M/s Sri Sama Suryanarayana Murty Educational Society, Kakinada V. The CIT, Rajahmundry, Rajahmundry

ITA 404/VIZ/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2139 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 23-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , . . . . , $ $ $ $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.404/VIZAG/2012 ( / ASSESSMENT YEAR : N.A.) SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY KAKINADA VS. CIT RAJAHMUNDRY [ PAN: AAAAS6943D ] ( & & & & / APPELLANT) ( '(& '(& '(& '(& / RESPONDENT ) & ) / APPELLANT BY : SHRI G.V.N. HARI, AR '(& ) / RESPONDENT BY : SHRI TH. LUCAS PETER, DR ) - / DATE OF HEARING : 20.11.2015 ) - / DATE OF PRONOUNCEMENT : 08.01.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT, RAJAHMUNDRY DATED 2.7.2012. 2. THE ASSESSEE NAMELY SRI SAMA SURYANARAYANA MURTH Y EDUCATIONAL SOCIETY HAS FILED AN APPLICATION U/S 12AA OF THE IN COME-TAX ACT, 1961 ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 2 (HEREINAFTER CALLED AS THE ACT) ON 14.2.2012, ALO NG WITH FORM NO.10A, BEFORE THE COMMISSIONER OF INCOME-TAX, RAJAHMUNDRY. 3. THE LD. COMMISSIONER AFTER RECEIVING THE APPLICA TION FROM THE ASSESSEE, HAS ISSUED A SHOW CAUSE NOTICE TO APPEAR BEFORE HIM ON 29.5.2012 AND ACCORDINGLY THE ASSESSEES REPRESENTA TIVE APPEARED AND FILED A DETAILED NOTE ON TRANSACTIONS WITH HUF, PRO DUCED BOOKS OF ACCOUNTS FOR THE FINANCIAL YEAR 2010-11 AND DETAILE D SUBMISSIONS MADE IN RESPECT OF UTILIZATION OF THE FUNDS. 4. THE LD. COMMISSIONER AFTER CONSIDERING THE DETAI LED SUBMISSIONS MADE BY THE ASSESSEE, HE HAS OBSERVED THAT THE CHIE F COMMISSIONER OF INCOME TAX, VISAKHAPATNAM VIDE ORDER IN F.NO.CC/VSP /TECH/10(23C)/ 1/11-12 DATED 29.2.2012 REJECTED THE ASSESSEES APP LICATION DATED 20.5.2011 FOR APPROVAL U/S 10(23C)(VI) OF THE I.T. ACT, FOR THE REASON THAT THE ASSESSEE SOCIETY HAS GIVEN INTEREST FREE A DVANCES (RENT ADVANCE) TO THE HUF, WHO ARE THE SONS OF SRI SAMA S URYANARAYANA MURTHY (WHOSE NAME TRUST IS CREATED). HE ALSO OBSE RVED THAT THE RELATIVES OF THE ASSESSEE SOCIETY NAMELY SMT. S.D.L . KAMALA, SMT. S. RAJESWARI, MS. S. MEENA KUMARI RELATIVES OF MEMBERS AND MS. RATNAMALA (MEMBER) ARE DRAWING RS.6900/- PER MONTH FROM THE SOCIETY. HE FURTHER OBSERVED THAT THE ASSESSEE HAS NOT REGIS TERED U/S 43(1) OF ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 3 THE ANDHRA PRADESH CHARITABLE AND HINDU RELIGIOUS I NSTITUTION AND ENDOWMENTS ACT, 1987. ON THE ABOVE OBSERVATION HE CAME TO A CONCLUSION THAT ASSESSEE HAS CONTINUED ITS VIOLATIO NS AND THOUGH THE AMENDED OBJECTS ARE CHARITABLE IN NATURE, THE ACTIV ITIES OF SOCIETY ARE NOT GENUINE AND REJECTED THE REGISTRATION U/S 12AA OF THE ACT. 5. ON BEING AGGRIEVED ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE OBJECTS OF THE ASSESSEE SOCIETY ARE ONLY CHARITABLE IN NATURE. THIS FACT HAS BEEN ACCEPTED BY THE LD. COMMISSIONER AND THEREFORE REJE CTED THE REGISTRATION U/S 12AA OF THE ACT BY FOLLOWING THE O RDER PASSED BY THE CCIT DATED 20.5.2011 IS NOT CORRECT AND THE ORDER P ASSED BY THE COMMISSIONER HAS TO BE QUASHED. HE FURTHER SUBMITT ED THAT AT THE TIME OF GRANTING THE REGISTRATION U/S 12AA OF THE ACT, T HE COMMISSIONER HAS TO SEE THAT THE OBJECTS OF THE SOCIETY ARE CHARITAB LE IN NATURE OR NOT AND WHETHER SOCIETY IS CARRYING SUCH ACTIVITIES IN ACCO RDANCE WITH THE OBJECTS OR NOT AND REGISTRATION U/S 12AA OF THE ACT HAS TO BE GRANTED. FOR THAT HE RELIED ON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. D IT 285 ITR 327 AND SUBMITTED THAT THE ASSESSEE TRUST EXISTED O NLY FOR CHARITABLE PURPOSE AND HENCE REGISTRATION U/S 12AA HAS TO BE G RANTED. ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 4 7. ON THE OTHER HAND, THE LD. D.R. HAS STRONGLY SUP PORTED THE ORDER PASSED BY THE COMMISSIONER. 8. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE A SSESSEE IS AN EDUCATIONAL SOCIETY EXISTED SOLELY FOR THE PURPOSE OF IMPARTING EDUCATION AND OTHER SOCIAL ACTIVITIES. THE LD. COMMISSIONER HAS ACCEPTED THAT THE OBJECTS OF THE SOCIETY ARE IN CHARITABLE NATURE. T HEREFORE, THERE IS NO DOUBT ABOUT THE ACTIVITIES OF THE ASSESSEE SOCIETY. THE LD. COMMISSIONER REJECTED THE REGISTRATION U/S 12AA OF THE ACT OF THE ASSESSEE ON THE GROUND THAT THE CHIEF COMMISSIONER BY ORDER DATED 20.5.2011 REJECTED THE APPROVAL U/S 10(23C)(VI) OF THE ACT ON THE GROUND THAT THE ASSESSEE SOCIETY HAS GIVEN INTEREST FREE ADVANCES TO THE HUF WHO ARE THE SONS OF SRI SAMA SURYANARAYANA MURT HY (WHOSE NAME TRUST IS CREATED) AND ALSO ON THE GROUND THAT SOME OF THE RELATIVES AND FAMILY MEMBERS ARE DRAWING RS.6,900/- P.M. FROM THE SOCIETY. WE FIND THAT THE ASSESSEE SOCIETY IS EXISTED ONLY FOR IMPAR TING EDUCATION AND THE SAME IS ACCEPTED BY THE COMMISSIONER. THE ASSESSEE IS PAYING REGULAR RENT TO THE HUF. IN THAT CONNECTION, CERTAIN ADVAN CES ALSO PAID. SIMPLY BECAUSE THERE IS NO WRITTEN AGREEMENT, IT CANNOT BE SAID THAT THE TRANSACTION IS NOT GENUINE. THE LD. COMMISSIONER R EJECTED THE ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 5 REGISTRATION U/S 12AA OF THE ACT MAINLY ON THE GROU ND THAT THE CHIEF COMMISSIONER HAS REJECTED THE APPROVAL U/S 10(23C)( VI) OF THE ACT DATED 20.5.2011. THEREFORE, HE HAS COME TO THE CONCLUSIO N THAT THE ASSESSEE TRUST IS NOT GENUINE AND REJECTED THE REGISTRATION U/S 12AA OF THE ACT. WE FIND THAT THE COMMISSIONER WITHOUT EXAMINING THE EXPLANATION OF THE ASSESSEE AND SIMPLY RELIED ON THE ORDER PASSED BY T HE CHIEF COMMISSIONER, REJECTED REGISTRATION U/S 12AA OF THE ACT IS NOT JUSTIFIED, PARTICULARLY WHEN THE ASSESSEE IS CARRYING ON THE E DUCATIONAL ACTIVITIES. SO FAR AS PAYMENT MADE BY THE SOCIETY, TO SOME OF T HE RELATIVES/MEMBERS OF THE HUF IS CONCERNED, IT WAS C LEARLY EXPLAINED BEFORE THE ADDL. COMMISSIONER OF INCOME TAX, KAKINA DA DATED 14.6.2010 BY STATING THAT SMT. KAMALA, SMT. RAJESWA RI, SMT. MEENA KUMARI AND SMT. RATNAMALA ARE WORKING FOR THE SCHOO L AND THEREFORE THE AMOUNT OF RS.6,900/- P.M. IS PAID AS SALARY. T HE LD. COMMISSIONER WITHOUT CONSIDERING DETAILED SUBMISSIONS MADE BY TH E ASSESSEE SIMPLY REJECTED THE REGISTRATION U/S 12AA OF THE ACT. ANO THER OBJECTION RAISED BY THE LD. COMMISSIONER IS THAT THE ASSESSEE SOCIET Y IS NOT REGISTERED WITH THE ANDHRA PRADESH CHARITABLE & HINDU RELIGIOU S INSTITUTIONS AND ENDOWMENTS ACT, 1987. THE TRIBUNAL HAS ALREADY CON SIDERED THIS ASPECT AND HELD THAT IN THE CASE OF SRI SARASWATI EDUCATIO NAL SOCIETY, AMALAPURAM VS. CIT RAJAHMUNDRY IN ITA NO.202/VIZAG/ 2012 FOR ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 6 REGISTRATION U/S 12AA OF THE ACT, IT IS NOT MANDAT ORY FOR REGISTRATION U/S 43 OF THE A.P. CHARITABLE & HINDU RELIGIOUS INSTITU TIONS AND ENDOWMENTS ACT, 1987. THEREFORE WE FIND THAT REJECTING THE R EGISTRATION ON THE GROUND OF NON-REGISTRATION WITH THE A.P. CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS AND ENDOWMENTS ACT IS NOT CORRECT. ON E MORE OBJECTION RAISED BY THE COMMISSIONER THAT THE FAMILY MEMBERS OF THE HUF ARE GOVERNING BODY MEMBERS OF THE SOCIETY, WE FIND THAT SOME OF THE MEMBERS OF THE FOUNDERS OF THE INSTITUTION ARE MEMB ERS OF THE ASSESSEE SOCIETY IS NOT A GROUND FOR REJECTING THE REGISTRAT ION U/S 12AA OF THE ACT. IN THIS CONTEXT, THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BABA KARTAR SINGH DU KKI EDUCATIONAL TRUST 221 TAXMAN 493 HAS HELD THAT FACT THAT A TRU STEE IS LIFE MEMBER, MAY BE A RELEVANT BUT CANNOT BY ITSELF LEAD TO A FI NDING THAT THE TRUST IS NOT CHARITABLE. 9. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST (SUPRA) HAS HELD THAT FOR THE PURPOSE OF REGISTRATION U/S 12AA OF THE ACT, WHAT T HE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION, HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLI ED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVIT Y BY WHICH THE INCOME ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 7 IS DERIVED BY THE TRUST. IN THE PRESENT CASE, THE ASSESSEE IS RUNNING AN EDUCATIONAL INSTITUTION, WHICH IS A CHARITABLE ONE IN NATURE, THE INCOME DERIVED FROM THE EDUCATIONAL INSTITUTION UTILIZED O NLY FOR CHARITABLE PURPOSE. THE LD. COMMISSIONER WITHOUT CONSIDERING DETAILS FILED BY THE ASSESSEE AND ALSO EXPLANATION GIVEN BY THE ASSESSEE , REJECTED THE REGISTRATION U/S 12AA OF THE ACT UNREASONABLY AND W ITHOUT THERE BEING ANY BASIS. AT THE TIME OF GRANTING REGISTRATION, T HE COMMISSIONER HAS TO SEE THAT WHETHER THE ASSESSEE IS ESTABLISHED FOR TH E CHARITABLE PURPOSE OR NOT AND WHETHER THE FUNDS COLLECTED ARE BEING UT ILIZED FOR THAT PURPOSE. ONCE THE ASSESSEE HAS SATISFIED THE CONDI TIONS THAT IT IS EXISTED FOR THE PURPOSE OF CHARITABLE NATURE AND TH E FUNDS RECEIVED ALSO ARE BEING UTILIZED TO ACHIEVE THE OBJECTS OF THE TR UST, THE COMMISSIONER HAS TO GRANT THE REGISTRATION U/S 12AA OF THE ACT. IF AT ALL DOUBTS ARE THERE IN RESPECT OF ACTIVITIES OF THE TRUST, THERE ARE OTHER SAFEGUARDS ALREADY PROVIDED BY THE ACT. IT CAN BE CONSIDERED AT THE TIME OF THE ASSESSMENT AND DECIDED ACCORDINGLY. IN THE PRESENT CASE, WE FIND THAT THE LD. COMMISSIONER REJECTED THE REGISTRATION U/S 12AA OF THE ACT WITHOUT THERE BEING ANY JUSTIFIED REASONS. AFTER C AREFUL CONSIDERATION OF THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO KEEPING IN VIEW OF THE JUDGEMENT OF HONBLE KARNATAKA HIGH COURT, W E ARE OF THE OPINION THAT ASSESSEE DESERVE TO BE GRANTED REGISTR ATION U/S 12AA OF THE ITA NO.404/VIZAG/2012 SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, KAKINADA 8 ACT. THUS, WE QUASH THE ORDER PASSED BY THE LD. CO MMISSIONER AND GRANT REGISTRATION U/S 12AA OF THE ACT TO THE ASSES SEE. ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 TH JAN16. SD/- SD/- ( . . . . ) ( . ) ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 3 / DATED : 8.1.2016 VG/SPS ) ' 4 / COPY OF THE ORDER FORWARDED TO :- 1. & / THE APPELLANT SRI SAMA SURYANARAYANA MURTHY EDUCATIONAL SOCIETY, DR.NO.50-4-9, MARKET STREET, JAGANNAICKPUR, KAKINAD A, EAST GODAVARI DISTRICT. 2. '(& / THE RESPONDENT THE CIT, RAJAHMUNDRY 3. 5 () / THE CIT(A),RAJAHMUNDRY 4. ' , , / // / DR, ITAT, VISAKHAPATNAM 5 . . . . / GUARD FILE / BY ORDER // TRUE COPY // 9: ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM