SHARDABEN RATANSHI CHANDAN CHARITABLE TRUST, MUMBAI V. DIT (E), MUMBAI

ITA 2005/MUM/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6672 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 13-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Keywords: Charitable institution
• Section: 12A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.2004/MUM/2013 : ASST.YEAR 2013-14 SOMESHWAR KRUPA CHARITABLE TRUST, 211, KAILASH PLAZA, VALLABH BAUG LANE, GHATKOPAR EAST, MUMBAI 400 077 PAN:AALTS 6186J DIRECTOR OF INCOME TAX (EXEMPTION), 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012. ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) ITA NO.2005/MUM/2013 : ASST.YEAR 2013-14 SHARADABEN RATANSHI CHANDAN CHARITABLE TRUST, 211, KAILASH PLAZA, VALLABH BAUG LANE, GHATKOPAR EAST, MUMBAI 400 077 PAN:AALTS 7160G DIRECTOR OF INCOME TAX (EXEMPTION), 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 400 012. ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI MEHUL SHAH ()$% * + * + * + * + /RESPONDENT BY : SHRI KISHAN VYAS ' * ,-' / / / / DATE OF HEARING : 12.06.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 12.06.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AND ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. DIRECTOR OF INCOME TA X(EXEMPTION) [DIT (E)] MUMBAI UNDER SECTION 12AA(1)(B)(II) READ WITH SECTION 12A OF THE INCOME TAX ACT,1961 (THE ACT) DATED 24/1/2013 AND 31/1/2013 IN THE CASE OF SHARADABEN RATANSHI CHANDAN CHARITABLE TRUST & SOMESHWAR KRUPA CHARITAB LE TRUST RESPECTIVELY. GROUNDS OF APPEAL IN BOTH THE APPEALS ARE IDENTICAL . BOTH THESE APPEALS WERE ITA NO.2004& 2005/MUM/2013 2 ARGUED TOGETHER BY BOTH THE PARTIES, THEREFORE, FOR THE SAKE OF CONVENIENCE BOTH THESE APPEALS ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. APPLICATION FOR REGISTRATION OF THESE TRUSTS HAV E BEEN REJECTED BY DIT(E) ON THE COMMON GROUNDS. THE GROUNDS STATED BY DIT(E) IN BO TH THE CASES WHILE REJECTING THE APPLICATIONS ARE AS FOLLOWS: IN THE CASE OF SHARADABEN RATANSHI CHANDAN CHARITA BLE TRUST: A PERUSAL OF THE TRUST DEED REVEALS THAT THE APPL ICANT TRUST HAS CHARITABLE AS WELL AS NON-CHARITABLE/COMMERCIAL OBJECTS SUCH AS ESTABLISH MENT OR MAINTENANCE OF NURSING INSTITUTIONS, GYMNASIUMS, SPORTS CLUBS, REST HOUSES ETC. FURTHER, THERE IS NO BINDING LEGAL OBLIGATION ON THE TRUSTEES TO APPLY INCOME / TRUST FUNDS SOLELY FOR CHARITABLE PURPOSES. IN THE CASE OF SOMESHWAR KRUPA CHARITABLE TRUST A PERUSAL OF THE TRUST DEED REVEALS THAT THE APPLI CANT TRUST HAS CHARITABLE AS WELL AS NON-CHARITABLE / COMMERCIAL OBJECTS SUCH AS ESTABLI SHMENT / MAINTENANCE OF GYMNASIUMS, SPORTS CLUBS ETC. FURTHER, THERE IS NO BINDING LEGAL OBLIGATION ON THE TRUSTEES TO APPLY INCOME / TRUST FUNDS SOLELY FOR C HARITABLE PURPOSES. IN OTHER WORDS, THE TRUSTEES ENJOY FULL DISCRETION TO APPLY THE INC OME OF THE TRUST TOWARDS ATTAINMENT OF ANY ONE OR MORE OF ITS OBJECTS INCLUDING THE ABOVE MENTIONED NON-CHARITABLE/COMMERCIAL OBJECTS. 3. IT IS THE CASE OF LD. AR THAT BOTH THE GROUNDS O N WHICH REGISTRATION HAS BEEN DENIED TO THE ASSESSEE DO NOT EXIST. TO CONTEND SO , OUR ATTENTION WAS DRAWN TO THE FACT THAT SHARADABEN RATANSHI CHANDAN CHARITABLE T RUST IS REGISTERED BY THE CHARITY COMMISSIONER VIDE CERTIFICATE DATED 11/5/20 12 AND COPY OF THE CERTIFICATE HAS FILED AT PAGE-7 OF THE PAPER BOOK. SIMILARLY, SOMESHWAR KRUPA CHARITABLE TRUST HAS ALSO BEEN REGISTERED WITH CHARITY COMMISS IONER VIDE CERTIFICATE DATED 11/5/2012. FURTHER IT WAS MENTIONED THAT THE OBJEC T WHICH HAS BEEN REFERRED TO BE NON-CHARITABLE/COMMERCIAL OBJECT IS STATED IN CLAUS E (E) OF BOTH TRUST DEED WHICH READ AS UNDER: (E) TO ESTABLISH, MAINTAIN OR GRANT AID TO HOMES F OR THE AGED, ORPHANAGES OR OTHER ESTABLISHMENTS AND/OR MAINTENANCE OF PARKS, GARDENS GYMNASIUMS, SPORTS CLUBS, DHARMASALAS AND REST HOUSES, FOR USE BY PUBLIC IN GENERAL. 4. FURTHER OUT ATTENTION WAS INVITED TO FOLLOWING N ARRATION, IMMEDIATELY AFTER NARRATION OF THE OBJECTS IN CLAUSE -3, WHICH READ A S UNDER: THE TRUST WILL NOT CARRY OUT ANY ACTIVITIES WITH T HE INTENSION OF EARNING PROFIT AND WILL PERFORM WITH SERVICE MOTIVE ONLY. ITA NO.2004& 2005/MUM/2013 3 THE OBJECTS OF THE CHARITABLE TRUST HEREINABOVE MEN TIONED SHALL BE LIMITED OR RESTRICTED TO ANY PARTICULAR RELIGION COMMUNITY CASTE OR CREED . 4.1 OUR ATTENTION WAS ALSO DRAWN TO THE FOLLOWING SUB-CLAUSES OF CLAUSE- 6 OF THE TRUST DEED: 6. ROLES AND RESPONSIBILITIES AND POWERS OF BOARD OF TRUSTEES: (C)THE INCOME AND THE PROPERTIES OF THE TRUST WILL BE SOLELY UTILIZED TOWARDS THE OBJECTS OF THE TRUST AND NO PORTION OF IT WILL BE UTILIZED FOR PAYMENT TO THE SETTLER, OR TRUSTEES OR THEIR RELATIVES BY WAY OF SALARY, ALLOWANCES, PROFI T, INTEREST, DIVIDEND ETC. (K) NO TRUSTEE SHALL COMMIT ANY ACT OR BREACH OF TR UST OF THE TRUST AND FUND OR PROPERTY OR CAUSE ANY LOSS TO THE TRUST PROPERTY OR COMMIT F RAUD IN THE ADMINISTRATION OF THE TRUST FUND / PROPERTY. 4.2 FURTHER REFERENCE WAS MADE TO CLAUSE -8 OF THE TRUST DEED WHICH READ AS UNDER: 8.DISSOLUTION: IN THE EVENT OF DISSOLUTION OF THE TRUST, THE EN TIRE TRUST FUNDS SHALL BE REALIZED AND FIRST BE USED FOR PAYMENT OF LIABILITIES OF THE TRU ST. THE ASSETS LEFT IF ANY, SHALL BE DISBURSED TO OTHER TRUSTS OR ASSOCIATIONS HAVING SI MILAR OBJECTIVES AFTER OBTAINING PREVIOUS APPROVAL OF COMMISSIONER OF INCOME-TAX AN D IN NO EVENT IT SHALL BE DISTRIBUTED IN ANY MANNER, TO ANY OF THE BOARD OF TRUSTEES OR T HEIR RELATIVES OR RELATED CONCERNS. 4.3 REFERRING TO ABOVE CLAUSES IT WAS SUBMITTED BY LD. AR THAT OBJECT OF ESTABLISHING , MAINTAINING OR GRANTING AID FOR THE ESTABLISHMENTS OR MAINTENANCE OF PARKS, GARDENS GYMNASIUMS, SPORTS CLUBS, DHARMAS ALAS AND REST HOUSE FOR THE PUBLIC IN GENERAL WITHOUT PROFIT MOTIVE CANNOT BE S AID TO BE AN ACTIVITY OF NON- CHARITABLE OR COMMERCIAL NATURE UNLESS THERE IS A MATERIAL ON RECORD TO SUGGEST OTHERWISE. HE SUBMITTED THAT THE TRUSTS ARE AT INI TIAL STAGE AND NONE OF SUCH TYPE OF ACTIVITY HAS STILL BEEN CARRIED OUT, THEREFORE, LD. DIT(E) HAS GIVEN THIS FINDING ONLY ON THE BASIS OF PRESUMPTION THAT THESE ACTIVITIES W OULD FALL WITHIN THE NON-CHARITABLE AND COMMERCIAL ACTIVITY. 4.4 HE SUBMITTED THAT IT IS ALSO INCORRECT TO SAY T HAT IN THE TRUST DEED THERE IS NO BINDING LEGAL OBLIGATION ON THE TRUSTEES TO APPLY I NCOME/TRUSTS FUND SOLELY FOR THE CHARITABLE PURPOSES. HE SUBMITTED THAT IT HAS BEEN MENTIONED IN SUB-CLAUSE (E) OF CLAUSE -4 THAT THE INCOME AND PROPERTIES OF THE TRU ST WILL BE SOLELY UTILIZED TOWARDS OBJECTIVES OF THE TRUST AND NO PORTION OF IT WILL BE UTILIZED FOR PAYMENT TO THE SETTLOR ITA NO.2004& 2005/MUM/2013 4 OR TRUSTEES OF THEIR RELATIVES BY WAY OF SALARY, AL LOWANCES, PROFIT, INTEREST DIVIDEND ETC. HE SUBMITTED THAT ACCORDING TO THIS CLAUSE NE ITHER THE PROPERTY OF THE TRUST COULD BE APPLIED FOR ANY PURPOSE OTHER THAN THE OBJ ECTS STATED IN THE TRUST DEED AND NO PART OF ITS INCOME OR PROPERTY COULD BE APPLIED FOR THE BENEFIT OF TRUSTEES OR THEIR RELATIVES. HE, FURTHER SUBMITTED THAT EVEN ON DIS SOLUTION NO PART OF THE INCOME OR PROPERTY OF THE TRUST COULD VEST EITHER IN THE TR USTEES OR FOR THEIR RELATIVES. THUS, IT WAS SUBMITTED THAT BOTH THE GROUNDS ON WHICH REGIST RATION HAS BEEN REFUSED TO THE ASSESSEE DO NOT EXIST AND ASSESSEE HAS WRONGLY BEEN DENIED THE BENEFIT OF REGISTRATION. 5. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER PASSED BY DIT(E) AND PLEADED THAT FOR THE REASONS STATED IN THE ORDER DIT(E) HA S RIGHTLY REJECTED THE CLAIM OF THE ASSESSEE FOR REGISTRATION AS CHARITABLE INSTITUTION . 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. GROUNDS ON WHICH DIT(E) HAS REJECTED T HE REGISTRATION HAVE ALREADY BEEN DESCRIBED IN THE ABOVE PART OF THIS ORDER. FI RST GROUND ON WHICH DIT(E) HAS REFUSED TO GRANT THE REGISTRATION IS THAT THE ACTIV ITY OF ESTABLISHMENT OR MAINTENANCE OF NURSING INSTITUTIONS, GYMNASIUMS, SPORTS CLUB, R EST HOUSE ETC. ARE NON-CHARITABLE AND HAVE COMMERCIAL OBJECTS. NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT ASSESSEE HAS CONDUCTED THESE ACTIVITIES AS NON -CHARITABLE OR COMMERCIAL PURPOSES. WITHOUT CITING ANY SUCH INSTANCE, IT CAN NOT BE HELD THAT THESE ACTIVITIES ARE NON-CHARITABLE OR COMMERCIAL. MOREOVER, CLAUSE (E) OF OBJECT HAS ALREADY BEEN REPRODUCED ABOVE AND THIS ACTIVITY IS SUBJECT TO TH E CONDITION DESCRIBED AT THE END OF THE OBJECT CLAUSE, ACCORDING TO WHICH TRUST IS RES TRICTED TO CARRY OUT ANY ACTIVITY WITH THE INTENTION OF EARNING PROFIT AND IT IS OBLI GATORY TO PERFORM THESE ACTIVITIES WITH SERVICE MOTIVE. THIS OBJECT HAS STATED THAT IT IS FOR THE USE OF PUBLIC IN GENERAL. A CONJOINT READING OF CLAUSE (E) AND WHAT IS STATED AT THE END OF THE OBJECT CLAUSE, WILL MAKE IT CLEAR THAT SUCH ACTIVITY OF THE ASSESSEE CANNOT BE DESCRIBED TO BE AN ACTIVITY OF NON-CHARITABLE NATURE OR COMMERCI AL IN NATURE MORE PARTICULARLY SO IN ABSENCE OF ANY MATERIAL TO SUGGEST THAT SUCH ACTIVITIES HAVE BEEN CARRIED OUT BY THE ASSESSEE IN CONTRAVENTION OF THE ABOVE CLAU SES OF THE TRUST. ITA NO.2004& 2005/MUM/2013 5 6.1 SECOND GROUND ON WHICH REGISTRATION HAS BEEN RE FUSED IS THAT THERE NO OBLIGATION FASTENED ON THE TRUSTEES TO APPLY INCOME /TRUSTS FUNDS SOLELY FOR THE CHARITABLE PURPOSES. THIS GROUND IS ALSO CONTRARY TO THE PROVISIONS MADE IN THE TRUST DEED AS ACCORDING TO SUB-CLAUSE (C) OF CLAUS E -6, WHICH HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER, NEITHER THE INCOME NOR THE PROPERTY OF THE TRUST CAN BE UTILIZED FOR THE PURPOSE OTHER T HAN THE PURPOSES STATED IN THE OBJECTS AND NO PORTION OF THE INCOME OR PROPERTY O F THE TRUST CAN BE UTILIZED FOR THE PAYMENT TO THE SETTLOR OR TRUSTEES OR THEIR RELATIV ES BY WAY OF SALARY, ALLOWANCE, PROFIT, INTEREST, DIVIDEND ETC. EVEN IN CASE OF TH E DISSOLUTION OF THE TRUST, ENTIRE TRUST FUND WAS FIRST TO BE UTILIZED TO DISCHARGE LI ABILITIES OF THE TRUST AND LEFT OUT AMOUNT IS REQUIRED TO BE DISBURSED TO OTHER TRUSTS OR ASSOCIATION HAVING SIMILAR OBJECTIVES AFTER OBTAINING PREVIOUS APPROVAL OF COM MISSIONER OF INCOME TAX AND IT IS STIPULATED THAT IN NO EVENT IT SHALL BE DISTRIB UTED IN ANY MANNER TO ANY OF THE BOARD OF TRUSTEES OR THEIR RELATIVES OR RELATED C ONCERNED. IN VIEW OF SUCH EXISTING CLAUSE IN THE TRUST DEED IT WILL BE WRONG TO PRESUM E THAT TRUSTEES DO NOT HAVE BINDING OBLIGATION TO APPLY INCOME/FUNDS OF THE TRU ST SOLELY FOR THE CHARITABLE PURPOSES. THEREFORE, ON THIS GROUND ALSO REGISTRATI ON CANNOT BE REFUSED TO THE APPELLANT TRUSTS. 6.2 FOR THE REASONS DISCUSSED ABOVE WE DO NOT FIN D ANY JUSTIFICATION IN REFUSAL TO GRANT OF REGISTRATION TO THE TRUSTS. THEREFORE, WE DIRECT THE LD.DIT(E) TO GRANT REGISTRATION TO BOTH OF THESE TRUSTS. 7. IN THE RESULT, APPEALS FILED BY BOTH THE TRUSTS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12TH JUNE, 2014. 1 * ./0 2'3 12/06/2014 / * 9 SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 12 TH JUNE, 2014. VM. ITA NO.2004& 2005/MUM/2013 6 1 * 1 * 1 * 1 * (,: ; :0, (,: ; :0, (,: ; :0, (,: ; :0,/ COPY OF THE ORDER FORWARDED TO : 1. $% / THE APPELLANT 2. ()$% / THE RESPONDENT. 3. <() / THE CIT, MUMBAI. 4. < / CIT(A)-13, MUMBAI 5. :?9 (,' , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. 1' 1' 1' 1' / BY ORDER, ):, (, //TRUE COPY// B BB B/ // /C C C C (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI