M/s. Suguna Charitable Trust, CHENNAI V. ITO, Coimbatore

ITA 2134/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5734 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-07-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN JCIT D R
• Assessee Lawyers: R KUMAR
• Keywords: Depreciation; Charitable institution; Benefit of exemption; Cancellation of registration
• Section: 12AA; 11

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A.NOS.2134/MDS./2016 & 2135 /MDS./2016 ( ASSESSMENT YEARS : 2011-12 & 2012-13 ) M/S. SUGUNA CHARITABLE TRUST , 5-A, SATHYAMOORTHY ROAD, RAM NAGAR, COIMBATORE-641009 VS. THE INCOME-TAX OFFICER, COMPANY WARD I, COIMBATORE. PAN AACTS 0371 C ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MR.R.KUMAR,ADVOCATE / RESPONDENT BY : MR.B.SAGADEVAN, JCIT, D.R ! ' / DATE OF HEARING : 21.11.2017 #$%& ! ' /DATE OF PRONOUNCEMENT : 05.12.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEAL ARE FILED BY THE ASSESSEE, AGGR IEVED BY THE DIFFERENT ORDERS OF THE LEARNED COMMISSIONER OF INC OME TAX(A)-2, COIMBATORE IN ITA NO.194/14-15 DATED 30.03.2016 & ITA NO.302/14- ITA NO.2134 & 2135/MDS/2016 2 15 DATED 30.03.2016 PERTAINING TO ASSESSMENT YEARS 2011-12 & 2012-13 RESPECTIVELY. 2. THERE WAS A DELAY OF 03 DAYS IN FILING THIS APP EAL BY THE ASSESSEE. CONSEQUENT TO THIS, THE ASSESSEE FILED AN AFFIDAVI T DATED 17.11.2017 FOR CONDOANTION OF DELAY STATING THAT THE SAID DELA Y IN FILING THE APPEAL IS NEITHER WILLFUL NOR DELIBERATE BUT DUE TO TECHNI CAL PROBLEMS IN E- PAYMENT OF THE APPEAL FEE AND IN POSTAL TRANSIT AND ALSO THE CIRCUMSTANCES BEYOND THE CONTROL OF PETITIONER HERE IN. AFTER CONSIDERING THE SAME, I AM SATISFIED ABOUT THE REAS ONS ADVANCED BY THE LD.A.R FOR DELAY OF 03 DAYS IN FILING THE APPEA L. ACCORDINGLY, THE DELAY IS CONDONED AND THE APPEAL IS ADMITTED FOR AD JUDICATION. 3. THE ASSESSEE HAS RAISED THE FOLLOWING COMMON GR OUNDS IN THE ABOVE MENTIONED TWO APPEALS FOR ADJUDICATION. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW. 2. THE COMMISSIONER (APPEALS) ERRED IN HOLDING THAT THE AO WAS JUSTIFIED IN DENYING EXEMPTION U/S 11 IN RESPECT OF INCOME FROM AUDITORIUM AND BRINGING IT TO TAX. 3. THE ASSESSING OFFICER / COMMISSIONER (APPEALS) E RRED IN NOT APPRECIATING THAT THE APPELLANT TRUST, WHICH IS REGISTERED AS A CHARITABLE TRUST U/S 1 2A OF THE ACT IS RUNNING SCHOOLS, POLYTECHNIC COLLEGE AND INDUSTRIAL TRAINING CENTRE IN TERMS OF THE OBJECTS AS PER THE DECLARATI ON OF TRUST ITA NO.2134 & 2135/MDS/2016 3 (DT.30.04.1973) AND HAS BEEN ENJOYING THE BENEFIT O F EXEMPTION IN RESPECT OF ITS INCOME. 4. THE AUTHORITIES BELOW FAILED TO SEE THAT THE AUD ITORIUM, AN IMMOVABLE PROPERTY BELONGING TO THE APPELLANT TRUST, IS LET O UT ON RENT FOR THE PURPOSE OF AUGMENTING THE RESOURCES REQUIRED FOR CA RRYING OUT THE PRIMARY AND DOMINANT OBJECT OF CARRYING OUT CHARITA BLE ACTIVITIES VIZ., EDUCATION. 5. THE AUTHORITIES BELOW FURTHER FAILED TO SEE THAT LETTING OUT OF THE IMMOVABLE PROPERTIES IS NOT THE MAIN ACTIVITY OF THE TRUST BU T A SUB-ORDINATE ACTIVITY AND WOULD NOT PREVENT THE TRUST FROM BEING A VALID CHARITY ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. 6. THE APPELLANT SUBMITS THAT IT IS COMMITTED TO ED UCATION, WHICH IS ITS DOMINANT ACTIVITY BESIDES MEDICALL RELIEF AND POOR RELIEF IN A SMALL MEASURE AND ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY IS NOT AN OBJECT AS PER THE DECLARATION OF TRUST UNDER WHICH IT IS CONSTITUTED AND IN SUCH CIRCUMSTANCES THE PROVISO TO SECTION 2( 15) IS NOT ATTRACTED TO BRING THE INCOME FROM THE AUDITORIUM TO TAX. 7. THE ASSESSING OFFICER I COMMISSIONER (APPEALS) E RRED IN DENYING ALLOWANCE OF DEPRECIATION ON ASSETS CLAIMED BY THE APPELLANT; THE REASONS STATED IN THE ASSESSMENT I APPELLATE ORDER ARE INCORRECT AND UNSUSTAINABLE. 8. THE APPELLANT SUBMITS THAT ITS CLAIM FOR DEPRECI ATION IS SUPPORTED BY VARIOUS JUDICIAL DECISIONS CITED BEFORE THE COMMISS IONER (APPEALS) WHICH OUGHT TO HAVE FOUND ACCEPTANCE. 3.1 IN ADDITION TO THE ABOVE GROUNDS RAISED IN ITS TWO APPEALS, THE ASSESSEE RAISED FOLLOWING ADDITIONAL GROUNDS FOR AD JUDICATION. 1. THE APPELLANT SUBMITS THAT ITS AGGREGATE RECEIPT S FROM THE AUDITORIUM DURING THE PREVIOUS YEAR ENDED 31.03.2011 DO NOT EX CEED 20 PERCENT OF THE TOTAL RECEIPTS OF THE SAID PREVIOUS YEAR AND TH E NEW PROVISO TO SECTION 2(15) INTRODUCED BY THE FINANCE ACT, 2015 APPLIES; ACCORDINGLY, THE TAX EXEMPTION OUGHT NOT TO HAVE BEEN DENIED BY THE ASSE SSING OFFICER / COMMISSIONER (APPEALS) IN RESPECT OF THE INCOME FRO M THE AUDITORIUM. 2. THE APPELLANT IS ADVISED TO SUBMIT THAT CIRCULAR NO.21 OF 2016 DATED 27TH MAY, 2016 (CLARIFICATION REGARDING CANCELLATION OF REGISTRATION U/S 1 2AA ITA NO.2134 & 2135/MDS/2016 4 OF THE IT ACT, 1961 IN CERTAIN CIRCUMSTANCES) IS RE LEVANT IN CONSIDERING THE APPLICABILITY OF THE PROVISO TO SECTION 2(15) OF TH E IT ACT, 1961. 3. THE APPELLANT IS FURTHER ADVISED THAT IN DIRECTO R OF INCOME TAX (EXEMPTIONS) VS. KHAR GYMKHANA [(2016) 385 ITR 162 (BORN)] THE HONBLE BOMBAY HIGH COURT HAS, IN DECIDING AN APPEA L BY THE REVENUE FOR ASSESSMENT YEAR 2009-10, CONSIDERED THE NEW PRO VISO INTRODUCED BY THE FINANCE ACT, 2015 (W.E.F APRIL 1, 2016) CHANGIN G THE CUT OFF BENCH MARK AS 20% OF THE TOTAL RECEIPTS INSTEAD OF THE FI XED LIMIT OF RS.25 LAKHS AND THE CBDTS CIRCULAR NO.21 OF 2016 DATED 27TH MA Y, 2016 AND HELD THAT THE NEW PROVISO WOULD APPLY IN THAT CASE (FOR ASSESSMENT YEAR 2009- 10), WHEN THERE IS NO CHANGE IN THE NATURE OF THE A CTIVITIES OF THE ASSESSEE DURING THE ASSESSMENT YEAR IN QUESTION. 4. THE APPELLANT RESPECTFULLY SUBMITS THAT IN THE L IGHT OF THE CBDTS CIRCULAR AND THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT T HE APPELLANTS INCOME FROM THE AUDITORIUM IS ELIGIBLE FOR EXEMPTIO N U/S 11 OF THE ACT. 4. THE ASSESSEE FILED PETITIONS FOR ADMITTING THE ADDITIONAL GROUNDS RAISED IN THESE TWO APPEALS STATING AS FOLLOWS:- THE PETITIONER / APPELLANT, A PUBLIC CHARITABLE TRU ST, HAS FILED THE ABOVE APPEAL AGAINST THE APPELLATE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 2, COIMBATOR E IN L.T.A.NO.194/14-15 DATED 30.03.2016 HOLDING THAT TH E AO WAS JUSTIFIED IN DENYING EXEMPTION U/S 11 IN RESPECT OF INCOME (OF RS.1 1,29,946/-) FROM AUDITORIUM AND BRINGING THE AMOUNT TO TAX. THE SAID APPEAL WAS FILED ON 15.07.2016 AND IS PENDING. IN THE GROUNDS OF APPEAL BEFORE THE HONBLE TRIBUNA L THE APPELLANT TRUST HAS CONTENDED THAT ITS MAIN OBJECT IS EDUCATI ON AND IT IS RUNNING SCHOOLS, POLYTECHNIC, COLLEGE AND INDUSTRIAL TRAINI NG CENTRE, ENJOYING THE BENEFIT OF EXEMPTION IN RESPECT OF ITS INCOME A ND THAT THE ITA NO.2134 & 2135/MDS/2016 5 AUDITORIUM IS LET OUT ON RENT FOR THE PURPOSE OF AU GMENTING THE RESOURCE REQUIRED FOR CARRYING OUT THE PRIMARY AND DOMINANT OBJECT VIZ., EDUCATION AND ON SUCH FACTS THE PROVISO TO SE CTION 2(15) OF THE ACT IS NOT ATTRACTED TO BRING THE INCOME FROM AUDIT ORIUM TO TAX. THE PETITIONER / APPELLANT SUBMITS THAT ITS TOTAL R ECEIPTS FOR THE YEAR ENDED 31.03.2011 IS RS.7,00,24,415/- AND THE AUDITO RIUM RECEIPTS, AS PER SEPARATE ACCOUNTS MAINTAINED, IS RS.36,34,599/- I.E., LESS THAN 20 PERCENT OF THE TOTAL RECEIPTS AND THAT THE CUT OF F BENCHMARK STIPULATED IN THE NEW PROVISO TO SECTION 2(15) INTR ODUCED BY THE FINANCE ACT, 2015 WILL BE APPLICABLE. 5. I HAVE GONE THROUGH THE PETITION FOR ADMISSION OF ADDITIONAL GROUNDS. IN MY OPINION, THERE EXISTS A GOOD AND SUF FICIENT REASON FOR NOT RAISING THIS ADDITIONAL GROUND ON EARLIER OCCAS ION. SINCE THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF DIT( EXEMPTION) VS. KHAR GYMKHANA IN (2016) 385 ITR 162(BOMBAY) WERE DE LIVERED ON 06.07.2016. THE CBDT CIRCULAR NO.21 OF 2016 WAS ISS UED ON 27.05.2016. IN THIS CASE, THE ORDER OF LD.CIT(A) F OR ASSESSMENT YEAR 2011-12 AND 2012-13 WERE PASSED ON 30.06.2016. BE ING SO, THE ASSESSEE COULD NOT RAISE THESE GROUNDS BEFORE THE L D.CIT(A). ITA NO.2134 & 2135/MDS/2016 6 5.1 SINCE THE ADDITIONAL GROUNDS RAISED BY THE ASS ESSEE GO TO THE ROOT OF THE MATTER, I ADMIT THE ADDITIONAL GROUNDS. FURTHER, IN MY OPINION, THESE GROUNDS ARE RAISED FIRST TIME BEFORE ME AND LD.CIT(A) HAVE NO OCCASION TO EXAMINE THE SAME, IT IS AN APP ROPRIATE TO REMIT THE ISSUE TO THE FILE OF LD.CIT(A) TO PASS THE SAME IN THE LIGHT OF THE JUDGMENT OF BOMBAY HIGH COURT IN THE CASE OF DIT(E XEMPTION) VS. KHAR GYMKHANA(SUPRA) WHEREIN HELD THAT:- 10. WE FIND THAT THE CIRCULAR NO. 21 OF 2016 WHEN READ AS A WHOLE, SPECIFICALLY LISTS OUT IN PARAGRAPHS 4 AND 5 REPROD UCED HEREIN ABOVE THAT THE REGISTRATION GRANTED UNDER SECTION 12AA COULD N OT BE CANCELLED, ONLY WHEN THE RECEIPTS ON ACCOUNT OF BUSINESS EXCEE DED THE CUT OFF, SPECIFIED IN THE PROVISO TO SECTION 2(15) OF THE AC T. THE JURISDICTION TO CANCEL THE REGISTRATION ONLY ARISES IF THERE IS CHA NGE IN THE NATURE OF ACTIVITIES OF THE INSTITUTION OR THE ACTIVITIES OF THE INSTITUTION, ARE NOT GENUINE. THE AFORESAID CIRCULAR BY PLACING RELIANCE UPON SECTION 13(8) OF THE ACT INTER ALIA PROVIDES THAT THE REGISTRATIO N GRANTED TO THE TRUST WOULD CONTINUE EVEN WHEN THE RECEIPTS ON ACCOUNT OF BUSINESS IS IN EXCESS OF RS. 25 LAKHS. IN SUCH CASE, THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT FOR THE SUBJECT ASSESSMENT Y EAR WOULD BE ENTITLED TO DENY THE BENEFIT OF EXEMPTION TO SUCH A TRUST FOR THAT YEAR. 11. THE SUBMISSION MADE ON BEHALF OF THE REVENUE TH AT THE CIRCULAR NO. 21 OF 2016 WOULD HAVE ONLY PROSPECTIVE EFFECT I N RESPECT OF ASSESSMENT MADE SUBSEQUENT TO THE AMENDMENT UNDER S ECTION 2(15) OF THE ACT, WITH EFFECT FROM APRIL 1, 2016 IS ALSO NOT SUSTAINABLE. THE AMENDMENT IN SECTION 2(15) OF THE ACT BROUGHT ABOUT BY FINANCE ACT, 2016, WITH EFFECT FROM APRIL 1, 2016, IS ESSENTIALL Y THAT WHERE EARLIER THE ITA NO.2134 & 2135/MDS/2016 7 RECEIPTS IN EXCESS OF RS. 25 LAKHS ON COMMERCIAL AC TIVITIES WOULD EXCLUDE IT FROM THE DEFINITION OF 'CHARITABLE PURPO SE' IS NOW SUBSTITUTED BY RECEIPTS FROM COMMERCIAL ACTIVITIES IN EXCESS OF 20 PER CENT. OF THE TOTAL RECEIPTS OF THE INSTITUTION. IN THE ABOVE VIE W, CIRCULAR NO. 21 OF 2016 DIRECTS THE OFFICER OF THE REVENUE NOT TO CANC EL REGISTRATION ONLY BECAUSE THE RECEIPTS ON ACCOUNT OF BUSINESS ARE IN EXCESS OF THE LIMITS IN THE PROVISO TO SECTION 2(15) OF THE ACT WOULD AL SO APPLY IN THE PRESENT CASE. THE IMPUGNED ORDER HAS HELD THAT CANCELLATION OF A REGISTRATION UNDER SECTION 12AA(3) OF THE ACT, CAN ONLY TAKE PLA CE IN CASE WHERE THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENU INE AND/OR NOT CARRIED ON IN ACCORDANCE WITH ITS OBJECTS. THE AFORESAID CIRCU LAR NO. 21 OF 2016 IS IN LINE OF THE FINDING OF THE TRIBUNAL IN THE IMPUG NED ORDER. THE SUBMISSION ON BEHALF OF THE REVENUE THAT THE TRUST IS NOT GENUINE BECAUSE IT IS HIT BY PROVISO TO SECTION 2(15) OF TH E ACT, IS IN FACT, NEGATIVED BY CIRCULAR NO. 21 OF 2016. IN FACT, THE ABOVE CIRCULAR NO. 21 OF 2016 CLEARLY PROVIDES THAT MERE RECEIPTS ON ACCO UNT OF BUSINESS BEING IN EXCESS OF THE LIMITS IN THE PROVISO WOULD NOT RESULT IN CANCELLATION OF REGISTRATION GRANTED UNDER SECTION 12AA OF THE ACT UNLESS THERE IS A CHANGE IN NATURE OF ACTIVITIES OF THE INSTITUTION. ADMITTEDLY, THERE IS NO CHANGE IN NATURE OF ACTIVIT IES OF THE INSTITUTION DURING THE SUBJECT ASSESSMENT YEAR. THE FURTHER SUB MISSION ON BEHALF OF THE REVENUE THAT LOOKING AT THE QUANTUM OF RECEI PTS ON ACCOUNT OF COMMERCIAL ACTIVITIES, IT IS UNLIKELY/ IMPROBABLE T HAT IN THE SUBSEQUENT ASSESSMENT YEARS, THE RECEIPTS WOULD FALL BELOW RS. 25 LAKHS AND THEREFORE, THE COMMISSIONER IS ENTITLED TO CANCEL T HE REGISTRATION. THE AFORESAID SUBMISSION MADE ON BEHALF OF THE REVENUE IS BASED NOT ON FACTS AS EXISTING BUT ON PROBABILITY OF FUTURE EVEN TS. WE ARE UNABLE TO ACCEPT THE SUBMISSION BASED ON CLAIRVOYANCE. FURTHE R, WE ARE UNABLE TO UNDERSTAND WHAT PREJUDICE IS CAUSED TO THE REVENUE SINCE WHENEVER ITA NO.2134 & 2135/MDS/2016 8 THE RECEIPTS ON ACCOUNT OF COMMERCIAL ACTIVITIES IS IN EXCESS OF THE LIMITS PROVIDED IN PROVISO TO SECTION 2(15) OF THE ACT, TH E ASSESSING OFFICER IS MANDATED/ REQUIRED TO DENY EXEMPTION UNDER SECTION 11 OF THE ACT AS PROVIDED IN CIRCULAR NO. 21 OF 2016, DATED MAY 27, 2016. ACCORDINGLY, THE ISSUE STANDS COVERED IN FAVOUR OF THE REVENUE B Y VIRTUE OF CIRCULAR NO. 21 OF 2016. ACCORDINGLY, THE ADDITIONAL GROUND IN BOTH THE APPE ALS ARE REMITTED TO THE FILE OF LD.CIT(A) FOR FRESH CONSIDERATION. 5.2 SINCE THE ADDITIONAL GROUNDS ARE REMITTED TO T HE FILE OF LD.CIT(A), AT THIS STAGE I REFRAIN FROM GOING INTO THE OTHER GROUNDS RAISED BY THE ASSESSEE. 6. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 05 TH DECEMBER, 2017. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 05 TH DECEMBER, 2017 . K S SUNDARAM. ' ( )!*+ ,+%! / COPY TO: 1 . / APPELLANT 3. ' ' -! () / CIT(A) 5. +0 1 )!)23 / DR 2. / RESPONDENT 4. ' ' -! / CIT 6. 1 45 6 / GF