GIA INDIA, MUMBAI V. DIT (E), MUMBAI

ITA 3921/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71268 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-09-2013
• Assessment Year: misc
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: H P RANINA; STATIRA RANINA
• Keywords: Charitable institution; Question of law; Benefit of exemption
• Section: 80G; 12A; 12

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL G GG G BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , !' !' !' !' #$ #$ #$ #$ % % % % & & & & , . BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH, AM , AM , AM , AM & && & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ./ I.T.A I.T.A I.T.A I.T.A. NO. . NO. . NO. . NO.3921/MUM/2010 3921/MUM/2010 3921/MUM/2010 3921/MUM/2010 ( '( '( '( '( ) ) ) ) / ASSESSMENT YEAR :) GIA INDIA 10 TH FLOOR, TRADE CENTRE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 ( ( ( ( / VS. DIRECTOR OF INCOME TAX (EXEMPTION), ROOM NO. 616, 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 $* !' ./ + ./ PAN/GIR NO. :AACCG1253E ( *, / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( -.*, / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) *, *, *, *, / / / / ! !! ! / APPELLANT BY : MR. H. P. RANINA & STATIRA RANINA -.*, -.*, -.*, -.*, 0 00 0 / / / / ! !! ! /RESPONDENT BY : MR. K. C. P. PATNAIK ( ( ( ( 0 00 0 1' 1' 1' 1' / DATE OF HEARING : 11 TH SEPTEMBER 2013 23) 23) 23) 23) 0 00 01' 1' 1' 1' /DATE OF PRONOUNCEMENT: 27 TH SEPTEMBER 2013 #!4 / O R D E R PER : & , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 9.12.2009 OF DIT (EXEMPTION), MUMBAI PASSED U/S 80G OF THE INCOME TAX ACT. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APPEAL HOWEVER, THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND ADJUDIC ATION IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE DIT(EXEMPTI ON) IS JUSTIFIED IN REFUSING THE RENEWAL/REGISTRATION U/S 80G TO THE AS SESSEE WHEN THE REGISTRATION U/S 80G AS WELL AS U/S 12A WAS ALREADY GRANTED. THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA AND HAS OBTAINED LICENCE U/S 25 OF COMPANIES ACT, 1956 AS AN EDUCATIONAL INSTITU TION EXISTING FOR ITA NO.3921/M/2010 GIA INDIA 2 CHARITABLE PURPOSE AND NOT FOR THE PURPOSE OF PROFI T. THE ASSESSEE WAS ALSO GRANTED REGISTRATION/APPROVAL U/S 80G(5)(VI) O F THE INCOME TAX ACT VIDE ORDER DATED 27.12.2004 WHICH WAS RENEWED UP TO 31.3.2009 VIDE ORDER DATED 23.11.2006. THE ASSESSEE FILED AN APPLI CATION DATED 20.3.2009 WHICH WAS RECEIVED IN THE OFFICE OF DIT O N 24.3.2009 FOR RENEWAL OF APPROVAL GRANTED U/S 80G(5)(VI). THE DIT REJECTED THE APPLICATION FOR RENEWAL OF APPROVAL VIDE IMPUGNED O RDER DATED 9.12.2009. 3. BEFORE US THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE DIT HAS NOT DISPUTED THE OBJECTS OF THE ASSESSEE BEING CHAR GEABLE AND THIS FACT IS ALSO EVIDENT FROM THE REGISTRATION GRANTED U/S 12A OF THE INCOME TAX ACT AS WELL AS U/S 80G INITIALLY VIDE ORDER DATED 27.12 .2004 WHICH WAS RENEWED BY ORDER DATED 23.11.2006. THUS, THE LD. AR HAS SUBMITTED THAT DESPITE ACCEPTING THE OBJECTS OF THE ASSESSEE AS CH ARGEABLE IN NATURE THE DIT REFUSED TO GRANT THE RENEWAL OF APPROVAL U/S 80 G ONLY ON THE GROUND THAT SOME OF THE DIRECTORS OF THE ASSESSEE ARE FORE IGN NATIONALS. THE DIT (EXEMPTION) HAS QUESTIONED THE STATES OF THE ASSESS EE ON THE GROUND THAT THE FOREIGN NATIONALS ARE NOT ALLOWED TO PERFORM WO RK OF A TRUSTEE AS PER THE PROVISIONS OF INDIAN TRUST ACT. THE LD. AR HAS URGED THAT THE ASSESSEE IS NOT REGISTERED UNDER THE INDIAN TRUST ACT BUT IS A COMPANY REGISTERED U/S 25 OF THE COMPANIES ACT, 1956 WHICH IS PERMISSI BLE U/S 80G(5)(V). HE HAS REFERRED THE CLAUSE (V) OF SECTION 80G(5) AND S UBMITTED THAT IF ANY FUND OR INSTITUTION IS ESTABLISHED FOR CHARGEABLE P URPOSE AND FULFIL THE CONDITION THAT THE INSTITUTION REGISTERED U/S 25 OF COMPANIES ACT, 1956 THEN THE DONATION TO SUCH INSTITUTION IS ELIGIBLE F OR DEDUCTION U/S 80G. ITA NO.3921/M/2010 GIA INDIA 3 THUS, THE LD. AR HAS ARGUED THAT THE ASSESSEE FULFI L THE CONDITION AS PROVIDED U/S 80G(5)(V) OF THE INCOME TAX ACT AND TH EREFORE, ELIGIBLE FOR GRANT OF RENEWAL OF APPROVAL. HE HAS POINTED OUT TH AT WHEN THE ASSESSEE IS A COMPANY AND REGISTERED UNDER THE COMPANIES ACT THEN DOMICILE OF THE DIRECTOR OF THE ASSESSEE COMPANY IS NOT RELEVAN T. HE HAS RELIED UPON THE FOLLOWING DECISION: INDO AMERICAN SOCIETY VS ADIT(EXEMPTION) 278 ITR 49 CIT VS RAJNESSH FOUNDATION 280 ITR 553 (BOM.) GRAMEEN INITIATIVE FOR WOMEN VS DIT(E), MUMBAI, ITA NO. 1937/M/2009 DATED 3.5.2011 4. ON THE OTHER HAND, THE LD. DR HAS RELIED UPON TH E IMPUGNED ORDER OF THE DIT AND SUBMITTED THAT THE ASSESSEE HAVING T HE DIRECTORS OF FOREIGN DOMICILE/NATIONALS WHICH VIOLATES THE RULE PRESCRIB ED UNDER INDIAN TRUST ACT. FURTHER THE DIT HAS HELD THAT THE FOREIGN NATI ONALS ARE NOT COMPETENT TO MAKE THE APPLICATION FOR GRANTING APPROVAL U/S 8 0G. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE COMPANY I S INCORPORATED AND REGISTERED IN INDIA U/S 25 OF COMPANIES ACT 1956 AS AN EDUCATIONAL INSTITUTION WITH THE OBJECTS OF CHARGEABLE PURPOSE FOR IMPARTING EDUCATION AND NOT FOR THE PURPOSE OF PROFIT. IT IS NOT DISPUT ED THAT THE ASSESSEE IS REGISTERED U/S 12A(A) OF THE INCOME TAX ACT AND THE REFORE, THE OBJECTS OF THE ASSESSEE ARE FOUND TO BE CHARGEABLE IN NATURE. WE FURTHER NOTE THAT THE ASSESSEE WAS INITIALLY GRANTING APPROVAL U/S 80 G(5)(VI) OF THE ACT ON 27.12.2004 WHICH WAS VALID UP TO 31.3.2006. THE APP ROVAL U/S 80G WAS ITA NO.3921/M/2010 GIA INDIA 4 RENEWED UP TO 31.3.2009 VIDE ORDER DATED 23.11.2006 . THE DIT HAS REFUSED THE FURTHER RENEWAL MAINLY ON THE GROUND TH AT TWO OF THE DIRECTORS OF THE ASSESSEE COMPANY ARE FOREIGN NATIONALS AND T HEREFORE, SUCH PERSONS ARE NOT ALLOW TO PERFORMING WORK OF TRUSTEE OF A CHARGEABLE INSTITUTION IN INDIA. THE DITS FINDINGS ARE GUIDED BY THE RULES PRESCRIBED UNDER INDIAN TRUST ACT. ANOTHER OBJECTION OF THE DI T WAS TECHNICAL ONE REGARDING THE VALIDITY OF THE APPLICATION BEING VER IFIED AND SIGNED BY IN COMPETENT PERSON. IT IS PERTINENT TO NOTE THAT THE ASSESSEE AT THE RELEVANT POINT OF TIME WAS HAVING THREE DIRECTORS NAMELY: MS. DONNA BAKER (APPOINTED AS DIRECTOR ON MARCH 9 , 2004) MS. NIRUPA BHATT (APPOINTED AS DIRECTOR ON FEBRUA RY 11, 2009) MR. DAVID TEARLE (APPOINTED AS DIRECTOR ON SEPTEM BER 17, 2009) 6. THE APPLICATION FOR RENEWAL OF APPROVAL U/S 80G( 5)(VI) WAS THOUGH SIGNED BY THE CHARTERED ACCOUNTANT OF THE ASSESSEE HOWEVER, THE FORM 10G ANNEXED TO THE FORMAL APPLICATION HAS BEEN VERI FIED AND SIGNED BY ONE NIRUPA BHATT, DIRECTOR OF THE ASSESSEE. WHEN TH E APPLICATION UNDER 10G HAS BEEN DULY VERIFIED AND SIGNED BY THE AUTHOR ISED PERSONS WHO WAS ALSO DIRECTOR OF THE ASSESSEE AT THE RELEVANT POINT OF TIME THEN WE DO NOT FIND ANY SUBSTANCE IN THE TECHNICAL OBJECTION RAISE D BY THE DIT. MOREOVER, THE DEFECT IN SIGNING/VERIFICATION OF THE APPLICATI ON IS A CURABLE DEFECT WHICH COULD HAVE BEEN RECTIFIED IF THE COMPETENT AU THORITY THINKS SO. THE VIEW OF THE DIT THAT THE DEFECT IS NOT CURABLE IS A GAINST THE SETTLED PRINCIPLE OF LAW AS THE DIT HAS NOT GRANTED ANY OPP ORTUNITY TO THE ASSESSEE TO EITHER RECTIFIED OR TO EXPLAIN THE SO C ALLED DEFECT, IF ANY, IN THE ITA NO.3921/M/2010 GIA INDIA 5 APPLICATION. THEREFORE, THE SAID TECHNICAL OBJECTIO N IS NOT SUSTAINABLE. AS REGARD THE OBJECTION OF FOREIGN NATIONAL BEING THE DIRECTORS OF THE ASSESSEE, IT IS TO BE NOTED THAT THERE IS NO SUCH R EQUIREMENT OR CONDITION U/S 80G(5) THAT THE INSTITUTION OR FOUND SHOULD NOT HAVE ANY DIRECTOR OF FOREIGN NATIONAL. SECTION 80G(5)(V) STIPULATES THE CONDITIONS FOR ELIGIBILITY TO THE DONATIONS FOR DEDUCTION AS UNDER: 5. THIS SECTION APPLIES TO DONATIONS TO ANY INSTIT UTION OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A) OF SUB SECTION (2), ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURP OSE AND IF IT FULFILS THE FOLLOWING CONDITIONS, NAMELY:- (I).. (II). (III) (IV) (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED A S A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETI ES REGISTRATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPOND ING TO THAT ACT IN FORCE IN ANY PART OF INDIA OR UNDER SECTION 25 OF THE COMPANIES ACT, 1956 (1 OF 1956), OR IS A UNIVERSITY ESTABLISHED BY LAW, OR IS ANY OTHER EDUCATIONAL INSTITUTION REC OGNISED BY THE GOVERNMENT OR BY A UNIVERSITY ESTABLISHED BY LAW, O R AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW, OR IS AN INSTITU TION FINANCE WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTH ORITY. 7. IT IS CLEAR FROM CLAUSE (V) OF SUB-SECTION 5 OF SECTION 80G THAT INTER ALIA THE INSTITUTION REGISTERED U/S 25 OF COMPANIES ACT 1956 IS ELIGIBLE FOR APPROVAL U/S 80G(5)(VI) IN RELATION TO DONATIONS MA DE AFTER 31.3.1992. THUS UNDER THE PROVISIONS OF SECTION 80G(5) THERE I S NO SUCH CONDITION OR PROHIBITION OF A DIRECTOR OF A COMPANY GRANTED APPR OVAL U/S 25 OF THE COMPANIES ACT SHALL NOT BE A FOREIGN NATIONAL. EVE N OTHERWISE THE TRUSTEE IS THE ASSESSEE COMPANY AND NOT THE DIRECTO RS THEREFORE, WHEN THE ITA NO.3921/M/2010 GIA INDIA 6 APPROVAL U/S 80G(5)(VI) WAS ALREADY GRANTED TWICE A ND THERE IS NO SUBSEQUENT CHANGE IN THE FACTS AND CIRCUMSTANCES TH EN THE REFUSAL OF THE RENEWAL OF THE APPROVAL BY THE DIT(EXEMPTION) IS NO T BASED ON ANY LEGAL PROVISIONS OF LAW INFORCES. IN THE CASE OF CIT VS R AHJESH (SUPRA) THE HONBLE JURISDICTION HIGH COURT HAS OBSERVED IN PAR A 25 AND 26 AS UNDER: 25. IT IS MATERIAL TO NOTE THAT THE RESPONDENT HAD ALSO REQUESTED THE GOVERNMENT TO GRANT BENEFIT OF DEDUCTION UNDER SECTION 80G OF THE INCOME TAX ACT FOR THE DONATIONS MADE TO THE RESPONDENT BY THE DONORS. ON THAT REQUEST, NECESSARY INQUIRY W AS MADE BY THE COMMISSIONER OF INCOME TAX AND AFTER GETTING DE TAILED REPLY AND CLARIFICATION AS PER THE LETTER DATED APRIL 9, 2001 FROM THE RESPONDENT, THE COMMISSIONER OF INCOME TAX ISSUED A N ORDER UNDER RULE 11AA DATED JULY 22, 2003, WHEREBY THE DO NATIONS MADE TO THE RESPONDENT ARE MADE ALLOWABLE FOR THE B ENEFIT OF DEDUCTION UNDER SECTION 80G OF THE INCOME TAX ACT I N THE HANDS OF THE DONORS FOR THE PERIOD FROM APRIL 1, 2001 TO MARCH 31, 2004. AGAIN THE SAME BENEFIT WAS CONTINUED BY AN OR DER DATED SEPTEMBER 17, 2004, WITH EFFECT FROM APRIL 1, 2004 TO MARCH 31, 2007. IT MEANS THE DONORS, WHO MAKE DONATIONS TO TH E RESPONDENT TRUST, ARE ALSO ENTITLED TO GET BENEFIT OF DEDUCTION OF THE SAID DONATION FROM THEIR INCOME AS PER THE PROV ISIONS OF SECTION 80G FOR THE PURPOSE OF THE INCOME TAX. IT C LEARLY SHOWS THAT THE GOVERNMENT IS FULLY SATISFIED THAT THE ACT IVITIES OF THE RESPONDENT ARE FOR CHARITABLE PURPOSES AND, THEREFO RE, NOT ONLY THE RESPONDENT IS REGISTERED UNDER SECTION 12A AS T HE CHARITABLE TRUST AND ENTITLED TO BENEFIT OF EXEMPTION UNDER SE CTION 11, EVEN THE DONORS ARE ALSO GIVEN THE BENEFIT UNDER SECTION 80G. CHANGES IN THE RESPONDENT TRUST TOOK PLACE WITH THE AMENDMENT IN 1989. THE RELEVANT ASSESSMENT YEAR 1991-92 IS OF THE PERIOD AFTER THE SAID AMENDMENT. IF ON THE BASIS OF THE SA ID TRUST DEED, THE GOVERNMENT COULD GIVE EXEMPTION UNDER SECTION 1 1 AS ALSO UNDER SECTION 80G BY THE SUBSEQUENT ORDERS, THE COM MISSIONER OF INCOME TAX (APPEALS) AND THE INCOME TAX APPELLAT E TRIBUNAL WERE FULLY JUSTIFIED IN HOLDING THAT THE RESPONDENT IS ENTITLED TO GET EXEMPTION UNDER SECTION 11 FOR THE RELEVANT ASS ESSMENT YEAR. 26. IN VIEW OF THE ABOVE CIRCUMSTANCES, WE FIND THA T THE OBJECTS OF THE RESPONDENT ARE CHARITABLE WITHIN THE MEANING OF SECTION 2(15) AND THE INCOME TAX APPELLATE TRIBUNAL WAS RIG HT IN HOLDING THAT THE RESPONDENT IS ENTITLED TO EXEMPTION UNDER SECTION 11 OF THE INCOME TAX ACT. IN THE RESULT, WE ANSWER THE SU BSTANTIAL ITA NO.3921/M/2010 GIA INDIA 7 QUESTION OF LAW IN THE AFFIRMATIVE AND THE APPEAL S TANDS DISMISSED. NO ORDER AS TO COST. 8. THUS, IT IS CLEAR THAT THE AUTHORITIES WERE FULL Y SATISFIED THAT THE ACTIVITIES OF THE ASSESSEE ARE FOR CHARGEABLE PURPO SE WHILE GRANTING THE REGISTRATION U/S 25 OF THE COMPANIES ACT AND U/S 12 A AS WELL SECTION 80G OF THE INCOME TAX ACT. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHEN NO SUCH OBJECTION WAS RAISED AT THE TIME OF GRANTING THE EARLIER REGISTRATION NOT ONCE BUT AT FOUR OCCASIONS AND UND ER DIFFERENT PROVISIONS OF INCOME TAX ACT AS WELL AS UNDER COMPANIES ACT TH EN THE OBJECTIONS RAISED BY THE DIT ARE NOT SUSTAINABLE. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE DIT (EXEMPTION) TO GR ANT APPROVAL/RENEWAL U/S 80G(5)(VI) OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( ) !' #$ ( RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH ) ACCOUNTANT MEMBER ( & ) ' #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI