State Forum of Bankers Club(Kerala), Cochin V. The ITO(Tech), Cochin

ITA 473/COCH/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86382 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 30-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: V SATHYANARAYANAN
• Keywords: Charitable institution
• Section: 12AA

Judgement Text

1 ITA NO. /COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO. 473/COCH/2014 STATE FORUM OF BANKERS CLUB (KERALA) VS THE ITO(TEC H) 1-A, LOTUS APARTMENT O/O THE COMMISSIONER OF DURBAR HALL ROAD, KOCHI 682 011 INCOME-TAX-1, KOC HI PAN : AANTS7644B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V SATHYANARAYANAN RESPONDENT BY : SHRI M ANIL KUMAR, CIT DATE OF HEARING : 23-12-2014 DATE OF PRONOUNCEMENT : 09-01-2015 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER REJECTING THE CLAIM OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT. 2. SHRI V SATHYANARAYANAN, THE LD.REPRESENTATIVE FO R THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST IS A STATE FORUM OF BANKERS CLUB. THE OBJECT OF THE TRUST WAS TO BRING ALL THE BANKERS CL UBS UNDER ONE ROOF FOR A COMMON PURPOSE. REFERRING TO THE OBJECT OF THE TRU ST, THE LD.REPRESENTATIVE 2 ITA NO. /COCH/2010 SUBMITTED THAT THE ASSESSEE IS ORGANIZING LECTURES AND SEMINARS FOR THE BENEFIT OF BANK EMPLOYEES. ACCORDING TO THE LD.REP RESENTATIVE, THE ASSESSEE TRUST IS INVITING SENIOR OFFICIALS FROM TH E RESERVE BANK OF INDIA, VIZ. THE GOVERNOR, THE DEPUTY GOVERNOR TO ADDRESS T HE BANKERS IN THE STATE. BY LISTENING TO THE SPEECHES DELIVERED BY T HE GOVERNOR AND THE DEPUTY GOVERNOR OF RBI, THE EFFICIENCY AND CAPABILI TY OF THE BANKERS WOULD INCREASE SO AS TO RENDER BETTER SERVICE TO THE GENE RAL PUBLIC. ON QUERY FROM THE BENCH, THE LD.REPRESENTATIVE FOR THE ASSES SEE CLARIFIED THAT GENERAL PUBLIC DOES NOT MEAN THE ENTIRE POPULATION OF THE S TATE. A SECTION OF THE PUBLIC CAN BE CONSIDERED TO BE GENERAL PUBLIC. ACC ORDING TO THE LD.REPRESENTATIVE, EMPLOYEES OF THE BANK IS A SECTI ON OF THE PUBLIC, THEREFORE, THE BENEFIT GIVEN TO THE BANK EMPLOYEES BY THE TRUST CAN BE CONSIDERED TO BE OF PUBLIC UTILITY SERVICE. REFERR ING TO THE ORDER OF THE COMMISSIONER OF INCOME-TAX, THE LD.REPRESENTATIVE S UBMITTED THAT THE COMMISSIONER OF INCOME-TAX HAS MISUNDERSTOOD THE OB JECT OF THE TRUST AND OBSERVED THAT THE ASSESSEE TRUST WAS ESTABLISHED FO R PROVIDING RECREATION TO ITS MEMBERS CLUBS. ACCORDING TO THE LD.REPRESEN TATIVE, IT IS NOT A RECREATION CLUB, BUT IS ESTABLISHED FOR THE PURPOSE OF SHARING COMMON THOUGHTS WITH REGARD TO EFFICIENCY IN THE BANKING B USINESS. REFERRING TO THE OBSERVATION MADE BY THE COMMISSIONER OF INCOME-TAX THAT NO ACTIVITY WAS CARRIED OUT BY THE ASSESSEE, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO START ANY ACTIVITY 3 ITA NO. /COCH/2010 SINCE THE APPLICATION WAS MADE IMMEDIATELY AFTER IT S ESTABLISHMENT. ACCORDING TO THE LD.REPRESENTATIVE, THE ACTIVITY CA N BE CARRIED OUT ONLY AFTER SOME TIME ONCE THE TRUST IS ESTABLISHED. REFERRING TO THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF MEDICAL ACCIDENT P REVENTION SOCIETY VS CIT (2005) 278 ITR 165 (KER), THE LD.REPRESENTATIVE SUBMITTED THAT IT IS NOT NECESSARY FOR THE ASSESSEE TRUST TO START ITS ACTIV ITY. AT THE TIME OF GRANT OF REGISTRATION WHAT IS REQUIRED TO BE CONSIDERED IS T HE GENUINENESS OF THE OBJECT OF THE TRUST. THE COMMISSIONER OF INCOME-TA X CANNOT TRAVEL BEYOND THAT. ACCORDING TO THE LD.REPRESENTATIVE, IF THE A PPLICATION FOR REGISTRATION WAS MADE SUBSEQUENT TO THE ESTABLISHMENT OF THE TRU ST, THEN THE COMMISSIONER MAY LOOK INTO THE ACTIVITY OF THE TRUS T. IN THIS CASE, THE APPLICATION WAS MADE IMMEDIATELY ON ESTABLISHMENT O F THE TRUST, THEREFORE, THE QUESTION OF LOOKING INTO THE ACTIVITY OF THE TR UST DOES NOT ARISE. IN FACT, ACCORDING TO THE LD.REPRESENTATIVE, THE ACTIVITY WA S STARTED AND THAT THE ASSESSEE HAS CONDUCTED SEVERAL PROGRAMMES IN WHICH THE DEPUTY GOVERNOR OF RESERVE BANK OF INDIA HAS PARTICIPATED, THE GOVERNOR OF KERALA HAS ALSO PARTICIPATED IN THE FUNCTION. THER EFORE, IT IS NOT CORRECT TO SAY THAT THE ASSESSEE HAS NOT STARTED ANY ACTIVITY. 3. ON A QUERY FROM THE BENCH THAT BY ORGANISING LEC TURES AND SEMINARS TO THE EMPLOYEES OF THE BANK, THE EFFICIENCY AND CA PABILITY OF THE EMPLOYEES TO EARN PROFIT TO THE BANKING COMPANY MAY INCREASE, HOW IT IS 4 ITA NO. /COCH/2010 GOING TO HELP THE GENERAL PUBLIC, THE LD.REPRESENTA TIVE CLARIFIED THAT BY INCREASING THE CAPABILITY AND EFFICIENCY OF THE BAN K EMPLOYEES, THEY WILL SERVE THE SOCIETY IN A BETTER MANNER WHICH ULTIMATE LY BENEFIT THE GENERAL PUBLIC. THEREFORE, ACCORDING TO THE LD.REPRESENTAT IVE, THE ACTIVITY OF THE ASSESSEE IS GENERAL PUBLIC UTILITY. REFERRING TO F IRST PROVISO TO SECTION 2(15) OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE IS NOT RENDERING ANY SERVICES TO THE TRADE OR COMMERCE. TH E ASSESSEE BRINGS ALL THE MEMBERS OF THE BANKER CLUBS TOGETHER AND ORGANI ZES SEMINARS SO THAT THE GENERAL PUBLIC MAY BE BENEFITED. ACCORDING TO THE LD.REPRESENTATIVE, THE BENEFIT DERIVED BY THE INDIVIDUAL BANK EMPLOYEE IS SUFFICIENT FOR GRANT OF REGISTRATION U/S 12AA SINCE THE EMPLOYEES OF THE BA NK THEMSELVES FORM PART OF A SECTION OF THE SOCIETY. THE LD.REPRESENT ATIVE FURTHER CLARIFIED THAT THE OBJECT OF THE TRUST DOES NOT BENEFIT THE COMMON MAN ON THE STREET. ACCORDING TO THE LD.REPRESENTATIVE, THE MOMENT THE BENEFIT OF THE TRUST WAS EXTENDED TO THE SECTION OF THE PUBLIC, VIZ. THE EMP LOYEES OF THE BANK IN THE STATE, THE ASSESSEE IS ENTITLED FOR REGISTRATION U/ S 12AA OF THE ACT. THE LD.REPRESENTATIVE PLACED RELIANCE ON VARIOUS CASE L AWS INCLUDING THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT VS ANDHRA CHAMBER OF COMMERCE 55 ITR 722 (SC) AND CIT VS GUJARAT MARITIM E BOARD (2007) 295 ITR 561 (SC); JUDGMENT OF THE KERALA HIGH COURT IN COMMISSIONER OF AGRICULTURAL INCOME-TAX VS RUBBER BOARD 226 ITR 722 (KER); DELHI HIGH 5 ITA NO. /COCH/2010 COURT IN THE CASE OF ALL INDIA MANAGEMENT ASSOCIATI ON VS DGIT (E) 2013- TIOL-935-HC-DEL-IT. 4. ON THE CONTRARY, SHRI M ANIL KUMAR, THE LD.DR SU BMITTED THAT THE ASSESSEE IS FUNCTIONING LIKE A APEX BANKERS CLUB. THERE ARE SEVERAL BANKERS CLUB IN THE STATE OF KERALA. THE ASSESSEE IS BRINGING ALL THE BANKERS CLUB IN THE STATE UNDER ONE UMBRELLA BY EST ABLISHING AN APEX BODY IN THE STATE. REFERRING TO THE OBJECT OF THE TRUST , COPY OF THE TRUST DEED FILED BY THE ASSESSEE, THE LD.DR SUBMITTED THAT THE ASSES SEE IS ORGANIZING LECTURES AND SEMINARS TO BENEFIT THE BANKING EMPLOY EES. BY EDUCATING THE BANKERS OR ITS EMPLOYEES, THE GENERAL PUBLIC MAY NO T GET ANY BENEFIT. AT THE BEST, ACCORDING TO THE LD.DR IT MAY INCREASE TH E CAPABILITY OF THE EMPLOYEES TO EARN MORE PROFIT FOR THE BANKING COMPA NIES. ACCORDING TO THE LD.DR, THE TRUST WAS CREATED TO BENEFIT THE MEM BERS CLUBS AND NOT ANY INDIVIDUAL MEMBERS. REFERRING TO THE IMPUGNED ORDE R OF COMMISSIONER OF INCOME-TAX, THE LD.DR SUBMITTED THAT THE INTENTION OF THE ASSESSEE TRUST IS TO COLLECT CORPORATE SOCIAL RESPONSIBILITY FUND FRO M VARIOUS BANKS. THE LD.DR PLACED HIS RELIANCE ON THE DECISION OF THIS B ENCH OF THIS TRIBUNAL ON IN DHATHRI AYURVEDA FOUNDATION ITA NO.93/COCH/2013 ORDER DATED 26-07- 2013. ACCORDING TO THE LD.DR, THE CIT(A) HAS RIGHT LY REJECTED THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT. 6 ITA NO. /COCH/2010 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE OBJECT OF THE TRUST AS PER THE TRUST DEED. THE OBJECT OF THE TRUST IS AS FOLLOWS: 3. THE OBJECT FOR WHICH THE TRUST IS ESTABLISHED A RE AS FOLLOWS: A) TO BRING TOGETHER ALL BANKERS CLUBS IN KERALA UN DER ONE UMBRELLA FOR THEIR COMMON GOAL. B) TO ARRANGE FOR LECTURES, SEMINARS AND TALKS ON T OPICS OF CONTEMPORARY RELEVANCE FOR THE BENEFIT OF BANK EMPL OYEES FRATERNITY. C) TO UNITE MEMBER CLUBS IN BONDS OF FRIENDSHIP, GO OD FELLOWSHIP AND MUTUAL UNDERSTANDING AND ACTIVATE DO RMANT CLUBS. D) TO REPRESENT AND BRING TO THE ATTENTION OF THE S TATE / DISTRICT AUTHORITIES, FINANCIAL AND OTHER ORGANIZATIONS, BAN KING MATTERS AND PROBLEMS OF COMMON NATURE FACED BY MEMBERS OF BANKERS CLUBS. E) TO PROVIDE REQUIRED ASSISTANCE, ENCOURAGEMENT, S UPPORT, ETC. TO MEMBER CLUBS TO ENLARGE THEIR KNOWLEDGE / T ECHNICAL SKILLS, TALENTS AND EXPERTISE, ETC. IN VARIOUS OTHE R FIELDS. F) TO UNDERTAKE VARIOUS CHARITABLE ACTIVITIES FOR R ELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF AND THE ADVANCEM ENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY WHICH AR E NOT IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. G) TO DO ALL SUCH THINGS AS MAY BE INCIDENTAL OR CO NDUCIVE TO THE ATTAINMENT OF THE AFORESAID OBJECTS. 7 ITA NO. /COCH/2010 FROM THE ABOVE OBJECTS OF THE TRUST IT APPEARS THAT THE MAIN OBJECT OF THE ASSESSEE TRUST IS TO BRING TOGETHER ALL BANKERS CLU B OF THE STATE UNDER ONE UMBRELLA. THE ASSESSEE IS ORGANIZING LECTURERS AND SEMINARS FOR THE BENEFIT OF THE EMPLOYEES OF THE BANKERS. THE QUEST ION ARISES FOR CONSIDERATION IS BY ORGANIZING LECTURERS AND SEMINA RS TO THE EMPLOYEES OF THE BANK, WHO WILL BENEFIT? WHETHER THE BANKING CO MPANY OR THE PUBLIC AT LARGE? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT BY ORGANIZING LECTURES AND SEMINARS THE BANKERS MAY BENEFIT; THE CAPABILITY OF THE EMPLOYEES OF THE BANK MAY SUBSTANTIALLY INCREASE AN D ALSO THE PROFITABILITY OF THE BANK MAY ALSO INCREASE. CONSEQUENTLY, THE G ENERAL PUBLIC MAY ALSO GET SOME BENEFIT FROM THE BANKING SECTOR. THE QUES TION, THEREFORE, ARISES FOR CONSIDERATION IS WHETHER SERVICES RENDERED BY T HE ASSESSEE TRUST IN ORGANIZING LECTURES, SEMINARS, ETC. TO THE EMPLOYEE S OF THE BANK BY BRINGING TOGETHER ALL BANKERS CLUB UNDER ONE UMBREL LA IN THE STATE OF KERALA WOULD AMOUNT TO SERVICES RENDERED TO A TRADE , COMMERCE OR BUSINESS? THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT BY PROVIDING SUCH KIND OF OPPORTUNITY TO THE EMPLOYEES OF THE BA NK TO LISTENING TO SEMINARS AND LECTURERS ORGANIZED BY THE TRUST, THE ASSESSEE IS REALLY RENDERING SERVICE TO THE BANKING BUSINESS. 8 ITA NO. /COCH/2010 6. THE NEXT QUESTION THAT WOULD ARISE FOR CONSIDERA TION IS WHEN THE ASSESSEE IS RENDERING SERVICES TO THE BANKING BUSIN ESS BY CONDUCTING LECTURES AND SEMINARS, WHETHER THE ASSESSEE IS ENTI TLED FOR RECOGNITION U/S 2(15) OF THE ACT? WE HAVE CAREFULLY GONE THROUGH T HE PROVISIONS OF SECTION 2(15) OF THE ACT WHICH READS AS BELOW: 2(15) CHARITABLE PURPOSE INCLUDES RELIEF OF THE PO OR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONM ENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE AND PRE SERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTO RIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE 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 P REVIOUS YEAR; THE FIRST PROVISO TO SECTION 2(15) WAS INCORPORATED BY FINANCE ACT, 2008 WITH EFFECT FROM 01-04-2009. BY VIRTUE OF FIRST PR OVISO TO SECTION 2(15), RENDERING ANY SERVICE IN RELATION TO TRADE COMMERCE OR BUSINESS FOR A FEES 9 ITA NO. /COCH/2010 CESS OR OTHER CONSIDERATION IRRESPECTIVE OF ITS USE OR APPLICATION CANNOT BE CONSIDERED TO BE A CHARITABLE PURPOSE. BY WAY OF A NOTHER AMENDMENT, VIZ. SECOND PROVISION TO SECTION 2(15), THE APPLICATION OF FIRST PROVISO IS RESTRICTED IN RESPECT OF THE TRUST OR INSTITUTION, WHOSE AGGREGATE VALUE OF THE RECEIPT IS LESS THAN RS.25 LAKH RUPEES. IN THE CAS E ON OUR HAND, IT IS NOT THE CASE OF THE ASSESSEE THAT THE AGGREGATE VALUE O F THE RECEIPT IS LESS THAN RS.25 LAKH RUPEES. THEREFORE, THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE FIRST PROVISO TO SECTION 2(15) WOU LD COME INTO OPERATION. IN VIEW OF THE FIRST PROVISO TO SECTION 2(15), THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT RENDERING OF ANY SERVICE TO THE BANKING BUSINESS CANNOT BE CONSIDERED TO BE A CHARITABLE ACTIVITY OR PURPOSE. IN THIS CASE, AS FOUND BY THIS TRIBUNAL, THE ASSESSEE IS RENDERIN G SERVICES TO THE BANKING BUSINESS BY ORGANIZING LECTURES AND SEMINAR S. THERE MAY BE AN INCIDENTAL BENEFIT TO THE CUSTOMERS OF THE BANK, BU T IT DOES NOT MEAN THAT THE ASSESSEE IS DOING CHARITABLE ACTIVITY. THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS NOT RENDERING ANY CHAR ITABLE ACTIVITY OTHER THAN RENDERING SERVICE TO BANKING BUSINESS BY ORGANIZING LECTURES AND SEMINARS. 7. THE JUDGMENTS RELIED UPON BY THE ASSESSEE WAS RE NDERED PRIOR TO INTRODUCTION OF PROVISOS TO SECTION 2(15) OF THE AC T. THEREFORE, THIS 10 ITA NO. /COCH/2010 TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDG MENT RELIED UPON BY THE LD.COUNSEL FOR THE ASSESSEE MAY NOT BE APPLICABLE T O THE FACTS OF THE CASE. 8. THE NEXT CONTENTION OF THE ASSESSEE IS THAT IT I S NOT NECESSARY FOR THE ASSESSEE TO START ANY ACTIVITY FOR REGISTRATION U/S 12AA OF THE ACT. THE LD.REPRESENTATIVE PLACED RELIANCE ON THE JUDGMENT O F THE JURISDICTIONAL HIGH COURT IN MEDICAL ACCIDENT PREVENTION SOCIETY (SUPRA ). WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT RENDERED BY THE LD.SINGLE JUDGE OF THE KERALA HIGH COURT ON A WRIT PETITION WHEREIN THE ORDER OF THE COMMISSIONER REJECTING REGISTRATION WAS CHALLENGED. HOWEVER, TH IS TRIBUNAL FINDS THAT A DIVISION BENCH IN THE KERALA HIGH COURT IN SELF EMP LOYERS SERVICE SOCIETY VS CIT (2001) 247 ITR 18 (KER) HAS CONSIDERED THIS ISSUE AND FOUND THAT THE ASSESSEE CAN APPLY FOR REGISTRATION ONLY AFTER COMMENCING ITS ACTIVITY. IN VIEW OF THE JUDGMENT OF THE DIVISION BENCH OF TH E KERALA HIGH COURT IN THE CASE OF SELF EMPLOYERS SERVICE SOCIETY (SUPRA), THE JUDGMENT OF THE LD.SINGLE JUDGE IN THE CASE OF MEDICAL ACCIDENT PRE VENTION SOCIETY (SUPRA) MAY NOT BE RELEVANT TO THE FACTS OF THIS CASE. 9. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 11 ITA NO. /COCH/2010 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH JANUARY, 2015. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 09 TH JANUARY, 2015 PK/- COPY TO: 1. STATE FORUM OF BANKEWRS CLUB (KERALA), 1-A, LOTU S APARTMENT, DURBAR HALL ROAD, KOCHI-11 2. THE ITO (TECH), OFFICE OF THE CIT, KOCHI 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH