Ayur Siddha Health & Research Foundation, CHENNAI V. DIT, CHENNAI

ITA 1601/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61046 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-04-2012
• Assessment Year: misc
• Appeal Filed On: 03-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: N DEVANATHAN
• Keywords: Charitable institution
• Section: 12AA; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NOS. 1601/MDS/2011 AYUR SIDDHA HEALTH & RESEARCH FOUNDATION 45/11, KONNUR HIGH ROAD CHENNAI PAN : AADTA 2297 E (APPELLANT) VS. THE DIRECTOR OF INCOME - TAX [EXEMPTIONS] CHENNAI (RESPONDENT) REVENUE BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL ASSESSEE BY : SHRI N. DEVANATHAN DATE OF HEARING : 18.04.2012 DATE OF PRONOUNCEMENT : 02.05.2012 O R D E R PER V. DURGA RAO, JM : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. DIT(EXEMPTIONS), CHENNAI DATED 29.07.2011 R EJECTING THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF T HE INCOME-TAX ACT, 1961. 2 ITA NO. 1601/MDS/2011 2. SHRI N. DEVANATHAN APPEARED ON BEHALF OF THE ASS ESSEE AND SHRI K.E.B. RENGARAJAN, REPRESENTED ON BEHALF OF TH E REVENUE. 3. THIS APPEAL HAS BEEN FILED WITH A DELAY OF SIX D AYS. THE LD. A.R. PRAYED FOR CONDONATION OF DELAY. FINDING THE REASONS STATED BY THE LD. A.R. TO BE REASONABLE, WE CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 4. THE ASSESSEE HAS RAISED FOUR GROUNDS OF APPEAL. HOWEVER, THE ONLY ISSUE RAISED IN THIS APPEAL PERTAINS TO THE LD . DIT(EXEMPTIONS)S ACTION IN REJECTING THE APPLICATION FOR GRANT OF RE GISTRATION MADE U/S 12AA OF THE ACT. 5. FACTS, IN BRIEF, ARE THAT THE ASSESSEE, A AYUR S IDDHA HEALTH AND RESEARCH FOUNDATION, APPLIED FOR REGISTRATION U /S 12AA OF THE ACT. THE MAIN OBJECT OF THE TRUST IS TO PROVIDE ED UCATIONAL ASSISTANCE, CHILD WELFARE IN THE FIELD OF MEDICAL, ENGINEERING, ARTS, SCIENCE, COMMERCE AND MEDICAL RESEARCH, RESEARCH FO UNDATION, MUSIC RESEARCH, SCIENTIFIC RESEARCH, RURAL DEVELOPM ENT, MEDICAL 3 ITA NO. 1601/MDS/2011 RELIEF, RELIEF TO THE DOWNTRODDEN, WEAKER SECTIONS OF THE SOCIETY, HANDICAPPED AND EX-SERVICEMEN, PROMOTE POOR WOMEN A ND CHILDREN, SOCIAL WELFARE, GENERAL PUBLIC UTILITY, F OOD AND NUTRITION, FREE LEGAL AID, FREE MARRIAGES, ETC. THIS APPLICATI ON FOR GRANT OF REGISTRATION WAS REJECTED BY THE DIT[EXEMPTIONS] BY ORDER DATED 29.7.2011 ON THE GROUND THAT A PERUSAL OF THESE OBJ ECT CLAUSES ESTABLISH THE INTENTION OF THE APPLICANT TRUST THAT THE INSTITUTION HAS THE AIM OF ESTABLISHING BUSINESS IN VARIOUS FIELDS AND ALSO CONDUCT OF RESEARCH AIMS AT OBTAINING COPYRIGHT AND PATENT RIG HT WHICH AGAIN AIMS AT CREATING PROFIT AND ACCUMULATION OF WEALTH. THEREFORE, THESE ACTIVITIES CANNOT BE TERMED AS FOR CHARITABLE PURPOSES AS THE AIM ITSELF IS TO CONDUCT BUSINESS. ACCORDINGLY, AP PLICATION U/S 12AA OF THE ACT WAS REJECTED. AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US. 6. THE LD. A.R. SUBMITTED THAT THE INSTITUTION OF T HE ASSESSEE WAS ESTABLISHED WITH THE SOLE INTENTION OF CHARITABLE N ATURE. THE ASSESSEE IS HAVING VARIOUS OBJECTIVES IN HIS CLAUSE S FOR CHARITABLE PURPOSES. SIMPLY BECAUSE THE ASSESSEE IS HAVING SO MANY OBJECTIVES 4 ITA NO. 1601/MDS/2011 IN THE CLAUSES IT CANNOT BE SAID THAT THE ASSESSEE INTENDED TO DO BUSINESS. THEREFORE, HE SUBMITTED THAT THE ASSESSE E IS ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT. 7. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORT ED THE ORDER OF THE DIT(EXEMPTIONS) AND SUBMITTED THAT PRIMA FAC IE THE OBJECTIVES OF THE INSTITUTION SHOW THAT THE ASSESSE E WANTED TO CARRY ON BUSINESS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDER OF THE DDIT [EXEMPTIONS] AS WELL AS THE MATERIAL AVAIL ABLE ON RECORD. WE HAVE GONE THROUGH THE PAPER BOOK FILED BY THE AS SESSEE WHEREIN IT IS CLEAR THAT THE ASSESSEE STARTED THIS INSTITUT ION WITH VARIOUS OBJECTIVES. IT APPEARS TO US THAT THE ASSESSEE IS OVER AMBITIOUS. SIMPLY BECAUSE IN THE TRUST DEED THE ASSESSEE HAS M ENTIONED VARIOUS OBJECTIVES, IT CANNOT BE SAID THAT THE ASSE SSEE WANTED TO RUN BUSINESS. NO DOUBT, THE ASSESSEE HAS MENTIONED IN THE TRUST DEED MANY OBJECTIVES, BUT SIMPLY ON THAT GROUND IT CANNOT BE STATED THAT THE ASSESSEE WANTED TO CARRY ON BUSINES S. THE LD. 5 ITA NO. 1601/MDS/2011 COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S TAMILNADU SMALL AND MEDIUM INDUSTRIES MUTUAL ASSOCIATION IN ITA NO. 195 0/MDS/2011 WHEREIN THE TRIBUNAL, ALLOWED THE APPEAL OF THE ASS ESSEE BY RELYING ON THE ORDER OF THE HONBLE SUPREME COURT IN THE CASE OF ADDL. CIT V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION ( 121 ITR 01) WHEREIN IT HAS BEEN HELD AS UNDER: THERE, THE ASSESSEE WAS A COMPANY REGISTERED WITH D ECLARED OBJECTS OF CARRYING ON OBJECTIVES ULTIMATELY LEADIN G TO PROMOTE COMMERCE AND TRADE IN ART SILK YARN, RAW SILK, COTT ON ETC. THE SUPREME COURT HELD THAT THE OBJECTS DECLARED BY THA T COMPANY WAS OF PUBLIC UTILITY NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT WITHIN THE MEANING OF SEC.2(15). WE FIN D THAT THE ABOVE SAID JUDGMENT OF THE SUPREME COURT IS SQUAREL Y APPLICABLE TO THE PRESENT CASE, BEFORE US. THE ABO VE DECISION OF THE HONBLE SUPREME COURT WAS FOLLOWED BY THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF DIT(EXEMPTIONS) V. BHARAT DIAMOND BOURSE (245 ITR 437) WHERE A TRADE ASSOCIAT ION ESTABLISHED FOR SERVING THE COMMON INTEREST OF A PA RTICULAR TRADE, THE COURT HELD THAT THE OBJECTS OF THE ASSOC IATION WAS CHARITABLE IN NATURE AND ENTITLED FOR EXEMPTION UND ER SEC.11. 6 ITA NO. 1601/MDS/2011 THIS WAS THE VIEW AGAIN BY THE SUPREME COURT IN THE CASE OF CIT V. ANDHRA CHAMBER OF COMMERCE (55 ITR 722). 7. WHETHER THE ASSESSEE-SOCIETY IS CONTRAVENING ANY PROVISION OF THE INCOME-TAX ACT RELATING TO CHARITI ES, IS A MATTER TO BE CONSIDERED SUBSEQUENT TO REGISTRATION, ON APP RECIATION OF THE ACTUAL AREA IN WHICH THE ASSESSEE IS OPERATING AND THE REVENUE IS HAVING ENOUGH SAFEGUARD TO MAKE SUCH EXAMINATION FROM YEAR TO YEAR AT THE TIME OF ASSESS MENT. ANY CONTRAVENTION OF THE PROVISION IN FUTURE CAN WELL B E CONSIDERED IN ASSESSMENT PROCEEDINGS. 8. THEREFORE, WHILE THE ELIGIBILITY OF THE ASSESSEE FOR REGISTRATION UNDER SEC.12AA IS EXAMINED IN THE LIGH T OF DECLARED OBJECTS OF THE ASSESSEE-SOCIETY, WE FIND NO REASON WHY REGISTRATION SHOULD NOT BE GRANTED. IN THE LIGHT O F THE JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, WE FIND THAT THE AS SESSEE- SOCIETY IS ENTITLED FOR THE REGISTRATION UNDER SEC. 12AA. 9. THE DIRECTOR (EXEMPTIONS) IS ACCORDINGLY, DIRECT ED TO GRANT REGISTRATION TO THE ASSESSEE-SOCIETY UNDER SE C.12AA OF THE INCOME-TAX ACT, 1961. 7 ITA NO. 1601/MDS/2011 9. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE F URTHER OBSERVE THAT WHETHER THE ASSESSEE FOUNDATION IS CONTRAVENIN G ANY PROVISIONS OF THE ACT RELATING TO CHARITIES IS A MATTER TO BE CONSIDERED SUBSEQUENT TO REGISTRATION ON APPLICATION OF THE AC TUAL AREA IN WHICH THE ASSESSEE IS OPERATING AND THE REVENUE IS HAVING ENOUGH SAFEGUARD TO MAKE SUCH EXAMINATION FROM EVERY YEAR TO YEAR AT THE TIME OF ASSESSMENT. ANY CONTRAVENTION OF THE PROVIS IONS IN FUTURE CAN WELL BE CONSIDERED IN ASSESSMENT PROCEEDINGS. THEREFORE, WHILE ELIGIBILITY OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT IS EXAMINED IN THE DECLARED OBJECTS OF THE ASSESSEE , WE FIND NO REASON WHY REGISTRATION SHOULD NOT BE GRANTED. IN THE LIGHT OF THE ABOVE JUDICIAL PRONOUNCEMENT, WE FIND THAT THE ASSE SSEE FOUNDATION IS ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT AN D DIRECT THE DIT[EXEMPTIONS] TO GRANT REGISTRATION TO THE ASSESS EE SOCIETY U/S 12AA OF THE ACT. 8 ITA NO. 1601/MDS/2011 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED ON WEDNESDAY, 2 ND OF MAY, 2012, AT CHENNAI. SD/- SD/- (O.K. NARAYANAN) (V. DURGA RAO) VICE PRESIDENT JUDICIAL MEMB ER CHENNAI, DATED THE 2 ND MAY, 2012. VL COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A), CHENNAI (4) CIT, CHENNAI (5) D.R. (6) GUARD FILE