URBAN IMPROVEMENT TRUST, Jaipur V. CIT, Alwar

ITA 30/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99442 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 10-01-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A; 12AA

Judgement Text

ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 30/JP/2014 UNDER SECTION 12A/AA OF THE ACT URBAN IMPROVEMENT TRUST NEAR CIRCUIT HOUSE BHARATPUR CUKE VS. THE CIT ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAATU 1956 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : NONE A JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA CIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 20/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/10/2015 VKNS'K@ ORDER PER VIKRAM SINGH YADAV:- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), ALWAR DATED 12-11-2013 FOR REGISTRATION O F TRUST U/S 12AA OF THE ACT PRAYING THEREIN FOLLOWING GROUND. THE LD. CIT, ALWAR HAS ERRED AT LAW AS WELL AS IN FACTS IN REJECTING THE REGISTRATION OF TRUST AND HOLDING OUT THAT THE OBJECTS ARE NOT COVERED U/S 2(15) OF THE I.T. ACT A ND THAT THE ACTIVITIES AND OBJECTS ARE NOT CHARITABLE. ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 2 2.1 NONE APPEARED ON BEHALF OF THE ASSESSEE APPEL LANT ON THE DATE OF HEARING. THEREFORE, THE BENCH DECIDED TO PROCEED IN THE MATTER EX-PARTE BASED ON THE MATERIALS AVAILABLE ON RECORD. 2.2 WE HAVE HEARD THE LD. DR AND PERUSED THE MATER IALS AVAILABLE ON RECORD. BRIEF FACTS OF THE CASE ARE THAT THE TRUST WAS CREATED ON 12-05-1981 THROUGH THE GAZETTE NOTIFICATION AND IT FILED AN AP PLICATION IN FORM NO. 12A ON 31-05-2013 SEEKING REGISTRATION U/S 12A(A) OF TH E I.T. ACT. THE LD. CIT ON PERUSAL OF THE DOCUMENTS FILED BY THE TRUST ALON GWITH ITS APPLICATION OBSERVED THAT THE TRUST FILED A COPY OF THE NOTIFIC ATION ALONGWITH ITS APPLICATION FOR REGISTRATION INSTEAD OF THE ORIGINA L TRUST DEED AS IS REQUIRED UNDER RULE 17-A(A) OF THE INCOME-TAX RULES, 1962. T HE LD. CIT OBSERVED THAT THE TRUST WAS COVERED U/S 10(20A) BEFORE THE A MENDMENT IN THE I.T. ACT, 1961. THE LD. CIT OBSERVED THAT THE TRUST HAD FAILE D TO EXPLAIN THAT ITS OBJECTS ARE COVERED IN THE DEFINITION OF SECTION 2(15) OF T HE I.T. ACT, 1961, WHICH IS NECESSARY REQUIREMENT FOR REGISTRATION U/S 12AA OF THE I.T. ACT. THE LD. CIT ON PERUSAL OF THE COPY OF ACCOUNTS OBSERVED THA T ALTHOUGH THE TRUST IS ENGAGED IN ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, IT CANNOT BE SAID TO BE A CHARITABLE PURPOSE, SINCE IT INVOLVES ACTIV ITIES IN THE NATURE OF COMMERCE OR BUSINESS FOR WHICH FEES AND OTHER CONSI DERATION ARE CHARGED, IN VIEW OF THE IST PROVISO OF SECTION 2(15) OF THE I.T . ACT, 1961. THE LD. CIT ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 3 CONSIDERING ALL THE ABOVE FACTS OF THE CASE OBSERVE D THAT THE TRUST HAS NOT BEEN ABLE TO BRING ANY EVIDENCE ON RECORD TO ESTABL ISH THAT ITS ACTIVITIES WERE COVERED BY THE DEFINITION CHARITABLE PURPOSE. A CCORDINGLY, THE LD. CIT HELD THAT THE SAID TRUST IS NOT ELIGIBLE FOR REGIST RATION U/S 12AA AND THE APPLICATION OF THE ASSESSEE TRUST WAS REJECTED ACCO RDINGLY. 2.3 IT IS NOT IN DISPUTE THAT THE TRUST IS ENGAGED IN ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY. AT THE SAME TIME, WHETHE R OBJECTS OF THE TRUST INVOLVES CARRYING ON ACTIVITY IN NATURE OF TRADE, C OMMERCE OR BUSINESS FOR WHICH FEE OR OTHER CONSIDERATION IS CHARGED. IF THE ANSWER TO THE LATTER IS IN AFFIRMATIVE, THE TRUST WILL BE HIT BY THE FIRST PRO VISO TO SECTION 2(15) OF THE ACT AND ITS ACTIVITIES CANNOT BEHELD TO BE FOR CHAR ITABLE PURPOSES. IN THIS REGARD, REFERENCE CAN BE DRAWN TO TO CBDT CIRCULAR NO. 11 OF 2008 DATED 19-12-2008, THE RELEVANT PROVISIONS OF WHICH ARE RE PRODUCED HEREUNDER:- 3. THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVA NCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, I.E. THE FOURTH LIMB OF THE DEFINITION OF CHARITABLE PURPOSE CONTAIN ED IN SECTION 2(15). HENCE, SUCH ENTITIES WILL NOT BE ELIGIBLE FO R EXEMPTION U/S 11 OR U/S 10(23C) OF THE ACT IF THEY CARRY ON C OMMERCIAL ACTIVITIES. WHETHER SUCH AN ENTITY IS CARRYING ON A N ACTIVITY IN THE NATURE OF TRADE, COMMERCE, OR BUSINESS IS A QUE STION OF FACT ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 4 WHICH WILL BE BASED ON THE NATURE, SCOPE AND FREQUE NCY OF THE ACTIVITY. 3.2 IN THE FINAL ANALYSIS, HOWEVER, WHETHER THE ASSESSEE HAS FOR ITS OBJECT THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY IS A QUESTION OF FACT. IF SUCH ASSESSEE IS ENGAGED IN ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR RENDERS ANY SERVICE IN RELATION TO TRAD E, COMMERCE OR BUSINESS, IT WOULD NOT BE ENTITLED TO CLAIM THAT ITS OBJECT IS CHARITABLE PURPOSE. IN SUCH A CASE, THE OBJECT OF GENERAL PUBLIC UTILITY WILL BE ONLY A MASK OR A DEVICE TO HIDE T HE TRUE PURPOSE WHICH IS TRADE, COMMERCE OR BUSINESS OR THE RENDERI NG OF ANY SERVICE IN RELATION TO TRADE, COMMERCE OR BUSINESS. EACH CASE WOULD, THEREFORE, BE DECIDED ON ITS OWN FACTS AND N O GENERALIZATION IS POSSIBLE. ASSESSEE, WHO CLAIM THA T THEIR OBJECT IS CHARITABLE PURPOSE WITHIN THE MEANING OF SEC TION 2(15), WOULD BE WELL ADVISED TO ESCHEW ANYTHING WHICH IS I N THE NATURE OF TRADE, COMMERCE OR BUSINESS OR THE RENDER ING OF ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS. AS IS EVIDENT FROM THE ABOVE CBDT CIRCULAR (SUPRA), WHETHER THE ASSESSEE HAS, AS ITS OBJECT, ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY IS ESSENTIALLY A QUESTION TO BE DECIDED ON THE FACTS O F THE ASSESSEE'S OWN CASE AND WHERE OBJECT OF GENERAL PUBLIC UTILITY IS ONLY A MASK OR A DEVICE TO HIDE THE TRUE PURPOSE OF TRADE, BUSINESS OR COMMERCE, OR RENDERING OF ANY SERVICE ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 5 IN RELATION THERETO, THE ASSESSEE CANNOT BE SAID TO BE ENGAGED IN A CHARITABLE ACTIVITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. AS A COROLLARY TO THIS, WHAT NEEDS TO BE EXAMINED IS THAT WHERE AN O BJECT OF GENERAL PUBLIC UTILITY IS NOT MERELY A MASK TO HIDE THE TRUE PURPO SE OR RENDERING OF ANY SERVICE IN RELATION THERETO, AND WHERE SUCH SERVICE S ARE BEING RENDERED AS PURELY INCIDENTAL TO OR AS SUBSERVIENT TO THE MAIN OBJECTIVE OF 'GENERAL PUBLIC UTILITY', WHETHER THE CARRYING ON OF BONA FIDE ACT IVITIES IN FURTHERANCE OF SUCH OBJECTIVES OF 'GENERAL PUBLIC UTILITY' WILL AL SO BE HIT BY THE PROVISO TO SECTION 2(15) OF THE ACT. 2.4 IN THE INSTANT CASE, THE MATTER THEREFORE, REQU IRES DETAILED EXAMINATION IN TERMS OF MAIN OBJECTS OF URBAN IMPROVEMENT TRUST , THE RELEVANT GOVERNING LEGISLATION / NOTIFICATION UNDER WHICH U RBAN IMPROVEMENT TRUST WAS ESTABLISHED AS WELL AS ACTIVITIES OF THE TRUST IN ORDER TO DECIDE WHETHER TRUST IS ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT. THUS IN THE LIGHT OF THE ABOVE, THE MATTER IS SET ASIDE TO THE FILE OF THE LD. CIT TO DECIDE AFRESH IN LIGHT OF BOARD CIRCULAR NO. 11 OF 2008 DATED 19-12- 2008 BY PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE IN THE PROCEEDINGS. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 30/JP/2014 M/S. URBAN IMPROVEMENT TRUST, BHARATPUR. VS. CIT, ALWAR 6 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/20 15. SD/- SD/- VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /10/ 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. URBAN IMPROVEMENT TRUST, BHARA TPUR 2. IZR;FKHZ@ THE RESPONDENT- THE CIT, , ALWAR 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.30/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR