BOMBAY MUDIBAZAR KARIANA, NAVI MUMBAI V. DIT (E), MUMBAI

ITA 5473/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8114 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-06-2015
• Assessment Year: 2013-2014
• Appeal Filed On: 14-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N P SINGHDR
• Assessee Lawyers: SHRIBHUPENDRA SHAHAR
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA; 12; 11

Judgement Text

1 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 IN THE INCOME TAX APPELLATE TRIBUNNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA ( ACCOUNTANT MEMBER) I.T.A.NO.5473/MUM/2013 BOMBAY MUDIBAZAR KARIANA MERCHANTS, A-26 MERCHANT CENTRE, PLOT NO.14, SECTOR 19 VASHI, NAVI MUMBAI-400703. V/S DIT (E) PIRMAL CHAMBERS, PAREL MUMBAI. PAN AACCB8702B APPELLANT RESPONDENT APPELLANT BY SHRIBHUPENDRA SHAH(AR) RESPONDENT BY SHRI N.P. SINGH(DR) DATE OF HEARING 07.03.2017 DATE OF ORDER 14.03.2017 O R D E R PER ASHWANI TANEJA, AM:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. DIRECTOR OF INCOME TAX(EXEMPTION), MUMBAI[HEREINAFT ER CALLED DIT] U/S 12AA(1)(B)(II) R/W SEC12AA OF THE INCOME TAX ACT, 1 961 ON THE FOLLOWING GROUNDS DATED 09.07.2014 PASSED AGAINST THE ORDER O F THE AO U/S 12AOF THE ACT DATED 24.06.2013 ON THE FOLLOWING GROUNDS:- 2 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 GROUNDS OF APPEAL: I) ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED D IT[EXEMPTION] MUMBAI HAS ERRED IN REJECTING THE APPLICATION U/S 1 2A FOR APPROVAL OF THE APPELLANT COMPANY BY HOLDING THAT THE MEMORANDU M AND ARTICLES OF ASSOCIATION OF THE APPELLANT CONTAINS M IXED OBJECTS, CHARITABLE AND NON CHARITABLE, AND ALSO LACK OF OBL IGATION ON THE BOARD OF DIRECTORS REGARDING APPLICATION OF INCOME. II) ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED DIT[EXEMPTION] MUMBAI HAS ERRED IN REJECTING THE AP PLICATION U/S12A FOR APPROVAL OF THE APPELLANT COMPANY BY WRONGLY HO LDING THAT THE MAIN OBJECTS ARE NOT CHARITABLE/MUTUAL IN NATURE AL THOUGH THEY ARE DIRECTLY FOR THE FURTHERANCE OF INTEREST OF THEMEMB ERS OF BOMBAY MUDIBAZAR KAIRANA MERCHANTS . 2. THE BRIEF BACKGROUND OF THE CASE IS THAT THE A SSESSEE IS A LIMITED COMPANY AND INCORPORATED U/S 25 OF COMPANIES ACT,1956 VIDE CERTIFICATE OF INCORPORATION DATED 06.02.2006. IT FILED APPLICATIO N FOR REGISTRATION U/S 12A OF THE ACT IN PRESCRIBED FORM NO.10A ON 05.12.2012 WIT H THE OFFICE OF DIT(EXEMPTION), MUMBAI. 3. LD. DIT (E), EXAMINED THE OBJECTS OF THE ASSESSEE A ND FOUND THAT THE ASSESSEE AND HAS BEEN FORMED AS AN ASSOCIATION OFGROCERY MER CHANT FOR THE PURPOSE OF DEVELOPING AND PROMOTING TRADE AND COMMERCE OF GROC ERY BUSINESS AND ALSO FOR PROTECTING THE BUSINESS INTERESTS OF GROCERY MERCHANTS. IT WAS HELD THAT THOUGH THE APPLICANT COMPANY HAS BEEN SETUP FOR THE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY BECAUSE THE PUBLIC IN GENERAL IS INTERESTED IN PROMOTION AND PROTECTION OF TRADE AND COMMERCE, HOW EVER THE APPLICANT HAS MIXED OBJECTS OF CHARITABLE AND NON CHARITABLE OBJE CTS. IT WAS THE FURTHER OBSERVED THAT SOME OF THE OBJECTS ARE DIRECTED TOWA RDS LOOKING AFTER PERSONAL BUSINESS INTEREST OF ITS MEMBERS. THEREFORE, THESE OBJECTS ARE NOT COVERED WITHIN THE AMBIT OF CHARITABLE PURPOSE AS DEFINED U/S 2(15) OF THE ACT. THUS, 3 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 THE ASSESSEE IS NOT ENTITLED TO BENEFIT OF REGISTRA TION U/S12A. UNDER THESE CIRCUMSTANCES, APPLICATION FOR GRANT OF REGISTRATIO N FILED BY THE ASSESSEE WAS REJECTED BY LD. DIT(E). 4. DURING THE COURSE OF HEARING BEFORE US, LD. COUNSEL VEHEMENTLY ASSAILED THE ORDER OF THE LD. DIT(E). IT WAS SUBMITTED THAT LD. DIT(E) HAS HIMSELF ADMITTED IN THE ORDER THAT THE OBJECTS OF THE ASSES SEE ARE MEANT FOR GENERAL PUBLIC UTILITY. UNDER THESE CIRCUMSTANCES, LD. DIT (E)MISUNDERSTOOD THE FACTS OF THIS CASE WHILE OBSERVING THAT ASSESSEE HAD MIXED O BJECTS OF CHARITABLE AND NON CHARITABLE OBJECTS. HE WRONGLY DENIED THE BENE FIT OF REGISTRATION. ONCE THE OBJECTS ARE FOUND TO BE OF GENERAL PUBLIC UTILI TY, THE BENEFIT OF REGISTRATION MUST BE GRANTED BECAUSE AO HAS FULL LIBERTY TO EXAM INE WHETHER ASSESSEE HAD CARRIED OUT ANY BUSINESS OR THAT THE FUNDS OF THE A SSESSEE WERE USED FOR ANY BUSINESS PURPOSE AND IF ANY SUCH THING IS FOUND,HE CAN VERY WELL REFUSE THE BENEFIT OF THE REGISTRATION AT THAT STAGE. HOWEVER , THE BENEFIT OF REGISTRATION CANNOT BE REFUSED AT THIS STAGE. HE PLACED RELIANC E UPON THE JUDGMENT OF THE HON'BLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE O F THE BENGAL FOUNDATION(I.T.A.NO. 1546/MUM/2013) ORDER DATED 30. 09.2015 AND SHRI VILE PARLE VARDHMAN STHANATVASI JAIN FOUNDATION U/S DIT 151 ITD 142 (MUMBAI) 5. PER CONTRA LD. CIT(DR) RELIED UPON THE IMPUGNED ORD ER AND SUBMITTED THAT AO MUST BE GIVEN FULL LIBERTY TO EXAMINE THE ELIGIB ILITY OF THE EXEMPTION AT THE ASSESSMENT STAGE. 6. WE HAVE GONE THROUGH THE ORDERS PASSED BY LD. DI T(E). IT IS NOTED BY US THAT THE ASSESSEE HAS BEEN FORMED AS A COMPANY U/S 25 OF COMPANIES ACT, AS ASSOCIATION OF MUMBAI GROCERY MERCHANTS ASSOCIATIO N. LD. DIT(E) HAS GONE THROUGH ALL THE OBJECTS IN THE MEMORANDUM OF ASSOCI ATION. HE HAS ALSO GONE THROUGH VARIOUS CLAUSES OF ARTICLES OF ASSOCIATION AND AFTER EXAMINING THE 4 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 SAME, HE WAS OF THE OPINION THAT MOSTLY OBJECTS OF THE ASSESSEE ARE OF GENERAL PUBLIC UTILITY. HE DID NOT FIND ANYTHING IN THE ME MORANDUM AND ARTICLES OF ASSOCIATION WHICH SUGGEST THAT THE ASSOCIATION WOUL D BE RUN LIKE A BUSINESS ASSOCIATION. THE ONLY APPREHENSION EXPRESSED BY TH E LD. DIT(E) IS ABOUT THE MIXED NATURE OF THE OBJECTS. HE IS OF THE OPINION T HAT SOME OF THE OBJECTS INDICATE THAT THE ASSOCIATION SHALL WORK FOR PROTEC TION OF BUSINESS INTEREST OF ITS MEMBERS, WHICH, ACCORDING TO HIM, WOULD NOT BE CHAR ITABLE AND THEREFORE, HE REFUSED THE BENEFIT OF REGISTRATION. 7. WE DO NOT AGREE WITH THE APPROACH ADOPTED BY TH E LD. DIT(E). AS PER OUR UNDERSTANDING, THE ROLE ASSIGNED BY THE LEGISLATURE TO LD. DIT(E) AT THE TIME OF GRANTING OF REGISTRATION IS TO PRIMA-FACIE EXAMIN E IF THE OBJECTS FALL INTO THE DEFINITION OF CHARITABLE PURPOSE AS DEFINED U/S2(15 ) OF THE ACT. LD. DIT(E) IS NOT GRANTING, AT THIS STAGE, THE ENTITLEMENT OF BENEFIT OF EXEMPTION U/S 11 BECAUSE THE AO CAN AT THE STAGE OF ASSESSMENT ALSO VERIFY THE NATURE OF ACTIVITIES OF THE TRUST AND APPLICATION OF INCOME BY THE ASSESSEE. RE LIANCE IN THIS REGARD HAS BEEN RIGHTLY MADE BY THE LD. COUNSEL OF THE ASSESSE E UPON THE JUDGMENT OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF THE BEN GAL FOUNDATION,SUPRA. RELEVANT PORTION OF THE SAME IS REPRODUCED IS BELOW :- WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LEARN ED DIT HAS REFUSED TO GRANT REGISTRATION TO THE ASSESSEE U NDER SECTION 12A OF THE ACT BASICALLY FOR THE FOLLOWING REASONS:- I) THE ASSESSEE HAS MIXED OBJECTS OF BOTH 'CHARITABLE' AND 'NON-CHARITABLE' NATURE; II ) THE TRUST DEED AUTHORIZES THE TRUSTEES TO APPL Y INCOME /FUND /TRUST EVEN FOR NON-CHARITABLE OBJECTS; AND III ) ACTIVITIES OF THE TRUST WAS NOT YET STARTED. 117 '1 5 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 AS FAR AS THE ALLEGATION THAT SOME OF THE OBJECTS ARE OF NON-CHARITABLE NATURE, IT IS TO BE NOTED, THE TRIBU NAL, MUMBAI BENCH, IN KANAKIA ART FOUNDATION (SUPRA), HELD THE VERY SAME OR ALMOST SIMILAR OBJECTS TO BE OF CHARITABLE NATUR E AND ALLOWED ASSESSEE'S CLAIM OF REGISTRATION UNDER SECT ION 12A. THAT BEING THE CASE, RESPECTFULLY FOLLOWING THE DEC ISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL CITED SUPRA, WE HOLD THAT THE LEARNED DIT'S FINDING THAT THE ASSESSEE TR UST IS HAVING NON-CHARITABLE / BUSINESS OBJECT CANNOT BE ACCEPTED. AS FAR AS THE ALLEGATION OF THE LEARNED DIT THAT THE A SSESSEE HAS NOT YET STARTED ITS ACTIVITIES, HENCE, THE GENUINEN ESS OF THE ACTIVITIES CANNOT BE ASCERTAINED, WE MUST OBSERVE T HAT THE CONTENTION OF THE ASSESSEE THAT UNLESS REGISTRATION IS GRANTED, IT IS DIFFICULT TO RECEIVE FUNDS AND START THE ACTIVITIES IN ACCORDANCE WITH THE OBJECTS MERITS CONSIDERATION . UNLESS REGISTRATION IS GRANTED TO THE ASSESSEE UNDER SECTI ON 12A OF THE ACT, IT IS DIFFICULT ON ITS PART TO GET DONATIO NS AND VOLUNTARY CONTRIBUTION, HENCE, IT CANNOT START ITS ACTIVITIES. MOREOVER, GRANT OF REGISTRATION UNDER SECTION 12 A OF THE ACT DOES NOT MAKE THE TRUST/INSTITUTION IMMUNE FROM FUR THER INVESTIGATION. THERE ARE ENOUGH SAFEGUARDS GIVEN U NDER THE STATUTE TO CANCEL THE REGISTRATION OF TRUST OR INST ITUTION IF SUBSEQUENTLY IT IS FOUND THAT THE OBJECTS OF THE TR UST OR INSTITUTION ARE NOT CHARITABLE OR THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR NOT IN ACCORDANCE WITH THE OBJECTS O F THE TRUST. THIS IS CLEAR FROM THE PROVISIONS CONTAINED UNDER SECTION 12AA(3) OF THE ACT. FURTHER, GRANT OF REGIS TRATION UNDER SECTION 12A DOES NOT AUTOMATICALLY ENTITLE TH E ASSESSEE TO AVAIL EXEMPTION UNDER SECTION 11 UNLESS HE SATISFIES THE CONDITIONS OF SECTIONS 11,12 AND 13 O F THE ACT. AT THE STAGE OF ASSESSMENT ALSO, THE ASSESSING OFFI CER CAN VERIFY THE GENUINENESS OF THE ACTIVITIES OF THE TRU ST AND THE APPLICATION OF INCOME BY THE ASSESSEE. THEREFORE, CONSIDERING THE AFORESAID ASPECTS, WERE OF THE VIEW THAT THE IMPUGNED ORDER PASSED BY THE LEARNED DIT REFUSING T O GRANT REGISTRATION TO THE ASSESSEE CANNOT BE SUSTAINED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED DIT AND DIRECT HIM TO GRANT REGISTRATION UN DER SECTION 12AA OF THE ACT TO THE ASSESSEE. THE GROUN D RAISED BY THE ASSESSEE IS ALLOWED. 9. SIMILARLY IN THE CASE OFVILE PARLE VARDHMAN ,SU PRA SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL. 6 MUMBAI MUDIBAZAR I.T.A.NO.5473/M/2013 10. IN THE CASE BEFORE US, THE ADMITTED CASE IS TH AT THE OBJECTS OF THE ASSESSEE ARE OF GENERAL PUBLIC UTILITY. UNDER THESE CIRCUMST ANCES THE BENEFIT OF REGISTRATION SHOULD NOT BE REFUSED TO THE ASSESSEE, SINCE THE GRANT OF REGISTRATION U/S 12 A DOES NOT AUTOMATICALLY ENTITL E THE ASSESSEE TO AVAIL THE BENEFIT OF THE EXEMPTION U/S11 UNLESS VARIOUS CONDI TIONS AS STIPULATED U/S 11,12 AND 13 OF THE ACT ARE ALSO SATISFIED. IT IS A LSO WELL SETTLED LAW AND WE CLARIFY HERE ALSO THAT AT THE STAGE OF ASSESSMENT A LSO THE AO CAN VERY WELL VERIFY THE NATURE OF THE ACTIVITIES CARRIED OUT BY THE ASSESSEE AND THE APPLICATION OF ITS INCOME TOWARDS ITS OBJECTS. UND ER THESE CIRCUMSTANCES WE SET ASIDEORDERS PASSED BY LD. DIT(E) AND DIRECT HIM TO GRANT REGISTRATION U/S 12 AA OF THE ACT TO THE ASSESSEE. 8. AS A RESULT APPEAL FILED BY THE ASSESSEE IS ALL OWED. ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE CONCL USION OF HEARING. SD/- SD/- (MAHAVIR SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT :14.03.2017 KT/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , B, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES