M/s. B.G. Lohia Foundation, Kolkata V. CIT (Exemption), Kolkata, Kolkata

ITA 2186/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6041 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 12-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: ANKIT JALAN
• Keywords: Principle of natural justice
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI A.T.VARKEY, JM &DR. A.L.SAINI, AM ./ITA NO.2186/KOL/2017 ( / ASSESSMENT YEAR: ) M/S B.G. LOHIA FOUNDATION 20B, ABDUL HAMID STREET, EAST INDIA HOUSE, 4 TH FLOOR, KOLKATA-700069. VS. CIT(EXEMPTION), KOLKATA 10B, MIDDLETON ROAD, KOLKATA-700071 ./ ./PAN/GIR NO.: AACTB 5916 G (ASSESSEE) .. (REVENUE) ASSESSEE BY :SHRI ANKIT JALAN, AR RESPONDENT BY : SHRI P.K. SRIHARI, CIT DR / DATE OF HEARING : 19/12/2018 /DATE OF PRONOUNCEMENT : 23/01/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, IS DIR ECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (EXEMPTION), KOLKATA U/S 12AA(1)(B)(II) OF THE INCOME TAX ACT, 1961 [IN SHORT THE ACT] DATED 17. 08.2017. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE IMPUGNED ORDER PASSED BY THE LD. CIT(E) WAS UNJUSTIFIED AND BAD IN LAW. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(E), KOLKATA ERRED IN LAW AS WELL AS IN FACTS IN REJECTING THE A PPLICATION FOR REGISTRATION OF TRUST U/S 12AA OF THE INCOME TAX ACT, 1961 ON TH E GROUND THAT NO ACTIVITY HAS BEEN CARRIED OUT IN SPITE OF THE FACT THAT THE APPELLANT IS A NEW TRUST. M/S B.G. LOHIA FOUNDATION ITA NO.2186/KOL/2017 ASSESSMENT YEAR: P PP PA AA AG GG GE EE E | || | 2 22 2 3. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, LD. CIT(E), KOLKATA HAD REJECTED THE APPLICATION FOR REGISTRATION OF TR UST U/S 12AA WITHOUT VALID REASON. THIS KIND OF REJECTION OF APPLICATION OF RE GISTRATION OF TRUST U/S 12AA(1)(B)(II) OF THE INCOME TAX ACT, 1961 IS BIASE D, ARBITRARY AND WITHOUT COMPLYING THE LAWS OF NATURAL JUSTICE AND THEREFORE LIABLE TO BE DELETED. 4. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MOD IFY, SUBSTITUTE, ADD TO, ABIDE AND/OR RESCIND ANY OR ALL OF THE ABOVE GROUND S. 3. THE BRIEF FACTS QUA THE ISSUE ARE THAT M/S B. G. LOHIA FOUNDATION (TRUST) CAME INTO EXISTENCE, AS A TRUST ON 20.06.2015. THIS TRUS T FILED AN APPLICATION IN FORM NO. 10A ON 20.02.2017 FOR GRANTING REGISTRATION AS CHAR ITABLE INSTITUTION U/S 12AA OF THE ACT. THE CIT(E) ASKED THE ASSESSEE TO PROVE ABO UT COMMENCEMENT OF CHARITABLE ACTIVITIES. THE CIT(E) HAS NOTED THAT TH E TRUST HAS DONATED RS. 17,500/- FOR PROVIDING RELIEF TO THE POOR BUT FAILED TO PROV E WHETHER THE CHARITABLE ACTIVITIES HAVE BEEN STARTED OR NOT. THE CIT(E) NOTED THAT SIN CE THE ASSESSEE DID NOT FILE ANY SUBSTANTIAL EVIDENCE TO PROVE ABOUT COMMENCEMENT OF CHARITABLE ACTIVITIES, AND SINCE THE CHARITABLE ACTIVITIES HAVE NOT BEEN COMME NCED THEREFORE, THE ASSESSEE SHOULD NOT BE GRANTED EXEMPTION U/S 12AA(1)(B) OF T HE ACT. THEREFORE, THE CIT(E) AFTER GOING THROUGH THE PROVISION OF SECTION 12AA O F THE ACT, CAME TO THE CONCLUSION THAT SINCE THE INSTANT TRUST HAS NOT STA RTED THE CHARITABLE ACTIVITIES THEREFORE, REGISTRATION U/S 12AA(1) OF THE ACT SHOU LD NOT BE GRANTED, HENCE, THE CIT(E) DENIED TO REGISTER THE TRUST U/S 12AA OF THE ACT. 4. AGGRIEVED BY THE STAND TAKEN BY CIT(E), THE ASSE SSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE BEGINS BY POINT ING OUT THAT IT IS NOT NECESSARY FOR A TRUST TO COMMENCE CHARITABLE ACTIVITY FOR THE PURPOSE OF GETTING REGISTERED U/S 12AA OF THE ACT. IN ORDER TO GET THE TRUST REGISTER ED U/S 12AA OF THE ACT, THE TRUST SHOULD ONLY DEMONSTRATE THE CHARITABLE ACTIVITY AND OBJECT CLAUSE OF THE CHARITABLE ACTIVITY. THE LD. COUNSEL POINTED OUT THAT THIS TRU ST HAS BEEN CREATED TO CARRY ON THE CHARITABLE ACTIVITIES AND THE TRUST DEED (VIDE PAGE NO. 3 OF TRUST DEED) WHERE THE FOLLOWING OBJECTIVE OF THE TRUST ARE MENTIONED: M/S B.G. LOHIA FOUNDATION ITA NO.2186/KOL/2017 ASSESSMENT YEAR: P PP PA AA AG GG GE EE E | || | 3 33 3 A) HELP DESERVING STUDENTS BY PROVIDING FINANCIAL A SSISTANCE FOR HIGHER STUDIES AS ALSO GIVE THEM ALLOWANCES, SCHOLARSHIP, STIPENDS AN D HELP THEM IN ALL OTHER POSSIBLE WAYS. B) TO ESTABLISH AND/OR MAINTAIN SCHOOLS, COLLEGE, H OSTELS OR OTHER INSTITUTIONS FOR IMPARTING EDUCATION AND GRANT AID TO SUCH INSTITUTI ONS. C) TO RENDER HELP IN AILMENTS OF NEEDY PERSONS BY P ROVIDING MEDICINES, FACILITIES FOR TREATMENT AND MEDICAL ASSISTANCE AND/OR BY OPEN ING DISPENSARIES, HOSPITAL NURSING HOMES ETC AND GIVE AID TO SUCH INSTITUTIONS FOR THE PUBLIC IN GENERAL. D) TO ASSIST PROMOTE AND/OR SUBSCRIBE TO THE ESTAB LISHMENT AND MAINTENANCE OF ANY INSTITUTION, ASSOCIATION FUND, TRUST OR CHARITY FOR THE BENEFIT OF GENERAL PUBLIC. E) TO TAKEOVER OR AMALGAMATE WITH ITSELF ANY OTHER TRUST INSTITUTION OF SOCIETY AND UTILIZE THE SAME IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. F) TO STUDY, SPREAD AND PROPAGATE INDIAN CULTURE ES PECIALLY IN ITS INTELLECTUAL, SPIRITUAL AND ARTISTIC ASPECTS AND FOR THE PURPOSE : I) TO MAINTAIN A RESEARCH LIBRARY AND A PLACE WHER E SCHOLARS CAN STUDY II) TO HOLD EDUCATIONAL CONFERENCES, SEMINARS ETC. III) TO PUBLISH ARTICLES , PAPERS AND BOOKS IV) TO GIVE STIPENDS TO PROMISING STUDENTS, ARTIST S ETC. G) TO DO ALL SUCH OTHER LAWFUL THINGS OR ACTS AS AR E CONDUCIVE TO THE ATTAINMENT OF THE ABOVE OBJECTS OR ANY OF THEM. 6. THE LD. COUNSEL THEREFORE, POINTED OUT THAT IN T HE LIGHT OF THE ABOVE CHARITABLE ACTIVITIES, ONE CAN UNDERSTAND THATTHE TRUST HAS EN GAGED IN VALID CHARITABLE ACTIVITIES WHICH ARE TO BE CARRIED ON IN FUTURE. TH E CRITERIA TO GRANT THE REGISTRATION U/S 12AA IS TO EXAMINE THE CHARITABLE ACTIVITIES ON LY. THEREFORE, THE LD. COUNSEL PRAYED THE BENCH THAT THE CIT(E) SHOULD BE DIRECTED TO GRANT THE EXEMPTION BASED ON THE CHARITABLE ACTIVITIES MENTIONED IN THE OBJEC T CLAUSE OF THE TRUST DEED. M/S B.G. LOHIA FOUNDATION ITA NO.2186/KOL/2017 ASSESSMENT YEAR: P PP PA AA AG GG GE EE E | || | 4 44 4 7. HOWEVER, THE LD. DR FOR THE REVENUE PRIMARY REIT ERATED THE STAND TAKEN BY THE LD. CIT(E), WHICH WE HAVE ALREADY NOTED IN OUR EARL IER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 8. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD, WE NOTE THAT IN ORDER TO GRANT REGISTRATION U/S 12AA OF THE ACT, IT IS NOT NECESSARY FOR THE CIT(E) TO E XAMINE WHETHER THE TRUST HAS STARTED CHARITABLE ACTIVITIES OR NOT. IN THE ASSESS EE`S CASE UNDER CONSIDERATION, THE CIT (E ) DENIED THE REGISTRATION U/S 12AA, SOLELY O N THE GROUND THAT TRUST HAS NOT STARTED CHARITABLE ACTIVITIES.WE DO NOT SUBSCRIBE T O THE ABOVE-SAID ACTION OF THE LD. CIT(E). WE ARE OF THE OPINION THAT SO FAR AS GRANT OF REGISTRATION U/S 12AA OF THE ACT IS CONCERNED, THE LD. CIT (E )S JURISDICTION I S ONLY TO VERIFY THE OBJECTS OF THE INSTITUTION AND GENUINENESS OF THE ACTIVITIES, MEAN ING THEREBY THAT HE HAS TO SATISFY HIMSELF THAT OBJECTS ARE CHARITABLE IN NATURE AND A CTIVITIES BEING CARRIED ON OR TO BE CARRIED ON ARE GENUINE, MEANING THEREBY THAT THEY A RE IN CONSONANCE FOR ACHIEVING OF CHARITABLE OBJECTS AND NOTHING ELSE. FROM A READ ING OF SECTION 12A AND 12AA OF THE ACT WHAT IS INTENDED THEREBY IS ONLY A REGISTRA TION SIMPLICITOR OF THE ENTITY/TRUST. THE REGISTRATION U/S 12AA OF THE TRUS T HAS BEEN MADE A CONDITION PRECEDENT FOR CLAIMING THE BENEFITS OF THE EXEMPTIO N U/S 11 AND 12 OF THE ACT. WHILE PROCESSING THE APPLICATION FOR REGISTRATION U /S 12AA OF THE ACT, NO EXAMINATION OF THE MODUS OF THE APPLICATION OF THE FUNDS OF THE ASSESSEE IS CALLED FOR. THE STAGE FOR CONSIDERATION OF THE APPLICATION OF THE FUNDS VIS-A-VIS OBJECTIVES OF THE TRUST ARISES AT THE TIME OF ASSESSMENT BY TH E A.O. WHERE BENEFITS ARE CLAIMED BY THE ASSESSEE IN TERMS OF SECTION 11 AND 12 OF TH E ACT AND AO CAN EXAMINE THE QUESTION AS TO THE NATURE OF THE CONTRIBUTIONS ETC. AT THE TIME OF ASSESSMENT. AT THE TIME OF REGISTRATION OF THE ASSESSEE U/S 12AA IS CO NCERNED WHAT IS TO BE LOOKED INTO IS WHETHER THE ASSESSEE TRUST IS A GENUINE ONE OR WHETHER IT IS A SHAM INSTITUTION FLOATED ONLY TO AVAIL THE BENEFITS OF E XEMPTION UNDER THE ACT (REFER SREEANJANAYA MEDICAL TRUST VS. CIT 382 ITR 399 KER ). IN THE LIGHT OF THE AFORESAID DISCUSSION THE IMPUGNED ORDER OF REJECTIO N FOR REGISTRATION UNDER 12AA BY THE LD. CIT(E) CANNOT BE SUSTAINED. THE LD. CIT( E) COULD HAVE EXAMINED ONLY THE GENUINENESS OF THE TRUST AND ITS ACTIVITIES POS TULATED ARE TO ACHIEVE THE OBJECTS M/S B.G. LOHIA FOUNDATION ITA NO.2186/KOL/2017 ASSESSMENT YEAR: P PP PA AA AG GG GE EE E | || | 5 55 5 FOR WHICH IT IS CREATED. THERE WAS NO MATERIAL TO S HOW THAT THE TRUST WAS NOT GENUINE OR THAT ITS ACTIVITIES WERE NOT AS PROFESSE D IN THE DEED OF TRUST. THERE WAS NO FINDING THAT THE TRUST WAS A SHAM ENTITY AND THE REFORE, WE ARE INCLINED TO SET ASIDE THE ORDER OF THE LD. CIT(E) WITH THE DIRECTIO N TO HIM TO CONSIDER THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT, D E NOVO BY PASSING A SPEAKING ORDER IN ACCORDANCE TO LAW AND AFTER GIVING ADEQUAT E OPPORTUNITY TO THE ASSESSEE IN ACCORDANCE TO LAW. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.01.201 9. SD/- ( A.T.VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 23/01/2019 ( SB, SR.PS ) / COPY OF THE ORDER FORWARDED TO : TRUE COPY BY ORDER ASSISTANT REGISTRAR, I.T.A.T, KOLKATA BENCHES, KOLKATA . 1. /THE ASSESSEE M/S B.G. LOHIA FOUNDATION 2. ! / THE REVENUE CIT(EXEMPTION), KOLKATA 3. ' ( ) / THE CIT(A), 4. ' / CIT 5. #$% &&'( , '( , / DR, ITAT, KOLKATA 6. %)*+ / GUARD FILE. !# & M/S B.G. LOHIA FOUNDATION ITA NO.2186/KOL/2017 ASSESSMENT YEAR: P PP PA AA AG GG GE EE E | || | 6 66 6