IILM Foundation, New Delhi V. DIT (Exemption), New Delhi

ITA 3638/DEL/2011

• Counselvise Citation: 363820114 RSA 2011
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-02-2012
• Assessment Year: misc
• Appeal Filed On: 26-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENU JOUHRI
• Assessee Lawyers: AJAY VOHRA SHRI RO HIT GARG
• Keywords: Charitable institution; Opportunity of being heard; Cancellation of registration
• Section: 143(3); 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI RAJPAL YADAV, JUDICIAL MEMBER I.T.A NO. 3638/DEL/11 ASSTT. YEAR - IILM FOUNDATION, RAI SCHOOL COMPLEX, 3 LODHI ROAD, NEW DELHI. VS. DIT (EXEMPTIONS), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI AJAY VOHRA, ADVOCATE, SHRI RO HIT GARG, ADVOCATE RESPONDENT BY: SMT. RENU JOUHRI, SR. DR ORDER ORDER ORDER ORDER PER RAJPAL YADAV, JM: THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF A SSESSEE AGAINST THE ORDER OF LD. DIT(EXEMPTIONS) DATED 7.7.2011 PAS SED U/S 12AA (3) READ WITH SECTION 12A OF THE INCOME TAX ACT. THE GRIEVAN CE OF THE ASSESSEE IS THAT LD. DIT HAS EXCEEDED HIS JURISDICTION IN WITHD RAWING THE REGISTRATION GRANTED U/S 12A OF THE ACT. ITA NO. 3638/DEL/11 2 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE TR UST FORMERLY KNOWN AS RAM KRISHAN CHARITABLE KULWANT RAI TRUST WAS SET U P ON 1 ST FEBRUARY, 2001. IT APPLIED FOR GRANT OF REGISTRATION U/S 12A ON 27.12.2001. THE REGISTRATION WAS GRANTED TO THE ASSESSEE VIDE ORDER NO. DIT(E) 2001 2002/R-416/01/215 DATED 25.6.2002. THE NAME OF THE TRUST HAS BEEN CHANGED FROM RAM KRISHAN KULWANT RAI CHARITABLE TRU ST TO IILM FOUNDATION. IT REQUESTED FOR CHANGE OF THE NAME IN THE REGISTRATION CERTIFICATE. THE APPLICATION OF THE ASSESSEE WAS EX AMINED AND ACCEPTED BY THE DIT (EXEMPTIONS). ACCORDINGLY, A FRESH REGIS TRATION U/S 12A READ WITH SECTION 12AA WAS GRANTED TO THE ASSESSEE W.E.F ASSTT. YEAR 2008-09 VIDE ORDER DATED 2 ND JUNE, 2008. THE ASSESSEE IS PRESENTLY RUNNING, INT ER- ALIA, AN EDUCATIONAL INSTITUTION IN THE NAME OF IIL M-UNDERGRADUATE BUSINESS SCHOOL. THIS INSTITUTION WAS DONATED BY RA M KRISHAN AND SONS CHARITABLE TRUST (RKSCT), ANOTHER CHARITABLE TRUST AS A RUNNING UNIT WITH ALL THE RIGHTS AND OBLIGATIONS. THIS INSTITUTION ST AND VESTED IN THE ASSESSEE ON 30.6.2002 .SUBSEQUENT TO THIS DATE, ALL INCOME A ND OUTGOING DONATION OF THIS INSTITUTION WERE HELD / INCURRED ON ACCOUNT OF ASSESSEE TRUST. THE SAME HAVE BEEN DULY ACCOUNTED IN THE BOOKS OF ASSES SEE AND TAKEN INTO ACCOUNT WHILE COMPUTING THE 85% SPENDING CRITERIA. AFTER THE ASSTT. ORDER PASSED IN ASSTT. YEAR 2003-04 AND 2004-05, LD. COMM ISSIONER FORMED AN OPINION THAT ASSESSEE HAS DONATED A SUM OF ` 4,43,3 7,505/- TO RKSCT. SIMILARLY, IN SUBSEQUENT YEARS HUGE AMOUNT HAS BEEN TRANSFERRED TO RKSCT BY TERMING SUCH TRANSFER OF AMOUNT AS VOLUNTA RY DONATION. ITA NO. 3638/DEL/11 3 3. LD. DIT HAD ISSUED SHOW CAUSE NOTICE U/S 12AA (3 ) FOR CANCELLATION OF REGISTRATION GRANTED U/S 12A OF THE INCOME TAX A CT ON THE GROUND THAT ASSESSEE HAS TAKEN A RUNNING EDUCATIONAL INSTITUTIO N FROM RKSCT AND IN LIEU OF THAT IT HAS PAID HUGE AMOUNT. AFTER HEARING THE ASSESSEE, LD. DIT HAS CANCELED THE REGISTRATION BY OBSERVING AS UNDER :- 5. THE SUBMISSIONS MADE IN THE ABOVE LETTER AND VE RBAL DISCUSSIONS HELD WITH THE AR OF THE APPLICANT, THE SAME WERE NOT FOUND CONVINCING AND ACCEPTABLE, AS THE ASSESSMENT PROCEEDINGS U/S 143(3) AND PROCEEDINGS U/S 12AA(3) ARE SEPARATE PROCEEDINGS FROM EACH OTHER AND THE OUTCOME OF ONE PROCEEDINGS DOES NOT HAVE ANY IMPACT ON THE OTHER PROCEEDINGS. BEING A CHARIT ABLE INSTITUTION, THERE IS OBLIGATION ON ITS PART TO CONDUCT ITS ACTI VITIES IN MORE TRANSPARENT AND RELIABLE MANNER. GENERAL PUBLIC, EV EN GOVERNMENT AGENCIES ARE LOOKING TOWARDS CHARITABLE ORGANIZATIO NS FOR VARIOUS PHILANTHROPIC PURPOSES. AS A CONSEQUENCE OF SUCH TR UST, VOLUNTARY DONATIONS AND GRANTS ARE BEING GIVEN TO SUCH CHARIT ABLE INSTITUTIONS TO CARRY PHILANTHROPIC ACTIVITIES FOR THE BENEFITS OF THE GENERAL PUBLIC AND SOCIETY AT LARGE. FURTHER, TAX INCENTIVES HAVE BEEN EXTENDED NOT ONLY TO THESE CHARITABLE INSTITUTIONS EXEMPTING THE IR INCOME FROM TAX BUT ALSO THE DONORS TO THESE CHARITABLE INSTITU TIONS ARE GIVEN TAX BENEFITS AS WELL. IN THIS BACKGROUND IT IS MANDATOR Y ON THE PART OF THESE VOLUNTARY ORGANIZATIONS TO KEEP THEIR ACTIVIT IES TRANSPARENT AND TO MAINTAIN THEIR BOOKS OF ACCOUNT IN RELIABLE MANNER. IN THE INSTANT CASE, ON GOING EDUCATIONAL INSTITUTION HAS BEEN TRANSFERRED TO THE ASSESSEE SOCIETY IN THE BOOKS OF ACCOUNT AS VOLUNTARILY RECEIVED WHEREAS IN ACTUAL CONDUCT, THE ASSESSEE SO CIETY HAS REPAID CRORES OF RUPEES YEAR AFTER YEAR TO THE INSTITUTION WHICH TRANSFERRED THE EDUCATIONAL INSTITUTION I.E. IILM UNDERGRADUATE BUSINESS SCHOOL (IILM-UBS). THE ENTIRE TRANSACTION OF TRANSFER AND THE SO CALLED DONATION TO SUCH INSTITUTION IS NOTHING BUT A COLOR ABLE DEVICE TO SUBVERT THE PROVISIONS OF THE LAW AND TO GAIN BENEF ITS AMONG SPECIFIED PERSONS Y/S 13 OF THE INCOME TAX ACT, 196 1. THE ACTIVITY OF THE TRUST DOES NOT FALL WITHIN THE MEANING OF CHARI TABLE ACTIVITY, AS THE TRANSFER OF RUNNING BUSINESS SCHOOL FROM RAM KR ISHAN AND SONS CHARITABLE TRUST TO RAM KRISHAN KULWANT RAI CHARITA BLE TRUST (THE ASSESSEE TRUST) IS PURELY A BUSINESS TRANSACTION FO R THE BENEFIT OF COMMON TRUSTEES AND NOT IN FAVOUR OF GENERAL PUBLIC . ITA NO. 3638/DEL/11 4 6. IN VIEW OF ABOVE FACTS AND CONSIDERING THE REPLY OF THE ASSESSEE, IT IS ESTABLISHED BEYOND REASONABLE DOUBT THAT THE SOCIETY HAS VIOLATED THE PROVISIONS OF SECTION 2 (15), ACTI VITY BY THE SOCIETY, IT DOES NOT QUALITY FOR REGISTRATION U/S 12A. ACCOR DINGLY, REGISTRATION GRANTED U/S 12A TO THE ASSESSEE SOCIETY IS CANCELLE D FROM A.Y. 2003- 04 ONWARDS. 4. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. LD. DIT HAD ISSUED NOTICE FOR CANCELLATION OF REGISTRATION ON THE BASIS OBSERVATION MADE BY THE A O IN THE ASSTT. ORDER FOR ASSTT. YEAR 2003-04. WHEN ASSESSEE APPRISED THE LD. DIT THAT LD. CIT(A) DID NOT CONCUR WITH THE CONCLUSION OF AO AND ORDER OF LD. CIT(A) HAS BEEN UPHELD BY ITAT. LD. DIT OBSERVED THAT PROCEEDI NG U/S 12AA(3) ARE SEPARATE PROCEEDING FROM THE ASSTT. PROCEEDING. MEA NING THEREBY, HE CAN INDEPENDENTLY EXAMINE THE ISSUE UNDER SUB SECTION 3 OF SECTION 12AA WHICH PROVIDE A PROCEDURE FOR CANCELLATION OF REGIS TRATION ALREADY GRANTED TO THE ASSESSEE. THIS CLAUSE READ AS UNDER :- [(3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (I) [ [ [ [ OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A (AS IS STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996)] ] ] ] AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED PROVIDED PROVIDED PROVIDED THAT NO ORDER UNDER THE SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD.] ITA NO. 3638/DEL/11 5 5. THE BARE PERUSAL OF THE CLAUSE WOULD REVEAL THAT REGISTRATION ALREADY GRANTED TO THE ASSESSEE CAN BE CANCELLED IF THE ACT IVITIES OF THE TRUST ARE NOT GENUINE OR THE ACTIVITIES OF THE TRUST ARE NOT CARRIED ON IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. THE LD. DIT IN ORDER TO DEMONSTRATE THAT ACTIVITIES OF THE TRUST ARE NOT GENUINE OR NOT CARR IED OUT IN ACCORDANCE WITH THE OBJECTS HAS OBSERVED THAT THE ENTIRE TRANSACTIO N OF TRANSFER AND THE SOCALLED DONATION TO SUCH INSTITUTION IS NOTHING BU T A COLORABLE DEVICE TO SUBVERT THE PROVISIONS OF LAW AND TO GAIN BENEFITS AMONGST SPECIFIED PERSONS U/S 13 OF THE INCOME TAX ACT 1961. LD. DIT HAS NOT SPECIFIED HOW IT IS A COLORABLE DEVICE AND HOW ANY SPECIFIED PERS ON U/S 13 WOULD GAIN BENEFIT. BOTH THE TRUST ARE ENJOYING BENEFIT U/S 12 A. LET US TAKE A HYPOCRITICAL EXAMPLE. THE ASSESSEE, IF NOT ACQUIRED THE INSTITUTION BY DONATION AND IT HAD NOT DONATED A SUM OF ` 4.43 CRO RE TO RKSCT THEN PROBABLY THERE WOULD BE NO PREJUDICE TO THE REVENUE AND THERE COULD BE NO GRIEVANCE. THE RECEIPT OUGHT TO BE RECEIVED BY R KSCT AND IT WOULD THEN TREATED AS APPLICATION OF INCOME BY THAT TRUST TOWARDS ITS OBJECTS. LD. DIT HAS NOT POINTED OUT AS TO HOW DONATIONS MADE BY ASSESSEE ARE NOT IN ACCORDANCE WITH THE OBJECTS AND IT CANNOT BE TREATE D AS GENUINE ACTIVITIES OF THE TRUST. THIS IS NOT THE ONLY INSTITUTION RUN BY THE TRUST, THE RKSCT IS RUNNING VARIOUS OTHER INSTITUTIONS AND ITS ACTIVITI ES HAVE NOT BEEN DOUBTED. THE SHOW CAUSE NOTICE IS BASED ON THE OBSERVATIONS OF AO IN ASSTT. YEAR 2003-04. HOWEVER, THOSE OBSERVATIONS WERE NOT UPHEL D BY THE LD. FIRST APPELLATE AUTHORITY AS WELL AS BY ITAT. COPY OF THE TRIBUNAL ORDERS HAVE BEEN PLACED IN THE PAPER BOOK ON PAGES NO.185 TO 21 1. THESE ARE THE ITA NO. 3638/DEL/11 6 ORDERS FOR ASSTT. YEAR 2003-04 TO 2006-07. ON DUE C ONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY GROUND FOR CANCELLATION OF REGISTRATION. THEREFORE, WE ALLOW THE APPEAL OF ASS ESSEE AND QUASH THE ORDER OF LD. DIT. THE REGISTRATION ALREADY GRANTED TO THE ASSESSEE IS RESTORED BACK. ORDER PRONOUNCED IN THE OPEN COURT ON 23.3.2012. SD/- SD/- [G.D. AGRAWAL] [RAJPAL YADAV] VICE PRESIDENT JUDICIAL MEMBER DATED: 23.3.2012 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT