M/s Charity Action for Rural Transformation Social Welfare Society (CHARTS), Kakinada V. The CIT Rajahmundry, Rajahmundry

ITA 302/VIZ/2011

• Counselvise Citation: 30225314 RSA 2011
• Duration Of Justice: 2 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2013
• Assessment Year: misc
• Appeal Filed On: 24-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA

Judgement Text

ITA NO.302/VIZAG/2011 CHARITY ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS), KAKINADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 302 /VIZAG/ 20 1 1 ASSESSMENT YEAR : NA CHARI TY ACTION FOR RURA L TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS) KAKINADA VS. CIT RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AAAAC3170E APPELLANT BY: SHRI D.L. NARASIMHA RAO RESPONDENT BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 09.12.2013 DATE OF PRON OUNCEMENT : 11.12.2013 ORDER PER SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER:- THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF CIT RAJAHMUNDRY REFUSING TO EXTEND THE REGISTRATION U/S 80G OF THE INCOME-TA X ACT TO THE ASSESSEE TRUST. 2. BRIEFLY STATED, THE ASSESSEE IS EVIDENCED BY CER TIFICATE OF REGISTRATION OF SOCIETIES ACT XXI 1860 IN NO.250 OF 1997, VIDE REGI STRATION DATED 16.5.1997. THE ASSESSEE FILED APPLICATION IN FORM NO.10G FOR RENEW AL OF RECOGNITION U/S 80G OF THE I.T. ACT ON 28.2.2011 ALONG WITH INCOME & EXPENDITU RE ACCOUNT FOR THE PERIODS ENDING WITH 31.3.2008, 31.3.2009 & 31.3.2010 AND BA LANCE SHEETS AS ON 31.3.2008, 31.3.2009 & 31.3.2010, COPIES OF ACKNOWLEDGEMENTS O F RETURNS OF INCOME FILED FOR THE A.YS 2007-08 TO 2009-10. REGISTRATION U/S 12AA OF THE ACT WAS GRANTED WEF 1.4.2005 AND RECOGNITION U/S 80G WAS GRANTED FOR TH E PERIOD 1.4.2005 TO 31.3.2007 AND RENEWAL OF RECOGNITION U/S 80G(5)(V) & (VI) WAS ALSO GRANTED FOR THE PERIOD 1.4.2007 TO 31.3.2010. THE PRESIDENT & SECRETARY OF THE TRUST PRODUCED BOOKS OF ACCOUNTS AND VOUCHERS BEFORE CIT. ITA NO.302/VIZAG/2011 CHARITY ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS), KAKINADA 2 3. THE LD. CIT REFUSED THE REGISTRATION BY STATING AS UNDER: IT IS SEEN FROM THE MEMORANDUM OF ASSOCIATION THAT THERE ARE 13 OBJECTIVES, WHICH APPEARS TO BE CHARITABLE I N NATURE BUT THE GENUINENESS OF THE ACTIVITIES HAS NOT BEEN ESTABLIS HED. THOUGH THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT, VOUCH ERS ARE NOT PROPERLY MAINTAINED FOR EXPENDITURE INCURRED ON ITS ACTIVITIES, AS A RESULT OF WHICH THE GENUINENESS OF UTILIZATION OF F UNDS FOR THE CHARITABLE PURPOSE HAS NOT BEEN ESTABLISHED. THERE IS NO NARRATION IN THE VOUCHERS OR THE CASH BOOK/LEDGER AS TO THE PURP OSE FOR WHICH THE EXPENDITURE WAS INCURRED. ALL THE RECEIPTS AND EXPENDITURE IS IN CASH ONLY. EVEN FOR FURNITURE ( ` .34,000/-), COTS & BEDS ( ` .59.950/-), THERE ARE NO BILLS. THE SOCIETY HAS NOT YET FINALIZ ED ITS BOOKS OF ACCOUNT FOR THE FINANCIAL YEAR 2010-11 AND FILED RE TURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12. FOR THE FINANCIAL YEAR S 2007-08 AND 2008-09, THOUGH THERE IS ACCUMULATION OF FUND, THE SAME WAS NOT UTILIZED FOR CHARITABLE PURPOSES. IN VIEW OF THE DEFECTS MENTIONED ABOVE, IT CAN BE SAID THAT THE ASSESSEE IS NOT ACCOUNTING FOR THE RECEIPTS AND EXPENDITURE. AS PER THE PROVISIONS OF SECTION 80G(5)(IV) OF THE I.T . ACT, ONE OF THE CONDITIONS FOR RENEWAL OF RECOGNITION U/S.80G OF TH E I.T. ACT IS THAT THE ASSESSEE SHALL MAINTAIN PROPER RECORDS & VOUCHE RS FOR RECEIPTS AND EXPENDITURE INCURRED ON CHARITABLE ACTIVITIES. AS THIS CONDITION IS NOT SATISFIED, THE ASSESSEE IS NOT ELIGIBLE FOR REN EWAL OF RECOGNITION U/S.80G OF THE I.T. ACT. ACCORDINGLY, THE APPLICATI ON IN FORM NO.L0G FOR RENEWAL OF RECOGNITION U/S.80G OF THE I.T. ACT FILE D ON 28-02-2011 IS, HEREBY, REJECTED. 4. AGGRIEVED THE ASSESSEE RAISED FOLLOWING GROUNDS WHICH ARE IN FACT VARIOUS SUBMISSIONS ON THE ISSUE. 2. TAKING COGNISANCE OF THE FACT THAT THE APPELLANT SOCIETY WAS GRANTED REGISTRATION UNDER SEC.12AA OF THE ACT W.E.F. 01.04.2005 BY THE COMMISSIONER OF INCOMETAX, RAJAHMUNDRY - VIDE HIS PROCEEDINGS IN F.NO.H.QRS./LLL/31/05-06-2005AND ALSO GOING BY THE FACT THAT 'SUCH REGIS TRATION' IS STILL IN OPERATION, THE LD. COMMISSIONE R OF INCOMETAX OUGHT NOT HAVE REJECTED THE CLAIM FOR RENEWAL OF REGISTRATION UNDER SEC.8OG OF THE ACT; 3. ALSO GOING BY THE FACT THAT THE APPELLANT-SOCIE TY WAS GRANTED RECOGNITION UNDER SEC.80G OF THE ACT TWICE ALREADY, I.E. ONCE FOR THE PERIOD FRO M 01.04.2005 TO 31.3.2007 AND LATER RENEWED BY HIS PREDESSOR CIT - VIDE PROCEEDINGS IN F.NO.H.QRS./LLL/58/89G/CLT/RJY/2007-08, DT. 04-12-2 007, FOR THE PERIOD FROM ITA NO.302/VIZAG/2011 CHARITY ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS), KAKINADA 3 01.04.2007 TO 31.3.2010, THE LD. CIT OUGHT NOT HAVE REJECTED THE CLAIM FOR RENEWAL FOR THE SUBSEQUENT PERIOD WITHOUT ANY VALID REASON; 4. EVEN AS PER THE OBSERVATIONS MADE BY THE LD. C .I.T IN THE IMPUGNED ORDER DT. 22.08.2011, THE APPELLANT - SOCIETY 'MAINTAINED REG ULAR BOOKS OF ACCOUNT' AND IN THE WAKE OF SUCH EMPHATIC FINDING, HE OUGHT NOT HAVE REJECTED THE APPELLANT'S VALID CLAIM MERELY ON THE GROUND THAT SOME OF THE EXPENSE S WERE COVERED BY 'SELF- VOUCHERS' AND IN SOME CASES REGULAR BILLS WERE NOT AVAILABLE; 5. THE LD. CIT OUGHT TO HAVE NOTICED THAT THERE W AS NO VIOLATION OF THE CONDITIONS ON THE APPELLANT'S PART UNDER SEC.80G(5)(IV) OF THE AC T, WHEN HE HIMSELF GAVE A 'CATEGORICAL FINDING IN THE IMPUGNED ORDER' TO THE EFFECT THAT 'THE ASSESSEE MAINTAINED REGULAR BOOKS OF ACCOUNT' (EMPHASIS SUPPLIED); 6. AS THERE WAS NO FINDING GIVEN BY THE LD. CIT HOLDING THAT THE APPELLANT-SOCIETY VIOLATED THE 'CHARTABLE PRINCIPLES LAID DOWN BY SEC. 2(15) OF TH E IT. ACT. 1961', AND HAVING GRANTED RECOGNITION UNDER SEC.80G OF THE ACT AS PER THE DETAILS ENUMERATED SUPRA: AND ALSO PARTICULARLY IN THE CONTEXT OF MAINTENANCE OF 'REGULAR BOOKS OF ACCOUNT' EVEN ACCORDING TO THE CIT, HE OUGHT NOT HA VE REJECTED THE CLAIM SUOMOTU MERELY ON THE GROUND THAT SOME EXPENSES WERE AUTHENT ICATED BY SELF-VOUCHERS ONLY; 7. THE LD. CIT OUGHT TO HAVE NOTICED THAT WITHOU T THE INFRASTRUCTURE, SUCH AS 'FURNITURE, COTS & BEDS, IT MIGHT NOT BE POSSIBLE TO RUN AN OLD AGE HO ME' AND GOING BY THE NATURE OF SERVICES RENDERED BY THE APPELLANT - SOCIETY, HE OUGHT NOT HA VE DISBELIEVED THE 'EXPENDITURE', AND ON THAT MERE GROUND HE OUGHT NOT HAVE REJECTED THE CLAIM FOR RENEWAL UNDER SEC.80G OF THE ACT; 8. EVEN OTHERWISE, THERE WAS NO ADEQUATE OPPORTUN ITY AFFORDED TO THE APPELLANT - SOCIETY BY THE LD. CIT BEFORE ARRIVING AS A SUMMARY OBSE RVATION LAID DOWN UNDER SEC.80G(5)(IV) OF THE ACT AND THUS THERE PATENTLY L IES NON ADEHRENCE TO THE PRINCIPLES OF NATURAL JUS TICE AND BY THIS TECHNICAL FIAW ITSELF, THE IMPUGNE D ORDER DT. 22.08.2011 MAY HAVE TO BE TREATED AS VOID IN LAW 5. THE ASSESSEE ALSO RAISED ADDITIONAL GROUNDS ON L EGAL ISSUES AS UNDER: 1. 'THAT IN VIEW OF THE OMISSION OF THE PROVISION T O SEC.80G(5) OF THE ACT BY THE FINANCE (NO.2) ACT 2009, W.E.F. 1.10.2009 AND IN THE LIGHT OF THE BOARD'S CIRCULAR NO.7/2010,DT.27.10.2010, THE LD.CIT, RAJAHMUNDRY OUGHT TO HAVE NOTICED THAT THE EXISTING APPROVALS EXPIRING ON OR AFTER 1 ST OCTOBER, 2009 SHALL BE DEEMED TO HAVE BEEN EXTENDED IN PERPETUITY UNLESS WITHDRAWN; 2. IN VIEW OF THE AFORESAID LEGAL PROVISION AND TA KING NOTE ON THE FACT THAT THE APPELLANT - SOCIETY WAS GRANTED RENEWAL OF EXEMPTION U/S 80G(5) (V) & (VI) OF THE ACT UPTO 31.03.2010 VIDE HIS PREDECESSOR'S ORDERS IN F.NO.HQRS /LLL/58/80G/CIT/RJY/2007-08, DT.04.12.2007, THE LD.CIT OUGHT TO HAVE LODGED THE EARLIER APPLICATION IN FORM NO.10G, ITA NO.302/VIZAG/2011 CHARITY ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS), KAKINADA 4 DT.28.02.2011 OF THE APPELLANT AND HELD THE VIEW TH AT THE EARLIER EXEMPTION IS DEEMED TO HAVE BEEN EXTENDED IN PERPET UITY. IT IS SUBMITTED THAT THIS LEGAL ASPECT WAS DULY BRO UGHT ON RECORD BY THE ASSESSEEE IN ITS MEMORANDUM OF WRITTEN SUBMISSIONS DT.25.04.2013 VID E PARAS 8.1 8.2 AND 8.3 THEREOF BEFORE CIT AND IN THE AFORESAID FACTUAL AND LEGAL BACKGROUND, THE HON'BLE ITAT MAY BE PLEASED TO ENTERTAIN THE AFORES AID ADDITIONAL GROUNDS AND THE ORDER OF THE CIT, RAJAHMUNDRY WHICH IS APPEALED AGA INST MAY BE HELD TO BE VOID IN THE EYES OF LAW, THAT THE EARLIER EXEMPTION IS DEEM ED TO HAVE BEEN EXTENDED IN PERPETUITY . 6. WE HAVE HEARD LD. COUNSEL WHO REITERATED THE SAM E. LD. D.R. SUPPORTED THE ORDER OF LD. CIT. AFTER CONSIDERING RIVAL CONTENTI ONS, WE ARE OF THE OPINION THAT ASSESSEE DESERVES REGISTRATION U/S 80G OF THE ACT. THERE IS NO DISPUTE ABOUT CHARITABLE ACTIVITY OF THE ASSESSEE AS THE ASSESSEE IS REGISTERED U/S 12A OF THE ACT AND SUCH REGISTRATION IS STILL VALID. THERE IS ALS O NO DISPUTE THAT ASSESSEE HAS BEEN GRANTED REGISTRATION U/S 80G OF THE ACT UPTO 31.3.2 010. IT IS ALSO TRUE THAT THE PROVISIONS OF THE ACT WERE AMENDED, AS RAISED IN AD DITIONAL GROUNDS AND SO, ASSESSEES REGISTRATION VALID UPTO 31.3.2010 CONTIN UES THEREAFTER. EVEN ON MERITS, THE CITS OBSERVATIONS/FINDINGS ARE CONTRARY TO EAC H OTHER. AT ONE PLACE HE STATED THAT BOOKS & ACCOUNTS WERE MAINTAINED AND ASSESSEE FILED APPLICATION WITH STATEMENTS FOR THE YEAR ENDING 31.3.2008 TO 31.3.20 10 ALONG WITH RETURNS OF INCOME. THERE IS NO INDICATION OF ANY VIOLATION OF SECTION 11 OF THE ACT AND RETURNS SEEMS TO HAVE BEEN ACCEPTED. FURTHER, THE REASON OF SELF MA DE VOUCHERS FOR REJECTING REGISTRATION IS NOT SUPPORTED BY THE PROVISION OF A CT WHICH ONLY MANDATES MAINTENANCE OF BOOKS OF ACCOUNTS. IT IS NOT EXPLAI NED HOW ASSESSEE CAN FINALISE ITS BOOKS OF ACCOUNT AND FILE RETURN OF INCOME FOR THE YEAR ENDING MARCH, 2011 WHEN APPLICATION ITSELF WAS MADE ON 28.02.2011 AS RECORD ED BY THE CIT IN HIS ORDER. COMING TO THE ASSESSEES ACTIVITIES, THERE IS NO WH ISPER ABOUT ANY VIOLATION OF ITS OBJECTS. MOREOVER, IF THERE IS ACCUMULATION OF INC OME, MORE THAN PERMITTED UNDER THE ACT, THE SAME IS TO BE EXAMINED WHILE ALLOWING EXEMPTION U/S 11. THAT CANNOT BE A REASON FOR REFUSING RENEWAL OF REGISTRATION U/ S 80G. WE ARE UNABLE TO AGREE WITH THE ACTION OF CIT. CONSIDERING THE FACTS OF T HE CASE, WE HAVE NO HESITATION IN ITA NO.302/VIZAG/2011 CHARITY ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS), KAKINADA 5 DIRECTING LD. CIT TO GRANT RENEWAL OF REGISTRATION U/S 80G, AS PER THE PROVISIONS OF THE ACT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH DECEMBER, 2013 COPY TO 1 CHARI ACTION FOR RURAL TRANSFORMATION SOCIAL WELFARE SOCIETY (CHARTS ), DOOR NO.61-1-32/2, YANAM ROAD, JAGANNAICKPUR, KAKIN ADA 2 CIT, RAJAHMUNDRY 3 THE CIT (A) , RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM