Dawat E Islami AP, Hyderabad, Hyderabad V. Commissioner of Income Tax, (Exemptions), Hyderabad

ITA 2038/Hyd/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2645 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-10-2018
• Assessment Year: misc
• Appeal Filed On: 07-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER I.T.A. NO. 2038/HYD/2017 DAWAT E ISLAMI AP, HYDERABAD [PAN: AABTD5383Q] VS COMMISSIONER OF INCOME TAX-(EXEMPTIONS), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI MOHD. AFZAL, AR FOR REVENUE : SMT. ALKA RAJVANSHI JAIN, CIT-DR DATE OF HEARING : 11-10-2018 DATE OF PRONOUNCEMENT : 09-11-2018 O R D E R PER S. RIFAUR RAHMAN, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (EXEMPTIONS)- HYDERABAD, DATED 29-09-2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED A N APPLICATION IN FORM NO.10A ON 30-03-2017, SEEKING REGISTRATION U/S. 12AA OF THE INCOME TAX ACT [ACT]. AFTE R VERIFICATION OF THE INFORMATION FILED BY THE ASSESSEE, CIT(E) OBSERVED THAT THE TRUST INCORPORATED ON 05-03-2009 WITH A N OBJECTIVE MENTIONED THEREIN. AS PER THE OBJECTIVE, CLAU SE 3(V) AS - THE ACTIVITIES WOULD BE CONFINED TO THE TERRITORY O F INDIA , BUT ITA NO. 2038/HYD/2017 :- 2 -: SUBSEQUENTLY, ON 17-04-2014, THEY AMENDED THE TRUST DEE D AND DELETED THE ABOVE SAID CLAUSE 3(V). WHEN THE SAM E WAS ENQUIRED WITH THE ASSESSEE, IT WAS EXPLAINED THAT THEY CO ULD NOT RESTRICT THE ACTIVITIES IN INDIA ONLY. ACCORDING TO CIT(E), IT IS CONTRARY TO THE PROVISIONS OF SECTION 11(1)(A) OF TH E ACT. ACCORDINGLY, REGISTRATION U/S. 12AA WAS DENIED. AGGRI EVED WITH THE ABOVE ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE US, RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIONS) IS AGAINST LAW, WEIGHT OF EVIDENCE AND PROBABILITIES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIO N) ERRED IN PASSING AN ORDER UNDER SECTION 12AA BY REJECTING TH E CLAIM OF REGISTRATION MADE BY FILING FORM NO.10A OF THE I.T RULES. 3. THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIO N) OUGHT TO HAVE GIVEN ONE MORE OPPORTUNITY IN WRITING EXPLAINI NG THE PROVISIONS OF SECTION 11(1)(A) IN RESPECT OF THE CHARITABLE AC TIVITIES TO BE CONFINED TO INDIAN TERRITORY. 4. THE LEARNED COMMISSIONER OF INCOME TAX (EXEMPTIO N) OUGHT TO HAVE DIRECTED THE ASSESSEE, BY GIVING AN OPPORTUNIT Y IN WRITING, TO AMEND THE TRUST DEED SO AS TO RESTORE THE ORIGINAL TRUST DEED DT: 05.03.2009. 5. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND OR M ODIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF H EARING OF THE APPEAL, IF IT IS CONSIDERED NECESSARY. 3. LD.AR BROUGHT TO OUR NOTICE THAT THE DISCREPANCIES POINTED OUT BY THE LD.CIT(E) WAS SUITABLY CORRECTED BY THE TRUST. THEREFORE, THE TRUST IS ELIGIBLE FOR REGISTRATIO N U/S. 12AA OF THE ACT. FURTHER, HE SUBMITTED THAT LD.CIT(E) SHOULD NOT HAVE DENIED THE EXEMPTION MERELY BECAUSE THE ASSESSEE S ITA NO. 2038/HYD/2017 :- 3 -: ACTIVITIES ARE NOT RESTRICTED TO WITHIN INDIA. AS PER TH E SECTION 11(1), THE EXEMPTION IS GRANTED TO THE ACTIVITIES, WHICH A RE CARRIED ON WITHIN INDIA. ANY ACTIVITY WHICH IS CARRIE D OUTSIDE INDIA, EXEMPTION MAY BE DENIED TO THAT EXTENT. THIS IS NOT THE PROPER REASON FOR DENYING THE REGISTRATION U/S. 12AA. HE RELIED ON THE FOLLOWING TWO CASE LAW TO SUPPORT THE CON TENTIONS: I. M.K. NAMBYAR SAARE LAW CHARITABLE TRUST VS. UNION OF INDIA & ORS. [269 ITR 556]; II. ITA NO. 997/DEL/2014 (AY. 2013-14) IN THE CASE OF NATIONAL INFORMATICS CENTRE SERVICES INC. VS. DIT (EXEMPTIONS), DT. 17-04-2017; 4. ON THE OTHER HAND, LD.DR SUBMITTED THAT ASSESSEE HAS MODIFIED THE OBJECTS AND ITS ACTIVITIES, SUBSEQUENT TO TH E IMPUGNED ORDER. THEREFORE, THIS NEEDS THOROUGH INVES TIGATION AND VERIFICATION BY THE LD.CIT(E). THEREFORE, SHE SU BMITTED