M/s Kakateeya Charitable Association, Rajahmundry V. THE CIT, RAJHAMUNDRY., Rajahmundry

ITA 353/VIZ/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0115 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-11-2015
• Assessment Year: misc
• Appeal Filed On: 24-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12

Judgement Text

ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.351 & 353/VIZAG/2012 ( / ASSESSMENT YEAR : N.A.) KAKATEEYA CHARITABLE ASSOCIATION RAJAHMUNDRY VS. CIT RAJAHMUNDRY [ PAN: AABAK2366B ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI G.V.N. HARI, AR '(& ) / RESPONDENT BY : SHRI G. GURUSWAMY, DR ) - / DATE OF HEARING : 15.12.2015 ) - / DATE OF PRONOUNCEMENT : 18.12.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT, RAJAHMUNDRY. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A CHARIT ABLE ASSOCIATION REGISTERED UNDER THE SOCIETIES REGISTRATION A.P. AC T ON 11.2.2011. THE OBJECTS OF THE ASSESSEE SOCIETY ARE AS UNDER: ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 2 (A) TO PROMOTE, ESTABLISH, MAINTAIN AND ASSIST IN M AINTAINING FREE EDUCATIONAL AND OTHER INSTITUTIONS WITH A VIEW TO I MPARTING EDUCATION IN ALL BRANCHES AND THUS TO FACILITATE SE CURING GAINFUL EMPLOYMENT TO THE YOUTH OF THE COUNTRY. (B) TO AWARD SCHOLARSHIPS, STIPENDS, PRIZES, FELLO WSHIPS, TRAVELLING GRANTS AND OTHERWISE AID POOR AND DESERVING STUDENT S AND RESEARCH SCHOLARS. (C) TO CREATE FACILITIES FOR THE GENERAL PUBLIC FO R PERFORMING MARRIAGES AND OTHER EVENTS BY CONSTRUCTING COMMUNITY HALLS AN D CHOULTRIES. (D) TO ESTABLISH HOSPITALS AND PROVIDING MEDICAL FA CILITIES TO THE POOR. (E) TO ESTABLISH RECREATION CENTRES, LIBRARIES, PUB LISH BOOKS, PAMPHLETS, JOURNALS, ETC. (F) TO HONOUR AND ENCOURAGE OUTSTANDING AND DESERVI NG PERSONS IN PUBLIC LIFE, SOCIAL SERVICE, MUSIC LITERATURE AND A RTS. (G) TO ASSIST AND GUIDE THE EDUCATED UN-EMPLOYEES I N THE MATTER OF EMPLOYMENT. (H) TO PROMOTE BETTER UNDERSTANDING AMONG MEMBERS O F ALL COMMUNITIES. (I) TO CARRY ON ANY SUCH ACTIVITIES OF A CHARITABLE NATURE AND OF GENERAL PUBLIC UTILITY AS MAY BE APPROVED BY THE MEMBERS OF THE ASSOCIATION FROM TIME TO TIME. 3. THE ASSESSEE SOCIETY WITH THE ABOVE OBJECTS APPL IED FOR REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER CALLED AS THE ACT) ON 21.1.2012. THE LD. COMMISSIONER AFTE R EXAMINING THE DETAILS FILED BY THE ASSESSEE OBSERVED THAT THE ASS ESSEE SOCIETY WAS FORMED ON 11.1.2011. THOUGH THE SOCIETY IS HAVING ITS ACTIVITIES IN CHARITABLE NATURE, ACCORDING TO THE MEMORANDUM OF A SSOCIATION SINCE THE DATE OF FORMATION OF THE SOCIETY AND UPTO 31.3.2012 , THE SOCIETY HAS CONDUCTED ONLY ONE ACTIVITY I.E. THE FUNDS RECEIVED AS DONATION OF RS.42,000/- WERE UTILIZED AND SCHOLARSHIP OF RS.40, 000/- FOR EDUCATION TO ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 3 FOUR POOR STUDENTS. THE SOCIETY DID NOT CONDUCT AC TIVITIES AS SPECIFIED IN THE MEMORANDUM OF ASSOCIATION EXCEPT OFFERING SCHOL ARSHIPS TO THE POOR STUDENTS FROM OUT OF THE FUNDS RECEIVED AS DONATION . ACCORDINGLY, THE LD. COMMISSIONER HAS DENIED THE REGISTRATION U/S 12 AA OF THE ACT AS CLAIMED BY THE ASSESSEE. 4. ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE LD. COMMISSIONER HAVING OBSERVED THAT ASSESSEE HAS CARR IED CHARITABLE ACTIVITIES AND DENIAL OF REGISTRATION U/S 12AA OF T HE ACT IS NOT JUSTIFIED. HE SUBMITTED THAT AT THE STAGE OF THE GRANT OF REGI STRATION U/S 12AA OF THE ACT, THE LD. COMMISSIONER HAS TO SEE THAT THE O BJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE OR NOT AND SUBMITTED THAT IN THE PRESENT CASE, THE ASSESSEE TRUST IS COMMITTED FOR O NLY CHARITY AND THEREFORE REGISTRATION U/S 12AA OF THE ACT MAY BE G RANTED. 6. ON THE OTHER HAND, THE LD. D.R. HAS STRONGLY SUP PORTED THE ORDER PASSED BY THE LD. COMMISSIONER. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAV E ALSO GONE PARTICULARLY THE OBJECTS OF THE SOCIETY AND AFTER P ERUSING THE OBJECTS, WE ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 4 ARE OF THE OPINION THAT THE ASSESSEE HAS EXISTED FO R THE PURPOSE TO CARRY OUT THE CHARITABLE ACTIVITIES. THE ASSESSEE HAS RE CEIVED AN AMOUNT OF RS.42,000/-, OUT OF WHICH RS.40,000/- WAS DONATED T O FOUR POOR STUDENTS FOR THEIR EDUCATION. THIS IS THE OBSERVAT ION GIVEN BY THE LD. COMMISSIONER. HAVING OBSERVED THAT ASSESSEE HAS CA RRIED SOME CHARITABLE ACTIVITY, HE WAS NOT JUSTIFIED IN DENYIN G REGISTRATION U/S 12AA OF THE ACT ON THE GROUND THAT ASSESSEE HAS NOT ABLE TO CARRY OUT ITS ACTIVITIES AS PER THE MEMORANDUM OF ASSOCIATION. WH EN PARTICULARLY THE PRESENT ASSESSEE IS IN ITS INITIAL DAYS OF CARRYING OUT ITS OBJECTS, IT CANNOT BE EXPECTED THAT ALL THE OBJECTS HAS TO BE CARRIED OUT SIMULTANEOUSLY. AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCE S OF THE CASE, WE FIND THAT THE LD. COMMISSIONER IS NOT JUSTIFIED IN REJEC TING THE REGISTRATION CLAIMED BY THE ASSESSEE U/S 12AA OF THE ACT. IN SI MILAR CIRCUMSTANCES, THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. G.K. EDUCATION AND CHARITABLE TRUST, VISAKHAPATNAM VS. CIT IN ITA NO.631/VIZAG/2013 DATED 24.9.2015, THE COORDINATE BENCH OF THE TRIBUN AL HAS CONSIDERED THE ISSUE AND HAS OBSERVED AS FOLLOWS: 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RDS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE IS A CHARITABLE TRUST APPLIED FOR REGISTRATION U/S 12AA OF THE ACT. WE HAVE GONE THROUGH THE OBJECTS OF THE TRUST AND WE FIND THAT THE MAIN OBJECT OF THE TRUST IS COMMITTED TO CONDUCT VARIOUS PROGRAMMES AND BY ORGA NIZING OTHER ACTIVITIES TO AID CHARITY TO THE PEOPLE. THE ASSES SEE TRUST IS ALSO COMMITTED TO IMPART PRIMARY AND HIGHER EDUCATION TO THE DESERVED ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 5 PEOPLE. THIS FACT WAS NOT DISPUTED BY THE COMMISSI ONER. THE COMMISSIONER REJECTED THE REGISTRATION U/S 12AA OF THE ACT TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT CA RRIED ANY ACTIVITY IN CONSONANCE WITH THE OBJECTS OF THE TRUST EXCEPT DON ATING BOOKS WORTH RS.9,000/-. WE FIND THAT WHEN THE ASSESSEE TRUST I S IN ITS INITIAL STAGE, UNLESS AND UNTIL THE ASSESSEE IS ABLE TO COLLECT TH E DONATIONS, IT IS DIFFICULT FOR THE TRUST TO CARRY OUT THE OBJECTS. OVER A PER IOD OF TIME, ASSESSEE COULD GATHER SUFFICIENT FUNDS AND IT MAY ACHIEVE IT S OBJECTS BASED ON THE AVAILABILITY OF THE FUNDS. WHEN THE ASSESSEE IS IN INITIAL STAGE, IT IS DIFFICULT TO THE ASSESSEE TRUST TO ACHIEVE THE OBJECTS FOR WH ICH IT WAS ESTABLISHED. THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF VIZIANAGARAM ROTARY EYE TRUST (SUPRA) HAS CONSIDERED THIS ASPECT AND IT HAS BEEN HELD THAT THE ASSESSEE TRUST BEING IN THE FIRST YEAR, ASSESSEE HA VING NOT RECEIVED ANY DONATIONS OR FUNDS FROM THE OUTSIDERS EXCEPT THE IN ITIAL CONTRIBUTION, IT CANNOT COMMENCE ITS ACTIVITIES SINCE IT NEEDS SUFFI CIENT FUNDS TO COMMENCE ITS ACTIVITIES. THE LD. COMMISSIONER APPE ARS TO HAVE BEEN DENIED THE REGISTRATION ONLY ON THE GROUND THAT ASS ESSEE HAS NOT CARRIED ANY ACTIVITY, WHICH IN OUR CONSIDERED OPINION CANNO T BE A REASON FOR DENYING THE REGISTRATION IN THE LIGHT OF THE DECISI ON CITED (SUPRA). 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND ALSO THE DECISION OF THE COORDINATE BENCH, WE ARE OF THE OPINION THAT THE COMMISSIONER IS NOT JUSTIFIED IN REJECTING THE REGI STRATION U/S 12A OF THE ACT TO THE ASSESSEE. WE THEREFORE, QUASH THE ORDER PASSED BY THE COMMISSIONER AND DIRECTED TO GRANT THE REGISTRATION U/S 12A OF THE ACT TO THE ASSESSEE TRUST. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. 8. THE VERY SAME COORDINATE BENCH IN THE CASE OF M/ S. DASARI BULLI VENKATA RAJU & SMT. DASARI VENKATA RAMANAMMA CHARIT ABLE TRUST VS. CIT-1, VISAKHAPATNAM IN ITA NO.147/VIZAG/2013 BY OR DER DATED 27.11.2015 HAS CONSIDERED THE SIMILAR ISSUE BY FOLL OWING THE JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR INCO ME TAX (EXEMPTION) 285 ITR 327 ALLOWED THE CLAIM OF THE AS SESSEE U/S 12AA OF THE ACT. THE RELEVANT PORTION OF THE ORDER IS EXTR ACTED HEREUNDER: ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 6 7. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THAT AS PER THE OBJECTIVES OF THE ASSESSEE TRUST, IT IS EXISTED SOL ELY FOR THE PURPOSE OF CARRYING CHARITABLE ACTIVITIES. IN FACT THE LD. COM MISSIONER HIMSELF HAS SAID THAT ASSESSEE HAS CARRIED OUT ITS ACTIVITIES R ELATING TO EXTENDING EDUCATIONAL FACILITIES TO THE POOR STUDENTS. THE O NLY OBJECTION RAISED BY THE LD. COMMISSIONER IS THAT 85% OF ITS INCOME NOT SPENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND SUBSEQUENT ASSESSMENT YEAR. THIS CANNOT BE A GROUND FOR REJECTION OF REGISTRATI ON U/S 12AA OF THE ACT. WHEN THE ASSESSEE FILED AN APPLICATION IN FORM NO.1 0A SEEKING REGISTRATION, THE LD. COMMISSIONER HAS TO SEE THE O BJECTIVES OF THE SOCIETY AND GENUINENESS IN RESPECT OF CARRYING OUT THE OBJE CTIVES. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVAMMA HAN UMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME TAX (EXEMPT ION) 285 ITR 327 HAS CONSIDERED THE REGISTRATION U/S 12A OF THE ACT TO T HE CHARITABLE TRUST AND SCOPE OF ENQUIRY AND OBSERVED THAT FOR THE PURPOSE OF REGISTRATION U/S 12A 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 TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOU S PURPOSES AND NOT THE NATURE OF ACTIVITY BY WHICH THE INCOME IS DERIVED B Y THE TRUST. THERE ARE SUFFICIENT SAFEGUARDS UNDER THE ACT FOR CANCELLATIO N OF THE REGISTRATION IF THE PROVISIONS ARE MISUSED. IN THE PRESENT CASE ALL THE OBJECTIVES OF THE TRUST ARE CHARITABLE IN NATURE AND ASSESSEE ALREADY CARRIED OUT SUCH CHARITABLE ACTIVITIES AND THE GENUINENESS OF THE AC TIVITIES CARRIED OUT BY THE ASSESSEES TRUST IS DOUBTED BY THE COMMISSIONER . HENCE, THE LD. COMMISSIONER IS NOT JUSTIFIED IN REJECTING THE REGI STRATION U/S 12AA OF THE ACT. THEREFORE, WE QUASH THE ORDER PASSED BY THE L D. COMMISSIONER AND DIRECT HIM TO GRANT REGISTRATION TO THE ASSESSEE TR UST U/S 12AA OF THE ACT. WE ORDER ACCORDINGLY. 9. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE BY FOLLOWING THE JUDICIAL PRECEDENTS, WE QUASH THE ORD ER PASSED BY THE LD. COMMISSIONER AND DIRECT HIM TO GRANT THE REGISTRATI ON TO THE ASSESSEE TRUST U/S 12AA OF THE ACT. WE ORDER ACCORDINGLY. ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 7 10. IN SO FAR AS THE CLAIM OF THE ASSESSEE IN RESPE CT OF SECTION 80G OF THE ACT IS CONCERNED, THE LD. COMMISSIONER REJECTED THE APPROVAL ON THE GROUND THAT IT IS PREMATURE. WE FIND THAT THE ASSES SEE HAS APPLIED FOR REGISTRATION U/S 12AA OF THE ACT AS WELL AS APPROVA L U/S 80G OF THE ACT SIMULTANEOUSLY. BOTH THE APPLICATIONS ARE MADE BY THE ASSESSEE HAVE TO BE CONSIDERED UNDER DIFFERENT PROVISIONS OF THE ACT . LD. COMMISSIONER CAN GRANT APPROVAL U/S 80G OF THE ACT ONLY AFTER GR ANTING THE REGISTRATION U/S 12AA OF THE ACT. WE THEREFORE, FIND THAT THERE IS MERIT IN THE ORDER PASSED BY THE LD. COMMISSIONER AND THEREFORE, WE DI SMISS THE APPEAL FILED BY THE ASSESSEE IN R/O APPROVAL U/S 80G OF TH E ACT. HOWEVER, WE OBSERVED THAT ONCE THE ASSESSEE HAS OBTAINED THE RE GISTRATION U/S 12AA OF THE ACT, IT IS OPEN TO THE ASSESSEE TO FILE ANOT HER APPLICATION FOR APPROVAL U/S 80G OF THE ACT BY FILING THE DETAILS. THEREAFTER, THE LD. COMMISSIONER IS DIRECTED TO CONSIDER THE APPLICATIO N OF THE ASSESSEE FOR APPROVAL U/S 80G OF THE ACT IN ACCORDANCE WITH LAW. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE BY ITA NO.351/VIZAG/2012 SEEKING APPROVAL U/S 80G OF THE A CT IS DISMISSED AND ITA NO351 & 353/VIZAG/2012 KAKATEEYA CHARITABLE ASSOCIATION, RAJAHMUNDRY. 8 APPEAL OF THE ASSESSEE BY ITA NO.353/VIZAG/2012 SEE KING APPROVAL U/S 12AA OF THE ACT IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DEC15. SD/- SD/- ( . . . . ) ( . ) ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 3 / DATED : 18.12.2015 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT KAKATEEYA CHARITABLE ASSOCIATION, D.NO.46-10-53/4, FLAT NO.4, BOMMANA APARTMENTS, DANAVAIPETA, RAJAHMU NDRY, PIN-533 103. 2. '(& / THE RESPONDENT THE CIT, RAJAHMUNDRY . 3. 5 () / THE CIT(A), RAJAHMUNDRY 4. ' , , / // / DR, ITAT, VISAKHAPATNAM 5 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM