Ananda Marga School, Balasore V. CIT(Exemptions), Hyderabad

ITA 347/CTK/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4910 (ITAT-CUTTACK)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 12-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MOHAPATRA
• Assessee Lawyers: P K MISHRA
• Section: 80G; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 347 /CTK/2017 ANANDA MARGA SCHOOL , AKINIA, OLANDA SARGAN, HALDIPADA, DIST: BALASORE. VS. CIT(EXEMPTION), HYDERABAD PAN/GIR NO. AAEAA 0348 Q (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI A.K.MOHAPATRA, CIT DR DATE OF HEARING : 01 /0 8 / 2018 DATE OF PRONOUNCEMENT : 01 /0 8 / 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( E ) - HYDERABAD DATED 31.7.2017. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. FOR THAT, THE IMPUGNED REJECTION ORDER PASSED BY THE LEARNED C.I.T (EXEMPTIONS) IS NOT JUST AND PROPER UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS SUCH THE IMPUGNED ORDER NEEDS TO BE QUASHED IN THE INTEREST OF JUSTICE. 2. FOR THAT, THE REASON ASSIGNED BY THE LEARNED C.I.T(EXEMPTIONS) IN H IS ORDER IS NOT ONLY ILLEGAL BUT ALSO CONTRARY TO THE FACTS ON RECORD, AS SUCH THE IMPUGNED OBSERVATION NEEDS TO BE REJECTED IN THE INTEREST OF JUSTICE. 3. FOR THAT, THE LEARNED C.I.T. (EXEMPTIONS) SHOULD NOT HAVE REJECTED THE APPLICATION FOR GRANT OF REG ISTRATION U/S.12AA ON THE GROUND THAT, THE AMENDMENT CLAUSE DOES NOT SPECIFICALLY STIPULATES 2 ITA NO.347/CTK/2017 THAT, THE AMENDMENT SHALL BE CARRIED OUT ONLY WITH THE PRIOR APPROVAL OF THE C.I.T(EXEMPTIONS). 4. FOR THAT, THE LEARNED C.I.T. (EXEMPTIONS) SHOULD NOT HAVE REJECTED THE APPLICATION ON THE GROUND THAT, ASSESSEE HAS NOT MENTIONED THAT, UNWINDING UP THE SOCIETY, THE REMAINING ASSETS SHALL BE TRANSFERRED TO AN INSTITUTION HAVING REGISTRATION U/S.12AA AND APPROVAL U/S.80G(5) OF THE ACT. 5. FOR THAT, THE REASON AD VANCED BY THE LEARNED C.I.T(EXEMPTIONS) CANNOT BE A REASON AT ALL TO DENY THE GRANT OF REGISTRATION AS LAW DOES NOT REQUIRE SO FOR REJECTION OF THE APPLICATION FOR GRANT OF REGISTRATION. 6. FOR THAT, SINCE THE ASSESSEE HAS QUALIFIED FOR ALL THE REQUISITE REQUIREMENTS, THE APPLICATION FOR GRANT OF REGISTRATION NEEDS TO BE ALLOWED IN THE INTEREST OF JUSTICE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE SOCIETY FILED APPLICATION IN FORM NO.10A AND FORM NO.10G ON 3.1.2017 SEEKING REGISTRATION U/S.12AA O F THE ACT AND APPROVAL UNDER SECTION 80G(5) OF THE ACT. THE CIT(EXEMPTION), HYDERABAD REJECTED THE APPLICATION OF THE ASSESSEE ON THE FOLLOWING GROUNDS: I ) THE AMENDMENT CLAUSE DOES NOT SPECIFICALLY STIPULATE THAT THE AMENDMENTS SHALL BE CARRIED OUT WITH THE PRIOR APPROVAL OF THE CIT(E). II ) SIMILARLY, THE DISSOLUTION CLAUSE DOES NOT SP ECIFICALLY STIPULATE THAT ON DISSOLUTION OF THE SOCIETY , THE REMAINING ASSETS SHALL BE TRANSFERRED/PAID TO AN INSTITUTION HAVING REGISTRATION U/S.12AA AND APPROVAL U/S.80 G(5) OF THE I.T.ACT, 1961. III) THERE IS NO INVESTMENT CLAUSE IN MOA, WHICH INDICATES THAT THERE IS NO INTENTION ON THE PART OF THE SOCIETY TO INVEST THE FUNDS IN THE MODES SPECIFIED UNDER THE PROVISIONS OF SECTION 11 ( 5) R.W.S 13(1)(D) OF THE ACT. 4. BEFORE US, LD A.R. OF THE ASSESSEE SUBMITTED THAT ABOVE REASONS GIVEN BY THE CIT(EXEMPTION) FOR REFUSING REGISTRATION TO THE ASSESSEE 3 ITA NO.347/CTK/2017 SOCIETY ARE NOT CORRECT. HE POINTED OUT FROM MEMORANDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATION OF THE ASSESSEE SOCIETY THAT THERE IS AN AMENDMENT CLAUSE AND DISSOLUTION CLAUSE WHICH READ AS UNDER: AMENDMENT CLAUSE: ANY AMENDMENT IN MEMORANDUM AND BYE - LAW OF THE SOCIETY SHALL BE MADE AS PER SECTION 12 OF SOCIETY REGISTRATION ACT XXI OF 1860. DISSOLUTION CLAUSE: THE SOCIETY MAY BE DISSOLVED BY 3/5 TH OF MEMBERS. UPON DISSOLUTION OF THE SOCIETY ITS ASSETS WILL BE HANDED OVER TO SIMILAR REGISTERED SOCIETY OR TO GOVERNMENT AFTER CLEARING UP ALL ITS DEBTS AND LIABILITIES. LD A.R. FILED A COPY OF THE ORDER OF THIS TRIBUNAL IN THE CASE OF INDO SWEDISH RHEUMATOLOGY FOUNDATION VS CIT(E) IN ITA NOS.354 & 381/CT/2016 ORDER DATED 11.12.2017 AND SUBMITTED THAT GROUNDS (I ) & (III) MENTIONED BY THE CIT(E) ARE COVERED IN FAVOUR OF THE ASSESSEE. AS REGARDS TO DISSOLUTION CLAUSE TAKEN IN GROUND NO.(II), LD A.R. SUBMITTED THAT THERE IS A CLAUSE IN THE MOA AND THEREFORE, IT WAS HIS SUBMISSION THAT THE CIT(EXEMPTION) WAS NOT JUS TIFIED IN NOT GRANTING REGISTRATION U/S.12AA OF THE ACT AND APPROVAL UNDER SECTION 80G OF THE ACT AS APPLIED BY THE SOCIETY . 5 . LD D.R. ON THE OTHER HAND RELIED ON THE ORDER OF THE CIT(EXEMPTION). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE IS A SOCIETY HAD APPLIED FOR REGISTRATION UNDER SECTION 12AA OF 4 ITA NO.347/CTK/2017 THE ACT IN THE PRESCRIBED FORM 10A ON 31.7.2017 SEEKING REGISTRATION UNDER THE INCOME TAX ACT AS WELL AS APPLICATION IN FORM 10G WAS FILED ON THE SAME DATE BY THE ASSESSEE SOCIETY FOR APPROVAL U/S.80G OF THE ACT. THE SAME WAS REJECTED BY THE COMMISSIONER OF INCOME TAX (EXEMPTION), HYDERABAD FOR THE FOLLOWING REASONS: I ) THE AMENDMENT CLAUSE DOES NOT SPE CIFICALLY STIPULATE THAT THE AMENDMENTS SHALL BE CARRIED OUT WITH THE PRIOR APPROVAL OF THE CIT(E). II) SIMILARLY, THE DISSOLUTION CLAUSE DOES NOT SP ECIFICALLY STIPULATE THAT ON DISSOLUTION OF THE SOCIETY , THE REMAINING ASSETS SHALL BE TRANSFERRED/PAID TO AN INSTITUTION HAVING REGISTRATION U/S.12AA AND APPROVAL U/S.80G(5) OF THE I.T.ACT, 1961. III) THERE IS NO INVESTMENT CLAUSE IN MOA, WHICH INDICATES THAT THERE IS NO INTENTION ON THE PART OF THE SOCIETY TO INVEST THE FUNDS IN THE MODES SPECIFIED UNDER THE PROVISIONS OF SECTION 11(5) R.W.S 13(1)(D) OF THE ACT. 11. WE FIND THAT THE REASONS FOR REJEC TING THE REGISTRATION IN GROUND NO.(II) AND (III) ARE COVERED BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF INDO SWEDISH RHEUMATOLOGY FOUNDATION (SUPRA), WHEREIN, IT HAS BEEN HELD AS UNDER: 3. BRIEF FACTS OF THE CASE ARE THAT THE CIT(E) REF USED TO GRANT REGISTRATION U/S.12AA OF THE ACT TO THE ASSESSEE TRUST ON TWO GROUNDS : - I) THE AMENDMENT CLAUSE IN THE TRUST DEED DOES NOT SPECIFICALLY STIPULATE THAT THE AMENDMENTS SHALL BE CARRIED OUT ONLY WITH THE PRIOR APPROVAL OF THE CIT(E). II) THE INVESTMENT CLAUSE HAS NOT BEEN INCORPORATED IN THE TRUST DEED, WHICH INDICATES THAT THE THERE IS NO INTENTION ON THE PART OF THE TRUST TO INVEST THE FUNDS IN THE MODES SPECIFIED UNDER THE PROVISIONS OF SECTION 13(1)(D) R.W.S.11(5) OF THE I.T.ACT. 4. WITH REGARD TO THE FIRST OBJECTION OF THE CIT(E) THAT THE AMENDMENT CLAUSE IN THE TRUST DEED DOES NOT SPECIFICALLY PROVIDE THAT THE AMENDMENTS SHALL BE CARRIED OUT ONLY WITH THE PRIOR APPROVAL OF THE CIT(E), WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF BALASORE LAW COLLEGE VS. CIT(E), ITA NO.459/CTK/2015, ORDER DATED 15.02.2017, WHEREIN IT WAS HELD THAT, THE 5 ITA NO.347/CTK/2017 SCOPE OF ENQUIRY CONTEMPLATED U/S.12A OF THE ACT IS LIMITED TO THE EXTENT OF CO MMISSIONER GETTING HIMSELF SATISFIED ABOUT OBJECT OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES SO AS TO GRANT OR REFUSE THE REGISTRATION U/S.12A OF THE ACT. A PERUSAL OF THE IMPUGNED ORDER OF THE LD. DIT(EXEMPTIONS) SHOWS THAT HE HAS NOT RECORDED ANY ADVERSE COMMENT OR DIS - SATISFACTION ABOUT THE OBJECT OF TRUST OR GENUINENESS OF THE TRUST ACTIVITIES. HE HAS REFUSED TO GRANT THE REGISTRATION U/S.12A OF THE ACT ON THE GROUND THAT ITS TRUST DEED DOES NOT CONTAIN DISSOLUTION CLAUSE. IN OUR OPINION, THE LD. DIT(EXEMPTIONS) THUS HAS CLEARLY GONE BEYOND THE SCOPE OF ENQUIRY CONTEMPLATED U/S.12A OF THE ACT AND HAS REFUSED TO GRANT THE REGISTRATION U/S.12A OF THE ACT TO THE ASSESSEE TRUST ON A TOTALLY IRRELEVANT GROUND WITHOUT POINTING OUT AS TO HOW HE WAS NO T SATISFIED EITHER ABOUT THE OBJECT OF THE TRUST OR THE GENUINENESS OF ITS ACTIVITIES. 5. WE FIND THAT IN THE PRESENT CASE ALSO THE CIT(E) HAS REFUSED TO GRANT REGISTRATION U/S.12AA OF THE ACT TO THE ASSESSEE TRUST ON THE GROUND THAT AMENDMENT CLAUSE DOES NOT PROVIDE FOR PRIOR APPROVAL OF THE CIT(E) BEFORE CARRYING OUT THE AMENDMENT IN THE TRUST DEED. WE FIND THAT THERE IS NO SUCH PROVISION IN THE ACT FOR REFUSAL TO GRANT REGISTRATION TO THE ASSESSEE TRUST. THUS, THE REFUSAL TO GRANT REGISTRATION ON THIS GROUND IS AN IRRELEVANT GROUND AND, HENCE, NOT SUSTAINABLE. 6. WITH REGARD TO OBJECTION REGARDING INVESTMENT CLAUSE STATING THAT THERE WAS NO INTENTION ON THE PART OF THE ASSESSEE TRUST TO INVEST THE FUNDS IN THE MODES SPECIFIED UNDER THE PROVISIONS OF SECTION 13(1)(D) R.W.S. 11(5) OF THE ACT AND THAT NO INVESTMENT CLAUSE WAS INCORPORATED IN THE TRUST DEED, WE ARE OF THE CONSIDERED VIEW THAT THE INCOME TAX ACT PROHIBITS INVESTMENT IN VIOLATION OF SECTION 13(1)(D) & 11(5) OF THE ACT AND THE TRUST DEED PROHIBITS SUCH AN INVESTMENT BY THE ASSESSEE TRUST AND, THEREFORE, REFUSAL TO GRANT REGISTRAT ION TO THE ASSESSEE TRUST ON THIS COUNT ALSO IS AN IRRELEVANT GROUND. HENCE, WE SET ASIDE THE ORDER OF CIT(E) ON THIS GROUND ALSO. WE THEREFORE, DIRECT THE CIT(E) TO GRANT REGISTRATION U/S.12AA OF THE ACT TO THE ASSESSEE TRUST. 7. WITH REGARD TO NOT GRANT ING APPROVAL U/S.80G OF THE ACT, WE FIND THAT THE REASON GIVEN BY THE CIT(E) THAT HE HAS REFUSED TO GRANT REGISTRATION U/S.12AA OF THE ACT, THEREFORE, CONSEQUENTLY HE HAD NOT GRANTED APPROVAL U/S.80G OF THE ACT TO THE ASSESSEE TRUST. AS WE HAVE GRANTED REG ISTRATION U/S.12AA OF THE ACT TO THE ASSESSEE TRUST, WE SET ASIDE THE ORDER OF CIT(E) ON HIS COUNT AND ALSO DIRECT THE CIT(E) TO GRANT APPROVAL U/S.80G OF THE ACT TO THE ASSESSEE TRUST AND ALLOW THE APPEAL OF THE ASSESSEE. 12. AS REGARDS THE DISSOLUTION CLAUSE, WE FIND THAT THERE IS A CLAUSE IN THE MOA, WHICH READS AS UNDER: THE SOCIETY MAY BE DISSOLVED BY 3/5 TH OF MEMBERS. UPON DISSOLUTION OF THE SOCIETY ITS ASSETS WILL BE HANDED OVER TO SIMILAR 6 ITA NO.347/CTK/2017 REGISTERED SOCIETY OR TO GOVERNMENT AFTER CLEARING UP ALL ITS DEBTS AND LIABILITIES. 1 3 . A READING OF ABOVE CLAUSE SHOWS THAT THE MEMORANDUM OF ASSOCIATION SPECIFICALLY PROVIDES THAT UPON DISSOLUTION OF THE SOCIETY, ITS ASSETS WILL BE HANDED OVER TO SIMILAR REGISTERED SOCIETY OR TO GOVERNMENT AFTER CLEARING UP ALL ITS DEBTS AND LIABILITIES. THEREFORE, IN VIEW OF ABOVE CLAUSE IN THE MOA OF THE SOCIETY, IN OUR CONSIDERED VIEW, THE LD CIT(EXEMPTION) WAS NOT JUSTIFIED IN REFUSING REGISTRATION TO THE ASSESSEE SOCIETY ON THIS GROUND ALSO. 1 4 . FOR THE REASONS STATED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE REFUSAL TO GRANT REGISTRATION U/S.12AA OF THE ACT TO THE ASSESSEE SOCIETY IS NOT PROPER AND JUSTIFIED. SIMILARLY, THE REFUSAL TO GRANT OF APPROVAL U/S.80G OF THE ACT IS ALSO NOT JUSTIF IED. HENCE, WE SET ASIDE THE ORDER OF THE CIT(EXEMPTION), HYDERABAD AND DIRECT HIM TO GRANT REGISTRATION U/S.12AA OF THE ACT AND APPROVAL U/S.80G OF THE ACT TO THE ASSESSEE SOCIETY. THUS, THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 1 5 . IN THE RES ULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 01 /0 8 /2018. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 01 /0 8 /2018 B.K.PARIDA, SPS 7 ITA NO.347/CTK/2017 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : ANANDA MARGA SCHOOL, AKINIA, OLANDA SARGAN, HALDIPADA, DIST: BALASORE 2. THE RESPONDENT. CIT(E), HYDERABAD 3. THE CIT(A) - 4. PR.CIT - 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//