Isha-Athu-Dheen Trust, Cochin V. CIT, Cochin

ITA 500/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69042 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 19-11-2013
• Assessment Year: 2013-2014
• Appeal Filed On: 20-08-2013
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: SAMUEL THOMAS
• Keywords: Capital asset; Charitable institution
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 500/COCH/2013 ASSESSMENT YEAR : 2013-14 ISHA-ATHU-DHEEN TRUST, ISLAMIC CENTRE, PULLEPPADY ROAD, KOCHI-18 [PAN:AAATI 9366D] VS. THE COMMISSIONER OF INCOME-TAX- I, KOCHI (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI SAMUEL THOMAS, REVENUE BY SMT. LATHA V. KUMAR, JR. DR DATE OF HEARING 19/11/2013 DATE OF PRONOUNCEMENT 22/11/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29-07-2013 PASSED BY LD CIT-I, KOCHI REJECTING THE APPLICATION FILED BY THE ASSESSEE SEEKING REGISTRATION U/S 12A OF THE ACT. 2. THE FACTS OF THE CASE ARE DISCUSSED IN BRIEF. T HE ASSESSEE TRUST WAS FORMED ON 05.03.1974. HOWEVER, IT FILED APPLICATION BEFORE L D CIT SEEKING REGISTRATION U/S 12A OF THE ACT ONLY ON 28.01.2013. THE LD CIT NOTICED THA T THE TRUST HAS BEEN FORMED TO FOSTER AND PROPAGATE TRUE TEACHINGS OF ISLAM AMONG THE MEMBERS OF THE MUSLIM COMMUNITY FOR AN ISLAMIC CULTURAL RENAISSANCE BY CO NSTANTLY PROPAGATING AMONG THEM THE SPIRIT AND MEANING OF THE QUARANIC TEACHINGS ET C. THE LD CIT FURTHER NOTICED THAT THE ASSESSEE TRUST IS DERIVING INCOME MAINLY FROM B UILDING RENT AND HOSTEL FEES COLLECTED. THE LD CIT ALSO NOTICED THAT THE ASSESS EE TRUST DID NOT SPEND MUCH MONEY ON RELIGIOUS ACTIVITIES, BUT INSTEAD UTILISED IN PU RCHASING CAPITAL ASSETS, REPAIRS OF I.T.A. NO. 500/COCH/2013 2 BUILDING ETC, WHICH WAS FOR FURTHERANCE OF BUSINESS ACTIVITIES OF THE ASSESSEE. ACCORDINGLY, THE LD CIT TOOK THE VIEW THAT THE ACTI VITIES OF THE TRUST ARE NOT AIMED OR DIRECTED TOWARDS ATTAINING ITS OBJECTIVES. THE LD CIT ALSO NOTICED THAT THE ASSESSEE DID NOT FILE RETURNS OF INCOME TILL DATE, EVEN THOUGH I T WAS CREATED ON 05-03-1974. ACCORDINGLY, HE REJECTED THE APPLICATION FILED BY T HE ASSESSEE BY HOLDING THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT GENUINE, AS THEY ARE NOT DIRECTED TOWARDS ATTAINING ITS OBJECTIVES. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE LD A.R SUBMITTED THAT THE LD CIT HAS REJ ECTED THE APPLICATION ON SURMISES AND CONJECTURES WITHOUT EXAMINING THE OBJECTIVES OF THE TRUST. HE FURTHER SUBMITTED THAT THE LD CIT WAS NOT JUSTIFIED IN EXAMINING THE NATURE OF INCOME AND THE MANNER OF APPLICATION OF THE SAME AT THE STAGE OF PROCESSING THE APPLICATION. HE FURTHER SUBMITTED THAT THE NON-FILING OF RETURN CANNOT BE A GROUND FO R REJECTION OF THE APPLICATION. HE SUBMITTED THAT THE PROVISIONS OF SEC. 12A DO NOT DI SCRIMINATE A RELIGIOUS TRUST AND A CHARITABLE TRUST, AND HENCE THE LD CIT WAS NOT JUST IFIED IN REJECTING THE APPLICATION FILED BY THE ASSESSEE. 4. THE LD D.R SUBMITTED THAT THE TRUST DEED OF THE ASSESSEE DOES NOT SATISFY THE CONDITIONS PRESCRIBED UNDER THE ACT. SHE SUBMITTED THAT THE TRUST DEED DOES NOT MENTION ANY THING ABOUT THE MANNER OF APPLICATION O F SURPLUS MONEY OR ABOUT THE MANNER OF DISTRIBUTION OF ASSETS, IN THE EVENT OF I TS DISSOLUTION. HOWEVER, THE ASSESSEE HAS PASSED ONLY A RESOLUTION IN THIS REGARD AND THE SAID RESOLUTION IS LIABLE TO BE CANCELLED AT ANY TIME BY THE TRUSTEES. SHE SUBMITTE D THAT THE ASSESSEE IS CARRYING ON BUSINESS LIKE ACTIVITIES LIKE GENERATING RENTAL INC OME AND COLLECTING HOSTEL FEES AND FURTHER IT DID NOT APPLY ANY AMOUNT FOR ACHIEVING I TS OBJECTIVES. ACCORDINGLY, SHE SUBMITTED THAT THE LD CIT WAS JUSTIFIED IN REJECTIN G THE APPLICATION FILED BY THE ASSESSEE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. WE NOTICE THAT THE TRUST HAS BEEN FORMED ON 05.03.1974. HOWE VER, IT FILED APPLICATION SEEKING REGISTRATION U/S 12A OF THE ACT ONLY ON 29.07.2013. THE LD CIT HAS NOTICED THAT THE I.T.A. NO. 500/COCH/2013 3 ASSESSEE HAS NOT FILED RETURNS OF INCOME SINCE THE DATE OF ITS INCEPTION. FURTHER HE HAS NOTICED THAT THE ASSESSEE WAS GENERATING RENTAL INC OME AND INCOME BY WAY OF HOSTEL FEES. HOWEVER, THE SAID INCOME SEEMS TO HAVE BEEN APPLIED FOR ACQUIRING CAPITAL ASSETS AND REPAIRS/RENOVATION OF BUILDING ETC. ACCORDINGL Y, THE LD CIT HAS OPINED THAT THE ASSESSEE HAS NOT SPENT ANY MONEY FOR ACHIEVING ITS OBJECTIVES AND HENCE THE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT DIRECTED TOWARDS ATTA INING ITS OBJECTIVES. ACCORDINGLY HE HAS EXPRESSED DOUBT ABOUT THE GENUINENESS OF THE AC TIVITIES OF THE ASSESSEE TRUST. 6. THE LD D.R HAS ALSO POINTED OUT THAT THE TRU ST DEED DOES NOT PROVIDE FOR MANNER OF DISTRIBUTION OF SURPLUS INCOME OF THE ASSESSEE A ND ALSO ABOUT THE MANNER OF DISTRIBUTION OF ASSETS IN THE EVENT OF DISSOLUTION OF TRUST. THOUGH THE LD A.R, BY PLACING RELIANCE ON THE RESOLUTION PASSED BY THE TRUSTEES, SUBMITTED THAT THE TRUSTEES ARE NOT ENTITLED TO DISTRIBUTE THE INCOME OR DIVIDE THE ASS ETS FOR THEIR PERSONAL BENEFITS, YET WE ARE OF THE VIEW THAT THE SAID RESOLUTION WOULD NOT MEET THE REQUIREMENTS OF THE LAW IN THIS RESPECT. AS SUBMITTED BY LD D.R, THE RESOLUTI ON PASSED IN ONE MEETING CAN BE RESCINDED OR MODIFIED IN ANOTHER MEETING. SO LONG AS THE TRUST DEED DOES NOT SPECIFICALLY PROVIDE FOR THE MANNER OF DISTRIBUTION OF SURPLUS FUNDS OR THE MANNER OF DISTRIBUTION OF ASSETS IN THE EVENT OF DISSOLUTION OF TRUST, IN OUR VIEW, THERE IS NO ASSURANCE THAT THEY MAY NOT BE DIVERTED FOR THE PER SONAL BENEFITS OF THE TRUSTEES. THOUGH THE LD CIT DID NOT EXAMINE THIS ASPECT, IN O UR VIEW, THESE CLAUSES ARE MANDATORY CLAUSES THAT GO TO ESTABLISH THE GENUINEN ESS OF THE TRUST. HENCE, IN OUR VIEW, THE ASSESSEE MAY NOT BE ENTITLED TO REGISTRAT ION U/S 12A OF THE ACT UNLESS IT AMENDS THE TRUST BY DULY INCORPORATION THE CLAUSES WITH REGARD TO THE MANNER OF DISTRIBUTION OF SURPLUS INCOME, THE MANNER OF DISTR IBUTION OF ASSETS IN THE EVENT OF DISSOLUTION OF TRUST AND ANY OTHER MANDATORY CLAUSE S THAT MAY BE REQUIRED AS PER THE PROVISIONS OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT IN REJECTING THE APPLICATION FILED BY THE ASSESSEE. 7. HOWEVER, WE MAKE IT CLEAR THAT THE ASSESSEE SHALL HAVE LIBERTY TO AMEND ITS TRUST DEED BY INCORPORATING ALL THE MANDATORY CLAUSES THA T ARE REQUIRED AS PER THE INCOME I.T.A. NO. 500/COCH/2013 4 TAX ACT AND THEREAFTER FILE ANOTHER APPLICATION BEF ORE LD CIT SEEKING REGISTRATION U/S 12A OF THE ACT. 8. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 22-11-20 13. (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 22ND NOVEMBER, 2013 GJ COPY TO: 1. ISHA-ATHU-DHEEN TRUST, ISLAMIC CENTRE, PULLEPPAD Y ROAD, KOCHI-18. 2. THE COMMISSIONER OF INCOME-TAX-I, KOCHI. 3. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 4. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN I.T.A. NO. 500/COCH/2013 5