Prachodam Charity trust, Calicut V. CIT, Calicut

ITA 502/COCH/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81379 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-10-2014
• Assessment Year: misc
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JOHN
• Assessee Lawyers: C B M WARRIER
• Section: 12AA

Judgement Text

1 ITA NO.502/COCH/2013 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. 502/COCH/2013 (ASSESSMENT YEAR 2013-14) PROCHODANAM CHARITY TRUST VS CIT, KOZHIKODE DEEPTHI, PUTHAN PURAYIL PIN 673 503 PAN : AACTP1554E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CBM WARRIER RESPONDENT BY : SHRI K.K. JOHN, SR DR DATE OF HEARING : 20-10-2014 DATE OF PRONOUNCEMENT : 14-11-2014 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 DATED 17-05-2013 REJECT ING THE APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT. 2. SHRI CBM WARRIER, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE COMMISSIONER OF INCOME-TAX REJECTED THE AP PLICATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE TRUST IS N OT MAINTAINING ANY BOOKS OF ACCOUNT AND THESE WERE ROUTED THROUGH THE PERSONAL ACCOUNT OF 2 ITA NO.502/COCH/2013 THE TRUST MEMBERS. THE LD.REPRESENTATIVE SUBMITTED THAT THE INITIAL STAGE THE ASSESSEE TRUST COULD NOT OPEN A BANK ACCOUNT, T HEREFORE, THE FUNDS WERE ROUTED THROUGH THE PERSONAL ACCOUNT OF THE TRU STEES. NOW THE ASSESSEE TRUST HAS OPENED A BANK ACCOUNT AND NO AMO UNT IS ROUTED THROUGH THE PERSONAL ACCOUNT OF THE TRUSTEES. THER EFORE, ACCORDING TO THE LD.REPRESENTATIVE, MERELY BECAUSE AT THE INITIAL PE RIOD THE FUNDS WERE ROUTED THROUGH THE PERSONAL ACCOUNT, THERE CANNOT B E A REASON TO REJECT THE CLAIM OF THE ASSESSEE. THE LD.REPRESENTATIVE F URTHER SUBMITTED THAT THE COMMISSIONER HAS NOT EXAMINED THE GENUINENESS OF TH E TRUST AND OTHER ACTIVITY OF THE TRUST. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE COMMISSIONER OF INCOME-TAX OUGHT TO HAVE GRANTED RE GISTRATION. 3. WE HEARD SHRI K.K. JOHN, THE LD.DR ALSO. ACCORD ING TO THE LD.DR, THE ASSESSEE ROUTING THE TRUST FUND THROUGH THE PER SONAL ACCOUNT OF THE TRUSTEES, THEREFORE, THE ASSESEE TRUST IS NOT ENTIT LED FOR REGISTRATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AT THE I NITIAL PERIOD IT IS NOT IN DISPUTE THAT THE FUNDS WERE ROUTED THROUGH THE PERS ONAL ACCOUNT OF THE TRUSTEE. ADMITTEDLY, THE TRUST WAS ESTABLISHED BY A TRUST DEED DATED 30-05- 2012. THE ASSESSEE APPLIED FOR REGISTRATION ON 12- 11-2012. THE ASSESSEE HAS SEVERAL OBJECTS INCLUDING THAT TO PROV IDE FREE EDUCATION AND 3 ITA NO.502/COCH/2013 HEALTH CARE TO THE STUDENTS, TO ESTABLISH COLLEGE S CHOOLS AND OTHER EDUCATIONAL INSTITUTION, ETC. NO DOUBT, THE TRUST IS AN INDEPENDENT AND SEPARATE ENTITY. THE FUNDS OF THE TRUST CANNOT BE ROUTED THROUGH PERSONAL ACCOUNT OF THE TRUSTEES. AT THE VERY SAME TIME, WH EN THE TRUST ITSELF WAS ESTABLISHED ON 30-05-2012 AND THE APPLICATION WAS M ADE FOR REGISTRATION WITHIN A PERIOD OF SIX MONTHS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT A REASONABLE TIME WOULD TAKE TO START THE ACTIVITY OF THE TRUST AND TO OPEN A BANK ACCOUNT, ETC. THEREFORE, AT THE INITIAL PERIO D, MERELY BECAUSE THE FUNDS WERE ROUTED THROUGH THE PERSONAL ACCOUNT OF T HE TRUSTEES AND SUBSEQUENTLY A SEPARATE ACCOUNT WAS OPENED IN THE N AME OF THE TRUST ITSELF, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT CANNOT BE A REASON TO REJECT THE CLAIM OF THE ASSESSEE. WHAT IS TO BE SE EN IS WHETHER THE INTERESTED PERSON IN THE TRUST HAS BENEFITED BY THE TRUST FUNDS OR NOT? IN OTHER WORDS, WHAT IS TO BE SEEN IS WHETHER THE TRUS TEES MISAPPROPRIATED THE TRUST FUNDS? UNFORTUNATELY, THE CIT HAS NOT EX AMINED WHETHER INTERESTED PERSON HAS BENEFITED BY THE ACTIVITY OF THE TRUST OR NOT? THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE OR DER OF THE LOWER AUTHORITY. HOWEVER, IT IS FOR THE COMMISSIONER TO EXAMINE AND ASCERTAIN WHETHER THE INTERESTED PERSONS ARE BENEFITED BY THE FUNDS OF TH E TRUST OR ACTIVITY OF THE TRUST OR MISAPPROPRIATION OF FUNDS BY THE TRUSTEES. IF IT IS A MERE ROUTING OF FUNDS FOR THE INITIAL PERIOD THROUGH THE BANK ACCOU NT OF THE TRUSTEES THAT ALONE CANNOT BE A REASON FOR REJECTING THE CLAIM OF THE ASSESSEE. 4 ITA NO.502/COCH/2013 HOWEVER, THE CLAIM OF THE ASSESSEE THAT NOW BANK AC COUNT HAS BEEN OPENED AND IT IS NOT ROUTED THROUGH THE PERSONAL AC COUNT OF THE TRUSTEES NEEDS TO BE EXAMINED. ACCORDINGLY, THE ORDER OF TH E LOWER AUTHORITY IS SET ASIDE AND THE ISSUE TO REMITTED BACK TO THE FILE OF THE CIT. THE CIT SHALL EXAMINE WHETHER A SEPARATE BANK ACCOUNT WAS OPENED FOR THE TRUST AND WHETHER ANY OF THE TRUSTEES OR INTERESTED PERSON BE NEFITED OUT OF THE FUNDS OF THE TRUST OR ACTIVITIES OF THE TRUST OR ANY TRUS TEES MISAPPROPRIATED THE FUNDS OF THE TRUST AND THEREAFTER DECIDE THE SAME I N ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO T HE ASSESEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH NOVEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH OCTOBER, 2014 PK/- COPY TO: 1. PROCHODANAM CHARITY TRUST, DEEPTHI, PUTHAN PURAY IL PIN 673 503 2. THE COMMISSIONER OF INCOME-TAX, KOZHIKODE 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH