The Instiute Management Committee of Women Industrial Training Institute, Ujjain V. The CIT, Ujjain

ITA 336/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0037 (ITAT-INDORE)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-08-2009
• Assessment Year: misc
• Appeal Filed On: 30-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S DESHPAHDE
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.I) BENCH, INDORE. BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER PAN NO. : AAAAJ2733H I.T.A.NO. 336 /IND/2009 (U/S 12A/12AA) INSTITUTE MANAGEMENT COMMITTEE OF WOMEN INDUSTRIAL TRAINING INSTITUTE, UJJAIN. VS. COMMISSIONER OF INCOME - TAX, UJJAIN. VS. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPAHDE, C.A . RESPONDENT BY : SMT.APARNA KARAN, ADDL. CIT DR O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, UJJAIN DATED 27 TH APRIL, 2009, U/S 12A/12AA OF THE INCOME- 2 TAX ACT,1961, CHALLENGING THE REJECTION OF APPLICAT ION FOR REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961. 2. I HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PARTIES, GONE THROUGH THE MATERIAL AVAILABLE ON RECORD AND PERUSE D THE FINDINGS OF THE LD. COMMISSIONER. 3. THE LD. COMMISSIONER NOTED FROM THE M.O.A. THAT AIM OF THE SOCIETY IS TO ASSIST IN IMPROVEMENT OF STANDARD OF VOCATIONAL TRAINING AND SKILL DEVELOPMENT OF THE WOMEN INDUSTRIAL TRAIN ING INSTITUTE, UJJAIN. IT HAS ALSO BEEN MENTIONED THAT THE MAIN OB JECTIVE IS TO ADOPT INNOVATIVE MEASURES LIKE PROVIDING CONSULTANCY, ADV ISORY SERVICES TO THE INDUSTRY SO AS TO GENERATE REVENUE, WHICH CAN B E UTILIZED FOR DEVELOPMENT OF TRAINING ACTIVITIES IN I.T.I. LD. CO MMISSIONER ALSO NOTED FROM PARA 55 OF MEMORANDUM OF ASSOCIATION THA T THE FUNDS OF THE SOCIETY SHALL CONSIST OF INCLUDING INCOME EARNE D BY RUNNING PRODUCTION/SERVICE CENTRE BY THE SOCIETY IN THE I. T. I., CHARGES FOR CONSULTANCY PROVIDED BY THE I.T.I. AND EXTRA CHARGE S ALLOWED TO BE COLLECTED BY THE STATE GOVERNMENT FOR ANY PAID SEAT S IN THE I.T.I. FOR TRAINING COURSES. THE COURSES BEING RUN BY THE ASSE SSEE WOULD BE 3 STENOGRAPHY (HINDI), DRESS MAKING, CUTTING, SEWING, DRAFTSMAN, MECHANICAL. THE LD. COMMISSIONER NOTED THAT MAIN OB JECTS OF THE ASSESSEE SOCIETY FALL UNDER ANY OTHER OBJECT OF P UBLIC UTILITY AS PER THE DEFINITION GIVEN IN SECTION 2(15) OF THE ACT. H OWEVER, IT WAS NOTED THAT AS PER AMENDED DEFINITION, THE INCOME GE NERATED FROM VARIOUS ACTIVITIES IS TO BE USED FOR CHARITABLE PUR POSES, THEREFORE, SHOW CAUSE WAS ISSUED TO, THE ASSESSEE AS TO WHY REGISTR ATION BE NOT REFUSED. THE ASSESSEE BRIEFLY EXPLAINED THAT ACTIVITIES OF T HE ASSESSEE HAVE ALREADY STARTED AND SOCIETY HAS PREPARED A PROJECT ON THE BASIS OF WHICH INTEREST FREE LOAN OF RS. 2.5 CRORES HAVE BEE N SANCTIONED AND RECEIVED FROM THE CENTRAL GOVERNMENT. THE INSTITUTE PROPOSES TO CONSTRUCT BUILDING FOR THE EXISTING I.T.I. FOR WHI CH LAND HAS ALREADY BEEN FINALIZED AND CIVIL WORK OF THE BUILDING WILL BE TAKEN CARE BY THE P.W.D. OF STATE DEPARTMENT. IT WAS ALSO EXPLAINED T HAT THE CLAUSE OF THE CONSULTANCY CLEARLY STATES THAT RECEIPT OF THE CONSULTANCY WILL BE UTILIZED FOR DEVELOPMENT OF TRAINING ACTIVITIES OF I.T.IS., WHICH HAS ALSO THE MAIN OBJECT OF THE INSTITUTE MANAGEMENT CO MMITTEE. THUS, THE OBJECTS ARE NOT DEVIATING. THE LD. COMMISSIONER EXAMINED MEMORANDUM OF ASSOCIATION AIMS AND OBJECTS OF THE A SSESSEE SOCIETY 4 IN THE LIGHT OF THE PROVISO TO SECTION 2(15) OF THE ACT AND REJECTED THE APPLICATION FOR REGISTRATION. HER FINDINGS ARE REPR ODUCED AS UNDER :- THERE IS NO DOUBT THAT THE ACTIVITIES OF THE APPLI CANT SOCIETY FALLS UNDER ANY OTHER OBJECT OF PUBLIC UTILITY. AS PER THE AMENDED DEFINITION NOTED ABOVE, THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WILL NOT BE A CHAR ITABLE PURPOSE EVEN IF THE RECEIPTS ARE USED FOR CHARITABLE PURPOS ES OUT OF THE INCOME GENERATED FROM ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR FROM RENDERING OF ANY SERVI CE IN RELATION TO TRADE, COMMERCE OR BUSINESS. IN THE CAS E OF THE APPLICANT SOCIETY ALSO, AS ADMITTED BY THE APPLICAN T SOCIETY, ONE OF THE SOURCE OF INCOME TO BE GENERATED IS BY R UNNING PRODUCTION AND SERVICE CENTRES AND THE INCOME GENER ATED FROM SUCH ACTIVITIES TO BE USED FOR UPGRADING THE ITI. I T IS FURTHER CLEAR FROM THE RELEVANT PORTION OF THE MOU NOTED AB OVE THAT THE MEASURES ARE REQUIRED TO BE UNDERTAKEN NOT ONLY FOR GENERATING SUFFICIENT REVENUE FOR RUNNING THE ITI B UT ALSO FOR REPAYMENT OF LOAN OF RS. 2.5 CRORES TAKEN FROM CENT RAL GOVERNMENT WHICH ESSENTIALLY INVOLVES GENERATION OF LARGE AMOUNT OF PROFITS FROM THE ACTIVITIES. 5 IN VIEW OF THE ABOVE FACTS THE OBJECTS OF THE APPLI CANT SOCIETY DOES NOT FALL UNDER THE DEFINITION OF CHAR ITABLE PURPOSES AND THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12A/12AA OF THE I. T. ACT IS REJEC TED. 4. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THA T THE ACTIVITIES OF THE ASSESSEE HAVE STARTED AND THAT PR OVISO TO SECTION 2(15) IS NOT APPLICABLE IN THIS CASE, BECAUSE ASSES SEE IS DOING ONLY CHARITABLE ACTIVITIES FOR WOMEN TRAINING AND VOCATI ONAL COURSES. HE HAS SUBMITTED THAT WHEN TRAINING WOULD BE GIVEN TO THE WOMEN FOR INDUSTRIAL PURPOSES AND INCIDENTALLY SOME ARTICLES ARE PRODUCED IN THAT WAY, IT CANNOT BE PRESERVED FOR A LONGER PERIOD AND IF THE SAME WOULD BE SOLD AND INCIDENTAL INCOME IS EARNED, IT WOULD NOT AMOUNT TO INCOME EARNED ON ACCOUNT OF ANY TRADE, COMMERCE AND BUSINESS. HE HAS SIMILARLY SUBMITTED T HAT ALL THE CHARGES WHICH ARE INCLUDED IN THE FUNDS OF THE SOCI ETY ARE JUST INCIDENTAL CHARGES THROUGH WHICH THE ASSESSEE WOULD NOT EARN ANY INCOME, BECAUSE ULTIMATELY AIMS OF THE ASSESSEE WER E MAINLY TO 6 RUN THE VOCATIONAL TRAINING INSTITUTE FOR THE BENEF IT OF WOMEN AT LARGE AND THE SAME FUNCTION SHALL BE ON NO PROFIT N O LOSS BASIS. HE HAS SUBMITTED THAT ALL THE ACTIVITIES ARE CONTROLLE D BY THE GOVERNMENT. HE HAS REFERRED TO DETAILS OF THE EXPEN SES, ESTIMATE PREPARED BY THE ENGINEER FOR BUILDING AND MAP FORWA RDED FOR SANCTION TO THE GOVERNMENT AND ALSO REFERRED TO PB 24 TO 31 IN SUPPORT OF THE CONTENTION AND ALSO SUBMITTED THAT A T PRESENT WOMEN ITI IS WORKING IN A RENTED PREMISES AT UJJAIN AND ACTIVITIES ARE BEING RUN AND FOR FURTHER ACTIVITIES, THE BUILD ING IS TO BE CONSTRUCTED AS WOULD BE APPROVED BY THE GOVERNMENT. HE HAS, ACCORDINGLY, SUBMITTED THAT SINCE LOAN IS ALREADY S ANCTIONED TO THE ASSESSEES INSTITUTE AND IT HAS STARTED ITS CHARITA BLE ACTIVITIES. THEREFORE, THE REGISTRATION SHOULD NOT HAVE BEEN RE FUSED IN THE MATTER. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE RELIED UPON THE ORDER OF THE LD. COMMISSIONER AND S UBMITTED THAT THE ASSESSEE WOULD BE DOING TRADE, COMMERCE OR BUSI NESS ACTIVITIES AND AS SUCH PROVISO TO SECTION 2(15) OF THE I.T.ACT IS 7 APPLICABLE AND, THEREFORE, THE ASSESSEE WOULD NOT B E ENTITLED FOR REGISTRATION U/S 12A/12AA OF THE I.T.ACT. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MATE RIAL AVAILABLE ON RECORD. ACCORDING TO SECTION 12AA OF T HE I.T.ACT, THE LD. CIT HAS TO SATISFY HERSELF ABOUT THE OBJECT S OF THE ASSESSEE SOCIETY AND GENUINENESS OF ITS ACTIVITIES AT THE TI ME OF CONSIDERATION OF REGISTRATION APPLICATION. SAME VIE W IS TAKEN BY THE DIVISION BENCH OF I.T.A.T., INDORE BENCH IN THE CASE OF DAWOODI BOHRA ZAMAT AND OTHERS VS. CIT, UJJAIN VIDE ORDER DATED 28 TH MARCH, 2008. THE VIEW OF THE TRIBUNAL HAS BEEN CON FIRMED BY THE HONBLE M.P.HIGH COURT IN THE CASE OF CIT VS . DAWOODI BOHRA ZAMAT AND OTHERS IN I.T.A.NO.86/IND/2008 AND OTHERS VIDE ORDER DATED 22 ND JUNE, 2009. ACCORDING TO SECTION 2(15), THE DEFINITION OF CHARITABLE PURPOSES HAS BEEN DEFINED IN THIS SECTION TO INCLUDE (I) RELIEF OF POOR (II) EDUCATION, (III) MEDICAL RELIEF AND (IV) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. AS PER PROVISO BY WAY OF AMENDMENT TO THE DEFINITIO N OF SECTION 2(15) OF THE ACT, THE ADVANCEMENT OF ANY OTHER OBJE CT OF GENERAL 8 PUBLIC UTILITY IS NOT TREATED AS CHARITABLE PURPOSE S, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TR ADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE FOR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OF APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITIES. THE A SSESSEE HAS FILED COPY OF THE BALANCE SHEET ENDING 31 ST MARCH, 2009, EXPLAINING THAT INTEREST FREE LOANS OF RS. 2.5 CROR ES HAVE BEEN RECEIVED FROM THE CENTRAL GOVERNMENT FOR ESTABLISHM ENT OF WOMEN I.T.I. AND ALSO FILED THE DETAILS OF THE EXPE NDITURE INCURRED FOR THE PURPOSE OF ESTABLISHING THE INSTITUTE. SOME ACTIVITIES ARE GOING ON IN THE RENTED PREMISES, MAP DULY PREPARED IS FORWARDED TO THE GOVERNMENT FOR SANCTION. THE ABOVE DETAILS, THUS, WOULD INDICATE THAT THE ASSESSEE HAS STARTED ITS ACTIVITI ES FOR THE PURPOSE OF ACHIEVING ITS AIMS AND OBJECTS. THE MAIN AIMS OF THE ASSESSEE HAVE BEEN NOTED BY THE LD. COMMISSIONER THAT THE AS SESSEE IS TO ASSESS ANY IMPROVEMENT OF STANDARD OF VOCATIONAL TR AINING AND SKILL DEVELOPMENT IN THE COUNTRY AS A WHOLE. THE FU RTHE4R 9 OBJECTIVE IS TO ADOPT INNOVATIVE MEASURE LIKE PROVI DING CONSULTANCY ADVISORY SERVICES TO THE INDUSTRY. THE SOCIETY HAS BEEN FORMED WITH SPECIFIC AIM OF UP-GRADATION OF IT I, UJJAIN, INTO A CENTRE OF EXCELLENCE IN SUCH A WAY THAT THE TRAIN ING INVOLVED IN THE ITI IS IMPROVED AND BECOMES DEMAND DRIVEN LEADI NG TO BETTER EMPLOYABILITY OF THE PASSING OUT GRADUATES. THE SOC IETY SHALL FUNCTION ON NO PROFIT NO LOSS PRINCIPLE. THE OTHER OBJECTIVES ARE ANCILLARY TO THE MAIN OBJECTS OF THE SOCIETY. THE L D. COMMISSIONER HAS ON CONSIDERATION OF THE ABOVE AIMS AND OBJECTS OF THE ASSESSEE HAS NOTED THAT THE OBJECTS OF THE ASSESSEE SOCIETY FALL UNDER ANY OTHER OBJECT OF PUBLIC UTILITY AS PER SECTION 2(1 5) OF THE I.T.ACT. THE LD. COMMISSIONER, HOWEVER, NOTED THAT PROVISO T O SECTION 2(15) IS APPLICABLE IN THIS CASE. HOWEVER, WE DO NO T AGREE WITH THE SUCH FINDINGS OF THE LD. COMMISSIONER. THE FUND S OF THE SOCIETY AS PROVIDED IN PARA 55 OF M.O.A. WAS CONSIS TING OF THE INTEREST FREE LOAN RECEIVED FROM THE CENTRAL GOVERN MENT, INCOME FROM INVESTMENT AND SAVINGS, RECEIPTS BY WAY OF FEE IN RESPECT OF TRAINING COURSES RUN BY THE SOCIETY IN ITI. THE OTH ER FUNDS AS 10 NOTED BY THE LD. COMMISSIONER ARE THAT THE INCOME E ARNED BY RUNNING PRODUCTION/SERVICES CENTRE BY THE SOCIETY I N THE I.T.I. AND CONSULTATION CHARGES ALONGWITH EXTRA CHARGES ALLOWE D TO, BE COLLECTED BY THE STATE GOVERNMENT AGAINST PAID SEAT S. LD. COMMISSIONER ON GOING THROUGH THE ABOVE FUNDS OF TH E SOCIETY NOTED THAT THE ASSESSEE, THUS, WOULD BE ENGAGED IN THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY AC TIVITY OF RENDERING OF ANY SERVICES IN RELATION TO TRADE, COM MERCE OR BUSINESS. SUCH FINDINGS OF THE LD. COMMISSIONER ARE WITHOUT ANY BASIS OR MATERIAL ON RECORD. THEREFORE, REGISTRATIO N SHOULD NOT HAVE BEEN REFUSED ON MERE CONJECTURE AND SURMISES. THE ASSESSEE HAS STARTED INITIAL ACTIVITIES AT THE TIME OF FILIN G REGISTRATION APPLICATION AND IS AT THE STAGE OF ESTABLISHMENT OF THE WOMEN ITI. SUCH AN OBSERVATION, THUS, WOULD BE CONTRARY TO THE FINDINGS OF THE LD. COMMISSIONER UNLESS SUCH FUNDS ARE ACTUALLY CREATED BY THE ASSESSEE WOULD NOT DEBAR THE ASSESSEE FROM CLAI MING THE REGISTRATION U/S 12AA OF THE ACT. MORE SO, THE LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT WHEN THE TRAINING IS GIVEN TO THE WOMEN 11 FOR VOCATIONAL COURSES AND SOME ARTICLES ARE PRODUC ED DURING THE TRAINING AND SOLD, IT WOULD NOT RESULT INTO DOING A NY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. SUCH PRODUCT ION WOULD BE INCIDENTAL TO THE TRAINING PROVIDED TO THE WOMEN IN RESPECT OF INDUSTRIAL ACTIVITIES FOR THE BETTER EMPLOYMENT OF THE WOMEN IN GENERAL. SIMILARLY, NO MATERIAL HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE STATE GOVERNMENT HAS ACTUALLY ALLOWE D THE ASSESSEE TO RECEIVE EXTRA CHARGES AGAINST PAID SEATS AND THA T THE ASSESSEE HAS, IN FACT, RECEIVED ANY EXTRA CHARGES. THE ASSES SEE HAS NOT GENERATED ANY FUND FROM ANY OTHER SOURCE WHICH WOUL D INVOLVE ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BU SINESS. THE COPY OF THE BALANCE SHEET FILED ON RECORD CLEARLY F ALSIFY THE OBSERVATION OF THE LD. COMMISSIONER. ULTIMATELY, CO NSIDERING THE OVER-ALL AIMS AND OBJECTS OF THE ASSESSEE AND THE FUNCTIONS OF THE SOCIETY, IT WOULD BE CLEAR THAT THE AIMS AND OBJECT S OF THE ASSESSEE WERE TO ASSIST IN IMPROVEMENT OF STANDARD OF VOCATI ONAL TRAINING AND SKILL DEVELOPMENT OF WOMEN ITI IN UJJAIN AND IN COUNTRY AS A WHOLE ON NO PROFIT NO LOSS BASIS. THUS, THE FINDING OF THE LD.CIT 12 WOULD BE HER MERE APPREHENSION THAT THE ASSESSEE HA S INDULGED IN ANY TRADE, COMMERCE OR BUSINESS. THE FUNDS ARE PROV IDED BY THE CENTRAL GOVERNMENT FOR ESTABLISHMENT OF THE WOMENS INDUSTRIAL INSTITUTE AT UJJAIN. CONSIDERING THE ENTIRE MATERIA L ON RECORD, I AM OF THE VIEW THAT THE PROVISO TO SECTION 2(15) WOULD NOT BE APPLICABLE IN THE CASE OF THE ASSESSEE. SINCE THE A SSESSEE SOCIETYS MAIN AIMS AND OBJECTS ARE CHARITABLE IN NATURE BEIN G THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND, THUS, SATISFIED THE CONDITION OF SECTION 12A/12AA O F THE I.T.ACT. THEREFORE, IN MY VIEW, THE ASSESSEE WOULD BE ENTITL ED FOR REGISTRATION UNDER THE ACT. IT MAY ALSO BE NOTED HE RE THAT GRANT OF REGISTRATION IS A STEPPING STONE IN THE MATTER AND IF THERE IS ANY VIOLATION LATER ON OF ANY RULE, SUCH A MATTER COULD BE CONSIDERED AT THE ASSESSMENT STAGE BY THE A.O. IN THIS VIEW OF TH E MATTER, I SET- ASIDE THE IMPUGNED ORDER OF THE LD. CIT AND DIRECT THE LD. CIT, UJJAIN, TO GRANT REGISTRATION TO THE ASSESSEE U/S 1 2A/12AA OF THE I.T.ACT. 7. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED. 13 THE ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST,2009. SD/- BHAVNESH SAINI JUDICIAL MEMBER DATED : 21 ST AUGUST, 2009. CPU * 198