SETCO FOUNDATION, MUMBAI V. DIT (E), MUMBAI

ITA 1635/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84543 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-12-2014
• Assessment Year: 2013-2014
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K ATRI
• Assessee Lawyers: FIROZE ANDHRIUJINA
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA

Judgement Text

, , ,, , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI , . . , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C.SHARMA, ACCOUNTANT MEMBER . / ITA NO.1635/MUM/2013 ! ! ! ! ' ' ' ' / ASSESSMENT YEAR: 2013-14 SETCO FOUNDATION, S.A. KANKI & COMPANY, 206, REWA CHAMBERS, SIR THACKERSAY MARG, NEW MARINE LINES, MUMBAI-400020 VS. DCIT(EXEMPTION), 6 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI-400012 ( !#$ / ASSESSEE) ( % / REVENUE) P.A. NUMBER : AAITS2452C ( !#$ & ' / ASSESSEE BY SHRI FIROZE ANDHRIUJINA % & ' / REVENUE BY: SHRI A.K.ATRI CIT-DR ! & $( / DATE OF HEARING : 16/12/2014 )*' & $( / DATE OF PRONOUNCEMENT : 18/12/2014 O R D E R PER JOGINDER SINGH, JM: THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 31/01/2013 OF THE LD. DIRECTOR OF INCOME TAX (EXEMP TION), MUMBAI. THE ASSESSEE HAS RAISED THE FOLLOWING GROUN DS: I. THAT THE LEARNED HONORABLE DIT(EXEMPTIONS), MUMBAI HAS ERRED IN CONCLUDING THAT AS THERE IS NO 2 SETCO FOUNDATION . WINDING UP CLAUSE HENCE THE APPLICATION CANNOT BE SAID TO HAVE CONSTITUTED A VALID PUBLIC CHARITABLE TRUST AND THAT THE APPLICATION FOR REGISTRATION IS LIABLE TO BE REJECTED ON THIS GROUND ALONE. II. THAT THE LEARNED HONORABLE DIT(EXEMPTIONS), MUMBAI HAS ERRED IN CONCLUDING THAT AS THERE IS NO WINDING UP CLAUSE AND THAT ON WINDING UP THE NET ASSETS COULD BE DISTRIBUTED TO ITS MEMBERS. THIS I S NOT LEGAL AND FACTUALLY INCORRECT AND BASED ON PRESUMPTION AND ASSUMPTION AS CLAUSE 12 OF THE TRUST DEED CLEARLY INDICATES THAT THE TRUST MAY BE AMALGAMATED WITH ANOTHER TRUST HAVING SIMILAR OBJECTS THEREFORE NO FUNDS CAN BE GIVEN TO OR DISTRIBUTED TO THE MEMBERS OF THE TRUST AND AS THE TRUST IS REGISTERED WITH THE CHARITY COMMISSIONER PROVISIONS OF SECTION 55 OF THE B.P.T.ACT ARE APPLICABLE AND WITH IT THE PRINCIPLE OF CY PRES WHEREIN APPLICATION SHOULD BE MADE TO THE CHARITY COMMISSIONER FOR DISTRIBUTION OF THE ASSETS ON WINDING UP. III. THE APPELLANT STATE THAT ADEQUATE MATERIAL HAS BEEN PLACED ON RECORD OF THE ACTIVITIES OF THE TRUS T FOR THE LAST THREE YEARS WITH THE AUDITED ACCOUNTS. ON THIS COUNT THE LEARNED D.I.T. (E) ERRED IN NOT CONSIDERING THE MATERIAL ON RECORD. IV. THE APPELLANT THEREFORE PRAYS THAT THE REGISTRATION U/S 12AA OF THE ACT BE GRANTED OR PROPER DIRECTION MAY BE GIVEN TO HON. D.I.T.-(E), MUMBAI FOR DOING NEEDFUL IN THE MATTER. 2. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE, SHRI FIROZE ANDHRIUJINA, INVITED OUR ATTENTION TO THE LE TTER DATED 14/01/2013 (PAGE 55 OF THE PAPER BOOK) AND PARA 4 ( PAGE-2) OF THE IMPUGNED ORDER. IT WAS SUBMITTED THAT REGISTRA TION U/S 12A OF THE INCOME TAX ACT, 1961 WAS WRONGLY DENIED TO THE ASSESSEE. ON THE OTHER HAND, SHRI, A.K. ATRI, LD. CIT-DR STRONGLY DEFENDED THE CONCLUSION ARRIVED AT IN THE IMPUGNED 3 SETCO FOUNDATION . ORDER BY SUBMITTING THAT THE NECESSARY DETAILS WERE NOT FILED BY THE ASSESSEE AND FURTHER THERE WAS NO DISSOLUTION CLAUSE IN THE TRUST DEED OF THE ASSESSEE. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BRI EF, ARE THAT THE ASSESSEE TRUST WAS CONSTITUTED BY A TRUST DEED DATE D 01/01/2009 AND WAS DULY REGISTERED WITH THE CHARITY COMMISSIONER ON 12/03/2009. THE ASSESSEE FILED AN APPLICATION FOR REGISTRATION U/S 12A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) WITH THE LD. DIT(E) ON T HE PRESCRIBED FORM NO.10A ON 31 ST JULY 2012. THE ASSESSEE WAS ASKED TO FURNISH CERTAIN DETAILS/DOCUMENTS. THE AUTHORIZED REPRESENTATIVE ON 05/11/2012, ATTENDED THE PROCEEDI NGS AND SUBMITTED THE RELEVANT DOCUMENTS FOR VERIFICATION A S IS EVIDENT FROM PAGE 1 OF THE IMPUGNED ORDER. THE LD. DIT(E) OBSERVED THAT THERE WAS NO DISSOLUTION CLAUSE IN THE TRUST D EED. THE ASSESSEE VIDE LETTER DATED 14/01/2013 EXPLAINED THA T IT IS BEING AN IRREVOCABLE TRUST, THE WINDING UP, IF ANY , HAS TO BE AS PER THE ACT/PROVISION OF SECTION 55 OF THE BPT ACT. HOWEVER, THE LD. DIT(E) REJECTED THE APPLICATION FOR REGISTR ATION, FILED BY THE ASSESSEE. THE AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. 2.2. UNDER THE FACTS STATED HEREINABOVE, WE ARE EXP ECTED TO ANALYZE AUTHENTICITY OF THE REJECTION OF REGISTRATI ON BY THE LD. DIT(E). ADMITTEDLY, AS PER THE PROVISIONS OF SECTI ON 12AA(1)(B) 4 SETCO FOUNDATION . OF THE ACT, THE AUTHORITY CONCERN IS EXPECTED TO SA TISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OF INSTITUTION AND T HE GENUINENESS OF ITS ACTIVITIES, BUT AT THE SAME TIME , SUCH SATISFACTION IS OBJECTIVE IN NATURE. THE LD.DIT(E) WHILE REJECTING THE APPLICATION OF THE ASSESSEE HAS NOWHERE MENTION ED THAT HE WAS NOT SATISFIED WITH THE OBJECTS OF THE TRUST OR GENUINENESS OF ITS ACTIVITIES. THE LD. DIT(E) HAS MERELY PERUSED THE AUDITED ACCOUNTS OF THE ASSESSEE AND RECEIPT OF DONATION OF RS.6 LAKH OUT OF WHICH RS.3,50,000/- WERE INCURRED FOR EDUCAT IONAL ACTIVITIES INCLUDING RS.32,721/- ON PRINTING AND ST ATIONARY, RS.27,500/- ON SALARY, RS.45,155/- AS UNIFORM EXPEN SES AND FURTHER RS.2,44,970/- ON WELFARE ACTIVITIES. SO FA R AS, SCOPE OF POWERS OF THE LD. COMMISSIONER/DIT(E) FOR THE PURPO SES OF SECTION 12AA OF THE ACT ARE CONCERNED, THE AUTHORIT Y HAVE TO SATISFY ABOUT THE GENUINENESS OF ITS ACTIVITIES OF THE TRUST OR INSTITUTION. THE OBJECTS OF THE TRUST ARE AVAILABL E AT PAGES 11 ONWARDS OF THE PAPER BOOK (INTERNAL PAGES 5 ONWARDS OF THE TRUST DEED). OUR VIEW IS FORTIFIED BY THE DECISION FROM HONBLE KARNATAKA HIGH COURT IN S.H.GOWDA CHARITABLE TRUST VS DIT(E) (2006) 156 TAXMAN 466 (KAR.), CIT VS RED ROSE SCHOO L (2007) 163 TAXMAN 19 (ALL.), CIT VS SPRING DEL EDUCATION S OCIETY (16 TAXMAN. COM 285/(2012) 204 TAXMAN.11, FIFTH GENERAT ION EDUCATION SOCIETY VS CIT (185 ITR 635) (ALL.) AND DIT VS FOUNDATION OF OPTHALAMIC OPTOMETRY RESEARCH EDUCATI ON CENTRE 254 CTR 133 (DEL.) 5 SETCO FOUNDATION . 2.3. EVEN OTHERWISE, IF THE FUNDS/CONTRIBUTION ARE USED BY THE ASSESSEE TRUST FOR NON CHARITABLE PURPOSES, THE RE IS A PROVISION IN THE ACT TO TAKE ACTION ACCORDINGLY. WH ILE, CONSIDERING THE APPLICATION U/S 12A OF THE ACT, ALL THAT THE LD. COMMISSIONER/DIT(E) IS EXPECTED TO EXAMINE WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREM ENT OF THE SECTION READ WITH RULE 17A, WHETHER FORM 10A HAS BE EN PROPERLY FILLED UP AND ALSO WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. SO LONG, THE TRUST HAS THE OBJE CTS OF CHARITABLE NATURE, IN OUR VIEW, THE REGISTRATION SH OULD NOT BE DENIED. SO FAR AS, APPLICATION OF FUNDS AND AS TO WHETHER THE ASSESSEE CAN CLAIM BENEFIT OF EXEMPTION IN TERMS OF SECTION 11 AND 12 ARE CONCERNED, THESE HAS TO BE EXAMINED BY T HE ASSESSING OFFICER AT THE STAGE WHEN SITUATION SO AR ISES. THE ASSESSEE VIDE LETTER DATED 21/11/212 CLARIFIED THAT FOR WINDING UP OF CHARITABLE TRUST SECTION 55 OF THE BOMBAY PUB LIC TRUST ACT, 1950 WILL COME INTO PLAY. THE TOTALITY OF FAC TS CLEARLY INDICATES THAT IT IS A FIT CASE WHERE REGISTRATION SHOULD HAVE BEEN GRANTED BY THE LD DIT(E). HOWEVER, WE ARE MAKI NG IT CLEAR THAT, IF AT ANY STAGE, THE ASSESSEE TRUST IS FOUND VIOLATING THE OBJECTS OF CHARITY OR MISUSING THE FUNDS FOR NON CH ARITABLE PURPOSES/COMMERCIAL PURPOSES, THE DEPARTMENT SHALL BE AT LIBERTY TO TAKE APPROPRIATE ACTION IN ACCORDANCE WI TH LAW. THEREFORE, KEEPING IN VIEW THE MATERIAL AVAILABLE O N RECORD AND THE JUDICIAL PRONOUNCEMENTS DISCUSSED HEREINABOVE, WE DIRECT THE LD. DIT(E) TO GRANT REGISTRATION TO THE ASSESSE E. 6 SETCO FOUNDATION . FINALLY, APPEAL OF THE ASSESSEE IS DISPOSED OF IN T ERMS INDICATED HEREINABOVE. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 16/12/2014. SD/- SD/- (R.C.SHARMA) ( JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED -18/12/2014 F{X~{T? P.S/. ! . . & && & +$, +$, +$, +$, -,'$ -,'$ -,'$ -,'$ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. +0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,23 +$! , , / DR, ITAT, MUMBAI 6. 34 5 / GUARD FILE. ! ! ! ! / BY ORDER, 0,$ +$ //TRUE COPY// 6 66 6 / 7 7 7 7 % % % % (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI