Mitra Technology foundation, Pune V. ITO, Pune

ITA 1719/PUN/2012

• Counselvise Citation: 171924514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 21-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: YUVAK MANGAVKAR
• Keywords: Charitable institution; Rule of consistency; Competent authority
• Section: 12A; 12AA; 12; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1719/PN/2012 (ASSESSMENT YEAR 2008-09) MITRA TECHNOLOGY FOUNDATION, HARIBHAKTI & CO., C-10, GODREJ ETERNIA, OLD MUMBAI-PUNE ROAD, WAKDEWADI, PUNE-411005 .. APPELLANT PAN NO.AADCM2601D VS. ITO, WARD-11(1), PUNE .. RESPONDENT APPELLANT BY : SHRI YUVAK MANGAVKAR REVENUE BY : SHRI S.P. WALIMBE DATE OF HEARING : 24-12-2013 DATE OF PRONOUNCEMENT : 31-12-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 24-02-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A TRUST REGISTERED U/S.12A(A) OF THE INCOME TAX ACT W.E.F., 18-12-2001. THE MAIN OBJECTS OF THE TRUST AS MENTIONED IN THE MEMOR ANDUM OF ASSOCIATION AND AS REPRODUCED BY THE ASSESSING OFFI CER IN THE BODY OF THE ASSESSMENT ORDER ARE AS UNDER : (I) TO LEVERAGE INFORMATION AND COMMUNICATION TECH NOLOGY FOR THE SOCIAL AND DEVELOPMENT SECTION AND IN THAT BEHALF TO TAKE UP ONLINE AND OFFLINE INFORMATION AND COMMUNICATION RELATED P ROJECTS FROM CORPORATE, THE GOVERNMENT, SEMI GOVERNMENT BODIES, F UNDING AGENCIES OR INSTITUTION FOR DEMONSTRATION, RESEARCH AND EDUCATIONAL PURPOSES IN THE SOCIAL AND DEVELOPMENT SECTORS. 2 (II) THE OTHER OBJECTS OF THE TRUST ARE : TO PREPARE, EDIT, PUBLISH, ISSUE, EXHIBIT AND CIRCULA TE BOOKS, MAZAGINE ETC. FOR THE PROMOTION OF THE OBJECTS OF THE COMPANY AND TO ESTABLISHED FORM AND MAINTAIN IT PARKS, MUSEUM, DATA CENTRES WITH BOOKS, PERIODICALS, FILMS ETC. NECESSARY FOR THE DEVELOPMENT P URPOSE AS WELL AS TO UNDERTAKE RESEARCH AND FULFIL THE OBJECTS OF THE COMPANY. TO RETAIN AND/OR EMPLOY SKILLED PROFESSIONAL OR TECHNI CAL ADVISERS IN CONNECTION WITH THE OBJECTS OF THE COMPANY. TO PROVIDE HARDWARE, SOFTWARE, TECHNICAL SUPPORT TO O RGANISATIONS, CORPORATIONS, NGOS TO FURTHER THE OBJECTS OF THE COMP ANY. TO MANAGE, CREATE & MAINTAIN WEBSITES & PORTALS IN REL ATION TO THE OBJECTS OF THE COMPANY. TO CREATE, DEVELOP, MAINTAIN, DEPLOY SOFTWARES WHICH WOULD FURTHER THE OBJECTS OF THE COMPANY. SECTION 2(15) OF THE I.T. ACT CHARITABLE PURPOSE AS RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY. 2.1 IT FILED ITS RETURN OF INCOME ON 26-09-2008 DEC LARING TOTAL INCOME OF NIL. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE TRUST HAS SHOWN RECEIPTS OF RS.3,54,83,139/-. AFTER SHOWING APPLICATION OF INC OME AT RS.3,16,46,041/- THE ASSESSEE HAS SHOWN SURPLUS OF RS.38,36,456/-. 2.2 THE ASSESSING OFFICER ANALYSED THE MAIN OBJECTS AND SOME OF THE OTHER OBJECTS AS MENTIONED IN THE MEMORANDUM OF ASSOCIATION AND CAME TO THE CONCLUSION THAT THE OBJECTS OF THE TRUS T DO NOT APPEAR TO BE CHARITABLE. THE ASSESSING OFFICER FURTHER EXAMINED SOME OF THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE TRUST SUCH AS IVO PROJECT OF CWY AND PROJECT OF CANADA WORLD YOUTH AND CAME TO T HE CONCLUSION THAT THE ACTIVITIES ARE NOT CHARITABLE IN NATURE AN D THE EXPENDITURE INCURRED ON THESE 2 PROGRAMMES HAS TO BE DISALLOWED EVEN IF EXEMPTION U/S.11 HAS TO BE ALLOWED. SINCE THE OBJE CTS PRIMA-FACIE HAD NOT BEEN APPEARED TO BE CHARITABLE, THE ASSESSING O FFICER HELD THAT THE ASSESSEE TRUST IS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF THE I.T. ACT. 3 WHILE DOING SO, HE FURTHER NOTED THAT SECTION 2(15) HAS BEEN AMENDED BY THE FINANCE ACT, 2008 W.E.F. A.Y. 2009-10, BY AD DING A PROVISO. HE OBSERVED THAT ALTHOUGH THIS AMENDMENT IS NOT APP LICABLE FOR THE INSTANT ASSESSMENT YEAR, HOWEVER, THE NATURE OF THE ACTIVITIES AND THE CONDUCT OF THE ORGANISATION ONLY SHOW THAT THE ASSE SSEE IS RUNNING A PURELY COMMERCIAL ORGANISATION. HE ACCORDINGLY HEL D THAT THE ASSESSEE TRUST IS NOT ELIGIBLE FOR EXEMPTION U/S.11 OF THE I.T. ACT AND THE INCOME OF THE TRUST IS TAXABLE AS THAT OF AN AS SOCIATION OF PERSONS. HE ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE T RUST AT RS.3,26,87,428/-. 3. BEFORE THE CIT(A) THE ASSESSEE TRUST MADE ELABOR ATE WRITTEN SUBMISSIONS CHALLENGING THE ORDER OF THE ASSESSING OFFICER. IT WAS ALSO ARGUED THAT THE ACTIVITIES OF THE ASSESSEE TRU ST SHOULD BE CONSIDERED TO BE FALLING WITHIN THE MEANING OF EDU CATION AVAILABLE IN SECTION 2(15). VARIOUS DECISIONS WERE ALSO BROU GHT TO THE NOTICE OF THE CIT(A) TO THE PROPOSITION THAT DEDUCTION U/S.11 CANNOT BE DENIED TO THE ASSESSEE. 4. HOWEVER, THE CIT(A) WAS NOT CONVINCED WITH THE A RGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE ORDER OF TH E ASSESSING OFFICER IN DENYING THE EXEMPTION U/S.11 OF THE I.T. ACT BY HOLDING AS UNDER : 3.3.1. I HAVE CAREFULLY CONSIDERED THE THIRD LIMB OF GROUND NO. 1 DISCUSSED ABOVE, IN THE FACTS OF THE CASE AND THE LAW AS ARE APPARENT FROM RECORD AND FIND THAT THE UNDISPUTED FACTS ARE THAT MI TRA TECHNOLOGY FOUNDATION WAS INCORPORATED BY A MEMORANDUM AND ARTI CLE OF ASSOCIATION, APPROVED BY THE REGISTRAR OF COMPANIES, PU NE ON 18.12.2001. MR. RAHUL NAINWAL, D-403 VRINDAVANAM, M ODEL COLONY, SHIVAJINAGAR, PUNE AND MR. SHALABH SAHAI, B-202 VRI NDAVANAM, MODEL COLONY, SHIVAJINAGAR, PUNE WERE THE FOUNDERS OF THIS FOUNDATION. THE ANNUAL ACCOUNT OF A.Y. 2008-09 SHOWS THAT THE APPELLA NT FOUNDATION HAS THE SHARE CAPITAL OF RS.200 AND RESERVE AND SURPLUS OF RS.5,79,75,669. 4 BOTH THESE FOUNDER MEMBERS HAVE SIGNED THE ANNUAL REPO RT AS DIRECTORS OF THE FOUNDATION. THE DETAILS IN RESPECT OF THE ADMI NISTRATIVE EXPENSES OF RS.28,84,293.88 DEBITED IN THE INCOME & EXPENDITURE A/C, IS GIVEN IN SCHEDULE-10 OF THE ANNUAL ACCOUNTS. FROM THE PERUSAL OF THE DETAILS AVAILABLE IN THE SCHEDULE, IT IS APPARENT THAT RS.12,0 0,000 HAS BEEN PAID TO DIRECTORS AS REMUNERATION AND THE SAME IN THE IMMED IATE PREVIOUS ASSESSMENT YEAR WAS AT RS.10,65,000. THE LICENCE GRANTED BY THE REGIONAL DIRECTOR, DEPARTMENT OF COMPANY AFFAIRS, TO THE APPE LLANT FOUNDATION VIDE NO. RD/12(25)/N)/5/2001/7425 DATED 1.11.2001, U/S.25 OF COMPANIES ACT CLEARLY SAYS AS UNDER; 1) 'THAT THE SAID COMPANY SHALL IN ALL RESPECTS B E SUBJECT TO AND GOVERNED BY THE CONDITIONS AND PROVISIONS CONTAINED IN ITS M EMORANDUM OF ASSOCIATION; 2) THAT THE INCOME AND PROPERTY OF THE SAID COMPAN Y WHENSOEVER DERIVED, SHALL BE APPLIED SOLELY FOR THE PROMOTION OF THE OBJECTS AS SET FORTH IN ITS MEMORANDUM OF ASSOCIATION AND THAT NO PORTIO N THEREOF SHALL BE PAID OR TRANSFERRED DIRECTLY OR INDIRECTLY BY WAY OF DIV IDEND, BONUS OR OTHERWISE BY WAY OF PROFIT TO PERSONS WHO AT ANY TIME ARE OR HAVE BEEN MEMBERS OF THE SAID COMPANY OR TO ANY OF THEM OR TO ANY PERSON CLAIMING THROUGH ANY ONE OR MORE OF THEM; 3) THAT NO REMUNERATION OR OTHER BENEFIT IN MONEY OR MONEY'S WORTH SHALL BE GIVEN BY THE COMPANY TO ANY OF ITS M EMBERS WHETHER OFFICERS OR SERVANTS OF THE COMPANY OR NOT EXCEPT PAYMENT OF OUT OF POCKET EXPENSES, REASONABLE AND PROPER INTEREST ON MONEY L ENT, OR REASONABLE AND PROPER RENT ON PREMISES LET TO THE COMPANY; 4) THAT NO MEMBERS SHALL BE APPOINTED TO ANY OFFIC E UNDER THE COMPANY WHICH IS REMUNERATED BY SALARY, FEES OR IN ANY OTHER MANNER NOT EXCEPTED BY CLAUSE (3); 5) THAT NOTHING IN THIS CLAUSE SHALL PREVENT THE P AYMENT BY THE COMPANY IN GOOD FAITH OF REASONABLE AND PROPER REMU NERATION TO ANY OF ITS OFFICERS OR SERVANTS (NOT BEING MEMBERS) OR TO ANY OTHER PERSON (NOT BEING A MEMBER), IN RETURN FOR ANY SERVICE ACTUALLY RENDE RED TO THE COMPANY; 6) THAT NOTHING IN CLAUSES (3), (4), AND (5) SHALL PREVENT THE PAYMENT BY THE COMPANY IN GOOD FAITH, WITH THE PREV IOUS APPROVAL OF THE CENTRAL GOVERNMENT, OF REASONABLE AND PROPER REMUNE RATION TO ANY OF ITS MEMBERS IN RETURN FOR ANY SERVICES (NOT BEING SERVI CES OF A KIND WHICH ARE REQUIRED TO BE RENDERED BY A MEMBER), ACTUALLY REND ERED TO THE COMPANY; 7) THAT NO ALTERATION SHALL BE MADE TO THE MEMORAN DUM OF ASSOCIATION OR TO THE ARTICLES OF ASSOCIATION OF TH E COMPANY, WHICH ARE FOR THE TIME BEING IN FORCE, UNLESS THE ALTERATION HAD BEEN PREVIOUSLY SUBMITTED TO AND APPROVED BY THE CENTRAL GOVERNMENT; AND 8) THAT THIS LICENCE SHALL BE LIABLE TO BE REVOKED IN THE EVENT OF VIOLATION OF ANY OF AFORESAID CONDITIONS OR ANY OF THE CONDITIONS AND PROVISIONS CONTAINED IN THE MEMORANDUM OF ASSOCIATI ON OF THE SAID COMPANY IN ACCORDANCE WITH THE PROVISIONS OF SECTIO N 25 OF THE COMPANIES ACT, 1956.' FROM THE PERUSAL OF THE ABOVE CONDITIONS IT IS APPAREN T THAT NO REMUNERATION OR ANY OTHER BENEFIT IN MONEY OR MONEY 'S WORTH COULD HAVE BEEN GIVEN TO ANY OF THE MEMBERS, OFFICE BEARER S OR SERVANTS OR IN THE EVENT OF ANY SUCH VIOLATION THE LICENCE WILL BE LIABLE TO BE REVOKED. FROM THE PERUSAL OF THE ANNUAL RECORD, IT IS ABUNDAN TLY CLEAR THAT THE DIRECTORS/MEMBERS HAVE TAKEN HEFTY REMUNERATION OTHER THAN 5 REIMBURSEMENT OF EXPENSE ETC. AND THEREFORE, IT IS CLE AR THAT THEY HAVE VIOLATED THE CONDITIONS OF REGISTRATION GRANTED U/S. 25 OF THE COMPANIES ACT. THE AO IS DIRECTED TO INFORM THE REGISTRAR OF CO MPANIES ABOUT THIS VIOLATION. THE ABOVE FINDING OF FACT CLEARLY SHOWS TH AT THE STRENGTH DRAWN BY THE APPELLANT ON THE REGISTRATION GRANTED U/S. 25 IS NOT CORRECT IN THE FACTS OF THIS CASE. IT ALSO GIVES AN IMPORTANT INSIGHT IN TO THE PURPOSE AND AFFAIRS OF THE COMPANY. 3.3.2. THE OTHER ARGUMENT OF THE APPELLANT THAT TH E REGISTRATION GRANTED U/S 12A OF THE I.T. ACT BY CIT-I, PUNE, DEBA RS THE AO TO LOOK INTO THE OBJECT AND THE ACTIVITIES OF THE TRUST FOR THE FU LFILLMENT OF CONDITIONS PRESCRIBED U/S. 2(15) OF THE I.T. ACT, LOOKS LEGALLY INCORRECT. REGISTRATION IS A PRE-CONDITION FOR AVAILING THE BENEFIT U/S. 11 AND 12 AND THEREFORE, AT THAT STAGE WHEN THE REGISTRATION IS GRANTED, IT IS NEIT HER POSSIBLE NOR FEASIBLE NOR ENVISAGED THAT THE AFORESAID ASPECTS ARE VE RIFIED AND CERTIFIED BY THE CIT. THE HON'BLE ALLAHABAD HIGH CO URT IN FIFTH GENERATION EDUCATION SOCIETY VS. CIT (1990) 185 ITR 634 HAS POINTED OUT THAT A READING OF THE SECTION SHOWS THAT THE REGISTRATION U/S.12A IS A PRECONDITION FOR AVAILING OF THE BENEFIT U/S. 11 AND 12.' IT WAS ALSO STATED IN THE SAID JUDGMENT THAT SEC. 11 PROVIDES FOR EXEMPTI ON OF INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSES AND SEC. 12 IS IN TH E NATURE OF EXPLANATION TO SEC. 11. IT WAS EXPLAINED THAT AT TH E STAGE WHEN REGISTRATION IS APPLIED OR GRANTED, THE COMMISSIONER IS NOT REQUIRED TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MA Y EXAMINE IS WHETHER THE APPLICATION FOR REGISTRATION IS MADE IN ACCORDANC E WITH THE REQUIREMENTS OF SEC. 12A R.W. RULE AND WHETHER FORM N O. 10A HAS BEEN PROPERLY FILLED UP AND WHETHER THE OBJECTS OF THE TR UST DEED ARE CHARITABLE IN NATURE OR NOT. THEREFORE, THE HON BLE HIGH COURT HAS CLEARLY HELD THAT THE EXEMPTION AVAILABLE U/S. 11 CAN BE AL LOWED ONLY IF THE SAME HAS BEEN APPLIED FOR CHARITABLE PURPOSES IN THE MANNE R PRESCRIBED IN SEC. 12, 13 ETC. AND THE REGISTRATION IS NOT A CERTIFICAT E THAT THE APPLICATION OF INCOME IS BEING MADE IN THE MANNER AS ENVISAGED. A SI MILAR VIEW WAS TAKEN IN NEW LIFE IN CHRIST EVANGELISTIC ASSOCIATION VS. CIT (1999) TAX LR 114 (MAD). SECTION 12AA INTRODUCED W.E.F. 1.4.19 97 HAS BEEN EXPLAINED IN CIRCULAR NO. 762 DATED 18.2.1998 230 I TR (ST) 12. IT HAS BEEN EXPLAINED THAT NOW A PROCEDURE FOR GRANT OF RE GISTRATION OR REFUSAL TO A TRUST OR INSTITUTION HAS BEEN PROVIDED WITH THIS SECTION. HOWEVER, THE COURTS ARE OF THE OPINION THAT THOUGH THE SEC. 12 AA REQUIRES ENQUIRY ABOUT 'OBJECTS OF THE TRUST OR INSTITUTION AND GENUINENES S OF ITS ACTIVITIES' BUT THIS DOESN'T MEAN THAT IT WILL GRANT EPSO FACTO EXEMPTION AT ALL POINT TO COME. ONE CAN CERTAINLY CONTEMPLATE A SITUATION , WHERE A TRUST IS ELIGIBLE FOR REGISTRATION, BUT NOT EXEMPTION. IT WI LL BE INCORRECT TO PRESUME THAT THE CIT WOULD BE IN A CONDITION TO VERI FY THE GENUINENESS OF ITS ACTIVITIES AT THE TIME OF ITS FORMATION AND THEREF ORE, THE COURTS ARE OF THE VIEW THAT IT IS NOT CORRECT TO INFER THAT THE EN QUIRY CONTEMPLATED IN SEC. 12AA IS ONE WHICH IS FOR CONFERRING EXEMPTION. T HEREFORE, IT DEFINITELY GRANTS AUTHORITY TO THE AO TO CONSIDER THE QUESTION WHETHER THE TRUSTS ARE CHARITABLE IN NATURE OR NOT, NOTWITHSTA NDING THE GRANT OF CERTIFICATE U/S.12A OF THE I.T. ACT. THE MP HIGH CO URT IN GOURI SHANKARJI DEITY VS. UNION OF INDIA (1984) 145 ITR 67 HAS POINTE D OUT THE LIMITED ROLE OF SEC.12A IN THE FOLLOWING WORDS : WHAT SECTION 12A ENVISAGED IS THAT THE PROVISIONS OF SEC.11 AND 12 SHALL NOT APPLY TO THE INCOME OF ANY TRUST OR THE INSTITU TIONS UNLESS AN APPLICATION FOR REGISTRATION OF THE TRUST OR THE IN STITUTION IS MADE IN THE PRESCRIBED FORM BEFORE THE SPECIFIED DATE. THE FOR M PRESCRIBED FOR THIS PURPOSE IS FORM NO.10A AND THE RELEVANT RULE IS RUL E17A OF THE I.T. RULES, 1962. IT WILL APPEAR FROM THE FORM AND THE RULE THAT IT DOES NOT ENVISAGED ANY ENQUIRY AS TO THE NATURE AND CHARACTE R OF ANY SPECIFIC PROPERTY AS THE PROPERTY OF THE TRUST. 6 IT IS TRUE THAT THE AMENDED PROVISION IN SEC.12A AND 1 2AA ALLOWS SOME ENQUIRY BUT STILL THE ABOVE DECISION WILL HOLD GOOD A S THE PROVISION YET APPLICABLE IS THAT MERE REGISTRATION DOES NOT PRECLUDE THE AO FROM MAKING ENQUIRIES AND COMING TO HIS OWN CONCLUSION. EX EMPTION IS ULTIMATELY DEPENDENT UPON THE ACTIVITIES OF THE TRUST OR THE INSTITUTION WHICH CANNOT BE JUDGED AT THE VERY INCEPTION AND FU RTHERMORE, THE SAME CANNOT REMAIN STATIC YEAR AFTER YEAR. A TRUST FULFIL LING CONDITIONS BY ITS ACTIVITIES IN A PARTICULAR YEAR CAN CHANGE IT SUBSEQU ENTLY AND THEREFORE, IT WILL LEAD TO ABSURDITY IF THE AO IS PRECLUDED FROM VE RIFYING THE ACTIVITIES YEAR AFTER YEAR. EVEN OTHERWISE, IT IS A WELL SETTLED PRINCIPLE OF LAW UNDER THE INCOME TAX ACT THAT EVERY ASSESSMENT YEAR IS SEPARATE AND INDEPENDENT OF EACH OTHER FOR WHICH RETURNS ARE TO B E FILED SEPARATELY. IF THE AO IS PRECLUDED FROM CHECKING THE RETURN, TO CHE CK THE FULFILLMENT OF THE CONDITIONS, WHETHER IT CONFORMS TO THE CHARITABLE PURPOSES OR NOT, FOR WHICH THE REGISTRATION WAS GRANTED AS A ONE TIME MEASUR E, THE SYSTEM OF GRANTING OF GRANTING EXEMPTION OR IN OTHER WORDS FOR GOING THE REVENUE WILL BE EXPOSED TO POSSIBLE EXPLOITATION. IN FACT, WI TH THE INSERTION OF SUB- SEC. (3) IN SEC. 12AA, THE COMMISSIONER HAS LESSER REQUIRE MENT OF GOING INTO THE QUESTION OF ELIGIBILITY AT THE TIME OF INCE PTION, AS THE REGISTRATION ONCE GRANTED CAN EASILY BE WITHDRAWN. KARNATAKA HIGH COURT IN THE CASE OF GOWDA CHARITABLE TRUST VS. DIT (EXEMPTIONS) (2005) 285 ITR 327 (KAR) HAS UPHELD THE DISTINCTION BETWEEN OBJECTS AND A CTIVITIES WHILE DEALING THE ISSUES RELATING WITH THE TRUST AND IT HAS BE EN STATED THAT REGISTRATION RELATES TO OBJECTS, SO THAT IF THE OBJECTS ARE CHARITABLE, IT SHOULD BE CONSIDERED AS GENUINE AND REGISTRATION SHOULD BE GRANTED. IN THE SAID JUDGMENT IT WAS HELD THAT THE ACTIVITY ATTRA CTS TAX AND THE SAME IS THE MATTER OF ASSESSMENT AND NOT REGISTRATION. SIMILAR VIEW WAS TAKEN BY THE TRIBUNAL IN AARYAN EDUCATION SOCIETY VS. CIT (20 06) 281 ITR (AT) 72 (DEL). IN THE PRESENT CASE, IT IS NOTED THAT THE MA IN OBJECT FOR WHICH THE FOUNDATION WAS INCORPORATED SAYS ' TO LEVERAGE INFORMATION AND COMMUNICATION TECHNOLOGY FOR THE SOCIAL AND DEVELOP MENT SECTORS AND IN THAT BEHALF TO TAKE UP ONLINE AND OFFLINE INFORMATI ON AND COMMUNICATION RELATED PROJECTS FROM CORPORATE, THE GOVERNMENT, SE MI GOVERNMENT BODIES, FUNDING AGENCIES OR INSTITUTIONS FOR DEMONSTRATION, RESEARCH AND EDUCATIONAL PURPOSES IN THE SOCIAL .AND DEVELOPMENT SECTORS.' THEREFORE, IT IS IMPORTANT TO NOTE THAT THE PURPOSE FOR WHICH THE F OUNDATION CAME INTO EXISTENCE WAS VERY WIDE. IT STATED TO ENGAGE ITSELF IN SOCIAL AND DEVELOPMENT SECTORS AND THEREFORE, AT THE TIME OF INC ORPORATION UNDER THE COMPANIES ACT AND THE REGISTRATION OF SEC. 12A OF IT. ACT, IT WAS NOT POSSIBLE AT ALL TO SEE WHETHER THE ACTUAL ACTIVITIES CA RRIED OUT BY THE APPELLANT IS FULFILLING THE CONDITIONS PRESCRIBED U/S.( 15) OF THE IT. ACT OR NOT. FORMATION OF COMPANY U/S. 25 OF THE INCOME TA X ACT ONLY ENVISAGED THE EXISTENCE OF THE OBJECT WHICH IS FOR GENERAL WELF ARE AND THE BAR ON DISTRIBUTION OF INCOME AND ASSETS TO THE MEMBERS. FOR T HIS REASON, THE CONDITIONS PRESCRIBED IN THE LETTER OF REGISTRATION HA VE SET OUT CONDITIONS TO DEBAR REMUNERATION AND OTHER MONETARY BENEFITS TO THE MEMBERS AND SUCH OTHER PERSONS. THERE COULD BE MANY WAYS IN WHICH THE BENEFIT CAN BE DERIVED EVEN AFTER THE RESTRICTIONS ARE FOLLOWED. IN THE PRESENT CASE HOWEVER, IT HAS BEEN FOUND THAT THE CONDITION PRESCRI BED IN THE LICENCE HAS BEEN BLATANTLY VIOLATED. WITHOUT PREJUDICE TO THE DISCUSSIONS MADE ABOVE, THE LEGAL POSITION IS THAT EVEN FOR A COMPANY REGISTERED U/S 25 OF THE COMPANIES ACT, IT IS INCUMBENT AND ESSENTIAL TO FUL FILL THE CONDITIONS PRESCRIBED IN THE INCOME TAX ACT, IF THE EXEMPTION I S TO BE AVAILED. IT IS NOT, AS CLAIMED IN THE SUBMISSIONS, THAT A REGISTRATION U /S 25 OF THE COMPANIES ACT WILL RENDER THE APPELLANT ELIGIBLE FOR EXEMPTION UNDER THE IT. ACT AND THE I.T. AUTHORITIES CANNOT LOOK INTO TH E REQUIREMENT OF THE INCOME TAX ACT BEFORE GRANTING THE EXEMPTION. THE C LAIM OF THE APPELLANT IS LEGALLY NOT CORRECT. NOW COMING BACK TO THE ACTIV ITIES OF THE TRUST CARRIED OUT, IT CAN BE NOTED THAT THE APPELLANT FOU NDATION IS ONLY ENGAGED IN BRINGING TOGETHER PERSONS HAVING SKILLS AND DESIRE TO VOLUNTEER FOR SOCIAL WORK TO THE NGOS REQUIRING THOSE PARTICULAR SKIL LS AND PERSONS FOR 7 THE PURSUANCE OF THEIR CHARITABLE OBJECTIVES. THEREF ORE, IT IS IMPORTANT TO NOTE THAT THE APPELLANT PER SE IS NOT ENGAGED IN ANY ACTIVITY OF CHARITABLE PURPOSES. IN ONE HAND, THERE ARE PERSONS HAVING DIFFERE NT SKILLS, WHO HAVE THE DESIRE TO WORK FOR THE SOCIAL CAUSE AT LESS THA N THE MARKET RATES AND ON THE OTHER SIDE ARE THE ORGANISATIONS, MORE PAR TICULARLY NGOS ETC. REQUIRING MANPOWER WITH PARTICULAR SKILLS FOR ACHIEV ING THE SOCIAL PURPOSES FOR WHICH THEY ARE EXISTING. IF THE REVENUE M ODEL OF THE APPELLANT IS CAREFULLY EXAMINED, IT IS SEEN THAT THE F EES ETC. CHARGED FROM VOLUNTEERS ARE GENERALLY VERY NOMINAL BUT THE MAIN R EVENUE IS THROUGH 'CONTRIBUTIONS' FROM THE NGOS/ ORGANISATIONS WHO ARE DE SIROUS OF HIRING SUCH VOLUNTEERS. THEREFORE, EVEN THOUGH THE RECEIPTS A RE IN THE NAME OF CONTRIBUTIONS, AS THE NGOS/ ORGANISATIONS GIVING THE CON TRIBUTIONS FOUND IT MORE PROPER TO CALL IT 'CONTRIBUTIONS', IN REALIT Y IT COULD BE SEEN TO BE FOR THE PURPOSES OF THE SERVICES RENDERED BY THE APPELL ANT. IT IS A WELL KNOWN FACT THAT THESE DAYS EDUCATED AND WELL TO DO PE RSONS HAVE ASPIRATIONS TO CONTRIBUTE TO A SOCIAL CAUSE, AND VARIO US CORPORATE AND ORGANISATIONS ARE ALSO WILLING TO DISCHARGE THEIR SOCIAL RESPONSIBILITY BY EITHER FORMING NGOS OR ASSOCIATING WITH NGOS. EVEN THE GOVERNMENT IN SOME CASES ARE INTERESTED IN ENGAGING NGOS IN ACHIEVING SOCIAL AND DEVELOPMENTAL OBJECTIVES. IF THE VARIOUS CUTTINGS OF T HE NEWSPAPERS, APPELLANT'S WEBSITES ARE CONSIDERED INCLUDING THE HISTOR Y OF THE FORMATION OF THIS COMPANY, IT CAN BE SEEN THAT THE F OUNDATION ACCEPTS THAT IT CONNECTS THE VOLUNTEERS TO DIFFERENT ORGANISATIONS THROUGH VARIOUS PROGRAMS LIKE I VOLUNTEER, INDIA FELLOW ETC. IT FURT HER SAYS THAT IT HAS 10,000 VOLUNTEERS, 300 VOLUNTARY ORGANISATIONS, 11 STAT ES AND 25 COUNTRIES IN ITS NETWORK. ONE OF THE REPORTS FURTHER SAYS THAT MITRA HAS PLACED CLOSED TO 6000 VOLUNTEERS SO FAR. THE DOCUMENT S PRODUCED FURTHER SHOW THAT MITRA FOUNDATION CAME INTO EXISTEN CE AS AN ENTREPRENEURIAL INITIATIVE OF 4 ALUMNI OF THE INSTIT UTE OF RURAL MANAGEMENT ANAND. THESE PERSONS REALISED THAT INDIA HA S A WEALTH OF HOME GROWN SKILLS AND EXPERTISE WHO ARE DESIROUS OF CON TRIBUTING TO A SOCIAL CAUSE AND THE ORGANISATIONS ENGAGED IN VARIOUS SOC IAL PROJECTS REQUIRED SUCH TALENT AND COMMITMENT AT COMPETITIVE R ATES, THE MISSING CONNECT BETWEEN THE TWO WAS THE OPPORTUNITY FOR THE SE PERSONS TO BRING INTO EXISTENCE AN ENTERPRISE FOR THEIR BENEFIT. UNDOU BTEDLY THEY HAVE FORMED THE ORGANISATION U/S. 25 AND HAVE TAKEN THE R EGISTRATION U/S. 12A BUT THERE IS A DIS-CONNECT BETWEEN THE OBJECTS STATED IN THE DOCUMENTS AND THE ACTUAL ACTIVITIES CARRIED OUT. THEY HAVE ALSO VIOLATED THE CONDITIONS PRESCRIBED IN THE LICENCE AND THE ACTIVITI ES CARRIED OUT ARE NOT FOR ANY CHARITABLE PURPOSES. THE NGO MAY BE ENGAGED I N THE ACTIVITY OF THE CHARITABLE PURPOSES BUT THE APPELLANT BY PROVIDIN G VOLUNTEERS IS DEFINITELY NOT ENGAGED IN ANY ACTIVITY OF CHARITABL E PURPOSES. THEY ARE BASICALLY AN ENTERPRISE TO CONNECT THE VOLUNTEERS TO T HE NGOS FOR THE FEES IT IS RECEIVING AS CONTRIBUTIONS OR CHARGES. THEREFORE, I FIND THAT THE DECISION OF THE AO TO DENY THE EXEMPTION U/S. 11 WAS CORRECT. 3.3.2. THE APPELLANT HAS ALSO ARGUED TO GRANT EXEMPTI ON U/S. 11 ON THE PRINCIPLE OF CONSISTENCY UPHELD IN CERTAIN CASES INCLU DING RADHASWAMY SATSANG 193 ITR 321 (SC). IT IS A WELL SETTLED PRINCIP LE OF LAW IN RESPECT OF ASSESSMENT UNDER THE INCOME TAX ACT THAT THE PRINCIPLE OF 'RES JUDICATA' DO NOT APPLY IN INCOME TAX PROCEEDINGS. EACH ASSESSMENT YEAR IS CONSIDERED A SEPARATE UNIT FOR CONSIDERING AND DECIDIN G THE ISSUES AND A DECISION TAKEN IN ONE YEAR IS NOT REQUIRED TO BE NECE SSARILY FOLLOWED IN THE SUBSEQUENT YEARS. HOWEVER, IN CERTAIN CASES EXCEPTIO NS HAVE BEEN ACCEPTED BY THE COURTS BUT GENERALLY SUCH EXCEPTIONS A RE IN RESPECT OF ISSUES WHERE TWO VIEWS ARE POSSIBLE AND A VIEW TAKEN CON SISTENTLY IS NOT ALLOWED TO BE DISTURBED ON THE PRINCIPLE OF CONSISTENC Y WITHOUT HAVING ANY MATERIAL ON RECORD WHICH CAN SHOW THAT THE FACTS AND THE LAW HAVE REMAINED THE SAME. THEREFORE, PRIMARILY THE PRINCIPL E OF CONSISTENCY CAN ONLY BE APPLIED WHERE THE VIEW TAKEN CONSISTENTLY IS I N ACCORDANCE WITH THE LAW AND THE FACTS, EVEN THOUGH SOME OTHER INTERP RETATION IS POSSIBLE. 8 IN THE CASE OF RADHASWAMY SATSANG, RELIED UPON BY THE APPELLANT, THE ISSUE WAS RELATING TO REOPENING OF AN ASSESSMENT ON THE B ASIS OF A CONTRARY STAND SOUGHT TO BE TAKEN BY A CIT, THEN THE VIEW OF THE EARLIER CIT. HOWEVER, IN THE PRESENT CASE THE FACTS AVAILABLE ON RECORD CLEARLY SHOWS THAT THE ACTIVITIES BEING CARRIED OUT BY THE APP ELLANT IS NOT OF THE NATURE OF CHARITABLE PURPOSES DEFINED IN SEC. 2(15) AN D THEREFORE, AO CANNOT BE FOUND TO BE AT FAULT FOR GIVING A FINDING ABOUT INELIGIBILITY OF THE FOUNDATION FOR EXEMPTION U/S. 11 DURING THE COURSE O F ASSESSMENT. THE AO, AS HELD BY THE DIFFERENT COURTS HAS THE AUTHORITY, DURING THE COURSE OF ASSESSMENT TO EXAMINE WHETHER THE EXEMPTION IS AVAILABLE TO AN ENTITY OR NOT. IN THE NAME OF CONSISTENCY, A CLAIM OTHERWISE NOT ALLOWABLE IN THE FACTS OF THE CASE AND THE LAW, CANNOT BE ALLOWED. THE REFORE, EVEN ON THIS GROUND THE CLAIM OF THE APPELLANT CANNOT BE ALLOWED . 3.3.3. IN THEIR SUBMISSIONS MADE THE APPELLANT HAS CLAI MED THAT THE RECEIPTS HAVE BEEN APPLIED FOR THE BENEFIT OF NEEDY AND POOR PEOPLE IN INDIA, TO CLAIM THAT THE FOUNDATION IS ELIGIBLE FOR EXEMPTION U/S.11. HOWEVER, ON CAREFUL CONSIDERATION, IT CAN BE FOUND T HAT THE RECEIPTS OF THE FUND HAS BEEN UTILISED FOR RAISING A SYSTEM AND RUNNING IT TO IDENTIFY AND REGISTER VOLUNTEERS WITH SPECIFIC SKILLS FOR THEIR EMPL OYMENT /DEPLOYMENT WITH VARIOUS NGOS/ ORGANISATIONS AND APPARE NTLY FOR THIS REASON THE AO HAS GIVEN THE FINDING IN THIS ASSESSMENT YEA R THAT THE EXPENDITURE OF RS.1,57,32,677/- CANNOT BE ALLOWED EV EN IF THE EXEMPTION U/S.11 IS ALLOWED. THE AFORESAID FINDING OF THE AO IS N OT PROPERLY EXPLAINED IN THE ASSESSMENT ORDER, BUT IT CAN BE CONSIDE RED TO BE INDICATING THE FACT THAT THE RECEIPTS MADE BY THE AP PELLANT HAVE NOT BEEN APPLIED IN ANY WAY FOR THE CHARITABLE PURPOSES. PERUSA L OF THE EXPENSES DEBITED IN THE P&L ACCOUNT IS TESTIMONY TO THIS FACT. THE RECEIPTS ARE MAINLY FROM ORGANISATIONS AND NGOS, OTHER THAN THE BAN K INTEREST EARNED FROM FIXED DEPOSITS OF CRORES OF RUPEES MADE IN THE BAN KS ETC. AND THESE ARE FOR PROVIDING THE SERVICES RENDERED TO THESE ORGAN ISATIONS/ NGOS. IN FACT, NEITHER THE VOLUNTEERS NOR THE NGOS, PER SE ARE NEEDY PEOPLE REQUIRING CHARITABLE HELP. 3.3.4. AFTER CONSIDERING THE DIFFERENT ASPECTS RAISED BY THE APPELLANT AND THE AO WHICH HAVE BEEN DISCUSSED IN THE FOREGOING PARAGRAPHS, I AM OF THE VIEW THAT GROUND NO. 1 CANNOT BE ALLOWED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICE R IN DENYING THE PROVISIONS OF SECTION 2(15) BASICALLY ON 2 GROUNDS : 9 (1) THAT THE ASSESSEE TRUST HAS VIOLATED THE CONDIT IONS OF REGISTRATION GRANTED U/S.25 OF THE COMPANIES ACT; S INCE THE DIRECTORS/MEMBERS HAVE TAKEN HEFTY REMUNERATION OTH ER THAN REIMBURSEMENT OF EXPENSES ETC. AND THEREFORE IT IS CLEAR THAT THEY HAVE VIOLATED THE CONDITIONS OF REGISTRATION G RANTED U/S.25 OF THE COMPANIES ACT. (2) THE OBJECTS OF THE ASSESSEE TRUST ARE NOT CHARI TABLE IN NATURE; AND 5.1 SO FAR AS THE VIOLATION OF CONDITIONS OF REGIST RATION GRANTED U/S.25 OF THE COMPANIES ACT, WE FIND THE LD.CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO INFORM THE ROC ABOUT THE VIOLA TION. WE FIND THE ROC, PUNE VIDE LR.NO. ROCP/ESTT/2012/5646, DATED 07 -11-2012 ADDRESSED TO THE ASSESSING OFFICER (COPY OF WHICH I S ENCLOSED AT PAGE 34 OF THE PAPER BOOK) HAS INFORMED THAT THERE IS NO RESTRICTIVE PROVISION FOR PAYMENT OF REMUNERATION TO DIRECTORS WHO ARE IN EMPLOYMENT AND ARE NOT MEMBERS OF THE COMPANY. THE CONTENTS OF THE LETTER IS REPRODUCED HEREIN BELOW FOR THE SAKE OF C LARITY. NO.ROCP/ESTT/2012/5646 DATED 07 TH NOV 2012 TO THE INCOME TAX OFFICE, WARD-11(1), SWARGATE, PUNE. SUB : VIOLATION OF CONDITIONS OF LICENSE GRANTED U/S.2 5 OF THE COMPANIES ACT, 1956. REF : YOUR LETTER NO.PN/ITO WD 11(1)/REPORTS/2012-1 3/27, DATED 24- 07-2012. SIR, WITH REFERENCE TO THE SUBJECT CITED ABOVE, I AM ENC LOSING HEREWITH THE LETTER RECEIVED FROM MITRA TECHNOLOGY FOUNDATION WH ICH IS SELF EXPLANATORY. FURTHER IN THE MATTER IT IS SUBMITTED T HAT AS PER PROVISIONS OF SECTION 25 OF THE ACT IS CONCERNED THERE IS NO RESTRICTIVE PROVISION FOR PAYMENT OF REMUNERATION TO DIRECTORS WH O ARE IN EMPLOYMENT AND ARE NOT MEMBERS OF THE COMPANY. THIS IS FOR YOUR INFORMATION PLEASE. YOURS FAITHFULLY, SD/- (V.K. KHUBCHANDANI) REGISTRAR OF COMPANIES, PUNE 10 ENCL: AS ABOVE COPY FOR INFORMATION TO : MITRA TECHNOLOGY FOUNDATION, C2, 905, GANGA SATELLITE, WANOWRIE, PUNE. SD/- REGISTRAR OF COMPANIES, PUNE FROM THE ABOVE, IT IS CLEAR THAT ONE OF THE ISSUE O N WHICH THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICE R IN DENYING THE EXEMPTION U/S.11 IS NOT CORRECT. 5.2 SO FAR AS THE SECOND REASON ON WHICH THE LD.CIT (A) UPHELD THE ACTION OF THE ASSESSING OFFICER IS THAT THE ACTIVIT IES OF THE ASSESSEE TRUST ARE NOT CHARITABLE IN NATURE AND THE ASSESSIN G OFFICER CERTAINLY CAN LOOK INTO THE ACTIVITIES. WE FIND THE REGISTRA TION GRANTED U/S.12A BY THE LD.CIT IS STILL IN FORCE AND HAS NOT BEEN CA NCELLED BY THE CONCERNED CIT. WHILE GRANTING REGISTRATION U/S.12A , THE CIT HAS GONE THROUGH THE OBJECTS OF THE TRUST. THERE IS NO CHAN GE IN THE OBJECTS OF THE TRUST FROM THE DATE OF APPLICATION TILL TODAY. FOR CANCELLING THE REGISTRATION OF A TRUST ALREADY GRANTED, THE ACT PR OVIDES CERTAIN PROCEDURE. WE FIND THE PROVISIONS OF SECTION 12AA( 3) READ AS UNDER : [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRAN TED REGISTRATION UNDER CLAUSE (B) BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES O F SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CAR RIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANC ELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION 11 5.3 IN THE INSTANT CASE, IF THE ASSESSING OFFICER W AS OF THE OPINION THAT THE ACTIVITIES CARRIED OUT BY THE ASSESSEE TRU ST ARE NOT CHARITABLE, HE COULD HAVE INFORMED THE SAME TO THE COMMISSIONER AND THE COMMISSIONER WHO IS THE COMPETENT AUTHORITY COULD H AVE CANCELLED THE REGISTRATION. THE MAIN OBJECTS AND OTHER OBJEC TS OF THE TRUST HAVE ALREADY BEEN REPRODUCED AT PARA 2 OF THE IMPUGNED O RDER. THE ASSESSEE HAS CARRIED OUT THE ACTIVITIES AS PER ITS OBJECTS AND THERE IS NO CHANGE IN THE OBJECTS OF THE TRUST FROM THE INCEPTI ON TILL TODAY, AS MENTIONED EARLIER. THE LD.CIT HAVING GONE THROUGH THE OBJECTS OF THE TRUST HAD GRANTED REGISTRATION U/S.12AA(A). UNDER T HESE CIRCUMSTANCES, WE FAIL TO UNDERSTAND AS TO HOW THE ASSESSING OFFIC ER WHO IS A SUBORDINATE AUTHORITY CAN SIT OVER THE JUDGMENT OF THE CIT AND HELD THAT THE ACTIVITIES OF THE TRUST ARE NOT CHARITABLE . SIMILARLY THE CIT(A) IN OUR OPINION HAS NO POWER TO HOLD THAT THE ACTIVI TIES OF THE TRUST ARE NOT CHARITABLE ESPECIALLY WHEN HIS COUNTERPART IN T HE ADMINISTRATION HAS ALREADY HELD THE OBJECTS OF THE TRUST AS CHARIT ABLE IN NATURE AND HAS GRANTED REGISTRATION U/S.12A. IF THE CIT(A) WAS OF THE OPINION THAT THE ACTIVITIES OF THE TRUST ARE NOT CHARITABLE, HE COUL D HAVE INFORMED THE SAME TO THE CIT CONCERNED AND IT IS ONLY THE CONCER NED CIT WHO COULD HAVE CANCELLED THE REGISTRATION GRANTED BY HI M EARLIER AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 12AA. WE, THEREFORE, HOLD THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DENYING THE EXEMPTION U/S.11 OF THE I.T. ACT TO THE ASSESSEE BY UPHOLDING THE OR DER OF THE ASSESSING OFFICER THAT THE ACTIVITIES OF THE TRUST ARE NOT CH ARITABLE. IN THIS VIEW OF THE MATTER, WE SET-ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 12 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31-12-2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 31 ST DECEMBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. DR B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE