Baba Kartar Singh Dukki Educational Trust, Ludhiana V. CIT-I, Ludhiana

ITA 40/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60915 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-04-2012
• Assessment Year: misc
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMAR
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND ITA NO. 40/CHD/2012 (UNDER SECTION 12AA(1)(B)(II) BABA KARTAR SINGH DUKKI VS THE CIT-I EDUCATIONAL TRUST, LUDHIANA. LUDHIANA. PAN NO. AAATB7340L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SMT.JYOTI KUMAR, CIT DR DATE OF HEARING : 23.04.2012 DATE OF PRONOUNCEMENT : 27.06.2012 ORDER PER SUSHMA CHOWLA, JM THE PRESENT APPEAL IS AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX I, LUDHIANA DATED 27.12.2011 PASSED UND ER SECTION12AA(1)(B)(II) OF THE ACT. 2. THE ASSESS HAS RAISED SEVERAL GROUNDS OF APPEAL ALL AGAINST THE DENIAL OF REGISTRATION UNDER SECTION 12 AA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE AS NOTED BY THE C IT IN PARA 1 ARE AS UNDER : THE ASSESSEE HAD FILED AN APPLICATION ON 31.05.2007 FOR GRANT OF REGISTRATION UNDER SECTION 12A(A) OF I.T. ACT 1961 ORDER UNDER SECTION 12AA(1)(B)(II) OF I.T. ACT 1961 WAS P ASSED ON 30.11.2007 VIDE THIS OFFICE ORDER NO. CIT-I/LDH/TECH/12A/14/2007-08/6910-12 VIDE WHICH TH E REGISTRATION REQUEST WAS REJECTED. THE ASSESSEE HA D FILED AN APPEAL AGAINST THIS ORDER BEFORE THE INCOME TAX APP ELLATE 2 TRIBUNAL, CHANDIGARH BENCHES, CHANDIGARH ON 1.6.201 1 IN I.T. APPEAL NO. 509/CHANDI/2011. THE HONBLE ITAT, CHAN DIGARH HAD OBSERVED THAT THE IMPUGNED ORDER WAS PASSED IN HAST Y MANNER WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. ALSO THAT NO REPORT OF THE A.O. AND THE JOINT COMMISSIONER OF INCOME TAX, RANGE-II, LUDHIANA IS C ONFRONTED. THEREFORE, ORDER OF THE CIT HAS BEEN SET-ASIDE BY T HE HONBLE ITAT WITH THE DIRECTIONS TO DECIDE THE MATTER AFRESH . 4. THE CIT OBSERVED THAT THE ASSESSEE WAS ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT PROSPECTIVELY I.E A.Y. 2012-13 BUT DECLINED REGISTRATION ON THE FOLLOWING ACCOUNTS : A) ONE OF TRUSTEE SHRI JASBIR SINGH HAD WITHDRAWN A SU M OF RS.13,00,000/- ON 16/3/2011 FROM UNION BANK OF INDIA, LATALA WHICH IS SHOWN IN BALANCE SHEET AS ON 31.03.2011 AS SH. JASBIR SINGH IMPREST ACCOUNT. B) THE PARA 9(I) OF THE TRUST DEED PROVIDES FOR LIFE-L ONG MEMBERSHIP FOR TRUSTEE THEMSELVES AS WELL AS THEIR SUCCESSORS. C) THIS IS STRANGELY A TRUST AND ALSO A SOCIETY AND IS GOVERNED BY DIFFERENT LAWS. THE STATUS OF THE ASSESSEE IS VERY AMBIGUOUS AS IT IS A TRUST AND IT IS ALSO A SOCIETY. 5. THE REPLY OF ASSESSEE AGAINST THE ISSUES RAISED BY CIT WERE AS UNDER:- A) THE WITHDRAWAL WAS MADE FOR SPECIFIC PURPOSE OF COM PLETING MULTI PURPOSE HALL BEING CONSTRUCTED IN BABA KARTAR SINGH SENIOR SECONDARY SCHOOL, LATALA. IN SUPPORT OF HIS CONTENTION, CER TIFICATES DULY SIGNED (UNDATED) BY THE PRINCIPAL AND THE SECRETARY HAD B EEN FILED. B) THE TENURE OF TRUSTEE UNDER CLAUSE 9 OF TRUST DEED IS TENURE : (I)A PERMANENT TRUSTEE SHALL HOLD OFFICE FOR LIFE S UBJECT TO CLAUSE 11. 11.EXPULSION OF A TRUSTEE : (II) THE BOARD OF THE TRUSTEE SHALL BE ENTITLED TO EXPEL ANY TRUSTEE PERMANENT OR NON-PERMANENT, WHOSE ACT AND C ONDUCT IS CONSIDERED AGAINST THE INTEREST AND WELFARE OF THE TRUST. SUCH, AS 3 EXPULSION SHALL ONLY BE MADE AT LEAST BE THREE-FOUR TH OF THE TRUSTEES. C) THE ASSESSEE IS REGISTERED UNDER THE SOCIETIES ACT AND WAS ALSO REGISTERED UNDER THE TRUST ACT AS PUBLIC TRUST. 6. THE CIT ON CONSIDERING THE MATTER, OBSERVED AS U NDER: A) AS PER DOCUMENTS SUBMITTED BY THE ASSESSEES COUNSE L, THE SUM OF RS. 13,00,000/- IS SHOWN TO HAVE BEEN GIVEN ON 16.0 3.2011 TO SHRI JASBIR SINGH, TRUSTEE AND IT WAS NOT DEPOSITED TILL THE LAST DATE OF HEARING ON 20.12.2011. THIS AMOUNT CONTINUES TO BE WITH HIM SINCE 16.03.2011 TILL IT WAS NOT DEPOSITED EVEN ON 02.12. 2011 ( A PERIOD OF MORE THAN 9 MONTHS). THE SAID AMOUNT WAS SUPPOS ED TO BE INVESTED IN THE MODES SPECIFIED IN SECTION 11(5). IN THIS VIEW OF THE MATTER, AN UNTRUE CERTIFICATE U/S 13(1)(C) WAS GIVE N AND ALSO AN UNTRUEAUDIT-REPORT WAS GIVEN. B) THE ASSESSEE IS A TRUST REGISTERED UNDER THE SOCIET IES REGISTRATION ACT AND NOT HAVING A PROVISION FOR ELECTIONS IS AN ANOMALY. ALSO BEING A PUBLIC TRUST, IT CANNOT OPT FOR LIFE-LONG S TATUS FOR ONE SINGLE TRUSTEE OR HIS HEIR. C) THIS IS STRANGELY A TRUST AND ALSO A SOCIETY AND IS GOVERNED BY DIFFERENT LAWS. THE STATUS OF THE ASSESSEE IS VERY AMBIGUOUS AS IT IS A TRUST AND IT IS ALSO A SOCIETY. 7. IN VIEW THEREOF, THE CIT UNDER THESE FACTS AND C IRCUMSTANCE, HELD THAT THE CONSTITUTION AND PRACTICES OF THE TRUST ARE NOT IN CONSONANCE WITH THE INDIAN LAW AND PRACTICE, PARTICULARLY INCOME TAX SE CTIONS 10(23)(C), 11, 12, 13 AND 80G OF I.T. ACT. AFTER THE INFORMATION CALL ED BY ME UNDER CLAUSE (A) OF SUB SECTION (1) OF SECTION 12AA, I AM NOT SATISFIED WITH THE OBJECTS AND GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE TRUST . I, THEREFORE, REFUSE TO REGISTER THE ASSESSEE WITHIN THE MEANING OF SUB-CLA USE (B)(II) OF SUB-SECTION (1) OF SECTION 12AA OF I.T. ACT. 8. THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEA L, ALL AGAINST THE DECLINE OF REGISTRATION U/S 12AA OF THE ACT. 4 9. THE LEARNED A.R. FOR THE ASSESSEE HAS FILED WRIT TEN SUBMISSIONS AND HAS ALSO PLACED RELIANCE ON CIT-II, CHANDIGARH VS. SURY A EDUCATIONAL & CHERITABLE TRUST [203 TAXMAN 53 (P&H)]. 10. THE LEARNED D.R. FOR THE REVENUE HAS PLACED REL IANCE ON THE ORDER OF CIT, LUDHIANA. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS REGISTRATION ALLOW ABLE TO A TRUST UNDER SECTION 12AA OF THE ACT. IN ORDER TO AVAIL THE BENEFIT OF DEDUCTION UNDER SECTION 11 AND 12 OF THE ACT, IT IS MANDATORY THAT THE TRUST O R ORGANIZATION SHOULD BE REGISTERED BY WAY OF FILING APPLICATION UNDER SECTI ON 12A OF THE ACT, CONSEQUENT TO WHICH THE CIT ON BEING SATISFIED THAT THE ACTIVITIES OF THE TRUST ARE CHARITABLE AND ARE GENUINE SHALL PASS AN ORDER REGISTERING THE TRUST UNDER SECTION 12AA OF THE ACT. 12. THE SCOPE OF POWERS OF THE CIT FOR REGISTRATION OF TRUST (SUPRA) U/S 12AA HAS BEEN ELABORATED UPON BY THE PUNJAB & HARYA NA HIGH COURT IN CIT- II, CHANDIGARH VS. SURYA EDUCATIONAL & CHERITABLE T RUST (SUPRA) WHEREIN IT HAS BEEN HELD AS UNDER AS PER SECTION 12AA AN APPLICATION FOR REGISTRATION OF THE TRUST AND INSTITUTION IS REQUIRED TO BE MADE WITHIN ONE YEAR FROM THE DATE O F CREATION OF THE TRUST OR THE ESTABLISHMENT OF SUCH INSTITUTION. THE PROCEDURE FO R REGISTRATION OF THE TRUST OR INSTITUTION IS PRESCRIBED UNDER SECTION 12AA. IN TE RMS OF CLAUSE (A) OF SECTION 12AA, THE COMMISSIONER IS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST ON SUCH INQUIRIES AS HE MAY DEEM NECESSARY. SUB-SECTION (1A) AND (2) OF SECTION 12AA ARE PROCEDURAL IN NATU RE, WHEREAS SUB-SECTION (3) OF SECTION 12AA EMPOWERS THE COMMISSIONER TO CANCEL THE REGISTRATION OF THE TRUST OR INSTITUTION, IF HE IS SATISFIED THAT THE A CTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT CARRIED OUT IN ACCORDANC E WITH THE OBJECTS OF THE TRUST OR INSTITUTION. [PARA 8] SECTION 11 CONTEMPLATES THAT THE INCOME AS SPECIFIE D THEREIN SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME DERIVED FROM THE PROPERTY HELD UNDER THE TRU ST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, WHEREAS SECTION 12 DEALS WITH T HE CONTRIBUTIONS RECEIVED BY THE TRUST OR AN INSTITUTION, ESTABLISHED FOR CHARIT ABLE AND RELIGIOUS PURPOSES, RECEIVING CONTRIBUTION, SHALL NOT BE AN INCOME IN T ERMS OF SECTION 11. THE BENEFIT OF SECTIONS 11 AND 12 IS AVAILABLE ONLY IF SUCH TRU ST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA. [PARA 9] 5 ON THE OTHER HAND, THE PROVISIONS OF SECTION 10(23C ) ARE THE PROVISIONS OF THE ACT IN SUBSTITUTION OF THE EARLIER PROVISIONS OF SECTIO N 10(22) AS TO WHICH INCOME SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME OF ANY PERSON. THEREFORE, THE PROVISIONS OF SECTIONS 11, 12 OR SECTION 10(23C) DE AL WITH THE INCOME OF A TRUST OR OF THE INSTITUTION AND THE CIRCUMSTANCES AS TO W HEN SUCH INCOME IS TO BE EXCLUDED FOR COMPUTING THE TOTAL INCOME, BUT THE BA SIS OF SUCH BENEFIT IS THE REGISTRATION UNDER SECTION 12AA. UNLESS A TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA, SUCH TRUST OR INSTITUTION SHALL NOT B E ENTITLED TO EXCLUDE FROM ITS TOTAL INCOME, DEDUCTIONS OR CONTRIBUTIONS OR FROM O THER SOURCES. THEREFORE, THE PRINCIPLES LAID DOWN FOR EXCLUDING THE INCOME FROM CONSIDERATION UNDER SECTION 10(22) NOW 10(23)(C) OR SECTIONS 11 AND 12 ARE NOT APPLICABLE WHILE CONSIDERING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA . THE APPLICATION FOR REGISTRATION IS REQUIRED TO BE MADE WITHIN ONE YEAR OF THE CREATION OF THE TRUST. SECTION 12AA REQUIRES SATISFACTION IN RESPECT OF TH E GENUINENESS OF THE ACTIVITIES OF THE TRUST, WHICH INCLUDES THE ACTIVITIES WHICH T HE TRUST IS UNDERTAKING AT PRESENT AND ALSO WHICH IT MAY CONTEMPLATE TO UNDERTAKE. THE INSERTION OF SUB-SECTION (3) TO SECTION 12AA CLARIFIES THE SAID FACT, WHEN IT EM POWERS THE COMMISSIONER TO CANCEL THE REGISTRATION IF THE ACTIVITIES OF THE TR UST ARE NOT CARRIED OUT IN ACCORDANCE WITH SUCH OBJECTS. [PARA 10] THEREFORE, THE OBJECT OF SECTION 12AA IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR C HARITABLE OR RELIGIOUS PURPOSES. THE STAGE FOR APPLICATION OF INCOME IS YET TO ARRIV E I.E., WHEN SUCH TRUST OR INSTITUTION FILES ITS RETURN. [PARA 11] 13. NOW COMING TO THE FACTS OF THE PRESENT CASE, TH E ASSESSEE TRUST WAS RUNNING A SCHOOL AT LATALA. THE TRUST WAS FORMED O N 04.02.2000 AND WAS FILLING ITS RETURNS OF INCOME FROM A.Y. 2000-01 ALO NGWITH AUDITED ACCOUNTS. THE ASSESSEE HAD EARLIER FILED APPLICATION FOR REGI STRATION OF TRUST, WHICH WAS NOT FOLLOWED UP AND HENCE REJECTED. THE ASSESSEE F ILED THE PRESENT APPLICATION U/S 12A OF THE ACT ON 31.05.2007. THE CIT HAD COND ONED THE DELAY FOR FILLING THE APPLICATION FOR REGISTRATION AND REGISTRATION W AS TO BE ALLOWED PROSPECTIVELY FROM A.Y. 2012-13, TO WHICH THE LEARN ED A.R. FOR THE ASSESSEE AGREED. HOWEVER, THE SAME WAS REJECTED ON INVOCAT ION OF SECTION 13(1)(II) OF THE ACT AND LIFE LONG MEMBERSHIP OF THE TRUSTEES AN D ASSESSEE BEING BOTH SOCIETY AND TRUST. 14. APPLYING THE PRINCIPLES LAID DOWN BY THE HONBL E PUNJAB & HARYANA HIGH COURT IN SURYA EDUCATIONAL & CHARITABLE TRUST, WE FIND THAT THE CIT WHILE GRANTING REGISTRATION U/S 12AA OF THE FACT IS TO LOOK INTO THE OBJECTS OF THE TRUST AND WHETHER THE TRUST IS CARRYING ON THE SAID OBJECTS OF THE TRUST. THE OBJECTS OF THE PRESENT ASSESSEE TRUST WERE IN T HE LINE OF EDUCATION AND THE 6 ASSESSEE WAS RUNNING BOTH SCHOOL AND COLLEGE. ONCE A TRUST IS ENGAGED IN THE ACTIVITIES OF PROVIDING EDUCATION BY WAY OF SETTING UP SCHOOL AND COLLEGE, WHICH IS ONE OF THE RECOGNIZED OBJECT OF CHARITABLE ACTIVITY AND NO EVIDENCE HAVING BEING BROUGHT ON RECORD, THAT THE SAID ACTIV ITIES OF THE TRUST WERE NOT GENUINE, THE SAID TRUST IS ENTITLED TO REGISTRATION U/S 12AA OF THE ACT. THE SATISFACTION OF CONDITIONS OF SEC. 11 TO 13 OF THE ACT IS TO BE GONE INTO BY ASSESSING OFFICER, WHILE DETERMINING THE INCOME OF TRUST AT THE TIME OF ASSESSMENT AND NOT TO BE GONE INTO BY CIT, WHILE GR ANTING REGISTRATION U/S 12AA OF THE ACT. THE NEXT OBJECTION OF THE CIT IS THAT THE ASSESSEE IS BOTH TRUST AND SOCIETY IS RECOGNIZED SYSTEM AND ONCE IT IS REGISTERED AS TRUST, PROVISION OF ELECTION ARE NOT APPLICABLE TO TRUSTS. THE NEXT OBJECTION OF THE CIT THAT TRUSTEE AND THEIR SUCCESSOR WERE LIFE LONG MEMBER AND HENCE ACTIVITIES OF TRUST BEING NOT GENUINE ARE NOT CORRE CT, AS THE RULE AGAINST PERPETUITY IS NOT APPLICABLE IN CASE OF PUBLIC CHAR ITABLE TRUST, AS PER SECTION 18 OF TRANSFER OF PROPERTY ACT. IN VIEW THEREOF, WE F IND NO MERIT IN THE ORDER OF CIT AND DIRECT THE CIT TO GRANT REGISTRATION U/S 12 AA OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE ALLOWE D. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JUNE, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JUNE, 2012 COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH