M/s. Kerala - Tamil Nadu Charity Trust for Cultural, Educational and Social Support, CHENNAI V. DIT, CHENNAI

ITA 2121/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6543 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-05-2011
• Assessment Year: misc
• Appeal Filed On: 14-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12AA

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. N.S. SAINI A.M. I.T.A. NO. 2 12 1 / MDS/201 0 KERALA TAMIL NADU CHARITY TRUST FOR CULTURAL, EDUCATIONAL AND SOCIAL SUPPORT, C - 94, AWHO PARAMESHWARAN VIHAR, 67, ARCOT ROAD, SALIGRAMAM, CHENNAI 600 093. [PAN: AABTK5735F] VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), AAYAKAR BHAWAN, ANNEXE III FLOOR, NO. 121, M.G. ROAD, NUNGAMBAKKAM, CHENNAI 600 034. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V. SWAMINATH AN REVENUE BY : SHRI SHAJI P. JACOB ORDER PER U.B.S. BEDI, J.M . TH IS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. DIRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI DATED 29 . 09 .2010 , WHEREBY REJECTION OF APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12AA HAS BEEN CHALLENGED. 2. FACTS INDICATE THAT THE ASSESSEE TRUST WAS CONSTITUTED THROUGH A DEED ON 08.01.2010, WHICH HAS FILED AN APPLICATION IN FORM 10A ON 15.03.2010 FOR REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX A CT AND FORM 10G FOR GRANT OF APPROVAL UNDER SECTION 80G OF THE ACT. 2.1 THE LD. DIT(E) SOUGHT FOR CERTAIN CLARIFICATION BY SENDING NOTICE AND CASE WAS POSTED FOR HEARING TO FURNISH ADDITIONAL INFORMATION AND ALSO TO OFFER THEIR EXPLANATION. THE ASSESSEE S AUTHORIZED REPRESENTATIVE APPEARED AND FILED REPLY I.T.A. NO . 212 1 /MDS/1 0 2 AND THE LD. DIT(E), WHILE REFERRING TO OBJECT CLAUSE (A) AT PAGE 4 HAS CONCLUDED TO REJECT THE APPLICATION OF THE ASSESSEE FROM PARA 4 ONWARDS AS UNDER: 4. SHRI SWAMINATHAN, AUTHORIZED REPRESENTATIVE AP PEARED AND FILED REPLY. THE OBJECT CLAUSE (A) AT PAGE (4) SPEAKS ABOUT PROMOTION OF DEVOTIONAL ACTIVITIES SUCH AS BAJANS, PRAYER SONGS, CHURCH CHOIRS, ETC. DEVOTIONAL ACTIVITIES ALWAYS REPRESENT/CONNECTED TO RELIGIOUS SERVICES ONLY. THE ABOVE ACTIVITIES ME NTIONED IN CLAUSE (A) ARE CLEARLY RELIGIOUS IN NATURE. TRUSTS HAVING RELIGIOUS OBJECTS ARE NEVER ELIGIBLE FOR REGISTRATION AS PUBLIC CHARITABLE TRUST . AS PER THE PROVISIONS OF SEC. 80G, EVEN IF ANY ONE OF THE OBJECTS OF A TRUST IS WHOLLY OR SUBSTANTIALLY WHOLLY OF A RELIGIOUS NATURE, THEN THE TRUST WOULD NOT COME IN THE SCOPE OF 80G. EXPLANATION 3 READ WITH CLAUSE (II) OF SEC. 80G(5) PROVIDES THAT THE DEED SHOULD NOT CONTAIN ANY PROVISION FOR THE TRANSFER OR APPLICATION OF ANY PART OF ITS INCOME OR ASSETS FOR ANY PURPOSE, WHICH IS WHOLLY OR SUBSTANTIALLY WHOLLY OF A RELIGIOUS NATURE. IF THERE BE ANY SUCH PURPOSE, THE TRUST WOULD NOT COME WITHIN THE AMBIT OF SECTION 80G(5). THE RESTRICTIVE CLAUSE OF NOT MORE THAN 5% BEING SPENT ON RELIGIOUS ACTIVITIES IS APPLICABLE TO TRUSTS HAVING CHARITABLE OBJECTS ONLY. HENCE THE APPLICATION FILED FOR REGISTRATION IS HEREBY REJECTED. AS THE REGISTRATION U/S 12AA IS NOT GRANTED APPROVAL U/S 80G CAN ALSO NOT BE GIVEN. ACCORDINGLY, APPLICATION FOR APPROVAL U/S 80G ALS O IS HEREBY REJECTED. 3. AGAINST SUCH CONCLUSION, THE ASSESSEE HAS COME UP IN APPEAL AND FILED WRITTEN SUBMISSIONS, WHICH READS AS UNDER: THE ABOVE TRUST HAS FILED APPLICATION WITH D IRECTOR OF INCOME TAX (EXEMPTIONS) CHENNAI FOR GRANTING REGISTRATION U/S12AA AND 80 G OF THE INCOME TAX ACT, 1961 . 1. D IRECTOR OF INCOME TAX (EXEMPTIONS), CHENNAI REJECTED THE C L AIM FOR REGISTRATION U/512AA AS WELL AS 80 G OF THE INCOME TAX ACT, 1961. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS DENIED REGISTRAT ION TO THE TRUST U/S 12 AA BASED ON THE FOLLOWING: I.T.A. NO . 212 1 /MDS/1 0 3 I) THE OBJECT CLAUSE (A) AT PAGE (4) OF THE TRUST DEED SPEAKS ABOUT PROMOTION OF DEVOTIONAL ACTIVITIES SUCH AS BAJAN S , PRAYER SONGS, CHURCH CHOIRS ETC. II) D EVOTIONAL ACTIVITIES ALWAYS REPRESENT/CONNE CTED TO RELIGIOUS SERVICES ONLY. III) THE ABOVE ACTIVITIES MENTIONED IN CLAUSE (A) ARE CLEARLY RELIGIOUS IN NATURE . IV) TRUST HAVING RELIGIOUS OBJECTS ARE NEVER ELIGIBLE FOR REGISTRATIONS AS PUBLIC CHARITABLE TRUST. WE WISH TO STATE THAT THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN DENYING EXEMPTION U/S 12 AA ON THE ABOVE GROUNDS DUE TO THE FOLLOWING: 1) SECTION 2(15) OF THE INCOME TAX ACT,1961 DEFINES CHARITABLE PURPOSE AS FOLLOWS. CHARITABLE PURPOSE INCLUDES RELIEF OF THE POO R, EDUCATION , MEDICAL RELIEF, [ PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC 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 PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELAT ION 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 ACTIVITY . A CHARITABLE TRUST IS NOT NECESSARILY LIMITED TO RELIEF OF THE POOR OR PROVIDING EDUCATION AND MEDICAL RELIEF IT COULD WELL BE FOR PROMOTION OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. RE LIGIOUS PURPOSE HAS ALWAYS BEEN CONSIDERED AS ONE OF THE PERM I SSIB LE OBJECTS, WHICH CAN BE CLASSIFIED AS CHARITABLE. 2) BASED ON T HE ABOVE IT IS CLEAR THAT RELI G IOUS PURPOSE IS A/WAYS CONSIDERED AS ONE OF THE PERMISSIBLE O BJECTS WHICH CAN BE CLASSIFIED AS CHARITABLE. I.T.A. NO . 212 1 /MDS/1 0 4 IN OUR CASE UNDER THE HEADING CULTURAL THE TRUST INTENDS TO PROM O TE VARIOUS CULTURAL ACTIVITIES OF ANCIENT INDIA SU CH AS CLASSICAL MUSIC/ D ANCE INCLUDING FOLK ETC., WHICH ALSO INCLUDES AS A PART OF ITS CULTURAL ACTIVITIES DEVOTIONAL ACTIVITIES SUCH AS BAJANS, PRAYER SONGS, CHURCH CHOIRS ETC. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) FAI L ED TO APPRECIATE THAT THE WORD CULTURE REPRESENTS A TYPE OF CIVILIZATIO N AND THE MEANING OF THE WORD D EVOTION INCLUDES PRAYER, STRONG AFFECTION AND FAITHFUL SERVICES. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) FAILED TO APPRECIATE THAT IT A PART OF OUR ANCIENT CULTURE TO RENDER MASS PRAYERS AND RENDERING OF DEVOTIONAL SONGS FOR THE COMMON WELFARE OF THE SOCIETY WHICH IN TURN PROVIDE CLOSE BONDAGE AMONG CITIZENS AND HELP IN CONVERGENCE OF COMMON PUBLIC FOR A SOCIAL CAUSE. FURTHER MORE THE FATHER OF OUR NATION HAS SUCC ESSFULLY USED THIS METHOD OF MASS PRAYERS, BHAJANS ETC., TO CREATE MUTUAL FRIENDSHIP AMONG VARIOUS RELIGIONS AND TO SHED THEIR HATRED WHICH IN TURN WILL HELP IN BUILDING A STRONG INDIA. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) FAILED TO APPRECIA TE THAT ONLY IN THE CONTEXT OF PROMOTING CULTURE, THE DEVOTIONAL ACTIVITIES LIKE PRAYERS, BHAJANS ETC., FOR THE COMMON GOOD OF THE SOCIETY WERE SOUGHT TO BE CARRIED ON AND FURTHER MORE IT IS ALSO EXPLAINED TO THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) THAT THE TRUST SHALL NOT SPENT MORE THAN 5 % OF THE RECEIPTS FOR SUCH CULTURAL ACTIVITIES WHICH IS FULLY ALLOWED BY THE INCOME TAX ACT.1961 EVEN FOR GRANTING 80 & BENEFITS TO THE TRUSTS. FURTHER T HE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS DENIE D REGISTRATION U/S 12 AA ON THE BASIS THAT REGISTRATION UNDER SECTION 12 AA CANNOT BE GRANTED TO TRUSTS HAVING RELIGIOUS OBJECTS. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) FAILED TO UNDERSTAND THAT IF A PUBLIC CHARITABLE TRUST DOES NOT HAVE ANY RE LIGIOUS ACTIVITIES IN THE OBJECT CLAUSE OF THEIR TRUST DEED THEN HOW CAN SUCH A TRUST DO ANY SUCH RELIGIOUS ACTIVIT I ES WHICH IS NOT PART OF THE OBJECTS OF THE TRUST AND THEN HOW THE AUTHORITY CAN IMPLEMENT THE PROVISIONS OF SECTION 80 G ( 5 B) OF THE INCOME TAX ACT,1961 WHICH ALLOWS A PUBLIC CHARITABLE TRUST TO SPEND NOT MORE THAN 5 % OF THEIR TOTAL INCOME FOR RELIGIOUS NATURE. I.T.A. NO . 212 1 /MDS/1 0 5 IF SUCH A VIEW IS TAKEN THEN IT WILL MAKE T HE OPERATION OF THE SECTION 80 G (5B) INOPERATIVE WHICH IS NOT THE INTENTION OF THE LAW MAKERS. FURTHER MORE THE STANDARD QUESTIONNAIRE SENT BY THE DEPARTMENT FOR GRANTING REGISTRATION U/S 12 AA STATES THE FOLLOWING UNDER NOTES: POINT NO.7. NOT MORE THAN 5 % OF THE INCOME OF THE TRUST/INSTITUTION WOULD BE APPLIED FOR ANY RELIGIOUS PUR POSES OR GIVEN TO RELIGIOUS INSTITUTIONS (ANY VIOLATION FOUND WILL LEAD TO DENIAL OF EXEMPTION UNDER SECTION 80 G CONSIDERATION THE TRUST AS PUBLIC RELIGIOUS IN NATURE) . BASED ON THE ABOVE FACT THE DEPARTMENT ITSELF HAS ADMITTED THAT A PUBLIC CHARITABLE TRUST CAN APPLY 5 % OF THE INCOME FOR ANY RELIGIOUS PURPOSES AND THAT IN CASE SUCH A PUBLIC CHARITABLE TRUST VIOLATES THIS CONDITION THEN SUCH A TRUST WILL BE TREATED AS PUBLIC RELIGIOUS TRUST AND WILL BE DENIED ONLY EXEMPTION U/S 80 & AND NOT THE REGISTR ATION U/S 12 AA. HENCE BASED ON THE ABOVE FACTS AND LAW THE TRUST IS ENTITLED FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 AND REQUEST THE HONORABLE TRIBUNAL TO D IRECT THE AUTHORITY TO GRANT REGISTRATION U/S 12 AA AND THUS RENDER JUSTICE. 2. THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS DENIED GRANT OF APPROVAL U/ S 80 G OF THE INCOME TAX A CT , 1961 BASED ON THE FOLLOWING: AS PER THE PROVISIONS OF SEC.8 0 G , EVEN IF ONE OF THE OBJECTS OF A TRUST IS WHOLLY OR SUBSTANTIALLY WHOLLY OF A R ELIGIOUS NATURE, THEN THE TRUST WOULD NOT COME IN THE SCOPE OF 80G. EXPLANATION 3 READ WITH CLAUSE (II) OF SEC.80G(S) PROVIDES THAT THE DEED SHOULD NOT CONTAIN ANY PROVISION FOR THE TRANSFER OR APPLICATION OF ANY PART OF ITS INCOME OR ASSETS FOR ANY PURPOS E, WHICH IS WHOLLY OR SUBSTANTIALLY WHOLLY OF A RELIGIOUS NATURE. IF THERE BE ANY SUCH PURPOSE THE TRUST WOULD NOT COME WITHIN THE AMBIT OF SECTION 80 G (5). THE RESTRICTIVE CLAUSE OF NOT MORE THAN 5 % BEING SPENT ON RELIGIOUS ACTIVITIES IS APPLICABLE TO TRUSTS HAVING CHARITABLE OBJECTS ONLY. WE WISH TO STATE THAT THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS ERRED IN DENYING APPROVAL U/S 80 G ON THE ABOVE GROUNDS: I.T.A. NO . 212 1 /MDS/1 0 6 THE LEARNED D IRECTOR OF INCOME TAX (EXEMPTIONS) HAS FAILED TO APPRECIATE THE FAC T THAT NOT MORE THAN 5 % OF THE RECEIPTS WOULD BE SPEND ON SUCH CULTURAL DEVOTIONAL ACTIVITIES SUCH AS BAJANS, PRAYER SONGS, CHURCH CHOIRS ETC. BUT HAS TREATED THE TRUST AS A WHOLLY OR SUBSTANTIALLY WHOLLY OF A RELIGIOUS TRUST. FURTHER SECTION 80 & ( 5 B) STATES AS FOLLOWS : NOT WITH STANDING ANYTHING CONTAINED IN CLAUSE (II) OF SUB - SECTION (5) AND EXPLANATION 3 STATES AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE DURING ANY PREVIOUS YEAR, WHICH IS OF A RELIGIOUS NATURE FOR AN AMOUNT NOT EXCEEDING FIVE PERCENT OF ITS TOTAL INCOME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND TO WHICH THE PROVISIONS OF THIS SECTION APPLY. A CHARITABLE TRUST IS NOT NECESSARILY LIMITED TO RELIEF OF THE POOR OR PROVIDING EDUCATION AND MEDICAL RELIEF. IT COULD WELL BE FOR PROMOTION OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. RELIGIOUS PURPOSE HAS ALWAYS BEEN CONSIDERED AS ONE OF THE PERMISSIBLE OBJECTS, WHICH CAN BE CLASSIFIED AS CHARITABLE. THEREFORE EXPENDITURE OF 5% OF TOTAL INCOME OF THE T RUST IS NOT COVERED BY EXPLANATIONS 3 TO 80 G BECAUSE THE TRUST IS NOT SUBSTANTIALLY A TRUST WHICH IS OF A RELIGIOUS NATURE. FURTHER A TRUST CANNOT SPEND ANY MONEY UNLESS AND UNTIL SUCH AN ACTIVITY IS ONE OF THE OBJECTS OF THE TRUST. THEREFORE IF RELIGI OUS ACTIVITIE S ARE NOT INCLUDED IN THE OBJECT OF THE TRUST Q TRUST CAN NEVER SPEND ANY AMOUNT TO RELIGIOUS ACTIVITIES WHICH IN TU R N WILL RENDER SECTION 80 G (5B) NOT OPERATABLE WHICH IS NOT THE INTENTION OF THE LAW MAKERS. HENCE BASED ON THE ABOVE FACTS THE TRUST IS ENTITLED FOR APPROVAL/S 80 & OF THE INCOME TAX ACT , 1961 AND REQUEST THE HONORABLE TRIBUNAL TO D IRECT THE AUTHORITY TO GRANT APPROVAL U/S 80 & AND THUS RENDER JUST ICE. 4. AT THE TIME OF HEARING OF THE APPEAL, THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING THE POINTS RAISED IN THE WRITTEN SUBMISSIONS HAS PLEADED FOR GRANTING REGISTRATION TO THE TRUST, WHEREAS, THE LD. DR STRONGLY OBJECTED AND STATED THAT AS PER OBJECT CLAUSE OF THE ASSESSEE TRUST DEED , THE ACTIVITIES OF THE I.T.A. NO . 212 1 /MDS/1 0 7 TRUST ARE RE LIGIOUS IN NATURE, THEREFORE, IT IS NOT ENTITLED TO REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT AND IN CASE THE TRUST IS NOT ENTITLED TO REGISTRATION UNDER SECTION 12AA OF THE ACT, IT WILL NOT BE ENTITLED FOR GRANT OF APPROVAL UNDER SECTION 80G O F THE INCOME TAX ACT. THEREFORE, THE ACTION OF LD. DIT(E) IS LEGALLY AND FACTUALLY CORRECT, WHICH SHOULD BE UPHELD AND SO FAR AS THE PLEA OF THE ASSESSEE ON MERIT OF THE CASE WITH REGARD TO APPROVAL UNDER SECTION 80G IS CONCERNED, IT WAS SUBMITTED THAT UNT IL AND UNLESS THE ASSESSEE IS ABLE TO DEMONSTRATE AND ESTABLISH THAT THE OBJECT OF THE ASSESSEE ARE NOT RELIGIOUS , WHICH WOULD ENTITLE THE ASSESSEE FOR THE BENEFIT OF REGISTRATION , AND THE ASSESSEE HAS MISERABLY FAILED TO DO SO, THEREFORE, NEITHER THE ASSE SSEE C OULD BE REGISTERED UNDER SECTION 12AA NOR APPROVAL UNDER SECTION 80G BE GIVEN AND THAT IS WHAT THE LD. DIT(E) HAS DONE. THEREFORE, IT WAS PRAYED FOR CONFIRMATION OF THE IMPUGNED AND DISMISSAL OF THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MATERIAL ON RECORD, RELEVANT PROVISIONS OF LAW AS WELL AS VARIOUS CLAUSE S OF TRUST DEED DATED 08.01.2010 AND THE POINTS RAISED IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE. IT IS STATED BY THE LD. DIT(E) THAT CERTAIN CLARIFICATIO N AND EXPLANATION WAS SOUGHT FOR, WHICH WERE REPLIED TO BY THE ASSESSEE S REPRESENTATIVE APPEARING FOR THE TRUST, BUT FROM THE ORDER OF THE LD. DIT(E), IT IS NOT BECOME CLEAR AS TO WHAT TYPE OF CLARIFICATION WAS SOUGHT FOR AND WHAT REPLY WAS FILED WHEN HE HAS GONE ONLY BY CLAUSE (A) OF THE TRUST DEED TO REJECT REGISTRATION AS SOUGHT FOR . SINCE PROPER AND DETAILED REASONS ARE FOUND TO HAVE NOT BEEN GIVEN BY THE LD. DIT(E), THEREFORE IN THE INTEREST OF JUST AND TO HAVE FAIR PLAY IN THE I.T.A. NO . 212 1 /MDS/1 0 8 MATTER, WE FIND IT JUST AND APPROPRIATE TO SET ASIDE THE IMPUGNED ORDER AND RESTORE BACK THE MATTER ON THE FILE OF THE DIT(E) TO RE - DECIDE THE REGISTRATION APPLICATION OF THE ASSESSEE AFRESH , AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE IN THE LIGHT OF RELEVANT PROVISIONS OF LAW . WE HOLD AND DIRECT ACCORDINGLY. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. O RDER PRONOUNCED ON 27 .05 .2011 . SD/ - SD/ - ( N.S. SAINI ) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 27 . 0 5 .2011 VM/ - TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R .