Tiruchirappalli Multi Purpose Social Service Society, Trichy V. ACIT, Trichy

ITA 1844/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0912 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-01-2013
• Assessment Year: 2012-2013
• Appeal Filed On: 15-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Charitable institution
• Section: 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT ME MBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1844/MDS/2012 TIRUCHIRAPPALLI MULTI PURPOSE SOCIAL SERVICE SOCIETY, 49K, BHARATHIAR SALAI, TRICHY-620 001. PAN: AAATT0330Q VS. ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II, 44, WILLIAMS ROAD, CANTONMENT TRICHY-620 001. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. S.SRIDHAR, ADVOCATE RESPONDENT BY : MR. SHAJI P.JACOB, ADDL.CIT DATE OF HEARING : 28 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 31 ST JANUARY, 2013 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNING THE ORDER OF THE CIT-I, TRICHY DATED 16 TH AUGUST, 2012 PASSED UNDER SECTION 80G(5)(VI) READ WITH RULE 11AA(5) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IS A SOCIETY REGISTERED UNDER SECT ION 12A(A) OF THE INCOME TAX ACT, 1961. EXEMPTION UNDER SECTION 80G OF THE ACT WAS GRANTED TO THE ASSESSEE ON 31.1. 2006 FOR THE PERIOD STARTING FROM 1.4.2005 TO 31.3.2008. THE ASSESSEE ITA NO.1844/MDS/2012 2 HAD APPLIED FOR RENEWAL OF EXEMPTION UNDER SECTION 80G ON 14.2.2012. THE COMMISSIONER OF INCOME TAX SOUGHT R EPORT FROM THE LOWER AUTHORITY TO CONSIDER THE APPLICATIO N OF THE ASSESSEE FOR GRANT OF RELIEF UNDER SECTION 80G. THE CIT., TRICHY AFTER PERUSING THE STATEMENT OF ACCOUNTS ANN EXED ALONG WITH FORM 10G, REJECTED THE APPLICATION FOR G RANT OF RENEWAL OF EXEMPTION UNDER SECTION 80G. AGGRIEVED AGAINST THE ORDER OF THE CIT-I, THE ASSE SSEE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI S.SRIDHAR APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT THE CIT HAS TRAVELLED BEYOND HIS JU RISDICTION UNDER SECTION 80G OF THE ACT. HE CONTENDED THAT RE GISTRATION UNDER SECTION 12AA HAS NOT BEEN WITHDRAWN BY THE DEPARTMENT AND THE ASSESSEE IS CARRYING ON CHARITAB LE ACTIVITIES AS LAID DOWN IN ITS OBJECTS. THE COUNSE L FOR THE ASSESSEE FURTHER SUBMITTED THAT ONCE THE ACTIVITIES /OBJECTS OF THE TRUST ARE HELD TO BE CHARITABLE, IT IS UNFAIR O N THE PART OF THE CIT TO REJECT THE APPLICATION FOR RENEWAL UNDER SECTION 80G. WHILE RENEWING THE EXEMPTION UNDER SECTION 80G , THE CIT CANNOT QUESTION THE OBJECTS OR THE ACTIVITIES BEING CARRIED ITA NO.1844/MDS/2012 3 OUT BY THE ASSESSEE TRUST. THE SCOPE OF SECTION 80G IS LIMITED AND THUS THE CIT CANNOT RE-APPRECIATE THE OBJECTS A GAINST WHICH REGISTRATION HAS BEEN GRANTED TO THE ASSESSEE . IN ORDER TO SUPPORT HIS CONTENTIONS, THE COUNSEL FOR THE ASS ESSEE RELIED ON THE FOLLOWING JUDGEMENTS OF VARIOUS HIGH COURTS: - I) ECUMENICAL CHRISTIAN CENTRE V. COMMISSIONER OF INCOME-TAX REPORTED AS 139 ITR 226 (KAR.) II) ORPAT CHARITABLE TRUST V CIT REPORTED AS [2002 ] 256 ITR 690 (GUJ) III) N.N. DESAI CHARITABLE TRUST VS. CIT REPORTED AS 246 ITR 452 (GUJ) IV) CIT VS. RAJMALA EDUCATIONAL SOCIETY REPORTED AS 65 DTR 307 (P & H) THE COUNSEL CONTENDED THAT MERELY BECAUSE THERE IS SURPLUS OF INCOME WITH THE ASSESSEE TRUST CANNOT BE A GROUN D TO REJECT EXEMPTION UNDER SECTION 80G. THE COUNSEL FU RTHER CONTENDED THAT IN THE PRESENT CASE THE CIT MERELY A FTER PERUSING THE BOOKS OF ACCOUNT OF THE ASSESSEE FORME D THE OPINION THAT THE ASSESSEE IS NOT CARRYING OUT ANY CHARITABLE ACTIVITY WHICH IS FACTUALLY INCORRECT. ITA NO.1844/MDS/2012 4 4. THE COUNSEL FOR THE ASSESSEE MADE AN ALTERNATE P RAYER THAT APART FROM THE MERITS OF THE CASE, THE CIT HAS NOT AFFORDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE INCOME AND EXPENDITURE ACCOUNT PLACED BEFORE HIM. HE CONTENDED THAT A PERUSAL OF RECORDS WOULD SHOW THAT ONLY A SINGLE DAY WAS GRANTED TO THE ASSESSEE TO PUT FORTH HIS CASE AND EXPLAIN THE BOOKS OF ACCOUNT WHICH IS NOT SUFFI CIENT. HE SUBMITTED THAT FAIR OPPORTUNITY HAS NOT BEEN GRANTE D TO THE ASSESSEE TO PUT FORTH HIS CASE. 5. ON THE OTHER HAND, SHRI SHAJI P.JACOB APPEARING ON BEHALF OF THE REVENUE SUBMITTED THAT THE ORDER OF T HE CIT IS A WELL-REASONED AND DETAILED ORDER. THE CIT HAS SPECI FICALLY ASKED ABOUT THE CHARITABLE ACTIVITY BEING CARRIED O UT BY THE ASSESSEE TRUST. THE ASSESSEE NEITHER BEFORE THE CIT NOR BEFORE THE TRIBUNAL HAS BROUGHT ANYTHING ON RECORD TO SHOW THAT CHARITABLE ACTIVITIES ARE BEING CARRIED OUT B Y THE ASSESSEE TRUST. NEITHER THE ASSESSEE HAD CARRIED OU T ANY CHARITABLE ACTIVITY IN THE PAST NOR IT HAS BEEN DOI NG ANY CHARITABLE ACTIVITY NOW. ITA NO.1844/MDS/2012 5 6. THE DR, CONTROVERTING THE SUBMISSIONS MADE BY TH E COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE DECISI ONS REFERRED TO BY THE COUNSEL FOR THE ASSESSEE DO NOT APPLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FIRST TH REE DECISIONS I.E. IN THE CASE OF ECUMENICAL CHRISTIAN CENTRE (SUPRA), ORPAT CHARITABLE TRUST (SUPRA) AND N.N. D ESAI CHARITABLE TRUST (SUPRA) RELATE TO GRANT OF REGISTR ATION UNDER SECTION 12AA WHEREAS THE DECISION IN RAJMALA EDUCATIONAL SOCIETY, RELATES TO SECTION 80G, BUT T HE FACTS AND CIRCUMSTANCES OF THE CASE IN HAND ARE ENTIRELY DIFF ERENT FROM THE ONE ADJUDICATED BY THE HONBLE PUNJAB & HARYANA HIGH COURT. THE DR CONTENDED THAT RATHER THERE ARE JUDG EMENTS OF THE HONBLE DELHI HIGH COURT REPORTED AS KIRTI CHAN D TARAWATI CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (EXEMP TIONS) REPORTED AS 232 ITR 11 AND THE JUDGEMENT OF THE HON BLE PATNA HIGH COURT IN THE CASE OF MADANI MUSAFIR KHA NA WELFARE SOCIETY VS. CIT REPORTED AS 264 ITR 481 TO SUPPORT THE CASE OF THE REVENUE. HE FURTHER SUBMITTED THAT ON THE RECEIPT OF DONATIONS, THE ASSESSEE ISSUES CERTIFICA TES TO THE CONTRIBUTORS TO CLAIM BENEFIT UNDER THE PROVISIONS OF SECTION ITA NO.1844/MDS/2012 6 80G. THIS BENEFIT IS BEING MIS-UTILIZED BY THE UNDE SERVING PEOPLE. HE STRONGLY SUPPORTED THE ORDER OF THE CIT. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDER OF THE CIT AND JUDGEMENTS/ORDERS REFERRED TO BY BOTH THE SIDES. A PERUSAL OF THE ORDER OF THE CIT-I SHOWS THAT A REPORT OF T HE LOWER AUTHORITY HAS BEEN OBTAINED BEFORE PASSING OF THE S AID ORDER. THE RELEVANT EXTRACT OF THE ORDER OF THE CIT IS REP RODUCED HEREIN BELOW:- .. 2.1 PERUSAL OF THE STATEMENT OF ACCOUNTS FI LED ALONG WITH THE APPLICATION IN FORM NO.10G REVEALS THE FOL LOWING: THE TRUST RUNS WORKING WOMENS HOSTEL, MORNING STAR ITI, M.R.SCHOOL, HOME P U RELY C O MME R C IAL B ASIS. IT IS SEE N FROM THE INCOM E AND EXPENDITURE STATEMENT FOR THE Y EA RS ENDING 31 . 3. 2009, 3 1 . 0 3 . 2010 & 31 . 03 .2 0 1 1 THAT UN DER T HE INCOME HE AD , ITEMS LI K E INTE R E S T , CO NTR IB U TIONS, EMPOWERMENT CENTRE COL LECT I O N, M O RNING S T AR ! T I FEE S C O L L ECTIO N, R E NT, SONTHA M - BIN D I NG C O LLEC T ION , WOMEN H OSTEL C O LLECTION , WORK I N G WOMEN ' S H O STE L, M . R.S CH OO L RECE I PT S, R ECEI PT S F ROM M AHA LI R MEMBAT TU IYA KKAM , CH A HA RECOVE RY, SONTA M - PR O F I T , G RANTS FROM G OVT. & OT H E R F O RU M S , ETC . APA R T FROM FO RE I GN FU ND R EC E IPTS HAVE BEEN SHOW N. ON THE EXPENDITU RE SI DE, I TEM S A PP E ARI NG M AIN LY RE L ATE T O RU NNING O F SC H OOL. ALL THESE I T EM S A R E W H OLL Y AND EX CL USIVELY RE L ATABLE T O THE RUNN I NG OF T H E H OSTEL , ITI, S CHOO L , CE N TRE, ET C. ALT HO UG H I T I S SHOW N T HAT TH E R E I S EX C E S S O F EXPENDI TU R E OVE R I NCO M E , FOR THE Y E ARS END IN G 3 1 . 0 3 . 2 0 09 & 3 1 . 03 . 2010 , TH ERE I S A SURPLUS O F INC O ME O V E R EXPENDITURE E A R N ED TO THE TUNE OF RS . 3 4,0 1 ,4 4 5/- G R O S S RECEI P TS O F T HE SOCIET Y FOR THESE YEARS WERE ` 3 ,6 5 , 99,748/- ` 3,01,39,572/- & ` 3,66,37,960/- WHIC H IN CLUDES FOREIGN ITA NO.1844/MDS/2012 7 F UN D R ECEIPT S WER E ` 1,17,12,402/- , ` 77,97,907 & ` 1, 4 4, 29,813 R ESPECTIVELY. 2.2 XXXXXXXXXX 2.3 XXXXXXXXXX 2.4 XXXXXXXXXX 2.5 THE INCOME OF A PUBLIC CHARITABLE TRUST COMPRI SES OF INCOME OUT OF PROPERTY HELD BY THE TRUST. SUCH INCOME MAY INCLUDE (I) VOLUNTARY DONATIONS FROM THE PUBLIC SECTION 12(1) , (II) PROFIT OF ANY COMMERCIAL ACTIVITY WHICH IS INCIDENTAL TO THE OBJECT OF THE TRUST SECTION 11(4) (4A) & (III) CAPITAL GAINS, I F ANY, ON SALE OF PROPERTY HELD BY THE TRUST SECTION 11(1A) OF THE INCOME TAX ACT. HENCE, THE ACTIVITIES ACTUALLY CARRIED OUT BY THIS TRUST IS ONLY GENERATING SURPLUS OUT OF RUNNING A SCHOOL, HOSTEL ETC. FOR BEING UTILIZED TOWARDS CHARITY WHICH HAS NOT BEEN DONE AT ALL IN ANY OF THE TWO FINANCIAL YEARS. THIS INFERENCE IS EVIDENT FROM THE FACT THAT NO EXPENDITURE TOWARDS ANY CHARITABLE ACTIVITY AS P ER THE TRUST DEED HAS BEEN DEBITED TO THE P & L ACCOUNT OR I/E A CCOUNT. THEREFORE, THE BASIC QUESTION I.E WHERE IS CHARITY ? HAS REMAINED UNANSWERED IN THE THREE FINANCIAL YEARS. IN ABSENCE OF ANY CHARITABLE ACTIVITY, THE INCOME OF THE TRUST WILL N OT BE EXEMPT U/S.11(1)(A) OF THE I.T. ACT WHICH PRESUPPOSES THA T AT LEAST 85% OF THE INCOME OF THE TRUST SHOULD BE APPLIED FOR CH ARITABLE PURPOSES IN INDIA DURING THE RELEVANT PREVIOUS YEAR . THIS STATUTORY CONDITION HAS, THEREFORE, NOT BEEN MET FOR ANY OF T HESE THREE FINANCIAL YEARS. 8. THE CIT IN HIS ORDER HAS CATEGORICALLY STATED THAT THE ASSESSEE TRUST RUNS WORKING WOMENS HOSTEL, M.R. SC HOOL, HOME FOR DISABLED PERSONS, EMPOWERMENT CENTRE ETC. ON PURELY COMMERCIAL BASIS. THE ASSESSEE HAS SHOWN IN ITS BOOKS OF ACCOUNT PROFIT GRANTS FROM GOVERNMENT AND OTHER FORUMS. THE MAIN EXPENDITURE HAS BEEN INCURRED ONLY WITH REGARD TO RUNNING OF THE SCHOOL. AS PER THE INCOME AND ITA NO.1844/MDS/2012 8 EXPENDITURE STATEMENT AS ON 31.3.2009, 31.03.2010 A ND 31.03.2011 THERE IS SURPLUS OF INCOME OVER EXPENDI TURE TO THE TUNE OF ` 34,01,445/-. THE GROSS RECEIPTS OF THE ASSESSEE SOCIETY FOR THE THREE YEARS WERE ` 3,65,99,748/-, ` 3,01,39,572/- AND ` 3,66,37,960/- RESPECTIVELY WHICH INCLUDE FOREIGN FUND RECEIPTS. 9. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEN DED THAT THE AMOUNT RECEIVED FROM FOREIGN CONTRIBUTION, CENTRAL AND STATE GOVERNMENT, BOARDS ETC. IS BEING USED FOR RELIEF TO POOR IRRESPECTIVE OF CAST, RELIGION, SEX AND IN VA RIOUS REHABILITATIONS, PROSTHETIC & HEALTH CENTRES ETC. HOWEVER, THE CONTENTIONS MADE ON BEHALF OF THE ASSESSEE ARE NOT SUBSTANTIATED BY ANY DOCUMENTARY EVIDENCE. EVEN BE FORE THE TRIBUNAL THE ASSESSEE HAS NOT BEEN ABLE TO PLACE AN Y DOCUMENT ON RECORD TO SHOW THAT THE ASSESSEE IS AC TUALLY UTILIZING THE FUNDS TOWARDS CHARITABLE ACTIVITIES. IN THE ABSENCE OF ANY COGENT EVIDENCE TO SUBSTANTIATE THE CLAIM, ADVERSE INFERENCE HAS TO BE DRAWN AGAINST THE ASSES SEE. DURING THE COURSE OF CARRYING ON CHARITABLE ACTIVIT IES, THE CHARITABLE INSTITUTION MAY EARN SOME INCOME BUT THE INCOME ITA NO.1844/MDS/2012 9 SO EARNED HAS TO BE UTILIZED FOR CHARITABLE PURPOSE S ONLY. IT HAS TO BE BORNE IN MIND THAT IN THE GARB OF CHARITA BLE ACTIVITIES THE ORGANIZATION SHOULD NOT BE ALLOWED TO CARRY OU T COMMERCIAL ACTIVITY AND TAKE ADVANTAGE OF THE BENE FITS ATTACHED WITH THE WORD CHARITABLE UNDER VARIOUS PROVISIONS OF LAW. 10. THE CIT HAS PASSED A WELL REASONED ORDER ON TH E BASIS OF THE REPORT. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. WE THEREFORE, UPHOLD THE ORDER OF THE CIT AND DISMISS THE APPEAL OF THE ASSESSEE BEING DEVOID OF MERIT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY TH E 31 ST DAY OF JANUARY, 2013 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 31 ST JANUARY, 2013 SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.