Sri Venkateswara Bhakti Channel, Tirupathi V. CIT, Tirupathi

ITA 336/HYD/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6056 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 16-11-2010
• Assessment Year: misc
• Appeal Filed On: 06-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA; AMLAN TRIPATHI
• Assessee Lawyers: S RAMA RAO
• Keywords: Principle of natural justice; Competent authority; Benefit of exemption
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.336/HYD/2009 SRI VENKATESWARA BHAKTI CHANNEL, TIRUPATI ( PAN - AALCS 3218 E ) V/S. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), TIRUPATI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.RAMA RAO RESPONDENT BY : SMT. VASUNDHARA SINHA & SHRI AMLAN TRIPATHI O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME-TAX, TIRUPATI, REFUSING REGISTRAT ION UNDER S.12A OF THE INCOME-TAX ACT, 1961 TO THE ASSESSEE. 2. GROUNDS OF APPEAL OF THE ASSESSEE IN THIS APPEAL ARE AS UNDER- '1. THE ORDER OF THE COMMISSIONER OF INCOME-TAX TIR UAPTI IS BAD IN LAW AND AGAINST ALL CANNONS OF EQUITY AN D NATURAL JUSTICE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX TIRUPATI ER RED IN UNDERSTANDING THE PROVISIONS OF LAW AND FACTS OF TH E CASE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX, TIRUPATI E RRED IN APPRECIATING THE FACT THAT SRI VENKATESWARA BHAKTI CHANNEL IS A COMPANY CONVERTED UNDER SECTION 25 OF THE COMPANI ES ACT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE SUBMITTED A T THE TIME OF HEARING THE APPELLANT PRAYS THE H ON'BLE INCOME TAX APPELLATE TRIBUNAL TO DIRECT THE COMMISSI ONER OF INCOME-TAX TIRUPATI TO GRANT SANCTION OF REGISTRATION U/S. 12A TO SRI VENKATESWARA BHAKTI CHANNEL.' ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 2 3. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONLY REASON ADVANCED BY THE COMMISSIONER OF INCOME-TAX WHILE REFUSING REGISTRATION UNDER S.12A OF THE ACT WAS THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORATED FOR PRODUCING RELIGIOUS FE ATURE FILMS, SERIALS, ETC. FOR TIRUMALA TIRUPATI DEVASTHANAM (TTD), AND TH EREFORE, THE ASSESSEE DOES NOT QUALIFY FOR REGISTRATION UNDER S.12A OF THE ACT. HE SUBMITTED THAT THE ASSESSEE IS A COMPANY UNDER S.25 OF THE COMPANIES ACT. HE SUBMITTED THAT IN ACCORDANCE WITH THE PROVISIONS OF S.11 OF THE I NCOME TAX ACT, THE INCOME RELATABLE TO ANY 'PERSON' WAS NOT INCLUDIBLE IN ITS TOTAL INCOME, IF THE OTHER CONDITIONS PROVIDED IN S.11 ARE SATISFIED. THE W ORD 'PERSON' HAS BEEN DEFINED IN S.2(31) OF THE ACT AND THE SAME INCLUDES 'CO MPANY' ALSO. HE SUBMITTED THAT THERE IS NO BAR ON A COMPANY TO CLAIM EX EMPTION UNDER S.11 OF THE ACT, IF THE OTHER CONDITIONS FOR GRANT OF EXEMP TION ARE SATISFIED. HE REFERRED TO THE PROVISIONS OF S.12A OF THE ACT, WHICH A PPLIES TO INCOME OF ANY TRUST OR INSTITUTION AND CONDITIONS LAID DOWN THER EIN REFER TO ANY 'PERSON' WHO WAS IN RECEIPT OF INCOME, WHO CAN MAKE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INSTITUTION IN THE PRESCRI BED FORM TO THE COMMISSIONER OF INCOME-TAX BEFORE THE SPECIFIED DATE. HE SUBMITTED THAT THERE IS NO PROVISION IN LAW TO RESTRICT THE BENEFIT OF S.11 TO A 'TRUST' ONLY. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT VARIO US ASSESSEES FORMED AS COMPANIES HAVE BEEN ALLOWED REGISTRATION UNDE R S.12A OF THE ACT, NAMELY, HYDERABAD RACE CLUB, A.P. STATE CIVIL SU PPLIES CORPORATION AND A.P. STATE ROAD TRANSPORT CORPORATION. HE RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S. ANDHRA PRADESH STATE ROAD TRANSPORT CORPORATION (1986) 159 ITR 1(SC), WHEREIN IT WAS HEL D THAT THE ACTIVITY OF THE ASSESSEE WAS NOT CARRIED ON WITH THE OBJECT OF MAKING PROFIT AND HENCE THE ASSESSEE WAS ENTITLED TO THE EXEMPTION CLAIMED BY I T BOTH UNDER THE 1922 ACT AND UNDER THE 1961 ACT. ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 3 4. THE LEARNED CIT-DEPARTMENTAL REPRESENTATIVE HA S OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. SHE R ELIED ON THE ORDER OF THE COMMISSIONER OF INCOME-TAX AND SUBMITTED T HAT WHAT COULD BE REGISTERED UNDER THE PROVISIONS OF S.12A OF THE ACT IS A 'TRUST' OR 'INSTITUTION' AND THEREFORE, A 'COMPANY' NOT BEING A TRUST, COULD N OT BE REGISTERED UNDER S.12A OF THE ACT. SHE SUBMITTED THAT THE SCHEME OF TH E ACT AND IN PARTICULAR, PROVISIONS OF S.11, 12, 12A,. 12AA CLEARLY PROVIDE THAT IT APPLIES ONLY TO A TRUST OR INSTITUTION AND NOWHERE IT IS PROV IDED UNDER THE LAW THAT A 'COMPANY' COULD BE REGISTERED UNDER S.12A OF THE ACT. SHE RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME-TAX, TIRUPATI. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY A ND HAVE PERUSED THE ORDER OF THE COMMISSIONER OF INCOME-TAX, T IRUPATI REFUSING REGISTRATION TO THE ASSESSEE UNDER S.12A OF THE ACT. THE ASSESSEE WAS INCORPORATED AS A PRIVATE LIMITED COMPANY ON 7TH JUNE , 2007 AND SUBSEQUENTLY CONVERTED ITSELF INTO A SECTION 25 COMPANY U NDER THE COMPANIES ACT, VIDE ORDER OF THE COMPETENT AUTHORITY DATED 19TH SEPTEMBER, 2008. THE ASSESSEE COMPANY APPLIED FOR REGIST RATION UNDER S.12A OF THE ACT, WITH COMMISSIONER OF INCOME-TAX, TIR UPATI. THE APPLICATION OF THE ASSESSEE COMPANY FOR REGISTRATION UND ER S.12A OF THE ACT WAS REJECTED BY THE COMMISSIONER OF INCOME-TAX, TIRUP ATI. WE FIND THAT THE ONLY REASON ADVANCED BY THE COMMISSIONER OF IN COME-TAX WHILE REFUSING REGISTRATION UNDER S.11 OF THE ACT WAS THAT T HE ASSESSEE WAS A PRIVATE LIMITED COMPANY INCORPORATED FOR PRODUCING REL IGIOUS FEATURE FILMS, SERIALS, ETC. FOR TIRUMALA TIRUPATI DEVASTHANAM AND TH EREFORE, THE ASSESSEE DOES NOT QUALIFY FOR REGISTRATION UNDER S.12A OF THE ACT. WE FIND THAT THERE IS NO PROVISION IN THE INCOME-TAX ACT OR RULES MADE THE REUNDER TO DENY REGISTRATION UNDER THE PROVISION OF S.12A OF THE ACT M ERELY BECAUSE THE ASSESSEE IS A 'COMPANY'. THE PROVISION OF S.11 PROVIDE FO R EXEMPTION OF THE TOTAL INCOME OF A 'PERSON', WHO DERIVES INCOME FROM PROPERTY HELD UNDER ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 4 TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE WORD 'PE RSON' HAS BEEN DEFINED IN S.2(31) OF THE ACT, AND THE DEFINITION TH EREIN IS NOT EXHAUSTIVE, BUT ILLUSTRATIVE, AND IT READS AS UNDER- '2. DEFINITIONS. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, - (1) TO (30). (31) 'PERSON' INCLUDES- (I) AN INDIVIDUAL, (II) A HINDU UNDIVIDED FAMILY, (III) A COMPANY, (IV) A FIRM, (V) AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDU ALS, WHETHER INCORPORATED OR NOT, (VI) A LOCAL AUTHORITY, AND (VII) EVERY ARTIFICIAL JURIDICAL PERSON, NOT FALLIN G WITHIN ANY OF THE PRECEDING SUB-CLAUSES. EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, AN AS SOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A LOCAL AUTHORITY OR AN ARTI FICIAL JURIDICAL PERSON SHALL BE DEEMED TO BE A PERSON, WHETHER OR NOT SUCH PERSON O R BODY OR AUTHORITY OR JURIDICAL PERSON WAS FORMED OR ESTABLISHED OR INCOR PORATED WITH THE OBJECT OF DERIVING INCOME, PROFITS OR GAINS;' (EMPHASIS SUPPLIED) A PLAIN READING OF THE DEFINITION OF THE WORD 'PERSO N' AS PROVIDED IN S.2(31) OF THE ACT MAKES IT CLEAR THAT THE WORD 'PERSON' INCLUDE S A 'COMPANY' ALSO. THE PROVISION OF S.12A OF THE ACT PROVIDE THAT PROVIS IONS OF S.11 AND S.12 SHALL NOT APPLY IN RELATION TO THE INCOME OF ANY TRU ST OR INSTITUTION, UNLESS THE ASSESSEE FULFILS THE CONDITIONS PROVIDED THEREIN FOR REGISTRATION UNDER S.12A OF THE ACT. THE PROVISION OF S.12AA OF THE ACT P ROVIDE FOR PROCEDURE FOR REGISTRATION UNDER S.12A OF THE ACT. THE WORD 'INSTITUTION' HAS NOT BEEN DEFINED ANYWHERE IN THE INCOME-TAX ACT, 1961. HENCE, WE HAVE TO GO BY ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 5 THE GENERAL MEANING OF THE SAME. AS PER OXFORD DICTION ARY (ONLINE), THE WORD 'INSTITUTION' HAS BEEN EXPLAINED TO MEAN- ' INSTITUTION PRONUNCIATION: /NSTTJU()N/ NOUN 1 AN ORGANIZATION FOUNDED FOR A RELIGIOUS, EDUCATIO NAL, PROFESSIONAL, OR SOCIAL PURPOSE AN ORGANIZATION PROVIDING RESIDENTIAL CARE FOR PEOP LE WITH SPECIAL NEEDS: ABOUT 5 PER CENT OF ELDERLY PEOPLE LIVE IN INSTITUTIONS AN ESTABLISHED OFFICIAL ORGANIZATION HAVING AN IMPO RTANT ROLE IN A SOCIETY, SUCH AS THE CHURCH OR PARLIAMENT: THE INSTITUTIONS OF DEMOCRATIC GOVERNMENT A LARGE COMPANY OR OTHER ORGANIZATION INVOLVED IN F INANCIAL TRADING: CITY INSTITUTIONS 2 AN ESTABLISHED LAW OR PRACTICE: THE INSTITUTION OF MARRIAGE INFORMAL A WELL-ESTABLISHED AND FAMILIAR PERSON OR CUSTOM: HE SOON BECAME SOMETHING OF A NATIONAL INSTITUTION 3 [MASS NOUN] THE ACTION OF INSTITUTING SOMETHING: A DELAY IN THE INSTITUTION OF PROCEEDINGS ..' THE MEANING OF THE WORD 'INSTITUTION', NOWHERE SUGGEST THAT A 'COMPANY' COULD NOT BE AN INSTITUTION. THE VERY PURPOSE OF THE PROVISIONS OF S.11,12, 12 AND 12AA OF THE ACT IS TO PROVIDE EXEMPTION FROM T AX TO ANY 'PERSON', WHO IS DERIVING INCOME FROM PROPERTY HELD UNDER 'TRUST ' WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES AND IF A NARROW INTERPRETATION RESTRICTING THE BENEFIT PROVIDED UNDER S.11 OF THE ACT ONLY TO A TRUST AND NO T TO OTHER TAXABLE ENTITIES AS DEFINED IN THE DEFINITION OF THE WORD 'PE RSON' UNDER S.2(31) OF THE ACT IS ADOPTED, IT WOULD FRUSTRATE THE VERY OBJECT OF P ROVIDING EXEMPTION FROM TAX TO A PERSON ESTABLISHED FOR CHARITABLE OR REL IGIOUS PURPOSES, AND WOULD BE AGAINST THE SPIRIT AND PURPOSE OF THE RELEVAN T PROVISIONS OF LAW. THE WORD 'CHARITABLE PURPOSE' HAS BEEN DEFINED IN THE PROVISIONS OF S.2(15) OF THE ACT, WHICH READS AS UNDER- ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 6 '2(15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF ANY OTHER OB JECT OF GENERAL PUBLIC UTILITY ; 6. THUS. THE TEST WHETHER AN ASSESSEE COULD BE REGISTE RED UNDER S.12A OF THE ACT IS NOT THE STATUS OF THE 'PERSON', BUT WHETHER THE PERSON (ASSESSEE) WAS ESTABLISHED FOR CHARITABLE OR RELIGIOUS PUR POSE. THE ''COMPANY', BEING A PERSON IN ACCORDANCE WITH THE SCHEME OF THE ACT IS ENTITLED TO THE BENEFIT OF S.12A OF THE ACT, WITH RE GARD TO EXEMPTION OF ITS INCOME AND THE REGISTRATION UNDER S.12A OF THE ACT BE ING A PRE-CONDITION TO AVAIL THE BENEFIT OF EXEMPTION PROVIDED UNDER S.11 OF THE ACT, HARMONIOUS INTERPRETATION WOULD BE THAT THE COMPANY IS ALSO ENTI TLED TO REGISTRATION UNDER THE PROVISION OF S.12A OF THE ACT. ANY OTHER I NTERPRETATION, DENYING REGISTRATION UNDER S.12A OF THE ACT TO A COMPANY, SHALL RENDER THE PROVISION OF S.11 PROVIDING EXEMPTION FROM TAX TO A 'PERSON', REDUNDANT AND THEREFORE, SUCH INTERPRETATION SHOULD BE AVOIDED. SINCE THE REVENUE TREATS 'COMPANY' AS A TAXABLE ENTITY, BEING AN ASSESSEE IN TERMS OF DEFINITION OF THE WORD 'ASSESSEE' AS DEFINED IN S.2(7) OF THE ACT, IT D OES NOT LIE IN THE MOUTH OF THE DEPARTMENT TO PLEAD TO THE CONTRARY AN D TO TAKE A CONTRARY STAND IN THE CONTEXT OF PROVISION OF S.11 OF THE ACT, THAT A 'COMPANY' IS NOT A 'PERSON' SO AS TO BE ELIGIBLE FOR THE BENEFIT OF S.1 1 OF THE ACT. WE FIND THAT THE COMMISSIONER OF INCOME-TAX HAS REJECTED THE APPLICAT ION OF THE ASSESSEE FOR REGISTRATION UNDER S.12A OF THE ACT, ON THIS SHORT ISSUE OF THE ASSESSEE BEING A COMPANY AND AS SUCH, HE HAS NOT GONE INTO THE ISSUE WHETHER OTHER CONDITIONS FOR REGISTRATION UNDER S.12A OF THE ACT WERE FULFILLED BY THE ASSESSEE IN THIS CASE OR NOT. IN THESE FA CTS OF THE CASE, WE CONSIDER IT LAWFUL TO SET ASIDE THE ORDER OF THE COMMISSI ONER OF INCOME-TAX TIRUAPTI, AND RESTORE THE MATTER TO HIS FILE WITH A DIRECTION TO EXAMINE AFRESH WHETHER OTHER CONDITIONS PROVIDED UNDER THE ACT FOR THE REGISTRATION UNDER S.12A OF THE ACT ARE FULFILLED IN THIS CASE OR NOT, AND NOT TO REFUSE REGISTRATION TO THE ASSESSEE ON THE GROUND THAT THE ASSESS EE IS A 'COMPANY' ITA NO.336/HYD/09 M/S.SRI VENKATESWARA BHAKTI CHANNEL , TI RUPATI 7 AND TO PASS A DE NOVO ORDER, AFTER PROVIDING THE ASSESSEE A REASONABLE OPPORTUNITY OF HEARING. WE DIRECT ACCORDINGLY. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 26.11.2010 SD/- SD/- (CHANDRA POOJARI) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 26TH NOVEMBER, 2010 COPY FORWARDED TO: 1. SRI VENKATESWARA BHAKTI CHANNEL, ALIPIRI, TIRUPAT I 2. ASST. COMMISSIONER OF INCOME-TAX CIRCLE 1(1), TIRUPAT I. 3. COMMISSIONER OF INCOME-TAX TIRUPATI. 4. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.