THAT IT SHOULD BE REMITTED BACK. 5. CONSIDERED THE RIVAL SUBMISSIONS AND MATERIAL ON RECORD. WE NOTICED THAT LD.CIT(E) DENIED THE EXEMPTION U/S. 12AA OF THE ACT, MAINLY FOR THE REASON THAT THE ACTIVITIES OF THE ASSESSEE ARE EXTENDED BEYOND THE TERRITORY OF INDIA. THE COURTS HAVE HELD THAT THIS IS NOT THE PARTICULAR REASON TO DENY THE REGISTRATION U/S. 12AA OF THE ACT. IN THE CASE OF M. K. NAMBYAR SAARE LAW CHARITABLE TRUST VS. UNION OF INDI A & ORS. ITA NO. 2038/HYD/2017 :- 4 -: [269 ITR 556], THE HON'BLE HIGH COURT OF DELHI HAS HE LD AS UNDER: AS THE BENEFIT OF SECTION 11(1)(A) IS CONCERNED, I T CAN BE EXTENDED ONLY TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. HOWEVER, IF THE INCOME IS APPLIED TO THE PUR POSES OUTSIDE INDIA, THEN CLAUSE (C) WILL BE APPLICABLE AND IF THE PERMI SSION IS GRANTED BY THE BOARD EITHER BY GENERAL OR SPECIAL ORDER, THEN, BENEFIT CAN BE EXTENDED. SECTION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. READING THE SECTION, IT BECOMES CLEAR THAT AFTER TH E APPLICATION IS MADE, THE OFFICER HAS TO CALL FOR DOCUMENTS OR INFO RMATION FROM THE TRUST TO SATISFY HIMSELF ABOUT THE GENUINENESS OF T HE ACTIVITIES OF THE TRUST. HE CAN MAKE FURTHER ENQUIRY AS HE MAY DEEM N ECESSARY. IT IS ONLY AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES THAT HE HAS TO PASS A N ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION. AND IF HE IS NOT SATISFIED, HE CAN REJECT THE SAME. THIS SECTION DOES NOT REFER TO THE ACTIVITIES IN INDIA OR OUTSIDE INDIA. IT REFERS TO APPLICATION OF INCOME F OR CHARITABLE OR RELIGIOUS PURPOSES IN INDIA AS ALSO WITH DIRECTION OR ORDER OF THE BOARD FOR APPLICATION OF INCOME AS AFORESAID OUTSID E INDIA. READING THE IMPUGNED ORDER IT IS VERY CLEAR THAT THERE IS N ON-APPLICATION OF MIND. IT WAS NECESSARY FOR THE COMMISSIONER TO EXAM INE THE PURPOSE FOR SATISFYING HIMSELF THAT THE ACTIVITIES ARE GENU INE. IT WAS OPEN FOR HIM TO MAKE NECESSARY ENQUIRIES IN THIS BEHALF AND TO PASS AN ORDER AS PER THE PROCEDURE LAID DOWN UNDER SECTION 12AA O F THE SAID ACT. SO FAR AS INCOME WHICH IS APPLIED OUTSIDE INDIA IS CONCERNED, IS NOT A RELEVANT CRITERIA FOR REJECTING THE APP1ICATION. IN ABSENCE OF ORDER UNDER SECTION 11(1)(A) OR (C), ONE CANNOT SEEK BENE FIT FOR APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS PURPOSES, OUTSID E INDIA. THEREFORE, THE ORDER PASSED BY THE DIRECTOR OF INCOME TAX (EXE MPTIONS) WHICH IS BASED ON IRRELEVANT CRITERIA IS QUASHED AND SET ASI DE WITH A DIRECTION TO CONSIDER THE APPLICATION STRICTLY IN ACCORDANCE WITH LAW. IT IS MADE CLEAR THAT EVEN APPLICATION UNDER SECTION 80G IS RE QUIRED TO BE CONSIDERED AFRESH. 5.1. THEREFORE, BY CONSIDERING THE ABOVE RATIO, WE AR E OF THE VIEW THAT THE LD.CIT(E) SHOULD HAVE GIVEN ONE MORE OPPORTUNITY TO ASSESSEE FOR MAKING PROPER CHANGES IN THE OBJECTIVES OF THE TRUST RATHER THAN REJECTING THE APPLICA TION UNDER RULE 10A. THEREFORE, WE ARE REMITTING THE MATTER BACK ITA NO. 2038/HYD/2017 :- 5 -: TO THE FILE OF LD.CIT(E) TO CONSIDER THE AMENDED TRUST DEED AND GIVE PROPER OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE BEFORE MAKING ANY DECISION IN THIS ASPECT OF GRANTING REGISTRATION U/S. 12AA AND TAKE APPROPRIATE DECISION UN DER THE LAW. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2018 SD/- SD/- (P. MADHAVI DEVI) (S. RIF AUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT M EMBER HYDERABAD, DATED 9 TH NOVEMBER, 2018 TNMM ITA NO. 2038/HYD/2017 :- 6 -: COPY TO : 1. DAWAT E ISLAMI AP, C/O. SHRI MD. AFZAL, ADVOCATE , 11-5-465, FLAT NO. 402, SHERSONS RESIDENCY, CRIMIN AL COURT ROAD, RED HILLS, HYDERABAD. 2. THE COMMISSIONER OF INCOME TAX(EXEMPTIONS), HYDERABAD. 3. ADDL.CIT(EX)-HYDERABAD. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.