Gyaan Vikas Foundation, Siliguri V. CIT, (Exemptions), Kolkata, Kolkata

ITA 1454/KOL/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1737 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 09-12-2015
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NOS. 1454&1455/ KOL/2015 GYAAN VIKAS FOUNDATION -VS.- C.I.T. (EXEM PTIONS) SILIGURI KOLKATA [PAN : AACTG 2333 E] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SUBASH AG ARWAL, ADVOCATE FOR THE RESPONDENT : SHRI G.MALLIKARJUNA, CIT (DR) DATE OF HEARING : 09.05.2017. DATE OF PRONOUNCEMENT : 12.05.2017. ORDER PER N.V.VASUDEVAN, JM THESE ARE APPEALS BY THE ASSESSEE AGAINST TWO ORDE RS DATED 18.11.2015 OF C.I.T.(EXEMPTIONS), KOLKATA REJECTING THE APPLICAT ION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 ( ACT) AND REJECTING THE APPLICATION FOR GRANT OF APPROVAL U/S 80G (5)(VI) OF THE ACT. 2. THE ASSESSEE IS A TRUST WHICH CAME INTO EXIST ENCE PURSUANT TO A DEED OF TRUST DATED 27.02.2015 EXECUTED AT SILIGURI BY ONE SHRI BALWANT RAI JAIN. THE MAIN OBJECTS OF THE TRUST AS CONTAINED IN CLAUSE-4(A) OF THE TRUST DEED READS AS FOLLOWS : TO OPEN, FOUND, ESTABLISH, PROMOTE, SET UP, TAKE O VER, RUN, MAINTAIN, ASSIST, FINANCE, SUPPORT AND/OR AID OR HELP IN THE SETTING UP AND/OR RUNNING SCHOOLS, COLLEGES, UNIVERSITIES, LECTURE HALLS, READING ROOM S, LIBRARIES, HOSTELS, BOARDING HOUSES, TRAINING AND VOCATIONAL INSTITUTIONS AND OT HER ESTABLISHMENTS OR INSTITUTIONS FOR ADVANCEMENT OF EDUCATION, KNOWLEDGE AND LEARNIN G AND FOR TRAINING IN ARTS, CRAFTS, COMMERCE, SCIENCE, LITERATURE, HUMANITIES A ND OTHER USEFUL SUBJECT IN ALL THEIR MANIFESTATIONS. 2 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 2 3. THE ASSESSEE APPLIED FOR GRANT OF REGISTRAT ION U/S 12A OF THE ACT AS WELL AS APPROVAL U/S 80G(5)(VI) OF THE ACT VIDE APPLICATION S DATED 09.06.2015 FILED IN THE OFFICE OF COMMISSIONER OF INCOME TAX (EXEMPTION) I.E. CIT (E) ON 16.07.2015. UNDER SECTION 12A OF THE ACT, ON RECEIPT OF AN APPLICATIO N FOR GRANT OF REGISTRATION U/S 12A OF THE ACT, THE COMMISSIONER HAS TO SATISFY HIMSELF AB OUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND ABOUT THE OBJECTS OF THE TRUST I.E . IT IS FOR CHARITABLE PURPOSE. ONCE HE IS SATISFIED ABOUT THE TWO ASPECTS HE HAS TO GRANT REG ISTRATION TO THE TRUST. IN THE PRESENT CASE THE CIT(E) FOUND THAT THE ASSESSEE TRUST DURIN G THE PREVIOUS YEAR HAD CONDUCTED VOCATIONAL TRAINING IN GARMENT MAKING AND DESIGNING AND HAD RECEIVED FEES FROM THE STUDENTS UNDERGOING COURSE IN GARMENT MAKING AND DE SIGNING. THE CIT(E) WAS OF THE VIEW THAT AS PER THE 1 ST PROVISO TO SECTION 2 (15) OF THE ACT SUCH ACTIVIT Y CANNOT BE REGARDED AS CHARITABLE PURPOSE. 4. SEC.2 (15) OF THE ACT, WHICH DEFINES THE EX PRESSION CHARITABLE PURPOSE FOR THE PURPOSE OF THE ACT, HAD UNDERGONE AN AMENDMENT BY T HE FINANCE ACT, 2008 WITH EFFECT FROM 01-04-2009. THE EXPRESSION CHARITABLE PURPOSE , PRIOR TO THE AFORESAID AMENDMENT READ AS FOLLOWS; (15) CHARITABLE PURPOSE INCLUDES RELIEF TO THE P OOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY THE DEFINITION AFTER THE AMENDMENT READS AS FOLLOWS ; CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, (PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF A RTISTIC OR HISTORIC INTEREST AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY; PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY AC TIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER 3 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 3 CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. IT CAN BE SEEN FROM THE PROVISO TO SEC.2(15) WHICH CAME INTO EFFECT FROM 01-04-2009 THAT ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUB LIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. 5. THE CIT(E) IN REJECTING THE APPLICATION OF TH E ASSESSEE FOR GRANT OF REGISTRATION U/S 12A OF THE ACT BASED HIS CONCLUSION ON THE PROVISO TO SECTION 2(15) OF THE ACT REFERRED TO ABOVE AND CONCLUDED THAT THE ACTIVITIES OF THE A SSESSEE TRUST WERE NOT GENUINE AND NOT IN ACCORDANCE WITH THE PROVISO TO SECTION 2(15) OF THE ACT AND THEREFORE THE APPLICATION FOR GRANT OF REGISTRATION IS BEING REJECTED. CONSEQ UENT TO THE REJECTION OF THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT THE A PPLICATION FOR GRANT OF APPROVAL U/S 80G(5(VI) OF THE ACT WAS ALSO REJECTED BY CIT(E). B OTH THE ORDERS WERE PASSED ON 18.11.2015. 6. AGGRIEVED BY THE AFORESAID ORDERS THE ASSESSE E HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COU NSEL FOR THE ASSESSEE. THE LD. COUNSEL SUBMITTED THAT THE TRUST CAME INTO EXISTENCE ONLY O N 27.02.2015. IT HAD CONDUCTED CERTAIN VOCATIONAL TRAINING COURSES IN GARMENT MAKI NG AND DESIGNING . THE CIT(E) HAS ACCEPTED THE FACT THAT THE ACTIVITY OF IMPARTING ED UCATIONAL TRAINING IN GARMENT MAKING AND DESIGNING WOULD BE FOR CHARITABLE PURPOSE FALLI NG WITHIN THE CLAUSE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THI S IS SO BECAUSE THE CIT(A) HAS MADE A REFERENCE TO THE FIRST PROVISO TO SECTION 2(15) OF THE ACT WHICH IS APPLICABLE ONLY WHEN THE OBJECTS OF THE TRUST/INSTITUTION CONSTITUTES AD VANCEMENT OF ANY OTHER OBJECT TO GENERAL PUBLIC UTILITY. THE LD. COUNSEL MADE A REFERENCE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTION OR GANISATION VS DGIT (EXEMPTION) 4 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 4 AND OTHERS 371 ITR 333 (DELHI) WHEREIN THE HONBLE DELHI HIGH COURT ON SIMILAR FACTS CAME TO THE CONCLUSION THAT MERELY BECAUSE FEE OR S OME OTHER CONSIDERATION IS COLLECTED OR RECEIVED BY AN INSTITUTION, IT WOULD NOT LOOSE ITS CHARACTER OF HAVING BEEN ESTABLISHED FOR CHARITABLE PURPOSE. THE HONBLE DELHI HIGH COU RT ALSO HELD THAT IF THE DOMINANT ACTIVITY OF THE INSTITUTION WAS NOT BUSINESS, TRADE OR COMMERCE THEN ANY SUCH INCIDENTAL OR ANCILLARY ACTIVITY WOULD ALSO NOT FALL UNDER THE CATEGORY OF TRADE, COMMERCE OR BUSINESS. IN OTHER WORDS THE DRIVING FORCE OF THE I NSTITUTION SHOULD NOT BE THE DESIRE TO EARN PROFITS BUT TO DO CHARITY. IN SUCH CIRCUMSTANC ES THE FIRST PROVISO TO SECTION 2(15) OF THE ACT WOULD NOT APPLY. THE LD. COUNSEL SUBMITTED THAT THE AFORESAID DECISION WOULD SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE AS THE ASSESSEE IN THE PRESENT CASE HAD NOT DERIVED ANY SURPLUS DURING THE PREVIOUS YEAR RELEVA NT TO A.Y.2016-17. A COPY OF THE AUDITED INCOME AND EXPENDITURE ACCOUNT AS ON 31.03. 2016 WAS FILED BEFORE US WHICH SHOWS THAT THE ASSESSEES EXPENDITURE WAS MORE THAN THE INCOME IT RECEIVED IN THE FORM OF FEES FROM STUDENTS AMOUNTING TO RS.28,435/-. ACC ORDING TO HIM THEREFORE THE INFERENCE DRAWN BY CIT(E) THAT THE ASSESSEE TRUST W AS NOT GENUINE AND THAT ITS OBJECTS WERE NOT CHARITABLE UNDER THE 1 ST PROVISO TO SECTION 2(15) CANNOT BE SUSTAINED. 8. THE LD. COUNSEL DREW OUR ATTENTION TO THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SHRI RAM EDUCATION FOUNDATION [2 001] 116 TAXMAN 832 (DELHI) WHEREIN INCOME EARNED FROM RUNNING A VOCATIONAL TRA INING CENTRE TRAINING WOMEN IN ART OF STITCHING AND EMBROIDERY WAS CONSIDERED AS AN OB JECT OF GENERAL PUBLIC UTILITY NOT INVOLVING CARRYING ON ANY ACTIVITY FOR THE PROFIT. REFERENCE WAS ALSO MADE TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF BREACH CANDY HOSPITAL TRUST VS CCIT [2010] 192 TAXMAN 98 (BOMBAY) WHEREIN IT WAS HELD THAT HAVING EXCESS OF INCOME OVER EXPENDITURE BY ITSELF CANNOT LEAD TO AN INFERENCE THAT THERE WAS PROFIT MOTIVE SO LONG AS THE EXCESS IS USED FOR CHARITABLE PURPOSE. RELIANCE WAS ALSO PLACED ON THE DECISION OF ITAT, KOLKATA IN THE CASE OF ITO(E) (1) VS INDIAN LEATHER PRODUCTS ASSOCIATION, KOLKATA IN ITA NO.735/KOL/2013 ORDER D ATED 02.12.2015 LAYING DOWN 5 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 5 IDENTICAL PROPOSITION. THE LD. DR, ON THE OTHER HAN D, SUBMITTED THAT CERTAIN FACTS WITH REGARD TO EXCESS OF EXPENDITURE OVER INCOME RELATIN G TO THE PERIOD AFTER THE DATE OF THE IMPUGNED ORDER HAVE BEEN BROUGHT TO THE NOTICE OF T HIS TRIBUNAL BY THE ASSESSEE. IT WAS HIS PRAYER THAT THE QUESTION AS TO WHETHER THE OBJE CTS OF THE ASSESSEE ARE CHARITABLE OR NOT HAS NOT BEEN FULLY ADDRESSED BY CIT(E) IN THE IMPUGNED ORDER AND THE MATTER SHOULD BE REMANDED FOR FRESH CONSIDERATION TO CIT(E ). 9. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION T O THE RIVAL SUBMISSIONS. AS RIGHTLY CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THE C IT(E) HAS ACCEPTED THAT THE OBJECTS OF THE ASSESSEE WOULD FALL WITHIN THE CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IN OUR VIEW CLAUSE -4(A) O F THE OBJECTS OF THE TRUST WOULD SHOW THAT THE ASSESSEE CAN BE REGARDED EVEN AS CARRYING ON THE CHARITABLE PURPOSE OF EDUCATION. WE HOWEVER MAKE IT CLEAR THAT WE ARE N OT GOING INTO THIS QUESTION AND PROCEED ON THE BASIS THAT THE OBJECTS OF THE ASSESS EE FALL WITHIN THE CHARITABLE PURPOSE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 10. THE CIT(E) HAS CONCLUDED THAT THE ASSESSEE TRUST IS NOT GENUINE AND DOES NOT EXIST FOR CHARITABLE PURPOSE FOR THE SOLE REASON THAT IT CHARGES FEES FROM THE STUDENTS UNDERGOING COURSE IN GARMENT MAKING AND DESIGNING. IN OUR VIEW THIS CAN NEITHER BE THE BASIS TO CONCLUDE THAT THE ACTIVITIES OF THE ASSESS EE ARE NOT GENUINE OR THE FIRST PROVISO TO SECTION 2(15) OF THE ACT WOULD BE APPLICABLE. THE D ECISION RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF INDIA TRADE PROMOTI ON ORGANISATION VS DGIT (EXEMPTION) (SUPRA) CLEARLY SUPPORTS THE PLEA OF TH E ASSESSEE IN THIS REGARD. THERE IS NO MATERIAL BROUGHT ON RECORD TO SHOW THAT THE PRIMAR Y DESIRE OR MOTIVE IS TO EARN PROFIT. ON THE OTHER HAND, THE OBJECTS OF THE ASSESSEE ARE ADMITTEDLY ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE DECISION REND ERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SHRI RAM EDUCATION FOUNDATION (SUPRA) ALSO SUPPORTS THE PLEA OF THE ASSESSEE THAT TRAINING WOMEN IN THE ART OF STIT CHING AND EMBROIDERY BY RUNNING A 6 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 6 VOCATIONAL TRAINING CENTRE WOULD CONSTITUTE THE OBJ ECT OF GENERAL PUBLIC UTILITY. AS ALREADY OBSERVED THERE IS NOTHING BROUGHT ON RECORD TO SHOW THAT THE ACTIVITIES OF THE ASSESSEE ARE DRIVEN BY PROFIT MOTIVE. IN THESE CIRC UMSTANCES WE ARE OF THE VIEW THAT THE CONDITIONS FOR GRANT OF REGISTRATION U/S 12AA OF TH E ACT ARE DULY SATISFIED AS THE ACTIVITIES OF THE ASSESSEE ARE GENUINE AND ITS OBJE CTS ARE ALSO CHARITABLE. WE THEREFORE DIRECT THE REGISTRATION U/S 12AA OF THE ACT BE GRAN TED. SINCE THE REGISTRATION U/S 12AA OF THE ACT IS BEING GRANTED TO THE ASSESSEE, THE A SSESSEE WOULD ALSO BE ENTITLED TO GRANT OF APPROVAL U/S 80G(5)(VI) OF THE ACT. THE SAME IS ALSO DIRECTED TO BE GRANTED. 11. IN THE RESULT BOTH THE APPEALS ARE ALLOWED . ORDER PRONOUNCED IN THE COURT ON 12.05.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDE VAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12.05.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1. GYAAN VIKAS FOUNDATION, PRANAMI MNDIR ROAD, P.O. SEVOKE ROAD, P.S.BHAKTINAGAR, SILIGURI-734001. 2. C.I.T. (EXEMPTIONS), KOLKATA. 3 CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 7 ITA NOS.1454&1455/KOL/2015 GYAAN VIKAS FOUNDATION 7