Matiwala Relief Trust, Dist.Bharuch V. The CIT-III, Baroda

ITA 548/AHD/2006

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9007 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-02-2010
• Assessment Year: misc
• Appeal Filed On: 06-03-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K ARUMUGAN
• Assessee Lawyers: S N DIVETIA
• Keywords: Charitable institution; Set aside
• Section: 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI A.N.PAHUJ A A.M. ITA NO.548/AHD/2006 UNDER SECTION 80G(5) MATLIWALA RELIEF TRUST, AT & PO. KARMAD, DIST. BHARUCH. V/S COMMISSIONER OF INCOME TAX-III, 2 ND FLOOR, AAYKAR BHAVAN, ANNEXE RACE COURSE CIRCLE, BARODA-390 007. PAN NO.AATM2727J (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI S.N.DIVETIA FOR DEPARTMENT: SHRI K.K. ARUMUGAN, CIT DR O R D E R PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX-III, BARODA, DATED 29.12 .2005 UNDER SECTION 80G(5)(VI) OF THE INCOME TAX ACT, 1961 BY R AISING FOLLOWING GROUNDS: 1. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN FACT AND IN LAW IN NOT GRANTING APPROVAL TO THE APPELLAN T U/S. 80 G(5)(VI) OF THE INCOME TAX ACT, 1961. 2. YOUR APPELLANT CRAVES RIGHT TO ADD TO OR ALTER, AMEND, SUBSTITUTE, DELETE OR WITHDRAW ALL OR ANY OF THE AB OVE GROUNDS OF APPEAL. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH THE P ARTIES, PERUSED THE FINDINGS OF AUTHORITY BELOW AND CONSIDE RED THE MATERIAL AVAILABLE ON RECORD. 2 3. THE LEARNED COMMISSIONER CONSIDERING THE ISSUE O F APPROVAL UNDER SECTION 80G(5)(VI) OF THE INCOME TAX ACT, 196 1 HELD AS UNDER:- 3. AFTER CONSIDERING THE MATERIAL ON RECORD AND HE ARING THE ASSESSEES REPRESENTATIVE. I FIND THAT THE TRUST IS NOT ELIGIBLE FOR APPROVAL U/S. 80G(5)(VI). THE MAIN OBJECTS OF T HE TRUST ARE EXPRESSLY FOR THE BENEFIT OF MUSLIM COMMUNITY. HENCE, IT IS HIT BY THE PROVISIONS OF SECTION 80G(5)(VI). THE TRUST WAS CREATED ON 12.07.1996, I.E. AFTER THE COMMENCEM ENT OF THE INCOME TAX ACT, 1961. THAT BEING THE CASE, S INCE THE TRUST IS CREATED FOR THE MUSLIM COMMUNITY ONLY, ITS INCOME WOULD NOT BE EXEMPT U/S. 11 BY VIRTUE OF THE RESTRICTION CONTAINED IN SECTION 13(1)(B). HENCE, T HE CONDITION LAID DOWN FOR APPROVAL U/S. 80G(5)(I) IS ALSO NOT SATISFIED. THE OBJECT NO.(D) OF THE TRUST AS PER TR UST DEED IS TO PUBLISH RELIGIOUS AND SECTARIAN LITERATURE WHICH IS SUBSTANTIALLY RELIGIOUS IN NATURE AND HENCE THE TRU ST IS DISQUALIFIED FOR APPROVAL BY VIRTUE OF EXPLANATION 3 BELOW SECTION 80GALSO. IT IS FURTHER SEEN THAT THE TRUST HAS INCURRED RS.46,727/- IN THE ACCOUNTING YEAR ENDING ON 31.03.2002, RS.6,58,008/- IN THE ACCOUNTING YEAR EN DING ON 31.03.2003 AND RS.61,989/- IN THE ACCOUNTING YEA R ENDING ON 31.03.2004ON ITS RELIGIOUS OBJECTS AS PER CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT FILED A LONG WITH THE APPLICATION. THIS EXPENDITURE COMES TO BE MORE THAN 5% OF THE TOTAL INCOME OF THE RESPECTIVE YEAR AND HENCE IT IS DISQUALIFIED FOR APPROVAL BY VIRTUE OF SECTION 80G(5B) ALSO. IN THE COURSE OF HEARING, ASSESSEE PL EADED THAT THE TRUST WAS DOING CHARITABLE ACTIVITIES WITH OUT RELIGIOUS DISCRIMINATION. BUT THERE IS NO EVIDENCE IN SUPPORT OF THIS CONTENTION WHICH IS CONTRADICTED BY THE OBJ ECTS OF THE TRUST. EVEN IF IT IS SO, THE DISQUALIFICATION O F SECTION 80G(5)(III) GOES BY THE DECLARED OBJECTS AND NOT BY ACTUAL ACTIVITIES. BESIDES, THERE ARE OTHER DISQUALIFICATI ONS AS STATED ABOVE WHICH ARE NOT REBUTTED. 4. IN VIEW OF THE FOREGOING, I AM OF THE CONSIDERED VIEW THAT THIS IS NOT A FIT CASE FOR APPROVAL U/S. 80G(5)(VI) . THE APPLICATION IS ACCORDINGLY REJECTED . 5. IF, HOWEVER, THE TRUST MODIFIES ITS TRUST DEED SO A S TO INCORPORATE OBJECTS OF PUBLIC CHARITY NOT CONFINED TO ANY PARTICULAR COMMUNITY OR CASTE AND REMOVES RELIGIOUS OBJECTS FROM THE TRUST DEED AND ALSO STOP S INCURRING EXPENDITURE ON ANY RELIGIOUS ACTIVITY, IT MAY FILE FRESH APPLICATION FOR APPROVAL, WHICH WILL BE CONSIDERED ON MERITS . 4. LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT PROV ISIONS OF SECTION 13(1)(B) OF THE INCOME TAX ACT, 1961 DO NOT APPLY TO THE CASE OF THE ASSESSEE BECAUSE IT APPLIES TO CHARITABLE IN STITUTIONS ONLY. HE 3 HAS RELIED UPON DECISION OF GUJARAT HIGH COURT IN T HE CASE OF CIT VS. BARKATE SAIFIYAH SOCIETY 213 ITR 492 IN WHI CH GUJARAT HIGH COURT HELD THAT THE PROVISIONS OF SECTION 13(1)(B) IS NOT APPLICABLE IF THE TRUST IS BOTH RELIGIOUS AND CHARITABLE. THE PROVISI ONS OF SECTION 13(1)(B) ARE APPLICABLE IN CASES WHERE THE TRUST IS PURELY C HARITABLE IN NATURE. LEARNED COUNSEL FOR ASSESSEE HOWEVER AS REGARDS THE AMOUNT SPEND MORE THAN 5% OF THE TOTAL INCOME, SUBMITTED THAT AS SESSEE WOULD MAKE FRESH APPLICATION BEFORE THE LEARNED COMMISSIO NER FOR GRANT OF APPROVAL UNDER SECTION 80G(5) OF THE INCOME TAX ACT , 1961. HE HAS REFERRED TO PB-28 TO SHOW THAT ASSESSEES TRUST IS REGISTERED AS PUBLIC TRUST. HE HAS ALSO REFERRED TO SEVERAL PAPERS FROM THE PAPER BOOK TO SHOW THAT THE ASSESSEE IS NOT MEANT FOR PARTICULAR RELIGIOUS COMMUNITY AND SOME OF ITS OBJECTS ARE CHARITABLE AND RELIGIOU S IN NATURE. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX AND SUBMITTED THAT THE DECISION OF THE SUPREME COURT IN THE CASE OF CI T VS. PALGHAT SHADI MAHEL TRUST 254 ITR 212 SQUARELY APPLY AGAINS T THE ASSESSEE AND LEARNED COMMISSIONER OF INCOME TAX CAN EXAMINE THE APPLICABILITY OF SECTION 11 OF THE INCOME TAX ACT, 1961 WHILE GRANTING APPROVAL UNDER SECTION 80G(5) OF THE INCOME TAX ACT , 1961. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE RELEVANT PROVISIO NS OF SECTION 80G(5) OF THE INCOME TAX ACT, 1961 FOR THE PURPOSE OF DISP OSAL OF THE PRESENT APPEAL ARE REPRODUCED AS UNDER:- 80G(5): THIS SECTION APPLIES TO DONATIONS TO ANY I NSTITUTION OR FUND REFERRED TO IN SUB-CLAUSE (IV) OF CLAUSE (A ) OF SUB- SECTION (2), ONLY IF IT IS ESTABLISHED IN INDIA FOR A CHARITABLE PURPOSE AND IF IT FULFILS THE FOLLOWING CONDITIONS, NAMELY:- [(I) WHERE THE INSTITUTION OR FUND DERIVES ANY INCO ME, SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTA L INCOME 4 UNDER THE PROVISIONS OF SECTION 11 AND 12 [***] [ [ ***]][OR CLAUSE (23AA)][OR CLAUSE 23C)] OF SECTION 10: [PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOME, BEING PROFITS AND GAINS OF BUSINESS, THE CONDITION THAT SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCO ME, IF- (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOK S OF ACCOUNT IN RESPECT OF SUCH BUSINESS; (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND A RE NOT USED BY IT, DIRECTLY OR INDIRECTLY, FOR THE PURPOSES OF SUCH BUSINESS; AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKI NG THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE USED, DIRECTLY OR INDIRECTLY, FOR TH E PURPOSES OF SUCH BUSINESS;]] (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT, OR THE RULES GOVERNING THE INSTITUTIONS OR FUND DO NOT, CONTAIN ANY PROVISION FOR THE TRANSFER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOSE; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CA STE; [(5B) NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (II) OF SUB- SECTION (5) AND EXPLANATION 3, AN INSTITUTION OR FU ND WHICH INCURS EXPENDITURE, DURING ANY PREVIOUS YEAR, WHICH IS OF A RELIGIOUS NATURE FOR AN AMOUNT NOT EXCEEDING FIVE PERCENT OF ITS TOTAL INCOME IN THAT PREVIOUS 5 YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND T O WHICH THE PROVISIONS OF THIS SECTION APPLY.] EXPLANATION 3 - IN THIS SECTION, CHARITABLE PURPOSE DOES NOT INCLUDE ANY PURPOSE THE WHOLE OR SUBSTANTIALLY THE WHOLE OF WHICH IS OF A RELIGIOUS NATURE. 5.1 ITAT, INDORE BENCH IN THE CASE OF DAWOODI BOHRA JAMAT & OTHERS VS. CIT REPORTED IN 317 ITR (AT) 133 HELD TH AT THE ASSESSEE WAS PUBLIC RELIGIOUS TRUST WITH ITS OBJECTS BEING S OLELY RELIGIOUS IN NATURE, AND THE REFUSAL TO GRANT REGISTRATION ON TH E GROUND THAT SECTION 13(1)(B) AND (C) OF THE ACT WERE VIOLATED, WAS NOT JUSTIFIED WHEN THE COMMISSIONER HAD NOT DOUBTED EITHER THE NA TURE OF ITS OBJECTS OR GENUINENESS OF ITS ACTIVITIES. THE TRIBU NAL IN THIS CASE CONSIDERED THE DECISION OF GUJARAT HIGH COURT IN TH E CASE OF BARKATE SAIFIYAH SOCIETY (SUPRA) RELIED UPON BY LEARNED COU NSEL OF ASSESSEE IN WHICH GUJARAT HIGH COURT HELD THAT THE PROVISION S OF SECTION 13(1)(B) IS NOT APPLICABLE, IF THE TRUST IS BOTH RE LIGIOUS AND CHARITABLE. THE PROVISIONS OF SECTION 13(1)(B) ARE APPLICABLE I N CASES, WHERE THE TRUST IS PURELY CHARITABLE IN NATURE. THE TRIBUNAL ALSO CONSIDERED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F PALGHAT SHADI MAHEL TRUST (SUPRA) RELIED UPON BY LEARNED DEPARTME NTAL REPRESENTATIVE AND DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE. IN THIS CASE, THE TRIBUNAL ALSO RELIED UPON ORDER OF I TAT, DELHI BENCH IN THE CASE OF AGARWAL MITRA MANDAL TRUST VS. DIT EXEM PTION 293 ITR (AT) 259, IN WHICH THE DELHI BENCH CONSIDERING THE APPLICABILITY OF SECTION 11, 12 AND 13 NOTED THAT THE SAID PROVISION S CAN BE APPLIED OR INVOLVED ONLY AT THE TIME OF COMPUTATION OF TOTA L INCOME OF THE PREVIOUS YEAR OF THE PERSON, WHO IS CLAIMING EXEMPT ION UNDER SECTION 11 OR SECTION 12. THE PHRASEOLOGY OF SECTION 13 MAK ES IT EXPLICITLY CLEAR THAT THE SAID PROVISION BECOME OPERATIVE OR R ELEVANT AT THE STAGE OF ASSESSMENT WHEN THE ASSESSING OFFICER IS R EQUIRED TO 6 EXAMINE THE CLAIM OF ASSESSEE FOR BENEFITS UNDER SE CTION 11 OR 12 WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR. THEREFORE, SECTION 13 THUS, FALLS WI THIN EXCLUSIVE DOMAIN OF THE ASSESSING OFFICER. THE ABOVE DECISION OF ITAT IN THE CASE OF DAWOODI BOHRA JAMAT AND OTHERS (SUPRA) WAS CHALLENGED BY THE REVENUE BEFORE THE M.P. HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DAWOODI BOHRA JAMAT REPORTED IN 3 17 ITR 342 AND THE DEPARTMENTAL APPEAL HAS BEEN DISMISSED CONF IRMING THE VIEW OF INDORE BENCH. CONSIDERING THE ABOVE, IT IS CLE AR THAT THE COMMISSIONER OF INCOME TAX WAS NOT JUSTIFIED IN REJ ECTING THE APPLICATION OF THE ASSESSEE WITH THE AID OF SECTION 11 READ WITH SECTION 13(1)(B) OF THE INCOME TAX ACT, 1961. THE F INDINGS OF COMMISSIONER OF INCOME TAX TO THAT EXTENT ARE SET A SIDE. 5.2 HOWEVER, CONSIDERING THE SPECIFIC FINDINGS OF T HE COMMISSIONER OF INCOME TAX AS PER SECTION 80(G)(5B) OF THE INCOME TAX ACT, 1961 AS NOTED ABOVE, IT IS CLEAR THAT EXPE NDITURE SPENT BY THE ASSESSEE WAS MORE THAN 5% OF THE TOTAL INCOME I N THE RESPECTIVE YEAR ENDING 31 ST MARCH 2002, 2003 AND 2004. THEREFORE, THE PROVISIONS OF SECTION 80G(5B) WOULD APPLY IN THE CA SE OF THE ASSESSEE AND WOULD DISQUALIFY THE ASSESSEE FROM CLA IMING THE APPROVAL. LEARNED COUNSEL FOR ASSESSEE DID NOT DISP UTE THE ABOVE FINDINGS OF THE COMMISSIONER OF INCOME TAX. HE HAS THEREFORE, PRAYED THAT ASSESSEE MAY BE PERMITTED TO FILE FRESH APPLICATION BEFORE THE COMMISSIONER OF INCOME TAX AFTER METING OUT THE FINDINGS OF THE COMMISSIONER OF INCOME TAX AS PER PARA. 5 AB OVE IN THE IMPUGNED ORDER. CONSIDERING THE FINDINGS OF THE C OMMISSIONER OF INCOME TAX, IN PARA.5 OF THE IMPUGNED ORDER IN WHIC H ASSESSEE HAS ALREADY BEEN ALLOWED TO MOVE FRESH APPLICATION FOR APPROVAL, WE ARE OF THE VIEW, ASSESSEE IS AT LIBERTY TO MOVE FRESH A PPLICATION FOR APPROVAL UNDER SECTION 80G(5) OF THE INCOME TAX ACT , 1961 IN ACCORDANCE WITH LAW BY SATISFYING THE CONDITIONS OF PROVISIONS OF THE 7 LAW. HOWEVER, THE FINDINGS OF COMMISSIONER OF INCOM E TAX SET ASIDE ABOVE IN THIS ORDER SHALL NOT BE RECONSIDERED AGAIN ST THE ASSESSEE. IN VIEW OF THE FINDINGS GIVEN IN THIS ORDER, WE ARE OF THE VIEW THAT ULTIMATELY ASSESSEE CANNOT SUCCEED IN THE PRESENT A PPEAL FOR GRANT OF APPROVAL AT THIS STAGE. 6. AS A RESULT, APPEAL OF THE ASSESSEE IS DISMISSED , HOWEVER, ASSESSEE IS AT LIBERTY TO MOVE FRESH APPLICATION FO R APPROVAL IN ACCORDANCE WITH LAW, IF SO ADVISED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2010. SD/- SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 05-02-2010 PARAS* COPY OF THE ORDER FORWARDED TO : 1. THE RESPONDENT 2. THE DCIT, (APPELLANT). 3. THE CIT CONCERNED 4. THE CIT 5. THE DR, ITAT, 6. GUARD FILE BY ORDER DY.R/AR, ITA T, AHMEDABAD