Sanstha Management Samiti, Solapur V. Commissioner of Income-tax - IV,

ITA 1997/PUN/2013

• Counselvise Citation: 199724514 RSA 2013
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Opportunity of being heard
• Section: 80G; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 1996 AND 1997/PN/2013 (ASSESSMENT YEAR 2013-14 ) SANSTHA MANAGEMENT SAMITI AUDYOGIK PRASHIKSHAN SANSTHA, A/P. SANGOLA, SOLAPUR-413307 PAN NO.AAITS6355C .. APPELLANT VS. CIT-IV, PUNE .. RESPONDENT ASSESSEE BY : SHRI S.N. PURANIK REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 06-03-2014 DATE OF PRONOUNCEMENT : 11-03-2014 ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST THE SEPARATE ORDERS DATED 30-09-2013 OF THE CIT(A)-IV, PUNE REJECTING REGISTRATION U/S.12A/12AA AND DENYING APPROVAL U/S. 80G OF THE I.T. ACT 2. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSE E, SANSTHA MANAGEMENT SAMITI AUDYOGIK PRASHIKSHAN SANSTHA APPL IED FOR REGISTRATION U/S.12A OF THE INCOME TAX ACT THROUGH AN APPLICATION FILED IN THE OFFICE OF THE COMMISSION OF INCOME TAX-IV, P UNE ON 11-03-2013 WITH THE REQUISITE DOCUMENTS ALONG WITH AUDIT REPOR T IN FORM NO.10B FOR THE YEAR ENDING 31-03-2010, 31-03-2011 AND 31-0 3-2012. THE LD.CIT OBSERVED FROM THE DETAILS FURNISHED BY THE A SSESSEE THAT THE TRUST CORPUS IS NIL. HE, THEREFORE, ASKED THE ASSESSEE T O EXPLAIN AS TO WHY THE 2 REGISTRATION U/S.12AA BE GRANTED TO IT AS THERE IS NO CORPUS OF THE TRUST AND THEREFORE NO VALID TRUST EXISTS. THE ASSESSEE SUBMITTED THAT THERE IS NO CORPUS FUND. THE LD.CIT THEREFORE CAME TO THE C ONCLUSION THAT THE ASSESSEE FAILED TO CONFIRM TO THE STATUS OF A VALID TRUST AS ITS CORPUS IS NIL. 2.1 ACCORDING TO THE LD.CIT, ALTHOUGH THE WORD COR PUS IS NOT DEFINED EITHER IN THE INCOME TAX ACT OR IN THE SOCI ETIES REGISTRATION ACT, 1860 BUT ORDINARILY CORPUS MEANS BODY OF LAW OR COL LECTION OF WRITINGS. UNDER SECTION 11(1)(D) OF THE INCOME TAX ACT, THE I NCOME FROM THE VOLUNTARY CONTRIBUTIONS TOWARDS THE CORPUS OF THE T RUST OR THE INSTITUTION IS NOT TO BE INCLUDED IN THE COMPUTATION OF INCOME. HOWEVER, BEFORE THE FUNDS FROM ANY DONOR (WITH SPECIFIC DIRECTIONS) ARE RECEIVED TOWARDS THE CORPUS, IT IS FOR THE TRUST TO PROVIDE FOR THE CREA TION OF A CORPUS FUNDS IN ITS MEMORANDUM WHICH THE ASSESSEE HAS FAILED TO DO SO IN THE PRESENT CASE. 2.2 HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT F ILED ANY DOCUMENTARY EVIDENCE TO SUPPORT ITS CONTENTION THAT IT HAS TRANSFERRED ANY FUNDS RECEIVED FROM THE DONOR TOWARDS CORPUS. RELYING ON THE DECISION OF THE CALCUTTA BENCH OF THE TRIBUNAL IN T HE CASE DIGAMBAR JAIN NAYA MANAGEMENT VS. ADIT REPORTED IN 70 ITD 121 HE HELD THAT NO VALID TRUST EXISTS IN THE INSTANT CASE IN ABSENCE O F THE CORPUS AND HENCE NO REGISTRATION CAN BE GRANTED TO THE ASSESSEE U/S. 12AA OF THE I.T. ACT. 2.3 SO FAR AS THE ARGUMENT OF THE ASSESSEE THAT THE CONTRIBUTION RECEIVED FROM CENTRAL GOVT. IS PART OF THE CORPUS O F THE TRUST IS CONCERNED, HE OBSERVED THAT THE ORDER DATED 23-04-2 008 HAS BEEN ISSUED 3 BY THE DIRECTORATE GENERAL OF EMPLOYMENT AND TRAINI NG, NEW DELHI WHICH PERTAINS TO THE GUIDELINES REGARDING FINANCIA L AND PROCUREMENT PROCEDURE TO BE FOLLOWED BY THE INSTITUTE MANAGEMEN T COMMITTEE FOR UTILISATION OF FUNDS ON ACCOUNT OF UPGRADATION OF 1 396 GOVERNMENT ITIS THROUGH PPP FOR WHICH INTEREST FREE LOAN OF RS.2.5 CRORES HAS BEEN RELEASED. SINCE THE ASSESSEE IS RECEIVING GOVERNME NT GRANTS AND THERE IS NO CORPUS OF THE TRUST, HENCE, HE HELD THAT THERE I S NO VALID TRUST EXISTS AND ACCORDINGLY HE REJECTED THE APPLICATION FOR GRA NT OF REGISTRATION U/S.12AA OF THE I.T. ACT. SINCE HE REJECTED THE GR ANT OF REGISTRATION U/S.12AA OF THE I.T. ACT HE, THEREFORE, HE ALSO REJ ECTED THE APPLICATION FOR APPROVAL U/S.80G OF THE I.T. ACT. 3. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSE E IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : ITA NO.1996/PN/2013 1) HONBLE CIT-IV HAS ERRED IN REJECTING THE REGIST RATION TO APPELLANT/ APPLICANT, APPELLANT PRAYS TO GRANT REGI STRATION. 2) HONBLE CIT HAS FAILED TO UNDERSTAND THAT APPLI CANT IS A 'SOCIETY' REGISTERED UNDER SOCIETIES REGISTRATION ACT, 1960 ON 19.08.2008 WHICH DOES NOT REQUIRE ANY 'SETTLEMENT O F PROPERTY'. WITHOUT PREJUDICE TO OTHER GROUNDS, APPELLANT PRAYS THAT REGISTRATION OUGHT TO HAVE GRANTED AND MAY PLEASE B E GRANTED. 3) HONBLE CIT HAS FURTHER ERRED IN STATING ' INTERE ST FREE GOVT. LOAN' GRANT AND RELEASED BY GOVERNMENT IS NOT TRUST FUND/THERE IS NO CORPUS AND REFUSING REGISTRATION W ITHOUT PREJUDICE TO ABOVE GROUND. 4) APPELLANT PRAYS THAT REGISTRATION CANNOT BE REFU SED FOR THE REASON OF NOT HAVING CORPUS. 5) CIT HAS FAILED TO APPRECIATE CLAUSE 2(11) OF SEC F OF MEMORANDUM OF AGREEMENT AND CLAUSE 6 OF THE AGREEME NT EXECUTED ON 5 TH NOV.2O08. 6) APPELLANT PRAYS TO GRANT JUST AND EQUITABLE REL IEF TO APPLICANT. 7) APPELLANT PRAYS TO ADD, ALTER, AMEND, MODIFY, C LARIFY AND OR WITHDRAW THE GROUND/S, BEFORE OR DURING THE APPELLAT E PROCEEDINGS. 4 ITA NO.1997/PN/2013 1. COMMISSIONER OF INCOME TAX-IV HAS ERRED IN NOT GR ANTING APPROVAL U/S.80G OF THE INCOME TAX ACT, 1961 SAME MAY PLEASE BE GRANTED. 4. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE LD.CIT. HE SUBMITTED THAT THE ASSESSEE IS A SO CIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 WHICH DOES NOT REQUIRE ANY SETTLEMENT OF PROPERTY AND THE CIT PROCEEDED WITH T HE ERRONEOUS BELIEF THAT THE ASSESSEE IS A TRUST. HE SUBMITTED THAT TH E SOCIETIES REGISTRATION ACT, 1860 BEING PRIMARY AUTHORITY HAS NOT REJECTED REGISTRATION FOR ANY REASON OR HAS NOT CANCELLED IT. FURTHER, THE REGIS TRATION UNDER SOCIETIES REGISTRATION ACT, 1860 HAS TAKEN NOTE OF THE SCHEME AND INTEREST FREE LOAN OF RS.2.5 CRORES TO THE SOCIETY AND THE MEMORA NDUM OF AGREEMENT (A COPY OF WHICH IS PLACED OF PAGE 105 OF THE PAPER BOOK) STATES SEED MONEY KEPT IN CORPUS FUND WHICH SHALL NOT EXCEED 50 % OF THE TOTAL LOAN AMOUNT RECEIVED. THUS, IT HAS RECOGNISED THAT 50% OF THE LOAN IS CORPUS FUND. HE SUBMITTED THAT WITHOUT APPRECIATING THE F ACT THAT 50% OF THE SEED MONEY HAS BEEN KEPT IN THE CORPUS FUND. THE L D.CIT REJECTED THE CLAIM OF REGISTRATION U/S.12A/12AA OF THE I.T. ACT. , 1961. 4.1 SO FAR AS THE DECISION RELIED ON BY THE LD.CIT IN THE CASE OF DIGAMBAR JAIN NAYA MANDIR (SUPRA) IS CONCERNED, HE SUBMITTED THAT FACTS IN THAT CASE WERE DIFFERENT. THE ISSUE WAS T HAT WHEN THERE WERE 2 BOXES ONE MARKING CORPUS DONATION AND THE OTHER MAR KING NON-CORPUS DONATION THEN IN THAT CASE WHETHER THE FUND IN CORP US DONATION BOX CAN BE ACCEPTED AS CORPUS DONATION FOR THE PURPOSE OF S ECTION 12 FOR ALLOWING EXEMPTION. HOWEVER, IN THE INSTANT CASE, THE ISSUE IS COMPLETELY 5 DIFFERENT. THEREFORE, THE SAME CASE IS NOT APPLICA BLE TO THE FACTS OF THE PRESENT CASE. SO FAR AS THE ISSUE RELATING TO APPR OVAL OF 80G IS CONCERNED HE SUBMITTED THAT THE SAME IS CONSEQUENTIAL. 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND WHILE SUPPORTING THE ORDER OF THE LD.CIT SUBMITTED THAT T HE ASSESSEE HAS NOT PROPERLY EXPLAINED AS TO HOW SUCH SEED MONEY HAS BE EN TRANSFERRED TO THE CORPUS FUND AND HOW IT HAS BEEN ACCOUNTED FOR I N THE BOOKS. HE THEREFORE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE CIT WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO TH E ASSESSEE TO SUBSTANTIATE ITS ELIGIBILITY. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. WE FIND THE LD.CIT REJECTED THE APPLICATION FOR REG ISTRATION U/S.12AA OF THE I.T. ACT ON THE GROUND THAT THE ASSESSEE TRUST DOES NOT HAVE ANY CORPUS FUND. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, WE FIND THE SOCIETY IS RECEIVING LONG TERM INTEREST FREE FU NDS FROM THE GOVERNMENT AND AS PER THE AGREEMENT DATED 05-11-200 8 THE SEED MONEY CAN BE KEPT IN THE CORPUS FUND WHICH SHALL BE 50% O F THE TOTAL LOAN AMOUNT RECEIVED. THE ASSESSEE HAS NOT FILED THE RE QUISITE DETAILS INCLUDING THE AUDITED ACCOUNTS TO SUBSTANTIATE BEFO RE US REGARDING THE MANNER OF TRANSFERRING THE SEED MONEY TO THE CORPUS FUND. IN OUR OPINION, MERE TECHNICALITIES SHOULD NOT STAND IN TH E WAY OF GRANTING REGISTRATION U/S.12AA OF THE I.T. ACT. UNDER THESE CIRCUMSTANCES, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE LD.CIT WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE SO CIETY TO SUBSTANTIATE BEFORE HIM AS TO HOW A PART OF THE SEED MONEY HAS B EEN TRANSFERRED TO THE 6 CORPUS AND ITS PRESENTATION ETC. THE LD.CIT SHOULD DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AT THE SAME TIME, WE ALSO D IRECT THE LD.CIT TO PASS THE ORDER U/S.12AA OF THE I.T. ACT WITHIN A PE RIOD OF TWO MONTHS FROM THE DATE OF RECEIPT OF THE ORDER IN HIS OFFICE . THE REQUEST OF THE LD. COUNSEL FOR THE ASSESSEE TO LEVY COST ON THE DEPART MENT FOR REJECTING THE REGISTRATION U/S.12AA IS DISMISSED BEING DEVOID OF ANY MERIT. SINCE WE RESTORE THE ISSUE RELATING TO REGISTRATION U/S.12AA OF THE I.T. ACT TO THE FILE OF THE LD.CIT FOR FRESH ADJUDICATION, THEREFOR E, APPROVAL U/S.80G BEING CONSEQUENTIAL IN NATURE IS ALSO BEING RESTORE D TO THE FILE OF THE LD.CIT FOR FRESH ADJUDICATION. WE HOLD AND DIRECT ACCORDINGLY. GROUNDS RAISED BY THE ASSESSEE IN BOTH THE APPEALS ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 11-03-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R .K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED 11 TH MARCH, 2014 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT-IV, PUNE 4. D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE