Yashaswi Education Society, Pune V. Commissioner of Income-tax - I,

ITA 250/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9612 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-07-2016
• Assessment Year: misc
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA
• Keywords: Charitable institution
• Section: 143(3); 80G; 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , ! ' # , $% &' #' , ' # '( BEFORE SHRI ANIL CHATURVEDI, AM AND SHRI VIKAS AWAS THY, JM '%. / ITA NO. 250/PUN/2014 YASHASWI EDUCATION SOCIETY, 7, AMIT COURT, CTS NO. 95, SHIVAJI NAGAR, PUNE 411005 PAN : AAATY1589L ....... / APPELLANT / V/S. COMMISSIONER OF INCOME TAX-I, PUNE / RESPONDENT ASSESSEE BY : SMT. DEEPA KHARE REVENUE BY : SHRI K.K. MISHRA / DATE OF HEARING : 04-04-2017 / DATE OF PRONOUNCEMENT : 13-04-2017 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX I, PUNE DATED 29-11-2013 R EJECTING THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S. 1 2AA(1)(B)(II) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A TRUST REGISTERED UNDER THE BOMBAY PUBLIC TRUSTS ACT, 2 ITA NO. 250/PUN/2014 1950 AND SOCIETIES REGISTRATION ACT, 1860. THE ASSESSEE TRUST WAS CONSTITUTED VIDE MEMORANDUM OF ASSOCIATION DATED 15-01-2 007. THE ASSESSEE MADE FIRST APPLICATION FOR REGISTRATION U/S. 12A OF THE ACT ON 01-06-2007. THE SAID APPLICATION OF THE ASSESSEE WAS NOT DISPOSED OF BY THE COMMISSIONER OF INCOME TAX. DESPITE THE FACT THAT THE ASSESSEE SENT REMINDER TO COMMISSIONER OF INCOME TAX ON 05-03-20 09 TO DECIDE THE APPLICATION, THE SAID APPLICATION REMAINED UNATTENDED. I N THE MEANTIME ASSESSMENT ORDERS U/S. 143(3) FOR THE ASSESSMEN T YEARS 2010-11 AND 2011-12 WERE PASSED ON 14-03-2013 AND 1 4-11-2013, RESPECTIVELY TREATING AS IF REGISTRATION HAS BEEN GRANTED TO THE ASSESSEE U/S. 12AA OF THE ACT. THE ASSESSEE FILED SECOND APPLICATION FOR GRANT OF REGISTRATION U/S. 12A AND FOR APPROVAL U/S. 80G ON 29-05- 2013. THE COMMISSIONER OF INCOME TAX VIDE IMPUGNED ORDER REJECTED THE APPLICATION OF THE ASSESSEE ON THE GROUND THAT THE ASSE SSEE HAS NOT PAID TAXES ON THE SURPLUS EARNED DURING THE FINANCIAL YEA RS 2009-10 AND 2010-11. AGGRIEVED BY THE REJECTION OF APPLICATION FOR GRANT OF REG ISTRATION U/S. 12A OF THE ACT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SMT. DEEPA KHARE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST WAS FORMED WITH THE OBJECT OF IMPARTING EDUCATION. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO O BJECT CLAUSE OF MEMORANDUM OF ASSOCIATION OF SOCIETY AT PAGE 7 OF THE PAP ER BOOK. THE LD. COUNSEL SUBMITTED THAT THE MAIN OBJECT OF THE A SSESSEE WAS TO ESTABLISH EDUCATIONAL INSTITUTIONS FOR IMPARTING PRE-PRIMARY, PRIMARY, SECONDARY, GRADUATE AND POST-GRADUATE COURSES. FURTH ER, THE ASSESSEE INTENDED TO SET UP EDUCATIONAL INSTITUTIONS FOR IMPARTING PR OFESSIONAL COURSES IN THE FIELD OF MANAGEMENT, MEDICINE AND ENGINEERING. THE 3 ITA NO. 250/PUN/2014 ASSESSEE MADE FIRST APPLICATION FOR GRANT OF REGISTRATION IN THE PRESCRIBED FORM TO THE COMMISSIONER OF INCOME TAX ON 01-0 6-2007. NO ORDER WAS PASSED BY THE COMMISSIONER OF INCOME TAX ON THE SAID APPLICATION. THEREAFTER, THE ASSESSEE FILED REMINDER APPLICATIO N ON 05-03-2009 (AT PAGE 100 OF THE PAPER BOOK). THE COMMISS IONER OF INCOME TAX TOOK NO PAINS TO DISPOSE OF THE AFORESAID APP LICATION OF THE ASSESSEE. ON 24-01-2013 THE ASSESSEE FILED APPLICATION U NDER RIGHT TO INFORMATION ACT, 2005 TO KNOW THE STATUS OF APPLICATION FILE D ON 01-06-2007. THE CENTRAL PUBLIC INFORMATION OFFICER (CPIO) VIDE ORDER DATED 21-02-2013 PASSED UNDER RIGHT TO INFORMATION ACT INFORMED THAT THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U /S. 12A DATED 01-06-2007 HAS NOT BEEN DISPOSED OF. THE ORDER DATED 21-02-2013 PASSED UNDER RIGHT TO INFORMATION ACT IS AT PAGE 98 OF T HE PAPER BOOK. THEREAFTER, ON 29-05-2013, THE ASSESSEE MADE SECOND AP PLICATION FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT. THE COMMISSIONE R OF INCOME TAX SOUGHT FURTHER INFORMATION AND CERTAIN DOCUMENTS FROM THE ASSESSEE VIDE COMMUNICATION DATED 14-10-2013. THE ASSE SSEE PROMPTLY RESPONDING TO THE QUERIES RAISED BY THE COMMIS SIONER OF INCOME TAX AND FURNISHED THE REQUISITE DOCUMENTS AND INFO RMATION ON 24-10-2013. THE REPLY OF THE ASSESSEE IS AT PAGES 87 AND 88 OF THE PAPER BOOK. THE LD. COUNSEL CONTENDED THAT IN THE MEANT IME THE ASSESSMENT ORDERS U/S. 143(3) OF THE ACT FOR ASSESSMENT YEARS 2010-11 AND 2011-12 WERE PASSED BY THE ASSESSING OFFICER TREATIN G AS IF REGISTRATION HAS BEEN GRANTED TO THE ASSESSEE. THE AS SESSING OFFICER VIDE ORDER DATED 04-03-2013 FOR THE ASSESSMENT YEAR 2 010-11 AND ORDER DATED 04-11-2013 FOR ASSESSMENT YEAR 2011-12 G RANTED THE BENEFIT OF DEEMED REGISTRATION U/S. 12AA, AS THE APPLICATION OF THE ASSESSEE WAS NOT DISPOSED OF BY THE COMMISSIONER OF INC OME TAX FOR THE PERIOD MORE THAN 6 MONTHS. 4 ITA NO. 250/PUN/2014 3.1 THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE H ONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INC OME TAX VS. SOCIETY FOR THE PROMOTION OF EDUCATION REPORTED AS 382 I TR 6 HAS HELD THAT IF THE ASSESSEE HAS NOT BEEN GRANTED REGISTRATION WITHIN THE PERIOD OF 6 MONTHS FROM THE DATE OF MAKING APPLICATION, IT SHALL BE P RESUMED THAT DEEMED REGISTRATION HAS BEEN GRANTED TO THE ASSE SSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT EARNING OF SIGNIFICANT PROFIT IS NOT RELEVANT TO DISALLOW THE APPLICATION FOR GRANT OF REGISTRATION U/S. 12AA OF THE ACT. THE COMMISSIONER OF INCOME TAX AT THE TIME O F REGISTRATION HAS TO SEE THE OBJECTS OF THE TRUST. IF THE OBJECTS OF THE TRUST ARE CHARITABLE IN NATURE, THE COMMISSIONER OF INCOME TAX IS BOUND TO GRA NT REGISTRATION. QUANTUM OF SURPLUS GENERATED BY THE ASSES SEE WHILE CARRYING OUT CHARITABLE ACTIVITIES IS NOT THE RELEVANT FACTO R TO DETERMINE WHETHER REGISTRATION U/S. 12A HAS TO BE GRANTED OR REJ ECTED. IN SUPPORT OF HER SUBMISSIONS, THE LD. COUNSEL FOR THE ASSESSEE HAS PLA CED RELIANCE ON THE FOLLOWING DECISIONS : I. CHIEF COMMISSIONER OF INCOME TAX VS. ST. PETERS EDUCATIO NAL SOCIETY, 385 ITR 66 (SC); II. QUEENS EDUCATIONAL SOCIETY VS. COMMISSIONER OF INCOME TAX , 372 ITR 699 (SC); III. VISVESVARAYA TECHNOLOGICAL UNIVERSITY VS. ASSISTANT COMMISSIONER OF INCOME TAX, 384 ITR 37 (SC); IV. DIRECTOR OF INCOME TAX (EXEMPTION) VS. M/S. LALA LAJPATRAI MEMORIAL TRUST, 69 TAXMANN.COM 158 (BOMBAY). 4. ON THE OTHER HAND SHRI K.K. MISHRA REPRESENTING THE D EPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIONER OF INCOM E TAX REJECTING THE APPLICATION OF THE ASSESSEE U/S. 12A OF THE ACT. THE LD. DR SUBMITTED THAT THE ASSESSEE WAS CARRYING ON ACTIVITIES W HICH WERE 5 ITA NO. 250/PUN/2014 GENERATING HUGE PROFITS. A PERUSAL OF THE RECORDS WOULD SHOW THAT THE ASSESSEE IS ENGAGED IN ACTIVITIES FOR PROFIT AND NOT FOR CHA RITY. THE ASSESSEE HAS NOT FURNISHED FEE STRUCTURE FOR VARIOUS COU RSES. THE CASE LAWS ON WHICH THE COUNSEL OF THE ASSESSEE HAS PLACED RELIA NCE ARE DISTINGUISHABLE ON FACTS. IN THE CASE OF CHIEF COMMISSIONER OF INCOME TAX VS. ST. PETERS EDUCATIONAL SOCIETY (SUPRA) THE DECISION WAS RENDERED BY THE HONBLE APEX COURT IS IN CONTEXT OF PR OVISIONS OF SECTION 10(23C)(VI) OF THE ACT. IT WAS NOT A CASE WHERE RE GISTRATION U/S. 12AA WAS DENIED. THE LD. DR FURTHER SUBMITTED THAT THE D ECISION RENDERED IN THE CASE OF VISVESVARAYA TECHNOLOGICAL UNIVER SITY VS. ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) SUPPORTS THE CASE OF DEPARTMENT, THE APPEAL OF THE ASSESSEE THEREIN WAS DISM ISSED BY THE HONBLE APEX COURT. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DOCUMENTS AND CASE LAWS ON WH ICH THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE. IT IS AN UN DISPUTED FACT THAT THE ASSESSEE MADE FIRST APPLICATION FOR GRANT OF REGIS TRATION U/S. 12AA ON 01-06-2007 AND THE SAID APPLICATION REMAINED UN- ADJUDICATED TILL DATE. AS PER THE PROVISIONS OF SECTION 12AA(2) OF THE A CT, THE ORDER GRANTING OR REFUSING REGISTRATION SHOULD BE PASSED BEFORE THE EXPIRY OF 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEIVED. IT IS A WELL SETTLED LAW THAT IF THE APPLICATION FO R GRANT OF REGISTRATION U/S. 12A IS NOT DISPOSED OF WITHIN THE STIPULAT ED TIME, IT SHALL BE DEEMED THAT THE REGISTRATION IS GRANTED TO THE ASSESSEE. RECENTLY, THE HONBLE APEX COURT IN THE CASE OF COMMISSIO NER OF 6 ITA NO. 250/PUN/2014 INCOME TAX AND OTHERS VS. SOCIETY FOR THE PROMOTION OF EDUCATION (SUPRA) HAS REITERATED THIS POSITION. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS POINTED THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 2010-11 AND 2011-12 IT WAS BROUGHT TO THE NOTICE OF ASSESSING OFFICER THAT THE ASSESSEE HAD MADE AN APPLICATION FOR GRANT OF REGISTRATION U/S. 12A ON 01-06-2007 AND THE SAME HAS NOT BEEN DISPOSED OF BY T HE COMMISSIONER OF INCOME TAX. THE ASSESSING OFFICER APPLYING THE RATIO OF PURPOSIVE INTERPRETATION TO THE LANGUAGE OF STATUTE RE NDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ANJUM M.H. GHASWA LA REPORTED AS 252 ITR 1 (SC) TREATED THE ASSESSEE AS R EGISTERED U/S. 12A AND ACCEPTED THE RETURN FILED BY THE ASSESSEE. THUS, IT WAS ACCEPTED THAT DEEMED REGISTRATION HAS BEEN GRANTED TO THE ASSESSEE. 7. THE ASSESSEE MADE SECOND APPLICATION FOR GRANT OF RE GISTRATION ON 29-05-2013. THE SAID APPLICATION OF THE ASSESSEE WAS REJ ECTED BY THE COMMISSIONER OF INCOME TAX ON 29-11-2013 ON THE GROUND THAT THE ASSESSEE HAS NOT PAID TAXES ON THE SURPLUS EARNED IN T HE FINANCIAL YEARS 2009-10 AND 2010-11. 8. AT THE TIME OF GRANT OF REGISTRATION U/S. 12AA THE CO MMISSIONER OF INCOME TAX HAS TO SATISFY ONLY ABOUT THE GENUINENES S OF THE ACTIVITIES AND THE OBJECTS OF THE TRUST. THE COMMISSIONER OF INCOM E TAX IN THE PRESENT CASE HAS ERRED IN TRAVELLING BEYOND THE SCOPE O F ENQUIRY WHILE CONSIDERING THE APPLICATION OF THE ASSESSEE FOR GRANT OF R EGISTRATION U/S. 12A OF THE ACT. THE ASSESSMENT ORDER OF ASSESSMENT Y EAR 2010-11 IN THE CASE OF ASSESSEE WAS PASSED PRIOR TO THE DATE OF P ASSING OF THE IMPUGNED ORDER. IT IS CLEARLY EMANATING FROM THE SAID ASS ESSMENT 7 ITA NO. 250/PUN/2014 ORDER THAT THE FIRST APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION U/S. 12A HAS NOT BEEN DECIDED. THEREFORE, DEEMED REGISTR ATION HAS BEEN GRANTED TO THE ASSESSEE. THE COMMISSIONER OF INCO ME TAX IGNORING ALL THESE FACTS AND THE SCOPE OF ENQUIRY HAS REJE CTED THE APPLICATION OF THE ASSESSEE MERELY ON THE GROUND THAT T HE ASSESSEE HAS GENERATED SURPLUS OF ` 50,32,296/- IN FINANCIAL YEAR 2009-10 AND ` 66,47,645/- IN FINANCIAL YEAR 2010-11 I.E. RELEVANT TO ASSESSM ENT YEARS 2010-11 AND 2011-12, RESPECTIVELY. THE COMMISSION ER OF INCOME TAX HAS FURTHER OBSERVED THAT THE ASSESSEE HAS NOT P AID TAXES FOR THE SAID ASSESSMENT YEARS. SINCE, THE ASSESSING OFFICER HAD AC CEPTED THAT THE ASSESSEE HAS BEEN GRANTED DEEMED REGISTRATION U/S . 12AA AND NO DEMAND WAS RAISED, THERE WAS NO QUESTION OF PAYING ANY TAXES ON THE SURPLUS GENERATED BY THE ASSESSEE. 9. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJ EEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (EXEMPTIONS) REPORTED AS 285 ITR 327 HAS HELD : 6. .HAVING REGARD TO THE SCHEME OF SECTIONS 11, 12 AND 13 ULTIMATELY WHAT THE COMMISSIONER HAS TO LOOK INTO I S NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER SUCH INCOME IS APPL IED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE SATISFACTION OF THE COMMISS IONER SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUS T FOR THE AFORESAID PURPOSES WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMPTION. FOR ARRIVING AT SUCH SATISFACTION PRIMARILY HE HAS TO L OOK AT THE OBJECT OF THE TRUST, WHEN THE SAME IS REDUCED INTO WRITING IN THE FORM OF TRUST DEED. IF ON THE DATE OF THE APPLICATION THE TRUST HAS RECEIV ED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEE N EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E., TOWARDS THE OBJECT OF THE TRUST. THEREFORE, FOR THE PURPOSE OF REGISTRATION UNDER SECTION 12AA OF THE A CT, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF T HE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS 8 ITA NO. 250/PUN/2014 APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED BY THE TRU ST . [EMPHASISED BY US] THUS, IN VIEW OF THE FACTS OF THE CASE AND LAW LAID DOWN IN T HE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (EXEMPTIONS) (SUPRA) WE ARE OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME TAX HAS ERRED IN REJECTING THE APPLICATION OF THE ASSESSEE BY MERELY REFERRING TO THE QU ANTUM OF SURPLUS GENERATED BY THE ASSESSEE DURING THE COURSE O F CHARITABLE ACTIVITIES BEING CARRIED OUT. 10. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPTION) VS. M/S. LALA LAJPATRAI MEMORIAL TRUS T (SUPRA) HAS HELD : 16. IT IS WELL-SETTLED PRINCIPLE OF LAW THAT THE T EST TO DETERMINE AS TO WHAT WOULD BE A CHARITABLE PURPOSE WITHIN THE MEANI NG OF SECTION 2 (15) OF THE ACT, IS TO ASCERTAIN WHAT IS THE DOMI NANT OBJECT OF THE ACTIVITY; WHETHER IT IS TO CARRY OUT A CHARITABLE P URPOSE OR TO EARN PROFIT. IF THE PRE-DOMINANT OBJECT IS TO CARRYOUT A CHARITABLE PURPOSE AND NOT TO EARN PROFIT THE PURPOSE WOULD NOT LOSE ITS CHARITAB LE CHARACTER MERELY BECAUSE THE SOME PROFIT ARISES FROM THE ACTIVITY. ( SEE CIT ANDHRA PRADESH VS APSRTC HYDERABAD (1986) 2 SUPREME COURT CASES 391). 11. DEEMED REGISTRATION HAS ALREADY BEEN GRANTED TO TH E ASSESSEE IN VIEW OF THE FACT THAT THE ORIGINAL APPLICATION MADE BY THE A SSESSEE WAS NOT DISPOSED OF BY THE COMMISSIONER OF INCOME TAX. THE COMMISSIONER OF INCOME TAX WHILE CONSIDERING SECOND APPLICAT ION OF THE ASSESSEE FOR GRANT OF REGISTRATION, SHOULD HAVE EXAMIN ED THE OBJECTS OF THE TRUST AND THE ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE TO ACHIEVE THOSE OBJECTS. THE COMMISSIONER OF INCOME TAX M ISDIRECTED 9 ITA NO. 250/PUN/2014 THE COURSE OF ENQUIRY AND CONCENTRATED ON THE SURPLUS GENERATED, LEAVING ASIDE THE OBJECTS AND ACTIVITIES CARRIED OUT BY TH E ASSESSEE. GENERATION OF SURPLUS WHILE CARRYING OUT CHARITABLE ACTIVITIES WOULD NOT DISENTITLE THE ASSESSEE FOR REGISTRATION U/S. 12A OF THE AC T. IN VIEW OF THE FACTS OF THE CASE AND THE WELL SETTLED LAW DISCUSSED ABOVE, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE COMMISSIONER OF I NCOME TAX TO GRANT REGISTRATION U/S. 12AA OF THE ACT TO THE ASSESSEE. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 13 TH DAY OF APRIL, 2017. SD/- SD/- ( / ANIL CHATURVEDI) ( ! / VIKAS AWASTHY) ' ! / ACCOUNTANT MEMBER # ! / JUDICIAL MEMBER ' / PUNE; $% / DATED : 13 TH APRIL, 2017 RK * + ,-& .&/ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. & & ' / THE CIT-I, PUNE 4. () *+ , & *+ , , ,- , ' / DR, ITAT, B BENCH, PUNE. 5. )./ 01 / GUARD FILE // // TRUE COPY// &'2 / BY ORDER, 3 %4 / ASSISTANT REGISTRAR, & *+ , ' / ITAT, PUNE