ITO (E), New Delhi V. Manav Foudation, Delhi

ITA 3472/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86953 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P DAM K AUNJNA
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12; 11

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI GEORGE GEORGE K. , JUDICIAL MEMBER AND SHRI B.C. MEENA , ACCOUNTANT MEMBER ITA NO. 3472 /DEL/201 3 ASSESSMENT YEAR 200 7 - 08 INCOME TAX OFFICER (E) VS. MANAV FOUNDATION TRUST WARD - IV, PRATYAKSH KAR F - 3/93, SECTOR - 15, ROHINI, BHAWAN, 24 TH FLOOR, E - 2, BLOCK NEW DELHI. DR. S.P. MUKHERJEE CIVIC CENTRE, NEW DELHI. (PAN AAAAM 6281 E ) ( APPELLANT) (RESPONDENT) DATE OF HEARING : 23.02.2015 DATE OF PRONOUNCEMENT : 25. 02.20 15 APPELLANT BY : NONE RESPONDENT BY: SH RI P. DAM K AUNJNA , SR. D.R. ORDER PER SHRI GEORGE GEORGE K , J M : 1. TH IS APPEAL , AT THE INSTANCE OF THE REVENUE , IS DIRECTED AGAINST THE CIT(A) S ORDER DATED 08 .0 3 .2013 , IN RELATION TO AY 2007 - 08 . 2 . THE EFFECTIVE GROUNDS RAISED READS AS FOLLOW: - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN ALLOWING THE BENEFIT OF SECTION 11 & 12 OF THE ACT IGNORING THE FACT THAT THE ACTIVITIES OF THE TRUST WERE NOT WITHIN TH E PURVIEW OF SECTION 2(15) OF THE ACT, 1961 DURING THE YEAR. IT A NO. 3472 /DEL /201 3 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN ALLOWING BENEFIT OF PROVISIONS OF SECTION 11 & 12 OF THE ACT BY IGNORING THE FACT THAT THE CASES OF DELHI INTE RNATIONAL FOOTBALL LEAGUE & SHRI GAIN GANGA VOCATIONAL & EDUCATIONAL SOCIETY ARE DISTINGUISHABLE ON FACTS IN THE INSTANT CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACC OUNT OF DONATION & CHARITY AMOUNTING TO RS. 81,26,175/ - . 3. BRIEFLY STATED THE FACTS OF THE CASE ARE AS FOLLOWS. THE ASSESSEE IS A SOCIETY , IMPARTING EDUCATION AND TRAINING TO THE FARMERS AND GENERAL PUBLIC IN ORGANIC FARMING. FOR THE RELEVANT ASSESSME NT YEAR , RETURN OF INCOME WAS FILED ON 31.10.2007 , DECLARING NIL INCOME . THE A SSESSMENT U/S 147/143(3) OF THE ACT WAS COMPLETED BY ORDER DATED 23.12.2009 FIXING TOTAL INCOME AT RS.1,94,64,881/ - . THE ASSESSING OFFICER HELD THAT ASSESSEE SOCIETY IS NOT ENT ITLED TO THE BENEFIT OF SECTION 11 & 12 OF THE ACT. ACCORDINGLY, SURPLUS AS PER THE INCOME AND EXPENDITURE ACCOUNT WAS ADDED TO THE TOTAL INCOME. FURTHER, THE AO ALSO ADDED TO THE TOTAL INCOME A SUM OF RS.81,00 , 000/ - AND RS.26,175/ - , BEING GRANTS TO OTHER INSTITUTION AND DONATION AND CHARITIES. 4. THE ASSESSEE BEING AGGRIEVED BY THE ASSESSMENT ORDER DATED 23.12.2009 FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE, STATING THAT THE PRE - DOMINANT OBJECTIVE AND ACTIVITIES OF TH E ASSESSEE ARE FOR CHARITABLE PURPOSES AND WAS ENTITLED TO THE BENEFIT OF EXEMPTION U/S 11 & 12 OF THE ACT. 5. THE REVENUE BEING AGGRIEVED IS IN APPEAL BEFORE US. THE LD. DR RELIED ON THE ORDER OF THE ASSESSMENT. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE . HOWEVER, WE PROCEED TO THE DISPOSE OF F THE MATTER ON MERITS. IT A NO. 3472 /DEL /201 3 3 6 . WE HAVE HEARD THE LEARNED DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER : - I HAVE PERUSED THE FACTS STATED IN THE ASSE SSMENT ORDER AS WELL AS THE REMAND REPORT AND THE FACTS STATED BY THE ASSESSEE IN HIS SUBMISSIONS AND REJOINDER. THE APPELLANT SOCIETY IS WHOLLY AND EXCLUSIVELY ENGAGED IN CHARITABLE ACTIVITIES/PURPOSES FOR IMPARTING EDUCATION AND TRAINING TO THE FARMERS AND GENERAL PUBLIC IN ORGANIC FARMING. THE SAID CHARITABLE ACTIVITIES ARE ABSOLUTELY WITHIN THE DEFINITION OF CHARITABLE PURPOSES AS DEFINED IN SECTION 2(15) OF THE INCOME TAX ACT, 1961. THE APPELLANT SOCIETY IS DULY REGISTERED U/S 12A OF THE INCOME TAX AC T, 1961, VIDE REGISTRATION NO. DIT(E)/12A/2005 - 06/M - 1370/530 DATED 2777/2005. EVEN THOUGH IT CHARGES NOMINAL FEES BUT ITS ACTIVITIES ARE CHARITABLE IN NATURE. ASSESSEE'S CASE IS COVERED BY THE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME TAX (EXEMPT ION) VS DELHI INTERNATIONAL FOOTBALL LEAGUE IN ITA NO. 1485/2010, 1489/2010 VIDE ITS ORDER DATED 24/09/2010 HAS STATED THAT. - A PERUSAL OF THE APPEAL PAPERS, WE FIND THAT THE TRIBUNAL IN ITS APPELLATE ORDER HAS CLEARLY RECORDED THE FOLLOWING FINDINGS: - ( I) THE AIM AND OBJECT OF THE RESPONDENT - ASSESSEE IS TO PROMOTE THE GAME OF FOOTBALL AND TO CARRY OUT OTHER ACTIVITIES OF PUBLIC IMPORTANCE WHICH ARE OF GENERAL PUBLIC UTILITY AND CHARITABLE IN NATURE. (II) FEES HAVE BEEN ACCEPTED FROM PARTICIPATING CHIL DREN ONLY FOR PLAYING FOOTBALL. THE FEES WERE RECEIVED BY THE RESPONDENT ASSESSEE FOR ITS EXISTENCE AND FOR DEVELOPMENT OF THE FACILITIES FOR THE CHILDREN TO PLAY FOOTBALL. (III) THERE WAS NOTHING ON RECORD WHICH SUGGESTED THAT THIS FEE WAS COLLECTED FOR MAKING ANY PROFIT. ( IV) THERE WAS NO COMPLAINT BY EITHER THE PARENTS OR THE CHILDREN THAT THEY HAD BEEN FORCED TO PAY FEES OR GIVE DONATION. FURTHER, THE DIRECTOR OF INCOME TAX (EXEMPTION) HAD NOT CONDUCTED ANY INDEPENDENT INQUIRY FROM THE DONORA. REFERE NCE IN THIS CASE WAS ALSO MADE OF MADHYA PRADESH ANAJ TILHAN VYAPARI MAHASANGH (SUPRA) REFERRED TO BY MR. MARATHA, WHICH STIPULATES THAT THE TEST TO BE APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IS TO SUB - SERVE THE CHARITABLE PURPOS E OR TO EARN PROFIT. IN FACT, THE RELEVANT OBSERVATIONS OF THE MADHYA PRADESH HIGH COURT IN THE SAID CASE ARE REPRODUCED HEREIN BELOW: - ' .... THE TEST WHICH HAS, THEREFORE, NOW TO BE APPLIED IS WHETHER THE PREDOMINANT OBJECT OF THE ACTIVITY INVOLVED IN C ARRYING OUT THE OBJECT OF GENERAL PUBLIC UTILITY IS TO SUB - SERVE THE CHARITABLE PURPOSE OR TO EARN PROFIT. WHERE PROFIT - MAKING IS THE PREDOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE THROUGH AN OBJECT OF GENERAL PUBLIC UTILITY, WOULD CEASE TO BE A CHARITAB LE PURPOSE. BUT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT THE CHARITABLE PURPOSE AND NOT TO EARN PROFIT IT WOULD NOT LOSE ITS IT A NO. 3472 /DEL /201 3 4 CHARACTER OF A CHARITABLE PURPOSE MERELY BECAUSE DOES NOT REQUIRE THAT THE ACTIVITY MUST BE CARRIED ON IN SUCH A MANNER THAT IT DOES NOT RESULT IN ANY PROFIT' IT WOULD INDEED BY DIFFICULT FOR PERSONS IN CHARGE OF A TRUST OR INSTITUTION TO SO CARRY ON THE ACTIVITY THAT THE EXPENDITURE BALANCES THE INCOME AND THERE IS NO RESULTING PROFIT. THAT WOULD NOT ONLY BE DIFFI CULT OF PRACTICAL REALIZATION, BUT WOULD ALSO REFLECT AN UNSOUND PRINCIPLE OF MANAGEMENT. ' CONSEQUENTLY, WE ARE OF THE VIEW THAT IN THE PRESENT FACTS, THE TRIBUNAL HAS APPLIED THE CORRECT TEST AND REACHED THE CORRECT CONCLUSION. ' FURTHER THE HON'BLE IT A T DELHI 'G' BENCH IN THE CASE OF SHRI GIAN GANGA VOCATIONAL & EDUCATIONAL SOCIETY VS CIT IN ITA NOS. 5706 & 57071DEL/2012 VIDE ITS ORDER DATED 18TH JANUARY, 2013 WHEREIN IT HAS BEEN HELD THAT: - 'CHARITABLE TRUST - REGISTRATION UNDER S. 12A - CHARITABLE P URPOSE VIS - A VIS IMPARTING EDUCATION - MAIN OBJECT OF THE ASSESSEE SOCIETY IS TO IMPART EDUCATION WHICH IS OF CHARITABLE NATURE IN LINE WITH THE PROVISIONS OF S. 2(15) - CIT HAS RAISED NO OBJECTIONS TO THE OBJECTS OF THE ASSESSEE - SOCIETY - IT WAS NOT WITHIN T HE CIT'S PURVIEW TO TAKE RECOURSE TO THE RIGHT OF CHILDREN TO FREE AND COMPULSORY EDUCATION ACT, 2009 TO REJECT THE ASSESSEE'S APPLICATION FOR REGISTRATION - UNDER S. 12AA, WHAT IS REQUIRED TO BE SEEN BY THE CIT WHILE CONSIDERING AN APPLICATION FOR REGISTR ATION IS A STO WHETHER THE OBJECT OF THE APPLICANT IS CHARITABLE AND WHETHER ITS ACTIVITIES ARE GENUINE - JURISDICTION AND COMPETENCE TO EXAMINE AN ISSUE UNDER THE TRE ACT, 2009 LIES WITH THE AUTHORITIES MENTIONED THEREIN - FURTHER, CBDT CIRCULAR NO. 11 OF 2008, DATED 18TH DEC., 2008 CLEARLY STATES THAT THE PROVISO TO S. 2(15) DOES NOT APPLY IN THE CASE OF EDUCATIONAL ACTIVITIES AND WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS TO IMPORT EDUCATION, IT CONSTITUTES 'CHARITABLE PURPOSE' EVEN IF IT INCIDENTALL Y INVOLVES CARRYING ON OF COMMERCIAL ACTIVITIES - THEREFORE, IMPUGNED ORDER IS CANCELLED AND C IT IS DIRECTED TO GRANT REGISTRATION TO THE ASSESSEE - SOCIETY AFTER VERIFYING THE ORIGINAL DOCUMENT OF FORMATION OF THE SOCIETY. PROVISO TO S. 2(15) DOES NOT APPL Y IN THE CASE OF EDUCATIONAL ACTIVITIES AND WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS TO IMPART EDUCATION, IT CONSTITUTES 'CHARITABLE PURPOSE' EVEN IF IT INCIDEMNTALLY INVOLVE CARRYING ON OF COMMERCIAL ACTIVITIES; ASSESSEE - COCIETY HAVING BEEN FORMED WITH THE MAIN OBJECT TO IMPART EDUCATION, IT IS ENTITLED TO REGISTRATION UNDER S. 12A. KEEPING IN VIEW OF THE ABOVE FACTS, I RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT AND DELHI HIGH COURT, THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUN T OF SURPLUS AMOUNTING TO RS 1,13,38,706/ - AND ALSO AMOUNTING TO RS 81,00,000/ - ON ACCOUNT OF GRANT TO OTHER INSTITUTIONS AND RS . 26,175/ - ON ACCOUNT OF DONATION AND CHARITY ARE HEREBY DELETED AND ASSESSEE'S APPEAL IS ALLOWED AND THE TRUST WILL CONTINUE TO ENJOY THE BENEFIT U / S 11 & 12 OF THE INCOME - TAX ACT. IN THE RESULT APPEAL IS PARTLY ALLOWED. 6. 1 ADMITTEDLY, ASSESSEE SOCIETY IS ENGAGED IN THE ACTIVITY OF IMPARTING EDUCATION AND TRAINING TO THE FARMERS AND GENERAL PUBLIC IN ORGANIC FARMING. THE CIT( A) HA D IT A NO. 3472 /DEL /201 3 5 CATEGORICAL HELD THAT THE PRE - DOMINANT ACTIVITY OF THE ASSESSEE IS IMPARTING EDUCATION , WHICH CONSTITUTE CHARITABLE ACTIVITY AND PROVISO TO SECTION 2(15) OF THE ACT IS NOT APPLICABLE TO THE FACTS OF THIS CASE. THIS CATEGORICAL FINDING OF THE CIT(A ) THAT THE PRE - DOMINANT OBJECTIVE /ACTIVITY OF THE ASSESSEE SOCIETY IS CHARITABLE HAS NOT BEEN DISPELLED BY THE REVENUE BY PLACING ON RECORD ANY MATERIAL. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND WE UPHOLD THE SAME AS CORREC T AND IN ACCORDANCE WITH LAW. IT IS ORDERED ACCORDINGLY. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. TH E DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 5 TH FEBRUARY , 201 5 . SD/ - SD/ - ( B.C. MEENA ) (GEORGE GEORGE K.) A CCOUNTANT MEMBER J UDICIAL MEMBER DATED: 2 5 TH FEBRUARY , 201 5 . AKS/ - COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST . REGISTRAR, ITAT, NEW DELHI