M/S Nai Pahal Foundation, Ranchi V. CIT EXEMPTION, Patna

ITA 268/RAN/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0398 (ITAT-RANCHI)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHANTY
• Keywords: Charitable institution; Question of law
• Section: 12AA; 12

Judgement Text

1 ITA NO. 268 /RAN/20 1 6 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI , ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE , JUDICIAL MEMBER ITA NO. 2 68 / RAN/20 1 6 ASSESSMENT YEAR : NA M/S NAI PAHAL FOUNDATION, 13P, SRS PARK PHASE - 1, TATISILWAY INDUSTRI AL AREA KHELGAON ROAD, RANCHI - 845103 V S CIT(E), PATNA PAN NO. : AA CAN 4248 A (APPELLANT ) .. RESPONDENT ASSESSEE BY : SHRI DEVESH PODDAR, AR REVENUE BY : SHRI A.K.MOHANTY , J CIT( J R. DR) DATE OF HEARING : 2 6 . 11 .20 1 8 DATE OF PRONOUNCEMENT : 27 . 11 .201 8 O R D E R PER PAVAN KUMAR GADALE, JM : THE ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER OF CIT(E), PATNA, DATED 11.07.2016 IN REJECTING THE GRANT OF R EGISTRATION U/S.12AA OF THE ACT . 2. TH E SOLE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS AGAINST THE REJECTION OF GRANT OF REGISTRATION U/S.12AA OF THE ACT BY THE CIT(E). 3 . THE ASSESSEE FILED AN APPLICATION IN FORM NO.10A FOR REGISTRATION U/S.12AA OF THE ACT ON 30.03.2016 AND IT WAS REJECTE D BY THE CIT(E), PATNA ON THE GROUND THAT THE ACTIVITIES OF THE SOCIETY ARE NOT GENUINE. AGAINST THE ORDER OF CIT(E), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 2 ITA NO. 268 /RAN/20 1 6 4 . LD. AR BEFORE US SUBMITTED THAT THE CIT(E) HAS DISMISSED THE APPLICATION FOR GRANT OF REG ISTRATION U/S.12AA WITH THE OBSERVATIONS THAT THE TRUST WAS INCORPORATED AND CAME INTO EXISTENCE W.E.F.30.04.2015 AND ALSO ASSESSEE HAS FILED THE REPLY IN THE COURSE OF HEARING PROCEEDINGS ON 03.06.2016. LD. AR FURTHER EMPHASIZED THAT THE CIT(E) HAS IGNORE D THE ACTIVITIES OF THE ASSESSEE TRUST AND OBSERVED THAT MORE THAN ONE YEAR HAS PASSED SINCE ITS INCEPTION AND NO ACTIVITIES WERE CARRIED ON AND HAVING NOT SATISFIED WITH THE ACTIVITIES OF THE ASSESSEE TRUST, THE CIT(E) HAS REJECTED THE APPLICATION. LD. A R FURTHER EMPHASIZED THAT THE CIT(E) AT THE TIME OF REGISTRATION HAS NOT DOUBTED THE GENUINENESS OF THE OBJECTIVES, THOUGH THE ASSESSEE HAS FILED THE AUDITED ACCOUNTS WHICH THE CIT(E) HAS OVERLOOKED AND DISMISSED THE ASSESSEES APPLICATION. THEREFORE, PRAY ED THAT THE APPEAL BE ALLOWED. 5. CONTRA, LD. DR RELIED ON THE ORDER OF CIT(E) AND SUBMITTED THAT THE CIT(E) HAVING NOT SATISFIED WITH THE ACTIVITIES OF THE ASSESSEE TRUST HAS PASSED CORRECT ORDER AND, THEREFORE, PRAYED FOR DISMISSAL OF THE APPEAL. 6. WE H AVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE, WE FOUND THAT THE TRUST WAS INCORPORATED AND FORMED ON 30.04.2015 AND AS PER OBSERVATION OF THE CIT(E) AT PARA 3 OF THE ORDER AND THE ASSESSEE HAS COMPLIED WITH THE INFORMATIO N AS CALLED FOR AND FILED THE SAME ON 03.06.2016 WHEREAS THE CIT(E) HAVING CONSIDERED THESE TWO DATES CAME TO UNILATERAL CONCLUSION THAT THE TRUST HAS NOT STARTED ITS ACTIVITIES AND REGISTRATION HAS TAKEN PLACE MORE THAN ONE YEAR TO THE DATE 3 ITA NO. 268 /RAN/20 1 6 OF MAKING AN A PPLICATION ON 03.0 6 .2016. LD. AR EXPLAINED THAT THE TRUST WAS ACTUALLY ENGAGED IN THE ACTIVITIES AND ALSO FILED AUDITED ACCOUNTS WHICH THE CIT(E) HAS OVERLOOKED. WE FOUND STRENGTH IN THE ARGUMENTS OF THE LD. AR THAT AT THE TIME OF REGISTRATION THE CIT(E) SHOULD CONSIDER THE GENUINENESS AND THE OBJECTIVES OF THE TRUST AND THE SAME CANNOT BE OVERLOOKED. W E SUPPORT OUR VIEW WITH THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT, ( VARANASI ) VS VARANASI WELFARE TRUST IN ITA NO.22 OF 2014 ORDER D ATED 2.11.2014 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL THE HIGH COURTS INCLUDING THIS COURT IS THAT AT THE TIME OF REGISTRATION U/S.12AA OF THE ACT, WHICH IS NECESSARY FOR CLAIMING EXEMPTION U/S.11 & 1 2 OF THE ACT THAT THE CIT IS NOT REQUIRED TO LO OK INTO THE ACTIVITIES , WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF IN ITS INITIATION. WHERE A TRUST , SET UP TO ACHIEVE ITS OBJECTIVES OF ENABLING EDUCATIONAL INSTITUTION, IS IN THE PROCESS OF E STABLISHING SUCH INSTITUTION AND RECEIVES DONATIONS, THE REGISTRATION U/S.12A CANNOT BE REFUSED ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED, THE CHARITABLE OR RELIGIOUS ACTIVITIES. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE, ONLY THE GENUINENESS OF THE OBJECTS HAS TO BE TESTED AND NOT THE ACTIVITIES WHICH HAVE NOT YET CO MMENCED. THE ENQUIRY OF THE CIT AT SUCH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENESS OF THE OBJECTS AND NOT OF THE ACTIVIT IES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE RUST OR SOCIETY CANNOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED U/S.12AA OF THE ACT AND AT 4 ITA NO. 268 /RAN/20 1 6 THAT SUCH INITIAL STAGE, THE TEST OF GENUINENESS OF THE ACTIVITIES CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY B E REFUSED. 7 . FURTHER, THE DELHI BENCHES OF THE TRIBUNAL IN THE CASE OF SAI ASHISH CHARITABLE TRUST VS DIT (E) IN ITA NO.5591/DEL/012 HELD THAT THE DIT (E) HAS NOT POINTED OUT ANY DEFECT OR DOUBT ABOUT THE CHARITABLE OBJECTS OF THE ASSESSEE TRUST. FROM TH E IMPUGNED ORDER, WE CLEARLY OBSERVE THAT THE DIT(E) HAS REJECTED THE APPLICATION OF THE ASSESSEE TRUST FOR GRANT OF REGISTRATION U/S.12A OF THE ACT BY HOLDING THAT IN ABSENCE OF ANY CHARITABLE ACTIVITY, THE GENUINENESS OF THE ACTIVITIES CANNOT BE HELD TO BE ESTABLISHED. AT THE SAME TIME, WE OBSERVE THAT AS PER RATIO OF THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT(E) VS FOUNDATION OF OPHTHALMIC AND OPTOMETRY RESEARCH EDUCATION CENTRE, REGISTRATION U/S.12A IS NOT DEPENDENT ON COMMENC EMENT OF CHARITABLE ACTIVITY. THE REGISTRATION GRANTING AUTHORITY IS NOT REQUIRED TO EXAMINE THE QUESTION WHETHER THE TRUST HAS ACTUALLY COMMENCED AND CARRIED ON ITS CHARITABLE ACTIVITIES. WE ALSO TAKE COGNIZANCE OF DECISION OF HON'BLE HIGH COURT OF ALLA HABAD IN THE CASE OF R.S.BAJAJ SOCIETY, AS RELIED BY THE ASSESSEE, WHEREIN, THEIR LORDSHIPS HELD THAT AT THE TIME OF REGISTRATION, ONLY GENUINENESS OF THE OBJECTS WAS TO BE TESTED AND NOT THE ACTIVITIES WHICH WERE NOT COMMENCED AT THAT TIME. 8 . THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST, [2011] 15 TAXMANN.COM 123 (PUNJAB & HARYANA) HAS HELD AS UNDER : - 5 ITA NO. 268 /RAN/20 1 6 8. WE HAVE HEARD LEARNED COUNSEL FOR THE APPELLANT, BUT FIND NO MERIT IN THE PRESENT APPEALS. AS PER SECTION 12AA OF THE ACT, AN APPLICATION FOR REGISTRATION OF THE TRUST AND INSTITUTION IS REQUIRED TO BE MADE WITHIN ONE YEAR FROM THE DATE OF CREATION OF THE TRUST OR THE ESTABLISHMENT OF SUCH INSTITUTION. THE PROCEDURE FOR REGISTRATION OF THE TRUST O R INSTITUTION IS PRESCRIBED UNDER SECTION 12AA OF THE ACT. IN TERMS OF CLAUSE (A) OF SECTION 12AA OF THE ACT, THE COMMISSIONER IS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST ON SUCH INQUIRIES AS HE MAY DEEM NECESSARY. SUB - SECTIO N (1A) AND (2) OF SECTION 12AA OF THE ACT, ARE PROCEDURAL IN NATURE, WHEREAS SUB - SECTION (3) OF SECTION 12AA OF THE ACT, EMPOWERS THE COMMISSIONER TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION, IF HE IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. 9. SECTION 11 OF THE ACT CONTEMPLATES THAT THE INCOME AS SPECIFIED THEREIN SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF T HE PERSON IN RECEIPT OF THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, WHEREAS SECTION 12 OF THE ACT, DEALS WITH THE CONTRIBUTIONS RECEIVED BY THE TRUST OR AN INSTITUTION, ESTABLISHED FOR CHARITABLE A ND RELIGIOUS PURPOSES, RECEIVING CONTRIBUTION, SHALL NOT BE AN INCOME IN TERMS OF SECTION 11 OF THE ACT. THE BENEFIT OF SECTIONS 11 AND 12 OF THE ACT, ARE AVAILABLE ONLY IF SUCH TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA OF THE ACT. 10. ON THE O THER HAND, SECTION 10(23C) OF THE ACT ARE THE PROVISIONS OF THE ACT IN SUBSTITUTION OF THE EARLIER PROVISIONS OF SECTION 10(22) OF THE ACT AS TO WHICH INCOME SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME OF ANY PERSON. THEREFORE, THE PROVISIONS OF SE CTIONS 11, 12 OR SECTION 10(23C) OF THE ACT, DEAL WITH THE INCOME OF A TRUST OR OF THE INSTITUTION AND THE CIRCUMSTANCES AS TO WHEN SUCH INCOME IS TO BE EXCLUDED FOR COMPUTING THE TOTAL INCOME, BUT THE BASIS OF SUCH BENEFIT IS THE REGISTRATION UNDER SECTIO N 12AA OF THE ACT. UNLESS A TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA OF THE ACT, SUCH TRUST OR INSTITUTION SHALL NOT BE ENTITLED TO EXCLUDE FROM ITS TOTAL INCOME, DEDUCTIONS OR CONTRIBUTIONS OR FROM OTHER SOURCES. THEREFORE, THE PRINCIPLES LAI D DOWN FOR EXCLUDING THE INCOME FROM CONSIDERATION UNDER SECTION 10(22) NOW 10(23)(C) OR SECTIONS 11 AND 12 ARE NOT APPLICABLE WHILE CONSIDERING THE 6 ITA NO. 268 /RAN/20 1 6 APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. THE APPLICATION FOR REGISTRATION IS REQUIRED TO BE MADE WITHIN ONE YEAR OF THE CREATION OF THE TRUST. SECTION 12AA OF THE ACT, REQUIRES SATISFACTION IN RESPECT OF THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, WHICH INCLUDES THE ACTIVITIES WHICH THE TRUST IS UNDERTAKING AT PRESENT AND ALSO WHICH IT MA Y CONTEMPLATE TO UNDERTAKE. THE INSERTION OF SUB - SECTION (3) TO SECTION 12AA OF THE ACT, CLARIFIES THE SAID FACT, WHEN IT EMPOWERS THE COMMISSIONER TO CANCEL THE REGISTRATION IF THE ACTIVITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH SUCH OBJECT S. 11. THEREFORE, THE OBJECT OF SECTION 12AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE STAGE FOR APPLICATION OF INCOME IS YET TO ARRIVE I.E. WHEN SUCH TR UST OR INSTITUTION FILES ITS RETURN. THEREFORE, WE FIND THAT THE JUDGMENTS REFERRED TO BY THE LEARNED COUNSEL FOR THE APPELLANT ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE ARISING OUT OF THE QUESTION OF REGISTRATION OF THE TRUST AND NOT OF ASSESSME NT. 12. IN VIEW OF THE ABOVE, WE DO NOT FIND THAT ANY SUBSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THE PRESENT APPEALS. HENCE, THE SAME ARE DISMISSED. 9 . THE HONBLE MADRAS HIGH COURT IN THE CASE OF DIT(E) VS. SEERVI SAMAJ TAMBARAM TRUST, [2014 ] 43 TAXMANN.COM 142 (MADRAS) HAS HELD AS UNDER: - IT IS NOT DENIED BY THE ASSESSEE THAT ON THE DATE OF THE APPLICATION UNDER SECTION 12AA, IT WAS YET TO COMMENCE ITS OPERATION. BUT NEVERTHELESS THE GENUINENESS OF THE OBJECTS OF THE TRUST WERE NOT QUESTION ED BY THE COMMISSIONER. CONSIDERING THE FACT THAT THE CONTINUANCE OF REGISTRATION IS FURTHER A SUBJECT MATTER OF SCRUTINY BY THE COMMISSIONER AS CONTEMPLATED UNDER SECTION 12AA(3), THE REVENUE WOULD NOT BE JUSTIFIED IN REFUSING THE REGISTRATION AT THE THRE SHOLD. [PARA 9] 10 . IN THE INSTANT CASE, WE FIND THAT THE CIT(E) HAS REFUSED REGISTRATION ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH THAT ACTIVITIES OF THE ASSESSEE ARE GENUINE , WHEREAS THE CIT(E) HAS NOT RAISED ANY DOUBT OR 7 ITA NO. 268 /RAN/20 1 6 OBJECT ION ABOUT THE CHARITABLE OBJECTS OF THE ASSESSEE SOCIETY, THEREFORE, REGISTRATION U/S. 12AA OF THE ACT CANNOT BE DENIED ON THE GROUND THAT THE GENUINENESS OF THE CHARITABLE ACTIVITIES CANNOT BE HELD TO BE ESTABLISHED IN ABSENCE OF ANY GENUINE CHARITABLE AC TIVITY . ACCORDINGLY CONSIDERING THE ABOVE JUDICIAL DECISIONS AND THE APPLICATION OF RATIO DECIDENDI TO THE PRESENT CASE, WE DIRECT THE CIT(E) TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY U/S.12AA OF THE ACT . ACCORDINGLY, GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 11 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 / 11 /201 8 SD/ - SD/ - (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER RANCHI , DATED 27 / 11 /2018 PRAKASH KUMAR MISHRA , SR. PS COPY OF THE ORDER FORWA RDED TO : BY ORDER, //TRUE COPY// SR.PS, ITAT, RANCHI 1. THE APPELLANT M/S NAI PAHAL FOUNDATION, 13P, SRS PARK PHASE - 1, TATISILWAY INDUSTRIAL AREA KHELGAON ROAD,RANCHI - 845103 2. THE RESPONDENT CIT(E), PATNA 3. THE CIT(A) CONCERNED 4. CIT , CONCERNED 5. DR, ITAT, RANCHI 6. GUARD FI LE.