Believers Church medical and Educational Trust, Pathanamthitta V. CIT, Kottayam

ITA 172/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61541 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: VENKATACHALAM
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

1 ITA NO. 172/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 172/COCH/2011 BELIEVERS CHURCH MEDICAL & EDUCATIONAL TRUST VS C.I .T., KOTTAYAM MANJADI P.O. THRIUVALLA PATHANAMTHITTA DIST. PAN : AABTB3567G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.S. VENKATACHALAM RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 18-06-2012 DATE OF PRONOUNCEMENT : 22-06-2012 O R D E R PER N.R.S. GANESAN (JM) THE ASSESSEE FILED THE PRESENT APPEAL AGAINST THE ORDER OF THE ADMINISTRATIVE COMMISSIONER DATED 25-01-2011 WITHDRAWING THE REGIS TRATION GRANTED U/S 12AA AS A CHARITABLE INSTITUTION. 2. SHRI M.S. VENKATACHALAM, THE LD.REPRESENTATIVE F OR THE ASSESSEE SUBMITTED THAT THE ASSESSEE APPLIED FOR APPROVAL U/S 80G OF THE IN COME-TAX ACT SINCE REGISTRATION U/S 12AA WAS GRANTED BY AN ORDER DATED 24-02-2010. IN THE COURSE OF THE PROCEEDINGS FOR GRANT OF APPROVAL U/S 80G, THE ADMINISTRATIVE COMMI SSIONER CANCELLED THE REGISTRATION GRANTED U/S 12AA OF THE ACT ON THE GROUND THAT THE BUILDING IN WHICH THE ASSESSEE IS RUNNING THE HOSPITAL BELONGS TO THE PARENT TRUST, V IZ. BELIEVERS CHURCH. ACCORDING TO THE LD.REPRESENTATIVE, ADMITTEDLY, THE ASSESSEE IS RUNN ING HOSPITAL IN THE LAND OWNED BY 2 ITA NO. 172/COCH/2011 BELIEVERS CHURCH. THE BUILDING WAS CONSTRUCTED BY THE ASSESSEE. THEREFORE, IT IS NOT CORRECT TO SAY THAT THE INCOME WAS NOT DERIVED FROM THE PROPERTY HELD UNDER TRUST. 3. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SU BMITTED THAT THE LAND WAS OWNED BY THE PARENT TRUST VIZ. BELIEVERS CHURCH. B ELIEVERS CHURCH TRUST WAS ALSO GRANTED REGISTRATION U/S 12AA OF THE ACT. THE LAND CONTINU ED TO BELONG TO BELIEVERS CHURCH AND THE ASSESSEE WAS ONLY RUNNING THE EDUCATIONAL INSTI TUTION / HOSPITAL IN THE BUILDING OWNED BY BELIEVERS CHURCH. THEREFORE, ACCORDING TO THE LD.DR, THE PROPERTY IN WHICH THE ASSESSEE WAS RUNNING EDUCATIONAL INSTITUTION / HOSP ITAL DOES NOT BELONG TO THE ASSESSEE AND AS SUCH, THE ASSESSEE DID NOT HOLD ANY PROPERTY UNDER TRUST. SINCE THE ASSESSEE HAS NOT HELD ANY PROPERTY THE ADMINISTRATIVE COMMISSION ER CAME TO THE CONCLUSION THAT THE TRUST WAS NOT GENUINE. THEREFORE, THE WITHDRAWAL G RANTED U/S 12AA WAS WITHDRAWN. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ADMINISTRATIVE COMMISSIONER ACCORDED HIS APPROVAL FOR REGISTRATION BY AN ORDER DATED 24-02-2010. ONCE THE REGISTRATION WAS GRANTED U/S 12AA, THE COMMISSIONER MAY CANCEL THE REGISTRATION BY VIRTUE OF POWERS CONFERRED IN HIM U/S 12AA(3) OF TH E ACT. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 12AA(3) OF THE AC T, WHICH READS AS FOLLOWS: (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTL Y THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INST ITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OB JECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONABLE OP PORTUNITY OF BEING HEARD. 3 ITA NO. 172/COCH/2011 SUBSEQUENT TO THE GRANT OF REGISTRATION U/S 12AA, I F THE COMMISSIONER IS SATISFIED THAT THE ACTIVITY OF THE TRUST IS NOT GENUINE OR THE ACT IVITIES ARE NOT BEING CARRIED ON IN ACCORDANCE WITH THE OBJECT OF THE TRUST, HE MAY PAS S AN ORDER CANCELLING THE REGISTRATION GRANTED U/S 12AA OF THE ACT. IN THIS CASE, THE ADM INISTRATIVE COMMISSIONER CANCELLED THE REGISTRATION ON THE GROUND THAT THE TRUST IS NO T GENUINE. THE REASON FOR COMING TO THE CONCLUSION THAT THE TRUST IS NOT GENUINE IS THE PROPERTY WAS CONTINUED TO BE OWNED BY THE PARENT TRUST, VIZ. BELIEVERS CHURCH AND THE ASSESSEE WAS RUNNING THE HOSPITAL IN THE LAND OWNED BY THE BELIEVERS CHURCH TRUST. THER EFORE, THE PROPERTY WAS NOT HELD BY THE ASSESSEE IN TRUST. WE ARE UNABLE TO UPHOLD THE REASONING OF THE ADMINISTRATIVE COMMISSIONER. NO DOUBT, FOR THE PURPOSE OF EXEMPTI ON U/S 11 OF THE INCOME-TAX ACT, THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRU ST WOULD BE EXEMPT TO THE EXTENT TO WHICH THE INCOME IS APPLIED FOR THE CHARITABLE P URPOSE IN INDIA AND SUCH INCOME WHICH IS ACCUMULATED OR SET APART FOR APPLICATION F OR THE CHARITABLE PURPOSE IN INDIA. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE A SSESSEE IS RUNNING THE HOSPITAL IN THE LAND OWNED BY THE PARENT TRUST, VIZ. BELIEVERS CHUR CH TRUST WHETHER IT WOULD BE A GROUND TO COME TO A CONCLUSION THAT THE TRUST WAS NOT GENU INE. THE INCOME-TAX ACT DOES NOT SAY ANYWHERE THAT THE CHARITABLE INSTITUTION SHOULD OWN THE LANDED PROPERTY ON ITS OWN. WHAT IS REQUIRED IS THE INCOME IS DERIVED FROM PROP ERTY HELD UNDER TRUST. IN THIS CASE, A HOSPITAL IS HELD UNDER TRUST BY THE ASSESSEE. OF C OURSE, THE HOSPITAL WAS HOUSED AND RUN FROM THE LAND BELONGING TO THE PARENT TRUST, VIZ. B ELIEVERS CHURCH TRUST. BUT THE HOSPITAL RUN BY THE ASSESSEE TRUST IS A PROPERTY HELD UNDER TRUST. THEREFORE, THE INCOME DERIVED FROM THE HOSPITAL RUN BY THE ASSESSEE IS THE INCOME DERIVED FROM THE PROPERTY HELD UNDER TRUST. IN THOSE CIRCUMSTANCES, WE CANNOT SAY THAT THE ASSESSEE DID NOT HOLD ANY PROPERTY UNDER TRUST. ANY INCOME ACCRUED IN THE CO URSE OF CHARITABLE ACTIVITY IN THE NORMAL COURSE WOULD ALSO BE INCOME WHICH IS ELIGIBL E FOR EXEMPTION SUBJECT TO APPLICATION OF THE SAME FOR CHARITABLE PURPOSE. TH EREFORE, THE ADMINISTRATIVE COMMISSIONER IS NOT JUSTIFIED IN SAYING THAT THE IN STITUTION IS NOT GENUINE. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE HAS NOT CARRI ED OUT CHARITABLE ACTIVITY IN ACCORDANCE WITH THE OBJECT OF THE TRUST. IN THESE CIRCUMSTANCES, CANCELLING THE 4 ITA NO. 172/COCH/2011 REGISTRATION GRANTED U/S 12AA IS NOT JUSTIFIED. AC CORDINGLY, THE IMPUGNED ORDER OF THE ADMINISTRATIVE COMMISSIONER IS SET ASIDE AND THE RE GISTRATION GRANTED UNDER SECTION 12AA BY AN ORDER DATED 24-02-2010 SHALL STAND RESTO RED.. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND JUNE, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 22 ND JUNE, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH