The Bengal, Kolkata V. DIT(Exemption), Kolkata

ITA 1601/KOL/2009

• Counselvise Citation: 160123514 RSA 2009
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 01-06-2011
• Assessment Year: misc
• Appeal Filed On: 11-09-2009
• Court: TRIBUNAL
• Department Lawyers: H N SINGH
• Assessee Lawyers: S M SURANA
• Keywords: Charitable institution
• Section: 2; 12AA

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , , , , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NOS . 1600 & 1601/KOL/2009 %& '(/ ASSESSMENT YEAR : (*+ / APPELLANT ) THE BENGAL C/O SHREE CEMENT LTD., KOLKATA (PAN: AABTT 5724 H) - % - - VERSUS - . (-.*+/ RESPONDENT ) D.I.T., EXEMPTION, KOLKATA *+ / 0 '/ FOR THE APPELLANT: SHRI S.M.SURANA -.*+ / 0 '/ FOR THE RESPONDENT: SHRI H.N.SINGH '1 / ORDER ( (( ( . .. . ! ! ! !. .. . ) )) ), , , , '# PER SHRI C.D.RAO, AM THE ABOVE APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE ORDER DATED 14.07.2009 OF THE DIRECTOR OF INCOME TAX, EXEMPTION, KOLKATA. 2. IN ITA NO.1600/KOL/2009 THE ISSUE RAISED B Y THE ASSESSEE IS RELATING TO THE REJECTION OF REGISTRATION U/S 12AA OF THE IT ACT AN D IN ITA NO.1601/KOL/2009 THE ISSUE RELATES TO THE REJECTION OF GRANTING OF REGIS TRATION U/S 80G(5)(VI) OF THE I.T.ACT, 1961. 3. AT THE TIME OF HEARING, THE LD. COUNSEL APPEA RING ON BEHALF OF THE ASSESSEE BY REFERRING TO THE CONTENTS OF THE IMPUGNED ORDER AND THE PAPER BOOK FILED BEFORE THE TRIBUNAL CONTAINING THE COPIES OF THE TRUST DEED, C OPY OF APPLICATION FOR REGISTRATION U/S 12AA AND EXEMPTION U/S 80G, COPY OF AUDITED ACC OUTNS FOR THE YEAR ENDING 31.3.2009 AND COPY OF LETTER GIVING ALL THE PARTICU LARS REQUIRED BY THE A.O. SUBMITTED THAT THE LD. D.I.T., EXEMPTION, KOLKATA IS NOT JUST IFIED IN NOT GRANTING THE REGISTRATION 2 U/S 12AA AS WELL AS U/S 80G(5) OF THE IT ACT, 1961. IN SUPPORT OF HIS SUBMISSIONS, HE RELIED ON THE CASE LAWS WHICH WERE FILED IN THE FOR M OF PAPER BOOK CONTAINING 59 PAGES. 4. ON THE OTHER HAND, THE LD. DR APPEARING ON BEHALF OF THE REVENUE RELIED ON THE ORDERS OF THE LD. D.I.T., EXEMPTION, KOLKATA AND FU RTHER CONTENDED THAT THE LD. D.I.T., EXEMPTION HAS RIGHTLY REJECTED THE REGISTRATION U/S 12AA AS WELL AS 80G(5) OF THE IT ACT, 1961. SINCE THE OBJECTS OF THE CLAUSE OF THE A SSESSEE TRUST IS NOT IN ACCORDANCE WITH THE PROVISION OF SECTION 12AA HE REQUESTED TO UPHOLD THE SAME. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND TH E CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE WE CONSIDER APPROPRIATE TO REFER THE O BJECTIONS OF THE LD. D.I.T., EXEMPTION, KOLKATA AND SOME OF THE CASE LAWS RELIED UPON BY THE ASSESSEE. INFORMATION AVAILABLE IN THE RECORDS REVEALS THE F OLLOWING DEFICIENCIES. SL.NO.5(I) OF THE OBJECT CLAUSE OF THE DEED OF CREATION OF THE APPLICANT TRUST READ AS TO ASSIST CITIZENS (INDIAN OR FOREIGN) TO BECOME BETTER ENTREPRENEURS BY INTERALIA DEVELOPING AND PROMOTING THE EXCHANGE OF IDEAS, EXPENSE AND PRACTICE PERTAINING TO BUSINESS MANAGEMENT. IT IS CLEAR FROM THE LANGUAGE OF THE ABOVE STATED CLAUSE THAT THE APPLICANT TRUST HA S THE OBJECTIVE TO ASSIST FOREIGN NATIONAL IN BECOMING BETTER BUSINESS ENTREPRENEUR, AND ALSO HAS THE OBJECTIVE OF PROMOTING PRACTICES PERTAINING TO BUSINESS MANAGEME NT. THESE OBJECTIVE OF THE APPLICANT TRUST ARE IN CONTRAVENTION OF THE CONDITI ON REQUIRED FOR GRANTING REGISTRATION U/S 12AA OF THE I.T.ACT, 1961. FURTHER, SUPPORTING BILLS AND VOUCHERS TO SUB STANTIATE THE GENUINENESS OF ACTIVITIES CARRIED ON BY THE TRUST WERE NOT PRODUCE D. NEITHER, EVIDENCES FOR DONATION RECEIVED WERE FURNISHED. SECTION 12AA(I)(B) OF ACT MAKES IT MANDATORY FOR THE DIRECTOR/COMMISSIONER OF INCOME TAX TO SATISFY HIMS ELF ABOUT THE NATURE OF OBJECTS OF THE SOCIETY AND THE GENUINENESS OF THE A CTIVITIES CONDUCTED. IN VIEW OF THE ABOVE I AM NOT SATISFIED WITH THE OBJECT OF THE APPLICANT TRUST AND GENUINENESS OF ITS ACTIVITIES. HENCE I AM TO IN FORM YOU THAT YOUR ABOVE CITED APPLICATIONS DT.27.01.2009 FILED IN FORM NO.1 0A & 10G HAVE BEEN REJECTED. 5.1. THE HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT VS RED ROSE SCHOOL 163 TAXMAN 19 (ALL) HAS HELD THE FOLLOWING OBSERVATIONS :- IN REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION, WHOSE OBJECTS DO NOT RUN CONTRARY TO PUBLIC POLICY AND ARE, IN FACT, RELATED TO CHARITABLE PURPOSES, THE COMMISSIONER IS AGAIN EMPO WERED TO MAKE ENQUIRIES AS HE THINKS FIT. IN CASE THE ACTIVITIES ARE NOT GE NUINE AND THEY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE T RUST/SOCIETY OR THE INSTITUTION, 3 OF COURSE, THE REGISTRATION CAN AGAIN BE REFUSED. B UT ON MERE PRESUMPTIONS AND ON SOME APPREHENSION THAT THE SAME WOULD NOT BE USE D IN THE PROPER MANNER AND FOR THE PURPOSES RELATING TO ANY CHARITABLE PUR POSE, REJECTION CANNOT BE MADE. SECTION 12AA, WHICH LAYS DOWN THE PROCEDURE FOR REG ISTRATION, DOES NOT SPEAK ANYWHERE THAT THE COMMISSIONER, WHILE CONSIDERING T HE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVE D BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUI RES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDING LY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/INSTITUTIO N, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAI NST THE PROPOSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME BUT CANNOT BE TA KEN TO BE A SYNONYM TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE I NSTITUTION. 5.2. AGAIN THE ITAT, CHANDIGARH BENCH IN THE CA SE OF SEMI CONDUCTOR LABORATORY VS CIT VIDE ITA NO.618/CHD/2008 ORDER DATED 29 TH SEPTEMBER, 2008 HAS HELD AS UNDER :- THE ONLY ASPECT TO BE CONSIDERED IS AS TO WHETHER THE OBJECTS OF THE SOCIETY ENUMERATED ABOVE CAN BE SAID TO FALL WITHIN THE SCO PE OF EXPRESSION ADVANCEMENT OF ANY OBJECT OF GENERAL PUBLIC UTILIT Y APPEARING UNDER S.2(15) OF THE ACT. WE HAVE PERUSED THE SAID OBJECTS EXTRAC TED ELSEWHERE IN THIS ORDER. THE OBJECTIVES ARE PRIMARILY TO UNDERTAKE, AID, PRO MOTE, GUIDE AND CARRY OUT RESEARCH IN THE FIELD OF SEMICONDUCTOR TECHNOLOGY, MICRO ELECTRO MECHANICAL SYSTEMS AND PROCESS TECHNOLOGY RELATING TO SEMICOND UCTOR PROCESSING. IT HAS OBJECTS TO ESTABLISH, MAINTAIN AND MANAGE ELABORATE WORKSHOPS FOR CARRYING OUT R&D WORK IN THE FIELD OF SEMICONDUCTOR AND MICR O ELECTRONICS. IT HAS OBJECTS TO PUBLISH INFORMATION RELATING TO RESEARCH ; IT HAS OBJECTS OF TRAINING FACILITIES, EDUCATING PUBLIC AT LARGE IN RELATION T O RESEARCH IN MICRO ELECTRONICS AND FOR ADVANCEMENT OF SCIENCE AND TECHNOLOGY IN GE NERAL. CONSIDERED IN AN OVERALL BASIS, THE FOCUS OF THE OBJECTS IS ADVANCEM ENT OF TECHNOLOGY BY UNDERTAKING AND SUPPORTING RESEARCH IN THE FIELD OF SEMICONDUCTOR AND MICRO ELECTRONICS. IN OUR OPINION, HAVING REGARD TO THE P ARITY OF REASONING LAID DOWN BY THE APEX COURT IN THE CASE OF GUJARAT MARITIME B OARD (SUPRA) THE DOMINANT ACTIVITIES UNDERTAKEN BY THE ASSESSEE FALL WITHIN T HE PURVIEW OF THE EXPRESSION ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS APPEARING IN S.2(15) OF THE ACT. IN FACT THE ASSESSEE IS HOLDING A BUS INESS IN TRUST BY WAY OF THE BUSINESS OF ERSTWHILE COMPANY M/S. SEMI CONDUCT OR COMPLEX LTD. IT HAS BEEN EXPLAINED BY THE ASSESSEE THAT UPON DEVOLUTION OF SAID BUSINESS FROM GOVERNMENT OF INDIA THE CONTRACTS/TENDERS ACCEPTED PRIOR TO THE DEVOLUTION ARE BEING CARRIED OUT. BROADLY SPEAKING, THE SAME ALSO LIES, IN OUR VIEW IN THE REALM OF TECHNICAL ACTIVITIES AND WE AGREE WITH THE STAND OF THE ASSESSEE THAT 4 SUCH BUSINESS CAN BE VIEWED AS AN ACTIVITY INCIDENT AL TO THE ATTAINMENT OF THE MAIN OBJECTIVES OF THE SOCIETY. THE INCOME THERE FR OM, AS IS EVIDENT, IS LIABLE TO BE APPLIED IN TERMS OF THE OBJECTS OF THE SOCIETY. SEC.11(4) PERMITS A CHARITABLE INSTITUTION, TO HOLD A BUSINESS UNDERTAKING ALSO WI THIN THE EXPRESSION PROPERTY HELD UNDER TRUST. THEREFORE, CONSIDERED IN THIS LI GHT, THE OBJECTION RAISED BY THE CIT THAT THE SOCIETY IS UNDERTAKING BUSINESS AC TIVITIES AND IS THUS INELIGIBLE FOR REGISTRATION UNDER S.12AA , IS MISPLACED AND UNTENABLE. 5.3. KEEPING IN VIEW OF THE ABOVE JUDICIAL PRONO UNCEMENTS AND THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE LD. D.I.T ., EXEMPTION IS NOT JUSTIFIED IN REJECTING THE REGISTRATION U/S 12AA AND THE CONSEQU ENTIAL REGISTRATION U/S 80(5) OF THE IT ACT. THEREFORE, WE DIRECT THE DIRECTOR OF INCOME TAX, EXEMPTION TO GRANT THE REGISTRATION U/S 12AA/8G(5) OF THE I.T.ACT. 6. IN THE RESULT THE APPEALS OF THE ASSESSEE ARE ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 03.06.2011. SD/- SD/- MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , ,, , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 03.06.2011 '1 / -2 3'2'4- COPY OF THE ORDER FORWARDED TO: 1. THE BENGAL C/O SHREE CEMENT LTD., 21, STRAND ROAD, KOLKATA-700001. 2 THE D.I.T., EXEMPTION, KOLKATA 3. THE CIT, 4. THE CIT(A)- KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA .2 -/ TRUE COPY, '1%9/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES R.G.(.P.S.)