Soham For Kids Education Society, Gurgaon V. DIT (Exemption), New Delhi

ITA 2241/DEL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5464 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 17-12-2013
• Assessment Year: misc
• Appeal Filed On: 05-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12A; 12AA; 12

Judgement Text

ITA 2241/DEL/2011 SOHAM FOR KIDS EDUCATION SOCIETY IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI S.V. MEHROTRA ITA NO. 2241/DEL/2011 U/S 12A OF THE I.T. ACT. SOHAM FOR KIDS EDUCATION SOCIETY VS. DIRECTOR OF I NCOME-TAX (E), CENTRE, DELHI-110092. NEW DELHI. PAN: AAEAS 3722 L ( APPELLANT ) ( RESPONDENT ) APPELLANT BY : SHRI R.K. KAPOOR C.A. RESPONDENT BY : SHRI RAMESH CHANDRA CIT (DR) O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 22-3-2011 PASSED BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), NEW DELHI U/S 12AA(1)(B) R.W.S. 12A OF THE INCOME-TAX ACT, 1961. FOLLOWING EFFECTI VE GROUNDS ARE RAISED: 1. THAT THE ORDER U/S 12AA(1)(B) R.W.S. 12A OF THE INCOME- TAX ACT DATED 23-03-2011 PASSED BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), DELHI REJECTING APPELLANTS APPLICATI ON DATED 14- 09-2010 FOR REGISTRATION OF CHARITABLE INSTITUTION U/S 12(A) OF THE INCOME TAX ACT IS BAD IN LAW ON THE FACTS OF TH E CASE AND IN VIEW OF THE FACT THAT IT HAS BEEN PASSED WITHOUT AL LOWING OPPORTUNITY OF BEING HEARD UNDER PROVISO TO SECTION 12AA(1) OF THE INCOME TAX ACT. 2. THAT THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) WHI LE REJECTING THE APPLICATION ERRED IN OBSERVING THAT T HE TRUST COULD NOT PROVE THE GENUINENESS OF THE ACTIVITIES OF THE TRUST WITHOUT 2 APPRECIATING THE SUBMISSIONS MADE IN APPELLANTS LE TTER DATED 20-12-2010. 2. BRIEF FACTS ARE: THE ASSESSEE A REGISTERED SOCIE TY, APPLIED FOR REGISTRATION U/S 12AA OF THE I.T. ACT ON 14-9-2010. IN RESPONSE TO DIT(E)S LETTER DATED 11-11-2010 THE ASSESSEE FILED THE NECE SSARY ANNUAL BALANCE- SHEET, INCOME AND EXPENDITURE ACCOUNT, OTHER COMPLI ANCES AND CONTENDED THAT THE SOCIETY WAS FORMED WITH AIMS AND OBJECTIVE S WHICH ARE CHARITABLE IN NATURE. IT BEING THE FIRST YEAR OF SOCIETY BY THE TIME OF FILING APPLICATION FOR REGISTRATION THERE WERE NO SUBSTANTIAL ACTIVITIES. DIT(E), HOWEVER, WITHOUT ASKING ANY FURTHER QUESTION REJECTED THE APPLICATIO N BY FOLLOWING OBSERVATIONS: 2. ON PERUSAL OF THE DETAILS IT IS SEEN THAT AS PE R RULES AND REGULATIONS OF THE SOCIETY LIFE MEMBERS & GENERAL M EMBERS ARE REQUIRED TO PAY RS. 1000/- & 500/- RESPECTIVELY AS ADMISSION FEE WHICH HAS NOT BEEN PAID TO THE SOCIET Y. WHEN SUCH RULE IS NOT COMPLIED WITH THEN THE SOCIETY IS NOT VALIDLY CONSTITUTED. ON PERUSAL OF THE DETAILS IT IS SEEN T HAT THE SOCIETY AS REGISTERED WITH REGISTRAR OF SOCIETY ON 17-11-20 09. THE INCOME & EXP. A/C FOR THE YEAR ENDING 31-03-2010 SH OWS INCOME OF RS. 3.00 AS INTEREST AND EXPENSES OF RS. 13927/- TOWARDS LEGAL & PROOF CHARGES. IT IS FURTHER NOTICE D THAT THE SOCIETY HAS NOT BEEN ABLE TO RAISE FUNDS FROM THE P UBLIC AND NOR FROM AMONGST THEMSELVES. THIS SHOWS THAT THE INTENT ION TO CARRY OUT CHARITABLE ACTIVITIES BY THE APPLICANT SOCIETY IS NOT GENUINE. IT HAS IN ITS LETTER DATED 25/11/10 CLEARLY STATED THAT NO ACTIVITIES HAVE BEEN STARTED AS YET. THERE HAS TO BE ACTIVITY TO ESTABLISH GENUINENESS. THE RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF SELF 3 EMPLOYEES SERVICE TRUST VS. CIT 247 ITR 18(KERALA). IN THIS CASE ALTHOUGH THE NATURE OF THE OBJECTS WAS CHARITA BLE AND VOLUNTARY, THE TRUST HAD NOT COMMENCED ANY OF ITS A CTIVITIES. THE TRUST COULD NOT PRODUCE ANY EVIDENCE BEFORE THE CIT REGARDING THE GENUINENESS OF ITS ACTIVITIES AND, THEREFORE, T H4E HONBLE HIGH COURT DISMISSED THE TRUSTS APPEAL AGAINST CIT S ORDER REJECTING REGISTRATION U/S 12AA. 3. THE PROVISIONS OF SECTION 12AA STIPULATE THE FOL LOWING CONDITIONS FOR REGISTRATION U/S 12A OF THE I.T. ACT , 1961:- (I) THE OBJECTS OF THE SOCIETY SHOULD BE OF CHARITA BLE IN NATURE; (II) THE ACTIVITIES OF THE SOCIETY SHOULD BE GENUIN E. THEREFORE, ONE OF THE CONDITIONS FOR GRANTING REGIS TRATION U/S 12AA IS ALSO NOT SATISFIED. 4. SINCE THE APPLICANT HAS NOT DONE ANY CHARITABLE ACTIVITY, THE GENUINENESS OF THE ACTIVITIES COULD NOT BE ESTA BLISHED. THEREFORE, ONE OF THE CONDITIONS FOR GRANTING REGIS TRATION U/S 12AA IS ALSO NOT SATISFIED. ACCORDINGLY, THE APPLIC ATION FILED BY THE APPLICANT FOR GRANT OF REGISTRATION U/S 12AA IS HEREBY REJECTED. 2.1. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE D IT(E) HAS NO WHERE DISPUTED, THE FACT THAT THE OBJECTS OF THE SOCIETY ARE CHARITABLE IN NATURE. APPLICATION HAS BEEN REJECTED MAINLY BY THE FOLLOW ING OBSERVATIONS: (I) THE SOCIETY HAS NOT BEEN ABLE TO RAISE FUNDS WHICH SHOWS THAT INTENTION TO CARRY OUT CHARITABLE ACTIVITY IS NOT G ENUINE. (II) THUS, THOUGH IT HAS NOT BEEN DISPUTED THAT THE OBJE CTIVES OF THE TRUST ARE GENUINE, HOWEVER, BECAUSE OF THE NON-COLL ECTION OF 4 DONATIONS IT HAS BEEN HELD THAT THERE APPEARS TO BE NO INTENTION AND IN THE ABSENCE OF ACTIVITIES THE OBJECTIVES ARE HEL D TO BE NON- GENUINE. 3.1. THE SOCIETY WAS IN EXISTENCE AS ON 31 ST MARCH 2010 FOR ABOUT 3-4 MONTHS ONLY. DURING THIS PERIOD A WEB SITE HAS BEEN CREATED AND THE PROCESS OF UNDERTAKING THE ACTIVITIES OF THE TRUST HAS COMM ENCED. THE SCHEME OF REGISTRATION AND ASSESSMENT OF TRUST IS WELL LAID OUT IN THE INCOME-TAX ACT INASMUCH AT THE TIME OF REGISTRATION THE DIT(E) HA S TO EXAMINE WHETHER THE OBJECTS OF THE SOCIETY TRUST ARE CHARITABLE OR NOT, NO DISPUTE HAS BEEN RAISED IN THIS BEHALF. WHETHER THE ACTIVITIES WHICH ARE CARRI ED OUT AFTER REGISTRATION ARE GENUINE OR NOT FALL IN DOMAIN OF THE ASSESSING OFFI CER WHILE FRAMING THE ASSESSMENT WHERE HE CAN EXAMINE THESE ASPECTS AND A CCORDINGLY APPLY THE PROVISION. THE ASSESSEE BEING A NEW TRUST UNDERTOOK FIRST THE ACTIVITY OF CREATING A WEB SITE AND MAKING ITS OBJECTS AND ACTI VITIES KNOWN TO PUBLIC. THIS IS AN ACTIVITY TOWARDS THE PROMOTION OF OBJECT S OF THE TRUST. EVEN IF IT IS HELD THAT THERE ARE NO CHARITABLE ACTIVITIES, THE R EGISTRATION CANNOT BE REFUSED AT INITIAL STAGE BY LD. DIT(E) FOR THIS REASON. RE LIANCE IS PLACED ON THE FOLLOWING JUDICIAL DECISIONS : (I) HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF O.P. JINDAL GLOBAL UNIVERSITY, SONEPAT VS. CCIT (E) (CWP NO. 6171 OF 2010), HOLDING THAT SUCH APPROVAL IS NOT REQUIRED T O BE SOUGHT EACH YEAR. THIS IS AN ONE TIME APPROVAL. AT PAGE NO. 16 OF THE JUDGMENT IT 5 HAS BEEN HELD THAT THE COMMISSIONER IS REQUIRED TO EXAMINE THE OBJECTIVE OF ESTABLISHING AN EDUCATIONAL INSTITUTE OR UNIVERSITY AND THE FACT THAT IT INTENDS TO ACHIEVE SUCH OBJECTIVES. SO LONG AS THE OBJECTIVE ON FORMING IS NOT IN DOUBT, THE EXEMPTION CANNOT BE DENIED ON THE GROUND THAT NO SUBSTANTIAL ACTIVITIES HAVE BEEN UND ERTAKEN IMMEDIATELY ON THE INCORPORATION OF THE SOCIETY. (II) HONBLE DELHI HIGH COURT IN THE CASE OF DIRECT OR OF INCOME-TAX VS. FOUNDATION OF OPHTHALMIC AND OPTOMETRY RESEARCH EDUCATION CENTRE (2013) 355 ITR 361 HOLDING AS UNDER: HELD, DISMISSING THE APPEAL, THAT UNDER SECTION 12 AA OF THE INCOME-TAX ACT, 1961, THERE ARE NO RESTRICTION S OF THE KIND WHICH THE REVENUE WAS READING INTO IN THIS CAS E. IN OTHER WORDS, THE STATUTE DOES NOT PROHIBIT OR ENJOI N THE COMMISSIONER FROM REGISTERING A TRUST SOLELY BASED ON ITS OBJECTS, WITHOUT ANY ACTIVITY, IN THE CASE OF A NEW LY REGISTERED TRUST. THE STATUTE DOES NOT PRESCRIBE A WAITING PERIOD, FOR A TRUST TO QUALIFY ITSELF FOR REGISTRAT ION. IF THE REVENUES CONTENTIONS WERE CORRECT THEN, NECESSARIL Y, A CONDITION WOULD HAVE TO BE READ INTO THE PROVISION THAT THE COMMISSIONER SHOULD BE SATISFIED THAT THE TRUST WAS IN FACT ENGAGED IN CHARITABLE ACTIVITIES WHICH WOULD I N TURN INJECT CONSIDERABLE DEAL OF SUBJECTIVITY. IT IS QUI TE POSSIBLE THAT IF SUCH FLEXIBILITY IS INTRODUCED, IT WOULD BE SUSCEPTIBLE TO VARIED INTERPRETATION BY THE DIFFERE NT AUTHORITIES, IN THAT SOME WOULD BE SATISFIED WITH T HE ACTIVITY OF FEW MONTHS, WHILE OTHERS MAY WISH TO EX AMINE THE ACTIVITIES OF THE ORGANIZATION FOR LONGER TIME. (III) HONBLE ALLAHABAD HIGH COURT IN THE CASE OF H ARDAYAL CHARITABLE & EDUCATIONAL TRUST VS. CIT (2013) 355 I TR 534, HOLDING THAT AT THE TIME OF REGISTRATION U/S 12AA, THE COMM ISSIONER IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES WHERE SUCH ACT IVITIES HAVE NOT ACTUALLY BEEN UNDERTAKEN OR IT IS IN THE PROCESS OF ITS INITIATION. WHERE 6 A TRUST HAS BEEN SET UP WITH OBJECTS OF ESTABLISHIN G CHARITABLE ACTIVITIES AND IT IS IN THE PROCESS OF ESTABLISHING SUCH ACTIVITIES, THE REGISTRATION U/S 12AA CANNOT BE REFUSED 3.2. FURTHER RELIANCE IS PLACED ON HONBLE KARNATAK A HIGH COURT DECISION IN THE CASE OF DIT(E) VS. MEENAKSHI AMMA ENDOWMENT TRUST (2013) 354 ITR 219 THAT THE TRUST CANNOT BE DENIED REGISTRATIO N AT THE THRESHOLD ON ACCOUNT OF THE FACT THAT NO CHARITABLE ACTIVITY HAS COMMENCED. 3.3. THUS A CATENA OF JUDGMENTS SUPPORT THE VIEW OF THE ASSESSEE. IT IS PLEADED THAT THE ORDER OF LD. DIT(E) MAY BE REVERSE D AND THE REGISTRATION MAY BE DIRECTED TO BE GRANTED. 4. LD. DR ON THE OTHER HAND CONTENDS THAT THE LD. D IT(E) WHILE REFUSING REGISTRATION HELD THAT (I) LIFE MEMBERS AND GENERAL MEMBERS HA NOT CONTRIBUTED THE RESPECTIVE CONTRIBUTION. (II) INCOME AND EXPENDITURE ACCOUNT SHOWS INCOME OF RS. 3/- AND EXPENDITURE OF RS. 13,927/- WHICH DOUBTED THE GENUI NENESS OF THE ACTIVITIES. (III) SOCIETY HAS NOT RAISED ANY FUNDS FROM PUBLIC AND TH ERE APPEARS TO BE NO INTENTION TO CARRY OUT THE CHARITABLE ACTIVIT IES. (IV) NO ACTIVITIES HAVE BEEN CARRIED OUT AS YET AND THER EFORE THE LD. DIT(E) HAS RIGHTLY RELIED ON THE RATIO OF DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF SELF EMPLOYEES SER VICE TRUST VS. CIT 247 ITR 18 (KER.). 7 4.1. LD. DR CONTENDS THAT THE CASE LAWS CITED BY TH E LD. COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE FOR THE REASON THAT IN ASSESSEES CASE APART FROM NO ACTIVITY, THERE ARE VARIOUS OTHER ISSUES ALSO. O RDER OF DIT(E) IS RELIED ON. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD. FROM THE DIT(E)S ORDER IT EME RGES THAT NO DISPUTE HAS BEEN RAISED ABOUT THE CHARITABLE NATURE OF THE OBJE CTIVES OF THE TRUST AS PER THE MEMORANDUM. THE ADVERSE INFERENCE HAS BEEN DRAW N ON POSSIBLE INTENTION, ACTIVITIES I.E. THE ISSUES, WHICH, IN OU R VIEW ARE NOT GERMANE AT THE TIME OF GRANT OF REGISTRATION OF TRUST U/S 12A MORE SO WHEN THE ASSESSEES OBJECTS ARE NOT HELD TO BE NON CHARITABLE. THE NON- CONTRIBUTION OF MEMBERSHIP FEE BY GENERAL MEMBERS AND LIFE MEMBERS MAY BE PAID LATER INASMUCH UNLESS THE MEMBERS MAKES THE NECESSARY CON TRIBUTION RIGHTS OF MEMBERSHIP CANNOT DWELL ON THEM. 5.1. APROPOS THE INCOME AND EXPENDITURE, IT HAS BEE N ACCEPTED BY THE ASSESSEE THAT IT HAD CREATED A WEB SITE FOR THE TR UST WHICH ALSO IS ONE OF THE ACTIVITY TO PROMOTE THE OBJECTS OF THE TRUST, THE F ACT WHICH IS NOT DENIED BY DIT(E) OR THE LD. DR. THEREFORE, THE ADVERSE INFERE NCE NOTHING TO REFLECT ON THIS ASPECT. APROPOS TIME TO RAISE THE FUNDS AND DO NATIONS IT IS THE DISCRETION OF THE SOCIETY THAT CAN BE UNDERTAKEN IN DUE COURSE , MAY BE THE ISSUE OF 80G REGISTRATION WHICH IS CONSEQUENT TO 12A REGISTRATIO N MAY BE IMPORTANT. THUS 8 MERE NON-CARRYING ON OF THE VIGOROUS ACTIVITIES OF TRUST AT THE TIME OF REGISTRATION PER SE CANNOT BE DETRIMENTAL FOR REGIS TRATION OF THE TRUST U/S 12A WHEN THE OBJECTS ARE CHARITABLE AND THERE IS NO ADV ERSE COMMENT ABOUT THEM. IN VIEW THEREOF WE FIND MERIT IN THE ARGUMENT OF LD . COUNSEL AND THE CASE LAWS CITED BY HIM AND RELYING ON THE RATIO OF DECIS IONS IN THE CASES OF FOUNDATION OF OPHTHALMIC AND OPTOMETRY RESEARCH EDU CATION CENTRE; O.P. JINDAL GLOBAL UNIVERSITY; MEENAKSHI AMMA ENDOWMENT TRUST; AND HARDAYAL CHARITABLE & EDUCATIONAL TRUST (SUPRA), WE HOLD THAT THE ASSESSEE IS ELIGIBLE FOR GRANT OF REGISTRATION U/S 12A. THE ORDER OF DIT(E) IS REVERSED AND THE ASSESSEE IS HELD TO BE ELIGIBLE FOR REGISTR ATION U/S 12A OF THE I.T. ACT. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 21-02-2014. SD/- SD/- ( S.V. MEHROTRA ) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21-02-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR