING MARRIAGES ETC. AND S IMILAR OTHER ACTIVITIES. ON 26/02/2013, ASSESSEE FILED AN APPLIC ATION BEFORE THE DIT(E) IN THE PRESCRIBED MANNER FOR GRANT OF REGIST RATION U/S 12A OF THE ACT. IN COURSE OF PROCEEDING, DIT(E) CALLED FOR BOOKS OF ACCOUNT AND OTHER INFORMATIONS FOR VERIFICATION. IN RESPONS E APPELLANT PRODUCED BOOKS OF ACCOUNT AND OTHER DOCUMENTS AS WE RE CALLED FOR BY THE DIT(E). THE DIT(E) ON PERUSAL OF MEMORANDUM OF ASSOCIATION OF THE SOCIETY, NOTICED THAT IT HAS BEEN ESTABLISHED F OR THE BENEFIT OF PERSONS BELONGING TO KURNI CASTE. DIT(E) WAS, THERE FORE, OF THE VIEW THAT AS THE SOCIETY HAS BEEN ESTABLISHED FOR THE BE NEFIT OF ONLY ONE COMMUNITY, IT CANNOT BE GRANTED REGISTRATION IN VIE W OF RESTRICTION IMPOSED U/S 13(1)(B) OF THE ACT. THOUGH, ASSESSEE E XPLAINED THAT RESTRICTION IMPOSED U/S 13(1)(B) IS SUBJECT TO EXCE PTIONS PROVIDED UNDER EXPLANATION 2 TO SECTION 13 AS PER WHICH REST RICTIONS IMPOSED U/S 13(1)(B) WOULD NOT APPLY TO TRUST AND INSTITUTI ONS CREATED FOR THE BENEFIT OF BACKWARD CLASSES. HOWEVER, THE DIT(E) IN TERPRETING THE SAID EXPLANATION CONCLUDED THAT AS PER THE LANGUAGE OF EXPLANATION 2, THE TRUST/INSTITUTIONS SHOULD BE FOR THE BENEFIT OF NUMBER OF CASTES AND NUMBER OF CLASSES OR NUMBER OF TRIBES SINCE THE LANGUAGE USED IS IN PLURAL SENSE. AS THE ASSESSEE SOCIETY IS MEANT O NLY FOR THE BENEFIT OF A SINGLE COMMUNITY I.E. KURNI COMMUNITY HE INFER RED THAT EXPLANATION 2 TO SECTION 13 WILL NOT BE APPLICABLE TO THE ASSESSEE. HENCE, AS THE INSTITUTION IS COMING WITHIN THE PROV ISIONS OF SECTION 13)1(B) OF THE ACT, IT IS NOT ELIGIBLE FOR REGISTRA TION U/S 12AA OF THE ACT. REFERRING TO BYE-LAW OF THE SOCIETY, DIT(E) N OTED THAT THE PROVISION PERTAINING TO MEMBERSHIP ALSO SHOWS THAT A PERSON BELONGING ONLY TO KURNI CASTE CAN BECOME A MEMBER O F THE SOCIETY. HE THEREFORE CONCLUDED THAT IN VIEW OF SUCH RESTRIC TION FOR MEMBERSHIP TO THE SOCIETY, ASSESSEE INSTITUTION CAN NOT BE CONSIDERED AS A PUBLIC CHARITABLE INSTITUTION, HENCE, CANNOT B E GRANTED REGISTRATION U/S 12A OF THE ACT. ACCORDINGLY, DIT(E ) REJECTED 3 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM APPLICATION FILED BY THE ASSESSEE. BEING AGGRIEVED OF THE SAID ORDER ASSESSEE IS BEFORE US. 3. THE LEARNED AR SUBMITTED BEFORE US THAT BOTH THE GROUNDS ON WHICH DIT(E) HAS REFUSED TO GRANT REGISTRATION ARE LEGALLY UNTENABLE. IT WAS SUBMITTED THAT THOUGH SECTION 13(1)(B) OF THE A CT PROVIDES FOR RESTRICTION IN GRANT OF REGISTRATION TO A TRUST OR INSTITUTION ESTABLISHED FOR THE BENEFIT OF A PARTICULAR CASTE, CREED OR CO MMUNITY, EXPLANATION 2 TO SECTION 13 PROVIDES EXCEPTIONS BY REMOVING SUC H RESTRICTION IN CASE OF A TRUST OR INSTITUTION ESTABLISHED FOR THE BENEFIT OF SCHEDULED CASTES, BACKWARD CLASSES AND SCHEDULED TRIBES. IT W AS SUBMITTED THAT FROM READING OF EXPLANATION 2 LEGISLATIVE INTENT IS CLEAR THAT IT IS MEANT FOR UPLIFTMENT OF UNDER PRIVILEGED CLASSES/CASTES. THEREFORE, INSTEAD OF INTERPRETING IN A NARROW MANNER, IT HAS TO BE IN TERPRETED IN A BROADER MANNER TO TAKE WITHIN ITS SWEEP ALL THE UND ER PRIVILEGED CASTES/CLASSES. THE LEARNED AR REFERRING TO SECTION 13 OF THE GENERAL CLAUSES ACT SUBMITTED THAT WORDS IN SINGULAR SHALL INCLUDE PLURAL. TAKING SHELTER UNDER THE AFORESAID PROVISION OF THE GENERAL CLAUSES ACT, THE LEARNED AR SUBMITTED, REFERENCE TO SCHEDU LED CASTES, BACKWARD CLASSES IN EXPLANATION 2 TO SECTION 13 SHO ULD BE READ TO MEAN THE SAME I.E. PLURAL INCLUDE SINGULAR AND VI CE VERSA. SO FAR AS SECOND OBJECTION OF THE DIT(E) THAT THE MEMBERSHIP OF THE ASSESSEE SOCIETY IS ONLY RESTRICTED TO MEMBERS OF THE KURNI COMMUNITY, THE LEARNED AR SUBMITTED THAT THE SAID CLAUSE CANNOT BE A GROUND TO REJECT ASSESSEES APPLICATION FOR GRANT OF REGISTRA TION. THE LEARNED AR SUBMITTED, A SECTION OF THE PUBLIC AS DISTINCT FROM SPECIFIED INDIVIDUALS IS ALSO THE PUBLIC. AN OBJECT OF PUBLIC UTILITY N EED NOT BE ONE BENEFITTING THE WHOLE MANKIND OR EVEN ALL PERSONS L IVING IN A PARTICULAR COUNTRY OR PROVINCE. IF THE DIRECT BENEFICIARIES U NDER A TRUST ARE THE PUBLIC THE TRUST DOES NOT LOSE ITS PUBLIC CHARACT ER. IT WAS SUBMITTED, MEMBERS ARE THE VOLUNTEERS OF THE SOCIETY AND CARR YING FORWARD THE OBJECTIVES OF THE SOCIETY. IT IS THE RESTRICTION OF BENEFICIARIES OF THE SOCIETY WHICH IS THE MAIN CRITERIA AND NOT THE REST RICTION OF THE 4 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM MEMBERSHIP. IT WAS SUBMITTED, IN THE REGION OF YEMM IGANUR, THE BACKWARD CLASS IS PREDOMINANTLY MADE UP OF KURNIS. IF SOME BETTER ENDOWED INDIVIDUALS OF THE SAME CLASS WORK FOR THE BETTERMENT OF THE INDIVIDUALS OF THE SAME SOCIAL CLASS, IT CANNOT BE CONSIDERED AS VOILATIVE OF THE PUBLIC CHARACTER OF THE INSTITUTI ON. IN THIS CONTEXT, THE LEARNED AR RELIED UPON DECISIONS OF HONBLE ALLAHA BAD HIGH COURT IN CASE OF CIT VS. SURJI DEVI KUNJILAL JAIPURIA CHARIT ABLE TRUST 186 ITR 728 AND IN CASE OF CIT VS. BHARTHIYA KHARTI SEVAN T RUST, 205 ITR 96. HE ALSO RELIED UPON A DECISION OF THE HONBLE KERAL A HIGH COURT IN CASE OF COMMISSIONER OF AGRICULTURAL I.T. VS. ABDUL SATTAR HAJEE MOOSA SAIT, 81 ITR 230 (AFFIRMED BY HONBLE SUPREME COURT IN 91 ITR 5). 4. THE LEARNED DR, ON THE OTHER HAND RELIED ON THE ORDER OF THE DIT(E). 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDER OF THE DIT(E). AS STATED EARLIER, THE DIT (E) HAS REJECTED APPELLANTS APPLICATION FOR GRANT OF REGISTRATION ON THE FOLLOWING TWO GROUNDS, I) THE SOCIETY AS PER ITS OBJECT, HAS BEEN ESTABLISHED FROM THE BENEFIT OF ONLY ONE COMMUNITY I.E. KURNI COMMUN ITY, HENCE, IT CANNOT BE CONSIDERED AS PUBLIC CHARITABLE TRUST, I I) MEMBERSHIP OF THE SOCIETY IS RESTRICTED TO PEOPLE FROM KURNI COMMUNIT Y, HENCE, THE SOCIETY IS NOT IN THE NATURE OF PUBLIC CHARITABLE T RUST. SO FAR AS THE FIRST OBJECTION OF THE DIT(E) IS CONCERNED, THOUGH SECTIO N 13(1)(B) OF THE ACT PROVIDES THAT EXEMPTION U/S 11 SHALL NOT APPLY TO A TRUST OR INSTITUTION CREATED OR ESTABLISHED FOR BENEFIT OF A PARTICULAR RELIGIOUS COMMUNITY OR CASTE, BUT, EXPLANATION 2 TO SECTION 1 3 CARVES OUT EXCEPTIONS BY PROVIDING THAT TRUST OR INSTITUTION C REATED OR ESTABLISHED FOR THE BENEFIT OF SCHEDULED CASTES, BACKWARD CLASS ES, SCHEDULED TRIBES OR WOMEN AND CHILDREN SHALL NOT BE DEEMED TO BE A TRUST OR INSTITUTION CREATED OR ESTABLISHED FOR THE BENEFIT OF RELIGIOUS COMMUNITY OR CASTE WITHIN THE MEANING OF CLAUSE (B) OF SECTION 13(1). 5 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM THOUGH, THE DIT(E) DOES NOT DISPUTE THE FACT THAT K URNI COMMUNITY HAS BEEN CLASSIFIED AS A BACKWARD CLASS BY THE CENT RAL GOVERNMENT AS WELL AS STATE GOVERNMENT, BUT, BY INTERPRETING T HE EXPLANATION IN HIS OWN WAY HAS CONCLUDED, AS THE SAID EXPLANATION REFERS TO SCHEDULED CASTES, BACKWARD CLASSES, SCHEDULED TRIBE S, VIZ., IN PLURAL SENSE, WHEREAS THE APPELLANT SOCIETY IS FOR THE BE NEFIT OF ONLY ONE COMMUNITY, HENCE, IT WILL NOT COME WITHIN THE EXCEP TION PROVIDED THEREIN. IN OUR VIEW A CONJOINT READING OF SECTION 13(1)(B) WITH EXPLANATION 2 TO SECTION 13 CLEARLY BRINGS OUT THE INTENTION OF LEGISLATURE THAT RESTRICTIONS IMPOSED U/S 13(1)(B) WILL NOT APPLY TO A TRUST OR INSTITUTION CREATED FOR BENEFIT OF SCHEDUL ED CASTES, BACKWARD CLASSES, SCHEDULED TRIBES ETC. SUCH LEGISLATIVE INT ENT HAS TO BE UNDERSTOOD IN THE BROADER PERSPECTIVE SO AS TO ACHI EVE THE PURPOSE FOR WHICH IT IS ENACTED AND NOT TO INTERPRET IN A N ARROW MANNER WHICH GOES AGAINST SUCH LEGISLATIVE INTENT. UNDISPUTEDLY, APPELLANT SOCIETY IS CREATED FOR THE BENEFIT OF KURNI COMMUNITY, WHICH I S CLASSIFIED AS A BACKWARD CLASS, HENCE, IN OUR VIEW, IT WILL COME WITHIN THE EXCEPTION PROVIDED UNDER EXPLANATION 2 TO SECTION 13, THEREFO RE, RESTRICTION IMPOSED U/S 13(1)(B) OF THE ACT WILL NOT APPLY TO T HE ASSESSEE. THE OBSERVATION OF THE LD. DIT(E) THAT APPELLANT SOCIET Y IS FOR THE BENEFIT OF SINGLE BACKWARD CLASS AND NOT ALL BACKWARD CLASSES AS ENVISAGED UNDER EXPLANATION 2 OF SECTION 13 IS NOT THE CORREC T INTERPRETATION OF THE PROVISION. THE TERM BACKWARD CLASSES USED IN EX PLANATION 2 OF SECTION 13 WILL ALSO INCLUDE ANY BACKWARD CLASS. FO R COMING TO SUCH VIEW WE CAN REFER TO SECTION 13 OF GENERAL CLAUSES ACT, 1897, WHICH READS AS UNDER: SECTION 13 GENDER AND NUMBER. IN ALL [CENTRAL ACTS] AND REGULATIONS, UNLESS THERE IS ANYTHING REPUGNANT IN THE SUBJECT OR CONTEXT, (1) WORDS IMPORTING THE MASCULINE GENDER SHALL BE TAKE N TO INCLUDE FEMALES; AND (2) WORDS IN THE SINGULAR SHALL INCLUDE THE PLURAL, AN D VICE VERSA. 6 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM 6. SO FAR AS THE SECOND OBJECTION OF THE LEARNED DI T(E) RELATING TO RESTRICTING THE MEMBERSHIP OF THE SOCIETY TO PEOPLE FROM KURNI COMMUNITY, WE ARE OF THE VIEW THAT SUCH CONCLUSION OF THE DIT(E) IS ALSO NOT CORRECT. AS CAN BE SEEN, THE SOCIETY HAS N OT BEEN CREATED FOR THE BENEFIT OF SPECIFIED INDIVIDUALS OR CLASS OF IN DIVIDUALS RATHER IT IS ESTABLISHED FOR THE BENEFIT OF KURNI COMMUNITY WHIC H REPRESENTS A SECTION OF PUBLIC. THAT BEING THE CASE, IT CANNOT LOSS ITS CHARACTER OF PUBLIC CHARITABLE TRUST OR INSTITUTION ONLY BECAUSE THE MEMBERSHIP OF THE SOCIETY IS RESTRICTED TO KURNI COMMUNITY. THE H ONBLE SUPREME COURT IN CASE OF AHMEDABAD RANA CASTE ASSOCIATION V S. DIT(E), 821 ITR 704 HELD THAT AN OBJECT BENEFICIAL TO A SECTION OF PUBLIC IS AN OBJECT OF GENERAL, PUBLIC UTILITY AND TO SERVE A CH ARITABLE PURPOSE, IT IS NOT NECESSARY THAT THE OBJECT SHOULD BE FOR BENEFIT OF ENTIRE PUBLIC OR WHOLE OF MANKIND IN A PARTICULAR COUNTRY OR STATE. THE HONBLE APEX COURT OBSERVED, IT IS SUFFICIENT IF THE INTENTION I S TO BENEFIT A SECTION OF THE PUBLIC AS DISTINGUISHED FROM A SPECIFIED IND IVIDUAL. FOLLOWING THE AFORESAID DECISION OF HONBLE APEX COURT, THE H ONBLE ALLAHABAD HIGH COURT IN CASE OF SURJI DEVI KUNJILAL KAIPURIA CHARITABLE TRUST (SUPRA) HELD THAT TRUST CREATED FOR EXTENDING MEDIC AL AID, SOCIAL WELFARE AND UPLIFTMENT OF POOR MEMBERS OF A PARTICU LAR COMMUNITY, VIZ., VAISH COMMUNITY CAN BE CONSIDERED TO BE FOR C HARITABLE PURPOSE. THE HONBLE KERALA HIGH COURT IN CASE OF A BDUL SATTAR HAJEE MOOSA SAIT (SUPRA) ALSO EXPRESSED SIMILAR VIEW. FUR THER, THE ENTIRE ISSUE CAN BE LOOKED INTO FROM ANOTHER ANGLE. AS WOU LD BE EVIDENT, ONLY REASON FOR WHICH DIT(E) HAS REFUSED TO GRANT R EGISTRATION IS, THE SOCIETY HAVING BEEN ESTABLISHED FOR THE BENEFIT OF A PARTICULAR COMMUNITY, VIZ., KURNI CASTE, COMES WITHIN THE REST RICTION IMPOSED U/S 13(1)(B). HOWEVER, THE PROVISIONS CONTAINED U/S 12A AND 12AA WOULD MAKE IT CLEAR THAT AT THE TIME OF GRANT OF REGISTRA TION U/S 12AA, THE CIT/DIT(E) CAN ONLY LOOK INTO THE CHARITABLE OBJECT AND GENUINENESS OF ACTIVITIES OF A TRUST OR INSTITUTIONS. AT THAT S TAGE THE CIT/DIT(E) CANNOT STEP INTO THE SHOES OF AO TO EXAMINE WHETHER ASSESSEE HAS VIOLATED ANY OF THE CONDITIONS OF SECTION 13 OF THE ACT. THAT ASPECT 7 ITA NO. 1384/HYD/2013 THE KURNI DAIVACHARA SANGHAM CAN BE EXAMINED BY THE AO AT THE TIME OF COMPUTATIO N OF TOTAL INCOME IN AN ASSESSMENT PROCEEDING WHILE CONSIDERING ASSES SEES CLAIM OF EXEMPTION U/S 11. GRANT OF REGISTRATION U/S 12AA DO ES NOT AUTOMATICALLY ENTITLE THE ASSESSEE FOR EXEMPTION U/ S 11 THOUGH, IT IS ONE OF THE CONDITIONS. IT IS ONLY THE AO WHO CAN EX AMINE ASSESSEES CLAIM OF EXEMPTION U/S 11 AT THE TIME OF ASSESSMENT SUBJECT TO FULFILLMENT OF CONDITIONS IMPOSED U/S 11 TO 13 OF T HE ACT. IT IS EVIDENT FROM THE ORDER OF DIT(E), HE HAS NOT RAISED ANY DOU BT WHATSOEVER WITH REGARD TO THE CHARITABLE OBJECT OF THE SOCIETY OR G ENUINENESS OF ITS ACTIVITY. IN THE AFORESAID VIEW OF THE MATTER, WE H OLD THAT THE DIT(E) WAS NOT CORRECT IN REJECTING ASSESSEES APPLICATION FOR GRANT OF REGISTRATION U/S 12A OF THE ACT. ACCORDINGLY, WE S ET ASIDE THE IMPUGNED ORDER OF THE LD. DIT(E) AND DIRECT HIM TO GRANT REGISTRATION TO THE ASSESSEE U/S 12AA OF THE ACT. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL ME MBER HYDERABAD, DATED: AUGUST, 2014 KV COPY TO:- 1. THE KURNI DAIVACHARA SANGHAM, D.NO. 10/069, MACH ANI STREET, YEMMIGANUR 518 360 2. DIT(E), HYDERABAD 3. DDIT-II, HYDERABAD. 4. DR, ITAT, HYDERABAD