Sri Venkatarama Achammal Trust, CHENNAI V. CIT, Madurai

ITA 211/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4852 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-06-2011
• Assessment Year: misc
• Appeal Filed On: 10-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI BEFORE SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. ITA NO.211/MDS./2011 SHRI VENKATARAMA ACHAMMAL TRUST, NO.4/55,KUMARAN ILLAM, RAMANA MAHARISHI NAGAR, COLLECTORATE POST, CINDIGUL 624 004. VS. THE COMMISSIONER OF INCOME TAX II, MADURAI 625 002. PAN AAITS 5398 D (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.SEETHARAMAN DEPARTMENT BY : SHRI P.B.SEKARAN O R D E R PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL IS FILED BY THE ASSESSEE, ITS GRIEVANCE IS THAT COMMISSIONER OF INCOME TAX DENIED IT REGISTRAT ION SOUGHT U/S.12AA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). PAGE OF 9 ITA.211 /MDS/11 2 2. ASSESSEE TRUST HAD FILED AN APPLICATION FOR REGISTRATION UNDER SECTION 12AA ON 14.06.2010. COMMISSIONER OF I NCOME TAX WHILE CONSIDERING SUCH APPLICATION REQUIRED THE ASSESSEE TO ATTEND AND TO FILE SUBMISSIONS REGARDING ITS CLA IM FOR REGISTRATION U/S.12AA OF THE ACT. THOUGH THE ASSESS EE PRODUCED AUDITED RECEIPTS AND PAYMENTS ACCOUNTS FOR THE YEAR ENDED 31.03.09, BALANCE SHEET AS ON 31.03.09 AND C OPY OF ITS TRUST DEED, LD. COMMISSIONER OF INCOME TAX WAS OF THE OPINION THAT REQUISITE DOCUMENTS TO HIS SATISFACTI ON WERE NOT PRODUCED BY THE ASSESSEE AND HE THEREFORE DENIED IT THE REGISTRATION SOUGHT FOR. FOR DENYING SUCH REGISTRAT ION, LD. COMMISSIONER OF INCOME TAX MADE A STUDY OF SECTIONS 11 TO 13 OF THE ACT AND MADE PARTICULAR REFERENCE TO SEC. 2(15). HE WAS OF THE OPINION THAT ASSESSEE SHOULD HAVE PRODUC ED AN INCOME EXPENDITURE ACCOUNT WHICH REFLECTED APPLICAT ION OF ITS SURPLUS INCOME, FOR CHARITABLE PURPOSE, AND UNLESS SUCH SURPLUS WAS UTILIZED FOR CHARITY, AND UNTIL IT COU LD BE ESTABLISHED THAT THERE WAS NO VIOLATION OF SEC.13(1 )(C) AND 13(1)(D) OF THE ACT, REGISTRATION U/S.12AA OF THE ACT COULD NOT BE GRANTED. RELIANCE WAS ALSO PLACED ON CIRCULAR NO .762 DT.18.02.98 OF THE CBDT, FOR ELUCIDATING HIS DUTY T O CONDUCT ENQUIRIES REGARDING GENUINENESS OF THE TRUST BEING CONSIDERED FOR REGISTRATION U/S.12AA OF THE ACT. 3. NOW BEFORE US LD. AR VEHEMENTLY ASSAILING THE O RDER OF THE COMMISSIONER OF INCOME TAX SUBMITTED THAT ASSES SEE TRUST WAS CREATED TO DO EDUCATIONAL ACTIVITIES AND HAD DURING THE RELEVANT PREVIOUS YEAR STARTED ITS BUILDING CON STRUCTION IN PAGE OF 9 ITA.211 /MDS/11 3 RIGHT EARNEST. AS PER THE LD. AR RECEIPT AND PAYMEN T ACCOUNT WOULD SHOW THAT CONTRIBUTIONS AND DONATIONS RECEIV ED AND ALSO LOANS RAISED IF ANY, WERE ALL SUBSTANTIALLY USED FOR THE BUILDING CONSTRUCTION. NEVERTHELESS, ACCORDING TO HIM COMMISSIONER OF INCOME TAX WENT OFF TANGENT AND HEL D THAT EDUCATION WAS NOT A CHARITABLE ACTIVITY FALLING WIT HIN THE SEC.2(15) OF THE ACT. AS PER LD. AR THERE WAS NO DI VERSION OF ANY INCOME NOR ANY VIOLATION OF SEC.13 OF THE ACT BY THE ASSESSEE. PER CONTRA LD. DR STRONGLY SUPPORTING TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX, SUBMITTED THAT CHARITY WAS NOT PROVED BY THE ASSESSEE TO HAVE BEEN CARRIED OUT IN ANY MANNER. THEREFORE, ACCORDING TO HIM APPLICATION OF THE ASSESSEE WAS RIGHTLY REJECTED. 4. WE HAVE PERUSED THE ORDER OF THE COMMISSIONER O F INCOME TAX AND HEARD RIVAL CONTENTIONS. THE SOLE O BJECT OF THE TRUST WAS TO SERVE AS AN EDUCATIONAL INSTITUTION WI THOUT PROFIT MOTIVE. THE OBJECT CLAUSE-3 OF THE TRUST DEED DT.1 3 TH JUNE, 2008 OF THE ASSESSEE TRUST READS AS UNDER:- 3) OBJECTS: THE SOLE OBJECT OF THE TRUST WILL BE TO SERVE AS AN EDUCATIONAL INSTITUTION WITHOUT PROFIT MOVIE BY ANY OR ALL THE FOLLOWING MODES OR ANY OTHER MODE INCIDENTAL THERETO:- A) TO RUN, DEVELOP OR IMPROVE ANY SCHOOL, COLLEGE O R OTHER EDUCATIONAL INSTITUTION WHETHER TECHNICAL OR NON- PAGE OF 9 ITA.211 /MDS/11 4 TECHNICAL OR ADOPT, ASSIST OR HELP ANY EXISTING EDUCATIONAL INSTITUTION WITHOUT PROFIT MOTIVE FOR T HE BENEFIT OF THE PUBLIC IN INDIA IN GENERAL. B) TO ORGANIZE, START, RUN OR ASSIST ANY PROGRAMME EITHER BY ITSELF OR BY ASSISTING OR COORDINATING WI TH OTHER EDUCATIONAL OR OTHER INSTITUTIONS FOR COACHIN G GUIDANCE AND COUNSELING, VOCATIONAL TRAINING OR TRAINING FOR PREPARATION FOR ANY ENTRANCE OR COMPETITIVE TESTS FOR RECRUITMENT FOR JOBS INCLUDIN G ALL INDIA AND STATE SERVICE EXAMINATION OR FOR ADMISSIO N TO PROFESSIONAL OR OTHER EDUCATIONAL INSTITUTIONS. C) TO START, RUN OR ASSIST PROGRAMMES FOR THE SCHED ULED CASTES AND SCHEDULED TRIBES, BACKWARD CLASSES, WOMEN, CHILDREN, BONDED LABOUR AND OTHER SECTIONS OF THE SOCIETY FOR THE PROMOTION OF LEGAL ASSISTANC E, LEGAL AWARENESS, TRAINING OF PARA-LEGALS, HUMAN RIGHTS, CIVIL RIGHTS AND OTHER MATTERS CONCERNED WI TH OVERALL DEVELOPMENT OF THESE SECTIONS OF SOCIETY. D) TO RUN, WORKSHOP, PROGRAMME, SEMINARS ETC. FOR T HE EDUCATED UNEMPLOYED AND THE RURAL YOUTH IN COORDINATION WITH OTHER ORGANIZATIONS. E) TO RUN COMPUTER TRAINING CENTRES. PAGE OF 9 ITA.211 /MDS/11 5 F) TO ENCOURAGE AND START RESEARCH AND STUDY ON ENVIRONMENTAL SCIENCE, SOCIOLOGY AND INFORMATION TECHNOLOGY G) TO PROMOTE AND FOSTER EDUCATION AMONG POOR AND DESERVING STUDENTS, WHETHER OF PRIMARY, SECONDARY, GRADUATE, POST-GRADUATE, TEACHER TRAINING, BASIC EDUCATION COURSE OR VOCATIONAL COURSES BY ALL MEANS AND MAKE SUCH EDUCATION AVAILABLE TO WEAKER SECTIONS OF THE COMMUNITY. H) TO GIVE DONATIONS TO EDUCATION INSTITUTIONS WHIC H ARE RUN ON NON-PROFIT BASIS SUBJECT TO SUCH CONDITIONS CONSISTENT WITH THE OBJECTS OF THE TRUST. I) TO CONSTITUTE SCHOLARSHIPS TO POOR AND DESERVING STUDENTS TO ENABLING THEM TO CONTINUE THEIR STUDIES AND TO GIVE GRANTS FOR FEES AND OTHER CHARGES OR REIMBURSEMENT FOR COSTS OF BOOKS, INSTRUMENTS AND OTHER EDUCATIONAL AIDS FOR THEIR EDUCATIONAL PURSUI TS. J) TO HELP ESTABLISHMENT OF STUDENTS HOSTEL OR TO GIVE OTHER ASSISTANCE FOR POOR AND DESERVING STUDENTS TO FIND INEXPENSIVE LIVING ACCOMMODATION TO ENABLE THEM TO PROSECUTE THEIR STUDIES. K) TO CONSTITUTE PRIZES FOR OUTSTANDING ACHIEVEMENT S OF STUDENTS IN EDUCATIONAL INSTITUTIONS EITHER IN THE EXAMINATIONS, SPORTS, GENERAL KNOWLEDGE OR SUCH OTHER PROFICIENCIES. PAGE OF 9 ITA.211 /MDS/11 6 L) TO GIVE LOANS FOR INTEREST AT NIL OR SUBSIDIZED LOW RATE TO STUDENTS TO ENABLE THEM TO PROSECUTE HIGHER STUDIES. M) TO UNDERTAKE THESE AND OTHER INCIDENTAL ACTIVITI ES WITHOUT PROFIT MOTIVE WHICH ARE CONSISTENT WITH THE ABOVE OBJECTS AND ARE NOT INCONSISTENT WITH THE OBJ ECT OF THE TRUST BEING PROMOTION OF EDUCATION. N) THE MONEYS DISBURSED FOR THE PURPOSES OF EDUCATI ON IN PURSUANCE OF THE ABOVE OBJECTS WILL BE CONFINED TO INDIAN SHORES. O) IF ANY OF THE ABOVE OBJECTS IS FOUND TO BE INCON SISTENT WITH THE OBJECTS OF A PUBLIC EDUCATIONAL CHARITABLE INSTITUTION U/S.10(23C) OR ANY OTHER SECTION OF THE INCOME TAX ACT, 1961 OR ANY OTHER LAW APPLICABLE TO SUCH TRUSTS AS NOW ENACTED OR AS MAY BE ENACTED OR AMENDED AT A FUTURE DATE, THE OBJECTS STATED ABOVE WILL BE TREATED AS SO MODIFIED TO ACCORD WITH SUCH LAW OR AMENDED LAW SO THAT ANY CONCESSION, PRIVILEGES, CONDITIONS OR REGULATIONS AVAILABLE AND APPLICABLE TO PUBLIC EDUCATIONAL INSTITUTION WILL BE AVAILABLE OR APPLICABLE TO THIS TRUST AS WELL ALSO THAT THIS INS TITUTION WILL CONTINUE TO RETAIN ITS CHARACTER AS A PUBLIC EDUCATIONAL INSTITUTION WITHOUT PROFIT MOTIVE WITH PUBLIC CHARACTER WITHIN THE MEANING OF SEC.10(23C) OF THE INCOME TAX ACT, 1961 OR ANY OTHER ANALOGOUS PROVISIONS UNDER THE INCOME TAX ACT OR ANY OTHER LAW. PAGE OF 9 ITA.211 /MDS/11 7 THE ABOVE CLAUSES WOULD CLEARLY SHOW THAT THE MAIN PURPOSE OF ASSESSEE TRUST WAS NOTHING BUT EDUCATION. ASSESS EE HAD PRODUCED RECEIPTS AND PAYMENT ACCOUNT, WHICH WOULD ALSO SHOW THAT THE MONEY RECEIVED BY IT WERE SUBSTANTIAL LY USED FOR CONSTRUCTION OF THE INFRASTRUCTURE NECESSARY FOR PU RSUING ITS EDUCATIONAL OBJECTS. THERE IS NO CONDITION U/S.2(1 5) OF THE ACT THAT EDUCATION TO BE CONSIDERED AS A CHARITABLE AC TIVITY, ANY SURPLUS THAT ARISE SHOULD BE USED FOR ANY OTHER CHA RITABLE ACTIVITY. CONSTRUCTION OF INFRASTRUCTURE FOR PURSUI NG EDUCATIONAL ACTIVITY IS ALSO BY ITS VERY NATURE, A NECESSARY EX PENDITURE FOR EFFECTIVELY PURSUING THE EDUCATIONAL OBJECTS. EDUCA TION PER-SE IS CHARITABLE PURPOSE. THE SAME WOULD REMAIN CHARIT ABLE IRRESPECTIVE OF GENERATION OF SURPLUS. THERE IS NO CONDITION IN THE STATUTE TO HOLD THAT EDUCATION SHOULD BE PROVID ED FREE AND WITHOUT CHARGING FEES. THE ACT ITSELF CONTEMPLATES EXEMPTION TO INCOME OF INSTITUTION IMPARTING EDUCATION. THIS, IN OTHER WORDS, MEANS THAT THE ACT ENVISAGES RECEIPT OF INCO ME BY A TRUST OR INSTITUTION BY WAY OF SURPLUS, SO AS TO GR ANT EXEMPTION U/S.11 & 12 OF THE ACT, SUBJECT TO CONDITIONS PRESC RIBED IN SECTION 11 AND SECTION 13 OF THE ACT. IF THERE IS NO SURPLUS GENERATED BY A CHARITABLE TRUST OR INSTITUTION, THE RE WOULD NOT BE ANY NEED FOR CLAIMING AN EXEMPTION. MERELY BECAU SE WHILE PURSUING ACTIVITIES WHICH ARE ESSENTIALLY IN THE NA TURE OF CHARITY, ASSESSEE COULD EARN A SURPLUS, IT WOULD NOT BE A GR OUND TO HOLD THAT IT COULD NOT BE CONSIDERED FOR A REGISTRA TION U/S.12AA OF THE ACT. IN TAKING THIS VIEW, WE ARE FORTIFIED B Y THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF N. N. DESAI CHARI TABLE TRUST VS. COMMISSIONER OF INCOME TAX (246 ITR 452). IN AN Y CASE AS ALREADY HELD BY US, IN ASSESSEES CASE ITS FUND S WERE USED PAGE OF 9 ITA.211 /MDS/11 8 ONLY FOR CREATING THE INFRASTRUCTURE NECESSARY FOR PURSUING ITS EDUCATIONAL OBJECTS, BEING IN THE INITIAL PHASE OF ITS FUNCTIONING. WE ARE OF THE OPINION THAT ASSESSEE TRUST WAS ELIGI BLE FOR REGISTRATION U/S.12AA OF THE ACT. THE ORDER OF COM MISSIONER OF INCOME TAX IS QUASHED AND WE DIRECT THE COMMISSIONE R OF INCOME TAX TO GRANT THE ASSESSEE, REGISTRATION U/S. 12AA OF THE ACT AS SOUGHT BY IT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT AT THE TIME OF HEAR ING THE APPEAL ON 23 RD JUNE, 2011. SD/- S D/- ( GEORGE MATHAN ) ( ABRAHAM P. GEORGE ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 23 RD JUNE, 2011. K S SUNDARAM COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE PAGE OF 9 ITA.211 /MDS/11 9 DATE INITIALS 1. DRAFT DICTATED ON 23.06.1 1 2. DRAFT PLACED BEFORE AUTHORITY 23.06.11 3. DRAFT PLACED BEFORE THE 28.06.11 SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S. 6. KEEP FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE 9. DATE OF DISPATCH OF ORDER