Joe Lourde Educational Trust, Cuddalore V. CIT, Pondicherry

ITA 1610/CHNY/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68797 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 31-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K ARUMUG AM
• Assessee Lawyers: M BALAGANESH
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI V, DURGA RAO, JUDICIAL MEMBER ITA NO. 1610(MDS)/2013 ASSESSMENT YEAR : 2014-15 M/S JOE LOURDE EDUCATIONAL TRUST, NO.15, BESKI STREET, PERIYAR NAGAR (SOUTH), VIRUDHACHALAM, CUDDALORE DIST. 606 001. PAN : AABTJ 6969 N V. THE COMMISSIONER OF INCOME TAX, PONDICHERRY. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M. BALA GANESH, CA RESPONDENT BY : SHRI K.K. ARUMUG AM, CIT DATE OF HEARING : 22 ND OCTOBER, 2013 DATE OF PRONOUNCEMENT : 22 ND OCTOBER, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX AT PONDICHERRY, DATED 28.6.2013. THE COMMISSIONER OF INCOME TAX, P ONDICHERRY, HAS REJECTED THE APPLICATION FILED BY THE ASSESSEE FOR OBTAINING 2 I.T.A. NO. 1610/MDS/13 REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX A CT, 1961, ON THE GROUND THAT THE ASSESSEE IS NOT A CHARITABLE INSTIT UTION. 2. THE ASSESSEE-TRUST HAD FURNISHED AN APPLICATION FOR REGISTRATION UNDER SECTION 12AA, ON 26.12.2012. IN THE COURSE OF CONSIDERING THE APPLICATION, THE COMMISSIONER HAD C ALLED FOR A REPORT FROM THE INCOME TAX OFFICER AT CUDDALORE. T HE INCOME TAX OFFICER AT CUDDALORE SUBMITTED HIS REPORT TO THE CO MMISSIONER OF INCOME TAX STATING THAT THE TRUST WAS NOT IN EXISTE NCE AND THE CLAIM OF CHARITABLE ACTIVITY WAS NOT GENUINE. THE COMMIS SIONER ALSO GOT A REPORT FROM THE JOINT COMMISSIONER OF INCOME TAX, C UDDALORE RANGE, WHO ALSO STATED THAT THE OBJECTS OF THE ASSE SSEE-TRUST WERE CONFINED TO A PARTICULAR COMMUNITY AND NOT FOR THE BENEFIT OF GENERAL PUBLIC AND AS SUCH, THE CLAIM OF THE ASSESSEE WAS N OT IN ACCORDANCE WITH LAW. 3. AFTER HEARING THE REPRESENTATIVE OF THE ASSESSEE AS WELL AS PERUSING THE REPORTS OF THE TWO OFFICERS, THE COMMI SSIONER OF INCOME TAX CAME TO A CONCLUSION THAT THE ASSESSEE-T RUST IS NOT ENTITLED FOR THE BENEFIT OF REGISTRATION UNDER SECT ION 12AA. IT IS IN THESE CIRCUMSTANCES, THE APPLICATION PUT UP BY THE ASSESSEE WAS REJECTED. 3 I.T.A. NO. 1610/MDS/13 4. IT IS AGAINST THE ABOVE, THE ASSESSEE HAS COME I N SECOND APPEAL BEFORE US. 5. WE HEARD SHRI M. BALAGANESH, THE CHARTERED ACCOU NTANT, APPEARING FOR THE ASSESSEE-TRUST AND SHRI K.K. ARUM UGAM, THE LEARNED COMMISSIONER OF INCOME TAX, APPEARING FOR T HE REVENUE. 6. ONE OF THE GROUNDS RAISED BY THE ASSESSEE-TRUST IS THAT THE COMMISSIONER OF INCOME TAX IS NOT JUSTIFIED IN HOLD ING THAT THE ASSESSEE-TRUST WAS NOT IN EXISTENCE, WHEN THE NOTIC ES ISSUED TO THE TRUST WERE SERVED AT THE REGISTERED OFFICE OF THE T RUST IN PERIYAR NAGAR, VIRUDHACHALAM. THIS GROUND RAISED BY THE AS SESSEE IS A MISNOMER. WHEN THE COMMISSIONER OF INCOME TAX STAT ES THAT THE ASSESSEE-TRUST IS NOT HAVING AN OFFICE OR AN ADDRES S; ON THE OTHER HAND, HE MEANT THAT THE TRUST IS NOT EXISTING IN TH E NATURE OF CHARITABLE INSTITUTION. 7. THE COMMISSIONER OF INCOME TAX HAS MADE FIELD EN QUIRIES THROUGH THE INCOME TAX OFFICER AND THE JOINT COMMIS SIONER OF INCOME TAX. THE INCOME TAX OFFICER REPORTED THAT T HE ASSESSEE WAS NOT CARRYING ON ANY CHARITABLE ACTIVITIES SO FA R. THE JOINT COMMISSIONER OF INCOME TAX FURTHER REPORTED THAT TH E ACTIVITIES OF THE ASSESSEE WERE CONTEMPLATED ONLY FOR CHRISTIANS. IT IS IN THESE CIRCUMSTANCES, THE COMMISSIONER OF INCOME TAX HAS C OME TO A 4 I.T.A. NO. 1610/MDS/13 FINDING THAT THE ASSESSEE IS NOT ENTITLED FOR REGIS TRATION UNDER SECTION 12AA OF THE ACT. 8. WE HAD DETAILED HEARING IN THE COURT WHEN THE CA SE WAS CALLED ON. IT WAS NOT DISPUTED THAT THE ASSESSEE-T RUST IS CONTEMPLATING ITS ACTIVITIES ONLY FOR THE BENEFIT O F A PARTICULAR RELIGIOUS COMMUNITY. BUT THAT ITSELF WOULD NOT BE A REASON TO REJECT THE PETITION, IF THE ASSESSEE HAD CLAIMED THE STATU S OF A RELIGIOUS INSTITUTION. WE ARE MAKING THIS OBSERVATION ONLY F OR THE SAKE OF ARGUMENT. BUT, WHEN THE ASSESSEE IS CLAIMING THE S TATUS OF CHARITABLE INSTITUTION, IT IS HIGHLY IMPROBABLE THA T ASSESSEE IS COMING UNDER THE CATEGORY OF CHARITABLE INSTITUTION SERVIN G THE COMMON GOOD OF GENERAL PUBLIC. THIS ITSELF IS A DEBILITAT ING FACTOR AGAINST THE ASSESSEE-TRUST. 9. WHEN WE EXAMINED THE COMPOSITION OF THE TRUST, W E FIND THAT IT IS A DE FACTO FAMILY TRUST, HUSBAND, WIFE, CHILDREN, BROTHERS AR E THE TRUSTEES OF THE ASSESSEE. IT IS A FAMILY ENDEAVOUR . THE ASSESSEE IS A FAMILY TRUST EVEN THOUGH REGISTERED AS A PUBLIC T RUST AND ALSO ORIENTED TOWARDS A PARTICULAR COMMUNITY AND SO FAR NO ACTIVITIES HAVE BEEN CARRIED OUT TO DEMONSTRATE ITS INTENTION OF DOING CHARITABLE ACTIVITIES TO THE PUBLIC AT LARGE. 5 I.T.A. NO. 1610/MDS/13 10. THE PRINCIPAL OBJECTIVE OF THE ASSESSEE IS TO R UN EDUCATIONAL INSTITUTION ON A CHARITABLE BASIS. IN THE OLDEN TI ME, EDUCATION WAS NOT A BUSINESS IN INDIA. NOW, IN THE CHANGED ECONO MIC SCENARIO, EDUCATION ALSO HAS BECOME ONE OF THE ELITE BUSINESS ES. THEREFORE, IT IS NOT POSSIBLE TO ARGUE THAT ANY SORT OF EDUCAT IONAL ACTIVITY IS INHERENTLY COVERED BY THE CONCEPT OF CHARITY. EV EN THOUGH AN ASSESSEE IS CARRYING ON ACTIVITIES FOR PUBLIC GOOD, EITHER IN EDUCATION OR IN MEDICAL RELIEF, IT IS NECESSARY FOR THE ASSES SEE TO PASS THE TEST OF CHARITABLE PURPOSES, MORE PARTICULARLY, ENSHRI NED IN THE PROVISO BROUGHT INTO SECTION 2(15) OF INCOME-TAX ACT, 1961. THE LITMUS TEST IS WHETHER AN ASSESSEE IS CARRYING ON ITS CHARITAB LE ACTIVITIES. CHARITY IS THE SUM AND SUBSTANCE OF EXEMPTION UNDER SECTION 11. CARRYING ON EDUCATIONAL ACTIVITIES OR MEDICAL RELIE F OR SIMILAR ACTIVITIES PER SE DOES NOT MAKE AN ASSESSEE A CHARITABLE INSTITUTION . AN ASSESSEE BECOMES CHARITABLE INSTITUTION ONLY WHE N SUCH ACTIVITIES ARE CARRIED OUT IN A CHARITABLE MANNER. 11. IN THE PRESENT CASE, THE ASSESSEE HAS FORMED A TRUST WITH HIS FAMILY MEMBERS. THE TRUST HAS ACQUIRED SOME LAND. THEY ARE PROPOSING TO RUN SCHOOLS. SCHOOLS ARE MEANT FOR A PARTICULAR COMMUNITY. THERE IS NO CHANCE FOR ANY PUBLIC INVOL VEMENT IN RUNNING OF THE TRUST. FOR ALL PRACTICAL PURPOSES, IT WILL REMAIN AS A FAMILY ENDEAVOUR, EVEN THOUGH COUCHED IN THE LEGAL FORMALITY AS A 6 I.T.A. NO. 1610/MDS/13 CHARITABLE TRUST. WHAT WE HAVE TO LOOK INTO IS TH E PITH AND SUBSTANCE RATHER THAN FORMAT. WHEN ALL THESE ASPEC TS ARE TAKEN INTO CONSIDERATION, WE FIND THAT THE ASSESSEE IS NO T A CHARITABLE INSTITUTION AS CONTEMPLATED UNDER THE INCOME-TAX LA W. 12. WE ARE OF THE CONSIDERED VIEW THAT CHARITIES CA NNOT BE PRIVATISED THROUGH FAMILY TRUSTS. 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE UPHOLD THE ORDER OF COMMISSIONER OF INCOME TAX. 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 22 ND OF OCTOBER, 2013 AT CHENNAI. SD/- SD/- (V. DURGA RAO) (DR. O. K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 22 ND OCTOBER , 2013. KRI. COPY TO: APPELLANT/RESPONDENT/CIT, PONDIC HERRY/DR/GF.