Social Pedia Knowledge Foundation, CHENNAI V. DIT, CHENNAI

ITA 1608/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73747 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 19-02-2014
• Assessment Year: misc
• Appeal Filed On: 29-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1608/MDS/2013 M/S. SOCIAL PEDIA KNOWLEDGE FOUNDATION, 72, MARSHALS ROAD, IV FLOOR, EGMORE, CHENNAI-600 008. VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), 310, AAYAKAR BHAVAN ANNEXE, 121, M.G.ROAD, CHENNAI-34. PAN:AAQCS8964E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR.ANITA SUMANTH, ADVOCATE /RESPONDENT BY : MR. ANIRUDH RAI, CIT / DATE OF HEARING : 19 TH FEBRUARY, 2014 /DATE OF PRONOUNCEMENT : 7 TH MARCH, 2014 & / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI D ATED 30.04.2013 IN REFUSING REGISTRATION UNDER SECTION 1 2AA OF THE ACT. 2. COUNSEL FOR THE ASSESSEE SUBMITS THAT DIRECTOR O F INCOME TAX (EXEMPTIONS) HAD ALREADY PASSED ORDER DA TED ITA NO.1608/MDS/2013 2 31.8.2012 REFUSING REGISTRATION UNDER SECTION 12AA OF THE ACT IN ASSESSEES CASE AND THE CO-ORDINATE BENCH OF THI S TRIBUNAL ALLOWED APPEAL OF THE ASSESSEE AGAINST THAT ORDER O F THE DIRECTOR OF INCOME TAX (EXEMPTIONS) DATED 31.08.201 2. COPY OF ORDER OF THE CO-ORDINATE BENCH WAS PLACED ON REC ORD. AS FAR AS THE ORDER PASSED BY DIRECTOR OF INCOME TAX (EXEMPTIONS) DATED 30.04.2013, THE COUNSEL SUBMITS THAT THIS ORDER WAS PASSED AGAINST THE SECOND APPLICATION FIL ED BY THE ASSESSEE AND WHICH WAS PENDING BEFORE THE DIRECTOR OF INCOME TAX (EXEMPTIONS). THE COUNSEL SUBMITS THAT A S THE TRIBUNAL HAD ALREADY DIRECTED THE DIRECTOR OF INCOM E TAX (EXEMPTIONS) TO GRANT REGISTRATION UNDER SECTION 12 AA OF THE ACT, SIMILAR DIRECTION MAY BE ISSUED AGAINST THE OR DER PASSED BY THE DIRECTOR OF INCOME TAX (EXEMPTIONS) ON THE S ECOND APPLICATION FILED BY THE ASSESSEE. 3. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT ASSESSE E FILED SECOND APPLICATION FOR REGISTRATION UNDER SEC TION 12AA OF THE ACT BEFORE THE DIRECTOR OF INCOME TAX (EXEMPTIO NS) ON 22.10.2012 I.E. BEFORE THE DATE OF FILING OF APPEAL BEFORE THE ITA NO.1608/MDS/2013 3 TRIBUNAL AGAINST THE ORDER OF DIRECTOR OF INCOME TA X (EXEMPTIONS) DATED 31.08.2012 AND THIS FACT WAS CON CEALED BY THE ASSESSEE DURING THE COURSE OF HEARING OF APP EAL BEFORE THE TRIBUNAL. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE ORDER OF DIRECTOR OF INCOME TAX (EXEMPTIONS) IN REFUSING REGISTRATION UNDER SECTION 12AA OF THE ACT EVEN ON THE SECOND APPLICATION FILED BY THE ASSESSEE. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE CO-ORDINATE BENCH OF THIS TRIBUNAL BY ORDER DAT ED 24.01.2013 IN ITA NO.1910/MDS/2012 HAD ALREADY DIRE CTED THE DIRECTOR OF INCOME TAX (EXEMPTIONS) TO GRANT RE GISTRATION UNDER SECTION 12AA OF THE ACT AGAINST THE ORDER PAS SED BY HIM ON 31.08.2012. THE ASSESSEE FILED SECOND APPLIC ATION BEFORE DIRECTOR OF INCOME TAX (EXEMPTIONS) ON 22.10 .2012 AND IN THE MEANWHILE THE APPEAL FILED BY THE ASSESS EE WAS DECIDED BY THE TRIBUNAL ON 24.01.2013 HOLDING AS UN DER:- 5. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE MAIN OBJECTS OF THE ASSES SEE COMPANY. THE TERM CHARITABLE OBJECTS HAS BEEN DEF INED IN SECTION 2(15) OF THE ACT, WHICH IS REPRODUCED HE REIN BELOW:- ITA NO.1608/MDS/2013 4 CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION , MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND T HE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: A BARE PERUSAL OF THE DEFINITION OF THE TERM CHARI TABLE PURPOSE SHOWS THAT IMPARTING EDUCATION IS A CHARI TABLE ACTIVITY. 6. THE BOARD CIRCULAR NO.11 OF 2008 DATED 19.12.2008 RELATES TO EXEMPTION UNDER SECTION 11 IN CASE OF ASSESSEE CLAIMING BOTH TO BE CHARITABLE INSTITUT ION AS WELL AS MUTUAL ORGANIZATION. THE RELEVANT EXTRACT O F THE CIRCULAR IS REPRODUCED HEREIN BELOW:- CIRCULAR NO. 11/2008, DATED 19-12-2008 DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2( 15) OF THE INCOME-TAX ACT, 1961 SECTION 2(15) OF THE INCOME TAX ACT, 1961 (ACT) D EFINES CHARITABLE PURPOSE TO INCLUDE THE FOLLOWING:- (I) RELIEF OF THE POOR (II) EDUCATION (III) MEDICAL RELIEF, AND (IV) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. AN ENTITY WITH A CHARITABLE OBJECT OF THE ABOVE NAT URE WAS ELIGIBLE FOR EXEMPTION FROM TAX UNDER SECTION 11 OR ALTERNATIVELY UNDER SECTION 10(23C) OF THE ACT. HOW EVER, IT WAS SEEN THAT A NUMBER OF ENTITIES WHO WERE ENGAGED IN COMMERCIAL ACTIVITIES WERE ALSO CLAIMING EXEMPTION ON THE GROUND THAT SUCH ACTIVITIES WERE FOR THE ADVANCEMEN T OF OBJECTS OF GENERAL PUBLIC UTILITY IN TERMS OF THE F OURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE. THEREFOR E, SECTION 2(15) WAS AMENDED VIDE FINANCE ACT, 2008 BY ADDING A PROVISO WHICH STATES THAT THE ADVANCEMENT OF ANY O THER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CH ARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS; OR (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS; ITA NO.1608/MDS/2013 5 FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION OF T HE INCOME FROM SUCH ACTIVITY. 2. THE FOLLOWING IMPLICATIONS ARISE FROM THIS AMEND MENT 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WIL L NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTIO N 2(15), I.E., RELIEF OF THE POOR, EDUCATION OR MEDICAL RELI EF. CONSEQUENTLY, WHERE THE PURPOSE OF A TRUST OR INSTI TUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE EVEN IF IT INCIDENT ALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. 7. THUS, AS PER THE CIRCULAR WHERE THE PURPOSE OF T HE TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATI ON OR MEDICAL RELIEF, PRESERVATION OF MEDICAL ENVIRONMENT OR PRES ERVATION OF HISTORIC MONUMENTS IT WILL CONSTITUTE CHARITABLE PURPOSES EVEN IF IT INCIDENTALLY INVOLVES COMMERCIAL ACTIVIT IES. THUS, THE OBJECT OF PROVIDING EDUCATION IS CHARITABLE ACT IVITY EVEN IF CONSEQUENT TO CARRY ON OF SUCH ACTIVITY THE TRUS T EARNS ANY BENEFIT OUT OF IT. 8. IN THE INSTANT CASE, A PERUSAL OF THE OBJECT CLA USE OF THE COMPANY SHOWS THAT IT HAS BEEN INCORPORATED WITH THE AIM OF PROVIDING EDUCATION, FACILITATE SOCIAL A ND ECONOMIC EMPOWERMENT, ECONOMIC DEVELOPMENT PROGRAMS, LITERACY PROGRAMS, TRAINING PROGRAMS FOR VILLAGERS AND DOWNTRODDEN PEOPLE. HOW THESE OBJECTS ARE TO BE ACHIEVED SHOULD BE LEFT TO THE ASSESSEE. THE FACT THAT THE ASSESSEE HAS BEEN INCORPORATED UNDER SECTI ON 25 OF THE COMPANIES ACT, 1956 SHOW THAT IT HAS BEEN FO RMED FOR PROMOTING CHARITY OR ANY OTHER USEFUL OBJECT AN D INTENDS TO APPLY ITS PROFITS, IF ANY OR OTHER INCOM E IN PROMOTING ITS OBJECTS. IN OTHER WORDS, ITS A NON-P ROFIT EARNING ORGANIZATION. 9. IN OUR CONSIDERED VIEW, THE DIRECTOR OF INCOME T AX (EXEMPTIONS) MERELY ON ASSUMPTION HAS REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12AA. THE IMPUGNED ORDER OF DIRECTOR OF INCOME TAX (EXEMPTIONS) IS SET ASIDE. THE DIRECTOR OF INCOME T AX (EXEMPTIONS) IS DIRECTED TO GRANT REGISTRATION TO T HE ASSESSEE UNDER SECTION 12AA. HOWEVER, IT SHALL BE O PEN TO DIRECTOR OF INCOME TAX (EXEMPTIONS) TO WITHDRAW THE SAME LATER, IF THE ACTIVITIES OF THE ASSESSEE ARE NOT FOUND IN ACCORDANCE WITH ITS OBJECTS. ITA NO.1608/MDS/2013 6 10. THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN OUR CONSIDERED VIEW, SINCE THE CO-ORDINATE BE NCH OF THIS TRIBUNAL HAD ALREADY DIRECTED THE DIRECTOR OF INCOME TAX (EXEMPTIONS) TO GRANT EXEMPTION UNDER SECTION 12AA OF THE ACT, THE ORDER PASSED BY THE DIRECTOR OF INCOME T AX (EXEMPTIONS) ON 30.04.2013 ON THE SECOND APPLICATIO N OF THE ASSESSEE IS ERRONEOUS AND THEREFORE, WE SET ASIDE T HE IMPUGNED ORDER DATED 30.04.2013. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 7 TH DAY OF MARCH, 2014 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) (CHALLA NAGEN DRA PRASAD) ACCOUNTANT MEMBER JUDI CIAL MEMBER CHENNAI, DATED THE 7 TH MARCH, 2014. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R (3) CIT (6) G.F.