The Lodge of Universal Charity 273 EC Charitable Trust, CHENNAI V. DIT (Exemptions), CHENNAI

ITA 2352/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1200 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 31-12-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA IRS
• Assessee Lawyers: D RAJASEKARAN
• Keywords: Gift; Charitable institution; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S.S.GODARA, JUDICIAL MEMBER I.T.A.NO. 2352/MDS/2012 THE LODGE OF UNIVERSAL CHARITY 273 EC CHARITABLE TRUST, 50 TAYLORS ROAD, KILPAUK, CHENNAI 600 010. PAN AAATT0615Q VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI - 34. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.RAJASEKARAN RESPONDENT BY : DR. S. MOHARANA, IR S, CIT DATE OF HEARING : 6 TH MARCH, 2013 DATE OF PRONOUNCEMENT : 6 TH MARCH, 2013 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE ASSESSEE IS A TRUST. IT HAD APPLIED FOR RENEWAL OF EXEMPTION U NDER SEC.80G THROUGH ITS APPLICATION IN FORM 10G FILED ON 26.3.2 012. THIS APPLICATION WAS REJECTED BY THE DIRECTOR OF INCOME- TAX(EXEMPTIONS) AT CHENNAI THROUGH HIS ORDER DATED 1.10.2012. ITA 2352/12 :- 2 -: THE PRESENT APPEAL IS FILED AGAINST THE SAID ORDER OF THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) AT CHENNAI. 2. THE ASSESSEE WAS REGISTERED UNDER SEC.12A(A) AS A CHARITABLE TRUST IN 1995. SIMULTANEOUSLY, THE ASSE SSEE WAS ALSO GRANTED RECOGNITION UNDER SEC.80G FOR A PERIOD FROM 2.6.1995 TO 31.3.1996. THEREAFTER, THE RECOGNITION UNDER SEC.8 0G HAS BEEN RENEWED FROM TIME TO TIME AGAINST THE APPLICATION P UT IN BY THE ASSESSEE. IN THAT WAY, THE ASSESSEE HAD ENJOYED TH E APPROVAL UNDER SEC.80G FROM 1.4.1996 TO 31.3.2007. 3. THEREAFTER, THE ASSESSEE FILED THE RENEWAL APPLI CATION ON 26.3.2012, AFTER A GAP OF ABOUT FIVE YEARS. THE AS SESSEE HAS ALSO FILED THE ACCOUNTS OF THE EARLIER THREE FINANC IAL YEARS, 2008- 09, 2009-10 AND 2010-11. AS PER THE ACCOUNTS, THE ASSESSEE HAD RECEIVED A TOTAL DONATION OF ` 14,000/- AND OUT OF THAT, THE ASSESSEE HAD SPENT A SUM OF ` 10,000/- TOWARDS CHARITABLE ACTIVITIES. 4. ON RECEIPT OF THE APPLICATION PUT IN BY THE ASSE SSEE, THE DIRECTOR OF INCOME-TAX(EXEMPTIONS) REFERRED THE MAT TER TO THE ASSESSING OFFICER, CALLING FOR A REMAND REPORT. TH E ASSESSING OFFICER REPORTED BACK TO THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) THAT THE ASSESSEE HAS NOT CARRIED OUT ANY CHARITABL E ACTIVITIES FOR ITA 2352/12 :- 3 -: THE FINANCIAL YEARS 2009-10, 2010-11 AND ALSO FOR 2 011-12. THE ASSESSING OFFICER ALSO REPORTED THAT THE AMOUNT OF ` 10,000/- STATED TO BE SPENT BY THE ASSESSEE FOR CHARITABLE A CTIVITIES, WAS IN FACT GIVEN TO ONE SHRI R. RAMESH FOR PURCHASING A K EYBOARD TO HELP HIM TO APPEAR FOR THE TRINITY EXAM(U.K.). THE ASSESSING OFFICER FOUND THAT SHRI RAMESH HAS NOT APPEARED FOR THE SAID EXAMINATION, BUT HE WAS USING THE SAID KEYBOARD AT HIS TRAINING CENTRE AT PUDUCHERRY. THE ASSESSING OFFICER HELD T HAT THIS ACTIVITY OF GIVING ` 10,000/- TO SHRI R. RAMESH CANNOT BE CONSIDERED AS A CHARITABLE ACTIVITY. 5. IN VIEW OF THE ABOVE REPORT OF THE ASSESSING OFF ICER, THE ASSESSEE WAS GRANTED AN OPPORTUNITY OF HEARING. TH E ASSESSEE EXPLAINED THAT IT HAD PAID ` 10,000/- TO M/S. SRI HARI MUSICALS, WHICH HAS PROVIDED A KEYBOARD TO SHRI R. RAMESH, WH O IS A QUALIFIED MUSICIAN AND THAT HELP WAS GIVEN IN PUBLI C INTEREST AS SHRI RAMESH WAS TRAINING A LOT OF YOUNGSTERS IN MUS IC. 6. BECAUSE OF THE ABOVE REASONS STATED BY THE ASSES SING OFFICER IN THE REMAND REPORT, THE DIRECTOR OF INCOM E- TAX(EXEMPTIONS) REJECTED THE RENEWAL APPLICATION FI LED BY THE ASSESSEE. ITA 2352/12 :- 4 -: 7. WE HEARD SHRI D. RAJASEKARAN, THE LEARNED COUNSE L APPEARING FOR THE ASSESSEE AND DR. S. MOHARANA, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENU E. STRICTLY SPEAKING, THE REASONS POINTED OUT BY THE DIRECTOR O F INCOME- TAX(EXEMPTIONS) PER SE, ARE NOT FOUND SUFFICIENT TO REJECT THE APPLICATION PUT IN BY THE ASSESSEE. THE ASSESSEE H AD NOT CARRIED OUT ANY CHARITABLE ACTIVITY FOR THE YEARS 2009-10, 2010-11 AND 2011-12 FOR THE REASON THAT IT HAD NO SUFFICIENT FU NDS. THAT IS WHY THE ASSESSEE HAD NOT SOUGHT FOR RENEWAL OF APPROVAL UNDER SEC.80G. NOW, ONE OF THE TRUSTEES, MR. V.V. VENKATASUBRAMANYAM HAD GIFTED A PIECE OF LAND TO TH E ASSESSEE TRUST IN 1998 AND A FEW PERSONS ARE COMING FORWARD TO GIVE DONATIONS TO THE ASSESSEE TRUST TO CONSTRUCT A BUIL DING IN THE SAID LAND SO THAT THE BUILDING CAN BE USED FOR THE PURPO SE OF THE TRUST. ACCORDING TO THE ASSESSEE, IT WAS IN THIS CONTEXT T HAT THE ASSESSEE HAD PUT IN APPLICATION FOR APPROVAL UNDER SEC.80G. THE REASONS EXPLAINED BY THE ASSESSEE TRUST ARE CONVINC ING AND IT IS NOT POSSIBLE TO DENY THE RIGHT OF THE ASSESSEE TO S EEK APPROVAL UNDER SEC.80G FOR THE REASON THAT THE ASSESSEE HAD NOT CARRIED OUT ANY CHARITABLE ACTIVITY IN THE IMMEDIATE PAST. THE CASE MAY GO AGAINST THE ASSESSEE ONLY IF THE ASSESSEE HAD NO T CARRIED OUT CHARITABLE ACTIVITIES IN SPITE OF FUNDS AVAILABLE W ITH IT. IN THE PRESENT CASE, FUNDS WERE NOT AVAILABLE AND NO ACTIV ITIES COULD BE ITA 2352/12 :- 5 -: CARRIED OUT. THE OTHER REASON POINTED OUT BY THE D IRECTOR OF INCOME-TAX(EXEMPTIONS) THAT THE ASSESSEE HAD PAID ` 10,000/- TO PURCHASE A KEYBOARD FOR THE BENEFIT OF ONE SHRI R.R AMESH, IS ALSO NOT SERIOUS TO REJECT THE APPLICATION OF THE ASSESS EE. ONE OF THE OBJECTS OF THE ASSESSEE TRUST IS CARRYING ON ACTIVI TIES OF EDUCATION AND LEARNING. MUSIC IS ALSO A GREAT DISCIPLINE IN THE FIELD OF LEARNING. THE ASSESSEE TRUST HELPING A POOR MAN TO PURCHASE A KEYBOARD, ENABLING HIM TO TAKE CLASSES TO YOUNGSTER S, IS DEFINITELY A LAUDABLE ACT. IT IS DEFINITELY CHARITABLE IN NAT URE. 8. WHEN WE HAVE EXPRESSED OUR VIEW IN THE ABOVE PARAGRAPHS, IT IS LOGICAL TO EXPECT THAT WE WILL AL LOW THE APPEAL FILED BY THE ASSESSEE AND DIRECT THE COMPETENT AUTH ORITY TO GRANT EXEMPTION TO THE ASSESSEE. 9. BUT, WE ARE UNABLE TO DO THAT. THE LAW DOES NOT PERMIT TO GIVE APPROVAL UNDER SEC.80G TO THE ASSESSEE, EVEN T HOUGH THIS ASPECT WAS NOT CONSIDERED BY THE DIRECTOR OF INCOME - TAX(EXEMPTIONS). BUT THE INCOME-TAX APPELLATE TRIB UNAL BEING THE FINAL FACT FINDING AUTHORITY, CANNOT IGNORE A LEGAL LACUNA THAT HAS COME UP IN THE WAY OF GRANTING APPROVAL TO THE ASSE SSEE UNDER SEC.80G. AS THE PARTIES BEFORE THE TRIBUNAL ARE PE RMITTED TO RAISE QUESTIONS OF LAW FOR THE FIRST TIME BEFORE IT, IT I S OPEN TO THE ITA 2352/12 :- 6 -: TRIBUNAL TO CONSIDER QUESTION OF LAW, SUO MOTU, IN A PROCEEDING BEFORE IT. 10. THE ASSESSEE TRUST IS AN OFFSHOOT OF UNIVERSAL LODGE OR OTHERWISE CALLED AS CLUB OF MASONS, THAT IS MOTHER BODY. THE MOTHER BODY IS A RECOGNIZED CLUB LIKE LIONS CLUB, R OTARY CLUB, WISE- MEN CLUB ETC. ALL THESE INSTITUTIONS ARE VER Y FAMILIAR IN OUR COUNTRY. 11. THE LEGAL CHARACTER OF THE ORGANIZATION OF THE MOTHER BODY, THAT IS, CLUB OF MASONS, IS THAT OF MUTUAL CONCERN. THE STATUS AS A SEPARATE IDENTITY, QUIET DIFFERENT FROM ASSOCIATI ON OF PERSONS, IS ONLY BASED ON THE PRINCIPLE OF MUTUALITY. IF A MOT HER BODY, THAT IS, CLUB OF MASONS THEMSELVES CARRIED OUT ANY CHARITABL E ACTIVITIES, EVEN THOUGH THE ACTIVITIES ARE LAUDABLE, THERE IS A CLASH BETWEEN THE LEGAL CHARACTER OF MOTHER ENTITY AND CHARITABLE ACTIVITY. WHEN THE CLUB OF MASONS THEMSELVES CARRY OUT CHARITABLE ACTIVITIES, THAT DEFEATS THE PRINCIPLE OF MUTUALITY AND THE MOTHER B ODY WOULD BE TREATED AS AN ASSOCIATION OF PERSONS. THIS IS BECA USE, CHARITABLE ACTIVITIES GO BEYOND THE PERIMETER OF MUTUALITY. O F COURSE, THE MOTHER BODY CAN SACRIFICE ITS STATUS OF A MUTUAL CO NCERN AND GO FOR OBTAINING REGISTRATION UNDER SEC.12AA AS A CHAR ITABLE INSTITUTION. IF IT IS CONVERTED INTO A CHARITABLE TRUST, STILL, IT IS DOUBTFUL WHETHER IT WILL GET EXEMPTION UNDER SEC.11 FOR THE REASON ITA 2352/12 :- 7 -: THAT THE OBJECT OF THE MOTHER ENTITY IS MAINLY TO S ERVE ITS MEMBERS. AGAIN, THERE IS A CLASH BETWEEN SERVING OF MEMBERS AND CHARITABLE ACTIVITIES. 12. BECAUSE OF THESE INHERENT CLASHES AND DIFFERENT STATUS DESIGNED IN LAW, IT IS NOT POSSIBLE TO GRANT EXEMPT ION WITHOUT DISTURBING THE STATUS OF MUTUAL CONCERN. THE MOTHE R BODY IN THE PRESENT CASE, CLUB OF MASONS HAS CONSTITUTED THE TR UST FOR THE PURPOSE OF CARRYING ON CHARITABLE ACTIVITIES. THER EFORE, IT IS A DE FACTO EXTENSION OF THE CLUB OF MASONS THEMSELVES. BY CONSTITUTING SUCH AN INDEPENDENT TRUST, THE CLUB OF MASONS, HAS CONTRAVENED THE RULES OF MUTUALITY AND IT IS LIKELY TO BE AN ASSOCIATION OF PERSONS. BUT SINCE THE CLUB OF MAS ONS IS NOT BEFORE US, IN ANY PROCEEDINGS, WE ARE NOT ABLE TO P ASS ANY ORDER PREJUDICIALLY AGAINST THE MOTHER CLUB. 13. OUR ENQUIRIES ARE CONFINED TO THE TRUST CREATED BY THE CLUB OF MASONS. THIS TRUST IS AN EXTENSION OF MUTUAL CLUB OF MASONS. THE MOTHER BODY HAS NOT SACRIFICED OR SURRENDERED I TS MUTUAL STATUS. THEREFORE, THAT MUTUAL STATUS TRANSGRESSES TO THE ASSESSEE TRUST AS WELL. THE STATUS OF MUTUALITY IS REFLECTED ON THE ASSESSEE TRUST ALSO. THEREFORE, IT CANNOT CLAIM TH E STATUS OF A CHARITABLE INSTITUTION. AS THE MOTHER BODY, CLUB O F MASONS IS NOT SURRENDERING ITS STATUS OF MUTUALITY, IT IS NOT POS SIBLE TO TREAT THE ITA 2352/12 :- 8 -: ASSESSEE TRUST AS AN INDEPENDENT CHARITABLE INSTITU TION. IF SO TREATED, WE WILL BE ENCOURAGING VIOLATION OF LAW BY PERMITTING THE MOTHER BODY, CLUB OF MASONS TO GO BEYOND THE PERIME TER OF MUTUALITY THROUGH THE MEDIUM OF A TRUST. 14. THEREFORE, WE FIND THAT EVEN THOUGH, THE ASSESS EE IS REGISTERED UNDER THE LAW RELATING TO THE TRUST, IT CANNOT BE CONSTRUED AS A CHARITABLE INSTITUTION FOR THE PURPO SE OF THE INCOME-TAX ACT. ON THIS GROUND, WE FIND THAT THE A PPLICATION PUT IN BY THE ASSESSEE UNDER SEC.80G CANNOT BE ENTERTAINED IN LAW. 15. ANOTHER QUESTION, THEREFORE, COMES INTO PICTURE IS WHETHER THE ASSESSEE IS ENTITLED FOR REGISTRATION UNDER SEC .12AA ITSELF. THE ASSESSEE WAS ALREADY GRANTED REGISTRATION. THE RE IS NO DISPUTE PLACED BEFORE US REGARDING THE REGISTRATION UNDER SEC.12AA. ANYHOW, WE FIND THAT THE DIRECTOR OF INC OME- TAX(EXEMPTIONS) MAY EXAMINE THE ISSUE AND INITIATE PROCEEDINGS IN ACCORDANCE WITH LAW. 16. WE ALSO FEEL IT NECESSARY TO CONVEY TO THE REVE NUE OFFICERS THAT THEY MAY CONSIDER THIS ASPECT OF CONFLICT OF S TATUS BETWEEN THE CLUBS LIKE THIS AND TRUSTS FORMED BY THEM, IF A NY, VIS-A-VIS THE ISSUE OF THOSE TRUSTS AVAILING THE BENEFITS OF SEC. 12AA/80G. THIS BEING A LARGER QUESTION, WE LEAVE IT TO THE WISDOM OF THE REVENUE. ITA 2352/12 :- 9 -: 17. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON WEDNESDAY, THE 6 TH OF MARCH, 2013 AT CHENNAI. SD/- SD/- (S.S.GODARA) (DR.O.K .NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 6 TH MARCH, 2013 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.