Sangeetha Bharathi Trust, Mangalore V. CIT, Mangalore

ITA 523/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9499 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 22-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: H A K RAO
• Keywords: Charitable institution
• Section: 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.523/BANG/2009 ASSESSMENT YEAR : NOT APPLICABLE SANGEETHA BHARATHI TRUST, C/O. AVINASH MEDICALS, KUNDAPURA. : APPELLANT VS. THE COMMISSIONER OF INCOME-TAX, MANGALORE. : RESPONDENT APPELLANT BY : SHRI H.A.K. RAO RESPONDENT BY : SHRI JASON P. BOAZ O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE IN ITA NO.52 3/B/09 DIRECTED AGAINST THE ORDER OF THE LD. CIT, MANGALORE NO.S- 48/80G(R)/CIT/MNG/2008.09 DATED 26.2.2009 UNDER SEC TION 80G OF THE ACT. 2. THE ASSESSEE HAS RAISED FOUR GROUNDS IN ITS APPE AL, HOWEVER, GROUND NOS.1, 3 & 4 ARE GENERAL IN NATURE AND THERE FORE NOT CONSIDERED FOR ADJUDICATION. GROUND NO.2 CONSISTS OF TWO PARTS A ND THEY ARE REPRODUCED HEREBELOW FOR CONSIDERATION: ITA NO.523/B/09 PAGE 2 OF 7 (A) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D IN CONCLUDING THE SANGEETHA SHALE CANNOT BE TREATED AS CONDUCTING EDUCATION. (B) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERR ED IN CONCLUDING THE COLLECTION OF MONEY BY TRUST, SPONSO RSHIPS, FEES FROM STUDENTS ETC. AMOUNT TO ACTIVITIES IN THE NATURE OF TRADE AND BUSINESS AS SUCH THE APPELLANT IS NOT CAR RYING ON ANY CHARITABLE ACTIVITY. 3. THE ASSESSEE TRUSTS APPLICATION FOR RENEWAL O F RECOGNITION U/S. 80G OF THE ACT DATED 22.8.2008 WAS REJECTED BY THE LD. CIT ON THE GROUND THAT THE ACTIVITY OF THE TRUST FALLS OUTSIDE THE PURVIEW OF CHARITABLE PURPOSE AS DEFINED UNDER 2(15) OF THE ACT. LD. CIT ALSO OBSER VED FROM THE TRUSTS INCOME AND EXPENDITURE STATEMENT THAT THE TRUST HAD RECEIVED INCOME FROM TUITION FEES, ADVERTISEMENTS AND SPONSORSHIPS FOR T HE PERIOD ENDING 31.3.2006, 31.3.2007 AND 31.3.2008 AND THEREFORE CA ME TO A CONCLUSION THAT THE TRUST ACTIVITIES FALLS IN THE NATURE OF TR ADE, COMMERCE AND BUSINESS. 4. THE ASSESSEE TRUST VIDE ITS LETTER DATED 20.2.20 09 REBUTTED TO THE VIEW OF THE LD. CIT BY CONTENDING : (1) THE TRUST HAS SET UP A MUSIC SCHOOL NAMELY SAN GEETHA SCHOOL WHICH COULD BE CONSTRUED TO BE AN INSTITUTION FOR E DUCATION. (2) TUITION FEE WAS COLLECTED FROM THE STUDENTS TO IMPART EDUCATION ON MUSIC WHICH IS PERMISSIBLE AS PER THE ACT. (3) THE ENTIRE TUITION FEE COLLECTED FROM THE STUDE NTS WERE WHOLLY UTILIZED FOR THE PURPOSE OF RUNNING AND MAINTAINING THE SANGEETHA SCHOOL. ITA NO.523/B/09 PAGE 3 OF 7 (4) THE TRUST SHOULD BE CONSTRUED TO BE MEANT FOR T HE PURPOSE OF EDUCATION BECAUSE ITS ACTIVITIES CONSISTED ONLY OF (A) PROVIDING TRAINING IN MUSIC (B) TEACHING CLASSICAL DANCES (C) TO BRING AWARENESS IN THIS FIELD AMONGST THE POTENTIAL STUDE NTS (D) THIS KNOWLEDGE IN MUSIC WAS TAUGHT TO INTERESTED PUPILS WITHOUT DISCRIMINATION OF CASTE, CREED, RELIGION ETC. (5) THE TRUST HAD ONLY RECEIVED SPONSORSHIP FROM SP ONSORS FOR CONDUCTING PROGRAMMES OF THE TRUST. ONLY A MEAGER FEE WAS RECEIVED FROM THE STUDENTS OF THE MUSIC SCHOOL AND IT WAS BARELY ENOUGH TO RUN THE SCHOOL. SECTION 2(15) OF THE ACT DOES NOT PROHIBIT COLLECTION OF SUCH REVENUE FROM THE TRUST CONSIDERED TO BE FOR EDUCATIONAL PURPOSE. 5. HOWEVER, THE LD. CIT, MANGALORE DID NOT AGREE WITH THE ARGUMENTS OF THE ASSESSEE AND HELD: (I) THE TRUST ACTIVITIES OF PROMOTING AND TEACHING MUSIC CANNOT BE CONSIDERED TO BE FOR EDUCATIONAL PURPOSE AS CONSTRU ED IN SECTION 2(15) OF THE ACT. (II) THE ACTIVITIES OF THE TRUST FALLS UNDER THE CA TEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS ENVISAGED IN FOURTH LIMB OF SECTION 2(15) OF THE AC T. (III) RECEIPT OF MONEY FROM SPONSORS FOR CONDUCTING PROGRAMMES, COLLECTION OF ADVERTISEMENT FEES ETC. ARE PURELY AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS AND THEREFOR E THE TRUST ITA NO.523/B/09 PAGE 4 OF 7 WILL NOT FALL WITHIN THE PURVIEW OF CHARITABLE PUR POSE BY VIRTUE OF THE AMENDED PROVISO TO SECTION 2(15) OF THE ACT W.E .F. 1.4.2009. 6. LD. CIT WITH THE ABOVE REASONING REACHED TO A CO NCLUSION THAT RENEWAL OF RECOGNITION U/S. 80G CANNOT BE GRANTED T O THE TRUST AND ACCORDINGLY REJECTED THE APPLICATION FILED BY THE A PPELLANT TRUST. 7. LD. AR FORCEFULLY ARGUED THAT THE TRUST FALLS WI THIN THE SECOND LIMB OF SECTION 2(15) OF THE ACT VIZ., EDUCATION, BECAUSE THE MAIN ACTIVITY OF THE TRUST CENTRES AROUND PROMOTING AND TEACHING MUSIC. IMPARTING SUCH SKILL AND KNOWLEDGE IS NOTHING OTHER THAN EDUCATION. THE TRUST HAS NOT GENERATED ANY SURPLUS ON ACCOUNT OF THESE ACTIVITIE S BUT ONLY COLLECTED TUITION FEES FROM THE STUDENTS, SPONSORSHIP AND ADV ERTISEMENT CHARGES TO CONDUCT PROGRAMMES ON MUSIC AND ALL SUCH AMOUNT COL LECTED WERE WHOLLY UTILIZED ON THESE ACTIVITIES. TO BUTTRESS HIS ARG UMENTS, LD. AR SUBMITTED A PAPERBOOK CONSISTING OF 1 TO 57 PAGES: (1) STATEMENT GIVING THE DETAILS OF AMOUNT COLLECTE D AND EXPENDITURE INCURRED FOR THE YEARS ENDED 31.3.2006, 31,3.2007 A ND 31.3.2008. (2) AUDITED STATEMENT FOR THE YEARS ENDED 31.3.200 6, 31,3.2007 AND 31.3.2008 ALONG WITH STATEMENT OF TOTAL INCOME RETU RNED. (3) DEED OF TRUST. (4) LEAFLETS/BROCHURES PUBLISHED AT THE TIME OF PRO GRAMME INDICATING NAME OF SPONSORS, ADVERTISER, CALLING FOR ASSISTANC E. (5) (A) COPY OF LETTER DATED 9.2.09 FROM CIT, MANG ALORE. (B) COPY OF LETTER DATED 20.2.09 OF APPELLANT. 8. LD. DR RELIED UPON THE FINDINGS OF LD. CIT AND PLEADED THAT THE ACTIVITIES OF THE TRUST ARE IN THE NATURE OF BUSINE SS AS IT IS APPARENT FROM THE RECORD THAT THE TRUST HAD GENERATED INCOME BY COLLE CTING ADVERTISEMENT ITA NO.523/B/09 PAGE 5 OF 7 CHARGES, TUITION FEE, ETC. AND ACCEPTED SPONSORSHIP . LD. DR FURTHER SUBMITTED THAT IN THESE CIRCUMSTANCES THE TRUST WIL L NOT BE ENTITLED FOR RECOGNITION U/S. 80G OF THE ACT AND THEREFORE PRAYE D THAT THE RENEWAL APPLICATION SHOULD BE REJECTED AND THE ORDER OF THE LD. CIT BE CONFIRMED. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MINUTELY PERUSED THE MATERIALS AVAILABLE ON RECORD PRODUCED BEFORE US. IT IS PERTINENT TO NOTE THAT THE TRUST HAD ENJOYED RECOGNITION U/S. 80G OF THE ACT IN THE PAST. ALL THE ACTIVITIES OF THE TRUST REMAINS THE SAME AS IN THE PAST. ON A PLAIN READING OF THE ACT ALONG WITH THE VARIOUS DECIDED C ASE LAW AND THE DECISION OF THE APEX COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT REPORTED IN [1975] 101 ITR 234 , IT IS APPARENT THAT THE APPELLANT TRUST FALLS IN THE CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS ENVISAGED IN THE FOURTH LIMB OF SECTION 2(15) OF THE ACT. FURTHER ON A MINUTE SCRUTINY OF THE ACTIVITIES OF THE TRUST FROM THE RECORDS PRODUCED BEFORE US, WE DO NOT FIND ANY ACTIVITY IN THE NATUR E OF TRADE, COMMERCE, BUSINESS OR SERVICE IN RELATION TO ANY TRADE, COMME RCE OR BUSINESS. ALL THE ACTIVITIES CONDUCTED BY THE APPELLANT TRUST ARE DIR ECTLY RELATED TO THE OBJECT OF THE TRUST VIZ., TO PROMOTE MUSIC AND IMPART EDUC ATION OF MUSIC. THE STATEMENT OF INCOME OF THE TRUST NO DOUBT REVEALS T HAT THE TRUST HAD GENERATED REVENUE BY WAY OF RECEIPT OF TUITION FEES FROM THE STUDENTS OF THE MUSIC SCHOOL, SPONSORSHIP AND ADVERTISEMENT CHARGES FOR THE YEAR ENDED 31.3.2006, 31.3.2007 AND 31.3.2008. BY VIRTUE OF T HIS REVENUE COLLECTION, LD. CIT WAS OF THE MISCONCEPTION THAT THE TRUST HAD COLLECTED REVENUE AND INDULGED IN THE ACTIVITIES OF TRADE, COMMERCE AND B USINESS THEREBY EXCLUDING THE APPELLANT TRUST FROM THE SCOPE OF CH ARITABLE PURPOSE AS ITA NO.523/B/09 PAGE 6 OF 7 DEFINED IN SECTION 2(15) OF THE ACT AND THE AMENDED PROVISO. LD. CIT HAS FAILED TO OBSERVE THAT FOR ALL THESE THREE YEARS, T HE STATEMENT OF INCOME SHOWS A DEFICIT BALANCE IMPLYING THAT THE ENTIRE AM OUNT IS SPENT TO MEET ITS CHARITABLE OBJECTIVES. THE APPELLANT TRUST HAD NO PROFIT MOTIVE. IT GOES WITHOUT SAYING THAT WHEN ANY SUCH ACTIVITIES ARE TO BE CONDUCTED, SOURCING OF FUNDS IS ESSENTIAL. WHEN SUCH SOURCING OF FUND ARE GENERATED WITHOUT INDULGING IN ANY ACTIVITY IN THE NATURE OF TRADE, C OMMERCE OR BUSINESS ETC., PROVISO TO SECTION 2(15) OF THE ACT WILL NOT APPLY. CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE FIRM OPINION THAT (1) THE APPELLANT TRUST FALLS IN THE CATEGORY OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AS PROVIDED IN THE FOURTH LIMB OF SECTION 2(15) OF THE ACT. (2) THE TRUST HAS NOT INDULGED IN ANY ACTIVITY WHI CH CAN BE CONSTRUED TO BE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS. (3) THE GENERATION OF REVENUE BY THE APPELLANT TRUS T BY WAY OF COLLECTING SPONSORSHIP, ADVERTISEMENT CHARGES, TUITION FEE ETC . WAS ONLY FOR THE PURPOSE TO MEET OUT EXPENDITURE IN RELATION TO THE FULFILLMENT OF THE OBJECTS OF THE TRUST. 10. BECAUSE OF OUR ABOVE FINDINGS AND REASONS, WE H EREBY DIRECT THE LD. CIT TO GRANT RENEWAL OF RECOGNITION U/S. 80G OF THE ACT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO.523/B/09 PAGE 7 OF 7 PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF SEPTEMBER 2009. SD/- SD/- ( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY ) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH SEPTEMBER, 2009. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.