Thamizh Thai Seva Trust, CHENNAI V. DIT, CHENNAI

ITA 2104/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81242 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-11-2014
• Assessment Year: misc
• Appeal Filed On: 04-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI IRS
• Assessee Lawyers: N DEVANATHAN
• Keywords: Charitable institution; Competent authority
• Section: 12AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , !' , # $! % BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ ITA NO. 2104 /MDS/2013 THAMIZH THAI SEVA TRUST, NO.3, LAKSHMI AVENUE, AMBAL NAGAR, SENNEER KUPPAM, POONAMALLEE, THIRUVALLUR DIST. CHENNAI 600 056. PAN AACTT1869N APPELLANT) V. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI 600 034. RESPONDENT) / APPELLANT BY : SHRI N. DEVANATHAN, ADVOCATE / RESPONDENT BY : SHRI ANIRUDH RAI, IRS, CIT / DATE OF HEARING : 10 TH NOVEMBER, 2014 / DATE OF PRONOUNCEMENT: 10 TH NOVEMBER, 2014 $& / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE ASSESSEE IS A TRUST. IT APPLIED FOR REGISTRATION UNDER SEC. 12AA OF THE INCOME-TAX ACT, 1961, SO AS TO SECURE THE STATUS OF A CHARITABLE INSTITUTION. THE APPLICATION FOR REGISTRATION WAS FILED ON 1 ST - - ITA 2104 /13 2 FEBRUARY, 2013. THE DIRECTOR OF INCOME-TAX(EXEMPTI ONS) AT CHENNAI CONSIDERED THE APPLICATION PUT IN BY THE AS SESSEE AND FOUND THAT THE ASSESSEE TRUST DOES NOT QUALIFY FOR REGISTRATION UNDER SEC. 12AA OF THE ACT. ACCORDINGLY, THE DIREC TOR OF INCOME- TAX(EXEMPTIONS) REJECTED THE APPLICATION FILED BY T HE ASSESSEE THROUGH HIS ORDER DATED 30 TH AUGUST, 2013. 2. THE ASSESSEE TRUST IS AGGRIEVED BY THE REJECTION ORDER PASSED BY THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) AN D, THEREFORE, THE PRESENT APPEAL, FILED BEFORE THE TRI BUNAL. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE TRU ST READ AS BELOW : 1. IN ORDER OF THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTIONS) [DIT(E)], IS OPPOSED TO LAW AND FACTS. 2. THE LEARNED DIT(E) ERRED IN STATING THAT THE TRU ST DEED OF APPELLANT TRUST CONTAINED SO MANY OBJECTS AND TH AT IT WOULD BE NEXT TO IMPOSSIBLE TO EXECUTE ALL THE OBJE CTS IN THE TRUST DEED. THE LEARNED DIT(E) OUGHT TO HAVE S EEN THAT THE GENUINENESS OF THE TRUST IS NOT VITIATED B ECAUSE IF NUMEROUS OBJECTS IN THE TRUST DEED. 3. FURTHER THE LEARNED DIT(E) ERRED IN STATING THAT ONE OF THE OBJECTS MENTIONED IN THE TRUST DEED VIZ., - - ITA 2104 /13 3 (A) TO ORGANIZE MILK SOCIETIES FOR FACILITATING SAL E OF MILK WHEREVER NECESSARY (B) TO ESTABLISH FACTORIES LIKE GINNING, HAND LOOM, SPINNING, FRUIT PROCESSING, FIBER, OIL EXTRACTION, AND PROCESSING AGRICULTURAL PRODUCTS FOR THE ECONOMIC DEVELOPMENT OF RURAL POOR WOMEN, ARE COMMERCIAL IN NATURE AND THAT THESE OBJECTS WIL L NOT BE COVERED UNDER THE DEFINITION OF CHARITABLE PURP OSE AS PER PROVISO TO SEC.2(15) OF INCOME TAX ACT, 1961 . 4. THE LEARNED DIT(E) HAD FAILED TO SEE THAT THESE OBJECTS WERE OF GENERAL PUBLIC UTILITY AND THAT THE RE IS NO COMMERCIAL ELEMENT IN SUCH ACTIVITIES. THE APPELLA NT RESPECTFULLY SUBMITS THAT THE ABOVE OBSERVATIONS OF LEARNED DIT(E) ARE NOT AT ALL WARRANTED WHILE CONSI DERING APPLICATION FOR REGISTRATION U/S 12AA OF THE IT ACT , 1961. 4. WE HEARD SHRI N. DEVANATHAN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE TRUST AND SHRI ANIRUDH R AI, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR TH E REVENUE. 5. THE APPLICATION FILED BY THE ASSESSEE TRUST HAS BEEN REJECTED BY THE COMPETENT AUTHORITY ON TWO SPECIFIC GROUNDS. THE FIRST GROUND IS THAT THE DECLARED OBJECTS OF TH E ASSESSEE TRUST ARE INNUMERABLE IN NUMBER AND IDEALISTIC IN CHARACT ER AND, THEREFORE, SUCH CONGLOMERATION OF OBJECTS IS VAGUE THAT THE - - ITA 2104 /13 4 OBJECTS COULD NOT BE CONSIDERED AS REAL AND PRACTIC AL. THE SECOND GROUND IS THAT CERTAIN OBJECTS MENTIONED IN THE TRUST DEED OF THE ASSESSEE, ARE OF COMMERCIAL IN NATURE AND, T HEREFORE COULD NOT BE TREATED AS ACTIVITIES FOR CHARITABLE P URPOSE AS PER THE PROVISO TO SEC.2(15) OF THE ACT. 6. REGARDING THE VERBOSITY OF THE OBJECTS MENTIONED IN THE TRUST DEED, THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) OBSERVED THAT THE OBJECTS OF THE ASSESSEE TRUST RUN INTO SIX PAGE S ENCOMPASSING OF ALL THE ACTIVITIES CONTEMPLATED IN THE FIELD OF EDUCATION, MEDICAL RELIEF, RELIEF OF THE POOR AND S O MANY OTHER IDEALISTIC PROPOSITIONS. THE DIRECTOR OF INCOME-TA X(EXEMPTIONS) CONCLUDES THAT THERE IS CONGLOMERATION OF OBJECTS W HICH MAKES EVERYTHING VAGUE AND DISTANT AND THEREFORE, OF NO P RACTICAL MERIT. 7. IN OUR CONSIDERED VIEW, THE ABOVE OBJECTION HIGH LIGHTED BY THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) AT CHENNAI, IS RATHER ACADEMIC OR LOGICAL. IT IS FOR THE ASSESSEE TRUST TO DECIDE WHAT SHOULD BE ITS OBJECTS. IT IS A COMMON PRACTICE IN DRAFTING AND CONVEYANCING THAT ALL POSSIBLE OBJECTIVES WHETHER P RINCIPAL OR INCIDENTAL, ARE SUBSTANTIALLY NARRATED IN THE CHART ER - - ITA 2104 /13 5 MEMORANDUM. THIS PRACTICE OF ABUNDANT STATEMENTS USUALLY DEPLOYED IN DRAFTING AND CONVEYANCING OF DEED AND D OCUMENTS IS VERY FAMILIAR IN MEMORANDUM AND ARTICLES OF ASSOCIA TION OF JOINT STOCK COMPANIES. THEY VISUALIZE ALL SORTS OF ACTI VITIES GERMANE TO THE MAIN SET OF OBJECTS OF THE COMPANY. THIS IS USUALLY PRACTICED IN TRUST DEED AS WELL. THIS IS BECAUSE C HANGING TIMES DEMAND CHANGES IN PRIORITIES. THE BASIC CHARTER O F A TRUST CANNOT BE AMENDED OFF AND ON. THEREFORE, IN ORDER TO COPE WITH THE PRIORITIES OF THE FUTURE IT HAS TO BECOME NECES SARY FOR TRUSTS AND SUCH OTHER INSTITUTIONS TO STATE THEIR OBJECTS IN VERY MANY WORDS ENCOMPASSING ALL FIELDS OF CHARITABLE ENDEAVO URS. IT IS NOT NECESSARY THAT A TRUST SHOULD CARRY ON ALL AND EVER Y ONE OF ITS STATED OBJECTS. IT IS SUFFICIENT THAT A TRUST CARR IES ON SELECTED NUMBER OF OBJECTS STATED IN ITS CHARTER. IN THE PR ESENT CASE, OUT OF A NUMBER OF DECLARED OBJECTS, THE ASSESSEE TRUST MAY BE PURSUING ONLY ONE OR TWO VIABLE OBJECTS AND MAY ADV ENT UPON OTHER OBJECTS AS AND WHEN THE CIRCUMSTANCES PERMIT. THEREFORE, STATING A LARGE NUMBER OF OBJECTS IN THE TRUST DEED DOES NOT DIS- ENTITLE THE ASSESSEE FROM CLAIMING THE STATUS OF A CHARITABLE TRUST. IT IS ONLY SUFFICIENT TO LOOK INTO WHETHER THE ACTU AL ACTIVITIES - - ITA 2104 /13 6 CARRIED ON BY THE ASSESSEE TRUST ARE COMING UNDER A NY OF THE OBJECTS STATED IN ITS TRUST DEED. WE FIND THAT THE FIRST GROUND RAISED BY THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) MA Y NOT BE SUSTAINABLE IN LAW. 8. THE SECOND GROUND POINTED OUT BY THE DIRECTOR OF INCOME- TAX(EXEMPTIONS) IS THAT CERTAIN OBJECTS STATED BY T HE ASSESSEE TRUST ARE COMMERCIAL IN NATURE IMPERMISSIBLE UNDER THE PROVISO TO SEC.2(15) OF THE ACT. SUCH OBJECTS POINTED OUT BY THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) ARE TO ORGANIZE MILK SOCIET IES FOR FACILITATING SALE OF MILK WHEREVER NECESSARY; TO ES TABLISH FACTORIES LIKE GINNING, HAND LOOM, SPINNING, FRUIT PROCESSING , FIBER, OIL EXTRACTION, AND PROCESSING AGRICULTURAL PRODUCTS FO R THE ECONOMIC DEVELOPMENT OF RURAL POOR WOMEN. ACCORDING TO THE DIRECTOR OF INCOME-TAX(EXEMPTIONS), THE ABOVE ACTIVITIES ARE IN THE NATURE OF COMMERCIAL ACTIVITIES AND, THEREFORE, CANNOT BE CON SIDERED AS ACTIVITIES FOR CHARITABLE PURPOSE. 9. IT IS TRUE THAT THE PROVISO TO SEC.2(15), RESTRI CTS THE SCOPE OF CHARITABLE PURPOSE IN A CASE WHERE THE ACTIVITIE S CARRIED ON BY AN ASSESSEE INVOLVES ACTIVITIES IN THE NATURE OF TR ADE, COMMERCE - - ITA 2104 /13 7 OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVI CE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITIES. IN THE PRESENT CASE, THE OBJECT OF THE ASSESSEE TRUST IS NOT TO OR GANIZE MILK SOCIETIES AND RUN FACTORIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE CRUCIAL POINT TO BE LOOKED INTO THE OBJECTIVE IS THAT THOSE ACTIVITIES ARE PROPOSED TO BE CARRIED OUT FOR ECONOMIC DEVELOPMENT OF RURAL, POOR WOMEN. THE ACTIVITIES FOR THE UPLIFTMENT OF RURAL WOMEN IN INDIA ARE GENERALLY CO NSIDERED AS CHARITABLE IN NATURE. IN ORDER TO IMPROVE THE ECON OMIC CONDITIONS OF POOR PEOPLE IN VILLAGES, IT IS VERY NECESSARY TH AT THE RURAL POPULATION MUST ENGAGE IN SOME ECONOMIC ACTIVITIES OUT OF WHICH THEY CAN EARN REASONABLE LIVELIHOOD. ECONOMIC ACTI VITIES ARE VERY ESSENTIAL TO GENERATE INCOME, WHICH IS AGAIN E SSENTIAL TO ENSURE A SUSTAINABLE GROWTH FOR THE POOR PEOPLE IN VILLAGES. THEREFORE, CARRYING ON OF ECONOMIC ACTIVITIES FOR G ENERATING INCOME FOR THE POOR PEOPLE IN VILLAGES CANNOT BE TR EATED AS ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS. THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSI NESS HAVE - - ITA 2104 /13 8 ESSENTIALLY AN UNDERLYING OBJECTIVE OF EARNING PROF IT BY ASSUMING RISK. THERE IS ALSO A NECESSITY OF INTRODUCING CA PITAL INTO BUSINESS. AS FAR AS THE PRESENT CASE IS CONCERNED, THE ASSESSEE TRUST CONTEMPLATES TO HELP RURAL POOR WOMEN TO SET UP MILK SOCIETIES AND FACTORIES FOR GIVING FRUITFUL EMPLOYM ENT TO SUCH RURAL WOMEN-FOLK. IN THESE CASES, HUGE CAPITAL INVESTMEN TS ARE NOT CONTEMPLATED; PROFITS AND GAINS ARE NOT EXPECTED. THE CONTRIBUTION OF RURAL POOR WOMEN WILL BE IN THE NAT URE OF THEIR LABOUR. INSTEAD OF WORKING AS LABOUR FOR OTHERS, T HE WOMEN-FOLK ARE PROMPTED TO JOIN THEMSELVES AS GROUPS AND SOCIE TIES SO THAT THEY CAN WORK FOR THEIR BETTERMENT BY AVOIDING MIDD LEMEN AND AGENTS. WHEN THE ASSESSEE TRUST CONTEMPLATES TO OR GANIZE MILK SOCIETIES FOR FACILITATING SALE OF MILK, THE UNDERL YING INTENTION IS TO GET GOOD PRICE FOR THE MILK SOLD BY THE VILLAGERS A ND ALSO TO ENCOURAGE THEM TO REAR THEIR OWN MILCH ANIMALS. TH E VILLAGERS CAN EARN A DECENT LIVELIHOOD BY ENGAGING THEMSELVES IN REARING OF MILCH ANIMALS AND SELLING OF MILK WITHOUT MIDDLE MEN AND EXPLOITATION, THROUGH THE SOCIETIES FORMED UNDER TH E GUIDANCE OF THE ASSESSEE TRUST. THIS IS THE SAME CASE WITH OT HER PROPOSED ACTIVITIES LIKE GINNING, SPINNING, FRUIT PROCESSING ETC., WHERE - - ITA 2104 /13 9 LABOUR OF THE VILLAGE WOMEN-FOLK COULD BE FRUITFULL Y DEPLOYED, TO KEEP AWAY EXPLOITATION. 10. THE ECONOMIC ACTIVITIES IN THE ABOVE NATURE CAN NOT BE TREATED AS ACTIVITIES IN THE NATURE OF TRADE, COMME RCE OR BUSINESS AS CONTEMPLATED IN PROVISO TO SEC.2(15). THEREFORE , WE FIND THAT THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) HAS CHARACTE RIZED THE ACTIVITIES OF THE ASSESSEE TRUST AS COMMERCIAL IN NATURE WITHOUT GOING INTO THE CIRCUMSTANCES IN WHICH THE ACTIVITIE S ARE CONTEMPLATED TO BE CARRIED ON BY THE ASSESSEE TRUST . 11. THE ASSESSEE TRUST HAS NOT SO FAR CARRIED OUT A NY SUBSTANTIAL ACTIVITIES AS PROCLAIMED BY THEM, FOR W ANT OF FUNDS. IT IS STATED THAT THE TRUST IS IN THE PROCESS OF COLLE CTING FUNDS TO ACCOMPLISH ITS OBJECTIVES. THEREFORE, IT IS NOT PO SSIBLE NOW TO SAY WHETHER THE ACTIVITIES CARRIED ON BY THE ASSESS EE ARE OUTSIDE THE PURVIEW OF CHARITABLE ACTIVITIES OR NOT. THE C ONCLUSION OF THE DIRECTOR OF INCOME-TAX(EXEMPTIONS)IS PREMATURE. 12. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE TRUST IS QUALIFIED FOR REGISTRATION U NDER SEC.12AA OF THE ACT. THE ORDER OF THE DIRECTOR OF INCOME-TAX(E XEMPTIONS) IS - - ITA 2104 /13 10 SET ASIDE. THE COMPETENT AUTHORITY IS DIRECTED TO GRANT TO THE ASSESSEE TRUST, REGISTRATION UNDER SEC.12AA OF THE ACT. 13. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COU RT AT THE TIME OF HEARING ON MONDAY, THE 10 TH OF NOVEMBER, 2014 AT CHENNAI. SD/- SD/- ( ! ' ) ( #$ . . . % (VIKAS AWASTHY) (DR. O.K.NARAYANAN) & '(' /JUDICIAL MEMBER ) *+ /VICE-PRESIDENT ,& /CHENNAI, -( /DATED, THE 10 TH NOVEMBER, 2014. MPO* (.'/!0! /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. 1 % /CIT(A) 4. 1 /CIT 5. !2 3''45 /DR 6. 3 #67 /GF.