Dogra Cultural and Educational Trust, Kathua V. The Commissioner of Income-tax, Jammu

ITA 453/ASR/2011

• Counselvise Citation: 45320914 RSA 2011
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-06-2012
• Assessment Year: misc
• Appeal Filed On: 16-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LAXMAN SINGH
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.453(ASR)/2011 PAN :AAAAD3776H M/S. DOGRA CULTURAL AND EDUCATIONAL VS. THE COMMIS SIONER OF INCOME TAX, TRUST, KATHUA. JMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. R.K. GUPTA, CA RESPONDENT BY: SH. LAXMAN SINGH, CIT(DR) DATE OF HEARING:24/07/2012 DATE OF PRONOUNCEMENT:30/07/2012 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER O F THE LD. COMMISSIONER OF INCOME TAX ( IN SHORT CIT), DATED 20.07.2011 AGAINST THE ORDER PASSED UNDER SECTION 12AA(1)(B)(II) OF THE IN COME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE WORTHY CIT IS NOT JUSTIFIED IN REFUSIN G TO GRANT REGISTRATION TO THE APPELLANT TRUST UNDER SEC. 12AA OF THE INCOME TAX ACT, 1961 BY APPLYING THE PROVISIONS OF SECTION 12A A(1)(B)(II) ON THE ALLEGED GROUND THAT THE APPELLANT INSTITUTION HAS N OT SATISFIED THE WORTHY CIT WITH THE GENUINENESS OF ACTIVITIES AND A S THE SURPLUS PROFITS ARE NOT IN CONSONANCE WITH THE INTENT AND S PIRIT OF PROVISIONS OF SECTION 12AA. ITA NO.453(ASR)/2011 2 2. THE APPELLANT CRAVES, LEAVES TO ALTER AND ADD TO SUBSTITUTE ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING.. 3. THE BRIEF FACTS IN THE PRESENT CASE ARE THAT THE ASSESSEE FILED AN APPLICATION IN FORM NO.10A ON 14.01.2011. IT WAS NO TICED BY THE LD. CIT THAT THE ASSESSEE IS HAVING EXCESS OF INCOME OVER E XPENDITURE IN EXCESS OF 15% IN SOME YEARS. THE LD. CIT HAS NOTICED DURING T HE ASSESSMENT YEARS 2007-08 & 2008-09 THAT THE TRUST HAS GENERATED SURP LUS PROFIT OUT OF TOTAL RECEIPTS BY 50.45% AND 29.63% RESPECTIVELY. THE OBS ERVATION OF THE LD. CIT FOR THE SAKE OF CLARITY IS BEING REPRODUCED HEREUND ER: AFTER GOING THROUGH THE ACCOUNTS OF THE TRUST FOR THE ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2009-10 IT HAS BEEN FOUN D THAT THE ASSESSEE TRUST HAS GENERATED SURPLUS (PROFIT) OUT O F THEIR TOTAL RECEIPTS, YEAR AFTER YEAR AND IT CANNOT BE ACCEPTED THAT THE SURPLUS GENERATED IS MERELY INCIDENTAL. THE SURPLUS GENERATED HAS BEEN U TILIZED BY THE TRUST RUN BY IT FOR MAKING INVESTMENT IN FIXED ASSETS/CAP ITAL ASSETS, THE CONSTRUCTION OF BUILDING ETC. IN ORDER TO GENERATE LARGER PROFITS AND NOT IN ORDER TO FURTHER THE CAUSE OF EDUCATION AND ALSO NOT FOR THE UTILIZATION OF ALL THE OBJECTS OF THE TRUST. THE CO UNSEL OF THE ASSESSEE TRUST WAS REQUESTED TO EXPLAIN AS TO HOW THE CASE O F HIS CLIENT WAS NOT COVERED BY THE ORDER OF THE HONBLE UTTARAKHAND HIG H COURT IN THE CASES OF CIT VS. QUEENS EDUCATION SOCIETY, HALDWAN I AND CIT VS. ST. PAULS SR. SECONDARY SCHOOL, KATHGODAM DATED 24.09. 2007. IN RESPONSE TO ABOVE, THE ASSESSEE FILED A WRITTEN REP LY MAINLY RELYING ON THE DECISION DATED 29.01.2010 OF HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARIT ABLE TRUST VS. UNION OF INDIA. IT IS WORTHWHILE TO MENTION THAT TH E DEPARTMENT HAS NOT ACCEPTED THE ABOVE DECISION OF THE HONBLE PUNJ AB & HARYANA HIGH COURT AND HAS FILED SPECIAL LEAVE PETITION SLP (C) NO.5381/2011 BEFORE THE HONBLE SUPREME COURT OF IN DIA IN THIS CASE. ON A SIMILAR ISSUE IN THE CASE OF CCIT, AMRITSAR VS . AJANTA EDUCATIONAL CENTRE, THE DEPARTMENT HAS FILED SPECIA L LEAVE PETITION SLP CIVIL NO.4445/2011 BEFORE THE HONBLE SUPREME C OURT OF INDIA AGAINST DECISION DATED 20.05.2010 OF HONBLE PUNJAB & HARYANA ITA NO.453(ASR)/2011 3 HIGH COURT. IN BOTH THE CASES SLPS ARE PENDING BEFO RE THE HONBLE APEX COURT. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED VIEW THAT THE ASSESSEE INSTITUTION HAS NOT SATISFIED ME WITH THE GENUINENESS OF ITS ACTIVITIES AND AS THE SURPLUS PROFITS AS MENTIONED ABOVE ARE NOT IN CONSONANCE WITH THE INTENT AND SPIRIT OF PROVISION S OF SECTION 12AA AND PROVISIONS OF SECTION 12AA(1)(B)(II) ARE APPLIC ABLE IN THIS CASE. KEEPING IN VIEW THE ABOVE FACTS OF THE CASE, I REFU SE TO GRANT REGISTRATION TO THE TRUST. 4. THE LD. COUNSEL FOR THE ASSESSEE, SH. R.K. GUPTA , CA, INVITED OUR ATTENTION TO THE COPY OF THE TRUST DEED PLACED AT P AGES 1 TO 12 WHERE THE TRUST IS HAVING THE OBJECTS OF PROVIDING EDUCATION, RELIEF TO THE POOR ETC. AND ESTABLISH SCHOOLS, COLLEGES, HOSTELS ETC. OUR ATTEN TION WAS INVITED TO THE BALANCE SHEET AND INCOME AND EXPENDITURE FOR THE YE AR ENDING 31 ST MARCH, 2008 AND 31 ST MARCH, 2009 WHERE ALL THE SURPLUS FUNDS HAVE BEEN INVESTED FOR THE OBJECTS OF THE SOCIETY. THERE IS NOTHING BR OUGHT ON RECORD BY THE LD. CIT THAT ANY FUND HAD BEEN INVESTED FOR ANY OBJECT, WHICH IS NOT THE OBJECT OF SOCIETY AS PER TRUST DEED. AS REGARDS THE RELIA NCE OF THE DECISION IN THE CASE OF CIT VS. QUEENS EDUCATIONAL SOCIETY (SUPRA) BY THE LD. CIT, THE LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO T HE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROV E INTERNATIONAL CHARITABLE TRUST & ORS. VS. UNION OF INDIA & ORS. ( 2010) 327 ITR 73 DATED 29 TH JANUARY, 2010, WHERE THE HONBLE PUNJAB & HARYANA HIGH COURT HAS NOT ACCEPTED THE VIEWS EXPRESSED BY THE DIVISION BE NCH OF THE HONBLE UTTARAKHAND HIGH COURT IN THE CASES OF CIT VS. QUEE NS EDUCATION SOCIETY (SUPRA) FOR THE REASONS MENTIONED THEREIN. THE HON BLE PUNJAB & HARYANA ITA NO.453(ASR)/2011 4 HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL C HARITABLE TRUST & ORS. VS. UNION OF INDIA & ORS.(SUPRA) HAS HELD THAT AT T HE INITIAL STAGE WHEN THE APPLICATION FOR EXEMPTION IS FILED BY AN EDUCATIONA L INSTITUTION THE SCOPE OF INQUIRY IS RESTRICTED ONLY TO ASCERTAIN THE GENUINE NESS OF THE ACTIVITIES OF SUCH INSTITUTION. THE FACT THAT AN INSTITUTION HAS EARNE D PROFIT WOULD NOT BE DECIDING FACTOR TO CONCLUDE THAT THE EDUCATIONAL IN STITUTION EXISTS FOR PROFIT. EVEN IF THERE REMAINS A SURPLUS AT THE HANDS OF THE EDUCATIONAL INSTITUTION, IT WOULD BE ENTITLED TO EXEMPTION UNDER SECTION 10(23C )(VI) PROVIDED THE EDUCATIONAL INSTITUTION SOLELY EXISTS FOR EDUCATION AL PURPOSES. 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. R.K. GUPTA , CA, RELIED UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT, BATHINDA VS. M/S. BABA DEEP SINGH EDUCATIONAL SOCIE TY, BATHINDA, IN ITA NO.881 OF 2010 DATED 13.10.2011. A COPY OF THE SAID ORDER OF HIGH COURT, HAS BEEN PLACED ON RECORD, WHEREIN IT HAS BEEN HELD THAT THE ACTIVITIES OF THE SOCIETY WERE ADMITTEDLY RUNNING A POLYTECHNIC COLLE GE AND THE ACTIVITIES WERE INTERWOVEN FOR FURTHERING THE PROJECTS AND ACT IVITIES PERTAINING TO EDUCATION, THE TRIBUNAL RIGHTLY DIRECTED THAT REGI STRATION SHOULD BE GRANTED TO THE RESPONDENT-SOCIETY. THE HONBLE PUNJAB & HAR YANA HIGH COURT HAD RELIED UPON THE DECISION OF THE SAID COURT IN THE O RDER DATED 05.10.2011 IN THE CASE OF CIT-II, CHANDIGARH VS. M/S. SURYA EDUCATION AL & CHARITABLE TRUST, IN ITA NO.701 OF 2010. THE HONBLE HIGH COURT HAS R ELIED UPON THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF C.I.T. VS. RED ITA NO.453(ASR)/2011 5 ROSE SCHOOL (2007) 163 TAXMAN 19, WHEREIN IT HAS BE EN HELD THAT THE JURISDICTION OF THE COMMISSIONER AT THE STAGE OF PR OCESSING APPLICATION U/S 12AA OF THE ACT IS LIMITED REGARDING WHETHER THE AC TIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR INST ITUTION AND WHERE EDUCATION IS BEING IMPARTED AS PER THE RULES AND THE FACTUM O F THE ESTABLISHMENT AND RUNNING OF SCHOOLS IS NOT DISPUTED THE SAME WAS A G ENUINE ACTIVITY AND THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CAN NOT BE STRETCHED BEYOND THIS. 6. THE LD. CIT(DR) MR. LAXMAN SINGH, ON THE OTHER H AND, INVITED OUR ATTENTION TO THE TRUST DEED THAT THE ASSESSEE CANNO T AMEND THE TRUST DEED WITHOUT DUE COURSE OF LAW IN WHICH THE ASSESSEE HA S CHANGED THE TRUST DEED ETC. IT WAS POINTED OUT THAT IT IS A FAMILY TRUST. THE ASSESSEE IS CHARGING TUITION FEE AT A VERY HIGH RATE TO HAVE A CONTROL O F THE FAMILY ITSELF. THE LD. CIT(DR) RELIED UPON THE ORDER OF THE LD. CIT, BATHI NDA. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE AMENDMENT TO THE TRUST DEED OR MANAG ING OF THE TRUST BY THE FAMILY MEMBERS ARE NOT THE ISSUE WHICH HAS BEEN RAI SED BY THE LD. CIT IN ITS ORDER DATED 20.07.2011. THEREFORE, THE ARGUMENT OF THE LD. CIT(DR) CANNOT BE TAKEN COGNIZANCE. 7.1. AS REGARDS THE SURPLUS OF THE TRUST, WHICH HAD ARISEN DURING THE ASSESSMENT YEARS 2007-08 & 2008-09 BY 50.45% & 29.6 3% OF THE TOTAL RECEIPTS OF THE ASSESSEE, WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE ITA NO.453(ASR)/2011 6 LD. COUNSEL FOR THE ASSESSEE AND THE RELIANCE PLACE D ON VARIOUS CASE LAWS OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. VS. UNION OF INDIA & ORS.(S UPRA) AND IN THE CASE OF CIT, BATHINDA VS. M/S. BABA DEEP SINGH EDUCATIONAL SOCIETY, BATHINDA (SUPRA). THE LD. CIT IN THE PRESENT CASE HAS NOT PO INTED OUT WHETHER ANY EXCESS TUITION FEE HAD BEEN CHARGED BY THE TRUST OR SOME CAPITATION FEE HAD BEEN CHARGED WHICH IS NOT THE OBJECT OF THE SOCIETY , HAS NOT BEEN PLACED ON RECORD. MOREOVER, NOTHING HAS BEEN BROUGHT ON RECOR D WHETHER ANY SURPLUS HAS BEEN USED FOR NON CHARITABLE ACTIVITIES BY THE CIT. SECTION 12AA OF THE ACT, REQUIRES SATISFACTION IN RESPECT OF THE GENU INENESS OF THE ACTIVITIES OF THE TRUST, WHICH INCLUDES THE ACTIVITIES WHICH THE TRUST WAS UNDERTAKING AT PRESENT AND ALSO WHICH IT MAY CONTEMPLATE TO UNDERT AKE. IN THE PRESENT CASE, THE LD. CIT HAS NOT BROUGHT ON RECORD THAT ANY OF T HE ACTIVITIES OF THE TRUST IS NOT GENUINE OR TRUST HAD CONTEMPLATED TO UNDERTA KE ANY NON GENUINE ACTIVITY FOR NON CHARITABLE OR NON EDUCATIONAL ACTI VITIES. THEREFORE, THE JURISDICTION OF THE LD. CIT AT THE STAGE OF PROCESS ING APPLICATION UNDER SECTION 12AA OF THE ACT IS LIMITED TO WHETHER THE ACTIVITIES ARE GENUINE AND IN CONSONANCE WITH THE OBJECTS OF THE TRUST OR INST ITUTION AND WHERE EDUCATION IS BEING IMPARTED AS PER THE RULES AND THE FACTUM O F THE ESTABLISHMENT AND RUNNING OF SCHOOLS IS NOT DISPUTED, THEN THE ACTIVI TY IS SAID TO BE GENUINE ACTIVITY AND THE ENQUIRY REGARDING GENUINENESS OF T HE ACTIVITIES CANNOT BE STRETCHED BEYOND THAT. ITA NO.453(ASR)/2011 7 7.2 IN VIEW OF THE ABOVE DISCUSSION AND THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT IS DIRECTED TO ALLOW REGISTRA TION TO THE ASSESSEE-TRUST UNDER SECTION 12AA(A) OF THE ACT. THUS, ALL THE GRO UNDS OF THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO.453(ASR)/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30TH JULY, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH JULY, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. DOGRA CULTURAL & EDUCATIONAL TRUS T, KALIBARI, KATHUA 2. THE CIT, JAMMU. 3. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.