P.M. Santhosha Charitable Trust, Bangalore V. DIT(Exemption), Bangalore

ITA 316/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9404 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 13-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHA PRAKASH
• Assessee Lawyers: H N KHINCHA
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS. 315 & 316/BANG/2009 ASSESSMENT YEAR : N.A. P.M. SANTHOSHA CHARITABLE TRUST, NO.15/1, FIRST FLOOR, SURVEYOR STREET, BASAVANGUDI, BANGALORE 560 004. : APPELLANT VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), BANGALORE. : RESPONDENT APPELLANT BY : SHRI H.N. KHINCHA RESPONDENT BY : SHRI HARSHA PRAKASH O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE ARE TWO APPEALS PREFERRED BY P.M. SANTHOSHA C HARITABLE TRUST ( THE TRUST), AGGRIEVED BY THE ORDERS OF THE LD. DIT(E) AGAINST - (I) REFUSAL TO ACCORD REGISTRATION U/S 12A OF THE ACT; AND (II) REJECTION OF APPLICATION FOR RECOGNITION U/S 80G OF THE ACT. 2. WITH REGARD TO REFUSAL TO GRANT REGISTRATION U/S 12A OF THE ACT [ITA NO:315], THE TRUST HAS RAISED FIVE GROUNDS. ON A C LOSE SCRUTINY OF THE ITA NO.315/B/09 PAGE 2 OF 8 GROUNDS, WE FIND THAT THE ESSENCE AND CRUX OF THE G RIEVANCE IS THAT THE DIT(E) HAS ERRED IN PASSING AN ORDER REJECTING THE TRUSTS APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. 3. IN RESPECT OF REFUSAL TO ACCORD RECOGNITION U/S 80G OF THE ACT, THE TRUST HAS COME UP WITH FOUR GROUNDS. HOWEVER ON A PERUSAL, THE GROUSE OF THE TRUST IS REVOLVED AROUND THE DIT (E)S ACTION I N REFUSING TO RECOGNIZE THE TRUST U/S 80G OF THE ACT. 4. AS THE ISSUES RAISED IN THESE APPEALS ARE INTER- LINKED, BOTH THE APPEALS ARE CONSIDERED TOGETHER AND DISPOSED OFF IN THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NO:315 [U/S 12A OF THE ACT] : 5. THE ASSESSEE TRUST WAS FORMED ON 28/8/2008 AND, SUBSEQUENTLY, FURNISHED AN APPLICATION DT: 31/10/2008 BEFORE THE DIT(E) FOR REGISTRATION U/S 12A OF THE ACT. ON EXAMINING THE DETAILS FURNI SHED BY THE TRUST IN COMPLIANCE TO THE CALL MEMO, THE LD. DIT(E) WAS OF THE VIEW THAT S.12AA (1)(B) OF THE ACT REQUIRES THE DESIGNATED OFFICER T O EXAMINE THE CASE WITH A VIEW TO SATISFY ABOUT THE OBJECTS AND THE GENUINENE SS OF THE ACTIVITIES OF THE TRUST BEFORE CONSIDERING OF ACCORDING REGISTRATION TO THE TRUST. HOWEVER, IN THE INSTANT CASE, SINCE NO ACTIVITIES HAVE BEEN CON DUCTED BY THE TRUST SO AS TO VERIFY THE GENUINENESS OF THE TRUST, THE LD. DIT (E) HAD REJECTED THE TRUSTS APPLICATION FOR REGISTRATION U/S 12A OF THE ACT. 6. AGGRIEVED, THE ASSESSEE TRUST HAS COME UP WITH THE PRESENT APPEAL. THE ASSESSEE TRUSTS CONTENTIONS ARE SUMMARIZED AS UNDER: ITA NO.315/B/09 PAGE 3 OF 8 (I) THE DIT(E) HAS NO POWER TO REJECT AN APPLICATION U/ S 12A OF THE ACT; (II) THE DIT(E) HAD COME TO AN ERRONEOUS CONCLUSION THAT AT THAT TIME OF GRANTING REGISTRATION U/S 12A OF THE ACT, THE TR UST SHOULD HAVE CARRIED OUT CERTAIN ACTIVITIES. THE DIT(E)S CONCLU SION THAT IN THE ABSENCE OF ACTIVITIES, IT WAS NOT POSSIBLE TO VERIF Y THE GENUINENESS OF THE TRUST WAS ALSO ERRONEOUS; THAT SUCH A CONCLU SION WAS NOT SUPPORTED BY THE FACTS OF THE CASE AND ALSO AGAINST THE LAW; AND (III) THE ASSESSEE TRUST HAVING COMPILED WITH ALL THE STA TUTORY REQUIREMENTS WAS ENTITLED TO REGISTRATION U/S 12AA OF THE ACT. 6.1. DURING THE COURSE OF HEARING, THE LD. A R HAD FURNISHED A PAPER BOOK CONTAINING 1 TO 45 PAGES WHICH, INTER ALIA, CO NSISTS OF COPY OF TRUST DEED, COPY OF APPLICATION FOR REGISTRATION ETC., TO STRENGTHEN HIS VIEW POINT, THE LD. A R HAS PLACED STRONG RELIANCE ON THE DECIS ION OF THE HONBLE HIGH COURT OF KARNATAKA REPORTED IN (2006) 285 ITR 327. 6.2. ON THE OTHER HAND, THE LD. D R HAD A FIRM VIEW THAT THE LD. DIT(E) HAD ACTED IN A JUDICIOUS MANNER WHICH REQUIRES NO I NTERFERENCE AT THIS STAGE AND, THEREFORE, PLEADED THAT THE IMPUGNED ORD ER DESERVES TO BE CONFIRMED. 7. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS AN D ALSO PERUSED THE RELEVANT MATERIALS PLACED BEFORE US. 7.1. THE OBJECTS OF THE TRUST, FOR READY REFERENCE, ARE REPRODUCED HEREUNDER: (A) TO ESTABLISH, BUILD, MAINTAIN, RUN HOSTEL FOR DESERVIN G STUDENTS FROM THE RURAL AREA TO PURSUE THEIR EDUCATION AND TO IMPROVE , EXTEND, RENDER FINANCIAL ASSISTANCE TO THE STUDENTS TO PURSUE THEI R EDUCATION AND GRANT DONATIONS TO THE OTHER INSTITUTIONS HAVING SIMILAR OBJECTS OF THE TRUST; ITA NO.315/B/09 PAGE 4 OF 8 (B) TO TAKE OVER ANY EXISTING INSTITUTIONS OF THE KIND REFERRED TO ABOVE OR PURCHASE OR CONSTRUCT OR OBTAIN ON LEASE OR OTHERWI SE ACQUIRE PREMISES OR BUILDINGS FOR THE ABOVE PURPOSE; (C) TO AWARD SCHOLARSHIP AND MERIT PRIZED AND GRANT AIDS TO DESERVING AND MERIT STUDENTS AND TO HELP THEM WITH ALL POSSIBLE M EANS FOR ATTAINING THEIR EDUCATION; (D) TO RUN EDUCATIONAL INSTITUTIONS SUCH AS SCHOOLS, CO LLEGES, TECHNICAL INSTITUTES, TECHNOLOGICAL STUDY CIRCLES AND TO EDUC ATE ALL SECTIONS OF SOCIETY; (E) TO AFFORD MEDICAL RELIEF OR ANY OTHER FINANCIAL HEL P TO THE ECONOMICALLY WEAKER SECTIONS, HANDICAPPED, SICK, POOR DISABLED AND SENIOR CITIZENS; (F) TO RENDER SERVICE FOR DEVELOPMENT OF UNDERPRIVILEGE D SOCIETY AND TO EXTEND SUPPORT AND CARRY OUT CHARITABLE ACTIVITIES TO PROM OTE HEALTH, EDUCATION AND PROVIDE SOCIAL SECURITY TO SUCH PERSONS; (G) TO DO ALL SUCH ACTS AND THINGS AS MAY BE INCIDENTAL TO AND IN FURTHERANCE OF THE ABOVE OBJECTS; & (H) TO IMPLEMENT CHARITABLE ASSIGNMENTS WHICH ARE NOT R EPUGNANT TO OTHER OBJECTS OF THE TRUST. 7.2. AMONGST OTHER OBJECTS OF THE TRUST, THE TRUST HAS BEEN CONCENTRATING IN HELPING THE NEEDY FOR MEDICAL ATTENDANCE/EDUCATI ONAL FIELD WHICH HAS BEEN AMPLY EXHIBITED IN DONATING LIBERALLY (I) A CHEQUE DT: 7/7/09 FOR RS.18000/- WAS SENT TO THE DIRECTOR, B.K.FOUNDATION, BANGALORE TOWARDS CONTRIBUTION FOR THE DIALYSIS TREATMENT FOR ONE MASTER MADHU WITH A REQUEST TO TR EAT THE PATIENT FOR THREE MONTHS I.E., JULY, AUGUST AND SEPTEMBER, 09; (II) A CHEQUE DT: 276/09 FOR RS.1 LAKH FAVOURING K OACON 2010 TOWARDS THE SPONSORSHIP OF KOA INTERNATIONAL TRAVELING FELL OWSHIP FOR HIGHER EDUCATION OF TWO DOCTORS DR.ANUP KUMAR, MANGALORE & DR.ANAND GALGALI, BANGALORE WAS SENT TO THE CHAIRMAN, KOA INTERNATIONAL TRAVELING FELLOWSHIP; (III)ON A REQUEST FROM SRI RAJARAJESWARI JAYAMMA L. M.EDUCATIONAL TRUST, BANGALORE, A CHEQUE DT.22/6/09 FOR RS.7200 WAS SENT TOWARDS SCHOOL FEES OF SIX STUDENTS; (IV)ON A REQUEST FROM ONE SRI R.SHESHAGIRI, BANGALO RE.4, A CHEQUE DT.23/6/09 FOR RS.2065/- WAS SENT BY THE TRUST FOR SCHOOL FEES OF SHESHAGIRIS SON; & (V)A SUM OF RS.30,000/- BY WAY OF CHEQUE DT.9/4/09 WAS SENT TO B.K.FOUNDATION TOWARDS CONTRIBUTION TO ONE FREE DIA LYSIS A DAY PROGRAM. ITA NO.315/B/09 PAGE 5 OF 8 7.3. THE SERVICES BEING RENDERED BY THE TRUST TO HU MANITY DESERVES TO BE APPLAUDED. IN THE SAME BREATH, WE WOULD LIKE TO PO INT OUT THAT THE PIECE OF EVIDENCE NOW PRODUCED BEFORE US WAS NOT MADE AVAILA BLE FOR THE PERUSAL OF THE LD. DIT(E) WHEN THE TRUSTS APPLICATION FOR REGISTRATION WAS BEING CONSIDERED. 7.4. IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CH ARITABLE TRUST V. DIT(E) REPORTED IN (2006) 285 ITR 327, THE HONB LE HIGH COURT OF KARNATAKA HAD AN OCCASION TO DEAL WITH A SIMILAR IS SUE. AFTER DELIBERATING THE ISSUE AT LENGTH, THE HONBLE COURT WAS PLEASED TO OBSERVE THUS SECTION 11 OF THE ACT DEAL WITH EXEMPTIONS AVAILAB LE TO INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURP OSES. EXEMPTION FROM TAX WILL BE ALLOWED ONLY IN RESPECT OF THE INCOME ACTUALLY APPLIED TO THE PURPOSES OF THE TRUST. INC OME DERIVED FOR TRUST PROPERTY MUST BE DETERMINED ON COMMERCIAL PRI NCIPLES. IN ORDER TO BE ELIGIBLE FOR THE AFORESAID EXEMPTION TH E ASSESSEE HAS TO GET THE TRUST REGISTERED UNDER SECTION 12A OF TH E ACT. THE ASSESSEE HAS TO MAKE AN APPLICATION IN THE PRESCRIB ED FORM AND COMPLY WITH THE OTHER LEGAL REQUIREMENTS MENTIONED IN THE AFORESAID SECTION. ON RECEIPT OF SUCH APPLICATION FOR REGISTRATION THE COMMISSIONER IS UNDER AN OBLIGATION TO FOLLOW T HE PROCEDURE PRESCRIBED UNDER SECTION 12AA BEFORE HE GRANTS OR R EFUSES REGISTRATION. WHAT HE IS EXPECTED TO DO ON RECEIPT OF SUCH AN APPLICATION IS, HE SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST IN ORDER TO SATISFY HIMSELF ABOUT T HE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION. IN ADD ITION TO SECURING INFORMATION IN THE AFORESAID MANNER, IT IS OPEN TO THE COMMISSIONER TO MAKE SUCH ENQUIRIES AS HE DEEMS NEC ESSARY IN THIS BEHALF. HAVING REGARDING TO THE SCHEME OF SEC TIONS 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 APPLICATIO N OF THE INCOME OF THE TRUST FOR THE AFORESAID PURPOSES WHIC H ONLY ENTITLE THE ASSESSEE TO CLAIM EXEMPTION. FOR ARRIVING AT S UCH SATISFACTION PRIMARILY HE HAS TO LOOK AT THE OBJECT OF THE TRUST, WHEN THE GAME IS REDUCED INTO WRITING IN FORM OF TH E TRUST DEED. ITA NO.315/B/09 PAGE 6 OF 8 IF ON THE DATE OF APPLICATION THE TRUST HAS RECEIVE D INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOM E IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E., TO WARDS 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 DERIVED FROM THE TRU ST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND N OT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED TO THE TRUST. 7.5. THE HONBLE HIGH COURT HAD OBSERVED THAT FOR THE PURPOSE OF REGISTRATION UNDER SECTION 12AA OF THE ACT, WHAT TH E AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR I NSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARI TABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED TO THE TRUST. 7.6. HOWEVER, THE PRESENT TRUST WAS, INDEE D, FORMED ON 28/8/2008 AND HAD APPLIED FOR REGISTRATION U/S 12A OF THE ACT WITHIN A COUPLE OF MONTHS OF ITS FORMATION. SINCE NO ACTIVITIES OF T HE TRUST WORTH THE NAME WERE FORTH-COMING, IN OUR CONSIDERED VIEW, THE LD.D IT(E) HAD ACTED IN CONFORMITY WITH THE RULE OF LAW. WE ARE ALSO NOT I N AGREEMENT WITH THE ASSESSEE TRUSTS ASSERTION THAT THE DIT(E) HAS NO POWER TO REJECT AN APPLICATION U/S 12A OF THE ACT. 7.6. THE EVIDENCED NOW PRODUCED BY THE TRUST WAS NO T MADE AVAILABLE BEFORE THE DIT(E) WHEN SHE HAD CONSIDERE D THE TRUSTS APPLICATION FOR REGISTRATION. 7.7. IN OVER ALL FACTS AND CIRCUMSTANCES OF THE ISS UE, WE ARE OF THE CONSIDERED VIEW THAT THE ISSUE SHOULD BE REMITTED B ACK ON THE FILE OF THE LD. DIT(E) FOR THE CONSIDERATION OF THE TRUSTS APPLICA TION AFRESH. THE ITA NO.315/B/09 PAGE 7 OF 8 ASSESSEE TRUST, THROUGH ITS A R, IS ADVISED TO FURN ISH ALL RELEVANT MATERIALS AND STATEMENT OF ACCOUNTS, IF ANY, BEFORE THE DIT ( E) TO FACILITATE THE DIT(E) TO TAKE APPROPRIATE ACTION IN ACCORDANCE WIT H LAW. IT IS ORDERED ACCORDINGLY. ITA NO.316/09 [ U/S 80G OF THE ACT] : 8. IN OUR FINDING [IN ITA NO: 315] REFERRED SUPRA, THE LD. DIT(E) HAS BEEN DIRECTED TO CONSIDER THE ASSESSEE TRUSTS APPL ICATION FOR REGISTRATION U/S 12A OF THE ACT AFRESH. IN VIEW OF THE ABOVE, T HE ISSUE OF ASSESSEE TRUSTS APPLICATION FOR RECOGNITION U/S 80G OF THE ACT IS ALSO REMITTED BACK ON THE FILE OF DIT (E) IN LINE WITH OUR DIRECTIONS CON TAINED IN ITA NO:315 REFERRED SUPRA. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT, BOTH APPEALS OF THE ASSESSEE TRUST ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES . PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF AUGUST, 2009. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 7 TH AUGUST, 2009. DS/- ITA NO.315/B/09 PAGE 8 OF 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. DIT 4. DR, ITAT, BANGALORE. 5. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.