M/s Sh. Ram Lal Bhasin Charitable Trust, Ludhiana V. The Commissioner of Income Tax (Exemption), Chandigarh

ITA 442/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8780 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Amritsar
• Next Hearing Date: 25-01-2017
• Assessment Year: misc
• Appeal Filed On: 26-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Keywords: Charitable institution
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 80G; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.442/ASR/2016 (ASSESSMENT YEAR N/A) M/S SH. RAM LAL BHASIN CHARITABLE TRUST, C-128, FOCAL POINT, LUDHIANA. PAN NO.AADAT0585B (ASSESSEE) VS .. CIT (EXEMPTIONS) CHANDIGARH. (REVENUE) ASSESSEE BY SHRI . ASHWANI KUMAR, CA. REVENUE BY SHRI BHAWANI SHANKAR,DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL AGAINST THE ORDER DATED 3 0.06.2016 PASSED BY THE LD. CIT(EXEMPTIONS), DENYING APPROVAL U/S 80G(5)(VI) OF THE I.T.ACT TO THE ASSESSEE. 2. THE ASSESSEE FILED APPLICATION DATED 16.12.2015 U/S 80G(5)(VI) OF THE ACT BEFORE THE LD. CIT(E). THE SAME WAS REJECTED BY THE LD. CIT(E) BY VIRTUE OF THE IMPUGNED ORDER. THE LD. CIT(E) OBSERVED THAT REGIST RATION U/S 12AA OF THE ACT WAS GRANTED TO THE ASSESSEE ON 08.05.2006; THAT APPROVA L U/S 80G (5) WAS GRANTED TO THE ASSESSEE FOR THE PERIOD FROM 01.04.2006 TO 31.03.20 08, VIDE ORDER DATED DATE OF HEARING 18.01.2017 DATE OF PRONOUNCEMENT 07.03.2017 I.T.A NO.442/ASR/2016 2 29.06.2006; THAT THEREAFTER, THE ASSESSEE DID NOT H AVE APPROVAL U/S 80G; THAT THERE WAS NO EXPLANATION AS TO WHY THE ASSESSEE DID NOT T RY FOR SUCH APPROVAL SUBSEQUENT TO 31.03.2008; THAT THE REPLY FILED BY THE ASSESSEE SHOWED THAT THERE WERE NO ACTIVITY RUN BY THE ASSESSEE TRUST; THAT THE ASSESS EE WAS QUERIED AS TO HOW IN THE ABSENCE OF ACTIVITIES, HOW THE CLAIM U/S 80G WAS GE NUINE AND NECESSARY; THAT SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON 06.06.20 16; THAT THE ASSESSEE FILED REPLY DATED 16.06.2016, AS PER WHICH, THE ASSESSEE STATED THAT THE TRUST HAD BEEN CONSTITUTED FOR THE CAUSE OF CHARITABLE ACTIVITIES, HAVING FAMILY MEMBERS AS TRUSTEES; THAT THE ASSESSEE HAD STATED THAT IN THE TRUST DEED, IT STOOD CLEARLY MENTIONED THAT THE TRUST FUNDS WOULD BE USED FOR CH ARITABLE ACTIVITIES AND, THEREFORE, IT COULD NOT BE CLASSIFIED AS BEING FOR RESTRICTIVE USE; THAT THE ASSESSEE HAD STATED THAT THE TRUST WAS INVOLVED IN DOING CHA RITABLE HELP AT SMALL LEVEL AND FUNDS WAS ACCUMULATED FOR BETTER CAUSE; THAT THE AS SESSEE HAD STATED THAT IN THE MATTER, THE TRUST WAS PLANNING TO SPEND HELP TO NEE DY PATIENT AND STUDENTS; THAT THIS REPLY WAS BEING TREATED AS INSUFFICIENT RATIONALE F OR NOT HAVING THE CLAUSES IN THE TRUST DEED THAT ARE ESSENTIAL FOR IMPARTING A CHARA CTER TO THE TRUST ATTUNED TO THE INTEREST OF THE GENERAL PUBLIC; THAT FOR APPROVAL A S PER THE PROVISION OF SECTION 80G(5) (VI), IT WAS REQUIRED TO BE SATISFIED IF THE TRUST WAS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE; THAT THE CONDITIONS CONTEMPLATE D BY SECTION 80G(5)(I) TO SECTION 80G(5)(VI) ARE CONDITIONS WHICH MUST BE ADD ITIONALLY FULFILLED TO BE ENTITLED TO THE APPROVAL; THAT THE INQUIRY AS TO WHETHER THE TRUST IS ESTABLISHED FOR A I.T.A NO.442/ASR/2016 3 CHARITABLE PURPOSE IS NOT CONFINED ONLY TO THE CONT AINS OF THE INSTRUMENT CONSTITUTING THE TRUST AND ONLY THE OBJECTS OF THE TRUST HAS SET OUT IN THE DEED OF DECLARATION ONLY NEED NOT BE CONFINED TO, FOR CONST RUING THE PURPOSE OF A TRUST; THAT THE REAL PURPOSE OF THE ESTABLISHMENT OF THE TRUST HAS TO BE FOUND OUT, AS DISTINGUISHED FROM THE OSTENSIBLE PURPOSE; THAT IF IT FOUND THAT THE PURPOSE OF THE TRUST WAS OTHER THAN CHARITABLE, THEN THE AUTHORITY WOULD NOT BE DEBARRED FROM DENYING THE APPROVAL CLAIMED; THAT THE AUTHORITY CA NNOT MERELY LOOK AT THE INSTRUMENT CREATING THE TRUST AND SHUT THEIR EYES T RUST THE ACTIVITIES ACTUALLY CARRIED OUT; THAT THE ASSESSEE TRUST, AS AVAILABLE FROM FIN ANCIAL STATEMENTS FOR THREE YEARS, OPERATED ON A FINANCIAL CORPUS THAT GOT INVESTED ON FDRS, ON WHICH, THE TRUST EARNED INTEREST, WHICH GOT RE-EMPLOYED IN THE CORPU S ADDING TO IT; THAT THE ASSESSEE RECEIVED INCOME BY INTEREST FROM FDRS, I.E., IN F.Y . 2012-13, OF RS.60,521/-, IN F.Y. 2013-14, OF RS.59,292/- AND IN F.Y. 2014-15, O F RS.72,539/-; THAT THE ASSESSEE ADDED THIS INCOME TO THE CORPUS FUNDS ENTIRELY IN T HE FIRST YEAR, AND THEN PART AMOUNTS IN THE LATTER YEARS; THAT PART OF THESE AMO UNTS HAD BEEN SHOWN TO HAVE BEEN UTILIZED FOR DONATIONS TO OTHER, SALARY AND HELP TO THE NEEDY AND POOR PEOPLE, THOUGH, NO EVIDENCE OTHER THAN ENTRIES IN THE INCOM E AND EXPENDITURE ACCOUNT, HAD BEEN FURNISHED REGARDING THESE CLAIMS; THAT THE SPE CIFIC QUESTION TO BE TO THE ASSESSEE IN THIS REGARD REMAINED UNANSWERED; THAT D ESPITE THE FACT THAT THE TRUST HAD BEEN INEXISTENCE FOR A LONG TIME, THERE WAS NO EVID ENCE WHATSOEVER OF ANY DONATION RECEIVED HITHERTO; THAT ALL THESE FACTS FA IL TO INSPIRE CONFIDENCE IN THE I.T.A NO.442/ASR/2016 4 ACTUAL INTENT AND CAPACITY OF THE TRUST WITH REGARD TO COLLECTION OF DONATIONS AND THEIR USED FOR CHARITABLE PURPOSES; THAT ALSO, THE TRUST DEED DID NOT CONTAIN ANY DISSOLUTION, BENEFICIARY OR UTILIZATION CLAUSES; AN D THAT THE ASSESSEE HAD NOT REBUTTED THE PRESUMPTION THAT THE TRUST DID NOT ENU RE FOR THE BENEFIT OF THE GENERAL PUBLIC. 3. IT WAS IN THIS MANNER, THAT APPROVAL U/S 80G(5)( VI) OF THE ACT WAS REFUSED TO THE ASSESSEE BY THE LD. CIT(E). AGGRIEVED, THE ASSE SSEE IS BEFORE US BY WAY OF THE PRESENT APPEAL. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE LD. CIT(E) HAS ERRED IN ARBITRARILY DENYING APPROVAL U/S 80G(5)(VI) OF T HE ACT TO THE ASSESSEE; THAT AS STATED BEFORE THE LD. CIT(E), THE ASSESSEE TRUST HA S BEEN CONSTITUTED FOR THE CAUSE OF CHARITABLE ACTIVITIES; THAT THE TRUST DID FINDS CLE AR MENTIONED TO THE EFFECT THAT THE TRUST FUND WILL BE USED FOR CHARITABLE ACTIVITIES; THAT AS SUCH, IT CANNOT BE CLASSIFIED AS BEING FOR RESTRICTIVE USE; THAT AS AVAILABLE FRO M THE BALANCE SHEETS OF THE ASSESSEE FOR THE YEARS ENDING 31.03.2015 AND 31.03.2016 AND THE INCOME AND EXPENDITURE ACCOUNT, THE ASSESSEE, HAS BEEN SPENDING MONEY ON C HARITABLE ACTIVITIES SUCH AS HELP TO POOR STUDENTS AND NEEDY PEOPLE; THAT IT IS NOT A CASE WHERE APPROVAL U/S 80G(5) IS TO BE GRANTED FOR THE FIRST TIME; AND THA T, THE LD. CIT(E) HAS MET OUT ANY CASE THAT THE ASSESSEE TRUST IS ITSELF ENGAGED IN A CTIVITIES WHICH ARE NOT CHARITABLE IN NATURE. I.T.A NO.442/ASR/2016 5 5. ON THE OTHER HAND, THE LD. DR HAS PLACED STRONG RELIANCE ON THE IMPUGNED ORDER. 6. HAVING HEARD THE PARTIES, WE FIND THAT IT HAS NO WHERE BEEN DENIED THAT REGISTRATION U/S 12A(A) OF THE ACT WAS GRANTED TO T HE ASSESSEE. MEANING THEREBY, THAT NEITHER THE OBJECTS, NOR THE GENUINE OF THE AC TIVITY OF THE ASSESSEE STANDS CALLED IN QUESTION. AS PER THE BALANCE SHEETS AND INCOME A ND EXPENDITURE ACCOUNT, THE ASSESSEE HAS BEEN SPENDING MONEY ON CHARITABLE ACTI VITIES SUCH AS HELP TO POOR STUDENTS AND NEEDY PEOPLE. IN THE TRUST DEED, IT HA S BEEN MENTIONED THAT THE TRUST FUNDS WILL BE USED FOR CHARITABLE ACTIVITIES. THUS, IT CANNOT BE SAID THAT THE ASSESSEE IS NOT INVOLVED IN CARRYING OUT CHARITABLE ACTIVITI ES. THE OBJECTIONS THAT THERE IS ABSENCE OF DISSOLUTION, BENEFICIARY AND UTILIZATION CLAUSES IN THE TRUST DEED, IS OF NO CONSEQUENCE. OBVIOUSLY, THE TRUST IS HITHERTO IN EX ISTENCE. RECOURSE, IF ANY REQUIRED, MAY BE HAD, AT THE RELEVANT TIME, TO THE PROVISIONS OF SECTION 115TD OF THE I.T. ACT, INSERTED BY THE FINANCE ACT, 2016 W.E .F. 01.06.2016. THE OBJECTION THAT THE INTEREST EARNED BY THE ASSESSEE ON FDRS, W HICH INTEREST IS RE-EMPLOYED IN THE CORPUS, ADDING TO IT, DOES NOT RENDER THE ASSES SEE TRUST TO BE A TRUST NOT CREATED FOR CHARITABLE PURPOSES. THE POSITION THAT THESE AM OUNTS EARNED HAVE BEEN SHOWN TO HAVE BEEN UTILIZED FOR DONATION TO OTHERS, SALAR Y AND HELP TO NEEDY AND POOR PEOPLE, FURTHERS RATHER THAN UNDERMINES THE CASE OF THE ASSESSEE. SUCH DEPICTION DOES NOT STAND REBUTTED. THE FACT THAT THERE IS NO EVIDENCE OF ANY DONATION RECEIVED DESPITE THE LENGTH OF TIME OF EXISTENT OF THE ASSES SEE, AGAIN, DOES NOT TAKE AWAY I.T.A NO.442/ASR/2016 6 FROM THE CHARITABLE NATURE OF THE OBJECTS OF THE TR UST. MOREOVER, THE LD. CIT(E) HAS HIMSELF OBSERVED THAT IT IS A PRESUMPTION THAT THE ASSESSEE TRUST DOES NOT ENURE FOR THE BENEFIT OF THE GENERAL PUBLIC. THE CIT(E) HAS S TATED THAT THIS PRESUMPTION HAS NOT BEEN REBUTTED BY THE TRUST. HOWEVER, AS OBSERVE D, THE PART OF THE AMOUNTS EARNED BY WAY OF INTEREST ON FDRS, HAVE BEEN SHOWN TO HAVE BEEN UTILIZED, INTER ALIA, FOR HELP TO NEEDY AND POOR PEOPLE. DESPITE HA VING NOTED IT HIMSELF, THE LD. CIT(E) HAS FAILED TO CONSIDER THIS ASPECT OF THE MA TTER. 7. IN VIEW OF THE ABOVE, FINDING MERIT THEREIN, THE GRIEVANCE OF THE ASSESSEE IS ACCEPTED. THE ORDER UNDER APPEAL IS REVERSED. THE L D. CIT(E) IS DIRECTED TO GRANT APPROVAL U/S 80G(5) TO THE ASSESSEE FORTHWITH. 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUTANT MEMBER JUDICIAL MEMBER DATED 07/03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S.