M/s. Mohanlal Mahendra Kumar Patni Charitable Trust, Kolkata V. CIT(Exemption), Kolkata, Kolkata

ITA 1463/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6247 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12A; 12; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI ABY. T. VARKEY, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 1463/KOL/20 17 ASSESSMENT YEARS : 2016- 17 M/S MOHANLAL MAHENDRA KUMAR PATNI. -VS- CIT(E), KOLKATA [PAN: AAATM 8500 F ] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S. M. SURANA, ADVOCATE FOR THE RESPONDENT : SHRI A.K. TIWARI, CIT DATE OF HEARING : 20.06.2018 DATE OF PRONOUNCEMENT : 04.07.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS), KOLKATA [ IN SHORT THE LD CIT(E)] REJECTING THE CLAIM OF EXEMPTION UNDER SECTION [IN SHORT U/S] 80G OF THE I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS A TRUST REGISTERED U/S 12A OF THE ACT WITH EFFECT FROM 25.6.1999. THE ASSESSEE TRUST WAS ESTABLISHED VIDE DEED OF TRUST DATED 23.11.1998 . IT IS NOT IN DISPUTE THAT THE O BJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE, WHICH IS EVIDENT FROM THE GRANT OF REGIS TRATION U/S 12A OF THE ACT. THE LD AR STATED THAT THE ASSESSEE TRUST WAS ENJOYING EXEMPTI ON U/S 80G OF THE ACT UPTO 31.3.2008. THEREAFTER IT HAD APPLIED FOR RENEWAL O F THE SAME AS PER THE THEN PREVAILING LAW IN SECTION 80G OF THE ACT READ WITH RULE 11AA O F THE INCOME TAX RULES. THE SAID 2 ITA NOS.1463/KOL/2017 M/S MOHANLAL MAHENDRA KUMAR PATNI A.YRS.2016-17 2 APPLICATION WAS REJECTED BY THE THEN LD CIT(E) WITH OUT AFFORDING ANY OPPORTUNITY TO THE ASSESSEE VIDE PROCEEDINGS DATED 13.1.2009. AGGRIEVE D, THE ASSESSEE PREFERRED AN APPEAL BEFORE THIS TRIBUNAL. THIS TRIBUNAL IN ITA NO. 256 /KOL/2009 DATED 9.11.2009 HAD RESTORED THE MATTER BACK TO THE FILE OF LD CIT(E) T O PASS A SPEAKING ORDER AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LD CIT(E) HOWEVER PASSED AN IMPUGNED ORDER ONLY ON 9.5.2017 AFTER A LAPSE OF ALMOST SEVE N AND HALF YEARS. IN THE IMPUGNED PROCEEDINGS BEFORE THE LD CIT(E), THE LD CIT(E) OBS ERVED THAT AFTER REFUSAL OF APPROVAL U/S 80G OF THE ACT, THE TRUST HAD NO ACTIVITY IN A SST YEAR 2014-15 AND THAT THE ONLY ACTIVITY DONE IN ASST YEAR 2016-17 WAS DONATING RS 10,000/- FOR SOME CHARITABLE PURPOSES. THE ASSESSEE MENTIONED BEFORE THE LD CIT (E) THAT MUCH ACTIVITIES COULD NOT BE UNDERTAKEN AS THE TRUST COULD NOT GET PROPER DON ATIONS AS EXEMPTION U/S 80G OF THE ACT WAS NOT AVAILABLE WITH IT. THE LD CIT(E) REPR ODUCED THE PROVISIONS CONTAINED IN RULE 11AA OF THE RULES. THE LD CIT(E) OBSERVED IN H IS ORDER AS UNDER:- A) THAT SATISFACTION OF THE COMMISSIONER IS MUST AB OUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, INTER ALIA, BEFORE GRANTING OF APPROV AL. B) THEREFORE, FOR A TRUST OR INSTITUTION , IT IS MA NDATORY TO DO CHARITABLE ACTIVITIES THAT WILL STAND THE TEST OF INSPECTION BY THE COMMISSION ER BEFORE THE APPROVAL IS GRANTED. C) IN THE ABSENCE OF ANY WORTHWHILE ACTIVITY BY T HE TRUST, THE COMMISSIONER DOES NOT HAVE A CHANCE TO SATISFY HIMSELF ABOUT THE GENUINEN ESS OF THE ACTIVITY. D) THE MISCHIEF RULE, WHEN APPLIED TO THIS SITUATIO N LEAD TO THE INESCAPABLE CONCLUSION THAT A TRUST MUST DO CHARITABLE ACTIVITY BEFORE IT BECOMES ELIGIBLE TO GET APPROVAL U/S 80G OF THE ACT. 2.1. ACCORDINGLY, THE LD CIT(E) OBSERVED THAT IT IS ABUNDANTLY CLEAR THAT THE TRUST WHICH IS YET TO START ANY ACTIVITIES OR FAILS TO FURNISH SUBSTANTIAL PROOF CANNOT BE GRANTED APPROVAL U/S 80G OF THE ACT. ACCORDINGLY, THE LD CIT(E) HELD THAT HE WAS DRIVEN TO THE INESCAPABLE CONCLUSION THAT IN ABSENCE OF PROOF OF ACTIVITY, APPROVAL U/S 80G OF THE ACT 3 ITA NOS.1463/KOL/2017 M/S MOHANLAL MAHENDRA KUMAR PATNI A.YRS.2016-17 3 CANNOT BE GRANTED AND ACCORDINGLY REJECTED THE APPL ICATION ON MERIT. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE CORE I SSUE TO BE DECIDED IN THIS APPEAL IS APPLICATION OF PROVISIONS OF RULE 11AA OF THE RULES AND THE CONDITIONS PRESCRIBED U/S 80G(5)(VI) OF THE ACT. FOR THE SAKE OF CONVENIENC E, THE PROVISIONS OF SECTION 80G(5) OF THE ACT AND PROVISIONS OF RULE 11AA OF THE RULES ARE REPRODUCED BELOW:- SECTION 80G DEDUCTION IN RESPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTIONS, ETC. (5) THIS SECTION APPLIES TO DONATIONS TO ANY INSTIT UTION OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB-SECTION (2), ONLY IF IT IS EST ABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF IT FULFILS THE FOLLOWING CONDITIONS, NAMELY : 53 [(I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME, S UCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE P ROVISIONS OF SECTIONS 11 AND 12 54 [* * *] 55 [***] 56 [OR CLAUSE (23AA)] 57 [OR CLAUSE (23C)] OF SECTION 10 : 58 [ PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOM E, BEING PROFITS AND GAINS OF BUSINESS, THE CONDITION THAT SUCH INCO ME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCOME, IF (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS; (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND ARE N OT USED BY IT, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES OF SUCH BU SINESS; AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKING T HE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARAT E BO OKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS REC EIVED BY IT WILL NOT BE USED, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES O F SUCH BUSINESS;]] (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT, OR THE RULES GOVERNING THE INSTITUTION OR FUND DO NOT, CON TAIN ANY PROVISION FOR 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 O THER THAN A CHARITABLE PURPOSE; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO BE FOR THE BENEFIT 59 OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; 4 ITA NOS.1463/KOL/2017 M/S MOHANLAL MAHENDRA KUMAR PATNI A.YRS.2016-17 4 (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCOUNTS OF ITS RECEIPTS AND EXPENDITURE; 60 [* * *] (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED AS A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 18 60 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF INDIA OR UNDER SECTION 25 61 OF THE COMPANIES ACT, 1956 (1 OF 1956), OR IS A UNI VERSITY ESTABLISHED BY LAW, OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGN ISED BY THE GOVERNMENT OR BY A UNIVERSITY ESTABLISHED BY LAW , OR AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW, 62 [ 63 [***]] OR IS AN INSTITUTION FINANCED WHOLLY OR IN P ART BY THE GOVERNMENT OR A LOCAL AUTHORITY; 64 [***] 65 [(VI) IN RELATION TO DONATIONS MADE AFTER THE 31ST DAY OF MARCH, 1992, THE INSTITUTION OR FUND IS FOR THE TIME BEING APPROVED BY THE COMMI S- SIONER IN ACCORDANCE WITH THE RULES 66 MADE IN THIS BEHALF 67 [; AND] 68 [***]] 67 [(VII) WHERE ANY INSTITUTION OR FUND HAD BEEN APPROVED UND ER CLAUSE (VI ) FOR THE PREVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2007 AND ENDING ON THE 31ST DAY OF MARCH, 2008, SUCH INSTITUTION OR FUND SHALL, FOR THE PURPOSES OF THIS SECTION AND NOTWITHSTANDING ANYTHING CONTAINED IN T HE PROVISO TO CLAUSE (15 ) OF SECTION 2 , BE DEEMED TO HAVE BEEN, (A) ESTABLISHED FOR CHARITABLE PURPOSES FOR THE PREVIOU S YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY O F MARCH, 2009; AND (B) APPROVED UNDER THE SAID CLAUSE (VI ) FOR THE PREVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY O F MARCH, 2009.] RULE 11AA - REQUIREMENTS FOR APPROVAL OF AN INSTITUTION OR FUN D UNDER SECTION 80G. 11AA . (1) THE APPLICATION FOR APPROVAL OF ANY INSTITUTION OR FUND UNDER CLAUSE (VI) OF SUB-SECTION (5) OF SECTION 80G SHALL BE IN FORM NO. 10G AND SHALL BE MADE IN TRIPLICATE. (2) THE APPLICATION SHALL BE ACCOMPANIED BY THE FOL LOWING DOCUMENTS, NAMELY : (I) COPY OF REGISTRATION GRANTED UNDER SECTION 12A OR COPY OF NOTIFICATION I SSUED UNDER SECTION 10(23) OR 10(23C) ; (II) NOTES ON ACTIVITIES OF INSTITUTION OR FUND SINCE IT S INCEPTION OR DURING THE LAST THREE YEARS, WHICHEVER IS LESS ; (III) COPIES OF ACCOUNTS OF THE INSTITUTION OR FUND SINCE ITS INCEPTION OR DURING T HE LAST THREE YEARS, WHICHEVER IS LESS. (3) THE COMMISSIONER MAY CALL FOR SUCH FURTHER DOCU MENTS OR INFORMATION FROM THE INSTITUTION OR FUND OR CAUSE SUCH INQUIRIES TO BE M ADE AS HE MAY DEEM NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF T HE ACTIVITIES OF SUCH INSTITUTION OR FUND. 5 ITA NOS.1463/KOL/2017 M/S MOHANLAL MAHENDRA KUMAR PATNI A.YRS.2016-17 5 (4) WHERE THE COMMISSIONER IS SATISFIED THAT ALL TH E CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G ARE FULFIL LED BY THE INSTITUTION OR FUND, HE SHALL RECORD SUCH SATISFACTION IN WRITING AND GRANT APPRO VAL TO THE INSTITUTION OR FUND SPECIFYING THE ASSESSMENT YEAR OR YEARS FOR WHICH T HE APPROVAL IS VALID 62 . (5) WHERE THE COMMISSIONER IS SATISFIED THAT ONE OR MORE OF THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION (5) OF SECTION 80G ARE NOT FULFILLED, HE SHALL REJECT THE APPLICATION FOR APPROVAL, AFTER RECORDING THE REASO NS FOR SUCH REJECTION IN WRITING : PROVIDED THAT NO ORDER OF REJECTION OF AN APPLICATION SHALL BE PASSED WITHOUT GIVING THE INSTITUTION OR FUND AN OPPORTUNITY OF BEING HEARD 63 . (6) THE TIME LIMIT WITHIN WHICH THE COMMISSIONER SH ALL PASS AN ORDER EITHER GRANTING THE APPROVAL OR REJECTING THE APPLICATION SHALL NOT EXCEED SIX MONTHS FROM THE 64 [ END OF THE MONTH IN ] WHICH SUCH APPLICATION WAS MADE : PROVIDED THAT IN COMPUTING THE PERIOD OF SIX MONTHS, ANY TI ME TAKEN BY THE APPLICANT IN NOT COMPLYING WITH THE DIRECTIONS OF THE COMMISSION ER UNDER SUB-RULE (3) SHALL BE EXCLUDED.] 3.1. WE FIND THAT THE LD CIT(E) HAD NO WHERE IN HIS ORDER HAD STATED THAT THE ASSESSEE HAD VIOLATED ANY OF THE CONDITIONS PRESCRIBED IN SE CTION 80G(5) OF THE ACT. IT CANNOT BE BRUSHED ASIDE THAT THIS IS THE SECOND ROUND OF PROC EEDINGS BEFORE THE LD CIT(E). HENCE THE LD CIT(E) HAS TO CONSIDER THE RENEWAL OF APPROV AL OF EXEMPTION U/S 80G OF THE ACT ONLY FROM 1.4.2008 ONWARDS. FOR THAT PURPOSE, AS P ER RULE 11AA OF THE RULES, HE HAS TO LOOK INTO THE ACCOUNTS FOR THE LAST 3 YEARS I.E UPTO 31.3.2008. THE LD CIT(E) IN HIS ORDER ITSELF STATES THAT NO ACTIVITIES WERE CARRIED OUT AFTER REFUSAL OF APPROVAL U/S 80G OF THE ACT. THE ORDER REFUSING APPROVAL WAS PASSED ON 13.1.2009. WHETHER THE ACTIVITIES WERE CARRIED OUT BY THE ASSESSEE AFTER 13.1.2009 OR NOT IS ABSOLUTELY NOT RELEVANT FOR THE LD CIT(E) TO GRANT APPROVAL FOR EXEMPTION U/S 80G F OR THE PERIOD FROM 1.4.2008 ONWARDS. WHAT IS RELEVANT AS PER RULE 11AA IS ONLY TO LOOK INTO THE ACCOUNTS OF THE LAST 3 YEARS I.E UPTO 31.3.2008. IT IS NOT IN DISPUTE T HAT THE CHARITABLE ACTIVITIES WERE INDEED CARRIED OUT GENUINELY UPTO 13.1.2009 EVEN ACCORDING TO THE ORDER OF THE LD CIT(E). HENCE THERE IS ABSOLUTELY NO REASON FOR THE LD CIT( E) TO DENY THE APPROVAL OF EXEMPTION U/S 80G OF THE ACT BASED ON SUBSEQUENT NON-CONDUCT OF CHARITABLE ACTIVITIES BY THE ASSESSEE TRUST. EVEN FOR THAT, WE FIND THAT THE AS SESSEE HAD GIVEN REASONABLE EXPLANATION THAT FOR WANT OF DONATIONS FROM PUBLIC, THE TRUST C OULD NOT CARRY OUT MORE CHARITABLE 6 ITA NOS.1463/KOL/2017 M/S MOHANLAL MAHENDRA KUMAR PATNI A.YRS.2016-17 6 ACTIVITIES. IT IS COMMON UNDERTSTANDING THAT THE GE NERAL PUBLIC WOULD COME FORWARD TO OFFER DONATIONS TO REGISTERED CHARITABLE TRUST ONLY IF THEY POSSESS APPROVAL OF EXEMPTION U/S 80G OF THE ACT. IN THESE CIRCUMSTANCES, WE HOL D THAT THE LD CIT(E) HAD MISCONCEIVED HIMSELF BY LOOKING INTO THE SUBSEQUENT CONDUCT OF THE ASSESSEE TRUST AND DRAWING A CONCLUSION THAT THE GENUINENESS OF THE AC TIVITIES OF THE TRUST ARE NOT PROVED. WE DIRECT THE LD CIT(E) TO GRANT APPROVAL OF EXEMPT ION U/S 80G OF THE ACT FROM 1.4.2008 ONWARDS TO THE ASSESSEE TRUST. ACCORDINGLY , THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE COURT ON 04.07.20 18 SD/- SD/- [A.T. VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 04.07.2018 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. M/S MOHANLAL MAHENDRA KUMAR PATNI CHARITABLE TRU ST, 9, INDIA EXCHANGE PLACE, KOLKATA-700001. 2. CIT(E),KOLKATA, 10B, MIDDLETON ROW, KOLKATA-7000 71. 3. C.I.T(A)- , KOLKATA 4. C.I.T.- K OLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S