C.R.Anand Educational Trust, Madurai V. ITO, Madurai

ITA 1561/CHNY/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51688 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-08-2011
• Assessment Year: misc
• Appeal Filed On: 17-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: G BASKAR
• Keywords: Charitable institution; Principle of natural justice
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER] I.T.A.NOS.1561 & 1562/MDS/2010 ASSESSMENT YEAR : N.A C.R.ANAND EDUCATIONAL TRUST NO.34 GANESHAPURAM K. PUDUR MADURAI 625 007 VS THE INCOME-TAX OFFICER WARD II(4) MADURAI [PAN AABTC1657J] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.BASKAR RESPONDENT BY : DR. I.VIJAYAKUMAR, CIT/DR O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THE ABOVE CAPTIONED APPEALS ARE BEING DI SPOSED OF BY A COMMON ORDER AS THE ISSUES INVOLVED ARE INTERFACED WITH EACH OTHER, IT WOULD BE CONVENIENT TO DO SO. I.T.A.NO. 1562/MDS/2010 2. THIS APPEAL OF THE ASSESSEE-TRUST, IS DIRECTED A GAINST THE ORDER OF THE LD. CIT, MADURAI, DATED 3.8.2010, VIDE WHICH HE HAS REFUSED TO GRANT REGISTRATION U/S 12AA OF THE ACT. ITA 1561&1562/10 :- 2 -: 3. THE FACTS LEADING TO THIS APPEAL ARE THAT THE TRU ST APPLIED FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT ON 5.2.10 10 ALONGWITH A COPY OF TRUST DEED IN FORM NO.10A. THE TRUST WAS CREATE D ON 2.12.2008. THE OBJECTS OF THE TRUST ARE OSTENSIBLY AND ADMITTE DLY CHARITABLE IN NATURE, BUT THE LD. CIT HAS NOTED THAT THE ACTIVITI ES CARRIED ON BY IT ARE NOT FOUND TO BE GENUINE. SO, HE REFUSED REGISTRAT ION OF THE TRUST U/S 12AA OF THE ACT. NOW, THE TRUST IS BEFORE US BEING AGGRIEVED. FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER OF THE COMMISSIONER OF INCOME - TAX IS WR ONG, ILLEGAL AND OPPOSED TO FACTS. THE COMMISSIONER OF I NCOME TAX WENT WRONG IN REJECTING THE APPLICATION FOR REG ISTRATION ON GROUNDS NOT STATED IN THE SHOW CAUSE NOTICE. THE ORDER IS LIABLE TO QUASHED AS VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE. 2. THE COMMISSIONER OF INCOME - TAX WENT WRONG IN HIS INTERPRETATION OF THE PROVISIONS OF SECTION 2(15) O F THE INCOME - TAX ACT. 3. THE COMMISSIONER OF INCOME - TAX WENT WRONG IN ITS OBSERVATION THAT THE APPELLANT TRUST HAS NOT BEEN ESTABLISHED AS A PUBLIC AND CHARITABLE TRUST. THE COMMISSIONER OF INCOME TAX FAILED TO SEE THE BENEFI CIARIES OF THE TRUST, AT CLAUSE ... PAGE .... 'THE BENEFITS OF THE TRUST ARE OPEN TO ALL IRRESPECTIVE OF CASTE, RELIGION, SE X ETC.,' 4. THE COMMISSIONER OF INCOME TAX NOT CONSIDERED THE A ICTE APPROVAL, THE APPELLANT SUBMITTED AT THE TIME OF HE ARING. 5. THE COMMISSIONER OF INCOME - TAX OUGHT TO HAVE SEEN THAT THE TERM CHARITABLE PURPOSE HAD BEEN WELL DEFINED B Y THE HON'BLE SUPREME COURT AND OTHER COURTS AND THERE IS NO FURTHER DISCUSSION REQUIRED ON THE SUBJECT. ITA 1561&1562/10 :- 3 -: 6. THE COMMISSIONER OF INCOME - TAX OUGHT TO HAVE ANY EVEN SEEN THAT WHETHER THE INCOME OF THE TRUST IS DERIVE D FROM THIS ACTIVITY OR NOT IS TO BE DECIDED EVERY YEAR IN THE ASSESSMENT PROCEEDINGS AND NOT ON SURMISES. 7. THE COMMISSIONER OF INCOME TAX ERRED IN MAKING OBSERVATIONS WITHOUT APPLYING HIS MIND TO THE NATUR E OF THE ACTIVITY IN THE PROPER VIEWPOINT. DOCUMENTARY EVIDENCE PRODUCED AT THE TIME OF HEARING ABOUT THE ACTIVITIES OF THE TRUST HAS BEEN IGNORED. 8. THE LEARNED COMMISSIONER WAS NOT JUSTIFIED IN IGNOR ING THE ASSURANCE OF FINANCE MINISTER IN THE PARLIAMENT , WHICH IS BINDING ON HIM AS HELD BY THE HON'BLE SUPR EME COURT IN R & B FALCON (A) PTY. LTD. V. CIT (2008) 3 01 ITR 309 (SC) AND WAS ALSO NOT JUSTIFIED IN IGNORING THE BOARD CIRCULAR NO. 11 OF 2008 DATED 19TH DECEMBER 2008, WHEN BOTH THE OBJECTS AND ACTIVITIES WERE CLE ARLY CONSISTENT WITH THE EXPLANATION OF LAW IN THE BOARD CIRCULAR, WHICH WAS BINDING ON HIM UNDER SECTION 11 9 OF THE ACT. 9. THE COMMISSIONER OF INCOME TAX ERRED IS NOT CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE, BEFORE ARRIVING AT THE UNTENABLE CONCLUSI ON. 10. IN ANY EVENT THE CONCLUSION OF THE COMMISSIONER OF INCOME TAX IS HYPER TECHNICAL AND SUPERFLUOUS. 11. THE APPLICATION IS LIABLE TO BE ALLOWED AND REGISTR ATION U/S 12A GRANTED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ENTIRE MATERIAL AVAILABLE ON RECORD. IN FACT, THE TRUST WAS CREATED BY ONE SHRI R.VEDHARAJAN AND SMT. V.MERCY, WHO WERE DECLARED AS THE FOUNDERS-CUM-MANAGING TRUSTEES OF THE ASSESSEE-TRUS T. THE TRUST IS A PRIVATE CHARITABLE TRUST AND NOT A PUBLIC CHARITA BLE TRUST. THE TRUST HAS CONSTRUCTED A BUILDING FOR STARTING AN ENGINEE RING COLLEGE. BUT AS ITA 1561&1562/10 :- 4 -: PER CIT NO EVIDENCE REGARDING PERMISSION OBTAINED F ROM THE COMPETENT AUTHORITIES LIKE, ALL INDIA COUNCIL FOR T ECHNICAL EDUCATION, ETC. WERE PRODUCED. AFTER MAKING MANY SIMILAR OBSE RVATIONS, THE LD. CIT HAS COME TO THE CONCLUSION THAT THE EXISTENCE A ND THE ACTIVITIES OF THE TRUST ARE NOT FOUND TO BE GENUINE. HE HAS ALSO CONSPICUOUSLY MADE A SEPARATE OBSERVATION THAT THIS TRUST IS A PRIVATE CHARITABLE TRUST AND NOT A PUBLIC CHARITABLE TRUST. IT WAS ARGUED BY LD.AR THAT BEFORE GIVING A FINDING REGARDING PRIVATE CHARITAB LE TRUST OR PUBLIC CHARITABLE TRUST, THE LD. CIT DID NOT GIVE ANY OPP ORTUNITY TO THE ASSESSEE TO EXPLAIN THE EXACT NATURE OF THE TRUST. IT WAS ARGUED THAT THE OBJECTS OF THE TRUST ARE FOUND TO BE CHARITABLE IN NATURE BY THE LD. CIT HIMSELF. IN THE VIEW OF LD.AR, SHRI G.BASKAR, IT IS NOT JUSTIFIABLE TO LOOK INTO THE APPLICABILITY OF THE FUNDS OF THE TR UST AT THE STAGE OF CONSIDERATION OF THE APPLICATION FOR REGISTRATION U /S 12AA OF THE ACT. IN THESE CIRCUMSTANCES, THE LD.AR HAS CONVINCINGLY APP EALED THAT THE MATTER NEEDS TO GO BACK TO THE LD. CIT SO THAT HIS OBSERVATIONS WHICH HAVE BEEN MADE IN THE ORDER AND WHICH WERE NEVER CO NFRONTED TO THE ASSESSEE COULD BE EXPLAINED TO AVOID ANY INJUSTICE AND FOR THAT MATTER IT WAS REQUESTED THAT AN OPPORTUNITY IS REQUIRED TO BE GIVEN TO THE ASSESSEE-TRUST. ON THE OTHER HAND, THE LD CIT/DR H AS SUPPORTED THE LD. CITS ORDER AND HAS REPELLED THE SUBMISSIONS OF THE LD.AR BY STATING ITA 1561&1562/10 :- 5 -: THAT CIT HAS ALREADY GIVEN AMPLE OPPORTUNITY TO TH E TRUST, BUT IT DID NOT AVAIL THE SAME AND HENCE, NO FRUITFUL PURPOSE W OULD BE SERVED IN REMITTING THE MATTER BACK. BUT AFTER CONSIDERING T HE GAMUT OF FACTS IN ITS ENTIRETY, WE ARE CONVINCED THAT IN THE GIVEN FA CTS AND CIRCUMSTANCES OF THE CASE IF ANOTHER OPPORTUNITY IS NOT GIVEN TO THE ASSESSEE IT WOULD RESULT INTO GRAVE INJUSTICE. THEREFORE, WE ORDER T HAT ONE MORE OPPORTUNITY IS REQUIRED TO BE GIVEN TO THE ASSESSEE -TRUST TO EXPLAIN AGAINST THE EX-PARTE OBSERVATIONS MADE BY THE LD. C IT, OSTENSIBLY, WITHOUT SEEKING ANY EXPLANATION QUA THEM. THEREFOR E, IN THE INTEREST OF JUSTICE, WE REMAND THE ENTIRE ISSUE BACK TO THE FILE OF THE LD. CIT, MADURAI, WITH A DIRECTION TO DECIDE THE SAME AFRESH AFTER ACCORDING OPPORTUNITY OF HEARING TO THE ASSESSEE AND AFTER SE EKING EXPLANATION ON THE NATURE OF THE TRUST. WE MAY MAKE IT CLEAR T HAT IN CASE THE OBJECTS OF THE TRUST ARE FOUND TO BE CHARITABLE IN NATURE, THE APPLICATION OF THE FUNDS OF THE TRUST WOULD NOT HAV E ANY MATERIAL BEARING AT THE STAGE OF CONSIDERING THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT. MOREOVER, WE FURTHER DIRECT THE L D. CIT TO GIVE A CLEAR FINDING REGARDING THE LEGAL POSITION IN CONNE CTION WITH THE APPLICABILITY OF SECTION 12AA TO A PUBLIC TRUST AND /OR A PRIVATE TRUST. ACCORDINGLY, WE RESTORE THIS APPEAL TO THE FILE OF THE LD. CIT WITH THE ABOVE DIRECTIONS. ITA 1561&1562/10 :- 6 -: 5. THE APPEAL IN I.T.A.NO. 1561/MDS/2010 IS A CONNECTE D APPEAL AS 80G(5) RECOGNITION HAS BEEN DENIED CONSEQUENT TO RE JECTION OF REGISTRATION OF THE TRUST U/S 12AA. ACCEPTANCE OR REJECTION OF THIS APPEAL IS TAGGED WITH THE APPEAL IN I.T.A.NO. 1561/ MDS/2010, THEREFORE, CONCOMITANTLY, THIS APPEAL IS ALSO RESTO RED TO THE FILE OF THE LD. CIT. 6. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR ST ATISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 1.8.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 1 ST AUGUST, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR