NOCCI Balasore Infrstructure Company, Balasore V. CIT, Cuttack

ITA 37/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4358 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 23-06-2011
• Assessment Year: 2010-2011
• Appeal Filed On: 18-01-2011
• Court: TRIBUNAL
• Department Lawyers: A K PATRADR
• Assessee Lawyers: P K MISHRAAR
• Section: 80G; 12AA

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 37, 38/CTK/2011 AND 39 & 40/CTK/2011 (ASSESSMENT YEAR 2010 - 11) 1 . NOCCI BALASORE INFRASTRUCTURE COMPANY , GANESWARPUR INDUSTRIAL ESTATE E,JANUGANJA,BALAS ORE. PAN AADCN 1818 R 2 . NORTH ORISSA CHAMBERS OF COMMERCE AND INDUSTRIES, PAN AAAAN 8835 D (ADDRESS AS ABOVE) VERSUS COMMISSIONER OF INCOME - TAX,CUTTACK. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI P.K.MISHRA,AR FOR THE RESPONDENT SHRI A.K.PATRA,DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE APPEALS BY THE TWO DIFFERENT ASSESSEES ARE BEFORE THE TRIBUNAL ON THE ISSUE OF REJECTION OF THE APPLICATION FOR GRA NTING REGISTRATION UNDER THE PROVISIONS OF SECTION 12AA AND UNDER THE PROVISIONS OF SECTION 80G SIMULTANEOUSLY WHICH WERE CONSIDERED FOR DISPOSAL TOGETHER ON THE BASIS OF FACTS INTERWOVEN TO THE EXTENT THAT THE SOLE CONSIDERATION BY THE LEARNED CIT FOR REJ ECTING THE SAID APPLICATIONS WAS ON THE BASIS OF NON - COMMENCEMENT OF THE PURPORTED ACTIVITIES FOR THE GENERAL PUBLIC UTILITY NOT BEGUN. 2. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TWO DIFFERENT ASSESSEES ARE ONE COMPANY REGISTERED U/S.25 OF THE COMPANIES ACT IN VIEW OF THE COMPANY HAVING BEEN GRANTED REGISTRATION WITH PROVISO TO NOTE INDICATED LIMITED IN THEIR NAMES INSOFAR AS THE COMPANY HAS BEEN REGISTERED HAS NO PROFIT FROM BUSINESS UNDERTAKING WITH UNLIMITED LIABILITY. THE SOCIETY WAS REGISTERED PRIOR TO THE REGISTRATION AND OBTAINING LICENSE FROM THE COMPANY INSOFAR AS THE SOCIETY WAS TO DEVELOP INFRASTRUCTURE ITA NO.37, 38/CTK/2011 AND 39 & 40/ CTK/2011 2 FACILITY ON THE BASIS OF GATHERING SUFFICIENT MATERIAL ON SURVEY AND IDENTIFYING BALANCES WHETHER SUCH FACILITIES COULD BE INTR ODUCED FOR THE BENEFIT OF THE GENERAL PUBLIC UTILITY. FOR THIS PURPOSES, THE CENTRAL GOVERNMENT ALSO TOOK INTEREST WHEN THE MATTER WAS BEFORE THE MINISTRY OF INDUSTRIES AND COMMERCE AND WAS TO PARTICIPATE IN GIVING GRANT AND FUNDING THE SOCIETY WITH THE IN VOLVEMENT OF THE LIMITED COMPANY TO BE REGISTERED WHEN THE CHAIRMAN OF THE LIMITED COMPANY WAS TO BE THE COLLECTOR OF AREA BEING A GOVERNMENT APPOINTEE. IN VIEW OF THE INFRASTRUCTURE FACILITY INVOLVING DEVELOPMENT OF FACILITATES FOR THE INDUSTRIES, THE ORI SSA GOVERNMENT UNDERTAKING NAMELY IDCO ALSO PITCHED IN FOR PROCESSING THE MAIN OBJECT OF THE SOCIETY AS WELL AS THE COMPANY ON HAVING BROUGHT ON RECORD THAT THE COMPANY WOULD BE HEADED BY GOVERNMENT OF ORISSA NOMINEE INSOFAR AS THE EXECUTION OF THE VARIOUS PROJECTS TO BE FUNDED WERE ALSO TO BE PARTICIPATION WHICH PROCESS TOOK CONSIDERABLE TIME. 3. THE ASSESSEE MOVED APPLICATION FOR REGISTRATION/S.12A AND SIMULTANEOUSLY APPLIED FOR GRANTING REGISTRATION UNDER THE PROVISIONS OF SECTION 80G(5) INSOFAR AS ON TH E BASIS OF PROCESS OF PROCURING PARTICIPATION TO THE EXTENT FUND TO BE CONTRIBUTED BY THE RESPECTIVE CENTRAL AND STATE GOVERNMENTS THE RESIDUAL BALANCE WAS TO BE PROCURED FROM THE GENERAL PUBLIC WAS APPLIED FOR HAS BEEN DENIED BY THE LEARNED CIT MERELY ON THE PRETEXT THAT AS A CONSEQUENCE OF REJECTION OF APPLICATION U/S.12A, THE REGISTRATION/S.80G BECOMES IRRELEVANT. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED IN SUPPORT OF HIS CONTENTION AS ABOVE A PAPER BOOK WHICH INTERALIA INCLUDES THE ANNUAL REPOR TS AND THE VARIOUS MEETINGS AND CONFERENCES TAKEN PLACE FOR THE PURPOSE OF INVOLVEMENT OF CENTRAL AND STATE GOVERNMENTS FOR IDENTIFYING A PARTICULAR SURVEY TO BE UNDERTAKEN WHEN THE GOVERNMENT NOMINEES HAVE ITA NO.37, 38/CTK/2011 AND 39 & 40/ CTK/2011 3 SHOWN THEIR INTEREST IN CONTINUING WITH THE ACTIV ITY OF GENERAL PUBLIC UTILITY AS WAS PRESCRIBED IN THE MEMORANDUM OF ARTICLES OF THE ASSOCIATION OF THE COMPANY AS WELL AS THE SOCIETY. WITH A DUE PROCESS OF CALLING FOR TENDERS AND IMPLEMENTING THE APPROVAL ISSUED BY THE MINISTRY OF INDUSTRIES AND COMMERC E FOR PROMOTION OF INDUSTRIAL POLICY. A COPY OF AUDIT REPORT AND THE RETURN FOR A VERY SMALL PERIOD OF THE YEAR WAS ALSO FURNISHED WHICH INDICATE THE LEARNED CIT(A) THAT THE ACTIVITIES HAVE NOT BEGUN. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT APPLICATION FOR SEEKING REGISTRATION U/S.12A AND U/S.80G REQUIRED ONLY THE LEARNED CIT TO CONSIDER THE GENUINENITY OF THE ASSESSEE AND THE OBJECTS WHETHER WERE AVAILABLE TO IT FOR CARRYING OUT AS A GENERAL PUBLIC UTILITY. HE WAS PREVAILED UPON BY THE FACT THAT NO MAJOR ACTIVITIES HAVE BEEN TAKEN INSPITE OF THE FACT THAT GOVERNMENT AGENCY HAD COLLECTED THEIR RESOURCES TO START IMPLEMENTING THE ACTIVITIES, WHEN THE GOVERNMENT FUNDS WERE WAITED TO BE OBTAINED AND PUT TO USE AS PER THE MAIN OBJECT. A GAPE IN THE FUNDING AND THE RESOURCES AVAILABLE TO THE ASSESSEE WAS TO BE FROM DONATIONS RECEIVED FROM THE GENERAL PUBLIC FOR WHOSE BENEFIT THE SOCIETY AND THE COMPANY HAD BEEN ESTABLISHED WAS THEREFORE IGNORED DENYING REGISTRATION U/S.80G AS A CONSEQUENCE TO R EJECTION OF APPLICATION U/S.12A. HE SUBMITTED THAT THE INVOLVEMENT OF THE GOVERNMENT AGENCY RATHER CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE ACTIVITIES WANTED TO BE CARRIED OUT WITH THE GOVERNMENT INVOLVEMENT REQUIRES TIME WHICH WAS CONSIDERED AS A PREMATURE SEEKING REGISTRATION. HE PRAYED THAT ESTABLISHING OF A LIMITED COMPANY WAS ON THE BASIS OF THE SOCIETY INVOLVED AS THE NODAL AGENCY FOR OBTAINING APPROVAL ETC., WHICH REQUIRE THE CENTRAL GOVERNMENT TO PROMPT A COMPANY TO BE REGISTERED AS COM PANY U/S.25 THEREFORE DOES NOT INDICATE THAT THE COMPANY WILL NOT FUNCTION. BEING PERPETUAL ENTITIES, THE LEARNED CIT ERRED IN HOLDING THAT THE TIME GAP ITA NO.37, 38/CTK/2011 AND 39 & 40/ CTK/2011 4 BETWEEN THE GOVERNMENT AGENCIES TO INVOLVE ACTUAL CARRYING OUT OF THE WORK VIS - - VIS PUBLISHING OF ADVE RTISEMENT FOR CREATING INFRASTRUCTURE BY WAY OF TENDERS CLEARLY INDICATES THAT THE LEARNED CIT WAS TO CONFINE HIMSELF TO GRANT REGISTRATION AND NOT REJECT FOR ACTIVITIES TO BE CARRIED OUT WHICH WAS IN PROCESS. 5. THE LEARNED DR SUPPORTED THE ORDER OF THE L EARNED CIT FOR HIS PART SUBMISSIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON OUR CAREFUL CONSIDERATION OF THE MATERIAL BROUGHT ON RECORD, WE ARE INCLINED TO HOLD THAT IT WAS NOT THE CASE OF THE LEARNED CIT TO ESTABLISH BY INVOLVING HIMSELF IN THE ACTIVITIES CARRIED OUT ON THE BASIS OF FINANCIAL STATEMENT TO UNDERSTAND THAT THE OBJECTS OF THE SAID ASSESSEES WERE NOT CHARITABLE OR FOR GENERAL PUBLIC UTILITY. THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THAT THE GOVERNMENT AGENCIES HAVE BEEN AGREED ON PRINCIPLE TO PART FUNDS TO THE ASSESSEE ON THE BASIS OF INCORPORATING THEMSELVES AS UTILITIES CARRYING OUT CHARITABLE WORK FOR THE USE OF GENERAL PUBLIC CLINCHES THE ISSUE THAT THE GOVERNMENT AGENCIES TO TAKE TIME TO INTERACT AND ON THE BASIS OF DIRECTION WERE TO BE COLLECTED FOR IMPLEMENTATION BY GETTING THEMSELVES REGISTERED U/SD.12A AS WELL AS U/S.80G. THE PROVISIONS IN THE SAID SECTIONS THEREFORE CLEARLY INDICATE THAT ONCE HAVIN G WAS ONLY TO ESTABLISH THAT THE INSTITUTION IS REGISTERED BONAFIDE AND THE ACTIVITIES TO BE CARRIED OUT BY IT ARE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(15) WAS TO PASS AN ORDER IN WRITING REGISTERING THE TRUST AND INSTITUTION. HOWEVER, HE IS ON B EING NOT SATISFIED PASS AN ORDER IN WRITING REFUSING TO REGISTER BY INDICATING THAT THE ACTIVITIES HAD NOT BEEN CARRIED OUT AND THE INSTITUTIONS ARE YET TO COMMENCE ACTIVITIES. WE HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD AS SUBMITTED BY THE LEARNED ITA NO.37, 38/CTK/2011 AND 39 & 40/ CTK/2011 5 CO UNSEL FOR THE ASSESSEE ABOUT THE GENUINENESS OF THE ACTIVITIES OF TRUST OR THE INSTITUTION AND THE ENQUIRIES MADE BY THE LEARNED CIT THEREFORE DO NOT INDICATE OTHERWISE. THE INVOLVEMENT OF THE GOVERNMENT AGENCY AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE CLINCHES THE ISSUE IN FAVOUR OF THE ASSESSEE AND FINDING HIMSELF TO THE EFFECT THAT THE SAID TRUSTS ARE REGISTERED AND ARE TO CARRY OUT THE ACTIVITIES AS PRESCRIBED THEREIN COULD NOT BE HELD AS IN CONTRAVENING TO PROCEDURE FOR REGISTRATION INSOFA R AS WHAT HAS NOT BEEN DONE CANNOT BE HELD TO BE A POINT LEARNED CITS BASIS FOR REJECTION OF THE APPLICATIONS. THE PROCEDURE FOR REGISTRATION WAS THEREFORE ONLY TO ESTABLISH THE GENUINENESS IN THE ACTIVITIES TO BE CARRIED OUT HAS BEEN ESTABLISHED BEYOND D OUBT BY THE ASSESSEE BEFORE US AND THE LACK OF FINDING WHICH HAS BEEN PROJECTED AS SOUGHT TO BE REGISTERED UNDER THE PROVISIONS OF SECTION80G IS ON THE BASIS OF MATERIAL ALREADY AVAILABLE CANNOT LEAD TO THE FINDING THAT THE ACTIVITIES WHICH WERE TO BE UNDE RTAKEN IN CONSEQUENCE THERETO HAVE NOT BEEN IMPLEMENTED. IN VIEW OF OUR ABOVE FINDING, WE ARE INCLINED TO SET ASIDE THE ORDERS OF THE LEARNED CIT AND DIRECT HIM TO GRANT REGISTRATION U/S.12AA AND SECTION 80G(5) OF THE I.T.ACT,1961. 7. IN THE RESULT, THE A PPEALS FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOUNTANT MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.37, 38/CTK/2011 AND 39 & 40/ CTK/2011 6 C OPY OF THE ORDER FORWARDED TO : 1. 1 . THE APPELLANT: NOCCI BALASORE INFRASTRUCTURE COMPANY , GANESWARPUR INDUSTRIAL ESTATEE,JANUGANJA,BALASORE. PAN AADCN 1818 R 2 . NORTH ORISSA CHAMBERS OF COMMERCE AND INDUSTRIES, 2. THE RESPONDENT: COMMISSIO NER OF INCOME - TAX,CUTTACK. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.