M/s. Disha Trust, CHENNAI V. DIT, CHENNAI

ITA 2087/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73745 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 12-02-2014
• Assessment Year: misc
• Appeal Filed On: 20-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: V D GOPAL
• Keywords: Charitable institution; Cancellation of registration
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO.2087/MDS./2012 M/S.DISHA TRUST , BASEMENT FLOOR,NO.2/1, LATTICE BRIDGE ROAD, ADYAR,CHENNAI 600 020. VS. DIRECTOR OF INCOME TAX(EXEMPTIONS), 21,MAHATMA GANDHI ROAD, CHENNAI 600 034. PAN AAB TD 6710 F ( &' / APPELLANT ) ( #(&' / RESPONDENT ) / APPELLANT BY : SHRI V.D.GOPAL, ADVOCATE / RESPONDENT BY : SHRI N.MADHAVAN, JCIT D.R. / DATE OF HEARING : 12.02.2014 /DATE OF PRONOUNCEMENT : 07.03.2014 ) / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE-TRUST, AGAIN ST THE ORDER OF THE DIRECTOR OF INCOME TAX(EXEMPTIONS),CHENNAI DAT ED 21.09.2012 ITA NO.2087/MDS/12 2 IN DIT(E) NO.2(982)/11-12 WHEREIN THE LD. DIT(E) DE NIED REGISTRATION TO THE ASSESSEE- TRUST UNDER SECTION 1 2AA OF THE ACT. 2. THE BRIEF FACTS OF THE CASE AS SUBMITTED BY THE LD. A.R. ARE THAT THE ASSESSEE IS A TRUST CONSTITUTED BY A TRUST DEED DATED 12.01.2012, FILED APPLICATION FORM NO.10A ON 01.03. 2012 SEEKING REGISTRATION U/S. 12AA OF THE ACT. IT WAS SUBMIT TED BEFORE THE LD.DIT(E) THAT THE ASSESSEE TRUST HAD NOT STARTED I TS ACTIVITY AND THE BANK ACCOUNTS ARE YET TO BE OPENED. BASED ON THESE SUBMISSIONS, LD.DIT(E) ARRIVED AT A CONCLUSION THAT SINCE THE AS SESSEE TRUST HAD NOT STARTED ITS ACTIVITIES, IT IS NOT ENTITLED FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. LD. DIT(E) FURTHER CAME TO A CON CLUSION THAT SINCE THE ASSESSEE TRUST HAD MIXED OBJECTS OF CHARITABLE & RELIGIOUS NATURE, IT IS NOT QUALIFIED FOR GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT. THUS, THE LD DIT(E) DENIED REGISTRATION UNDER THE ACT TO THE ASSESSEE-TRUST AND REJECTED THE APPLICATION FILED B Y IT. 3. BEFORE US, LD. A.R. SUBMITTED THAT THE TRUST WA S CREATED BY ICICI BANK IN PURSUANCE OF THE DIRECTIONS OF THE RE SERVE BANK OF ITA NO.2087/MDS/12 3 INDIA (RBI) FOR THE PURPOSE OF PROMOTING FINANCIAL LITERACY AMONGST FARMERS AND TO PROMOTE COUNSELING SERVICES TO THEM AND OTHER BORROWERS AND SMALL INVESTORS. IT WAS ALSO SUBMITT ED THAT THE TRUST WAS A WELL ESTABLISHED ORGANIZATION AND HAD STARTED CARRYING OUT ITS OBJECTIVES WITH THE EXISTING INFRASTRUCTURES. FURT HER, THE TRUST DOES NOT CONTEMPLATE ANY RELIGIOUS ACTIVITY. THE TRUST WAS CONSTITUTED FOR THE BENEFITS OF THE MEMBERS OF THE PUBLIC WITHOUT ANY P ROFIT MOTIVE. HENCE, THE TRUST WAS A PUBLIC CHARITABLE TRUST. THE REFORE, THE LD.A.R PLEADED THAT DIRECTIONS MAY BE GIVEN TO THE LD.DIT( E) FOR GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT. 4. LD. D.R STOUTLY OPPOSED TO THE SUBMISSIONS OF T HE LD. A.R. AND ARGUED STATING THAT THE TRUST HAD NOT STARTED ITS A CTIVITIES AND SINCE THE ACTIVITIES WERE MIXED, LD DIT(E) WAS RIGHT IN REJEC TING THE APPLICATION OF THE ASSESSEE AND THEREFORE, REQUESTED THAT THE O RDERS OF LD DIT(E) MAY BE UPHELD. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE LD. A.R. HAD RELIED IN THE DECISION OF THE FOLLOWING CASES:- ITA NO.2087/MDS/12 4 I). HARDAYAL CHARITABLE & EDUCATIONAL TRUST VS.CIT-II , AGRA REPORTED IN [2013] 32 TAXMANN.COM 341 (ALLAHABAD). AT THE TIME OF REGISTRATION UNDER SECTION 12 AA WHICH IS NECESSARY FOR CLAIMING EXEMPTION U/S. 11 & 12, THE COMMISSIONER IS NOT REQUIRED TO LOOK INTO THE ACTIV ITIES, WHERE SUCH ACTIVITIES HAVE NOT COMMENCED OR ARE IN THE PR OCESS OF ITS INITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS O BJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION, IS IN THE PRO CESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATI ONS, THE REGISTRATION UNDER SECTION 12AA CANNOT BE REFUSED ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CH ARITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOUL D AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE O NLY THE GENUINENESS OF THE OBJECTS HAS TO BE TESTED AND NOT THE ACTIVITIES, WHICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMISSIONER AT SUCH PRELIMINARY STAGE SHOULD BE RE STRICTED TO GENUINENESS OF THE OBJECTS AND NOT THE ACTIVITIES U NLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CAN NOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED U/S. 12AA AND, T HUS, AT SUCH INITIAL STAGE THE TEST OF THE GENUINENESS OF THE AC TIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED.[ PARA 21] ITA NO.2087/MDS/12 5 IN THE INSTANT CASE, IT IS NOT DENIED THAT F OR SUBSEQUENT YEAR THE ASSESSEE HAS BEEN GRANTED EXEMPTION U/S. 12AA AND H AS ALSO BEEN APPROVED U/S. 80G SUBJECT TO CERTAIN CONDITION S. IF THE COMMISSIONER WAS SATISFIED WITH THE GENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUBSEQUENT ASSESSMENT YEAR, TH E REFUSAL OF THE REGISTRATION FOR THE PREVIOUS ASSESSMENT YEAR 2 011-12 WAS NOT JUSTIFIED [PARA 22] THE QUESTION OF THE EXEMPTION OF THE APPLICA TION OF INCOME RECEIVED BY WAY OF DONATION IS A SEPARATE ISSUE WHI CH MAY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN IS FILED BY THE TRUST AND IS EXAMINED BY THE INCOME TAX OFFICER. THE QUE STION AS T WHETHER THE DONATION BY THE SOCIETIES WAS THE EXPEN DITURE OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES WIL L BE EXAMINED AT THE TIME OF EXAMINING THE RETURN.[PARA 23] IN THE RESULT THE INCOME TAX APPEAL IS ALLOW ED.[PARA 24] II). DIT(E) V. MEENAKSHI AMMA ENDOWMENT TRUST REPORTED IN [2013] 219 TAXMAN 136 (KARNATAKA)(MAG.) THE TRUST WAS FORMED ON 23.1.2008, AND WITHIN A PE RIOD OF NINE MONTHS THEY HAD FILED AN APPLICATION U/S. 12A FOR I SSUANCE OF THE REGISTRATION CLAIMING EXEMPTION. THE FACT THAT THE CORPUS OF THE TRUST IS NOTHING BUT THE CONTRIBUTION OF RS.1,000 B Y EACH OF THE TRUSTEES AS CORPUS FUND GOES TO SHOW THAT THE TRUST EES WERE ITA NO.2087/MDS/12 6 CONTRIBUTING THE FUNDS BY THEMSELVES IN A HUMBLE WA Y AND WERE INTENDING TO COMMENCE CHARITABLE ACTIVITIES. IT IS NOT EVEN THE CASE OF THE REVENUE THAT BY THE TIME THE APPLICATION OF THE ASSESSEE CAME TO BE CONSIDERED BY THEM, THE ASSESSEE HAD COL LECTED LOTS OF DONATIONS FOR THE ACTIVITIES OF THE TRUST. WHEN THE TRUST ITSELF WAS FORMED IN JANUARY, 2008, WITH THE MONEY AVAILABLE W ITH THE TRUST, ONE CANNOT EXPECT THEM TO DO ACTIVITY OF CHARITY IM MEDIATELY AND BECAUSE OF THAT SITUATION THE AUTHORITY CANNOT COME TO A CONCLUSION THAT THE TRUST WAS NOT INTENDING TO DO ANY ACTIVITY OF CHARITY. IN SUCH A SITUATION THE OBJECTS OF THE TRUST HAVE TO BE TAK EN INTO CONSIDERATION BY THE AUTHORITY AND THE OBJECTS OF T HE TRUST COULD BE READ FROM THE TRUST DEED ITSELF.(PARA 5) A TRUST COULD BE FORMED TODAY AND WITHIN A WEEK RE GISTRATION U/S. 12A COULD BE SOUGHT AS THERE IS NO PROHIBITION UNDE R THE ACT SEEKING SUCH REGISTRATION. THE ACTIVITIES OF THE T RUST HAVE TO BE CONSIDERED IF SUCH REGISTRATION IS SOUGHT MUCH LATE R THAN THE FORMATION OF THE TRUST OR AFTER EXPIRY OF THE EARLI ER REGISTRATION GRANTED IN FAVOUR OF THE TRUST. THEREFORE, IN A CA SE OF THIS NATURE WHERE THE TRUST HAS APPROACHED THE AUTHORITY FOR RE GISTRATION U/S. 12A WITHIN A SPAN OF EIGHT MONTHS OF ITS FORMATION, THE ABOVE MENTIONED CRITERIA, NAMELY, THE OBJECTS OF THE TRUS T FOR WHICH IT WAS FORMED WILL HAVE TO BE EXAMINED TO BE SATISFIED ABO UT ITS ITA NO.2087/MDS/12 7 GENUINENESS AND THE ACTIVITIES OF THE TRUST CANNOT BE THE CRITERION, SINCE IT IS YET TO COMMENCE ITS ACTIVITIES. [PARA 6 ] III). SANJEEVAMMA HANUMANTHE GOWDA CHARITALE TRUST VS. DI T(E) REPORTED IN [2006] 285 ITR 327 SECTION 11 OF THE ACT DEAL WITH EXEMPTIONS AVAILAB LE TO INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. EXEMPTION FROM TAX WILL BE ALLOWED ONLY IN RESPECT OF THE INC OME ACTUALLY APPLIED TO THE PURPOSES OF THE TRUST. INCOME DERIVED FOR TRUST PROPERTY MUST BE DETERMINED ON COMMERCIAL PRINCIPLES. IN ORDER TO BE ELIGIBLE FOR THE AFORESAID EXEMPTION THE ASSESSEE HAS TO GET THE TRU ST REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE HAS TO MAKE AN APPLICATION IN THE PRESCRIBED FORM AND COMPLY WITH THE OTHER LEGAL REQUIREMENTS MENTIONED IN THE AFORESAID SECTION. ON RECEIPT OF SUCH APPLICATION FOR REGISTRATION THE CIT IS UNDER AN OB LIGATION TO FOLLOW THE PROCEDURE PRESCRIBED UNDER SECTION 12AA BEFORE HE G RANTS OR REFUSES REGISTRATION. WHAT HE IS EXPECTED TO DO ON RECEIPT OF SUCH AN APPLICATION IS, HE SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACT IVITIES OF THE TRUST OR INSTITUTION. IN ADDITION TO SECURING INFORMATION IN THE AFORESAID MANNER, IT IS OPEN TO THE CIT TO MAKE SUCH ENQUIRIES AS HE DEE MS NECESSARY IN THIS BEHALF. HAVING REGARD TO THE SCHEME OF SECTION S 11, 12 AND 13 ITA NO.2087/MDS/12 8 ULTIMATELY WHAT THE CIT HAS TO LOOK INTO IS NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER SUCH INCOME IS APPLIED FOR CH ARITABLE OR RELIGIOUS PURPOSES. THE SATISFACTION OF THE CIT SHOULD BE REG ARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE AFOR ESAID PURPOSES WHICH ONLY ENTITLE THE ASSESSEE TO CLAIM EXEMPTION. FOR A RRIVING AT SUCH SATISFACTION PRIMARILY HE HAS TO LOOK AT THE OBJECT OF THE TRUST, WHEN THE SAME IS REDUCED INTO WRITING IN THE FORM OF TRUST D EED. IF ON THE DATE OF THE APPLICATION THE TRUST HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHET HER IT CAN BE SAID THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E., TOWARDS THE OBJECT OF THE TRUST. TH EREFORE, FOR THE PURPOSE OF REGISTRATION UNDER SECTION 12AA OF THE A CT, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF T HE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED TO THE TRU ST.[PARA 4] SUB-SECTION (3) OF SECTION 12AA OF THE ACT PROVIDE S THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UND ER CLAUSE (B) OF SUB- SECTION (1) AND SUBSEQUENTLY THE CIT IS SATISFIED T HAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NO T BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING TH E REGISTRATION OF SUCH ITA NO.2087/MDS/12 9 TRUST OR INSTITUTION. THEREFORE, SUFFICIENT SAFEGUA RD IS PROVIDED UNDER THE ACT FOR CANCELLATION OF REGISTRATION OBTAINED BY TH E ASSESSEE, IN THE EVENT OF ITS MISUSING THOSE PROVISIONS.[PARA 5] IN THE INSTANT CASE THE AUTHORITIES HAVE NOT KEPT IN MIND THESE MANDATORY PROVISIONS. THEY HAVE NOT APPLIED THEIR M IND IN THE WAY THEY ARE EXPECTED TO, BEFORE PASSING THE IMPUGNED ORDERS . THEREFORE, BOTH THE ORDERS CANNOT BE SUSTAINED.[PARA 6] 5.1 FURTHER ON PERUSING THE TRUST DEED OF THE A SSESSEE TRUST WE FIND THAT OBJECTS OF THE TRUST ARE AS FOLLOWS: THE TRUST HAS BEEN ESTABLISHED WITH THE FOLLOWING O BJECTS : A) TO PROVIDE CREDIT COUNSELLING SERVICES TO PERS ONS FOR THE PURPOSES OF, AMONGST OTHERS, FACILITATING EFFICIENT DEBT MANAGEM ENT AND PROMOTING AND ASSISTING BETTER CREDIT MANAGEMENT; B) TO SET UP OF CENTERS ACROSS THE COUNTRY FOR PROV IDING CREDIT COUNSELLING SERVICES OR USE ANY OTHER CHANNEL, INCL UDING INTERNET, PHONE OR TELEVISION, FOR THE PURPOSES OF PROVIDING THE CREDIT COUNSELLING SERVICES; ITA NO.2087/MDS/12 10 C) TO PURCHASE PROPERTY, MOVABLE OR IMMOVABLE, IN THE NAME OF THE TRUST FOR THE PURPOSES OF ESTABLISHING THE CENTERS AND/OR INFRASTRUCTURE FOR PROVIDING CREDIT AND COUNSELLING SERVICES; D) TO FORM, CONSTITUTE, PROMOTE, SUBSIDIZE, ORG ANIZE OR AID IN FORMING, CONSTITUTING, PROMOTING, ORGANIZING OR ASSISTING OR AIDING ANY COMPANIES/TRUST/ALLIANCES/PARTNERSHIPS (INCLUDING A NY KIND OF FUNDS IN THE FORM OF COMPANIES/TRUSTS IN CONSULTATION WITH T HE ADVISORY COUNCIL, FOR THE PURPOSES OF PROMOTING, EXPANDING OR WIDENIN G THE NETWORK FOR PROVIDING THE CREDIT COUNSELLING SERVICES IN ACCORD ANCE WITH THE PROVISIONS OF THE TRUST DEED; E) TO INVEST THE SURPLUS AMOUNTS OF THE TRUST FUNDS , IF ANY, IN INVESTMENTS PERMITTED UNDER THE INCOME TAX LAW. F) TO PROVIDE ON A QUARTERLY BASIS REPORT TO THE SE TTLOR GIVING DETAILS OF THE BUSINESS AND ACTIVITIES OF THE TRUST, INCLUDING INFORMATION REGARDING CUSTOMER DATABASE, NATURE OF COMPLAINTS/ ENQUIRIES/ SUGGESTIONS/ REDRESSAL STEPS ETC; ITA NO.2087/MDS/12 11 G) DISPLAY PROMINENTLY THE NAME OF ICICI BANK AS T HE SETTLOR OF THE TRUST ON THE CENTERS, BROCHURES, PAMPHLETS, ADVERTISEMENT S, WEBSITE AND ALL OTHER MODES OF EXTERNAL COMMUNICATION; H) SUCH OTHER PURPOSES AS MAY BE DECIDED BY THETRUS TEES IN CONSULTATION WITH THE ADVISORY COUNCIL (WHICH SHALL INCLUDE ANYTHING INCIDENTAL AND ANCILLARY TO THE FUNCTIONING OF THE TRUST AND THE OBJECTS STIPULATED HEREINABOVE). I) ALL OBJECTS OF THE TRUST WILL HAVE TO CONFORM STRICTLY AND NECESSARILY WITH OBJECTS RECOGNIZED AS CHARITABLE UNDER THE INCOME T AX LAW FOR THE TIME BEING IN FORCE; ANY OBJECT CONTRARY TO THE TAX LAW WILL NOT BE RECOGNIZED BY THIS TRUST DEED AND THIS CLAUSE WILL HAVE OVERRIDING EFFECT. 6. CONSIDERING THE RATIO OF THE ABOVE DECISIONS, I T IS EVIDENT THAT THE LD.DIT(E) HAS NOT EXAMINED THE OBJECTS OF THE T RUST FOR GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT, BUT WEN T ON THE WRONG PREMISES THAT THE ASSESSEE TRUST HAS NOT STARTED IT ACTIVITIES AND THE OBJECTS ARE MIXED. THEREFORE, WE HEREBY SET ASIDE THE ORDER OF THE LD.DIT(E) AND REMIT BACK THE MATTER TO HIS FILE IN ORDER TO EXAMINE THE OBJECTS OF THE TRUST AND DECIDE THE MATTER IN THE L IGHT OF THE DECISIONS ITA NO.2087/MDS/12 12 RENDERED BY VARIOUS HONBLE HIGH COURTS MENTIONED S UPRA, AND IN ACCORDANCE WITH THE FACTS OF THE CASE AND LAW. NEE DLESS TO MENTION THAT IN THE PROCESS THE LD.DIT(E) SHALL ANALYZE THE OBJECTS OF THE ASSESSEE TRUST AND DETERMINE WHETHER THE OBJECT WOU LD FALL WITHIN THE PREVIEW OF SECTION 2(15) OF THE ACT AND IF SO UNDER WHICH LIMP OF THE PROVISION I.E., RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FOREST AND WILDLIFE), PRESERVATION OF MONUMENTS OR PLACES OR O BJECTS OF ARTISTIC OR HISTORICAL INTEREST, OR ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY . 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED ON 07 TH MARCH, 2014 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD ) (A.MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 7 TH MARCH, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE ITA NO.2087/MDS/12 13