JITO MUMBAI GOREGAON CHAPTER, MUMBAI V. DIT (E), MUMBAI

ITA 4774/MUM/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3540 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 05-10-2015
• Assessment Year: 2013-2014
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Charitable institution; Additional evidence; Competent authority
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH J, MUMBAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO.4774/MUM/2013 ASSESSMENT YEAR: M/S JITO MUMBAI GOREGOAN CHAPTER, WITTY INTERNATIONAL SCHOOL, 1 ST FLOOR, NEELKANTH APARTMENT, RAMCHANDRA LANE, MALAD (W), MUMBAI-400064. PAN:AABTJ3902B VS. DIT(E), 6 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI-400012 (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI ALOK JOHRI (DR) DATE OF HEARING : 05.10.2015 DATE OF PRONOUNCEMENT : 13.01.2016 O R D E R PER SANDEEP GOSAIN, JM: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER DATED 30.05.2013 PASSED BY THE DIT(E), MUMBAI THERE BY THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT WAS REJECTED. 2 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER 1. WHEN AS PER SECTION 14 OF SOCIETY REGISTRATION A CT, 1860, SOCIETY CANNOT DISTRIBUTE ASSETS TO TRUSTEES OR MEMBERS ON DISSOLUTION OF TRUST ONCE SOCIETY IS REGISTERED UNDER THE SOCIETY REGIST RATION ACT, 1860. WHEN THE ASSESSEE TRUST IS REGISTERED UNDER SOCIETY REGISTRATION ACT, 1860 IN SUCH CASE WHETHER DIT (E) IS CORRECT IN LAW AND IN FACT IN HOLDING THAT THERE IS REMOTE POSSIBILITY THAT TRUST EES WILL DISTRIBUTE ASSETS ON DISSOLUTION OF TRUST TO THE MEMBERS OF TH E TRUST IF THERE IS NO EXPRESSED BAN IN TRUST DEED? 2. WHETHER LEARNED DIRECTOR OF INCOME TAX (EXEMPTIO N) IS CORRECT IN HOLDING THAT AS THE ASSESSEE TRUST DEED DOES NOT SP ECIFICALLY PROVIDES FOR NON-DISTRIBUTION OF ASSETS AMONG MEMBERS, ASSES SEE TRUST HAS VIOLATED THE PROVISIONS OF SECTION 12A/12AA? 3. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) H AS ERRED IN FACT AND IN LAW IN NOT FOLLOWING RECENT JUDGMENT OF SITA RAM KUTIR CHARITABLE TRUST VS. CIT CHARITABLE TRUST (APPEAL NO. ITA NO.7 1/AHD/2013) AHMADABAD TRIBUNAL IN WHICH IT WAS HELD THAT NOT SP ECIFICALLY MENTION OF DISSOLUTION CLAUSE IN TRUST DEED OF SOCIETY REGI STERED UNDER SOCIETY REGISTRATION ACT, 1890 WOULD NOT MAKE TRUST TO DIS- ENTITLE FOR REGISTRATION U/S 12AA OF INCOME TAX ACT. 4. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND, AL TER AND FOR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE TIME OF HEARING. 2. DURING THE PENDENCY OF THE APPEAL, THE ASSESSEE MOVED AN APPLICATION FOR SEEKING PERMISSION TO FILE THE REVI SED GROUNDS OF APPEAL AND MENTIONED THAT THE ORIGINAL GROUND OF APPEAL AR E LENGTHY AND ARGUMENTATIVE, THEREFORE, THE ASSESSEE/APPELLANT SO UGHT PERMISSION TO FILE REVISED GROUNDS OF APPEAL. HENCE, CONSIDERING THE REQUEST OF THE ASSESSEE, THE REVISED GROUNDS OF APPEAL WERE ALLOWE D TO BE FILED AND ACCORDINGLY NOW IN THE REVISED GROUNDS OF APPEAL AR E AS UNDER: DENIAL OF REGISTRATION U/S 12AA 1. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) E RRED IN REJECTING APPLICATION FOR GRANT OF APPROVAL OF REGI STRATION U/S 12AA OF THE ACT ON THE GROUND THAT DISSOLUTION CLAUSE IF NO T PROPERLY MENTIONED IN MEMORANDUM OF ASSOCIATION AND ARTICLE OF ASSOCIATION OF THE APPELLANT TRUST. 3 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER 2. THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION) E RRED IN REJECTING APPLICATION FOR GRANT OF APPROVAL OF REGISTRATION U /S 12AA OF THE ACT ON THE GROUND THAT APPELLANT TRUST IS NOT ABLE TO E XPLAIN THE DISTRIBUTION OF ASSETS ON DISSOLUTION OF TRUST. THE APPELLANT CRAVES THE LEAVE TO ADD, AMEND, ALTER AND / OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES INSTITUTION HAS FILED AN APPLICATION FOR REGISTRATION U/S. 12A OF THE INC OME TAX ACT, 1961 IN THE PRESCRIBED FORM NO. 10A ON 09.11.2012. THE INST ITUTION HAS BEEN CONSTITUTED BY A MEMORANDUM OF ASSOCIATION DATED 18 .05.2010. IT WAS REGISTERED WITH THE ASSTT. REGISTRAR OF SOCIETIES, MUMBAI ON 26.11.2010 AND THE CHARITY COMMISSIONER, MUMBAI ON 03.11.2012. JITO HERE REFERS TO JAIN INTERNATIONAL TRADE ORGANIZATION, A COMPANY REGISTERED U/S.25 OF THE COMPANIES ACT, 1956 ON 20.03.2007 IN THE STATE OF MAHARASHTRA. A NOTICE WAS SERVED UPON THE ASSESSEE REQUIRING IT TO FURNISH THE CERTAIN DETAILS/DOCUMENTS, AND AFTER CONSIDERING THE CASE, THE DIT(E) REJECTED THE APPLICATION FILED BY THE ASSESSEE-TRUST FOR REG ISTRATION U/S 12AA OF THE ACT WITHOUT EXPRESSING ANY OPINION ABOUT THE CHARIT ABLE NATURE AND THE OBJECTS OF THE APPLICANT INSTITUTION OR THE GENUINE NESS OF ITS ACTIVITIES. 4. AGGRIEVED BY THE ORDER OF DIT(E) DATED 30.05.201 3 THE ASSESSEE FILED THE APPEAL BEFORE US ON THE GROUNDS REPRODUCE D HEREINABOVE. 5. ALONG WITH GROUNDS OF APPEAL, THE ASSESSEE ALSO FILED PAPER BOOK THEREBY FILING CERTAIN DOCUMENTS WHICH AS UNDER: 4 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER I. SOCIETIES REGISTRATION ACT, 1860. II. CERTIFICATE OF REGISTRATION OF MUMBAI CHARITY C OMMISSIONER III. CERTIFICATE OF REGISTRATION OF SOCIETY REGISTR ATION ACT, 1860. IV. MEMORANDUM OF ASSOCIATION JITO MUMBAI GOREGAON CHAPTER. IN ADDITION, ANOTHER PAPER BOOK WAS ALSO FILED THER EBY FILING THE ADDITIONAL EVIDENCE WHICH ARE AS UNDER: I. 12AA CERTIFICATE AND MEMORANDUM OF ASSOCIATION, JAI N INTERNATIONAL TRADE ORGANIZATIONS. II. 12AA CERTIFICATE AND MEMORANDUM OF ASSOCIATION, JIT O MUMBAI QUEENS CHAPTER. III. 12AA CERTIFICATE AND MEMORANDUM OF ASSOCIATION JITO -MUMBAI JUHU CHAPTER. IV. 12AA CERTIFICATE AND MEMORANDUM OF ASSOCIATION OF J ITO MUMBAI, WALKESHWAR CHAPTER. 6. ON THE LAST DATE OF HEARING I.E. 24.08.2015 NOBO DY FROM THE SIDE OF ASSESSEE APPEARED AND IT WAS OBSERVED IN THE ORDER DATED 24.08.2015 OF THE TRIBUNAL THAT ON 29.07.2015, THIS APPEAL WAS AD JOURNED AT THE REQUEST OF THE ASSESSEE. THE LAST OPPORTUNITY WAS G RANTED TO THE ASSESSEE FOR ARGUMENTS ON THE APPEAL BUT EVEN THEN ON 24.08.2015 NOBODY APPEARED, THEREFORE, THE MATTER WAS AGAIN AD JOURNED TO 05.10.2015, HOWEVER, IT IS NOTICED THAT AFTER RISIN G OF THE COURT ON 24.08.2015 THE REPRESENTATIVE OF THE ASSESSEE APPEA RED AND PUT HIS SIGNATURES ON THE ORDER-SHEET AND NOTED DOWN THE NE XT DATE OF HEARING I.E. ON 05.10.2015. AGAIN ON 05.10.2015 WHEN THE CA SE WAS CALLED OUT, 5 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER NONE APPEARED ON BEHALF OF THE ASSESSEE, THIS SHOWS THAT THE ASSESSEE IS NOT INTERESTED TO PURSUE HIS APPEAL AND THEREFORE, THE CONDUCT OF THE ASSESSEE IS DEPRECATED. HOWEVER, CONSIDERING THE IN TEREST OF JUSTICE, WE HAVE DECIDED TO DECIDE THE APPEAL ON MERITS. 7. WE HAVE CAREFULLY CONSIDERED THE ORDERS PASSED B Y DIT(E), THE OPERATIVE PORTION OF THE SAID ORDER IS MENTIONED AS UNDER: 3. IN ORDER TO BE ELIGIBLE FOR REGISTRATION, THE B ASIC REQUIREMENT IS THAT THE APPLICANT HAS TO BE A VALIDLY CONSTITUTED PUBLIC CHARITABLE INSTITUTION. IT IS SEEN FROM PERUSAL OF THE RULES & REGULATIONS OF THE APPLICANT THAT IT DOES NOT HAVE A PROPER 'DISSOLUTI ON CLAUSE' TO THE EFFECT THAT IF FOR SOME REASON ITS OBJECTS CANNOT B E CARRIED OUT BY THE TRUSTEES WHO DECIDE TO DISSOLVE THE APPLICANT INSTI TUTION THEN AS PER THE PROVISIONS OF THE SOCIETIES REGISTRATION ACT, 1 860 AND THE BOMBAY PUBLIC TRUSTS ACT, 1950 ITS NET ASSETS WILL BE GIVEN TO ANOTHER INSTITUTION HAVING SIMILAR OBJECTS AND UNDE R NO CIRCUMSTANCES, THESE WILL BE DISTRIBUTED AMONG THE TRUSTEES. CLAUSE 31 OF THE RULES & REGULATIONS OF THE APPLICANT DEAL ING WITH 'DISSOLUTION' PROVIDES THAT '.... UPON DISSOLUTION OF THIS CHAPTER AFTER SATISFACTION OF ALL ITS DUES AND LIABILITIES, THE R EMAINING ASSETS / FUNDS OF THIS CHAPTER SHALL BE GIVEN/DISTRIBUTED OR TRANS FERRED COMPLETELY TO JITO MAIN CHAPTER OR TO OTHER CHAPTERS OR INSTITUTI ONS AS DIRECTED BY THE MAIN CHAPTER OF JITO'. IN THIS CONNECTION, IT I S STATED BY THE APPLICANT VIDE LETTER DATED 13.03.2013 THAT 'IF DIS SOLUTION CLAUSE IS NOT PROVIDED IN THE TRUST DEED, THEN DISSOLUTION OF TRUST PROCEDURE SHALL BE GOVERNED BY PUBLIC TRUST ACT. HENCE, IT C AN BE DEEMED THAT DISSOLUTION PROCEDURE IS PROVIDED'. IT IS SUBMITTED THAT UNDER INCOME TAX ACT, REGISTRATION IS GOVERNED BY SECTIONS 12A A ND 12AA WHICH DO NOT REQUIRE ANY PARTICULAR CLAUSES TO BE INCORPORAT ED IN TRUST DEED. IT IS CONTENDED THAT IF THE DISSOLUTION CLAUSE IS N OT THERE IN TRUST DEED, THE TRUST ACT WILL PREVAIL AND HENCE APPLICAT ION FOR REGISTRATION CANNOT BE REJECTED ON THIS GROUND. IT IS ARGUED THA T THE CHARITY COMMISSIONER, MUMBAI IS THE COMPETENT AUTHORITY TO DECIDE WHETHER TRUST SHOULD BE REGISTERED WITHOUT DISSOLUTION CLAU SE OR NOT. 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPLICA NT BUT THE SAME ARE NOT ACCEPTABLE. THERE IS NO JUDICIAL AUTHORITY FOR THE PROPOSITION THAT ONCE A TRUST '' INSTITUTION IS REGISTERED UNDE R THE BOMBAY PUBLIC TRUST ACT OR THE SOCIETIES REGISTRATION ACT, IT MU ST BE GRANTED REGISTRATION UNDER INCOME TAX ACT, 1961 AS WELL WIT HOUT ANY ENQUIRY 6 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER INTO ITS VALIDITY, ITS OBJECTS OR ITS ACTIVITIES. S INCE THE APPLICANT IS A SOCIETY CONSTITUTED UNDER THE SOCIETIES REGISTRATIO N ACT, 1860 IT HAS TO HAVE A 'DISSOLUTION CLAUSE' IN CONSONANCE WITH S ECTION 14 OF THE SAID ACT WHICH CLEARLY IMPOSES A BAR ON PAYMENT OR DISTRIBUTION OF SURPLUS AMONG THE MEMBERS OF THE SOCIETY CONSEQUENT UPON ITS DISSOLUTION. THE ISSUE OF PROHIBITION ON DISTRIBUTI ON OF PROPERTY OF THE INSTITUTION AMONG THE TRUSTEES IN THE EVENT OF ITS DISSOLUTION MUST FIND CLEAR AND SPECIFIC MENTION IN THE RULES & REGU LATION ITSELF AND CANNOT BE LEFT TO THE DISCRETION OF THE TRUSTEES. I T MAY BE MENTIONED THAT IN THE ABSENCE OF SUCH A CLAUSE, THERE COULD A LWAYS BE A POSSIBILITY, HOWSOEVER REMOTE, OF NET ASSETSOF THE TRUST BEING DIVIDED OR DISTRIBUTED AMONG THE TRUSTEES IN CASE OF DISSOL UTION OF THE INSTITUTION. IN THIS SENSE, CLAUSE 31 DOES NOT MEET THE LEGAL REQUIREMENT. THERE IS ANOTHER FLAW IN THE SAID CLAU SE 31 IN AS MUCH AS IT DOES NOT SPECIFY THAT UPON DISSOLUTION, THE N ET ASSETS OF THE APPLICANT WILL BE TRANSFERRED TO ANOTHER PUBLIC CHA RITABLE TRUST OR INSTITUTION HAVING SIMILAR OBJECTIVES. RATHER, ON T HE CONTRARY, IT LAYS DOWN THAT THE NET ASSETS OF THE APPLICANT IN CASE O F ITS DISSOLUTION SHALL BE TRANSFERRED INTER ALIA TO OTHER INSTITUTIO NS 'AS DIRECTED BY THE MAIN CHAPTER OF JITO'. 5. EACH STATUTE GOVERNING REGISTRATION OF CHARITABL E TRUSTS AND INSTITUTIONS HAS ITS OWN SET OF LEGAL PROVISIONS AN D RULES TO BE COMPLIED WITH. NO CHARITABLE TRUST OR INSTITUTION C AN TAKE THE PLEA THAT ONCE IT HAS COMPLIED WITH THE REQUIREMENTS OF A PARTICULAR ACT, IT MUST AUTOMATICALLY BE GRANTED REGISTRATION UNDER OT HER ACTS WITHOUT ANY FURTHER PROBE OR INSISTENCE ON COMPLIANCE UNDER OTHER STATUTES. IT IS TRUE THAT REGISTRATION UNDER INCOME TAX ACT, 1961 IS GOVERNED BY SECTION 12A/12AA. BUT THIS DOES NOT MEAN THAT TH E REGISTERING AUTHORITY SHOULD WEAR BLINKERS AND ALLOW REGISTRATI ON IRRESPECTIVE OF WHETHER THE APPLICANT IS A VALIDLY CONSTITUTED PUBL IC TRUST/INSTITUTION OR NOT. NO APPLICANT CAN AFFORD TO OVERRIDE STATUTO RY PROVISIONS AND REQUIREMENTS EXCEPT AT HIS OWN PERIL. FOR WANT OF T HE DESIRED AND APPROPRIATE DISSOLUTION CLAUSE IN THE RULES & REGUL ATIONS, THE APPLICANT CANNOT BE SAID TO HAVE BEEN CONSTITUTED A S A VALID PUBLIC CHARITABLE INSTITUTION. THE APPLICATION FILED BY TH E APPLICANT TRUST FOR REGISTRATION U/S. 12AA IS ACCORDINGLY REJECTED. AT THIS STAGE, NO OPINION IS BEING EXPRESSED ABOUT THE CHARITABLE NAT URE OF OBJECTS OF THE APPLICANT INSTITUTION OR THE GENUINENESS OF ITS ACTIVITIES WHICH WILL BE EXAMINED AS AND WHEN THE APPLICANT MAKES A FRESH APPLICATION FOR REGISTRATION AFTER INCLUSION OF A SUITABLE CLAUSE T O THE ABOVE EFFECT IN ITS RULES & REGULATIONS. 8. THE ASSESSEE HAS CHALLENGED THE AFOREMENTIONED O RDER ON THE GROUND THAT IN THE RECENT JUDGMENT OF CO-ORDINATE BE NCH IN ITA NO. 71/AHD.2013 OF AHMADABAD TRIBUNAL TITLED IN CASE AS SITARAM KUTIR 7 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER CHARITABLE TRUST VS. CIT CHARITABLE TRUST, IT WAS HELD THAT NOT SPECIFICALLY MENTIONING OF DISSOLUTION CLAUSE IN TH E TRUST DEED OF SOCIETY REGISTERED UNDER SOCIETY REGISTRATION ACT, 1890, WO ULD NOT MAKE TRUST TO DIS-ENTITLE FOR REGISTRATION U/S. 12AA OF INCOME TA X ACT. 9. WE HAVE CONSIDERED THE FACTS, THE ORDERS PASSED BY DIT(E) AND WE ARE OF THE CONSIDERED VIEW THAT THE AFOREMENTIONED FILE BE REMANDED BACK TO DIT(E), MUMBAI WITH A DIRECTION TO CONSIDER THE JUDGMENT OF CO- ORDINATE BENCH IN ITA NO. 71/AHD.2013 TITLED AS SIT ARAM KUTIR CHARITABLE TRUST AND OTHERS IF ANY ON THE SUBJECT AND PASS ORDE R U/S 12AA R.W.S. 12A OF THE INCOME TAX ACT AFRESH AFTER PROVIDING AN OPPORTUNITY OF HEARING TO THE ASSESSEE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED WITH THE AFOREMENTIONED DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF JANUARY, 2016. SD/- SD/- (D.KARUNAKARA RAO) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.01.2016 SHARWAN P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI 8 ITA NO.4774/M/2013 M/S JITO MUMBAI GOREGOAN CHAPTER THE CIT(A) CONCERNED, MUMBAI THE DR I BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.