M/s Dwarampudi Charitable Trust, Kakinada V. The CIT Rajahmundry, Rajahmundry

ITA 231/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56797 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 22-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Gift; Charitable institution
• Section: 12A; 12AA

Judgement Text

ITA NO 231 OF 2011 DHARMAPUDI CHARITABLE TRUST KAKI NADA PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.231/VIZAG/2011 ASSESSMENT YEAR:NA DHARMAPUDI CHARITABLE TRUST, KAKINADA VS. CIT RAJAHMUNDRY (APPELLANT) PAN NO:AABTD 4940 M (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH. LUCAS PETER, CIT (DR) DATE OF HEARING: 03-08-2011 DATE OF PRONOUNCEMENT: 23-08-2011 ORDER PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER: IN THIS APPEAL, THE ASSESSEE IS ASSAILING THE O RDER DATED 30.05.2011 PASSED BY THE LD CIT, RAJAHMUNDRY, IN WHICH THE LEA RNED CIT HAS REJECTED THE APPLICATION FILED BY THE ASSESSEE SEEKING REGIS TRATION U/S 12AA OF THE ACT. 2. THE FACTS RELATING TO THE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE HEREIN, A CHARITABLE TRUST, FILED AN APPLICATION IN FORM NO.10A BEFORE THE LD CIT RAJAHMUNDRY ON 08.01.2010 SEEKING REGISTRATION U/S 12AA OF THE INCOME TAX ACT. HOWEVER, THE LD CIT REJECTED THE APPLICATION OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS: 4. A PERUSAL OF THE DOCUMENTS AVAILABLE ON RECORD REVEALED THAT THE DEED WAS NOT WRITTEN WITH PRECISION. THERE EXISTED SOME INTERPRETATIONAL COMPLEXITY IN THE DEED. IT WAS MENTIONED IN THE DEED THAT THE TRUST IS ENTITLED TO COLLECT AND ACCEPT DONATIONS FROM THE INDIVIDUALS, FIRMS AND CO MPANIES ITA NO 231 OF 2011 DHARMAPUDI CHARITABLE TRUST KAKI NADA PAGE 2 OF 5 AND FROM ALL OTHER LEGAL ENTITIES. IT IS ENTITLED T O ACCEPT GIFTS, BENEFITS AND DONATIONS EITHER MOVABLE OR IMMOVABLE PROPERTIES OR CASH FROM THE PUBLIC LOCAL BODIES, PU BLIC BODIES, SOCIETIES AND ASSOCIATIONS AND COMPANIES OF STATE A ND CENTRAL GOVERNMENT OR ANY OTHER WAY. IT IS ENTITLED TO ACCEP T THE DONATIONS AND GIFTS FROM NRIS WHO ARE RESIDING AT OT HER COUNTRIES. IT WAS MENTIONED IN THE DEED THAT THE TRU ST IS ENTITLED TO INVEST THE TRUST FUNDS IN DEPOSITS IN S CHEDULE BANKS AND OR BY PURCHASING MOVABLE AND IMMOVABLE PROPERTI ES AND CONSTRUCTING THE CHOULTRIES, REPOSES, HOSTELS, BUIL DINGS AND SHEDS ETC., TO DONATE THE DESERVING AS NARRATED IN THE AIMS AND OBJECTIVES OF THE TRUST AND IT IS ENTITLED TO T RANSFER, ALIENATE ANY OF THE PROPERTY OF THE TRUST IN THE CO URSE OF ATTAINMENT OF ITS OBJECTS. AS MENTIONED (SUPRA), TH ERE EXISTED CLEAR AMBIGUITY IN CONSTRUING THE ABOVE MENTIONED C LAUSES WITH SPECIFIC REFERENCE TO APPLICATION OF FUNDS FOR THE ATTAINMENT OF THE OBJECTS OF THE TRUST. NOWHERE IN THE TRUST DEED, IT WAS MENTIONED THAT THE FUNDS COLLECTED BY THE TRUST WILL BE APPLIED FOR ATTAINMENT OF THE OBJECTS. THIS LACK OF EXACTITUDE IN THE DEED CREATES A SUSPICION AND DOUB T THE DEGREE OF DISCRETION BEING EXERCISED BY THE MEMBERS OF THE TRUST WITH REGARD TO THE UTILIZATION OF TRUST FUNDS . 5. THE TRUST RECEIVED VOLUNTARY DONATIONS OF ` 5,22,000/- AS THE END OF 31-03-2011 WHICH CAN BE EVIDENCED FRO M THE FINANCIAL STATEMENTS APPENDED TO THE APPLICATION AN D FILED SUBSEQUENTLY DURING THE COURSE OF HEARING THE CASE. AS PER THE DETAILS FILED ALONG WITH THE APPLICATION, THE D ONATIONS ARE CLAIMED TO BE VOLUNTARY AND THE CLAIM WAS CHANGED I N THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 14 2(1) OF THE ACT. AS AT THE END OF 31-03-2010, THE VOLUNTARY DON ATIONS WERE GIVEN THE SHAPE OF CORPUS FUND AS IF THEY WERE GIVEN WITH SOME SPECIFIC DIRECTIONS. NOWHERE IN THE TRUST DEED, SUCH DISCRETIONARY POWER WAS VESTED WITH MEMBERS OF THE TRUST TO MEDDLE WITH THE DONATIONS AND COVERT THE VOLUNTARY DONATIONS INTO CORPUS DONATIONS. DURING THE COURSE OF HEARING , THE AR FAILED TO PRODUCE THE LIST OF DONORS WHO PURPORTED TO HAVE MADE DONATIONS. 6. IN VIEW OF THE AFORE STATED DISCUSSION, THE UNDER SIGNED DO NOT WISH TO BE UNDERSTOOD TO HAVE ENTERTAINED TH E APPLICATION FILED IN FORM NO.10A BY THE APPLICANT F AVOURABLY FOR CONSIDERING THE REQUEST FOR REGISTRATION U/S 12AA O F THE ACT. ITA NO 231 OF 2011 DHARMAPUDI CHARITABLE TRUST KAKI NADA PAGE 3 OF 5 ACCORDINGLY, THE APPLICATION FILED IS LIABLE TO BE REJECTED AND HENCE REJECTED . AGGRIEVED BY THE SAID DECISION OF LEARNED CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE OBSERVATIONS OF THE LD CIT WITH REGARD TO THE METHOD OF USAGE OF FUNDS OF THE TRUST ARE IN CONTRADICTION TO THE FACTS ALREADY AVAILABLE IN THE TRUST DEED. IN THIS CONNECTION, HE INVITED OUR ATTENTION TO THE CLAUSES IN THE TRUS T DEED, PARTICULARLY TO CLAUSE 4 UNDER THE HEADING DUTIES OF TRUSTEES IN PAGE 7 O F THE TRUST DEED, WHEREIN IT IS MENTIONED THAT THE INCOME AND CORPUS SHALL BE APPLI ED ONLY FOR THE PURPOSES MENTIONED IN THE DEED OF TRUST. WITH REGARD TO THE OBSERVATIONS OF THE LD CIT RELATING TO THE VOLUNTARY DONATIONS, THE LD AUTHORI ZED REPRESENTATIVE SUBMITTED THAT THESE ASPECTS HAVE TO BE VERIFIED DURING THE C OURSE OF PROCEEDINGS ONLY. ON THE OTHER HAND, THE LD DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE LD CIT. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE PRO VISIONS OF SEC.12AA ARE APPLICABLE TO THE ISSUE BEFORE US. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW SUB SECTION (1) OF SECTION 12AA OF THE ACT: 12AA (1) THE COMMISSIONER, ON RECEIPT OF AN APPLIC ATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE(A) OR CLAUSE (AA) OF SUB SECTION (1) OF SECTION 12A SHALL - (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRU ST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATI SFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE T RUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE- ITA NO 231 OF 2011 DHARMAPUDI CHARITABLE TRUST KAKI NADA PAGE 4 OF 5 (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLICANT. A CAREFUL READING OF THE PROVISIONS EXTRACTED ABOVE WOULD SHOW THAT THE LD CIT HAS TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRU ST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES AT THE TIME OF PROCES SING OF THE APPLICATION FILED BY THE ASSESSEE SEEKING REGISTRATION UNDER SECTION 12A A OF THE ACT. FROM THE IMPUGNED ORDER OF LD CIT, WE NOTICE THAT THE LD CIT DID NOT FIND ANY FAULT EITHER WITH THE OBJECTS OF THE TRUST OR WITH THE GENUINENE SS OF ITS ACTIVITIES EXCEPT STATING THAT THE ASSESSEE DID NOT PRODUCE ANY DOCUM ENTARY EVIDENCE IN PROOF OF EXTENDING SERVICES AS PROVIDED IN THE OBJECTS OF TH E TRUST. IT IS PERTINENT TO NOTE THAT SECTION 12AA(1) EMPOWERS THE LD CIT TO CALL FO R SUCH DOCUMENTS OR INFORMATION FROM THE TRUST AS HE THINKS NECESSARY I N ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T. IN THE INSTANT CASE, THERE IS NO OBSERVATION TO THE EFFECT THAT THE ASSESSEE HAS FAILED TO SUBMIT THE DETAILS THAT WERE CALLED FOR. IN OUR VIEW, THE OBSERVATIONS MADE BY LEARNED CIT IN PARAGRAPH 4 OF HIS ORDER ARE NOT IN TUNE WITH THE P ROVISIONS OF SEC. 12AA OF THE ACT AND IN ANY CASE THEY ARE IN CONTRADICTION TO TH E RECITALS MADE IN THE TRUST DEED. WE ALSO AGREE WITH THE SUBMISSIONS OF BY LEAR NED A.R THAT THE NATURE OF DONATION RECEIVED BY THE ASSESSEE HAS TO BE EXAMINE D AT THE END OF THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEED ING AND, IN OUR VIEW, THE SAID QUESTION IS RELEVANT FOR THE PURPOSE OF COMPUTING T HE INCOME OF THE TRUST UNDER THE ACT. ITA NO 231 OF 2011 DHARMAPUDI CHARITABLE TRUST KAKI NADA PAGE 5 OF 5 5. THE ABOVE DISCUSSIONS WOULD SHOW THAT THE LD CIT HAS NOT PROPERLY ADJUDICATED THE CLAIM OF THE ASSESSEE SEEKING REGIS TRATION U/S 12AA OF THE ACT. ACCORDINGLY WE SET ASIDE THE IMPUGNED ORDER OF LEAR NED CIT AND RESTORE THE ISSUE BACK TO HIS FILE WITH A DIRECTION TO PROCESS THE APPLICATION FILED BY THE ASSESSEE IN ACCORDANCE WITH THE LAW. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TREAT ED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:23-08-2011 COPY TO 1 THE DHARMAPUDI CHARITABLE TRUST, D.NO.25-6-37/A G ANJAMVARI STREET, KAKINADA 533001 2 THE COMMISSIONER OF INCOME TAX, RAJAHMUNDRY 3 THE ADD. CIT KAKINADA RANGE, RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM