M/s. Karnataka State Safety Institute, Bangalore V. DIT, Bangalore

ITA 271/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9427 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-08-2009
• Assessment Year: misc
• Appeal Filed On: 02-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATHI S PATIL
• Keywords: Charitable institution; Cancellation of registration
• Section: 12A; 12AA; 12

Judgement Text

PAGE 1 OF 10 ITA NO.271/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N L KALRA, A.M. AND SHRI GEORGE GEORGE K, J.M. ITA NO.271/BANG/2009 M/S KARNATAKA STATE SAFETY INSTITUTE (REGD.), KARMIKA BHAVAN, 3RD FLOOR, BANNERGHATTA ROAD, BANGALORE-29. - APPELLAN T VS THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE. - RESPONDENT APPELLANT BY : SHRI S PARTHASARATHI RESPONDENT BY : SMT. SWATHI S PATIL O R D E R PER N L KALRA : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF LEARNED DIT(EXEMPTIONS), BANGALORE DATED 21ST JA NUARY, 2009. 2. THE GROUNDS OF APPEAL RAISED BY THE APPELLANT AR E AS UNDER:- I) THE ORDER OF THE DIT(EXEMPTIONS) REJECTING THE APPLICATION U/S 12A OF THE ACT IS BAD IN LAW AS THE SAME IS PASSED WITHOUT AFFORDING A REASONABLE OPPORTUNITY TO THE APPELLANT. PAGE 2 OF 10 ITA NO.271/BANG/2009 2 II) THE ORDER OF THE DIT(EXEMPTIONS) IS BAD IN LAW AS THE SAME IS PASSED WITHOUT CONSIDERING THE FACT THAT THE APPELLANT INSTITUTE WAS CONSTITUTED BY THE STATE GOVERNMENT AND THE INCOME GENERATED BY THE APPELLANT INSTITUTE IS MAINLY FROM THE TRAINING PROGRAMMES ON SAFETY, HEALTH AND WELFARE OF THE WORKERS. III) WITHOUT PREJUDICE, THE CONTRIBUTIONS RECEIVED FROM THE WORKERS IS BEING SPENT FOR THE TRAINING PROGRAMME, EDUCATING THE WORKERS ON INDUSTRIAL HEALTH HAZARDS AND SAFETY MEASURES ETC. AND CONDUCTING MEDICAL EXAMINATION TO UPDATE THEIR HEALTH DATA BASE. IV) WITHOUT PREJUDICE, THE ORGANIZATION IS RUNNING AS A NON-PROFIT MAKING ORGANISATION WHERE THE INCOME IS SPENT WHOLLY FOR THE BENEFIT OF THE WORKING CLASS COMMUNITY IRRESPECTIVE OF THEIR CASTE, CREED AND COMMUNITY. V) WITHOUT PREJUDICE, THE DIT(EXEMPTIONS) OUGHT TO HAVE APPRECIATED THAT MERE CHARGING OF FEES WOULD NOT DECIDE WHETHER THERE IS CHARITABLE ACTIVITY OR NOT AND HE OUGHT TO HAVE GRANTED REGISTRATION U/S 12A OF THE ACT. 3. THE ASSESSEE MOVED AN APPLICATION FOR GRANT OF REGISTRATION U/S 12A OF THE I T ACT ON 16TH JULY, 20 08. THE LEARNED DIT(EXEMPTIONS) ISSUED SHOW CAUSE NOTICE ON 15TH DECEMBER, 2008 VIDE WHICH THE ASSESSEE WAS GIVEN AN OPPORTUNITY AS TO WHY ITS APPLICATION FOR REGISTRATIO N SHOULD NOT BE REJECTED. THE ASSESSEE FILED A LETTER DATED 19T H JANUARY, 2009 VIDE WHICH HE ENCLOSED COPY OF THE REGISTRATION CERTIFICATE PAGE 3 OF 10 ITA NO.271/BANG/2009 3 FROM THE REGISTRAR OF SOCIETIES. THE LEARNED DIT(E XEMPTIONS) PASSED THE ORDER ON 21ST JANUARY, 2009. 4. THE LEARNED DIT(EXEMPTIONS) NOTICED THAT THE ACTIVITIES OF THE SOCIETY INCLUDES CONDUCTING SAFETY TRAINING PROGRAMME, NATIONAL SAFETY DAY CELEBRATIONS, SUPPLY OF CIRCULARS AND BANNERS AND SAFETY MEASURES, CONDUCTING EXHIBITI ONS AND DEMONSTRATIONS OF SAFETY EQUIPMENTS. AS PER THE LEA RNED DIT(EXEMPTIONS), THE ACTIVITIES OF THE SOCIETY ARE C OVERED UNDER THE FOURTH LIMB OF SECTION 2(15) OF THE I T ACT I.E . 'ADVANCEMENT OF GENERAL PUBLIC UTILITY'. PERUSAL OF RECEIPTS AND PAYMENTS ACCOUNTS SHOWED THAT THE ASSESSEE HAD AN EXCESS OF INCOME OVER EXPENDITURE FOR THE FINANCIAL YEAR 2005-06, 2006-07 AND 2007- 08 TO THE EXTENT OF RS.1,36,440/-, RS/22,75,337/- A ND RS.19,44,873/- RESPECTIVELY. THERE WERE SUBSTANTIAL TAXABLE SURPLUSES BUT THE ASSESSEE NEITHER FILED ITS RETURN OF INCOME NOR CLAIMED REGISTRATION U/S 12A. AS PER THE LEARNED DIT(EXEMPTIONS), THE ASSESSEE IS CHARGING FEE FOR I MPARTING THE TRAINING ACTIVITY. IT WAS THEREFORE INFERRED THAT T HE CASE OF THE ASSESSEE IS COVERED UNDER THE PROVISO TO SECTION 2( 15) INSERTED FROM 1/4/2008. HENCE, APPLICATION OF THE ASSESSEEU /S 12A WAS REJECTED. 5. WE HAVE HEARD BOTH THE PARTIES. IT IS SEEN FRO M THE ORDER THAT THE ASSESSEE FILED REPLY ON 19TH JANU ARY, 2009 VIDE WHICH IT ENCLOSED COPY OF THE REGISTRATION CERT IFICATE FROM PAGE 4 OF 10 ITA NO.271/BANG/2009 4 THE REGISTRAR OF SOCIETIES. BEFORE DENYING REGISTRA TION, THE LEARNED DIT(EXEMPTIONS) HAS NOT GIVEN SUFFICIENT OP PORTUNITY TO THE ASSESSEE. 6. AS PER THE MEMORANDUM, COPY OF WHICH WAS FILED BEFORE US, THE OBJECTIVES OF THE INSTITUTE ARE AS U NDER:- 1. ONE OR TWO DAYS SAFETY TRAINING PROGRAMME FOR WORKERS/SUPERVISORS/INDUSTRIALISTS/MANAGERS. 2. SEMINAR/WORKSHOP REGARDING LAW, SAFETY, HEALTH, PERSONALITY DEVELOPMENT ETC. TO THE MANAGEMENT AND THE SENIOR OFFICERS. 3. PREPARATION OF EMERGENCY SCHEMES, MAINTENANCE, MEDICAL AID, WORKSHOP ON THE CONCERNED SUBJECTS. 4. MOCK DEMONSTRATION OF EMERGENCY SCHEMES AND TRAINING. 5. TRAINING TO THE SAFETY OFFICER, WELFARE OFFICERS AND MEDICAL OFFICERS. 6. ANY OTHER AUXILIARY TRAINING PROGRAMMES PREPARED AS PER THE REQUIREMENT OF THE FACTORIES. PUBLICATIONS 1. A TRIMONTHLY MAGAZINE BY NAME SURAKSHATHA VAHINI CONTAINING THE ANALYSIS, PREVENTION AND REMEDIES FOR THE ACCIDENTS THAT OCCUR IN THE INDUSTRIES, ARTICLES ON SAFETY, HEALTH, PERSONALITY DEVELOPMENT AND THE RECENT AMENDMENTS, NOTIFICATION, SAFETY ADVERTISEMENTS. 2. MANUAL, PAMPHLET REGARDING SAFETY PROCEDURES AND ACTIVITIES. 3. PRINTING AND SUPPLY OF THE SAFETY POSTERS, BANNERS. 4. PRINTING AND EXPLANATION/PUBLICATION OF HOARDING, SAFETY POSTERS. PAGE 5 OF 10 ITA NO.271/BANG/2009 5 OTHER ACTIVITIES 1. CHALKING OUT PROGRAMMES SUPPLEMENTED TO THE ACTIVITIES OF THE DEPARTMENT LIKE CELEBRATION OF SAFETY DAY, CHEMICAL TRAGEDY PREVENTION DAY ETC. 2. EXHIBITION AND DEMONSTRATION OF SAFETY TOOLS. 3. EXHIBITION OF SAFETY RUN, DRAMA ETC. 4. TO ENCOURAGE THE INDUSTRIAL WORKERS, CONDUCTING VARIOUS COMPETITIONS AND GIVING AWARDS. 2. THE AMOUNT ACCRUED IN THE INSTITUTE SHALL BE USED FOR THE ACTIVITIES OF THE INSTITUTE ONLY. FOR NO REASONS THIS AMOUNT BE DISTRIBUTED AMONGST THE MEMBERS AND WILL NOT BE GIVEN FOR OTHER ACTIVITIES. 7. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF ECUMENICAL CHRISTIAN CENTRE V CIT 139 ITR 226 HAD A N OCCASION TO CONSIDER THE MEANING OF 'EDUCATION'. THE HON'BL E JURISDICTIONAL HIGH COURT HAS CONSIDERED THE DECISI ON OF THE HON'BLE APEX COURT IN THE CASE OF CIT V SOLE TRUSTE E, LOKA SHIKSHANA TRUST 101 ITR 234. WHILE CONSIDERING THE OBJECTS OF THE TRUST AS MENTIONED AT PAGE 228 OF THE DECISION, THE HON'BLE JURISDICTIONAL HIGH COURT HELD THAT THE OBJECTS MEN TIONED DIRECTLY RELATE TO EDUCATION. EXPRESSION OF A WIDE AND GENERAL CHARACTER HAS BEEN USED APPARENTLY WITH A VIEW NOT T O RESTRICT ITS SCOPE SUCH AS MERELY TO START AN EDUCATIONAL SCH OOL OR COLLEGE. IN THE CASE BEFORE THE JURISDICTIONAL HIGH COURT, T HE WORD USED IN THE OBJECT OF THE TRUST WAS 'SEARCH FOR TRUTH'. THE HON'BLE HIGH COURT HELD THAT ITS MEANING NEED NOT BE RESTRI CTED SO AS TO EXCLUDE THE NOTION OF EDUCATION. PAGE 6 OF 10 ITA NO.271/BANG/2009 6 8. THE BOARD VIDE CIRCULAR NO.11 OF 2008 DATED DECEMBER 19, 2008 HAS CLEARLY MENTIONED THAT THE PRO VISION INSERTED IN SECTION 2(15) IS APPLICABLE ONLY TO THE FOURTH LIMB I.E. OBJECT OF GENERAL PUBLIC UTILITY. THE LEARNED DIT(E XEMPTIONS) HAS NOT CONSIDERED AS TO WHETHER THE OBJECTS OF THE SOCIETY CAN BE CONSIDERED AS COVERED UNDER EDUCATION. THE APPE LLANT WAS NOT PROVIDED AN OPPORTUNITY TO PLACE ITS CASE BEFORE THE LEARNED DIT(EXEMPTIONS) TO MENTION THAT IT IS EXISTING FOR EDUCATION. 9. THE CHARACTER OF THE RECIPIENT OF INCOME WILL H AVE THE CHARACTER OF EDUCATIONAL INSTITUTION IN INDIA I N CASE ITS NATURE OF ACTIVITIES ARE IN THE NATURE OF EDUCATION . IF AFTER MEETING EXPENDITURE, SURPLUS REMAINS INCIDENTALLY FR OM THE ACTIVITY CARRIED ON BY THE EDUCATION INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSE. IN THE INSTANT CASE, IT IS TRUE THAT THE SURPLUS IS ARISING IN THE FINANCIAL YEARS 2005-06, 2006-07 AND 2007-08. IT IS ALSO TRUE THAT THE APPELLANT IS CHARGING FEES FOR IMPARTING TRAINING T O THE WORKERS ON SAFETY MEASURES. IT IS PROVIDED IN THE BYE LAWS O F THE INSTITUTE THAT FEES IS TO BE FIXED DEPENDING UPON T HE SPECIALIZATION OF THE WORKSHOPS SO AS TO ENABLE TO INCUR EXPENSES TOWARDS THE SPECIAL WORKSHOPS, TRAINING PROGRAMMES CONDUCTED BY THE DEPARTMENT. HENCE, WE ARE NOT AWARE AS TO HO W THE FEES IS BEING FIXED FOR DIFFERENT PROGRAMMES. IF THE FE ES IS BEING FIXED AFTER CONSIDERING ALL THE EXPENSES INCLUDING THE EXPENSES PAGE 7 OF 10 ITA NO.271/BANG/2009 7 FOR CARRYING OUT OTHER ACTIVITIES THEN NATURALLY, THE TRAINING PROGRAMME BEING CONDUCTED IS WITH THE PURPOSE TO EA RN PROFITS. 10. THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V QUEENS' EDUCATION SOCIETY 223 CTR 395 REPRODUC ED THE FOLLOWING OBSERVATION OF THE HON'BLE APEX COURT IN THE CASE OF ADITANAR EDUCATIONAL INSTITUTION ETC. V ADDL. CIT 2 24 ITR 310:- 'AFTER MEETING THE EXPENDITURE, IF ANY SURPLUS RESULTS INCIDENTALLY FROM THE ACTIVITY LAWFULLY CARRIED ON BY THE EDUCATIONAL INSTITUTION, IT WILL NOT CEASE TO BE ONE EXISTING SOLELY FOR EDUCATIONAL PURPOSES SINCE THE OBJECT IS NOT ONE TO MAKE PROFIT. THE DECISIVE OR ACID TEST IS WHETHER ON AN OVERALL VIEW OF THE MATTER, THE OBJECT IS TO MAKE PROFIT. IN EVALUATING OR APPRAISING THE ABOVE, ONE SHOULD ALSO BEAR IN MIND THE DISTINCTION DIFFERENCE BETWEEN THE CORPUS, THE OBJECTS AND POWERS OF THE CONCERNED ENTITY. IF ONE LOOKS AT THE OBJECTS CLAUSE, THERE ARE OTHER NOBLE AND PIOUS OBJECTS BUT ASSESSEE SOCIETY HAS DONE NOTHING TO ACHIEVE THE OTHER OBJECTS EXCEPT PERUSING MAIN OBJECT OF PROVIDING EDUCATION AND EARNING PROFIT. FURTHER, WITH PROFIT EARNED THE SOCIETY HAS STRENGTHENED OR ENHANCED ITS CAPACITY TO EARN MORE RATHER THAN TO UNDERTAKE ANY OTHER ACTIVITIES TO FULFILL OTHER NOBLE OBJECTS FOR THE CAUSE OF POOR AND NEEDY PEOPLE OR ADVANCEMENT OF RELIGIOUS PURPOSE'. PAGE 8 OF 10 ITA NO.271/BANG/2009 8 11. AFTER REPRODUCING THE ABOVE PARAS, THE HON'BLE UTTARAKAND HIGH COURT HELD IN THAT CASE THAT EDUCAT IONAL INSTITUTION IS EXISTING FOR THE PURPOSE OF PROFIT B ECAUSE PROFIT OF 27% TO 30% WAS EARNED. 12. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE C ASE OF SANJEEVAMMA HANUMATHE GOWDA CHARITABLE TRUST V DIRE CTOR OF INCOME TAX (EXEMPTIONS) 285 ITR 327 HAS LAID DOWN T HE GUIDELINES FOR EXAMINING THE POINTS AT THE TIME OF REGISTRATION. THE HON'BLE JURISDICTIONAL HIGH COURT OBSERVED AS U NDER:- 'HAVING REGARD TO THE SCHEME OF SECTIONS 11, 12 AND 13 ULTIMATELY WHAT THE COMMISSIONER HAS TO LOOK INTO IS NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE SATISFACTION OF THE COMMISSIONER SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE AFORESAID PURPOSES WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMPTION. FOR ARRIVING AT SUCH SATISFACTION PRIMARILY HE HAS TO LOOK 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 RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN 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 ACT, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME PAGE 9 OF 10 ITA NO.271/BANG/2009 9 DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED BY THE TRUST. SUB-SECTION (3) OF SECTION 12AA OF THE ACT PROVIDES THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. THEREFORE, SUFFICIENT SAFEGUARD IS PROVIDED UNDER THE ACT FOR CANCELLATION OF REGISTRATION OBTAINED BY THE ASSESSEE, IN THE EVENT OF ITS MISUSING THOSE PROVISIONS'. ACCORDINGLY, THE LEARNED DIT(EXEMPTIONS) HAS TO REST RICT THE EXAMINATION OF THE DOCUMENTS AND ISSUES FOR THE PUR POSE OF REGISTRATION AS PER THE DECISION OF THE JURISDICTIO NAL HIGH COURT. THE LEARNED DIT(EXEMPTIONS) HAS NOT CONSIDERED THE CIRCULAR ISSUED BY THE BOARD AND THE CONTENTION OF THE APPELL ANT THAT IT IS EXISTING FOR EDUCATIONAL PURPOSES AND THEREFORE, WE FEEL THAT THE ISSUE OF REGISTRATION IS REQUIRED TO BE CONSIDERED AFRESH. THE MATTER IS THEREFORE RESTORED BACK ON THE FILE OF TH E LEARNED DIT(EXEMPTIONS). PAGE 10 OF 10 ITA NO.271/BANG/2009 10 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 13TH AUGUST, 2009 . SD/- SD/- (GEORGE GEORGE K) (N L KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED:13/8/2009 COPY TO :- 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR 6. GF 7. GF, ITAT, DELHI BENCH BY ORDER MSP/11/8/ ASSISTANT REGISTRAR, ITAT, BANGALORE.