Varanasi Welfare Trust, The Gateway Hotel Ganges, Varanasi V. CIT, Varanasi

ITA 25/ALLD/2014

• Counselvise Citation: 2520714 RSA 2014
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAKESH TRIPATHI
• Assessee Lawyers: ARVIND SHUKLA
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT ME MBER ITA NOS. 25 & 26/ALLD./2014 VARANASI WELFARE TRUST, VS. COMMISSIONER OF THE GATEWAY HOTEL GANGES, INCOME-TAX, VARANASI. NADESAR, VARANASI. (PAN : AABTV 6965 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARVIND SHUKLA, ADVOCATE RESPONDENT BY : SHRI RAKESH TRIPATHI, SR. DR DATE OF HEARING : 29.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST DIFFERENT ORDERS OF LD. CIT, VARANASI DATED 23.12.2013 REJECTING THE REGIST RATION APPLICATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED APPLICATIONS FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE IT ACT BEFORE THE LD. CIT, VARANASI IN PRESCRIBED FORM. THE LD. CIT OBSER VED THAT NOTHING HAS BEEN FILED REGARDING THE ACTIVITIES OF THE TRUST SINCE ITS INC EPTION NOR THE BOOKS OF ACCOUNTS HAVE BEEN PRODUCED. THEREFORE, ONLY EXPRESSING AN I NTENTION TO DO CHARITABLE ITA NO. 25 & 26/ALLD/2014 2 ACTIVITIES IN THE TRUST DEED IS NOT ENOUGH TO GRANT REGISTRATION UNTIL THE COMMENCEMENT OF CHARITABLE ACTIVITIES IS NOTICED. A PPLICATION FOR REGISTRATION WAS ACCORDINGLY REJECTED. SINCE THE REGISTRATION APPLIC ATION WAS REJECTED, THEREFORE, APPLICATION U/S. 80G(5)(VI) OF THE IT ACT WAS ALSO REJECTED. 3. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO OBJ ECTS OF THE ASSESSEE TRUST AND SUBMITTED THAT SAME ARE CHARITABLE IN NATURE, WHICH HAVE NOT BEEN DISPUTED BY THE LD. CIT IN THE IMPUGNED ORDERS. HE HAS RELIED UPON THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF HARDAYAL CHARIT ABLE AND EDUCATION TRUST VS. CIT-II, AGRA, 32 TAXMAN.COM 341, IN WHICH IT WAS HE LD THAT REGISTRATION U/S. 12AA CANNOT BE REFUSED ON THE GROUND THAT TRUST HAS NOT YET COMMENCED CHARITABLE OR RELIGIOUS ACTIVITIES. THE LD. DR, HOWEVER, RELIED U PON THE IMPUGNED ORDER. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF IT AT, ALLAHABAD BENCH IN THE CASE OF PANCHGANGA FOUNDATION VS. CIT IN ITA NO. 75/A/20 14 AND 76/A/2014 OF THE EVEN DATE IN WHICH FOLLOWING THE ORDER OF ITAT, AGR A BENCH AND THE DECISION OF HONBLE ALLAHABAD HIGH COURT CITED ABOVE, THE APPEA LS OF THE ASSESSEE HAVE BEEN ALLOWED. THE ORDER IS REPRODUCED AS UNDER : ITA NO. 25 & 26/ALLD/2014 3 BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST DIFFERENT ORDERS OF LD. CIT, VARANASI DATED 07.01.2014, REJECTING THE A PPLICATIONS U/S. 12AA OF THE IT ACT AND APPROVAL U/S. 80G(5) OF THE IT ACT. 2. THE ASSESSEE FILED APPLICATION FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE IT ACT BEFORE THE LD. CIT, VARANA SI IN PRESCRIBED FORM. THE LD. CIT IN THE IMPUGNED ORDER NOTED THAT THE ASSESSEE F ILED SOME REQUIRED DETAILS AND ON THE NEXT DATE OF HEARING FURTHER DETAILS WERE NO T FILED. IT WAS NOTICED THAT NO ACTIVITY OF CHARITY HAS BEEN PERFORMED BY THE ASSES SEE TRUST TILL DATE. THEREFORE, ONLY EXPRESSING ITS INTENTION TO PERFORM CHARITABLE ACTIVITIES DOES NOT ENTITLE THE TRUST FOR REGISTRATION U/S. 12A UNTIL CHARITABLE AC TIVITIES MENTIONED IN THE TRUST DEED ACTUALLY COMMENCE. IT WAS ALSO OBSERVED THAT AS PER BY-LAWS OF THE TRUST DEED, DR. HEMANT GUPTA WILL REMAIN MANAGING TRUSTEE FOR HIS W HOLE LIFE AND IN ABSENCE OF SUPPORTING DOCUMENTS, THE APPLICATION FOR REGISTRAT ION U/S. 12AA AND APPROVAL U/S. 80G(5) WERE REJECTED. THE ASSESSEE IS IN APPEAL ABO VE. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS IN THE IMPUGNED ORDER AND MATERIAL ON RECO RD. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE DEED OF THE TRUST AS FILED IN THE PAPER BOOK AND STATED THAT THE ASSESSEE TRUST WAS CREATED FOR CHARITABLE PURPO SE ONLY FOR ENVIRONMENTAL DEVELOPMENT, MEDICAL ASSISTANCE, EDUCATIONAL DEVELO PMENT AND HUMAN RESOURCES DEVELOPMENT AND TO CARRY OUT OTHER CHARITABLE WORK FOR THE WELFARE AND BENEFIT OF COMMUNITY AT LARGE. HE HAS SUBMITTED THAT ALL THESE OBJECTS INCLUDING PRESERVATION OF ENVIRONMENT AND RELATED ONES ARE CHARITABLE IN N ATURE U/S. 2(15) OF THE IT ACT WHICH HAVE NOT BEEN DISPUTED BY THE LD. CIT IN THE IMPUGNED ORDER. HE HAS, THEREFORE, SUBMITTED THAT SINCE THE OBJECTS OF ASSE SSEE TRUST ARE CHARITABLE IN NATURE AND HAVE NOT BEEN DISPUTED BY THE LD. CIT, THEREFOR E, MERE NON-COMMENCEMENT OF CHARITABLE ACTIVITIES WOULD NOT LEAD TO CANCELLATIO N OF REGISTRATION AND APPROVAL U/S. 80G(5) OF THE ACT. HE HAS SUBMITTED THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT, AGRA BENCH IN TH E CASE OF VINAY MEMORIAL EDUCATIONAL TRUST VS. CIT-II, AGRA DATED 28.02.2014 , IN WHICH THE APPEAL WAS ALLOWED BY FOLLOWING THE JUDGMENT OF JURISDICTIONAL ALLAHABAD HIGH COURT. THE ENTIRE ORDER IS REPRODUCED AS UNDER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT-II, AGRA DATED 18.09.2013, REJECTING THE APPLICATION U/ S. 12AA OF THE IT ACT. 2. THE ASSESSEE TRUST MOVED FOR GRANT OF REGISTRATI ON U/S. 12AA OF THE IT ACT. THE LD. CIT NOTED THAT THE ASSESSEE TRUST I S YET TO BEGIN ITS ACTIVITIES. ONLY LAND HAS BEEN PURCHASED ON WHICH S CHOOL BUILDING IS UNDER CONSTRUCTION. THE LD. CIT, THEREFORE, HELD TH AT SINCE CHARITABLE ACTIVITIES HAVE NOT YET STARTED, THEREFORE, HE WAS UNABLE TO SATISFY HIMSELF REGARDING THE GENUINENESS OF CHARITABLE ACTIVITIES UNDERTAKEN BY THE TRUST. THE APPLICATION WAS ACCORDINGLY REJECTED. ITA NO. 25 & 26/ALLD/2014 4 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE ISSUE IS NOW COVERED BY THE ORDER OF HONBLE ALLAHA BAD HIGH CURT IN THE CASE OF HARDAYAL CHARITABLE & EDUCATIONAL TRUST VS. CIT REPORTED IN 355 ITR 534, IN WHICH IT WAS HELD AS UNDER : THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL TH E HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF REGISTR ATION UNDER SECTION 12AA OF THE INCOME TAX ACT, WHICH IS NECESSARY FOR CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE ACT, THE COM MISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVIT IES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS IN ITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHIN G EDUCATIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATIONS, THE REGISTRATION UNDER SECTION 12AA CANNOT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET C OMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF TH E NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THI S STAGE ONLY THE GENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WHICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMIS SIONER OF INCOME TAX AT SUCH PRELIMINARY STAGE SHOULD BE REST RICTED TO GENUINENESS OF THE OBJECTS AND NOT THE ACTIVITIES U NLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CAN NOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12 AA OF THE ACT AND THUS AT THAT SUCH INITIAL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATI ON MAY BE REFUSED. IT IS NOT DENIED THAT FOR SUBSEQUENT YEAR THE APPEL LANT HAS BEEN GRANTED EXEMPTION UNDER SECTION 12AA AND HAS ALSO B EEN APPROVED UNDER SECTION 80G OF THE ACT, SUBJECT TO C ERTAIN CONDITIONS. IF THE COMMISSIONER OF INCOME TAX WAS S ATISFIED WITH THE GENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUBSEQUENT ASSESSMENT YEAR, THE REFUSAL OF THE REGISTRATION FO R THE PREVIOUS ASSESSMENT YEAR 2011-12 WAS NOT JUSTIFIED. THE QUESTION OF EXEMPTION OF THE APPLICATION OF INC OME RECEIVED BY WAY OF DONATION, IS A SEPARATE ISSUE AND WHICH MAY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN IS FILED BY THE TRUS T AND IS EXAMINED BY THE INCOME TAX OFFICER. THE QUESTION AS TO WHETHER THE DONATIONS BY THE SOCIETIES WAS THE EXPENDITURE OF THE TRUST FOR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXAMINED AT THE TIME OF EXAMINING THE RETURN. 3.1 HE HAS FURTHER SUBMITTED THAT THE ASSESSEE SOLE LY EXISTS FOR EDUCATIONAL PURPOSES WHICH HAVE NOT BEEN DISPUTED. THEREFORE, THE ASSESSEE IS ENTITLED FOR REGISTRATION. THE LD. DR A CCEPTED THAT THE ISSUE IS ITA NO. 25 & 26/ALLD/2014 5 COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE JUDG MENT OF HONBLE ALLAHABAD HIGH COURT. 4. ON CONSIDERATION OF THE MATERIAL ON RECORD IN TH E LIGHT OF DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF HARD AYAL CHARITABLE & EDUCATIONAL TRUST (SUPRA), WE SET ASIDE THE IMPUGNE D ORDER AND DIRECT THE LD. CIT TO GRANT REGISTRATION TO THE ASSESSEE U/S. 12AA OF THE IT ACT IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. HE HAS ALSO REFERRED TO DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BABA KARTAR SINGH DUKKI EDUCATIONAL TRUST, 42 TAXMAN.COM 17, IN WHICH IT WAS HELD THIS APART, THERE APPEARS TO BE A MISCONCEPTION AMO NGST OFFICERS EXERCISING POWER UNDER SECTION 12AA OF THE ACT THAT IF A TRUSTEE IS A LIFE LONG MEMBER OF A TRUST, IT AUTOMATICALLY RAISES AN INFERENCE THAT THE TRUST IS NOT CHARITABLE. THE FACT THAT A TRUSTEE IS A LIF E MEMBER, MAY BE RELEVANT BUT CANNOT BY ITSELF LEAD TO A FINDING THAT THE TRU ST IS NOT CHARITABLE. HE HAS ALSO SUBMITTED THAT SINCE THE ASSESSEE LATER ON STARTED CARRYING OUT CHARITABLE ACTIVITIES, THEREFORE, THE ASSESSEE IS E NTITLED FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5) OF THE IT ACT. HE HAS PLAC ED COPIES OF NEWSPAPER CUTTINGS IN SUPPORT OF THE ARGUMENTS. 3.1 ON CONSIDERATION OF THE ABOVE, WE ARE OF THE VI EW, THE ASSESSEE IS ENTITLED FOR REGISTRATION AS WELL AS APPROVAL IN THE ABOVE P ROVISIONS. THE OBJECTS OF THE ASSESSEE BEING CHARITABLE HAVE NOT BEEN DISPUTED IN THE IMPUGNED ORDER. THE TRUST DEED ALSO SUPPORTS THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE OBJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NAT URE. MERELY BECAUSE THE ASSESSEE HAS NOT CARRIED OUT SUCH ACTIVITIES WOULD NOT DISEN TITLE THE ASSESSEE FOR REGISTRATION. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT, AGRA BENCH IN THE CASE OF VINAY MEMORIAL EDUCATIONA L TRUST(SUPRA) IN WHICH FOLLOWING THE DECISION OF ALLAHABAD HIGH COURT, THE REGISTRATION U/S. 12A WAS GRANTED. FURTHER OBJECTION OF THE LD. CIT THAT THE MANAGING TRUSTEE WAS FOR WHOLE LIFE, WAS ALSO NOT CONSIDERED IN FAVOUR OF THE REVE NUE BY THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BABA KAR TAR SINGH DUKKI EDUCATIONAL TRUST (SUPRA). THEREFORE, ALL THE OBJEC TIONS OF THE LD. CIT IN THE IMPUGNED ORDER HAVE BEEN MET BY THE ASSESSEE. THE A PPLICATION U/S. 80G(5) WAS REJECTED BECAUSE THE REGISTRATION U/S. 12AA HAS BEE N REFUSED BY THE LD CIT, WHICH IS CONSEQUENTIAL IN NATURE. IN VIEW OF THE ABOVE, W E ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE ACT. WE ACCORDINGLY SET ASIDE THE IMPUGNED ORDER AN D DIRECT THE LD. CIT(A) TO ITA NO. 25 & 26/ALLD/2014 6 ISSUE REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G( 5)(VI) ACCORDINGLY WITHIN ONE MONTH FROM THE DATE OF THIS ORDER. 4. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. BY FOLLOWING THE ABOVE ORDER IN THE CASE OF PANCHGA NGA FOUNDATION (SUPRA), WE SET ASIDE THE IMPUGNED ORDERS AND DIRECT THE LD. CIT, V ARANASI TO GRANT REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) TO THE ASSESSEE W ITHIN ONE MONTH FROM THE DATE OF THIS ORDER. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (J. SUDHAKAR REDDY) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY