GEETA LALWANI FOUNDATION, MUMBAI V. DIT (E), MUMBAI

ITA 3566/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87866 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Assessment Year: 2013-2014
• Appeal Filed On: 06-05-2013
• Court: TRIBUNAL
• Department Lawyers: S PADMAJA
• Assessee Lawyers: DR K SHIVARAM RAHUL SARDA
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 3566/M/2013 ( / ASSESSMENT YEAR : 2013 - 2014 ) GEETA LALWANI FOUNDATION, FLAT NO.73, KSARA, 240, PALI ROAD, BANDRA (W), MUMBAI 400 050. / VS. DIRECTOR OF INCOME TAX (EXEMPTIONS), PIRAMAL CHAMBER, MUMBAI - 400 012. ./ PAN : AABT48195P ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : DR. K. SHIVARAM, RAHUL SARDA / RESPONDENT BY : SMT. S. PADMAJA - CIT, DR / DATE OF HEARING : 10 .12.2014 / DATE OF PRONOUNCEMENT : 2. 01.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE DIT (E), MUMBAI U/S 12AA(1)(B)(II) READ WITH SECTION 12A OF THE ACT, DATED 23.4.2013 FOR THE AY 2013 - 2014. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. THE ORDER PASSED BY THE LD DIRECTOR OF INCOME TAX (EXEMPTION) U/S 12AA(E)(IV) R.W.S 12A REJECTING REGISTRATION TO APPELLANT TRUST IS BAD IN LAW. 2. THE LD DIRECTOR OF INCOME TAX ERRED IN REJECTING REGISTRATION ON THE GROUND THAT (I) THE TRUST DEED DOES NOT CONTAIN A DISSOLUTION CLAUSE AND (II) THE TRUST HAS NOT CARRIED OUT ANY ACTIVITIES SO FAR. THE LD DIT (E) FAILED TO APPRECIATE THAT TH ERE ARE NO LEGAL REQUIREMENTS FOR THE ABOVE & THAT TRUST IS ENTITLED TO REGISTRATION ONCE IT SATISFIES THE PRESCRIBED CONDITIONS REG. ITS OBJECTS. 3. THE CASE LAWS RELIED ON BY THE DIT (E) TO DENY REGISTRATION ARE NOT RELEVANT AS SHOWN BELOW. I 291 ITR 41 9 BOM IT IS IN ASSESSEES FAVOUR. CIT S APPEAL WAS DISMISSED & REGISTRATION ALLOWED II 93 ITD 546 DELHI THIS IS ALSO IN ASSESSEES FAVOUR CITS ORDER REFUSING REGISTRATION WAS CANCELLED. III 95 ITD 305 DELHI FACTS ARE ENTIRELY DIFFERENT. WHILE THE OBJECT IS TO PROVIDE FREE EDUCATION, THE TRUST CHARGES EXORBITANT FEES FROM STUDENTS I V 247 ITR 18 KER FACTS ARE DIFFERENT. THE SOCIETY WAS FOUND TO BE ACCEPTING RECURRING DEPOSITS FROM MERCHANTS AND LOANS WERE GIVEN @ 21% INTEREST. V 138 ITD 179 AG FACTS ARE DIFFERENT. WHILE AIM WAS TO PROVIDE EDUCATION TO DESTITUTE, THE ONLY ACTIVITY WAS SPENDING HUGE AMOUNTS ONLY ON ADVERTISEMENTS. 4. DIT (E) FAILED TO NOTE THAT AS HELD IN SWARGIYA JJ SHIKSAN SANTHA 141 ITD 543 NAGPUR, AT THE STAGE OF GRANTING REGISTRATION TO A CHARITABLE TRUST, 2 DIRECTOR OF INCOME TAX IS ONLY TO EXAMINE GENUINENESS OF OBJECTS OF THE TRUST AND NOT APPLICATION OF THE INCO ME FOR CHARITABLE PURPOSE WHICH CAN BE EXAMINED WHEN TRUST FILED ITS RETURN OF INCOME. 5. DIT (E) FAILED TO NOTE THAT THE CHARITY COMMISSIONER APPOINTED BY THE GOVERNMENT OF MAHARASHTRA HAS REGISTERED THE APPLICATION AS A CHARITABLE TRUST WHICH SATISFIES T HE CONDITIONS OF CHARITY. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FILED AN APPLICATION FOR REGISTRATION U/S 12A OF THE IT ACT, 1961. IN THIS REGARD, ASSESSEE WAS ASKED TO FURNISH THE RELEVANT DETAILS / DOCUMENTS. ON PERUSAL OF THE TRUST DEED OF THE ASSESSEE, DIT (E) FOUND THE ABSENCE OF DISSOLUTION CLAUSE. NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THAT THE DISSOLUTION CLAUSE IS NOT APPLI CABLE TO THE ASSESSEE SINCE THE TRUST IS IRREVOCABLE, DIT (E) CAME TO THE CONCLUSION THAT ASSESSEES TRUST FAILED TO COMPLY WITH THE MANDATORY REQUIREMENT S PRESCRIBED U/S 12AA READ WITH RULE 17A OF THE ACT AND THEREFORE, REJECTED THE GRANT OF REGISTRATION . AGGRIEVED WITH THE DECISION OF THE DIT (E), ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 3. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE SU BMITTED THAT THE ASSESSEE MADE REQUEST FOR REGIS TRATION U/S 12A OF THE ACT AND THE SAME WAS REJECTED ON THE GROUND (I) THAT THE TRUST DEED DOES NOT CONTAIN CLAUSE RELATING TO DISSOLUTION OF THE TRUST; (II) THE TRUST HAS NOT RECORDED ANY ACTIVITIES. OTHERWISE, THERE IS NO FINING OF THE FACT BY THE DIT ( E) THAT THE OBJECTS OF THE TRUST ARE NOT GENUINE. FURTHER, DR. SIVARAM, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE DIT (E) HAS NOT CATEGORICALLY SPECIFIED UNDER WHICH PROVISION OF BOMBAY PUBLIC TRUSTS ACT, 1950 THERE IS A MANDATORY CLAUSE FOR DISSOLUT ION. IN THIS REGARD, HE BROUGHT OUR ATTENTION TO PAGE OF THE PAPER BOOK AND SUBMITTED THAT CHARITY COMMISSIONER OF THE STATE GOVERNMENT HAS GRANTED THE REGISTRATION VIDE HIS ORDER DATED 17.9.2012. FURTHER, ON THE ISSUE OF ABSENCE OF CHARITABLE ACTIVITI ES OF THE TRUST, LD COUNSEL SUBMITTED THAT THE TRUST IS REGISTERED RECENTLY AND THE SAME IS YET TO COMMENCE ITS CHARITABLE ACTIVITIES. THEREFORE IT IS A PRE - MATURE TO COME TO THE CONCLUSION THAT THE ASSESSEE COULD NOT BE GIVEN A REGISTRATION U/S 12A OF TH E ACT FOR THE PROP OSITION THAT APPLICATION OF THE INCOME OF THE TRUST IS NOT A MANDATORY REQUIREMENT AND ONLY THING TO BE EXAMINED IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. FOR THIS HE RELIED ON THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIT (E) [2006] 285 ITR 327 (KAR.) (HIGH COURT). ON THE ASPECT OF ABSENCE OF DISSOLUTION CLAUSE IN THE TRUST DEED, LD 3 COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE ITAT, AMRUTSAR BENC H IN THE CASE OF DREAM LAND EDUCATIONAL TRUST VS. CIT [2007] 109 TTJ 850 (AMR.) (TRIB) AS WELL AS THE DECISION OF THE ITAT, INDORE BENCH IN THE CASE OF DAWOODI BOHRA JAMAT VS. CIT [2010] 123 ITD 452 (IND.) (TRIB). FURTHER, BRINGING OUR ATTENTION TO THE CO PY OF THE TRUST DEED CLAUSE - 2 , WHICH READS THAT THE TRUST HEREBY DECLARED SHALL BE IRREVOCABLE. THIS, THE TRUST IS IRREVOCABLE AND PERPETUITY THEREFORE THE CLAUSE, IF ANY, ON THE DISSOLUTION IS NOT MANDATORY IN THE TRUST DEED. 4. ON THE OTHER HAND, LD DR RELIED ON THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SELF EMPLOYERS SERVICE SOCIETY VS. CIT [2000] 247 ITR 18 (KER) FOR THE PROPOSITION THAT REGISTRATION SHOULD NOT BE GRANTED WHEN THE TRUST HAS NOT DONE ANY CHARITABLE WORK AND NOT RE CORD ANY ACTIVITY AND IF THE TRUST IS ENGAGED IN GENERATING INCOME FOR ITS MEMBERS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED JUDGMENTS OF THE HIGHER JUDICIARY AND THE RELEVANT MATERIAL PLACED BE FORE US. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES, WE FIND THE JUDGMENT OF THE HONBLE KERALA HIGH COURT IN THE CASE OF SELF EMPLOYERS SERVICE SOCIE TY (SUPRA) IS DECIDED ON THE FACTS OF THE SAID TRUST GENERAT ING THE INCOME AND NOT UNDERTAKING ANY CHARITABLE WORK. THUS, THE SAME IS DISTINGUISHABLE. IN THE PRESENT CASE, ASSESSEE IS YET TO COMMENCE ITS ACTIVITIES AND THEREFORE, THE ASSESSEE CANNOT BE DESCRIBED AS UNDERTAKING THE ACTIVITIES FOR GENERATING INCOME ONLY. REGARDING THE DISSOLUTION CLAUSE NOTING IS BROUGHT ON RECORD EVEN BEFORE US THAT THE BOMBAY PUBLIC TRUSTS ACT, 1950 MANDATES FOR INCORPORATION OF MANDATORY CLAUSE OF DISSOLUTION OF ANY IRREVOCABLE TRUST. THEREFORE, IN OUR OPINION, THE DECISION OF THE DIT (E) REJECTING THE REGISTRATION U/S 12A IS REQUIRED TO BE REVERSED. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNC ED IN THE OPEN COURT ON 2 ND JANUARY, 2015. SD/ - SD/ - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 .1.2015 4 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI