The Rotary Megapolis Foundation, New Delhi V. CIT (Exemption), New Delhi

ITA 4490/DEL/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1050 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 13-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Set aside
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 THE ROTARY MEGAPOLIS FOUNDATION, VS. DIT, EXEMPTION , D 17A, KAILASH COLONY, NEW DELHI. NEW DELHI 110 048. (PAN : AACTT5439L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. YADAV, ADVOCATE REVENUE BY : SHRI J.K. MISHRA, CIT DR DATE OF HEARING : 26.11.2018 DATE OF ORDER : 30.11.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, THE ROTARY MEGAPOLIS FOUNDATION (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FIL ING THE PRESENT APPEALS, SOUGHT TO SET ASIDE THE IMPUGNED ORDER BOT H DATED 19.10.2015 PASSED BY LD. CIT (EXEMPTIONS), NEW DELH I ON THE FOLLOWING GROUNDS INTER ALIA THAT:- ITA NO.6768/DEL/2015 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. DIT - EXEMPTION IS BAD BOTH IN TH E EYES OF LAW AND ON FACTS. ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 2 2. THAT THE LD. DIT - EXEMPTION HAS ERRED IN REJECT ING THE APPLICATION FOR REGISTRATION U/S 12AA. 3. THAT THE LD. DIT - EXEMPTION HAS ERRED IN REJECT ING THE APPLICATION IN FORM NO. 10G FOR REGISTRATION U/S 80 G. 4. THAT THE LD. DIT - EXEMPTION HAS ERRED IN DECIDI NG THE CASE WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEA RD AND DISMISSING THE SAME ON IRRELEVANT GROUNDS. 5. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE. ITA NO.4490/DEL/2018 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT - EXEMPTION IS BAD BOTH IN TH E EYES OF LAW AND ON FACTS. 2. THAT THE LD. CIT - EXEMPTION HAS ERRED IN REJECT ING THE APPLICATION IN FORM NO. 10G FOR REGISTRATION U/S 80 G, MERELY DUE TO REJECTION OF REGISTRATION U/S 12AA. 4. THAT THE LD. CIT - EXEMPTION HAS ERRED IN DECIDI NG THE CASE WITHOUT GIVING PROPER OPPORTUNITY OF BEING HEA RD AND DISMISSING THE SAME ON IRRELEVANT GROUNDS. 5. THAT THE IMPUGNED APPELLATE ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : THE APPLICATIONS MOVED BY THE ASSESSEE COMPANY IN FORM NO.10A AND 10G FOR REGISTRATION UND ER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) AND APPROVAL U/S 80G OF THE ACT RESPECTIVELY HAVE BEEN REJECTED BY THE LD. CIT ON THE GROUNDS THAT THE NATURE OF THE TRUST IN QUESTION IS AGAINST THE NORM AND CHARACTER OF A CHARITABLE ORGA NISATION; THAT ALL ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 3 THE POWERS HAVE BEEN CENTRALIZED WITH TRUSTEES WHO CAN UTILIZE THE SAME FOR PERSONAL BENEFITS AND THE DONORS WOULD BE CONTROLLING THE FUNCTION OF THE TRUST AT THEIR OWN WISHES AND OBJEC TS; AND THAT THE BALANCE SHEET FILED BY THE TRUST IS UNSIGNED AND IS NOT CONTAINING THE DETAILED LIST OF DONORS. 3. FEELING AGGRIEVED, THE ASSESSEE COMPANY HAS COME UP BEFORE THE TRIBUNAL BY CHALLENGING THE IMPUGNED ORD ER PASSED BY LD. CIT BY WAY OF FILING THE PRESENT APPEALS . 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, THE ASSESSEE HAS PRODUCED BEFORE L D. CIT (EXEMPTIONS) THE TRUST DEED, BANK STATEMENT, COPY O F PROVISIONAL ACCOUNTS, ORIGINAL VOUCHERS RELATED TO EXPENSES ON CHARITABLE ACTIVITIES. THE ASSESSEE HAS CONSTITUTED A TRUST V IDE TRUST DEED CONTAINING COMPREHENSIVE OBJECT CLAUSE WITH MAIN OB JECTS AS UNDER:- 5. OBJECTIVE CLAUSE THE OBJECTS OF THE TRUST SHALL BE : MAIN OBJECTS A) REHABILITATION OF SLUM & STREET CHILDREN. ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 4 B) SETTING UP OF ORPHANAGES & OLD AGE HOMES. C) EDUCATION OF PERSONS OF ECONOMICALLY WEAKER SECTION S OF THE SOCIETY. D) REHABILITATION OF HANDICAPPED PERSONS. E) GRANT OF SCHOLARSHIPS TO THE DESERVING STUDENTS AND SUPPORT FOR BOOKS, UNIFORMS, TRAVEL, ACCOMMODATION, ETC. F) PROVIDING ENVIRONMENT PROTECTION, POLLUTION CONTROL AND HYGIENE IN THE LIVING CONDITIONS OF THE POOR. G) PROVIDING MEDICAL AID TO THE WEAKER SECTIONS OF THE SOCIETY. H) CONSERVATION OF WATER AND OTHER NATURAL RESOURCES. I) HOLDING BLOOD DONATION AND EYE CAMPS AND OTHER SUCH HEALTH CHECK UP CAMPS FOR THE ECONOMICALLY WEAKER SECTIONS OF THE SOCIETY. J) REHABILITATION OF VICTIMS OF NATURAL CALAMITIES, SU CH AS, FLOODS, DROUGHTS K) TO ENGAGE ANY OTHER ACTIVITY IN ORDER TO FULFILL TH E ABOVE OBJECTS. 6. THE LD. CIT (EXEMPTIONS) DECLINED THE REGISTRATI ON AND APPROVAL U/S 12AA AND 80G OF THE ACT TO THE ASSESSE E BY PICKING UP THE THREE CLAUSES OF THE TRUST DEED WHICH ARE AS UNDER :- 15.15 THE BOARD OF TRUSTEES MAY JOIN, CO-OPERATE A ND AMALGAMATE THE TRUSTS CREATED BY THESE PRESENTS OR ANY PORTION THEREOF WITH ANY TRUST OR INSTITUTION HAVING ALLIED AND/OR SIMILAR OBJECTS UPON SUCH TERMS AS THEY MAY IN THEIR ABSOLU TE DISCRETION THINK FIT. 15.18 THE BOARD OF TRUSTEES SHALL BE ENTITLED AT T HEIR DISCRETION FROM TIME TO TIME TO START, DISCONTINUE, ABOLISH AND RESTART ANY CHARITABLE INSTITUTION, TO IMPOSE ANY C ONDITION OR CONDITIONS TO ANY SUBSCRIPTION OR DONATION MADE BY THEM AND TO EARMARK ANY PORTION OF THE TRUST PROPERTY OR INCOME FOR ANY PARTICULAR OBJECT OR OBJECTS. 25. POWER TO MODIFY THE TERMS OF THE TRUST IN THE INTEREST OF BENEFICIARY: THE TRUSTEES APPOINTED IN THIS DEED WILL HAVE THE POWER TO MODIF Y THE TERMS OF THE TRUST AS THEY DEEM FIT TO KEEP THE INTEREST OF THE BENEFICIARIES ALWAYS IN THEIR MIND. WHENEVER SUCH MODIFICATION IS PROPOSED, ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 5 THE DECISION OF THE MAJORITY OF THE TRUSTEES SHALL PREVAIL EVEN OVER THOSE TRUSTEES WHO MAY HAVE GIVEN THEIR DISSEN T TO SUCH MODIFICATION. 7. BARE PERUSAL OF THE AIMS AND OBJECT OF THE TRUST CONSTITUTED BY THE ASSESSEE LEADS TO THE CONCLUSION THAT THE SA ME HAS BEEN ESTABLISHED FOR REHABILITATION OF SLUM AND STREET C HILDREN; TO SET UP ORPHANAGES AND OLD AGE HOMES; PROVIDING EDUCATION T O THE WEAKER SECTIONS OF THE SOCIETY, REHABILITATION OF HANDICAP PED PERSONS AND GRANT OF SCHOLARSHIPS TO THE DESERVING STUDENTS, ET C. 8. THE LD. CIT (E), WITHOUT EXAMINING THE AIMS AND OBJECTS OF THE ASSESSEE TRUST, PICKED UP THREE CLAUSES FROM OT HER OBJECTS CENTRALIZING POWERS OF THE BOARD OF TRUSTEES TO ST ART, DISCONTINUE, ABOLISH AND RESTART ANY CHARITABLE INSTITUTION AND TO IMPOSE ANY CONDITION TO ANY SUBSCRIPTION OR DONATION AND THAT IT MAY ALSO JOIN, COOPERATE AND AMALGAMATE THE TRUST WITH ANY TRUST O R INSTITUTION HAVING SIMILAR OBJECTS AND HAVING POWERS TO MODIFY THE TERMS OF THE TRUST IN THE BENEFIT OF THE BENEFICIARIES. 9. HOWEVER, WHEN WE EXAMINE ALL THE POWERS CONFERRE D ON THE BOARD OF TRUSTEES IN THE LIGHT OF THE MAIN OBJECTS AND OTHER OBJECTS OF THE TRUST, IT LEADS TO THE INESCAPABLE CONCLUSIO N THAT THE TRUST HAS BEEN CREATED FOR JUST CHARITABLE PURPOSE. MAIN OBJECTS OF THE TRUST ARE ONLY TO CONFER THE POWERS ON THE BOARD OF TRUSTEES TO RUN ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 6 THE TRUST IN AN EFFICIENT AND CHARITABLE MANNER. F URTHERMORE, ASSESSEE BROUGHT ON RECORD THE DETAIL OF ACTIVITIES BEING CARRIED OUT BY THE ASSESSEE VIDE LETTER, AVAILABLE AT PAGES 15 & 16 OF THE PAPER BOOK, TO THE NOTICE OF LD. CIT (E) SHOWING THAT IN ORDER TO ACHIEVE THE OBJECTS OF THE TRUST, IT HAS HIRED FIVE ROOMS I N SLUM AND JJ AREA AND HAS ALREADY ENGAGED FIVE TEACHERS TO TEACH CHIL DREN OF WEAKER SECTION OF THE SOCIETY. THE ASSESSEE HAS ALSO PLAC ED BEFORE LD. CIT (E) UPDATED BANK STATEMENT, COPY OF PROVISIONAL ACC OUNTS AS ON 10.09.2015 AND ORIGINAL VOUCHERS RELATED TO EXPENSE S ON CHARITABLE ACTIVITIES. 9. THE LD. CIT (E) HAS ALSO POINTED OUT THAT THE BA LANCE SHEET PLACED ON FILE BY THE ASSESSEE IS UNSIGNED AND DETA ILED LIST OF DONORS HAS NOT BEEN SUBMITTED NOR THE DETAILED NOTE S ON ITS ACTIVITIES HAVE BEEN FILED. WE ARE OF THE CONSIDER ED VIEW THAT WHEN THE ASSESSEE HAS CATEGORICALLY BROUGHT ON RECORD TH E ACTIVITIES BEING CARRIED OUT IN ORDER TO ACHIEVE OBJECTS OF THE TRUS T VIDE LETTER, AVAILABLE AT PAGES 15 & 16 OF THE PAPER BOOK, ALONG WITH ANNUAL REPORT, AVAILABLE AT PAGE 18 OF THE PAPER BOOK, SHO WING THE DETAILED NOTES ON ITS ACTIVITIES, THE REGISTRATION U/S 12A C ANNOT BE DECLINED ON THE BASIS OF MERE CONJECTURES PARTICULARLY WHEN AIMS AND OBJECTS OF THE ASSESSEE TRUST ARE CATEGORIC ONE AND THEY HA VE ALREADY HIRED ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 7 FIVE ROOMS AND ENGAGED FIVE TEACHERS TO EDUCATE THE CHILDREN OF THE WEAKER SECTION OF THE SOCIETY. 10. FURTHERMORE, WHEN WE EXAMINE THE CLAUSES 15.2 & 15.3 OF THE TRUST DEED AGAIN IT GOES TO PROVE THE BOARD OF TRUSTEES SHALL SPEND EACH AND SINGLE PENNY IN FURTHERANCE OF THE C AUSE OF MAIN OBJECTS OF THE ASSESSEE TRUST AND THEY WILL MAINTAI N THE TRUE AND ACCURATE ACCOUNTS WHICH WOULD OTHERWISE BE SUBJECT TO THE SCRUTINY AT THE TIME OF ASSESSMENT OF THE ASSESSEE TRUST IN EVERY ASSESSMENT YEAR. SO, ALL AIMS AND OBJECTS ENSHRINED IN THE TR UST DEED NEED TO BE READ AS A WHOLE TO WORK OUT IF THE TRUST HAS BEE N ESTABLISHED TO CARRY OUT THE CHARITABLE ACTIVITIES. 11. SO FAR AS QUESTION OF COMPLETE LIST OF DONORS B Y THE ASSESSEE IS CONCERNED, THE SAME IS OTHERWISE REQUIRED AT THE TIME OF ASSESSMENT AND NOT AT THE TIME OF REGISTRATION U/S 12A OF THE ACT. FURTHERMORE, ASSESSEE TRUST IS REQUIRED TO CARRY OU T THE CHARITABLE ACTIVITIES ONLY AFTER GETTING REGISTRATION U/S 12A OF THE ACT. EVEN OTHERWISE, PROVIDING REGISTRATION U/S 12A OF THE AC T IS NOT A LICENCE FOR ANY TRUST TO UTILIZE THE SAME FOR THEIR OWN BEN EFIT AND FOR COMMERCIAL PURPOSES, WHICH ASPECT IS TO BE SEEN AT THE TIME OF ASSESSMENT. 12. LD. CIT (E) WAS ONLY REQUIRED TO FIRSTLY SATISF Y HIMSELF IF THE TRUST HAS BEEN ESTABLISHED FOR CHARITABLE ACTIVITIE S AND ITS ACTIVITIES ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 8 ARE GENUINE FOR THE PURPOSE OF GRANT OF REGISTRATIO N U/S 12AA OF THE ACT. MOREOVER, IN THE INSTANT CASE, THE CIT (E) HA S NOT GIVEN ANY CONTRARY OBSERVATION THAT THE ASSESSEE TRUSTS ACTI VITIES ARE NOT GENUINE RATHER HE HAS DECLINED THE REGISTRATION U/S 12A AND APPROVAL U/S 80G MERELY ON THE GROUND THAT BOARD OF TRUSTEES HAVING ABSOLUTE POWERS WHICH, TO OUR MIND, ARE TO B E EXAMINED IN THE LIGHT OF THE ACTIVITIES BEING CARRIED OUT AND T O BE CARRIED OUT BY THE ASSESSEE TRUST. 13. HONBLE ALLAHABAD HIGH COURT IN CASE CITED AS CIT (E) VS. YAMUNA EXPRESSWAY INDUSTRIAL DEVELOPMENT AUTHORITY (2017) 395 ITR 18 (ALL.) WHILE DISCUSSING THE SCOPE OF SECTIONS 11 & 12 OF THE ACT HAS HELD THAT IT IS NOT WITHIN THE PURVI EW OF COMMISSIONER TO EXAMINE WHETHER THE ASSESSEE WAS EN TITLED TO EXEMPTION U/S 11 OR 12 SINCE THAT WAS WITHIN THE JU RISDICTION OF AO AND NOT THE COMMISSIONER (E). HONBLE HIGH COURT F URTHER HELD THAT, A BODY OR INSTITUTION WHICH IS FUNCTIONING FOR ADVA NCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY AND WHOSE ACTIVIT IES ARE NOT IN THE NATURE OF TRADE, BUSINESS OR COMMERCE OR SHEER PROF IT MAKING, IS ENTITLED TO CLAIM ITSELF TO BE CONSTITUTED FOR 'CHA RITABLE PURPOSES' AND SEEK REGISTRATION UNDER SECTION 12A(1) OF THE I NCOME-TAX ACT, 1961. CHARITABLE PURPOSE PRIMARILY MEANS THAT THE P REDOMINANT OBJECT MUST BE TO PROMOTE WELFARE OF GENERAL PUBLIC . AN ANCILLARY ITA NO.6768/DEL./2015 ITA NO.4490/DEL./2018 9 ACTIVITY, IF ANY, TO THAT GENERAL ONE PERFORMED BY THE INSTITUTION WOULD NOT RENDER SUCH INSTITUTION 'NON-CHARITABLE'. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THE ASSESSEE TRUST HAVING BEEN CONSTITUTED TO CARRY OUT THE CHARITABLE ACTIVITIES IS ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT AND CONSEQUENT APPROVAL U/S 80G BUT THE LD. CIT (E) HAS ERRED IN DECLINING THE REGISTRATION U/S 12A A OF THE ACT ON THE BASIS OF CONJECTURES AND SURMISES THAT THE TRUS T CAN BE UTILIZED FOR PERSONAL BENEFITS OF THE TRUSTEE WHICH COULD BE EVEN COMMERCIAL IN NATURE WITHOUT HAVING ANY MATERIAL ON FILE IN THIS REGARD, WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW . CONSEQUENTLY, APPEALS FILED BY THE ASSESSEE ARE ALLOWED DIRECTING THE LD. CIT (E) TO PROVIDE REGISTRATION U/S 12AA TO THE ASSESSEE AN D ALSO TO GRANT CONSEQUENT APPROVAL U/S 80G OF THE ACT. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2018. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER , 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.