M/s. Jag. Sri Chandra Sekarendra Saraswathi SASSC Trust, CHENNAI V. CIT, Pondicherry

ITA 1583/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58025 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2012
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 13-03-2012
• Assessment Year: misc
• Appeal Filed On: 22-09-2011
• Court: TRIBUNAL
• Keywords: Business income; Charitable institution; Principle of natural justice
• Section: 12AA; 11; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1583/MDS/2011 M/S JAGADGURU SRI CHANDRA SEKARENDRA SARASWATHI SWAMIGAL AVATARSTHALA SMARAKSHNA AND CENTENARY COMMEMORATION TRUST , NEW NO.47, OLD NO.48, KUBERA STREET, VILLUPURAM. PAN : AABTJ4064G (APPELLANT) V. THE COMMISSIONER OF INCOME TAX, DEIVANAYAGAM PILLAI THOTTAM, MAHATMA GANDHI ROAD, PONDICHERRY 605 003. (RESPONDENT) APPELLANT BY : SHRI PHILIP GEORGE RESPONDENT BY : SHRI M.N. MURTHY NAIK DATE OF HEARING : 13.03.2012 DATE OF PRONOUNCEMENT : 13.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT COMMISSIONER OF INCOME TAX, PONDICHERRY, REFUSED TO GRANT REGISTRATION UNDER SECTION 12AA OF INCOME-TAX ACT, 1962 (IN SHORT 'THE ACT') VIDE HIS ORDER DATED 12.8.2011. I.T.A. NO. 1583/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED AN APPLICATION IN FORM NO.10A FOR REGISTRATION UNDER SECTION 12AA OF THE ACT ON 11.2.2011. THE OBJECTS OF THE ASSESSEE-TRUST , AS PER TRUST DEED, WERE AS UNDER:- (A) TO IMPROVE, MAINTAIN AND DEVELOP THE SANKARA MUTT B RANCH AT THE AVATARSTHALA AT SANKARA MATAM STREET, VILLUPURA M. (B) TO ESTABLISH, IMPROVE, MAINTAIN LIBRARY CONTAINING BOOKS VEDAS, SASTRAS, VEDANTHA, ASTROLOGY AND THE LIKE. (C) TO MAINTAIN, IMPROVE, DEVELOP THE AVATAR ROOM OF HI S HOLINESS SRI JAGADGURU SRI CHANDRASEKARA SARASWATHI SWAMIGAL WITHOUT MODIFYING ANY THING INSIDE THE ROO M. (D) TO ORGANIZE, DEVELP, IMPROVE, PERFORM BISHAVANDANAM TO HIS HOLINESS SRI SANKARACHARYA OF KANCHI KAMAKOTI PEETA M ANNUALLY AT HIS POOJA CAMP AND WHENEVER HE PAYS A V ISIT TO VILLUPURAM. (E) TO ORGANIZE, AND ARRANGE FOR THE ACCOMMODATION; FOR THE CONDUCT OF SRI CHANDRA MOULEESWARA POOJA, FOR THE E NTOURAGE, AND FOR THE SANTHARAPANAI TO THE ENTOURAGE OF HIS H OLINESS DURING THE VISITS TO VILLUPURAM. LD. CIT WAS OF THE OPINION THAT OBJECTS INDICATED A MIXED NATURE, PARTLY CHARITABLE AND PARTLY RELIGIOUS. ACCORDING TO HIM, UNLESS THE TRUST WAS EITHER WHOLLY RELIGIOUS OR WHOLLY CHARITA BLE, EXEMPTION PROVISION UNDER SECTION 11 OF THE ACT COULD NOT BE APPLIED. LD. CIT ALSO NOTED THAT ASSESSEES AUTHORIZED REPRESENTATIV E, DURING THE COURSE OF HEARING, HAD WITHDRAWN THE APPLICATION MA DE UNDER SECTION 12AA OF THE ACT. LD. CIT FINALLY REJECTED THE APPL ICATION CONSIDERING IT AS WITHDRAWN. I.T.A. NO. 1583/MDS/11 3 3. NOW BEFORE US, LEARNED A.R. FILED AN AFFIDAVIT O F SHRI R. HARIRAO, CHARTERED ACCOUNTANT, AND SUBMITTED THAT WITHDRAWAL OF APPLICATION FILED UNDER SECTION 12AA OF THE ACT, WAS MADE BY TH E SAID CHARTERED ACCOUNTANT UNDER COMPULSION FROM THE CIT. ACCORDIN G TO THE LEARNED A.R., LD. CIT HAD POINTED OUT THAT UNLESS CERTAIN C LAUSES IN THE TRUST DEED WERE DELETED, IT COULD NOT BE GRANTED REGISTRA TION UNDER SECTION 12AA OF THE ACT AND THE CHARTERED ACCOUNTANT WAS UN DER AN IMPRESSION THAT MORE TIME WOULD BE GRANTED FOR EFFE CTING SUCH CHANGES. ACCORDING TO HIM, THOUGH THE SAID CHARTER ED ACCOUNTANT, HAD, ON 12.8.2011 ITSELF, BROUGHT TO THE ATTENTION OF LD. CIT THAT WITHDRAWAL OF PETITION WAS DONE WITHOUT REALIZING T HE CONSEQUENCES, AND REQUESTED THE LD. CIT TO GIVE MORE TIME FOR REC TIFYING THE DEFECTS, THIS WAS NOT CONSIDERED BY LD. CIT. AS PER THE LEA RNED A.R., RULES OF NATURAL JUSTICE WERE VIOLATED WHEN ON THE SAME DAY, LD. CIT PASSED THE ORDER DENYING REGISTRATION ON 12.8.2011 CONSIDE RING THE APPLICATION OF THE ASSESSEE AS WITHDRAWN BY HIM. T HEREFORE, ACCORDING TO HIM, ASSESSEE OUGHT TO BE GIVEN ONE MO RE OPPORTUNITY FOR PURSUING ITS APPLICATION BEFORE LD. CIT. 4. PER CONTRA, LEARNED D.R. SUBMITTED THAT APPLICAT ION WAS WITHDRAWN BY THE ASSESSEE AND LD. CIT HAD CLEARLY N OTED IT IN HIS I.T.A. NO. 1583/MDS/11 4 ORDER AND REJECTED IT CONSIDERING SUCH WITHDRAWAL. HENCE, ACCORDING TO HIM, ASSESSEE COULD NOT NOW ARGUE THAT THE ORDER OF LD. CIT WAS INCORRECT. 5. WE HAVE PERUSED THE ORDER AND HEARD THE RIVAL S UBMISSIONS. THERE IS NO DISPUTE THAT LD. CIT HAD REJECTED THE A PPLICATION OF THE ASSESSEE CONSIDERING IT TO BE WITHDRAWN. IT IS ALS O NOT DISPUTED THAT THE CHARTERED ACCOUNTANT, WHO WAS REPRESENTING THE ASSESSEE, HAD SIGNED BEFORE THE LD. CIT IN THE ORDER SHEET WHEREI N IT WAS MENTIONED THAT THE APPLICATION WAS WITHDRAWN BUT HA D POINTED OUT HIS MISTAKE ON THE VERY NEXT DAY. NOW THE QUESTION IS WHETHER DESPITE SUCH WITHDRAWAL, ASSESSEE CAN BE ALLOWED TO PURSUE THE MATTER BEFORE THIS TRIBUNAL, ASSAILING THE ORDER OF LD. CI T. LD. CIT HAD CONSIDERED THE OBJECTS OF THE ASSESSEE IN DETAIL AN D CAME TO A CONCLUSION THAT IT COULD NOT BE ACCORDED REGISTRATI ON UNDER SECTION 12AA OF THE ACT. AS PER LD. CIT, ASSESSEE WAS DOIN G PART CHARITABLE AND PART RELIGIOUS AND UNLESS THE TRUST WAS WHOLLY FOR RELIGIOUS PURPOSE OR WHOLLY FOR CHARITABLE PURPOSE, REGISTRAT ION UNDER SECTION 12AA COULD NOT BE ACCORDED. AFTER ARRIVING AT SUCH A CONCLUSION, LD. CIT NOTED THAT ASSESSEE HAD WITHDRAWN THE APPLICATI ON FILED BY IT. I.T.A. NO. 1583/MDS/11 5 THE ORDER OF LD. CIT RUNS TO THREE PAGES AND PARA 3 IN WHICH HE HAS CONSIDERED THE ISSUE ON MERIT, IS REPRODUCED HEREUN DER:- 3. IMPROVING, MAINTAINING AND DEVELOPING THE SANKAR A MUTT BRANCH, CONDUCTING O F ' BIKSHAVANDANAM' TO HIS HOLINESS SRI SANKARACHARAYA OF KANCHI KAMAKOTI PEETAM AND CONDUCT OF CHANDRA MOUIEESWARA POOJA ARE OBJECTS OF RELIGIOUS NATURE . A CONJOINT READING OF OBJECTS ABOVE AND OTHER OBJECTS IN THE TRUST DEED W OULD INDICATE THAT THE TRUST HAS MIXED OBJECTS VLZ . , PARTLY CHARITABLE AND PARTLY RELIG I OUS . THE LEARNED AUTHORIZED REPRESENTATIVE HAS FAIRLY AD MITTED THAT THE OBJECTS OF THE TRUST ARE BOTH RELIG I OUS AND CHARITABLE IN NATURE. FOR THE FOLLOWING REA SONS THE ASSESSEE IS NOT ENTITLED FOR REGISTRAT I ON U/S.12AA OF THE INCOME TAX ACT, 1961. A) THE PROVISIONS OF SECTION 11(1) EXEMPTS THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME I S APPLIED TO SUCH PURPOSES IN INDIA SUBJECT TO FULFIL LMENT OF OTHER STIPULATIONS . B) HERE TWO EXPRESSIONS / WORDS ARE OF SIGNIFICANCE. IT MAY BE SEEN THAT THE EXPRESSION CHARITABLE OR RELIGIOUS PURPOSE IS QUALIFIED BY THE WORD 'WHOLLY' . IT WOULD MEAN THAT THE PURPOSE SHOULD BE EITHER WHOLLY CHARITABLE OR WHOLL Y RELIGIOUS. IT EXCLUDES THE WORD PARTLY. THE DICTIONARY MEANING OF THE WORD 'WHOLLY' AS PER RAMANATHA AIYER'S DICTIONARY MEANS 'ENTIRELY, COMPLETELY, FULLY, TOTALLY AND IN EVERY RESPECT'. THEREFORE, THE USE OF THE WORDS IN SECTION 11 REFERS TO EITHER A WHOLLY CHARITABLE OR WHOLLY RELIGIOUS TRUST. C) THE OTHER WORD USED IN THE SECTION IS 'OR' . THIS WORD SEPARATES RELIGIOUS FROM CHARITABLE. THE WORD 'OR' IS GENERALLY USED DISJUNCTIVELY NOT C ONJUNCTIVELY . WHEREVER THE WORD ' OR' IS USED EXEGETICALLY OR AS AN EXPLANATORY, THE MEANING WOULD BE ALIAS OR OTHERWISE CALLED . THIS USE IS DONE WHERE THE WORD ' OR ' JOINTS CONNOTES SAME THING OR ARE INTERCHANGEABLE. IT MAY BE SEEN THAT IN SECTION 11 THE USE OF WORDS CHARITA BLE OR RELIGIOUS HAVE NOT BEEN US E D CONNOTING THE SAME MEANING OR AS INTERCHANGEABLE WO RDS . THEREFORE , THE TWO WORDS CONNOTE DIFFERENT MEANING. THIS COUPLED WITH THE EX PRESS I ON 'WHOLLY' INDICATES THAT THERE SHOULD EITHER BE A WHOLLY CHARITABLE OR A WHOLLY RE LIGIOUS TRUST . D) EVEN OTHER LEGISLATIONS USE THE WORDS 'RELIGIOUS' AND 'CHARITABLE' CONVEYING DISTINCT MEANING AS IN SECTION 92 OF CPC . IN INCOME TAX ACT ALSO SUB-CLAUSE (IV) AND (V) OF C LAUSE 23C OF SECTION10 VISUALIZE DISTINCTION BETWEEN CHARITABLE AND RELIGIOUS PURPOSES. SUB-CLAUSE (1) OF CLAUSE (C ) TO SECTION 11 REFERS TO CHARITABLE PURP OSES ONLY. SECOND PROVISO TO SECTION 13(L)(C) EXEMPTS ALL RELIGIOUS TRUSTS FROM OPERATIO N OF SUB-CLAUSE (II) OF THE SECTION WHILE CHARITABLE TRUSTS CREATED BEFORE 01/04/1962 ONLY AR E SAVED. WHILE BUSINESS INCOME WAS LIABLE TO TAX IN CASE OF CHARITABLE TRUST UNDER SEC TION 2(15) AND 13(L)(BB) , RELIGIOUS TRUSTS WERE LEFT OUT. BENEFITS UNDER SECTION BOG IS NOT AVAILABLE IN CASES WHERE THE APPLICATION OF INCOME OF A CHARITABLE TRUST EXCEEDS 5% OF ITS RECE IPTS . ALL THESE PROVISIONS WOULD SHOW THAT THE LEGISLATURE VISUALIZED CHARITABLE AND RELIGIOUS TRUSTS SEPARATELY / DISTINCTLY IN THE SCHEME OF THE ACT . A NARROW INTERPRETATION IS THEREFORE NOT PERMISSIBL E . E) IT IS PERTINENT TO MENTION HERE THAT WHEREVER THE J UDICIARY HAS HELD THAT A RELIGIOUS ACTIVITY IS PART OF A RESIDUARY ACTIVITY (ADVANCEMENT OF ANY OT HER OBJECT OF GENERAL PUBLIC UTILITY) , THE SAME WAS IN A DIFFERENT CONTEXT . IN SUCH CASES , IF THE PREDOMINANT ACTIVITY IS CULTURAL , A SMALL I.T.A. NO. 1583/MDS/11 6 DEVIATION BY WAY OF AN ANCILLARY ACTIVITY BY APPLIC ATION OF SOME INCOME OF RELIGIOUS PURPOSES WAS HELD TO BE NOT FATAL . THERE WAS NEVER ANY PRONOUNCEMENT MIXING THE TWO OB JECTS HOLDING IT AS SAME. F) A PERUSAL OF THE OBJECTS CLAUSE DOES NOT SHOW IN C LEAR TERMS WHICH ACTIVITY I S PREDOMINANT AND WHICH WAS ANCILLARY . THEREFORE , THIS GIVES UNFETTERED POWERS TO THE TRUSTEES TO APP LY THE INCOME AS THEY LIKE. THIS IS NEGATION OF THE VERY C ONCEPT OF INCOME AND ITS APPLICATION . G) IT MAY BE PERTINENT TO MENTION HERE THAT AFTER THE LATEST AMENDMENT IN 2009 , ON C E CERTIFICATE UNDER SECTION 80G(5)(VI) OF THE I . T . ACT IS GRANTED , THE SAME IS PERPETUAL . AFTER INTRODUCTION OF SUCH A PROVISION , IT IS MORE IMPORTANT THAT THERE SHOULD BE TWO DISTI NCT TRUSTS. OTHERWISE, A CHARI T ABLE TRUST WOULD APPLY ITS INCOME FOR RELIGIOUS PUR POSES AND ESCAPE ATTENTION OF AUTHORITIES . THIS WILL DEFEAT THE PURPOSES OF THE ACT . H) IN VIEW OF THE ABOVE, FOR THE PU R POSES OF SECTION 12AA, THERE SHOULD BE TWO DISTINCT TRUSTS . I) UNDER SECTION 11 OF THE I . T . ACT, 1961, THE TRUST HAS TO BE ENGAGED EITHER WHOLL Y IN RELIGIOUS ACTIVITIES OR WHOLLY I N CHARITABLE ACTIVITIES . THE TRUST WHICH IS PARTLY RELIGIOUS AND PAR T LY CHA R ITABLE IS NOT ENTITLED FOR REGISTRATION. IN THIS CO NTE X T , RELIANCE IS PLACED ON THE RATIO LAID DOWN BY THE APE X COURT IN MP SHANTI VERMA JAIN 231 ITR 787 AND ALSO ON THE DECISIONS OF THE HON'BLE J&K HIGH COURT IN THE CASE O F GHULAM MOHIDIN TRUST 248 ITR 587 AND YOGI RAJ CHAR I TY TRUST, 103 ITR 777 (SC) . 6. IF LD. CIT WAS OF THE OPINION THAT THE APPLICATI ON WAS TO BE DISMISSED AS WITHDRAWN, THERE WAS NO NECESSITY FOR HIM TO ADJUDICATE ON ITS MERITS. A READING OF THE ORDER OF LD. CIT W ILL CLEARLY SHOW THAT LD. CIT HAD ADJUDICATED THE APPLICATION ON MERITS A ND CAME TO A CONCLUSION THAT IT COULD NOT BE GIVEN REGISTRATION UNDER SECTION 12AA OF THE ACT. HE HAD REJECTED THE APPLICATION NOT BE CAUSE THE APPLICATION WAS WITHDRAWN. ONCE ADJUDICATION HAS B EEN DONE ON MERITS, TO SAY THAT THE APPLICATION WAS REJECTED ON ACCOUNT OF WITHDRAWAL, WILL NOT, IN OUR OPINION, STAND THE TES T OF REASONING. ASSESSEES REPRESENTATIVE, NO DOUBT, HAD NOTED IN T HE ORDER SHEET THAT THE APPLICATION WAS WITHDRAWN. BUT, ON THE VE RY NEXT DAY, THE SAME REPRESENTATIVE OF THE ASSESSEE HAD POINTED OUT THAT SUCH I.T.A. NO. 1583/MDS/11 7 WITHDRAWAL WAS MADE WITHOUT REALIZING THE CONSEQUEN CES. AN AFFIDAVIT HAS ALSO BEEN FILED BY THE CONCERNED CHAR TERED ACCOUNTANT WHEREIN HE HAS MENTIONED AS UNDER:- AT THE TIME OF HEARING IT WAS POINTED OUT BY THE CI T THAT THE TRUST WAS NEITHER WHOLLY RELIGIOUS NOR WHOLLY C HARITABLE AND REGISTRATION COULD BE GRANTED ONLY IF SOME OF THE C LAUSES ARE DELETED TO MAKE IT EITHER WHOLLY CHARITABLE OR RELI GIOUS. I WAS UNDER THE BONAFIDE IMPRESSION THAT TIME WOULD BE GR ANTED TO EFFECT THE CHANGES AND HENCE I ORALLY AGREED, BEING UNDER THE IMPRESSION THAT I HAD TO FILE A FRESH AMENDED DEED OF TRUST. IMMEDIATELY THE HEARING WAS COMPLETED. I WAS ASKED TO AFFIX MY SIGNATURE IN THE ORDER SHEET AND DID SO SPONTANEOUS LY AND ONLY THEREAFTER REALIZED THAT THE CIT HAD WRITTEN WITHD RAWN. I REALIZED THIS ONLY AFTER AFFIXING MY SIGNATURE. IT WAS SUBMITTED IMMEDIATELY THAT THE AMENDED TRUST DEED HAS TO BE C ONSIDERED ON THE BASIS OF APPLICATION ALREADY SUBMITTED ON 11 .02.2011 SO THAT THE TRUST COULD CLAIM EXEMPTION IN RESPECT OF DONATIONS RECEIVED DURING THE YEAR ENDED 31.03.2011 RELEVANT TO A.Y. 2011- 2012. HOWEVER THE CIT CLOSED THE HEARING. A LETTER IN THIS REGARD WAS SUBMITTED ON 12.8.2011 A COPY OF WHICH IS HEREWITH ANNEXED. INSPITE OF REPRESENT ATION, THE APPLICATION FILED IN FORM NO.10A WAS REJECTED ON TH E PLEA THAT THE TRUST WAS NEITHER WHOLLY CHARITABLE NOR WHOLLY RELIGIOUS AND THAT I HAD WITHDRAWN THE APPLICATION. LEARNED D.R. DID NOT REFUTE THE CONTENTS OF THE AFF IDAVIT NOR REQUIRED THE DEPONENT TO BE CROSS-EXAMINED. AS HELD BY HON BLE APEX COURT IN THE CASE OF MEHTA PARIKH & CO. V. CIT (30 ITR 18 1), WHEN A PERSON, WHO GIVES AN AFFIDAVIT, IS NOT CROSS-EXAMIN ED IT WOULD NOT BE OPEN TO CHALLENGE THE CORRECTNESS OF THE STATEMENT THEREIN. I.T.A. NO. 1583/MDS/11 8 7. IN THE CASE OF SOCIETY OF PRESENTATION SISTERS V . ITO (121 ITD 422) (COCHIN) (TM), THIS TRIBUNAL HELD THAT EXEMPTI ON UNDER SECTION 11 COULD NOT BE DENIED TO A CHARITABLE TRUST SIMPLY BECAUSE IT WAS ALSO HAVING SOME ACTIVITY WHICH COULD BE TERMED AS RELIGIOUS. IT WAS ALSO HELD THAT EVEN IF AN ASSESSEE WAS CARRYING ON RELIGIOUS ACTIVITIES, WHICH COULD PARTLY BE TREATED AS CHARITABLE ALSO, A ND EVEN IF ITS ACTIVITIES WERE TREATED AS RELIGIOUS, THERE WAS NO JUSTIFICATION FOR DENYING EXEMPTION. THE SAID BENCH WHILE TAKING THE ABOVE VIEW, HAD CONSIDERED THE DECISION OF HONBLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF GHULAM MOHIDIN TRUST V. CIT (248 ITR 58 7) RELIED ON BY THE CIT(APPEALS) FOR TAKING AN ADVERSE VIEW AGAINST THE ASSESSEE HERE. 8. WE ARE THEREFORE, OF THE OPINION THAT THE MATTER REQUIRES A RE- VISIT BY THE LD. CIT. HE HAS TO CONSIDER THE APPLI CATION AFRESH AND NOT TREAT IT AS WITHDRAWN BY THE ASSESSEE IN VIEW OF TH E AFFIDAVIT FILED BY THE REPRESENTATIVE OF THE ASSESSEE. WE, THEREFORE, QUASH THE ORDER OF LD. CIT AND REMIT THE MATTER BACK TO HIM FOR FRESH CONSIDERATION AND DISPOSAL DE NOVO CONSIDERING THE APPLICATION DATED 11.2.2011 FILED BY THE ASSESSEE FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. I.T.A. NO. 1583/MDS/11 9 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 13 TH MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH MARCH, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT, PONDICHERRY (4) D.R. (5) GUARD FILE