Bethsaida Women Dev Society, Trivandrum V. CIT, Trivandrum

ITA 407/COCH/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1041 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-12-2012
• Assessment Year: misc
• Appeal Filed On: 18-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T K MATHEW
• Keywords: Charitable institution; Source of fund
• Section: 12A; 12AA; 11

Judgement Text

1 ITA NO. 407/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 407/COCH/2010 BETHSAIDA WOMEN DEVELOPMENT SOCIETY VS C.I.T., TRIV ANDRUM MARION COMPLEX, MULLOOR PO VIZHINJAM, TRIVANDRUM-695 521 PAN : AAATB6734E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.K. MATHEW RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 11-01-2013 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED BY THE ORDER OF THE ADMINISTRATIVE COMMISSIONER DATED 21-04-2010 REJECTING THE APPLICATION OF THE TA XPAYER FOR REGISTRATION U/S 12A OF THE ACT, THE TAXPAYER HAS FILED THE PRES ENT APPEAL BEFORE THIS TRIBUNAL. 2 ITA NO. 407/COCH/2010 2. SHRI T.K. MATHEW, THE LD.REPRESENTATIVE SUBMITTE D THAT THE ADMINISTRATIVE COMMISSIONER REJECTED THE APPLICATION OF THE TAXPAYER FOR REGISTRATION U/S 12A ON THE GROUND THAT THE TAXPAYE RS OBJECT IS TO INVOLVE IN COMMERCIAL ACTIVITY, THEREFORE, NOT ENTITLED FOR EX EMPTION U/S 12A OF THE ACT. REFERRING TO PROVISO TO SECTION 2(15) OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED THAT SO LONG AS THE AGGREGATE VALUE OF TH E RECEIPT FROM THE COMMERCIAL ACTIVITIES WHICH ARE REFERRED TO IN THE PROVISO TO SECTION 2(15) OF THE ACT DOES NOT EXCEED RS.25 LAKHS, THE TAXPAYE R IS ENTITLED FOR REGISTRATION U/S 12A. MOREOVER, EVEN IF IT IS EXCE EDED RS.25 LAKHS, AT THE BEST, THE ASSESSING OFFICER, MAY REJECT THE CLAIM OF EXEMPTION U/S 11 OF THE ACT. ACCORDING TO THE LD.REPRESENTATIVE, REGISTRAT ION U/S 12A CANNOT BE DENIED ON THE GROUND THAT THE TAXPAYER INVOLVES IN COMMERCIAL ACTIVITY. THE LD.REPRESENTATIVE PLACED PLACED HIS RELIANCE ON THE DECISION OF THE JAIPUR BENCH B IN THE CASE OF RAJASTHAN HOUSING BO ARD VS C.I.T. (2012) 148 TTJ 68. THEREFORE, ACCORDING TO THE LD.REPRESENTAT IVE, THE TAXPAYER IS ENTITLED FOR REGISTRATION U/S 12A OF THE ACT. 3. ON THE CONTRARY, SMT. S VIJAYAPRABHA, THE LD.DR S UBMITTED THAT THE TAXPAYER RECEIVED HUGE DONATION, THE SOURCE OF WHIC H WAS NOT EXPLAINED TO 3 ITA NO. 407/COCH/2010 THE ADMINISTRATIVE COMMISSIONER. FOR THE FINANCIAL YEAR 2004-05, THE TAXPAYER HAS RECEIVED RS.2,63,84,207 AS FOREIGN CON TRIBUTION. LIKEWISE, FOR THE FINANCIAL YEARS 2005-06, 2006-07 & 2008-09 THE TAXPAYER HAS RECEIVED RS.2,87,59,611; RS.2,85,94,698; AND RS.2,27,94,735 RESPECTIVELY. THE LD.DR FURTHER SUBMITTED THAT CLAUSES 11, 13 & 14 OF THE M EMORANDUM OF ASSOCIATION GIVE UNLIMITED DISCRETION TO THE TRUSTE ES TO INVEST FUNDS IN THE BUSINESS ACTIVITY. THEREFORE, ACCORDING TO THE LD. DR, THE TAXPAYER IS NOT ENTITLED FOR REGISTRATION U/S 12A OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ADMI NISTRATIVE COMMISSIONER REJECTED THE APPLICATION OF THE TAXPAYE R ONLY ON THE GROUND THAT THE TAXPAYER INVOLVES ITSELF IN COMMERCIAL ACT IVITY. AS RIGHTLY SUBMITTED BY THE LD.REPRESENTATIVE FOR THE TAXPAYER, AN INSTI TUTION OR TRUST CANNOT BE CONSIDERED TO BE CHARITABLE INSTITUTION / TRUST IN CASE THE AGGREGATE VALUE OF THE RECEIPT FROM THE ACTIVITIES REFERRED TO IN PROV ISO TO SECTION 2(15) EXCEEDS RS.25 LAKHS. THEREFORE, THIS FACT HAS TO B E EXAMINED ONLY BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. AT TH E BEST, THE ASSESSING OFFICER MAY REJECT THE EXEMPTION U/S 11 EVEN AFTER R EGISTRATION U/S 12A IN 4 ITA NO. 407/COCH/2010 CASE THE AGGREGATE VALUE OF THE TRUST REFERRED TO I N PROVISO TO SECTION 2(15) EXCEEDS RS.25 LAKHS. IN THE CASE BEFORE US, IT APP EARS THAT THE TAXPAYER SOCIETY WAS ESTABLISHED TWO DECADES AGO. MOREOVER, THE TAXPAYER IS RECEIVING CRORES AND CRORES OF RUPEES EVERY YEAR AS FOREIGN CONTRIBUTION. THEREFORE, IT IS NECESSARY FOR THE ADMINISTRATIVE C OMMISSIONER WHETHER THE ACTIVITY OF THE TAXPAYER SOCIETY IS CARRIED ON IN A CCORDANCE WITH ITS OBJECTS. IT IS ALSO NECESSARY TO FIND OUT WHETHER SUCH OBJECT S ARE CHARITABLE NATURE OR NOT. WE FIND THAT THE KERALA HIGH COURT HAD AN OCC ASION TO EXAMINE AN IDENTICAL ISSUE IN THE CASE OF NORKA ROOTS (2010) 3 20 ITR 733 (KER). THE KERALA HIGH COURT AFTER CONSIDERING THE PROVISIONS OF SECTION 12AA FOUND THAT THE COMMISSIONER SHOULD VERIFY THE SOURCES OF FUNDS AND THE UTILIZATION OF THE SAME FOR THE PURPOSE OF GRANT OF REGISTRATIO N. IN FACT, THE KERALA HIGH COURT OBSERVED AS FOLLOWS ON PAGES 735 & 736 OF THE ITR: . HOWEVER, WE FIND THAT BEFORE DECIDING THE ENTITLEMENT FOR REGISTRATION AS CHARITABLE INSTITUT ION, THE COMMISSIONER SHOULD VERIFY THE SOURCE OF FUNDS AND UTILISATION OF THE SAME. EVEN THOUGH THIS IS AN EXERCISE TO BE DONE EVERY YEAR IN THE COURSE OF ASSESSMENT, AFTER GRANTING RE GISTRATION, WE FEEL THE OBJECT OF THE INSTITUTION SHOULD BE ASCE RTAINED WITH 5 ITA NO. 407/COCH/2010 REFERENCE TO THE SOURCE OF FUNDS AND THE APPLICATIO N OF THE SAME. IF UNDER COVER OF PROMOTING INTERESTS OF NON -RESIDENT KERALITES, THE APPELLANT IS ENGAGED IN COLLECTION O F CHARGES FROM THEM AND MAKING A PROFIT, THEN CERTAINLY IT IS A PROFITABLE ORGANIZATION, NO MATTER THAT NO DIVIDEND IS DECLARE D BY VIRTUE OF REGISTRATION GRANTED UNDER SECTION 25 OF THE COM PANIES ACT. IF FUNDS ARE EXPENDED FOR UNNECESSARY TRAVEL AND EXTRAVAGANZA, THEN THE SAME WILL REFLECT UPON THE T RUE PURPOSE OF THE ORGANIZATION. THE QUESTION OF LIMITATION RA ISED BY THE APPELLANT IS NEITHER TENABLE NOR WOULD ADVANCE THE CASE OF THE APPELLANT BECAUSE IN THE FIRST ROUND, THE TRIBUNAL DID NOT ACCEPT THE LIMITATION, BUT SET ASIDE THE ORDER AND REMANDED THE MATTER FOR FRESH CONSIDERATION. SECONDLY BY GE TTING A DECLARATION THAT THE MATTER IS TIME BARRED, THE APP ELLANT WILL NOT GET REGISTRATION MORE SO BECAUSE THE APPELLANT S APPLICATION IS NOT AN APPLICATION FOR RENEWAL AND A N APPLICATION FOR FRESH REGISTRATION. WE THEREFORE REJECT THIS CON TENTION ALSO. SINCE THESE ARE MATTERS NOT CONSIDERED BY THE COMMI SSIONER OR THE TRIBUNAL, AND SINCE AFTER REGISTRATION THE A PPELLANT WAS ENGAGED IN SIX YEARS OF OPERATION, WE DISPOSE OF TH E APPEAL BY SETTING ASIDE THE ORDERS OF THE TRIBUNAL AND THAT O F THE COMMISSIONER AND BY RESTORING THE MATTER TO THE COMMISSIONER FOR FRESH DECISION, BUT THE COMMISSION ER IS DIRECTED TO CONSIDER THE ORIGINAL APPLICATION AFTER CALLING FOR 6 ITA NO. 407/COCH/2010 PARTICULARS, PARTICULARLY STATEMENT OF ACCOUNTS, AS STATED ABOVE. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS OF THE CONSI DERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED IN THE LIGHT OF THE OBSERVATIONS OF THE KERALA HIGH COURT. ACCORDINGLY, THE ORDER OF ADMIN ISTRATIVE COMMISSIONER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE ADMINISTRATIVE COMMISSIONER. THE ADMINISTRATIVE COMMISSIONER SHAL L RE-EXAMINE THE ISSUE IN THE LIGHT OF THE JUDGMENT OF THE KERALA HIG H COURT IN THE CASE OF NORKA ROOTS (SUPRA) AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE TAXPAYER . 5. IN THE RESULT, THE APPEAL OF THE TAXPAYER IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH JANUARY, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 11 TH JANUARY, 2013 PK/- 7 ITA NO. 407/COCH/2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH