M/s. Coimbatore Education Foundation, Coimbatore V. CIT, Coimbatore

ITA 1658/CHNY/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6987 (ITAT-CHENNAI)
• Duration Of Justice: 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-11-2011
• Assessment Year: misc
• Appeal Filed On: 10-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1658/MDS/2011 & S.P. NO. 69/MDS/2011 (IN I.T.A. NO. 1658/MDS/2011) M/S COIMBATORE EDUCATION FOUNDATION, 14, VOC ROAD, RS PURAM, COIMBATORE 641 002. PAN : AAAAC9358G (APPELLANT / PETITIONER) V. THE INCOME TAX OFFICER, COMPANY WARD I, COIMBATORE. (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI ANIRUD H RAI, CIT-DR DATE OF HEARING : 02.11.2011 DATE OF PRONOUNCEMENT : 04.11.2011 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT IT WAS DENIED REGISTRATION UNDER SECTION 12A(A) OF INCOME-TAX ACT , 1961 (IN SHORT THE ACT). I.T.A. NO. 1658/MDS/11 S.P. NO.69/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, CONSTITUT ED AS AN IRREVOCABLE TRUST EXECUTED ON 21.6.2010, HAD APPLIE D FOR REGISTRATION UNDER SECTION 12A(A) OF THE ACT IN FORM NO.10A ON 2 1.3.2011. PURSUANT TO NOTICE ISSUED BY COMMISSIONER OF INCOME TAX-I, COIMBATORE, ASSESSEE REPLIED AND FURNISHED DOCUMENT S IN SUPPORT OF ITS APPLICATION. LD. CIT NOTED FROM SUCH DOCUMENTS THAT ASSESSEE HAD BROUGHT IN FUNDS OF ` 94,01,000/- FROM ITS TRUSTEES AS DONATIONS AND IT HAD EMBARKED UPON ACTIVITIES OF CONSTRUCTION OF A BUILDING. AS PER LD. CIT, ASSESSEE HAD ALSO TAKEN A LOAN OF ` 5 LAKHS AND WAS HAVING FIXED DEPOSITS OF ` 35 LAKHS. LD. CIT WAS OF THE OPINION THAT POOLING OF HUGE FUNDS FROM VARIOUS SOURCES REFLECTE D THE INTENTION OF THE TRUSTEES TO CARRY OUT ACTIVITIES OF ADVENTURE I N THE NATURE OF TRADE AND COMMERCE. HE, THEREFORE, HELD THAT THE TRUST W AS NOT GENUINE, BUT ONLY A DE FACTO BODY OF INDIVIDUALS FORMED TO C ARRY OUT PROFIT GENERATING ACTIVITY. HE, THEREFORE, DENIED REGISTR ATION UNDER SECTION 12A(A) READ ALONG WITH SECTION 12AA OF THE ACT, TO THE ASSESSEE. 3. WHEN THE APPEAL WAS TAKEN UP, NOBODY APPEARED ON BEHALF OF ASSESSEE. I.T.A. NO. 1658/MDS/11 S.P. NO.69/MDS/11 3 4. LEARNED D.R., IN SUPPORT OF THE ORDER OF LD. CIT , SUBMITTED THAT ASSESSEE COULD NOT PROVE THE GENUINENESS OF ITS CHA RITABLE ACTIVITIES AND LD. CIT HAD DENIED REGISTRATION FOR VALID REASO N. 5. WE HAVE PERUSED THE ORDER OF LD. CIT AND HEARD T HE CONTENTION OF LEARNED D.R. PARA 5 OF THE ORDER OF LD. CIT RUN S AS UNDER :- 5.0. FACTS AND CIRCUMSTANCES OF THE CASE, WRITTEN S UBMISSIONS OF THE TRUST WERE CONSIDERED. THOUGH, THE TRUST-DE ED REFLECTS MAIN OBJECT OF IMPARTING EDUCATION; FACTS AND THE C IRCUMSTANCES, SHOWING POOLING OF HUGE FUNDS FROM VARIOUS MANAGEAB LE SOURCES POINT TOWARDS INTENTIONS OF THE TRUSTEES TO CARRY OU T ACTIVITY(S) OF ADVENTURE IN NATURE OF TRADE AND COMMERCE. IN V IEW OF SUCH, I AM NOT SATISFIED AS TO THE GENUINENESS OF THE TRUST . THE TRUST IS NOTHING BUT A DE FACTO BODY OF INDIVIDUALS (BOI) INT ENDING TO CARRY OUT PROFIT-GENERATING ACTIVITY(S). THUS, THE REGISTRATION U/S 12A(A) OF THE ACT, SOUGHT BY THE APPELLANT IS, H EREBY, REJECTED. LD. CIT HAS ADMITTED THAT MAIN OBJECT OF ASSESSEE W AS IMPARTING HIGHER EDUCATION WITHOUT ANY DISCRIMINATION OF CAST , CREED AND RELIGION AT PARA ONE OF HIS ORDER. JUST BECAUSE THE TRUSTEE S OF THE ASSESSEE HAD CONTRIBUTED LARGE SUMS TO THE TRUST WOULD NOT, IN OUR OPINION, BE A REASON TO DENY REGISTRATION TO THE TRUST UNDER SE CTION 12A(A) OF THE ACT. SIMILARLY, JUST BECAUSE THE DONORS INCLUDED R ELATIVES OF THE I.T.A. NO. 1658/MDS/11 S.P. NO.69/MDS/11 4 TRUSTEES WOULD ALSO NOT BE A REASON FOR DENYING THI S REGISTRATION. IF THE ASSESSEE HAD EMBARKED UPON AN ACTIVITY OF CONST RUCTING A BUILDING, UNLESS IT WAS FOUND THAT THE BUILDING WAS CONSTRUCTED NOT IN PURSUANCE OF ITS OBJECT OF IMPARTING HIGHER EDUCATI ON, NO ADVERSE INFERENCE COULD HAVE BEEN REACHED. IN OUR OPINION, THE CONSTRUCTION ACTIVITY STARTED BY THE ASSESSEE, WHICH IS ACCEPTED BY LD. CIT AT PARA 4.2 OF HIS ORDER, CLEARLY BRINGS OUT THE GENUINE IN TENTION OF THE ASSESSEE. THE MAIN OBJECT OF THE ASSESSEE WAS IMPA RTING EDUCATION AND THEREFORE, FOR CREATION OF INFRASTRUCTURE IT WO ULD HAVE BEEN NECESSARY TO HAVE A BUILDING. IF THE BUILDING WAS NOT USED FOR THE PURPOSE OF OBJECTS OF THE TRUST, LD. CIT CAN ALWAYS INVOKE POWERS VESTED ON HIM TO WITHDRAW THE REGISTRATION GRANTED TO ASSESSEE. ON A MERE APPREHENSION THAT THE BUILDING WAS BEING CONST RUCTED TO BE USED FOR THE PURPOSE OF TRADE AND COMMERCE, REGISTR ATION UNDER SECTION 12A(A) OF THE ACT COULD NOT HAVE BEEN DENIE D. WE ARE OF THE OPINION THAT THE REGISTRATION WAS UNJUSTIFIABLY DEN IED TO THE ASSESSEE. ORDER OF LD. CIT IS QUASHED. HE IS DIRECTED TO GRA NT REGISTRATION UNDER SECTION 12A(A) READ ALONG WITH SECTION 12AA OF THE ACT. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STAN DS ALLOWED. I.T.A. NO. 1658/MDS/11 S.P. NO.69/MDS/11 5 7. SINCE THE APPEAL OF THE ASSESSEE IS ALLOWED, THE STAY PETITION HAS BECOME INFRUCTUOUS. 8. TO SUMMARIZE, ASSESSEES APPEAL IS ALLOWED AND S TAY PETITION IS DISMISSED AS INFRUCTUOUS. THE ORDER WAS PRONOUNCED IN THE COURT ON 4 TH NOVEMBER, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 4 TH NOVEMBER, 2011. KRI. COPY TO: (1) ASSESSEE (2) ASSESSING OFFICER (3) CIT-I, COIMBATORE (4) D.R. (5) GUARD FILE