Guru Nanak Public School, Sambalpur V. CIT, Sambalpur

ITA 460/CTK/2012

• Counselvise Citation: 46022114 RSA 2012
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 21-09-2012
• Court: TRIBUNAL
• Department Lawyers: N K NEB
• Assessee Lawyers: P S PANDAKAMAL AGRAWALLA ARS
• Keywords: Charitable institution
• Section: 12A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , H ONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 460/CTK/2012 GURU NANAK PUBLIC SCHOOL, KHETRAJPUR, SAMBALPUR PAN: AAATG 4513 E - - - VERSUS - COMMISSIONER OF INCOME - TAX, SAMBALPUR. ( /APPELLANT ) ( / RESPO NDENT ) / FOR THE APPELLANT : / SHRI P.S.PANDA/KAMAL AGRAWALLA, ARS / FOR THE RESPONDENT: / SHRI N.K.NEB, DR / DATE OF HEARING: 23.11.2012 / DATE OF PRONOUNCEMENT: 21.12.2012 / ORDER . . . , SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DT.20.7.2012 OF THE COMMISSIONER OF INCOME - TAX, SAMBALPUR REJECTING THE APPLICATION OF THE ASSESSEE SEEKING REGISTRATI ON U/S.12A OF THE I.T.ACT,1961. 2. THE ASSESSEE RAISES THE FOLLOWING ISSUES : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY LD.CIT REJECTING THE APPLICATION FILED BY THE APPELLANT FOR REGISTRATION OF THE TRUST U/S.12A OF THEI.T.ACT,19 61 IS ILLEGAL AND BAD IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT HAS ERRED IN APPLYING THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT V. QUEENS EDUCATIONAL SOCIETY (2009) 177 TAXMANN 326 (UTTARAKHAND) FOR REJECTING THE APPLI CATION FILED BY THE APPELLANT WITH A CONTENTION THAT THE TRUST IS FORMED WITH A PROFIT MOTIVE . 3. HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDER OF THE LEARNED CIT AND THE DECISION RELIED ON BY THE LEARNED CIT AND THE DECISIONS RELIED AT BAR. I.T.A.NO. 460/CTK/2012 2 4. THE ASSESSEE, A TRUST FILED APPLICATION DT. 29.02.2012 BEFORE THE COMMISSIONER OF INCOME - TAX, SAMBALPUR SEEKING REGISTRATION U/S.12 A OF THE I.T.ACT,1961. THE LEARNED CIT REJECTED THE SAID APPLICA TION BY THE IMPUGNED ORDER DT.20 .7.2012 HOLDING INTER ALIA THA T IN VIEW OF THE DECISION OF HONBLE JHARKHAND HIGH COURT IN THE CASE OF CIT V. M/S.QUEENS EDUCATIONAL SOCIETY (SUPRA), IT CANNOT BE HELD THAT THE ASSESSEE IS AN INSTITUTION EXISTING SOLELY FOR THE PURPOSE OF EDUCATION AND NOT FOR THE PURPOSE OF MAKING SYS TEMATIC PROFITS . 3. ON CAREFUL ANALYSIS OF THE ORDER PASSED BY THE LEARNED CIT, IT IS FOUND THAT ADMITTEDLY THE ASSESSEE IS A TRUST FOR THE PURPOSE OF CHARITABLE OBJECTS AND IT APPLIED FOR REGISTRATION U/S.12A OF THE I.T.ACT,1961 ON 29.02.2012. AFTER EXA MINING THE DETAILS FURNISHED BY THE ASSESSEE, THE LEARNED CIT OF THE I.T.ACT ON 20.07.2012 HAS REJECTED THE APPLICATION FILED BY THE ASSESSEE SEEKING REGISTRATION U/S.12A , WHEREIN IT IS OBSERVED BY THE LEARNED CIT THAT IT CANNOT BE SAID THAT THE INSTITUTIO N RUN BY THE ASSESSEE IS SOLELY FOR THE PURPOSE OF EDUCATION AND NOT FOR THE PURPOSE OF PROFIT. IT IS FURTHER NOTED IN THE IMPUGNED ORDER THAT THE ASSESSEE IS MAKING SYSTEMATIC PROFITS . 4. IT IS AN UNDISPUTED FACT THAT WHILE CONSIDERING THE REGISTRATION O F A CHARITABLE TRUST IT IS INCUMBENT UPON THE CIT TO LOOK INTO THE GENUINENESS OF THE OBJECTS APART FROM THE OBJECTS BEING CHARITABLE OR NOT. IN THE IMPUGNED ORDER THE LEARNED CIT HAS OBSERVED THAT THE OBJECTS OF THE TRUST AS REPRODUCED IN THE IMPUGNED ORD ER ARE PRIMA FACIE APPEAR TO BE CHARITABLE IN NATURE BUT HOWEVER, HE RESORTED TO EXAMINE THE ACTIVITIES OF THE TRUST IN ORDER TO COME TO A CONCLUSION WHETHER ACTUAL ACTIVITIES CARRIED OUT BY THE TRUST IS CHARITABLE OR NOT. FOR THAT PURPOSE, THE LEARNED CIT HAS SEEN THE FINANCIAL STATEMENTS FOR THE IMMEDIATELY PRECEDING THREE YEARS TO THE DATE OF FILING OF APPLICATION I.E., 2008 - 09, 2009 - 10 AND 2010 - 11 AND FOUND THAT THE I.T.A.NO. 460/CTK/2012 3 ASSESSEE HAS EARNED INCOME OVER EXPENDITURE OF RS.4,45,958 IN THE FINANCIAL YEAR 2008 - 09 , RS. 43,896 IN THE FY 2009 - 10 AND 36,040 IN THE FINANCIAL YEAR 2010 - 11. AFTER FINDING THESE THREE YEARS ACCOUNT STATEMENTS, THE LEARNED CIT HAS COME TO THE CONCLUSION THAT THE ASSESSEE IS MAKING SYSTEMATIC PROFITS AND HENCE, HE DENIED REGISTRATION TO THE ASSESSEE. WHILE DOING SO, THE LEAR NED CIT HAS RELIED ON THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V. M/S.QUEENS EDUCATIONAL SOCIETY DT.24.9.2007. THIS DECISION OF HONBLE UTTARAKHAND HIGH COURT HAS OBSERVED IN THE SAID JUDGMENT THAT THE HONBLE APEX COURT IN THEIR DECISION REPORTED IN ( 1992) 3SCC 390, HAS HELD THAT WHE RE A SOCIETY OR BODY IS MAKING SYSTEMATIC PROFIT, EVEN THOUGH THAT PROFIT IS UTILIZED ONLY FOR CHARITABLE PURPOSE., YET IT CANNOT BE SAID THAT IT COULD CLAIM EXEMPTION. IF, MERELY QUALITATIVE TEST IS A PPLIED TO SOCIETIES, EVEN SCHOOLS WHICH ARE RUN ON COMMERCIAL BASIS MAKING PROFIT WOULD GO OUT OF THE PURVIEW OF THE TAXATION AND WOULD DEMAND EXEMPTION. HONBLE DELHI HIGH COURT IN THE CASE OF DIT V. FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTRE IN I.T.APPEAL NO.1687 OF 2010 DT.16.08.2012 HAS HELD THAT THE STATUTE DOES NOT PROHIBIT OR ENJOIN THE COMMISSIONER FROM REGISTERING TRUST SOLELY BASED ON ITS OBJECTS, WITHOUT ANY ACTIVITY , IN THE CASE OF A NEWLY REGISTERED TRUST. THE STATUTE DOES NOT PRESCRIBE A WAITING PERIOD, FOR A TRUST TO QUALIFY ITSELF FOR REGISTRATION. AND FOLLOWING THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MEENAKSHI AMMA ENDOWMENT TRUST HAS APPROVED THE DECISION OF THE TRIBUNAL WHERE THE TRUST HAS ACTUALLY COMMENCED ITS ACTIVITIES OR NOT. WHILE RENDERING THIS JUDGMENT, HONBLE DELHI HIGH COURT HAS CONSIDERED THE CASE OF KERALA HIGH COURT IN THE CASE OF SELF EMPLOYERS SERVICE SOCIETY V. CIT (247 ITR 18 AND DECISION OF DELHI BENCH OF ITAT IN THE CASE OF DHARMA SANSTHAPAK SANGH (NIYAS) V . CIT (28 SOT 1 (DELHI)(URO) AND THE DECISION OF I.T.A.NO. 460/CTK/2012 4 KARNATAKA HIGH COURT IN THE CASE OF DIT V. MEENAKSHI AMMA ENDOWMENT TRUST (50 DTR 243) AND THE DECISION OF DIVISION BENCH OF KARNATAKA HIGH COURT RENDERED IN THE CASE OF SANJEEVAMM A HANUMANTHE GOWDA CHARITABLE TRUST V. DIT (285 ITR 327). 5. ON GOING THROUGH THE JUDGMENT IN THE CASE OF CIT V. M/S.QUEENS EDUCATIONAL SOCIETY (SUPRA), WHICH WAS RELIED ON BY THE LEARNED CIT IN HIS IMPUGNED ORDER , IT IS FOUND THAT THE HONBLE HIGH COURT S INTERPRETATION WAS DISTINGUISHED BY VARIOUS HIGH COURTS IN SUBSEQUENT JUDGMENTS BY HONBLE BOMBAY HIGH COURT IN THE CASE OF VANITA VISHRAM TRUST V. CCIT (327 ITR 121), HIMACHAL PRADESH HIGH COURT IN THE CASE OF MAA SARASWATI TRUST V. UNION OF INDIA (2010 ) 194 TAXMAN 84 (HP), HARYANA HIGH COURT IN PINEGROVE INTERNATIONAL CHARITABLE TRUST V. UOI (327 ITR 73 (P & H) AND DELHI HIGH COURT IN ST.LAWRENCE EDUCATIONAL SOCIETY V. CIT , (2011) 197 TAXMANN 504 (DELHI) . SO ON CONSOLIDATED APPRECIATION OF THE JUDICIAL PRONOUNCEMENTS STATED SUPRA, IT IS SEEN THAT THE VIEW EXPRESSED BY THE HONBLE UTTARAKHAND HIGH COURT IS NOT ACCEPTED BY THE OTHER HIGH COURTS. THEREFORE, IT IS ONLY A MINORITY DECISION WHEREAS THE MAJORITY OF THE HIGH COURTS ARE HOLDING OTHERWISE. THEREF ORE, RELYING ON SUCH DECISION OF MAJORITY HIGH COURTS STATED SUPRA, IT MUST BE HELD THAT THE IMPUGNED ORDER OF THE LEARNED CIT IS NOT SUSTAINABLE FOR LEGAL SCRUTINY. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE CITS IMPUGNED ORDER REJECTING THE REGIS TRATION TO THE ASSESSEE IS NOT IN ACCORDANCE WITH THE MAJORITY VIEW OF THE HIGH COURTS STATED SUPRA. SINCE THE LEARNED CIT HAS NOT FOUND THAT THE OBJECTS OF THE ASSESSEE ARE NOT CHARITABLE AND NOT GENUINELY ESTABLISHED, SIMPLY BECAUSE THE ASSESSEE IS EARNI NG PROFIT COULD NOT BE A GROUND FOR REFUSING THE REGISTRATION U/S.12A SOUGHT BY THE ASSESSEE . SIMILAR ASPECT WAS CONSIDERED BY THE ITAT, CHANNEI BENCH IN THE CASE OF THE INSTITUTE OF CHARTERED I.T.A.NO. 460/CTK/2012 5 SHIPBORKERS V. DIT IN ITA NO.348(MDS) 2012 DT.30.7.2012 (COPY F URNISHED), WHEREIN THE TRIBUNAL HAS HELD THAT THE ASSESSEE CONTINUES TO ENJOY THE REGISTRATION U/S.12AA AS IF THERE WAS NO INTERRUPTION. WHILE HOLDING SO, THE TRIBUNAL HAS APPLIED THE RATIO OF THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF DIT(EX EMPTIONS) VS. THE CHARTERED ACCOUNTANTS STUDY CIRCLE IN TAX CASE(APPEAL) NO.593 OF 2011, WHEREIN THEIR LORDSHIPS HAVE HELD IN PARAGRAPHS 8 AND 9, QUOTED BY THE TRIBUNAL IN ITS ORDER, AS UNDER : 8. THE OBJECTS OF THE ASSESSEE - TRUST, AS REFERRED TO ABOVE, ARE AMONG OTHER THINGS TO CONDUCT PERIODICAL MEETINGS ON PROFESSIONAL SUBJECTS AND TO ACHIEVE THE SAID OBJECTS, THE ASSESSEE IS PUBLISHING BOOKS, BOOKLETS, ETC. ON PROFESSIONAL SUBJECTS, AND SELLING THE SAME ONLY ON THE SUBJECTS RELATED TO AUDIT AND NOT ON ANY OTHER SUBJECT. CONSEQUENTLY, THOSE BOOKS ARE PRIMARILY SOLD ONLY TO THE MEMBERS OF THE SOCIETY. OFCOURSE, THE BOOKS ARE ALSO MADE AVAILABLE FOR SALE TO THE GENERAL PUBLIC AIMING TO HELP THE SOCIETY TO GET BETTER, WELL - EQUIPPED AND SKILLED SET OF CHART ERED ACCOUNTANTS FOR MAINTAINING AUDIT QUALITY. 9. IN OUR OPINION, SUCH ACTIVITIES OF THE ASSESSEE - TRUST CANNOT BE CONSTRUED TO BE ONE OF TRADE OR COMMERCE OR BUSINESS AND IT WOULD ONLY BE A CHARITABLE IN NATURE. THE REFORE, IT CANNOT BE HELD THAT THE ACTI VITIE S OF THE ASSESSEE - TRUST IN PUBLI SH IN G AND SELLING BOOKS OF PROFESSIONAL INTEREST, WHICH ARE MEANT TO BE USED AS A REFERENCE MATERIAL EVEN BY THE GENERAL PUBLIC AS WELL AS THE PROFESSIONALS IN RESPECT OF BANK AUDIT, TAX AUDIT, ETC., CANNOT BE CONSTRUED TO BE ONE OF COMMERCE IN NATURE. THE FINDING OF THE TRIBUNAL IN THIS REGARD REQUIRES NO INTERFERENCE. THEREFORE, RESPECTFULLY FOLLOWING THE MAJORITY VIEWS OF VARIOUS HIGH COURTS REFERRED TO ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED ORDER OF THE LEARNED CIT REFUSING REGISTRATION U/S.12A IS NOT SUSTAINABLE FOR LEGAL SCRUTINY . WE, THEREFORE, SET ASIDE IMPUGNED ORDER OF THE LEARNED CIT AND I.T.A.NO. 460/CTK/2012 6 DIRECT HIM TO GRANT THE REGISTRATION U/S. 12A AS SOUGHT FOR BY THE ASSESSEE BEFORE HIM, BY ALLOWING THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. S D/ - S D/ - ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( ) DATE: - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : GURU NANAK PUBLIC SCHOOL, KHETRAJPUR, SAMBALPUR 2 / THE RESPONDENT: COMMISSIONER OF INCOME - TAX, SAMBALPUR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY OR DER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 17. 12. 2012 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 17 .12.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFOR E THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.12.2012 7. DATE ON WHICH THE FILE GOES TO THE HEA D CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER .. ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY.