M/s. Social Pedia Knowledge Foundation, CHENNAI V. DIT, CHENNAI

ITA 1910/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0963 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-01-2013
• Assessment Year: misc
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Charitable institution
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1910/MDS/2012 M/S. SOCIAL PEDIA KNOWLEDGE FOUNDATION, M/S.DR. ANITA SUMANTH, ADVOCATES, 51, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. PAN: AAQCS8964E VS. DIRECTOR OF INCOME TAX (EXEMPTIONS) AAYAKAR BHAVAN ANNEXE 3 RD FLOOR 121 M.G.ROAD, NUNGAMBAKKAM, CHENNAI-600 034. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.ANITA SUMANTH, ADVOCA TE RESPONDENT BY : MR. ANIRUDH RAI, CIT DR DATE OF HEARING : 9 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 24 TH JANUARY, 2013 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE ASSESSEE IMPUGNIN G THE ORDER OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS ) DATED 31.8.2012 REJECTING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX A CT (HEREINAFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE IS A COMPANY REGISTERED UNDER SECTI ON 25 OF THE COMPANIES ACT, 1956. THE ASSESSEE COMPANY WA S INCORPORATED ON 17.1.2012 WITH THE FOLLOWING MAIN O BJECTS:- ITA NO.1910/MDS/2012 2 1. TO HELP, EDUCATE, NETWORK, FACILITATE SOCIAL AN D ECONOMIC EMPOWERMENT, ECONOMIC DEVELOPMENT PROGRAMS, LITERACY PROGRAMS, WORKSHOPS, TRAINING PROGRAMS FOR VILLAGERS AND DOWNTRODDEN PEOPLE ENCOURAGE AND HELP TO GAIN EMPLOYMENT FOR CHILDREN AND THEIR PARENTS OR ELDERLY. 2. TO EDUCATE, TEACH, INSTRUCT, COACH, INFORM, TRAIN VILLAGERS AND DOWNTRODDEN PEOPLE THROUGH FORMAL AND INFORMAL MEANS FOR THEIR WELFARE AND PROTECTION IN RESPECT OF THEIR FOOD, CLOTHING, SAFE DRINKING WATER, SANITATION FACILITIES. 3. TO HELP VOLUNTARY AGENCIES AND OTHER BODIES TO REACH THE POOR AND NEEDY AND TO ENLARGE THEIR VISION OF SERVICE AND STRENGTHEN THEM IN THEIR MISSION TO THE NEEDY. 4. TO PROVIDE EDUCATION TO VILLAGERS AND DOWNTRODDEN PEOPLE FROM LESS PRIVILEGED BACKGROUND, TO PURSUE EDUCATION, VOCATIONAL TRAINING, TO TRAIN TEACHERS TO WORK IN NON-FORMAL EDUCATION AND VOCATIONAL CENTERS TO PROVIDE FOR THE ALL-ROUND DEVELOPMENT OF A CHILD WITH SPORTS, MEDICAL CAMPS, ART CAMPS. 5. TO IMPART TRAINING SUITABLE TO VILLAGERS AND DOWNTRODDEN PEOPLE AND TO FACILITATE DISTRIBUTION AND SALE OF PRODUCE OF SUCH TRAINING AND PRODUCE OF ACTIVITIES RELATED TO AGRICULTURAL OR NON- AGRICULTURAL, HORTICULTURE, POULTRY, ANIMAL-HUSBAND RY, MILK, MILK BASED AND ORGANIC PRODUCTS WITH OR WITHOUT HELP OF MODERN TECHNOLOGIES LIKE DEDICATED WEB PORTALS, INTERNET TECHNOLOGIES AND OTHER APPLICATIONS AND TOOLS. ITA NO.1910/MDS/2012 3 ON 8.2.2012, THE ASSESSEE MADE AN APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. THE ASS ESSEE WAS ASKED TO FURNISH CERTAIN INFORMATION AND CLARIFICAT IONS, WHICH THE ASSESSEE ALLEGEDLY SUBMITTED. 3. DR. ANITA SUMANTH APPEARING ON BEHALF OF THE ASS ESSEE CONTENDED THAT APPLICATION FOR REGISTRATION WAS MAD E IMMEDIATELY AFTER INCORPORATION OF THE ASSESSEE COM PANY. DIRECTOR OF INCOME TAX (EXEMPTIONS) HAS DISMISSED T HE APPLICATION MERELY ON ASSUMPTION THAT COMMERCIAL HA RNESSING OF SUCH PORTAL CANNOT BE RULED OUT. THE COUNSEL FOR THE ASSESSEE CONTENDED THAT A PERUSAL OF THE OBJECTS OF THE ASSESSEE COMPANY WOULD CLEARLY SHOW THAT THE SAME H AS BEEN INCORPORATED WITH THE OBJECT TO HELP, EDUCATE, FACILITATE SOCIAL AND ECONOMIC EMPOWERMENT, LITERACY PROGRAMS, WORKSHOPS, TRAINING PROGRAMME FOR VILLAGERS AND DOW NTRODDEN PEOPLE AND TO GAIN THEM EMPLOYMENT. THE OBJECT OF T HE ASSESSEE IS TO TEACH, INSTRUCT AND COACH PEOPLE IN GENERAL AND TRAIN VILLAGERS AND DOWNTRODDEN PEOPLE THROUGH FORMAL AND INFORMAL MEANS FOR THEIR WELFARE AND PROTECTION IN RESPECT OF THEIR FOOD, CLOTHING, SAFE DRINKING WATER, SANIT ATION FACILITIES ITA NO.1910/MDS/2012 4 ETC. THE COUNSEL CONTENDED THAT THE DIRECTOR OF INC OME TAX (EXEMPTIONS) OUGHT TO HAVE GRANTED REGISTRATION UND ER SECTION 12AA OF THE ACT IN THE FIRST INSTANCE AND IF THE AS SESSEE IS FOUND INELIGIBLE ON ACCOUNT OF ITS ACTIVITY BEING C ARRIED OUT IN THE SUBSEQUENT YEARS, THE SAME IS OPEN TO THE AUTHO RITIES CONCERNED TO WITHDRAW THE REGISTRATION. 4. ON THE OTHER HAND, SHRI ANIRUDH RAI, APPEARING O N BEHALF OF THE REVENUE SUBMITTED THAT THE DIRECTOR O F INCOME TAX (EXEMPTIONS) IN PARA 8 OF THE ORDER HAS CATEGOR ICALLY STATED THAT THE OBJECTS AND ACTIVITIES OF THE ASSES SEE ARE NOT INCONFORMITY WITH THE DEFINITION OF CHARITABLE OBJ ECTS UNDER SECTION 2(15). THEREFORE, THE TRUST DOES NOT QUALIF Y FOR THE REGISTRATION UNDER SECTION 12AA OF THE ACT. HE FURT HER CONTENDED THAT EDUCATION PER SE IS NOT A CHARITABLE ACTIVITY. HE STRONGLY SUPPORTED THE ORDER OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS) IN REJECTING THE APPLICATION OF THE AS SESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES. WE HAVE GONE THROUGH THE ORDERS OF THE AUT HORITIES BELOW AND THE MAIN OBJECTS OF THE ASSESSEE COMPANY. THE ITA NO.1910/MDS/2012 5 TERM CHARITABLE OBJECTS HAS BEEN DEFINED IN SECTI ON 2(15) OF THE ACT, WHICH IS REPRODUCED HEREIN BELOW:- CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION , MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: A BARE PERUSAL OF THE DEFINITION OF THE TERM CHARI TABLE PURPOSE SHOWS THAT IMPARTING EDUCATION IS A CHARI TABLE ACTIVITY. 6. THE BOARD CIRCULAR NO.11 OF 2008 DATED 19.12.20 08 RELATES TO EXEMPTION UNDER SECTION 11 IN CASE OF AS SESSEE CLAIMING BOTH TO BE CHARITABLE INSTITUTION AS WELL AS MUTUAL ORGANIZATION. THE RELEVANT EXTRACT OF THE CIRCULAR IS REPRODUCED HEREIN BELOW:- CIRCULAR NO. 11/2008, DATED 19-12-2008 DEFINITION OF CHARITABLE PURPOSE UNDER SECTION 2(15) OF THE INCOME-TAX ACT, 1961 SECTION 2(15) OF THE INCOME TAX ACT, 1961 (ACT) DEFINES CHARITABLE PURPOSE TO INCLUDE THE FOLLOWING:- (I) RELIEF OF THE POOR (II) EDUCATION (III) MEDICAL RELIEF, AND ITA NO.1910/MDS/2012 6 (IV) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. AN ENTITY WITH A CHARITABLE OBJECT OF THE ABOVE NAT URE WAS ELIGIBLE FOR EXEMPTION FROM TAX UNDER SECTION 1 1 OR ALTERNATIVELY UNDER SECTION 10(23C) OF THE ACT. HOWEVER, IT WAS SEEN THAT A NUMBER OF ENTITIES WHO WERE ENGAGED IN COMMERCIAL ACTIVITIES WERE ALSO CLAIMING EXEMPTION ON THE GROUND THAT SUCH ACTIVITIES WERE FOR THE ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY IN TERMS OF THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE. THEREFORE, SECT ION 2(15) WAS AMENDED VIDE FINANCE ACT, 2008 BY ADDING A PROVISO WHICH STATES THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHAL L NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON OF (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS; OR (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS; FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION OF THE INCOME FROM SUCH ACTIVITY. 2. THE FOLLOWING IMPLICATIONS ARISE FROM THIS AMENDMENT 2.1 THE NEWLY INSERTED PROVISO TO SECTION 2(15) WIL L NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SE CTION 2(15), I.E., RELIEF OF THE POOR, EDUCATION OR MEDIC AL RELIEF. CONSEQUENTLY, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MED ICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSE EVE N IF IT INCIDENTALLY INVOLVES THE CARRYING ON OF COMMERCIAL ACTIVITIES. 7. THUS, AS PER THE CIRCULAR WHERE THE PURPOSE OF T HE TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, PRESERVATION OF MEDICAL ENVIRONMENT OR PRESERVATION OF ITA NO.1910/MDS/2012 7 HISTORIC MONUMENTS IT WILL CONSTITUTE CHARITABLE PU RPOSES EVEN IF IT INCIDENTALLY INVOLVES COMMERCIAL ACTIVITIES. THUS, THE OBJECT OF PROVIDING EDUCATION IS CHARITABLE ACTIVIT Y EVEN IF CONSEQUENT TO CARRY ON OF SUCH ACTIVITY THE TRUST E ARNS ANY BENEFIT OUT OF IT. 8. IN THE INSTANT CASE, A PERUSAL OF THE OBJECT CL AUSE OF THE COMPANY SHOWS THAT IT HAS BEEN INCORPORATED WITH TH E AIM OF PROVIDING EDUCATION, FACILITATE SOCIAL AND ECONOMIC EMPOWERMENT, ECONOMIC DEVELOPMENT PROGRAMS, LITERA CY PROGRAMS, TRAINING PROGRAMS FOR VILLAGERS AND DOWNT RODDEN PEOPLE. HOW THESE OBJECTS ARE TO BE ACHIEVED SHOULD BE LEFT TO THE ASSESSEE. THE FACT THAT THE ASSESSEE HAS BEE N INCORPORATED UNDER SECTION 25 OF THE COMPANIES ACT, 1956 SHOW THAT IT HAS BEEN FORMED FOR PROMOTING CHARITY OR ANY OTHER USEFUL OBJECT AND INTENDS TO APPLY ITS PROFIT S, IF ANY OR OTHER INCOME IN PROMOTING ITS OBJECTS. IN OTHER WOR DS, ITS A NON-PROFIT EARNING ORGANIZATION. 9. IN OUR CONSIDERED VIEW, THE DIRECTOR OF INCOME T AX (EXEMPTIONS) MERELY ON ASSUMPTION HAS REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION ITA NO.1910/MDS/2012 8 12AA. THE IMPUGNED ORDER OF DIRECTOR OF INCOME TAX (EXEMPTIONS) IS SET ASIDE. THE DIRECTOR OF INCOME T AX (EXEMPTIONS) IS DIRECTED TO GRANT REGISTRATION TO T HE ASSESSEE UNDER SECTION 12AA. HOWEVER, IT SHALL BE OPEN TO DI RECTOR OF INCOME TAX (EXEMPTIONS) TO WITHDRAW THE SAME LATER, IF THE ACTIVITIES OF THE ASSESSEE ARE NOT FOUND IN ACCOR DANCE WITH ITS OBJECTS. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, T HE 24 TH DAY OF JANUARY, 2013 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JANUARY, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.