Kayalpatnam Baithulmal Trust, Kayalpatnam V. CIT, Madurai

ITA 1506/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64371 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-10-2012
• Assessment Year: misc
• Appeal Filed On: 30-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS A DDL
• Assessee Lawyers: N DEVANATHAN
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1506 & 1507(MDS)/2012 KAYALPATNAM BAITHULMAL TRUST, 181-ARAMPALLI STREET, KAYALPATNAM-628 204. PAN AABTK1854D. VS. THE COMMISSIONER OF INCOME-TAX-I, MADURAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.DEVANATHAN, ADV OCATE RESPONDENT BY : SRI SHAJI P JACOB, IRS, AD DL.CIT DATE OF HEARING : 9 TH OCTOBER, 2012 DATE OF PRONOUNCEMENT : 9 TH OCTOBER, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THESE TWO APPEALS ARE FILED BY THE ASSESSEE. ONE APPEAL IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX REJECTING THE APPLICATION OF THE ASSESSEE FOR REGIS TRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961. THE OTHE R APPEAL IS AGAINST THE ORDER OF THE SAME COMMISSIONER OF INCOM E-TAX - - ITA 1506 & 1507 OF 2012 2 REFUSING APPROVAL UNDER SECTION 80G OF THE INCOME-T AX ACT, 1961. 2. IN HIS ORDER PASSED UNDER SECTION 12AA(1)(B)(II ) DATED 26-6-2012, THE COMMISSIONER OF INCOME-TAX HAS REJECTED THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA , PUT IN BY THE ASSESSEE ON THE FOLLOWING GROUNDS:- (I) THE OBJECTS OF THE ASSESSEE TRUST ARE ADMIXTU RE OF BOTH RELIGIOUS AND CHARITABLE IN NATURE. (II) NO IRREVOCABILITY OR UTILIZATION CLAUSES AR E AVAILABLE IN THE TRUST DEED. (III) THERE IS A RESTRICTIVE CLAUSE IN THE DEED O F THE TRUST. THE MEMBERSHIP OF THE TRUST IS CONFINED TO THE MEMBERS OF A PARTICULAR RELIGIOUS COMMUNITY . 3. THE APPLICATION PUT IN BY THE ASSESSEE FOR APPR OVAL UNDER SECTION 80G HAS BEEN DISMISSED BY THE COMMISS IONER OF INCOME-TAX IN CONSEQUENCE OF HIS ORDER REJECTING TH E APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. - - ITA 1506 & 1507 OF 2012 3 4. THE GROUNDS RAISED IN BOTH THE APPEALS ARE INTERCONNECTED AND INTERMINGLING. WE HEARD SHRI N. DEVANATHAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND SHRI SHAJI P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APPEA RING FOR THE REVENUE. 5. WE HAVE GONE THROUGH THE COPY OF THE TRUST DEED PRODUCED BEFORE US. THE OBJECT OF THE TRUST IS MAI NLY TO IMPROVE THE EDUCATION, WELL BEING AND HEALTH OF POOR AND BA CKWARD PEOPLE LIVING IN AND AROUND KAYALPATNAM. IN PURSUA NCE OF THE ABOVE OBJECTIVE, THE ASSESSEE HAS PROVIDED FOR ESTA BLISHING SMALL-SCALE INDUSTRIAL TRAINING CENTRES, HOSPITALS, OLD-AGE HOMES, EDUCATIONAL INSTITUTIONS AND OTHER SIMILAR SOCIAL S ERVICE ORGANIZATIONS. 6. A PERUSAL OF THE ABOVE OBJECTS PROCLAIMED BY TH E ASSESSEE TRUST SHOWS THAT IT IS NOWHERE STATED THAT THE OBJECTS ARE RELIGIOUS IN NATURE. THE OBJECTS ARE DEFINITEL Y CHARITABLE IN NATURE. THEREFORE, THE COMMISSIONER OF INCOME-TAX IS NOT JUSTIFIED IN REJECTING THE APPLICATION OF THE ASSES SEE BY STATING THAT THE OBJECTS OF THE ASSESSEE TRUST ARE A MIXTUR E OF CHARITABLE AS WELL AS RELIGIOUS ACTIVITIES. - - ITA 1506 & 1507 OF 2012 4 7. EVEN IF, FOR THE SAKE OF ARGUMENT, IT IS FOUND THAT THE OBJECTS OF THE ASSESSEE TRUST ARE A MIXTURE OF BOTH CHARITABLE AND RELIGIOUS ACTIVITIES, STILL THE ASSESSEE IS ENTITLE D FOR THE BENEFIT OF REGISTRATION UNDER SECTION 12AA. THIS IS BECAUSE T HE EXEMPTION UNDER SECTION 11 IS AVAILABLE TO AN ASSESSEE CARRYI NG ON CHARITABLE ACTIVITIES OR RELIGIOUS ACTIVITIES OR BO TH CHARITABLE AND RELIGIOUS ACTIVITIES. THIS POSITION HAS BEEN MADE VERY CLEAR BY THE HONBLE MADRAS HIGH COURT IN THE JUDGMENT OF TH EIR LORDSHIPS IN THE CASE OF CIT VS. ARULMIGU SRI KAMATCHI AMMAN TRUST, THROUGH THEIR JUDGMENT DATED 25-1-2012 IN TAX CASE APPEAL NO.643 OF 2011. THE HONBLE COURT HAS HELD THAT SE CTION 12AA OF THE ACT DOES NOT MAKE ANY DIFFERENCE BETWEEN THE TRUSTS CREATED WITH THE OBJECT OF CHARITABLE AND RELIGIOUS PURPOSES AND EVEN IF THE TRUST IS NOT CREATED WITH BOTH THE OBJE CTS, LAW DOES NOT MAKE ANY DISQUALIFICATION FOR THE TRUST TO MAKE AN APPLICATION FOR REGISTRATION. 8. REGARDING THE IRREVOCABILITY OF THE TRUST, IT I S STATED IN THE TRUST DEED THAT THE TRUST IS IRREVOCABLE SI NCE IT HAS BEEN ESTABLISHED FOR THE BENEFIT AND IN THE INTEREST OF THE MINORITY. REGARDING THE UTILIZATION OF FUNDS, IT IS STATED TH AT THE INCOME OF - - ITA 1506 & 1507 OF 2012 5 THE TRUST SHALL BE SOLELY UTILIZED TOWARDS ITS OBJE CTIVES. IT WAS FURTHER STATED THAT THE MEMBERS AND THE OFFICE BEAR ERS OF THE TRUST ARE NOT ENTITLED TO ANY SHARE, PROFIT, INTERE ST OR ANY OTHER BENEFITS FROM THE TRUST. IT IS ALSO STATED IN THE TRUST DEED THAT IN THE CASE OF DISSOLUTION OF THE TRUST, THE PROPERTIE S AND FUNDS SHALL BE HANDED OVER TO THE TRUST HAVING IDENTICAL OBJECT S ENJOYING EXEMPTION UNDER SECTION 80G OR TO ANY INSTITUTION U NDER THE CONTROL OF THE GOVERNMENT FOR THE BENEFIT AND WELFA RE OF THE PUBLIC. 9. THE ABOVE CLAUSES INCORPORATED IN THE TRUST DEE D CLEARLY SHOW THAT THE OTHER OBJECTIONS POINTED OUT BY THE COMMISSIONER OF INCOME-TAX REGARDING THE UTILIZATIO N OF FUNDS AND IRREVOCABLE NATURE OF THE TRUST, ARE WITHOUT AN Y BASIS. THOSE BASIC CONDITIONS HAVE BEEN PROPERLY SATISFIED IN TH E TRUST DEED EXECUTED BY THE ASSESSEE. 10. ANOTHER OBJECT POINTED OUT BY THE COMMISSIONER OF INCOME-TAX IS THAT THE MEMBERS OF THE TRUST BELONGE D TO A PARTICULAR COMMUNITY. IT IS TRUE THAT THE MEMBERS OF THE ASSESSEE TRUST ARE FROM SUNNI MUSLIMS. BUT THAT DO ES NOT MAKE THE TRUST INELIGIBLE FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. - - ITA 1506 & 1507 OF 2012 6 IT IS TO BE SEEN THAT EVEN A RELIGIOUS TRUST IS ENT ITLED FOR THE BENEFIT OF SECTION 11. IN A RELIGIOUS TRUST IT IS OBVIOUS THAT THE MEMBERS SHALL BELONG TO A PARTICULAR RELIGIOUS COMM UNITY. IN THE CASE OF A CHARITABLE SOCIETY ALSO THERE IS NO RULE THAT THE MEMBERS SHOULD NOT BE FROM A SINGLE COMMUNITY. IN INDIA USUALLY MANY OF THE CHARITABLE INSTITUTIONS ARE PRO MOTED BY NOBLE PEOPLE OF DIFFERENT RELIGIONS. CHRISTIANS ARE RUNN ING A NUMBER OF CHARITABLE INSTITUTIONS IN THIS COUNTRY, WHERE TRUS TS ARE FORMED BY CHRISTIANS AS WELL AS THE REPRESENTATIVES OF THE CH URCH. HINDU COMMUNITY IS RUNNING A NUMBER OF CHARITABLE INSTITU TIONS, WHOSE MEMBERS ARE FROM HINDU COMMUNITY. MUSLIM COMMUNITY IS ALSO RUNNING A NUMBER OF CHARITABLE INSTITUTIONS CONSIST ING OF THEIR OWN MEMBERS. IF THE REASONING OF THE COMMISSIONER OF I NCOME-TAX IS ACCEPTED, THEN THERE CANNOT BE A CHARITABLE SOCIETY FORMED EXCLUSIVELY BY MEMBERS OF THE DALITH COMMUNITY OR M INORITY COMMUNITY. THE OBSERVATION OF THE COMMISSIONER OF INCOME-TAX IN THIS REGARD IS NOT ONLY AGAINST LAW BUT ALSO AGA INST THE PROCLAIMED POLICY OF THE STATE. 11. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE COMMISSIONER OF INCOME-TAX HAS GROSSLY ERR ED IN - - ITA 1506 & 1507 OF 2012 7 REFUSING REGISTRATION TO THE ASSESSEE UNDER SECTION 12AA OF THE ACT. HIS ORDER IS SET ASIDE. THE COMMISSIONER OF INCOME-TAX IS DIRECTED TO GRANT THE ASSESSEE TRUST REGISTRATION U NDER SECTION 12AA OF THE INCOME-TAX ACT, 1961. 12. IN VIEW OF THE ABOVE FINDING, WE ALSO SET ASID E THE ORDER OF THE COMMISSIONER OF INCOME-TAX PASSED UNDE R SECTION 80G OF THE ACT. HE IS FURTHER DIRECTED TO GRANT AP PROVAL TO THE ASSESSEE TRUST UNDER SECTION 80G OF THE ACT. 13. IN RESULT, THESE TWO APPEALS FILED BY THE ASSE SSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 9 TH OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 9 TH OCTOBER, 2012. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.