Shri Tapgachha Sangh Mota Vadala, V. The Commissioner of Income Tax, JAMNAGAR

ITA 440/RJT/2013

• Counselvise Citation: 44024914 RSA 2013
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-05-2014
• Assessment Year: misc
• Appeal Filed On: 15-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: J C RANPURA
• Keywords: Charitable institution; Bonafide belief
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBULAL, SMC BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM ITA NO. 440/RJT/2013 SHRI TAPGACHHA SANGH MOTA VADALA, VILLAGE : MOTA VADALA, VIA- KALAWAD (SHITLA), DIST: JAMNAGAR PAN : AAATS 9851 M ( / APPELLANT) THE COMMISSIONER OF INCOME-TAX JAMNAGAR / RESPONDENT / ASSESSEE BY SHRI J.C. RANPURA, CA / REVENUE BY SHRI M.L. MEENA, DR / DATE OF HEARING 22.05.2014 !'# / DATE OF PRONOUNCEMENT 29.05.2014 / ORDER THIS APPEAL BY THE ASSESSEE-TRUST IS AGAINST THE OR DER DATED 19.09.2013 OF COMMISSIONER OF INCOME-TAX, JAMNAGAR REJECTING THE APPLICATION OF ASSESSEE-TRUST FOR REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 19 61. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE-TRUST WAS CREATED ON 14.03.1978. THE ASSESSEE-TRUST WAS REGISTERED UNDER BPT ACT WIT H THE ASSTT. CHARITY COMMISSIONER, RAJKOT VIDE REGISTRATION NO.A/748/JAM NAGAR DATED 05.11.1965. THE ASSESSEE-TRUST MADE AN APPLICATION FOR REGISTRATION U/S 12A(A) OF THE INCOME-TAX ACT ON 25.03.2013. 3. THE LD COMMISSIONER OF INCOME-TAX, JAMNAGAR, ON VERIFICATION OF THE TRUST DEED, OBSERVED SOME DISCREPANCIES WITH RESPECT TO T HE PROVISION OF DISSOLUTION OF THE TRUST, AS NARRATED BY HIM IN PARAGRAPH NOS.2-3 OF H IS ORDER DATED 19.09.2013. AGAINST THE DISCREPANCIES AS POINTED OUT BY THE LD. COMMISS IONER OF INCOME-TAX, JAMNAGAR, THE ASSESSEE-TRUST VIDE ITS LETTER DATED 17.09.2013 SUBMITTED THAT AS THE TRUST IS CARRIED OUT ITS ACTIVITIES AS PER THE SCHEME FRAMED BY THE CHARITY COMMISSIONER, THERE IS NO POWER GIVEN TO THE TRUSTEES TO DISPOSE OFF ANY OF THE ASSETS AT THEIR SWEET WILL IN DAY TO DAY ACTIVITIES OR EVEN AT THE EVENTU ALITY OF SHUT DOWN THE ACTIVITIES OF THE TRUST. THE AFORESAID SUBMISSION WAS NOT ACCEPTABLE TO THE LD. COMMISSIONER OF INCOME-TAX, JAMNAGAR AND HE ACCORDINGLY REFUSED THE REGISTRATION TO THE ASSESSEE- TRUST U/S 12AA OF THE INCOME-TAX ACT, OWING INADEQU ATE WINDING UP/DISSOLUTION CLAUSE IN CASE OF DISSOLUTION OF TRUST. 2 440-RJT-2013 - SHRI TAPGACHHA SANGH MOTA VADALA - SEC12AA (SMC) AGGRIEVED WITH THE ORDER OF LD COMMISSIONER OF INC OME-TAX, JAMNAGAR REJECTING THE APPLICATION OF THE ASSESSEE-TRUST U/S 12AA OF THE INCOME-TAX ACT, THE ASSESSEE-TRUST IS NOW IN APPEAL BEFORE THIS TRIBUNA L. 4. BEFORE THE TRIBUNAL, ON BEHALF OF THE ASSESSEE, SHRI J.C. RANPURA, CA APPEARED AND FILED A PAPER BOOK CONTAINING 36 PAGES , WHICH INTER-ALIA INCLUDE THE COPY OF TRUST DEED WITH ENGLISH TRANSLATION, COPY O F REGISTRATION CERTIFICATE WITH THE DEPUTY CHARITY COMMISSIONER, RAJKOT DATED 05.11.196 5, COPY OF APPLICATION FOR ISSUING DUPLICATE/FRESH CERTIFICATE OF REGISTRATION U/S 12A(A) DATED 05.03.2013, COPY OF LETTER DATED 04.04.2013 ISSUED BY ITO, WARD-3(2), J AMNAGAR, COPY OF REPLY OF THE ASSESSEE-TRUST DATED 10.05.2013, COPY OF LETTER OF CIT, JAMNAGAR DATED 02.09.2013 ETC THE COUNSEL OF THE ASSESSEE ALSO SUBMITTED THA T THE ASSESSEE-TRUST IS A VERY OLD TRUST CAME INTO EXISTENCE PRIOR TO 1965 AND IS DULY REGISTERED UNDER THE BPT ACT, 1950 VIDE REGISTRATION NO.A/748/JAMNAGAR ON 05.11.1 965. HE ALSO SUBMITTED THAT THE TRUST IS A RELIGIOUS TRUST CARRYING OUT ITS ACT IVITIES AS PER THE SCHEME FRAMED BY THE CHARITY COMMISSIONER FOR MANAGER AND ADMINISTRATION OF THE TRUST DATED 14.03.1978 AND THE TRUSTEES ARE UNDER BONAFIDE BELIEF THAT THE TRUST IS DULY REGISTERED UNDER SECTION 12A(A) OF THE INCOME-TAX ACT, 1961. THE TR UST IS REGULARLY FILING ITS RETURN OF INCOME SINCE ITS INCEPTION MENTIONING IN ITS COMPUT ATION OF INCOME THAT THE TRUST IS DULY REGISTERED UNDER SECTION 12A OF THE ACT; HOWEV ER, THE ASSESSEE-TRUST IS NOT HAVING ANY INFORMATION READILY AVAILABLE ON HAND IN RESPECT OF REGISTRATION CERTIFICATE OF THE TRUST U/S 12A(A) DUE TO CESSATION OF THE OFF ICE OF THE EARLIER TAX CONSULTANT AND AUDITORS NAMELY M/S. PUNJANI & CO., JAMNAGAR. THE C ORRESPONDENCE WITH THE DEPARTMENT, AS CONTAINED IN THE PAPER-BOOK, CLEARLY INDICATES THAT THE ASSESSEE-TRUST MADE AN APPLICATION FOR REGISTRATION U/S 12AA EARLI ER ALSO BUT THE ASSESSEE-TRUST COULD NOT TRACE THE EARLIER REGISTRATION CERTIFICAT E DUE TO THE CESSATION OF OFFICE OF ITS EARLIER TAX CONSULTANT AND AUDITORS NAMELY M/S. PUN JANI & CO. THEREFORE, THE ASSESSEE-TRUST MADE AN APPLICATION AGAIN ON 25.03.2 013, REQUESTING EITHER TO ISSUE DUPLICATE OR FRESH CERTIFICATE OF REGISTRATION U/S 12A(A) OF THE INCOME-TAX ACT, 1961, WHICH WAS REFUSED BY LD. COMMISSIONER OF INCOME-TAX , JAMNAGAR DUE TO THE REASON THAT THE TRUST DEED DOES NOT CONTAIN PROVISIONS IN THE EVENT OF ITS DISSOLUTION TO THE EFFECT THAT UPON THE DISSOLUTION, IF ANY PROPERTY R EMAINS AFTER SATISFACTION OF ITS DEBTS AND LIABILITIES, THE SAME SHALL BE TRANSFERRED TO T HE TRUST HAVING SIMILAR OBJECTS. THE 3 440-RJT-2013 - SHRI TAPGACHHA SANGH MOTA VADALA - SEC12AA (SMC) LD. COUNSEL OF THE ASSESSEE FURTHER POINTED OUT THA T THE ASSESSEE-TRUST VIDE ITS LETTER DATED SUBMITTED THAT AS THE TRUST IS CARRIED OUT I TS ACTIVITIES AS PER THE SCHEME FRAMED BY THE CHARITY COMMISSIONER, THERE IS NO POW ER GIVEN TO THE TRUSTEES TO DISPOSE OFF ANY OF THE ASSETS AT THEIR SWEET WILL I N DAY TO DAY ACTIVITIES OR EVEN AT THE EVENTUALITY OF SHUT DOWN THE ACTIVITIES OF THE TRUS T. THE LD. AR OF THE ASSESSEE FURTHER RELIED UPON THE DECISION OF CO-ORDINATE BEN CH (ITAT B BENCH AHMEDABAD) IN THE CASE OF SHREE CHARGAM DASHA PORWAD MAHAMANDA L V. DIT (EXEMPTION) BEARING ITA NOS. 337 & 338/AHD/2013, DATED 08.05.20 13, WHEREIN IT WAS HELD THAT WHEN THE ASSESSEE-TRUST IS REGISTERED WITH THE SUB- REGISTRAR AS A CHARITABLE TRUST, IN THE EVENT OF FAILURE OF THE TRUST THE NET ASSETS/IN COME WOULD OBVIOUSLY BE TAKEN OVER BY THE CHARITY COMMISSIONER AND THE REJECTION OF RE GISTRATION ON THIS GROUND WAS HELD NOT ON A SOUND FOOTING. THE LD. AR OF THE ASSESSEE ALSO RELIED UPON THE DECISION OF ITAT RAJKOT SMC BENCH IN THE CASE OF CHORWADI MATAJ I MANDIR TRUST V. CIT IN ITA NO.458/RJT/2013, WHEREIN ALSO THE LD. CIT WAS DIREC TED TO GRANT THE REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961 TO THE ASSESSEE, F OLLOWING THE DECISION OF THE CO- ORDINATE BENCH, ITAT B BENCH, AHMEDABAD IN THE CA SE OF SHREE CHARGAM DASHA PORWAD MAHAMANDAL V. DIT (SUPRA). 5. ON THE OTHER HAND, SHRI M.L. MEENA, LD. DEPARTME NTAL REPRESENTATIVE, APPEARED ON BEHALF OF THE REVENUE, VEHEMENTLY SUPPO RTED THE ORDER OF LD. CIT AND ARGUED THAT IN THE CASE OF DISSOLUTION, THE ASSETS MUST NOT BE TRANSFERRED FOR ANY OTHER PURPOSES, BUT FOR THE OBJECTS OF THE CHARITY, AND BECAUSE THIS CLAUSE WAS NOT PROVIDED IN THE TRUST DEED, THEREFORE, THE TRUST WA S NOT A GENUINE TRUST, AND HENCE REGISTRATION WAS RIGHTLY DENIED. 6. RIVAL SUBMISSIONS WERE CONSIDERED. IT IS PERTINE NT TO NOTE THAT THE TRUST IN QUESTION CAME INTO EXISTENCE PRIOR TO 1965 AND IS D ULY REGISTERED UNDER THE BPT ACT, 1950. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESS EE-TRUST IS REGULARLY FILING ITS RETURN OF INCOME SINCE ITS INCEPTION. THIS PRIMA-FACIE INDICA TES THAT FILE OF THE ASSESSEE-TRUST IS AVAILABLE WITH THE LD. CIT, JAMNAGAR. HERE, IN TH E CASE ON HAND, THE LD. COMMISSIONER OF INCOME-TAX, JAMNAGAR REFUSED TO GRA NT THE REGISTRATION TO THE ASSESSEE-TRUST U/S 12AA OF THE INCOME-TAX ACT SOLEL Y ON THE GROUND THAT THE TRUST DEED DOES NOT CONTAIN PROPER DISSOLUTION/WINDING UP CLAUSE. CONSIDERING THE FACTS OF 4 440-RJT-2013 - SHRI TAPGACHHA SANGH MOTA VADALA - SEC12AA (SMC) THE CASE ON HAND, I AM OF THE VIEW THAT THE ISSUE O F 'DISSOLUTION CLAUSE' NOW STOOD COVERED BY THE DECISION OF CO-ORDINATE BENCH, ITAT B BENCH, AHMEDABAD IN THE CASE OF SHREE CHARGAM DASHA PORWARD MAHAMANDAL VS. DIT (EXEMPTIONS), VIDE ITA NO.337 AND 338/AHD/2013 ORDER DATED 8.5.2013, WHERE IN IT WAS HELD AS UNDER: '3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY AND PERUSED THE ORDERS OF THE DIT(EXEMPTIONS) AS WELL AS THE DECISION OF T HE ITAT DELHI IN THE CASE OF SHRI SAI SAMARPAN TRUST CO.(SUPRA). WE FIND THAT TH E ONLY REASON ADVANCED FOR REFUSING THE REGISTRATION U/S.12AA AND 80G(5) O F THE ACT BY THE DIT(EXEMPTIONS) IS THAT THERE IS NO DISSOLUTION CLA USE IN THE TRUST-DEED AND TRUST DOES NOT HAVE ANY CLAUSE THAT THE TRUST WILL NOT BE DISSOLVED AND IT IS A PERPETUAL TRUST. THIS ISSUE OF REFUSING REGISTRATIO N IN THE ABSENCE OF DISSOLUTION CLAUSE IN THE TRUST-DEED IS COVERED IN FAVOUR OF TH E ASSESSEE WITH THE DECISION OF CO-ORDINATE BENCH OF DELHI TRIBUNAL IN THE CASE OF SHRI SAI SAMARPAN TRUST CO.(SUPRA), WHEREIN IN PARAGRAPH NO.8 HELD THAT WHE N THE ASSESSEE- TRUST IS REGISTERED WITH THE SUB-REGISTRAR AS A CHARITABLE T RUST, IN THE EVENT OF FAILURE OF THE TRUST THE NET ASSETS/INCOME WOULD OBVIOUSLY BE TAKEN OVER BY THE CHARITY COMMISSIONER AND THE REJECTION OF REGISTRATION ON T HIS GROUND WAS HELD NOT ON A SOUND FOOTING AND THE ORDERS OF THE DIT(EXEMPTION S) WERE REVERSED. WE FIND THAT THE CASE OF THE ASSESSEE IS ON MORE SOUND FOOT ING SINCE IT HAS ALREADY APPLIED TO THE CHARITY COMMISSIONER FOR AMENDMENT O F THE TRUST-DEED VIDE APPLICATION SUBMITTED ON 26/02/2013, WHEREBY INSERT ING THE DISSOLUTION CLAUSE PROVIDING THAT THE TRUST SHALL BE IRREVOCABLE AND I N THE MOST UNLIKELY SITUATION, IF TRUST PRACTICALLY STOPS FUNCTIONING, IT CAN ONLY BE MERGED/AMALGAMATED WITH OTHER ONE OR MORE PUBLIC CHARITABLE TRUSTS OR BODIE S HAVING SIMILAR OBJECTS SUBJECT TO THE APPROVAL OF THE OFFICE OF THE PUBLIC CHARITY COMMISSIONER, ETC. NO OTHER MATERIAL HAS BEEN PRODUCED ON BEHALF OF TH E REVENUE BEFORE US TO SUGGEST THAT THE AIMS AND OBJECTS OF THE TRUST ARE NOT CHARITABLE IN NATURE. IN THESE FACTS OF THE CASE, WE HOLD THAT THERE IS NO J USTIFICATION FOR REFUSING THE REGISTRATION U/S.12AA AND 80G(5) OF THE ACT TO THE ASSESSEE, WHICH IS ACCORDINGLY ALLOWED TO THE ASSESSEE AND THE ORDERS OF THE DIT(EXEMPTIONS) IN BOTH THE CASES ARE REVERSED AND WE DIRECT THE DIT(E XEMPTIONS) TO GRANT THE REGISTRATION U/S.12AA & 80G(5) OF THE ACT TO THE AS SESSEE IN BOTH THE CASES AND THE GROUND(S) RAISED IN BOTH THE APPEALS ARE HE REBY ALLOWED.' SINCE THE FACTS OF THE CASE OF THE ASSESSEE-TRUST A RE IDENTICAL TO THAT OF SHREE CHARGAM DASHA PORWAD MAHAMANDAL (SUPRA); I, FOR SIM ILAR REASONS GIVEN IN ITA NOS. 337 & 338/AHD/2013, ALLOW THE APPEAL OF THE AS SESSEE AND DIRECT THE LD. COMMISSIONER OF INCOME-TAX, JAMNAGAR TO GRANT REGIS TRATION U/S. 12AA OF THE INCOME-TAX ACT TO THE ASSESSEE-TRUST. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- ( $.. &' / T. K. SHARMA) ( ) /JUDICIAL MEMBER *)& +) ,/ ORDER DATE: 29.05.2014 !$ /RAJKOT *BT 5 440-RJT-2013 - SHRI TAPGACHHA SANGH MOTA VADALA - SEC12AA (SMC) / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT- SHRI TAPGACHHA SANGH MOTA VADALA, JAM NAGAR 2. / RESPONDENT- THE COMMISSIONER OF INCOME-TAX, JAMN AGAR 3. ,0,1 * * 2 / CONCERNED JT. CIT, RANGE 3, JAMNAGAR 4 . 345 1, * 1#, !$ / DR, ITAT, RAJKOT 5 . 57 89 / GUARD FILE *)& / BY ORDER TRUE COPY PRIVATE SECRETARY, ITAT, RAJKOT