Philia Charitable Society, Alappuzha V. The CIT, Kottayam

ITA 430/COCH/2014

• Counselvise Citation: 43021914 RSA 2014
• Duration Of Justice: 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 13-01-2015
• Assessment Year: misc
• Appeal Filed On: 07-10-2014
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: MANOJ PETER
• Keywords: Cancellation of registration
• Section: 11; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO.430/COCH/2014 PHILIA CHARITABLE SOCIETY, PUTHENPURAYIL, KARTHIKAPALLY, ALPPUZHA-690 516. [PAN: AACAP 8936H] VS. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. (ASSESSEE-APPELLANT) (REVENUE-RESPONDENT) ASSESSEE BY SHRI MANOJ PETER, CA REVENUE BY SHRI K.K. JOHN, SR. DR DATE OF HEARING 13/01/2015 DATE OF PRONOUNCEMENT 06/03/2015 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 31-07- 2014 PASSED BY THE CIT, KOTTAYAM REJECTING THE APPL ICATION FOR REGISTRATION U/S. 12AA OF THE I.T. ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A SOCIETY REGISTERED UNDER THE TRAVANCORE-COCHIN LITERARY, SCIENCE, CHARITABLE SOCIETIES REGISTRATION ACT, 1955 ON 26-06-2013. THE SOCIETY HAS FILED AN APPLICATIO N IN THE PRESCRIBED FORM 10A ON 26-03-2014 FOR REGISTRATION U/S. 12AA OF THE I.T. A CT, 1961. I.T.A. NO . 430/COCH/2014 2 3. THOUGH THE OBJECTIVES FOR WHICH THE SOCIETY WAS CONSTITUTED ARE MAINLY CHARITABLE IN NATURE, THE CIT NOTICED THAT THE ASSE SSEE SOCIETYS ACTIVITIES SO FAR WAS NOT UPTO THE MARK AND NOT IN CONSISTENT WITH THE OB JECTIVES FOR WHICH IT HAS BEEN FORMED. ON GOING THROUGH THE FINANCIAL STATEMENTS PRODUCED BEFORE HIM, THE CIT FOUND THAT THE SOCIETY IS IN SHORT OF FUNDS FOR UND ERTAKING THE OBJECTIVES ENSHRINED IN THE MEMORANDUM OF ASSOCIATION. THEREFORE, THE CI T WAS NOT SATISFIED THAT THIS IS A FIT CASE FOR GRANTING REGISTRATION U/S. 12AA OF T HE I.T. ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. DR RELIED ON THE ORDER OF THE CIT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. THE QUESTION WHICH HAS ARISEN IN THE PRESENT CASE IS AS TO WHETH ER REGISTRATION HAS RIGHTLY BEEN REFUSED TO THE ASSESSEE BY THE LEARNED CIT U/S . 12AA OF THE I.T. ACT. SECTION 12AA OF THE I.T. ACT, PRESCRIBES THE PROCED URE FOR REGISTRATION OF A SOCIETY. AS PER THIS SECTION, THE CIT, ON RECEIPT O F AN APPLICATION FOR REGISTRATION, SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM T HE SOCIETY AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF THE SOCIETY AND MAY ALSO MAKE SUCH ENQUIRY AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND THAT AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE S OCIETY AND THE GENUINENESS OF ITS ACTIVITIES, HE SHALL PASS AN ORDER IN WRITING, REGISTERING THE SOCIETY. THEREFORE, IN ACCORDANCE WITH SECTION 12AA OF THE ACT, THE LEA RNED CIT WAS REQUIRED TO I.T.A. NO . 430/COCH/2014 3 SATISFY HIMSELF ABOUT THE OBJECTS OF THE SOCIETY AN D THE GENUINENESS OF THE ACTIVITIES CARRIED OUT BY THE ASSESSEE. 6. IN THE PRESENT CASE, A PERUSAL OF THE ORDER OF T HE CIT SUGGEST THAT HE IS NOT SATISFIED ABOUT THE CHARITABLE ACTIVITIES CARRI ED OUT BY THE ASSESSEE. IN HIS OPINION, IT IS NOT UPTO THE MARK AND NOT IN CONSIST ENT WITH THE OBJECTS FOR WHICH IT HAS BEEN FORMED. ACCORDING TO THE CIT, THE ASSESSE E IS IN SHORT OF FUNDS FOR CARRYING OUT THE OBJECTS FOR WHICH IT WAS CONSTITUT ED. THIS OBSERVATION OF THE CIT HAS BEEN REBUTTED BY THE ASSESSEES COUNSEL THA T THE ASSESSEE HAS CARRIED OUT THE ACTIVITIES IN ACCORDANCE WITH THE OBJECT CL AUSE IN THE MEMORANDUM OF ASSOCIATION AND BYE-LAWS OF THE SOCIETY. IT WAS S UBMITTED BEFORE US THAT THE SOCIETY WAS FORMED UNDER THE TRAVANCORE-COCHIN LITE RARY, SCIENTIFIC, CHARITABLE SOCIETIES REGISTRATION ACT, 1955 ON 26-06-2013 TH E ASSESSEE HAS FILED BEFORE US RECEIPTS AND PAYMENTS ACCOUNT, INCOME AND EXPENDI TURE STATEMENT, CASH FLOW STATEMENT AND BALANCE SHEET AS ON 31 ST MARCH, 2014. THE ASSESSEE HAS RECEIVED RS. 6,25,000/- AS CONTRIBUTION TOWARDS COR PUS FUND. AS PER CLAUSE 12(A) OF THE MEMORANDUM OF ASSOCIATION, AMOUNT RECEIVED A S SHARE SHOULD BE DEPOSITED WITH A NATIONAL BANK OR A SCHEDULED BANK AND THE ANNUAL INTEREST RECEIVED FROM IT SHOULD BE USED. AS PER THIS CLAUSE , THE ASSESSEE HAS SPENT AN AMOUNT OF RS.76,300/- TOWARD THE MAIN OBJECTS OF TH E SOCIETY FOR WHICH IT WAS FORMED. ACCORDING TO THE ASSESSEES COUNSEL, THE F INDINGS RECORDED BY THE CIT THAT THE ACTIVITY CARRIED OUT BY THE ASSESSEE IS NO T UP TO THE MARK, IS NOT CORRECT. I.T.A. NO . 430/COCH/2014 4 WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE CO UNSEL THAT THE ASSESSEE IS IN THE INITIAL STAGE AND THE TOTAL INCOME OF THE ASSES SEE FROM 26 TH JUNE 2013 TO 31 ST MARCH, 2014 IS RS.1,37,585/-. THE ASSESSEE EARNED INTEREST AT RS.32,481/-. THE TOTAL EXPENDITURE WAS RS.99,328/-. THE ASSESSEE HA S SPENT RS.76,300/- TOWARDS THE OBJECT OF THE SOCIETY FOR WHICH IT WAS FORMED. THE ASSESSEE HAS SPENT THE INTEREST EARNED ON FIXED DEPOSITS AND SOUGHT FINANC IAL HELP FROM VARIOUS INDIVIDUALS AND ORGANIZATIONS TOWARDS ITS OBJECT OF CARRYING OUT CHARITABLE ACTIVITIES. BEING SO, IT CANNOT BE SAID THAT THE A CTIVITY OF THE ASSESSEE IS NOT UPTO THE MARK. WE HAVE TO BEAR IN MIND THAT THE ASSESSE E IS AT THE EARLY STAGE OF FORMATION AND THE ASSESSEE HAS INCURRED ADMINISTRAT IVE EXPENSES TO RUN THE SOCIETY. IN THE ABOVE CIRCUMSTANCES, IN OUR OPINIO N, THE AMOUNT SPENT BY THE ASSESSEE TOWARDS THE OBJECT OF THE SOCIETY IS VERY CONSIDERABLE AND THERE IS NO ALLEGATION BY THE CIT THAT THE ACTIVITY OF THE ASSE SSEE IS NOT CHARITABLE. ONCE THE ACTIVITY IS CHARITABLE AND IT HAS BEEN CARRIED OUT BY THE ASSESSEE DURING THIS PERIOD, IN OUR OPINION, REJECTION OF GRANT OF REGIS TRATION U/S. 12AA BY THE CIT IS NOT JUSTIFIED. THE CIT IS ONLY REQUIRED TO SATISFY HIMSELF WITH REGARD TO THE OBJECTS AND GENUINENESS OF THE ACTIVITIES OF THE SOCIETY. THE OBSERVATION MADE BY THE CIT DOES NOT IMPINGE UPON THESE ASPECTS AND THE OBS ERVATION MADE BY THE CIT IS THE RESULT OF MERE SURMISES AND CONJECTURES. NOT HING TURNS ON IT AGAINST THE ASSESSEE FOR GRANTING REGISTRATION U/S. 12AA OF THE I.T. ACT. IN VIEW OF THE ABOVE, IT IS PROPER TO GRANT REGISTRATION U/S. 12AA OF THE I.T. ACT TO THE ASSESSEE I.T.A. NO . 430/COCH/2014 5 AND ACCORDINGLY, REGISTRATION U/S. 12AA OF THE I.T. ACT SHALL BE GRANTED TO THE ASSESSEE BY CIT. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 06-03-2015. BY SEPARATE ORDER SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 06/03/2015 GJ COPY TO: 1. PHILIA CHARITABLE SOCIETY, PUTHENPURAYIL, KARTHI KAPALLY, ALPPUZHA-690 516. 2. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 3. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 4. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COC HIN I.T.A. NO . 430/COCH/2014 6 BY N.R.S GANESAN 8. I HAVE CAREFULLY GONE THROUGH THE TRANSLATED COP Y OF THE TRUST DEED AVAILABLE AT PAGE 15 OF THE PAPER BOOK. THE M EMBERSHIP OF THE SOCIETY SHALL BE GIVEN TO THOSE WHO ARE PAYING RS.25,000. THE MEMBERS, IN ADDITION TO RS.25,000 SHALL ALSO PAY MO NTHLY SUBSCRIPTION OF RS.100. THE SOCIETY HAS FOLLOWING OBJECTS AS PER ITS BYE LAWS. A. TO PROVIDE FINANCIAL OR OTHER AID TO THE SICK AN D THE HELPLESS; B. TO CONSTRUCT AND PROVIDE HOUSES, OR TO PROVIDE FINANCIAL ASSISTANCE FOR CONSTRUCTING HOUSES FOR TH E HOMELESS. TO PROVIDE HELP FOR REPAIR EXISTING HOUSES. C. TO ENSURE EDUCATION FOR THOSE CHILDREN WHO AR2E UNABLE TO STUDY DUE TO FINANCIAL PROBLEMS BY PROVIDING FINANCIAL HELP FOR THEIR EDUCATION; D. TO ESTABLISH AND RUN HOSPITALS, SERVICE CENTRES, OLD AGE HOMES, ORPHANAGES, TRAINING CENTRES FOR THE PHYSICALLY AND MENTALLY CHALLENGED, GENERAL EDUCATIONAL INSTITUTION OR TO PROVIDE FINANCIAL ASSISTANCE TO SUCH INSTITUTIONS; I.T.A. NO . 430/COCH/2014 7 E. TO PROVIDE FINANCIAL HELP FOR SELF-EMPLOYMENT VENTURES; F. TO ORGANIZE PUBLIC AWARENESS CAMPAIGN AND MEDICAL CAMPS; G. TO CONDUCT PROGRAMS FOR PROTECTING THE WIDOWS, HELPLESS WOMEN AND CHILDREN; H. TO ACQUIRE OR LEASE OR RENT OR TRANSFER OR CONST RUCT OR REPAIR OR EVEN SELL ALL OR ANY PART OF THE MOVABLE AND IMMOVABLE PROPERTY OF ABOVE SOCIETY NECESSARY OR CONVENIENT FOR PURPOSE OF THE ATTAINMENT OF THE SOCIETYS OBJECTS; I. TO PROVIDE NECESSARY HELP FOR MATTERS THAT REQUI RE IMMEDIATE ATTENTION UNDER SPECIAL CIRCUMSTANCES; J. TO PROVIDE FINANCIAL ASSISTANCE FOR MARRIAGE; K. TO UNDERTAKE ACTIVITIES FOR THE PHYSICAL AND MEN TAL DEVELOPMENT OF THE MEMBERS OF THE SOCIETY AND THEIR FAMILY MEMBERS; L. IN ADDITION THE SOCIETY MAY IMPLEMENT ANY MATTER S DECIDED BY ITS GENERAL BODY FOR THE SOCIAL BENEFIT. 9. THE BENEFICIARIES OF THE SOCIETY IS NOT SPECIFIE D IN THE BYE LAWS. THEREFORE, THE PRESUMPTION WOULD THAT THE EN TIRE SOCIETY AT LARGE WOULD BE THE BENEFICIARIES. ON A QUERY FROM THE BENCH WHETHER ANY PROHIBITION FOR THE MEMBERS OF THE SOCI ETY FROM SHARING THE PROFIT AT THE END OF THE YEAR, THE LD.REPRESENT ATIVE, SHRI MANOJ PETER FAIRLY ADMITTED THAT THERE IS NO PROHIBITION IN THE BYE LAWS OF THE I.T.A. NO . 430/COCH/2014 8 SOCIETY TO SHARE THE PROFIT AT THE YEAR END. HOWEV ER, AFTER REFERRING TO THE BYE LAWS 10(2)(F) ON PAGE 18 THE LD.REPRESEN TATIVE CLARIFIED THAT AT THE TIME OF DISSOLUTION THE ASSETS OF THE S OCIETY WILL NOT BE DISTRIBUTED TO THE MEMBERS OF THE SOCIETY. THE ASS ET, HOWEVER, WOULD BE TRANSFERRED TO ANOTHER REGISTERED SOCIETY WITH SIMILAR OBJECT OR TO THE GOVERNMENT IN ACCORDANCE WITH PROVISIONS OF TRAVANCORE- COCHIN LITERARY, SCIENTIFIC AND CHARITABLE SOCIETIE S REGISTRATION ACT, 1995 (ACT XII OF 1955). IT HAS TO BE KEPT IN MIND THAT THE MEMBERS OF THE SOCIETY SHALL NOT TAKE ANY PROFIT FROM THE SOCI ETY IN VIEW OF THE PROHIBITION CONTAINED IN SECTION 13(1)(C) OF THE AC T. THE LEGISLATURE BY WAY OF AMENDMENT HAS INTRODUCED SECTION 12AA(3) AND 12AA(4) EMPOWERING THE RESPECTIVE COMMISSIONER OF INCOME-TA X TO CANCEL THE REGISTRATION IN CASE THERE WAS A VIOLATION OF S ECTION 13(1) OF THE ACT. THEREFORE, I AM OF THE CONSIDERED OPINION THA T THE CONCERNED ADMINISTRATIVE COMMISSIONER / PRINCIPAL COMMISSIONE R AND THE ASSESSING OFFICER SHALL ENSURE THAT NO PART OF THE SOCIETYS FUND IS DISTRIBUTED TO THE BENEFIT OF THE PERSONS REFERRED TO IN SECTION 13(3) OF THE ACT EITHER DIRECTLY OR INDIRECTLY. IF ANY PART OF THE PROFIT / INCOME OF THE SOCIETY WAS FOUND TO BE APPLIED FOR OR TAKEN / SHARED BY THE MEMBERS OF THE SOCIETY THE BENEFIT OF INTERESTED PE RSON AS REFERRED IN SECTION 13(3) EITHER DIRECTLY OR INDIRECTLY, THE COMMISSIONER OR I.T.A. NO . 430/COCH/2014 9 PRINCIPAL COMMISSIONER SHALL TAKE IMMEDIATE ACTION FOR CANCELLATION OF THE REGISTRATION U/S 12AA / 12AA(3) OF THE ACT. 10. THE SO-CALLED CORPUS OF THE FUND IS NOTHING BUT THE CONTRIBUTION RECEIVED BY THE SOCIETY FROM ITS MEMBERS AT THE TIM E OF ADMISSION. THE ASSESSEE CLAIMS THAT THE SHARE AMOUNT COLLECTED TO THE EXTENT OF RS.6,25,000 FROM ITS MEMBERS AT THE TIME OF ADMISSI ON WAS DEPOSITED IN THE BANK ACCOUNT AND THE INTEREST THER EFROM WAS USED FOR CARRYING OUT THE OBJECT OF THE TRUST AS PROVIDE D IN BYE LAW 12 OF THE SOCIETY. APART FROM CONTRIBUTIONS FROM THE MEM BERS, THE SOCIETY HAS ALSO RECEIVED MONEY FROM NON MEMBERS ON THE OCC ASIONS LIKE BIRTHDAYS, WEDDINGS, ETC. THE INCOME AND EXPENDITU RE ACCOUNT, COPY OF WHICH IS AVAILABLE AT PAGE 24 SHOWS THAT TH E ASSESSEE HAS ALSO RECEIVED RS.2,510 FROM AUCTION. IT IS NOT KNO WN WHAT WAS THE NATURE OF AUCTION. THE COMMISSIONER SHALL ENSURE T HAT IF THE ASSESSEE IS INVOLVED IN CARRYING OUT ANY ACTIVITY I N THE NATURE OF TRADE OR COMMERCE, THEN THE INCOME OF THE SOCIETY SHALL N OT BE EXCLUDED AS PER SECTIONS 11 & 12 OF THE ACT IN VIEW OF SECTI ON 13(8) OF THE ACT WHICH WAS INTRODUCED BY FINANCE ACT, 2012 WITH RETR OSPECTIVE EFFECT FROM 01-04-2009. FROM THE MATERIAL AVAILABLE ON RE CORD IT APPEARS THAT THE ASSESSEE HAS SPENT TO THE EXTENT OF RS.76, 300 BY WAY OF DONATION TO VARIOUS PERSONS, THE DETAILS OF WHICH A RE AVAILABLE AT I.T.A. NO . 430/COCH/2014 10 PAGES 82 AND 83 OF THE PAPER BOOK. THE COMMISSIONE R AND THE ASSESSING OFFICER SHALL ENSURE THAT THE BENEFICIARI ES, THE DETAILS OF WHICH ARE AVAILABLE AT PAGES 82 & 83 ARE NOT THE RE LATIVES OF THE PERSONS S PROVIDED IN EXPLANATION 1 TO SECTION 13(3 ) OF THE ACT. 11. THE COMMISSIONER HAS NOT EXAMINED THESE ASPECTS WHILE PASSING THE IMPUGNED ORDER. SINCE THE LEGISLATURE HAS MADE SPECIFIC PROVISIONS FOR CANCELLATION OF THE REGISTR ATION U/S 12(3) AND 12(4) OF THE ACT, WHEREVER THE TRUST / SOCIETY FAIL ED TO CARRY OUT ITS ACTIVITY IN ACCORDANCE WITH ITS OBJECTS OR CARRYING ON IS OBJECT IN VIOLATION OF SECTION 13(1) OF THE ACT, THE COMMISSI ONER CAN EXAMINE THE SAME AT A LATER STAGE AND CANCEL THE REGISTRATI ON, IF ANY, GRANTED. THE ASSESSING OFFICER IN ADDITION TO THESE, SHALL A LSO EXAMINE IF THERE IS ANY VIOLATION OF SECTIONS 11 AND 12 OF THE ACT. 12. IN VIEW OF THE SAFEGUARD PROVIDED UNDER THE ACT BY GIVING LIBERTY TO THE COMMISSIONER TO EXAMINE THE MATTER A T A LATER STAGE AND CANCEL; THE REGISTRATION, I AGREE WITH THE VIEW OF THE LD.ACCOUNTANT MEMBER. HOWEVER, IT IS MADE CLEAR TH AT THIS ORDER OF THIS TRIBUNAL SHALL NOT STAND IN THE WAY OF THE COM MISSIONER WHILE INITIATING PROCEEDINGS FOR CANCELLATION OF THE REGI STRATION U/S 12AA(3) OR 12AA(4). IN OTHER WORDS, IRRESPECTIVE OF THE OR DER OF THIS TRIBUNAL, I.T.A. NO . 430/COCH/2014 11 IF THE COMMISSIONER FOUND THAT THERE IS A CASE FOR CANCELLATION OF THE REGISTRATION U/S 12AA(3) OR 12AA(4), HE MAY SUO MOT U INITIATE THE PROCEEDINGS FOR CANCELLATION OF REGISTRATION. MORE OVER, THE COMMISSIONER AND THE ASSESSING OFFICER SHALL ENSURE THAT THE REGISTRATION GRANTED TO THE SOCIETY U/S 12AA SHALL NOT BE USED AS A VEHICLE FOR COLLECTING MONEY COMPULSORILY IN THE GU ISE OF VOLUNTARY DONATION. 13. WITH THE ABOVE OBSERVATIONS, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS _6TH____ MARCH, 2015. SD/- (N.R.S. GANESAN) JUDICIAL MEMBER COCHIN, DT : 6 TH MARCH, 2015 PK/-