Indian Medical Association, Solapur V. Commissioner of Income-tax - IV,

ITA 2236/PUN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0373 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2016
• Assessment Year: misc
• Appeal Filed On: 30-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N DOSHI
• Keywords: Benefit of exemption; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE , ! , # $ BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.2236/PN/2013 INDIAN MEDICAL ASSOCIATION, DUFFRIN CHOWK, SOLAPUR. PAN NO.AAATI4550M. . / APPELLANT V/S COMMISSIONER OF INCOME - TAX IV, PUNE. . / RESPONDENT / APPELLANT BY : SHRI S.N. DOSHI / RESPONDENT BY : SHRI RAJEEV KUMAR. & / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL OF THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX-IV (CIT), PUNE DATED 31.10.2013. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER :- / DATE OF HEARING :17.11.2016 / DATE OF PRONOUNCEMENT: 25.11.2016 2 ITA NO.2236/PN/2013 2.1 THE ASSESSEE IS A TRUST STATED TO HAVE BEEN CREATED ON 13.10.1954 AND REGISTERED UNDER BOMBAY PUBLIC TRUST ACT , 1950 VIDE REGISTRATION NO.E-62(SOL) DT.13.10.1954. IT IS STATED T O BE AN EDUCATIONAL TRUST / CHARITABLE ORGANIZATION. IT FILED AN APPLICATION ON 31.03.2013 FOR REGISTRATION OF THE TRUST U/S 12(A) OF THE ACT. 3. ON PERUSING THE APPLICATION FILED BY THE ASSESSEE, CIT INTER ALIA CONCLUDED THAT ASSESSEE TRUST WAS NOT FOLLOWING ANY CHARITABLE ACTIVITIES AND HENCE CANNOT BE TERMED AS A CH ARITABLE ORGANIZATION AND FOR REACHING THE AFORESAID CONCLUSION HE INTER-ALIA NOTED THAT THE NEWS LETTER TITLED SIMA WHICH WAS PUB LISHED BY ASSESSEE WAS A NEWS LETTER MEANT FOR THE MEMBERS ONL Y AND DID NOT REACH OUT TO GENERAL PUBLIC. HE ALSO NOTED THAT ONL Y PERSONS POSSESSING MEDICAL QUALIFICATIONS AND REGISTERED WITH ANY MED ICAL COUNCIL OF INDIA COULD BE THE MEMBER OF THE ASSESSEE. HE ALSO NOTED THAT MOST OF THE ACTIVITIES OF THE ASSESSEE TRUST PERTAIN TO AND RESTRICTED TO THE MEMBERS AND FOR WHICH FEE WAS CHA RGED AND HENCE THE ACTIVITIES OF ASSESSEE WERE NOT CHARITABLE ACT IVITIES FOR THE PURPOSE OF EXEMPTION UNDER INCOME TAX ACT. ACCOR DING TO HIM THE ASSESSEES SUBMISSION OF CARRYING OUT GENERAL PUBLIC ACTIVITIES LIKE COMPUTER TRAINING, SWIMMING LEARNING, MORNING CLUB, PHOTOGRAPHY COURSE ETC. ALSO COULD NOT BE TERMED AS C HARITABLE ACTIVITY IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE FILED B Y THE ASSESSEE. HE THEREFORE CONCLUDED THAT THE ACTIVITIES OF THE TRUST WERE PURELY OF A SOCIAL CHARACTER AND DID NOT QUALIFY FOR EXEMPTION UNDER THE INCOME TAX ACT AND ACCORDINGLY REJECTED TH E APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. AGGRIEVED WITH THE O RDER OF LD. 3 ITA NO.2236/PN/2013 CIT-IV, PUNE, ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS ERRED IN REFUSING TO GRANT THE REGISTRATION SOUGHT U/S 12AA (1) OF THE IT ACT, 196 1 BY ASSIGNING THE REASONS INCORRECTLY IN AS MUCH AS THE CIT HAS ERRED IN INTERPRETING THE OBJECTS CLAUSE CONSTITUTING AS IF THE APPELLANT INSTITUTION IS NOT THE CHARITABLE ORGANIZATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT HAS FURTHER ERRED IN NOT ALLOWING THE CLAIM OF EXEMPTION U/S 10(23)(IIIAD) OF THE IT ACT, 1961 ON THE GROUND THAT THE SAID SECTION APPLIES TO UNIVERSITIE S OR OTHER EDUCATIONAL INSTITUTIONS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PRO FIT AND IN THE PROCESS HOLDING THAT APPELLANT INSTITUTI ON DOES NOT GET COVERED UNDER THE SAID PROVISIONS OF SECTION 10(23)(IIIAD) 4. BEFORE US, AT THE OUTSET LD. AR SUBMITTED THAT THOUG H THE ASSESSEE HAS RAISED TWO GROUNDS, BUT THE SOLE CON TROVERSY WHICH IS TO BE DECIDED IS ABOUT THE REGISTRATION OF THE ASSESSEE U/S 12A OF THE ACT. 5. BEFORE US THE LD. AR REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND FURTHER SUBMITTED THAT THE ASSESSEE TRUST WAS CREATED IN 1954 AND IS CARRYING OUT VARIOUS ACTIVITIES LIKE A RRANGING EDUCATIONAL CAMPS AMONG PUBLIC IN THE MATTER OF HEALTH AND SANITATION, CONTINUED MEDICAL EDUCATION FOR ITS MEMBERS WHICH IN TURN HELP THE GENERAL PUBLIC. HE FURTHER SUBMITTED THAT A SSESSEE ALSO UNDERTAKES VARIOUS OTHER ACTIVITIES LIKE COMPUTER TRA ININGS, SPORTS EVENTS, YOGA ETC. FOR THE GENERAL PUBLIC AND IN SU PPORT OF THE ACTIVITIES CARRIED OUT BY THE ASSESSEE, HE ALSO PLACED ON RECORD THE COPY OF THE INCOME AND EXPENDITURE ACCOUNT FOR YEAR END ED 31.03.2010 TO 31.03.2013 AND FROM THAT HE POINTED OUT TO THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE OBJECTS O F THE TRUST. LD. AR FURTHER SUBMITTED THAT ASSESSEE IS A BRANCH OF IN DIAN 4 ITA NO.2236/PN/2013 MEDICAL ASSOCIATION AND THAT APART FROM THE ASSESSEE THE RE ARE VARIOUS OTHER BRANCHES OF INDIAN MEDICAL ASSOCIATION IN VA RIOUS CITIES HAVING IDENTICAL OBJECTIVES AND ACTIVITIES AND ALL THOSE BRANCHES HAVE BEEN RECOGNIZED AS EXEMPTED INSTITUTION U /S 12A OF THE ACT AND IN SUPPORT OF WHICH HE PLACED ON RECORD A C OPY OF THE LIST OF VARIOUS BRANCHES WHICH ENJOY EXEMPTION AT PAGES 208 TO 212 OF THE PAPER BOOK. HE THEREFORE SUBMITTED THAT ONCE TH E OTHER BRANCHES OF INDIAN MEDICAL ASSOCIATION HAVING SIMILAR OBJECTS AS THAT OF ASSESSEE HAVE BEEN CONSIDERED TO BE AN EXEMP T INSTITUTION BY THE INCOME TAX DEPARTMENT, THE ASSESSEE SHOULD ALS O BE CONSIDERED AS AN EXEMPT INSTITUTION. LD.ARS SECOND ARGU MENT WAS THAT WHILE MAKING ENQUIRIES DURING THE COURSE OF PROCEEDING S U/S 12AA / 12A OF THE ACT FOR GRANT OF REGISTRATION, CIT COU LD MAKE ENQUIRY ONLY REGARDING THE GENUINENESS OR OTHERWISE OF THE OBJECTIVES OF THE TRUST AND AS FOR AS THE APPLICATION O F THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSE IS CONCERN ED, IT IS THE SUBJECT MATTER OF ASSESSMENT WHICH IS TO BE CONSIDE RED BY AO AT THE TIME OF ASSESSMENT. HE ALSO RELIED ON THE VARIOUS D ECISIONS CITED IN THE PAPER BOOK. HE THEREFORE SUBMITTED THAT T HE ORDER OF LD. CIT(A) REFUSING THE GRANT OF REGISTRATION BE SET ASIDE. 6. LD.D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD. CIT AND FURTHER SUBMITTED THAT FOR THE PURPOSE OF REGIS TRATION, THE LD. CIT HAS TO BE SATISFIED NOT ONLY WITH REGARD TO THE G ENUINENESS OF THE TRUST BUT ALSO WITH REGARD TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. HE FURTHER SUBMITTED THAT THE AC TIVITIES OF THE TRUST AS STATED IN THE NEWS LETTER CANNOT BE CON SIDERED TO BE A CHARITABLE ACTIVITY SO AS TO QUALIFY FOR EXEMPTION. HE FU RTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF INDIAN NUTRITIONAL 5 ITA NO.2236/PN/2013 MEDICAL ASSOCIATION VS. CIT-1, KOCHI REPORTED IN (2 013) 35 TAXMANN.COM 505, STATE FORUM OF BANKERS CLUB (KERA LA) VS. INCOME TAX OFFICER (TECH), KOCHI (2015) 56 TAXMANN. COM 172 (COCHIN TRIB), DIRECTOR OF INCOME TAX VS. PHD CHA MBER OF COMMERCE & INDUSTRY (2014) 51 TAXMANN.COM 380 (SC), COMMISSIONER OF INCOME-TAX VS. ERNAKULAM DIST. CEMEN T DEALERS ASSOCIATION (2001) 119 TAXMAN 871 (KER). HE THUS SUPPORTED THE ORDER OF CIT. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO DENIAL OF CLAIM OF REGISTRATION U/S 12A OF THE ACT. 8. THE REGISTRATION U/S 12A OF THE ACT CAN BE SOUGHT EITHER BY A TRUST OR BY AN INSTITUTION. IN ORDER TO A VAIL OF THE BENEFIT OF EXEMPTION U/S 11 OR 12 OF THE ACT, THE ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE CHARITABLE OR FOR RELIGIO US PURPOSES. THE CONDITIONS FOR APPLICABILITY OF SEC.11 AND 12 ARE PROVIDED U/S 12 A AND ONE OF THE CONDITIONS IS THAT THE PERSON IN RECEIPT OF THE INCOME WHICH HE CLAIMS TO BE FOR CHARITABLE P URPOSES HAS TO MAKE AN APPLICATION FOR REGISTRATION OF THE TRUST O R THE INSTITUTION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED M ANNER TO THE COMMISSIONER WITHIN THE PERIOD STIPULATED THEREIN. THE PROCEDURE FOR REGISTRATION OF THE TRUST OR THE INSTITUTIO N BY THE COMMISSIONER IS PROVIDED U/S 12 AA OF THE ACT. SEC.12AA(1) REQUIRES THE COMMISSIONER TO WHOM AN APPLICATION IS MADE FOR THE REGISTRATION OF A TRUST OR INSTITUTION TO SATISFY HIMSELF AB OUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUT ION AS WELL 6 ITA NO.2236/PN/2013 AS THE OBJECTS OF THE TRUST OR INSTITUTION AND FOR THAT PURPOSE COMMISSIONER IS VESTED WITH POWER TO CALL FOR DOCUMENTS OR INFORMATION AND IS ALSO EMPOWERED TO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THAT BEHALF. THE COMMISSIONER IS THEREUPON EMPOWERED TO PASS AN ORDER IN WRITING EITHER REGISTERING AN INSTITUTION OR IF HE IS NOT SATISFIED ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND OF THE GENUINENESS OF ITS ACTIVITIES, TO P ASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITU TION. THUS IT CAN BE SEEN THAT AT THE TIME OF GRANT OF REGISTRATION, THE COMMISSIONER IS NOT EMPOWERED TO EXAMINE THE APPLICATION O F INCOME. THE STAGE FOR CONSIDERATION OF THE RELEVANCE OF T HE OBJECT OF THE TRUST AND THE APPLICATION OF ITS FUNDS ARISES AT TH E TIME OF ASSESSMENT. WE FURTHER FIND THAT HONBLE KERALA HIGH COUR T IN THE CASE OF SHRI ANJANEYA MEDICAL TRUST VS. CIT (2016) 382 ITR 399 (KER) ON THE ISSUE OF THE SCOPE OF INQUIRY BY CIT(A) FOR TH E REGISTRATION U/S 12A AND 12AA HAS OBSERVED AS UNDER : IT IS CLEAR FROM A PLAIN READING OF SECTIONS 12A A ND 12AA OF THE ACT THAT WHAT IS INTENDED THEREBY IS ONLY A REG ISTRATION SIMPLICITER OF THE ENTITY OF A TRUST. THIS HAS BEE N MADE A CONDITION PRECEDENT FOR THE CLAIMING OF BENEFITS UN DER THE OTHER PROVISIONS OF THE ACT REGARDING EXEMPTION OF INCOME, CONTRIBUTION, ETC. NO EXAMINATION OF THE MODUS OF THE APPLICATION OF THE FUNDS OF THE TRUST OR AN EXAMINA TION OF THE ETHICAL BACKGROUND OF ITS SETTLERS IS CALLED FOR WH ILE CONSIDERING AN APPLICATION FOR REGISTRATION. THE S TAGE FOR CONSIDERATION OF THE RELEVANCE OF THE OBJECT OF THE TRUST AND THE APPLICATION OF ITS FUNDS ARISES AT THE TIME OF ASSESSMENT. WHERE BENEFITS ARE CLAIMED BY THE ASSESSEE IN TERMS OF SECTIONS 11 AND 12 OF THE ACT, THE QUESTION AS TO T HE NATURE OF SUCH CONTRIBUTION AND INCOME CAN BE LOOKED INTO. AT THE TIME OF REGISTRATION OF THE TRUST, GOING BY THE BIN DING JUDGMENTS OF THE APEX COURT, WHAT IS TO BE LOOKED I NTO IS WHETHER THE TRUST IS A GENUINE ONE AND WHETHER IT I S A SHAM INSTITUTION FLOATED ONLY TO AVAIL THE BENEFITS OF E XEMPTION UNDER THE ACT. THERE IS NO SUCH FINDING IN THE IMP UGNED ORDER. 7 ITA NO.2236/PN/2013 9. ON PERUSING THE OBJECTIVES OF THE TRUST AS PER THE MEMORANDUM OF ASSOCIATION, PLACED IN PAPER BOOK THE OBJECTIVES OF THE ASSESSEE READS AS UNDER: 1) TO PROMOTE AND ADVANCE MEDICAL AND ALLIED SCIENCES IN THEIR DIFFERENT BRANCHES, FROM TIME TO TIME. 2) TO PROMOTE IMPROVEMENT IN PUBLIC HEALTH AND MEDICAL EDUCATION; 3) TO MAINTAIN THE HONOUR AND DIGNITY OF THE PROFESSION; TO UPHOLD ITS INTERESTS AND TO PROMOTE CO-OPERATION AMONGST THE MEMBERS OF THE PROFESSION. 10. ON PERUSING THE OBJECTIVES OF THE TRUST AS DETAILED ABOVE, IT IS SEEN THAT THE OBJECTS OF THE ASSESSEE ARE INTER ALIA TO PROMOTE AND ADVANCE MEDICAL AND ALLIED SCIENCES IN DIFFERENT BRANCHES AND TO PROMOTE IMPROVEMENT IN PUBLIC HEALTH AND MEDICAL EDUCATION. THUS THE OBJECTS OF THE TRUST, PRIMA FA CIE, APPEARS TO BE OF CHARITABLE IN NATURE. FURTHER, WE ARE O F THE VIEW THAT IN ORDER TO ASCERTAIN THE TRUE NATURE AND PURPOS E OF THE TRUST, THE OBJECTIVES ARE TO BE CONSIDERED AS A WHOLE AND NOT IN ISOLATION. ANOTHER ASPECT OF ISSUE IS THE INTRODUCTION OF FIRST PROVISO OF SEC (15) HOLDING THAT ACTIVITIES OF THE TRUST WAS COMMERCIAL IN NATURE. IN THIS CONNECTION, WE FIND THAT THE AMRITSAR BEN CH OF TRIBUNAL IN THE CASE KAPURTHALA IMPROVEMENT TRUST VS. CIT, JALANDHAR REPORTED IN [2015] 60 TAXMANN.COM 301 (AMRITSAR TRIBUNAL) HAS HELD THAT FIRST PROVISO TO SECTION 2(15) HAVE N O ROLE IN MATTERS RELATING TO REGISTRATION OF A TRUST OR INSTITUTION UNDER SECTION 12A OR 12AA FOR GRANTING OR DECLINING REGISTRATION OR IN RESPECT OF CANCELLATION OF REGISTRATION. 8 ITA NO.2236/PN/2013 11. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO DEMONSTRATE THAT THE TRUST WAS EITHER NOT GENUINE OR ITS ACTIVITIES WERE NOT AS PROFESSED IN THE TRUST DEED. FURT HER, BEFORE US, LD. AR HAS SUBMITTED A LIST OF BRANCHES OF MEDICAL ASSO CIATIONS HAVING SIMILAR OBJECTS AS THAT OF ASSESSEE BUT IN DIFFERENT CITIES AND WHICH HAVE BEEN GRANTED THE STATUS OF EXEMPTION U/S 12 A OF THE ACT. LD.D.R., HAS NOT POINTED OUT ANY DIFFERENCE IN THE OBJ ECTS OF THE ASSESSEE TRUST AND THE OTHERS WHICH HAVE BEEN GR ANTED EXEMPTION U/S 12 A BY THE AUTHORITIES. FURTHER THE CA SE LAWS RELIED UPON BY REVENUE ARE DISTINGUISHABLE ON FACTS AND A RE THEREFORE NOT APPLICABLE TO THE PRESENT CASE. CONSIDE RING THE TOTALITY OF THE AFORESAID FACTS AND AFTER RELYING ON THE AFO RESAID DECISIONS OF HONBLE KERALA HIGH COURT, WE ARE OF THE VIEW THAT THE REJECTION OF APPROVAL FOR REGISTRATION U/S 12A WAS NOT WA RRANTED IN PRESENT CASE AND THEREFORE, WE SET ASIDE THE IMPUGNED O RDER OF CIT AND THE CIT IS DIRECTED TO GRANT REGISTRATION IN TERMS OF SEC.12A OF THE ACT. THUS, THE GROUND OF ASSESSEE IS ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS FRIDAY, THE 25TH DAY OF NOVEMBER, 2016. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) / JUDICIAL MEMBER # / ACCOUNTANT MEMBER PUNE; ! DATED : 25 TH NOVEMBER, 2016. YAMINI 9 ITA NO.2236/PN/2013 & ' ( )* +* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. CIT - IV, PUNE 4. 5. 6. THE JT.CIT, RANGE-1&2, SOLAPUR. #$% &&'(, * '(, A / DR, ITAT, A PUNE; %+, - / GUARD FILE. & / BY ORDER , / / / TRUE COPY / / //TRUE COPY// ./0 &1 '2 / SR. PRIVATE SECRETARY * '( , / ITAT, PUNE