Saraswathi Trust, Tuticorin V. DIT, CHENNAI

ITA 2007/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8323 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 17-12-2015
• Assessment Year: misc
• Appeal Filed On: 18-09-2015
• Court: TRIBUNAL
• Department Lawyers: SUNEEL VERMA
• Assessee Lawyers: J MARTIN JOSEPH SELVARAJ
• Keywords: Charitable institution
• Section: 12AA; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , ! ' , # $% & [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD , JUDICIAL MEMBER ] ./ I.T.A.NO.2007/MDS/2015 / ASSESSMENT YEAR : N.A M/S SARASWATHI TRUST NO.452/EXPENDITURE, NEAR ANDROSE SCHOOL SS NAGAR, PALLAKU ROAD, KOVILPATTI TK, TUTICORIN DISTRICT VS. T HE DIRECTOR OF INCOME - TAX(EXEMPTIONS) CHENNAI [PAN AAOTS 0423K ] ( '( / APPELLANT) ( ')'( /RESPONDENT) / APPELLANT BY : SHRI J MARTIN JOSEPH SELVARAJ, CA /RESPONDENT BY : SHRI SUNEEL VERMA, CIT / DATE OF HEARING : 17 - 12 - 2015 / DATE OF PRONOUNCEMENT : 08 - 01 - 2016 * / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNA I DATED 29.6.2015. 2. THE GRIEVANCE OF THE ASSESSEE IS WITH REGARD TO NON -GRANTING OF REGISTRATION U/S 12AA OF THE ACT. THE ASSESSE E FILED APPLICATION IN FORM NO.10A ON 8.9.2014 FOR REGISTRATION U/S 12AA OF THE ACT. ITA NO. 2007/15 :- 2 -: ACCORDING TO THE DIT(E), LIMITATION FOR PASSING ORD ER U/S 12AA(2) OF THE ACT EXPIRED ON 31.3.2015, HOWEVER, IN VIEW OF T HE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SHE ELA CHRISTIAN CHARITABLE TRUST, 354 ITR 478, THE CIT IS EMPOWERED TO PASS ORDER EVEN AFTER THAT DATE AS THE DATE MENTIONED IN 12AA( 2) OF THE ACT IS ONLY DIRECTORY AND NOT MANDATORY. ACCORDINGLY, HE PASSED ORDER ON 29.6.2015. REGARDING GRANTING OR REGISTRATION U/S 12AA OF THE ACT, THE DIT(E) WAS OF THE OPINION THAT THE OBJECT CLAUS E OF THE ASSESSEE READS AS FOLLOWS: 2. TO DEVELOP RURAL SOCIETY ECONOMICALLY AND SOCI ALLY. EXPENDITURE-3 : ECONOMY TO GIVE THEM HELP IN SELF-EARNING AS PER THEIR KNO WLEDGE AND SKILLS VIZ. PREPARING HOME-MADE PICKLES INCENSE STI CKS, BINDING PREPARING SWEETS AND SAVOURITES ETC. TO HELP THEM TO MAKE EARNINGS BY SELLING THE AGRICU LTURAL COMMODITIES FROM THE YIELDS OF THE COMMERCIAL PLANT S LIKE GUAVA, MANGO, COCONUT, NEEM, TAMARIND AND OTHER COMMERCIAL PLANTS BY SUPPLYING THE SAME AT FREE OF COST. TO ANALYSE AND IDENTIFY THE INBUILT SKILL OF EVERY INDIVIDUAL AND TO BRING THEM OUT PROSPEROUSLY BY SHAPING IT. 3. ACCORDING TO THE DIT(E), THE ABOVE CLAUSES PERMIT T HE ASSESSEE TO ENGAGE IN COMMERCIAL ACTIVITIES WHICH WILL NOT BE COVERED UNDER THE DEFINITION OF CHARITABLE PURPOSE AS PER SEC. 2(15) OF THE ACT. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF KERA LA HIGH COURT IN THE CASE OF IDEAL PUBLICATION TRUST VS CIT 305 ITR 143, JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF DAULAT RAM PUBLIC T RUST VS CIT, 244 ITA NO. 2007/15 :- 3 -: ITR 514 AND ALSO THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF ZENITH TIN WORKS CHARITABLE TRUST VS CIT, 102 ITR 1 19. FURTHER, HE HAS OBSERVED THAT THE INCOME AND EXPENDITURE ACCOUN T FROM 1.4.2014 TO 18.3.2015 OF THE ASSESSMENT-TRUST SHOWS THE EXPE NDITURE INCURRED MOSTLY IN CONDUCTING CELEBRATIONS OR PROGRAMMES LIE NEW YEAR CELEBRATION, REPUBLIC DAY CELEBRATION, PROGRAMME AT IIT KHARAGPUR. ACCORDING TO HIM, THE ASSESSEE HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES, AND A VERY SMALL AMOUNT TOWARDS STUDY M ATERIAL FOR STUDENTS AND THE ASSESSEE HAS NOT FURNISHED THE DETAILS TO WHOM THE EXPENDITURE WAS INCURRED. ACCORDINGLY, HE REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE QUESTION FOR CONSIDERATION IS WITH R EGARD TO THE SCOPE OF ENQUIRY BY THE DIT(E) U/S 12AA OF THE ACT. WITH E FFECT FROM 1.4.1997, THE CIT(E)/DIT(E) IS EMPOWERED TO ENQUIRE ABOUT THE ACTIVITIES OF THE ASSESSEE BEFORE PASSING THE ORDER. THERE MAY BE CA SES WHERE APPLICATION MADE AFTER THE COMMENCEMENT OF ACTIVITI ES BY THE ASSESSEE-TRUST. IN SUCH CASES, THE DIT(E) IS JUSTI FIED TO ENQUIRE ABOUT THE ACTIVITIES. HOWEVER, WHERE NO ACTIVITY IS COMM ENCED, THE QUESTION OF MAKING ANY ENQUIRY REGARDING ANY ACTIVITY BY THE DIT(E) WOULD NOT ARISE. THE NATURE OF ENQUIRE WOULD DEPEND UPON THE FACTS OF EACH ITA NO. 2007/15 :- 4 -: CASE. HENCE, THE SCOPE OF THE DIT(E) IS LIMITED TO ASCERTAIN ONLY WHETHER THE OBJECTS ARE CHARITABLE OR NOT. NOW, CO MING TO THE CASE OF THE ASSESSEE, THE ASSESSEE MADE AN APPLICATION FO R REGISTRATION U/S 12AA OF THE ACT ON 8.9.2014. THE DIT(E) HAS TO SEE WHETHER THE ACTIVITIES ARE UNDER THE PURVIEW OF SEC. 2(15) OF T HE ACT. SEC. 2(15) OF THE ACT READS AS FOLLOWS: ' CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, ED UCATION, MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCLU DING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIV E OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY:] [PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVI TIES REFERRED TO THEREIN IS [TWENTY-FIVE LAKH RUPEES] OR LESS IN THE PREVIOUS YEAR;]' 5. THE OBJECT OF THE ASSESSEE-TRUST AS PER THE TRUST DEED FILED BEFORE US IS AS FOLLOWS: 1. TO PROVIDE RESOURCES FOR ADVANCED EDUCATION FO R PEOPLE WHO DESERVE IT. 2. TO DEVELOP RURAL SOCIETY ECONOMICALLY AND SOCIA LLY. 3. TO PROVIDE RESOURCES TO ENHANCE THE TECHNICAL SK ILLS OF THE YOUTH OF THE COUNTRY SO THAT THEY CAN BE SELF EMPLO YED. 4. TO PROVIDE JOB ORIENTED EDUCATION TO THE RURAL YOUTH. 5. TO HELP THEM FIND SUITABLE JOBS IN ORDER TO IMP ROVE THEIR SOCIO ECONOMIC CONDITIONS. ITA NO. 2007/15 :- 5 -: 6. TO BRING AWARENESS IN PEOPLE REGARDING HEALTH B Y CONDUCTING AWARENESS CAMPS. 7. TO PROVIDE GOOD SANITATION FACILITIES IN RURAL AREAS. 8. TO DISTRIBUTE FREE EDUCATIONAL AIDS FOR THE PO OR AND NEEDY PERSONS. 9. TO PROVIDE FREE TRANSPORT FACILITY FOR COMMUTI NG TO SCHOOL TO THE POOR AND NEEDY PERSONS IN RURAL AREAS. 10. TO PROMOTE VOCATIONAL EDUCATION IN RURAL AREA S. 11. TO DO SUCH OTHER ACTS AS ARE CONDUCIVE TO THE ATTAINMENT OF THE ABOVE OBJECTS OR ANY OF THEM. 12.TO MOTIVATE AND FACILITATE TRAINING AND EDUCATI ON TO DEVELOP PHYSICAL, MENTAL AND EMOTIONAL ASPECT OF THE RURAL POOR. 13. TO BE SUPPORTIVE TO POOR PEOPLE IN BUILDING U P THEIR OWN SHELTER, CLOTHING AND THEIR OWN SANITATION FACILITI ES. THE MAIN OBJECT OF THE ASSESSEE IS TO PR OVIDE RESOURCES FOR ADVANCED EDUCATION FOR PEOPLEWHO DESERVE IT. THE S UPREME COURT IN THE CASE OF SURAT ART SILK & CLOTH MFRS ASSOCIATION , 121 ITR 1, HELD THAT IT IS NOW WELL SETTLED AS A RESULT OF THE DECISION OF THIS COURT IN DHARMADEEPTI VS CIT 1978 CTR (SC) 120: (1978) 114 I TR 454 THAT THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVIT Y FOR PROFIT QUALIFY OR GOVERN ONLY THE LAST HEAD OF CHARITABLE PURPOSE AND NOT THE EARLIER THREE HEADS. WHERE, THEREFORE, THE PURPOSE OF A TR UST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, TH E REQUIREMENT OF THE DEFINITION OF CHARITABLE PURPOSE WOULD BE FULLY S ATISFIED, EVEN IF AN ACTIVITY FOR PROFIT IS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING OUT ITA NO. 2007/15 :- 6 -: OF THE PRIMARY PURPOSE OF THE TRUST OR INSTITUTION. AT THIS STAGE, IT IS ALSO PERTINENT TO NOTE THAT THE CLAUSE NOT INVOLVI NG CARRYING ANY ACTIVITIES OF PROFIT WERE OMITTED FROM THIS DEFINI TION BY THE LEGISLATURE BY FINANCE ACT 1993 WITH EFFECT FROM 1 ST APRIL 1983. THEREFORE, AFTER SUCH OMISSION, THE ELEMENT OF PROFIT CANNOT BE EXCL UDED FROM THE DEFINITION CHARITABLE PURPOSES U/S 2(15) OF THE ACT. ACCORDING TO THIS PROVISION, IF ANY EDUCATIONAL INSTITUTION IS RUNNIN G ON COMMERCIAL BASIS, THEN THE INCOME OF SUCH EDUCATIONAL INSTITUTION CAN NOT BE EXEMPTED FROM TAXATION. HOWEVER, SUCH INSTITUTION CAN CLAIM EXEMPTION U/SS 11 & 12 OF THE ACT IF IT INVOLVES CHARITABLE ACTIVITIE S. AFTER COMPLYING THE REQUIREMENT OF SEC. 11 OF THE ACT, IF THERE IS ANY VIOLATION EITHER IN SEC. 11 OR 13, PROFIT OF SUCH INSTITUTION WOULD BE TAXAB LE BECAUSE SOME PROFIT HAS BEEN EARNED BY THE INSTITUTION, REGISTRA TION U/S 12AA CANNOT BE DENIED SO LONG AS PROVISIONS OF SECTIONS 11, 12 & 12 OF THE ACT ARE COMPLIED WITH. SO LONG AS IT IS ESTABLISHED THAT I NCOME OF THE INSTITUTION HAS BEEN APPLIED FOR THE PURPOSE FOR WH ICH IT WAS ESTABLISHED IN TERMS OF SEC. 2(15) OF THE ACT AND T HERE IS NO VIOLATION OF SEC. 13, THE ASSESSEE WOULD BE ENTITLED TO ENJO Y THE BENEFIT OF REGISTRATION U/S 12AA OF THE ACT. IF THE ASSESSE E IS ESTABLISHED FOR CHARITABLE ACTIVITIES AND IN THE COURSE OF CARRYING OUT CHARITABLE ACTIVITIES, THE ASSESSEE EARNS PROFITS, THEN SUCH INSTITUTION WILL NOT BE DEBARRED OR DISENTITLED FOR REGISTRATION U/S 12AA. THEREFORE, ITA NO. 2007/15 :- 7 -: REGISTRATION U/S 12AA WOULD NOT BE RELEVANT BY ITS ELF FOR CLAIMING EXEMPTION U/S 11 OF THE ACT. THE OBJECTS OF THE TRUST AND ITS GENUINENESS HAVE TO BE EXAMINED BY THE DIT(E) WHILE GRANTING REGISTRATION U/S 12AA OF THE ACT. 6. IN VIEW OF THE ABOVE DISCUSSION, THE DIT(E) IS DIRE CTED TO GRANT REGISTRATION U/S 12AA OF THE ACT TO THE ASS ESSEE-TRUST. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2016, AT CHENNAI. SD/- SD/- ( ! ' ) ( CHALLA NAGENDRA RASAD) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 8 TH JANUARY, 2016 RD $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF