Telangana Corrugators Development Trust, Hyderabad, Hyderabad V. CIT (Exemptions), Hyderabad, Hyderabad

ITA 1733/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2473 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SRINIVAS REDDY
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.1733/HYD/2016 (ASSESSMENT YEAR: NA ) TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD PAN: AACTT 7481 L VS COMMISSIONER OF INCOME TAX (EXEMPTIONS) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD FOR REVENUE : DR. K.SRINIVAS REDDY, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE C.I.T (EXEMPTIONS) REJECTING ASSESSEES APPLICATION FOR R EGISTRATION U/S 12AA OF THE ACT, VIDE ORDERS DATED 30.09.2016. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WA S EARLIER KNOWN AS ANDHRA PRADESH CORRUGATED BOX MANUFACTURI NG ASSOCIATION. AFTER THE BIFURCATION OF THE STATE OF TELANGANA FROM ANDHRA PRADESH IN 2014, THE ASSESSEE SOCIETY WAS FO RMED AND IT FILED APPLICATION IN FORM NO.10A AND IN FORM NO.10G ON 30.03.2016 SEEKING REGISTRATION U/S 12AA OF THE ACT AND APPROVAL U/S 80G OF THE ACT RESPECTIVELY. THE ASSESSEE WAS A SKED TO PRODUCE ITS ORIGINAL TRUST DEED FOR VERIFICATION AN D ON PRODUCTION DATE OF HEARING: 21.02 . 201 8 DATE OF PRONOUNCEMENT: 28.02.2018 ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 2 OF 7 OF THE SAME, THE CIT (E) WENT INTO THE FOLLOWING OB JECTIVE CLAUSES OF THE ASSESSEE AND OBSERVED THAT THEY ARE FOR THE MUTUAL BENEFIT OF CORRUGATED BOX MANUFACTURERS ASSOCIATION MEMBERS . 2. I HAVE GONE THROUGH THE INFORMATION FILED BY TH E SOCIETY. SOME OF THE OBJECTIVE CLAUSES ARE MENTIONED AS UNDE R: (A) TO ESTABLISH OR TO ASSIST IN ESTABLISHMENT OF ANY MANUFACTURING FACILITY THAT IS LIKELY TO BENEFIT TH E CORRUGATED BOX MANUFACTURING ASSOCIATIONS MEMBERS ESPECIALLY THE MICRO AND SMALL MANUFACTURING UNITS OWNERS AND THEIR WORK FORCE. (B) TO INVITE EQUIPMENT MANUFACTURERS; RESEARCH AND DEVELOPMENT AGENCIES OR SIMILAR OTHER AGENCIES CONN ECTED WITH MANUFACTURING AND LOGISTICS OF CORRUGATED BOXE S AND ALLIED PRODUCTS OR SERVICES FOR ARRANGING DEMONSTRA TIONS ON A COMMON PRODUCTIONS FACILITY BELONGING TO TRUST AND TO COLLECT AND DISSEMINATE TECHNICAL, STATISTICAL A ND OTHER USEFUL INFORMATION AND KNOWLEDGE AMONG THE MEMBERS OF THE ASSOCIATION AND ASSIST THE MEMBERS BY SUCH MEAN S LIKE, PROVIDING LIBRARY OR SUBSCRIBING TO OR PUBLIC ATION OF TECHNICAL OR TRADE, JOURNALS, BOOKS, PERIODICALS, PHAMPHLETS AND SUCH OTHER LITERATURES AS MAY BE FOU ND NECESSARY. (C) TO UNDERTAKE AND/OR ASSIST IN THE RESEARCH WORK FOR THE GENERAL DEVELOPMENT AND PROGRESS OF THE CORRUGATED BOX MANUFACTURERS AND ASSIST IN THE ACTIVITIES OF INVEN TIONS OF NEW EQUIPMENT, TOOLS, TECHNIQUES AND DESIGNS USEFUL TO THE CORRUGATED BOX MANUFACTURERS. 2.1 THE ABOVE OBJECTIVE CLAUSES ARE CLEARLY MUTUAL IN NATURE. THE OBJECTIVE CLAUSES OF THE TRUST ARE FOR THE MUTUAL BENEFIT OF CORRUGATED BOX MANUFACTURING PERS ONS. THE MEMBERS OF THE ASSOCIATION ARE FROM THIS TRADE. THERE IS NO ADVANCEMENT OF OTHER OBJECT OF GENERAL PUBLIC UTILITY AS REQUIRED U/S 2(15) OF THE ACT IN THE CASE OF THE APPLICANT. HENCE, IT CANNOT BE REGARDED AS A PUBLIC CHARITABLE TRUST THEREFORE, HE CAME TO THE CONCLUSION THAT THERE IS NO ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY BY THE ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 3 OF 7 ASSESSEE AS REQUIRED U/S 2(15) OF THE ACT. THEREFOR E, HE HELD THAT THE ASSESSEE CANNOT BE CONSIDERED AS A PUBLIC CHARI TABLE TRUST AND REJECTED THE APPLICATION FOR REGISTRATION U/S 1 2AA AS WELL AS U/S 80G OF THE ACT. AGGRIEVED, THE ASSESSEE IS IN F URTHER APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI K.A. SAI PRASAD, HAS FILED BEFORE US THE COPY OF THE REGISTR ATION GRANTED TO THE ANDHRA PRADESH CORRUGATED BOX MANUFACTURING ASS OCIATION VIDE ORDERS DATED 18.08.2008. HE SUBMITTED THAT THE ASSESSEE IS ONLY FORMED OUT OF THE SAID ORGANIZATION ON BIFURCA TION OF THE STATE AND SINCE THE ASSESSEE IS ALSO CARRYING ON TH E VERY SAME ACTIVITY, IT SHOULD NOT HAVE BEEN DENIED REGISTRATI ON U/S 12AA OF THE ACT. AS REGARDS THE ACTIVITY OF THE ASSESSEE, T HE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE D ECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL AT CHENNAI IN THE CASE OF M/S. TAMIL NADU SMALL & MEDIUM INDUSTRIES MUTUAL ASSOCIA TION IN ITA NO.1950/MDS/2011 AND ALSO THE DECISION OF THE HON'B LE RAJASTHAN HIGH COURT IN THE CASE OF JODHPUR CHARTER ED ACCOUNTANTS SOCIETY REPORTED IN 127 TAXMANN 90 (RAJ .) 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ANDHRA PRADESH CORRUGAT ED BOX MANUFACTURERS ASSOCIATION FROM WHICH THE ASSESSEE H AS BEEN CARVED OUT, HAS SIMILAR OBJECTIVES AND HAS ALREADY BEEN GRANTED REGISTRATION U/S 12AA OF THE ACT VIDE ORDER DATED 1 8.08.2008 ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 4 OF 7 WHICH HAS SINCE BEEN NOT RESCINDED. THE ASSESSEE HA S BEEN FORMED ON THE BIFURCATION OF THE STATE OF TELANGANA AND IS HAVING THE SAME OBJECTIVES AND THEREFORE, IT IS ALSO ENTIT LED FOR REGISTRATION U/S 12AA OF THE ACT ON THIS GROUND ALO NE. EVEN OTHERWISE, THE OBJECTIVES OF THE ASSESSEE ARE FOR T HE BENEFIT OF A PARTICULAR TRADE. WHETHER RESTRICTING THE BENEFIT T O THE MEMBERS OF A PARTICULAR TRADE DISENTITLES IT FROM REGISTRATION U/S 12AA OF THE ACT?. THIS ISSUE HAS FIRST BEEN EXAMINED IN DETAIL BY THE CONSTITUTION BENCH OF THE HON'BLE SUPREME COURT IN THE CASE OF SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUP RA). THE HON'BLE SUPREME COURT HELD THAT WHERE THE DOMINANT AND PRIMARY OBJECT OF THE ASSESSEE IS TO PROMOTE COMMER CE AND TRADE IN ART SILK YARN ETC., IT IS CHARITABLE AND THE OTH ER BENEFITS WHICH ARE INCIDENTAL IN CARRYING OUT THE MAIN OR PRIMARY PURPOSE OF THE ASSESSEE, WOULD NOT MAKE IT NOT CHARITABLE. THIS FI NDING WAS REITERATED BY THE APEX COURT IN THE CASE OF CIT VS. ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722) BY HOLDING T HAT THE CHAMBER OF COMMERCE DID NOT CEASE TO BE CHARITABLE MERELY BECAUSE THE MEMBERS OF THE CHAMBER WERE INCIDENTALL Y BENEFITTED IN CARRYING OUT ITS MAIN CHARITABLE PURPOSE. 6. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (E) VS. BHARAT DIAMOND BOURSE, REPORTED IN 245 ITR 437 ALSO APPLIED THE DOMINANT PURPOSE TEST TO HOLD IT TO BE A CHARIT ABLE INSTITUTION AND THE SAID DECISION WAS UPHELD BY THE HON'BLE SUP REME COURT AS REPORTED IN 295 ITR 280 (S.C). 7. IN THE CASE OF JODHPUR CHARTERED ACCOUNTS SOCIET Y CASE (SUPRA), THE HON'BLE RAJASTHAN HIGH COURT HELD THAT TO SERVE A CHARITABLE PURPOSE, IT IS NOT NECESSARY THAT THE OBJECTS SHOULD ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 5 OF 7 BE TO BENEFIT THE WHOLE OF MANKIND OR ALL PERSONS I N A COUNTRY OR STATE, AND EVEN IF A SECTION OF PUBLIC IS GIVEN BEN EFIT, IT CANNOT BE SAID THAT IT IS NOT A TRUST FOR CHARITABLE PURPOSE IN THE INTEREST OF THE PUBLIC. FOR COMING TO THIS CONCLUSION, THE HON' BLE RAJASTHAN HIGH COURT HAS FOLLOWED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF AHMEDABAD RANA CASTE ASSOCIATI ON REPORTED IN (1971) 182 ITR 704. ITAT AT CHENNAI ALSO FOLLOWE D THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF ADDL. C IT V. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (121 ITR 01) A ND THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIT (EXEMP TIONS) VS. BHARAT DIAMOND BOURSE (245 ITR 437) WHERE A TRADE A SSOCIATION ESTABLISHED FOR SERVING THE COMMON INTEREST OF A PA RTICULAR TRADE, WAS HELD BY THE COURT THAT THE OBJECTS OF THE ASSOC IATION WERE CHARITABLE IN NATURE AND ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. 8. WE FIND THAT FOLLOWING THE ABOVE DECISIONS, THE COORDINATE BENCH OF ITAT AT CHENNAI HAS ALREADY DIR ECTED THE DIRECTOR OF INCOME TAX (EXEMPTION) TO GRANT REGISTR ATION TO THE TAMIL NADU SMALL & MEDIUM INDUSTRIES MUTUAL ASSOCIA TION (SUPRA). EVEN IN THE CASE OF AHMEDABAD RANA CASTE A SSOCIATION VS. CIT (CITED SUPRA), THE HON'BLE SUPREME COURT HA S HELD THAT THE OBJECTS OF SUCH AN INSTITUTION ARE CHARITABLE I N NATURE. THE RELEVANT PARA IS REPRODUCED HEREUNDER: IT IS WELL-SETTLED BY NOW THAT AN OBJECT BENEFICIAL TO A SECTION OF THE PUBLIC IS AN OBJECT OF GENERAL PUBLI C UTILITY. TO SERVE A CHARITABLE PURPOSE IT IS NOT NECESSARY T HAT THE OBJECT SHOULD BE TO BENEFIT THE WHOLE OF MANKIND OR ALL PERSONS IN A PARTICULAR COUNTRY OR STATE. IT IS SUF FICIENT IF THE INTENTION TO BENEFIT A SECTION OF THE PUBLIC AS DIS TINGUISHED FROM A SPECIAL INDIVIDUAL IS PRESENT. IN THE INSTANT CASE, WHAT HAD TO BE SEEN WAS WHETHE R THE MEMBERS OF THE RANA CASTE WHO WERE NOT NATIVES ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 6 OF 7 OF AHMEDABAD BUT WHO CAME TO RESIDE THERE AND WERE ACCEPTED AS MEMBERS OF THAT CASTE ACCORDING TO ITS USAGE AND CUSTOM COULD BE SAID TO HAVE A RELATIONSHIP WHI CH WAS AN IMPERSONAL ONE DEPENDENT ON THEIR CONDITION AS MEMBERS OF THE RANA COMMUNITY. SUCH MEMBERS OF THE RANA CASTE COULD NOT BE REGARDED AS HAVING BEEN INTRODUCED INTO THAT CASTE BY CONSIDERATION OF THEI R PERSONAL STATUS AS INDIVIDUALS. AS A MATTER OF FACT THAT PRE DOMINANT CONTENTION AND REQUIREMENT OF THE CLAUSE DEFINING 'BENEFICIARIES' IN THE CONSTITUTION OF THE ASSESSEE WAS THE FACTUM OF THEIR BELONGING TO THE RANA COMMUNITY OF AHMEDABAD. THE COMMON QUALITY, THEREFORE, UNITIN G THE POTENTIAL BENEFICIARIES INTO THE CLASS CONSISTED OF BEING MEMBERS OF THE RANA CASTE OR COMMUNITY OF AHMEDABAD WHETHER AS NATIVES OR AS BEING ADMITTE D TO THAT CASTE OR COMMUNITY UNDER CUSTOM OR USAGE. THE MERE FACT THAT A PERSON OF THE RANA COMMUNITY WHO WAS NO T AN ORIGINAL NATIVE OF AHMEDABAD HAD TO PROVE HIS CREDE NTIALS ACCORDING TO THE CUSTOMS AND USAGE OF THAT COMMUNIT Y TO GET ADMITTED INTO THAT COMMUNITY COULD NOT INTRODUC E A PERSONAL ELEMENT. AS REGARDS THE ACCEPTANCE OF SUCH PERSONS AS MEMBERS OF THE COMMUNITY OR CASTE, ACCOR DING TO CUSTOM AND USAGE, IT IS WELL-KNOWN THAT WHETHER A QUESTION ARISES WHETHER A PERSON BELONGS TO A PARTI CULAR COMMUNITY OR CASTE, THE CUSTOMS OR USAGE PREVAILING IN THAT COMMUNITY MUST PLAY A DECISIVE AND VITAL PART. THAT CANNOT BE REGARDED AS AN ELEMENT WHICH WOULD DETRACT FROM THE IMPERSONAL NATURE OF THE COMMON QUALITY. THE APPEALS WERE ACCORDINGLY ALLOWED. THEREFORE, WE DIRECT THE CIT (EXEMPTIONS) TO GRANT REGISTRATION U/S 12AA OF THE ACT. 9. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 28 TH FEBRUARY 2018. VINODAN/SPS ITA NO 1733 OF 2016 TELANGANA CORRUGATORS DEVELOPMENT TRUST HYDERABAD. PAGE 7 OF 7 COPY TO: 1 C/O CH. PARTHASARATHY & CO. CA 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO.1, ASHOKNAGAR, HYDERABAD 5 00020 2 C.I.T. (EXEMPTIONS), 2 ND FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500004 3 IT.O (EXEMPTIONS) WARD - 3 HYDERABAD 4 THE DR, ITAT HYDERABAD 5 GUARD FILE BY ORDER