Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 5194 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-11-2013
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
H
Next Hearing Date
11-11-2013
Assessment Year
misc
Appeal Filed On
08-06-2011
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL H B ENCH, MUMBAI . . , !'#$ , % &' BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI N.K. BILLAIYA, AM ./ I.T.A. NO. 4624/MUM/2011 LATE SMT. HANJABAI GAHLOT CHARITABLE TRUST, 603, GAHLOT COMPLEX, PLOT NO. 28A, SECTOR-10, NERUL, NAVI MUMBAI-400 706 DIRECTOR OF INCOME TAX (EXEMPTION), 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400 012 '( % ./ )* ./PAN/GIR NO. :AAATH 4797B ( (+ /APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY : ` DR. P. DANIEL ,-(+ / . /RESPONDENT BY : SHRI K.C.P. PATNAIK / 01% / DATE OF HEARING : 11.11.2013 234 / 01% / DATE OF PRONOUNCEMENT : 11.11.2013 &5 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE DIT(EXEMPTION), MUMBAI DT.19.5.2011. 2. THE ASSESSEE HAS RAISED 8 SUBSTANTIVE GROUNDS OF APPEAL. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE IS T HAT THE DIT (EXEMPTION) ERRED IN REJECTING APPLICATION OF THE A SSESSEE TRUST FOR ITA NO.4624/MUM/2011 2 REGISTRATION U/S. 12A OF THE ACT. A PERUSAL OF THE ORDER OF DIT(EXEMPTION) SHOWS THAT THE ASSESSEE TRUST FILED AN APPLICATION IN FORM NO. 10A ON 24.11.2010 FOR REGISTRATION U/S. 12 A OF THE ACT. THE DIT[E] WHILE PERUSING THE STATEMENT OF ACCOUNTS OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAS SHOWN A SUBSTANTIAL AMOUNT OF RENT INCOME. ON FURTHER PERUSAL, THE DIT OBSERVED THAT THE ASSESSEE TRUST HAS CONSTRUCTED SHOPS/OFFICES AND THE SAME HAS BEEN GIVEN ON SUB-LE ASE. THE DIT (EXEMPTION) SOUGHT CLARIFICATION FROM THE ASSESSEE AS TO HOW THE ACTIVITY OF SUB-LEASING OF SHOPS AND OFFICES IS WITHIN THE MEANING OF SEC. 2(15) OF THE I.T. ACT. THE ASSESSEE TRUST WAS ALSO ASKED T O CLARIFY WHY THE SAID ACTIVITY SHOULD NOT BE CONSIDERED AS COMMERCIAL IN NATURE. 3. THE ASSESSEE FILED A DETAILED REPLY ON 22.3.2011 AND EXPLAINED THAT THE PRIMARY OBJECT OF THE TRUST IS TO IMPART EDUCAT ION AND GRANTING MEDICAL RELIEF. IT WAS FURTHER EXPLAINED THAT THE TRUST HA S OBTAINED A PLOT ON LEASE OF 60 YEARS FROM CIDCO. THE SHOPS AND OFFICES WERE CONSTRUCTED FOR THE SMOOTH FUNCTION OF EDUCATIONAL INSTITUTIONS. IT WA S STRONGLY CONTENDED THAT SEC. 2(15) R.W. BOARDS CIRCULAR SUPPORTS THE C LAIM OF THE ASSESSEE. IT WAS EXPLAINED TO THE DIT (EXEMPTION) THAT SUB-LEASI NG OF SMALL PART OF BUILDING IS NOT ONE OF THE OBJECTS OF THE TRUST BUT AN ACTIVITY CARRIED ON TO FULFILL THE OBJECT OF THE TRUST, THEREFORE THE INCO ME DERIVED FROM SUCH SUB- LEASING IS NOT A COMMERCIAL ACTIVITY BUT PROPERTY I NCOME. THE DIT(EXEMPTION) CONSIDERED THE SUBMISSIONS OF THE AS SESSEE TRUST BUT DID NOT ACCEPT THE SAME. THE DIT(EXEM.) WAS OF THE FIR M BELIEF THAT THIS ACTIVITY OF THE TRUST IS OUTSIDE THE SCOPE OF THE O BJECT OF THE TRUST WHICH DISENTITLES THE TRUST FROM GETTING ANY REGISTRATION U/S. 12A OF THE ACT. THE DIT (EXEMPTION) THEREAFTER RELIED UPON THE DEDICISI ON OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF SHRI DHAKA D SAMAJ DHARAMSHALA BHAWAN TRUST VS CIT REPORTED AT 302 ITR 321 AND ITA NO.4624/MUM/2011 3 CONCLUDED THAT THE APPLICATION DT. 24.11.2010 FOR R EGISTRATION U/S. 12A IS REJECTED. 4. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. TH E LD. COUNSEL FOR THE ASSESSEE REITERATED THAT THE PRIMARY OBJECT OF THE TRUST AS ENVISAGED IN THE TRUST DEED IS TO IMPART EDUCATION FOR WHICH THE TRUST IS RUNNING 2 COLLEGES IN NAVI MUMBAI AREA. THE LD. COUNSEL FUR THER SUBMITTED THAT FOR THIS PURPOSE CIDCO ALLOTTED A LAND FOR A LEASE PERIOD OF 60 YEARS. THE LD. COUNSEL FURTHER ARGUED THAT THE SHOPS WERE CONSTRUCTED WITH THE PERMISSION OF CIDCO FOR THE PURPOSE OF CARRYING ON THE OBJECTS OF THE TRUST. MERELY BECAUSE THE TRUST IS EARNING RENTAL I NCOME WOULD NOT MAKE THE ACTIVITY OF THE TRUST AS COMMERCIAL ACTIVITY. IT IS THE SAY OF THE LD. COUNSEL THAT EVEN SEC. 2(15) IF READ WITH CBDT CIRC ULAR NO. 11/2008 DT. 19.12.2008 WOULD SUPPORT THE CLAIM OF THE ASSESSEE TRUST. TO FURTHER SUBSTANTIATE, THE LD. COUNSEL RELIED UPON THE DECIS ION OF THE TRIBUNAL HYDERABAD BENCH IN ITA NO. 639/HYD/13 AND ALSO ON T HE DECISION OF THE TRIBUNAL MUMBAI BENCH IN ITA NO. 7106/MUM/2011. T HE LD. COUNSEL ALSO REFERRED TO THE DECISION OF THE TRIBUNAL LUCKN OW BENCH IN ITA NO. 735/LUCK/2011 AND THE DECISION OF THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS JANMABHUMI PRESS TRUST REPORTED IN 242 ITR 457. 5. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE DIT(EXEMPTION). IT IS THE SAY OF THE LD. DR THAT THE DIT (EXEMPTION) AFTER HAVING BEEN SATISFIED THAT THE AS SESSEE IS ENGAGED IN COMMERCIAL ACTIVITY HAS REJECTED THE APPLICATION FO R REGISTRATION U/S. 12A OF THE ACT, THEREFORE, THERE IS NO ERROR IN THE FIN DINGS OF THE DIT (EXEMPTION). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE QUESTION FOR OUR CONSIDERATION IS ITA NO.4624/MUM/2011 4 WHETHER ON THE FACTS AND IN LAW, THE REGISTRATION U /S. 12A OF THE ACT CAN BE REFUSED TO THE ASSESSEE. FOR THE PURPOSE OF SEC TIONS 11 AND 12, THE WORD CHARITABLE PURPOSE HAS BEEN DEFINED IN SEC. 2(15) OF THE ACT WHICH READS AS FOLLOWS: CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, E DUCATION, MEDICAL RELIEF, (PRESERVATION OF ENVIRONMENT (INCLU DING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST) AND THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY. PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT O F GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PU RPOSE, IF IT INVOLVES THE CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIV E OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY). (PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS (TWENTY-FIVE LAKH RUPEES) OR LESS IN THE PREVIOUS YEAR) THIS DEFINITION OF CHARITABLE PURPOSE HAS BEEN EXP LAINED BY THE CBDT IN ITS CIRCULAR NO. 11/2008 DT. 19.12.2008. TH E CBDT THUS CLARIFIED AS UNDER: THE NEWLY INSERTED PROVISO TO SEC. 2(15) WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SECTION 2(15), I.E. RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF. CONSEQUENTL Y, WHERE THE PURPOSE OF A TRUST OR INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, IT WILL CONSTITUTE CH ARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES THE CARRY ING ON OF COMMERCIAL ACTIVITIES. ITA NO.4624/MUM/2011 5 6.1. A PERUSAL OF THE ABOVE CIRCULAR SHOWS THAT THE NEWLY INSERTED PROVISO TO SEC. 2(15) IS NOT APPLICABLE WHERE THE P URPOSE OF A TRUST IS EDUCATION, THOUGH THIS CIRCULAR WAS RELIED UPON BY THE ASSESSEE BEFORE THE DIT (EXEMPTION) , IT APPEARS THAT THE DIT HAS NOT CONSIDERED THIS CIRCULAR WHILE DECIDING THE APPLICATION FOR REGISTR ATION U/S. 12A OF THE ACT. IT IS ALSO AN UNDISPUTED FACT THAT THE LAND W AS OBTAINED ON LEASE OF 60 YEARS FROM CIDCO FOR THE SPECIFIC PURPOSE OF IMP ARTING EDUCATION. IT IS ALSO AN UNDISPUTED FACT THAT THE CIDCO HAS SUBSE QUENTLY PERMITTED THE ASSESSEE TRUST FOR THE CONSTRUCTION OF SOME SHOPS/O FFICES. THIS FACT HAS ALSO NOT BEEN APPRECIATED BY THE DIT(EXEMPTION) WHI LE DECIDING THE APPLICATION OF REGISTRATION. IF A LOCAL BODY HAS A LLOTTED THE LAND ONLY FOR EDUCATIONAL PURPOSE AND SUBSEQUENTLY PERMITS THE TR UST FOR CONSTRUCTION OF SHOPS, THE LOCAL AUTHORITY MUST HAVE BEEN CONVINCED THAT THE PURPOSE OF THE CONSTRUCTION OF SHOPS BY THE ASSESSEE TRUST IS NOT TO CARRY ON ANY COMMERCIAL ACTIVITY. THE DIT (EXEMPTION) HAS NOT C ONSIDERED THESE FACTS, THEREFORE IN THE INTEREST OF JUSTICE AND FAI R PLAY, WE RESTORE THIS ISSUE OF REGISTRATION U/S. 12A BACK TO THE FILES OF DIT ( EXEMPTION). THE DIT(EXEMPTION) IS DIRECTED TO CONSIDER THE LETTER O F PERMISSION GRANTED TO THE ASSESSEE TRUST BY CIDCO. THE DIT (EXEMPTION) I S ALSO DIRECTED TO CONSIDER THE CIRCULAR OF THE BOARD REFERRED TO HERE INABOVE IN THE LIGHT OF THE OBJECTS OF THE TRUST. THE ASSESSEE IS DIRECTED TO FURNISH ALL THE DETAILS IN RESPECT OF THE ALLOTMENT OF LAND AND SUBSEQUENT SANCTION BY THE CIDCO FOR THE CONSTRUCTION OF SHOPS. AS IT APPEARS, THE DIT(EXEMPTION) HAS NOT MADE ANY ENQUIRY TO SATISFY HIMSELF ABOUT THE OBJE CT AND THE PURPOSE FOR WHICH THE LAND HAS BEEN ALLOTTED BY CIDCO VIS-A-VIS OBJECT OF THE TRUST. THE DIT(EXEM) IS DIRECTED TO RE-EXAMINE THE ISSUE A FRESH AFTER CONSIDERING THE DOCUMENTS PRODUCED/BEING PRODUCED B EFORE HIM BY THE ASSESSEE. THE ASSESSEE SHALL BE GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE PROCEEDING IS COMPLETED. ITA NO.4624/MUM/2011 6 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER , 2013. &5 / 34 % 6 7&8 11.11.2013 3 / > SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) /PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 11/11/2013 . . ./ RJ , SR. PS &5 / ,0! ?!40 &5 / ,0! ?!40 &5 / ,0! ?!40 &5 / ,0! ?!40 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. @ ( ) / THE CIT(A)- 4. @ / CIT 5. !A> ,0 , , / DR, ITAT, MUMBAI 6. >B C / GUARD FILE. &5 &5 &5 &5 / BY ORDER, -!0 ,0 //TRUE COPY// D DD D / E ) E ) E ) E ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI
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