Dr. Bhim Rao Ambedkar Aducational Society, Barabanki V. Commissioner of Income Tax (II ), Lucknow

ITA 548/LKW/2012

• Counselvise Citation: 54823714 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-02-2015
• Assessment Year: misc
• Appeal Filed On: 06-11-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VIVEK MISHRA
• Keywords: Charitable institution; Capital expenditure
• Section: 133A; 12A; 12AA

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.548/LKW/2012 ASSESSMENT YEAR:N.A. C.I.T. - II, LUCKNOW. VS DR. BHIM RAO AMBEDKAR EDUCATIONAL SOCIETY, VILL DHARSANIA, POST ASAINI, SAFEDABAD RAILWAY CROSSING, DISTT. BARABANKI. PAN:AAAJD0271G (RESPONDENT) (APPELLANT) SHRI A. R. SHUKLA, ADVOCATE SHRI R. B. SHUKLA, ADVOCATE APPELLANT BY SHRI VIVEK MISHRA, C.I.T., D. R. RESPONDENT BY 18/02/2015 DATE OF HEARING 31 /03/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT - II, LUCKNOW DATED 03/09/2012 PASSED BY HIM U/S 12AA (3) OF THE INCOME TAX ACT. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE LD. COMMISSIONER OF INCOME - TAX HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE IMPREST ACCOUNT IN THE NAME OF DR. C.P CHAUDHACY, PRESIDENT OF SOCIETY, MEANT FOR PURCHASE OF STAMP PAPERS WITH REGARD TO PURCHASE OF LAND AND/OR ADVANCES AGAINST PURCHASE OF LAND FOR EXPANSION OF COLLEGE REFLECTS THAT 'ALL THE ACTIVITIES OF SOCIETY ARE NEITHER GENUINE NOR ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY'. 2 2. BECAUSE THE LD. COMMISSIONER OF INCOME - TAX HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT SINCE AN AMOUNT OF RS. 1.10 CRORE FROM ANONYMOUS DONATIONS USED IN THE CONSTRUCTION OF COLLEGE BUILDING WAS SURRENDERED DURING SURVEY U/S 133A AND TAX WAS PAID U/S 115BBC OF THE ACT, THEREFORE, THE ACTIVITIES OF SOCIETY ARE NEITHER GENUINE NOR ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. 3. BECAUSE THE LD. COMMISSIONER OF INCOME - TAX HAS ERRED IN LAW AND ON FACTS IN H OLDING THAT THE FUNDS OF THE SOCIETY WITH REFERENCE TO IMPREST MONEY ARE USED FOR THE BENEFIT OF THE MEMBERS OF THE SOCIETY, THEREFORE, THE ACTIVITIES OF SOCIETY ARE NEITHER GENUINE NOR ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY'. 4. BECAUSE THE LD. COMMISSIONER OF INCOME - TAX HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ACTIVITIES OF THE SOCIETY ARE IN THE NATURE OF COMMERCIAL VENTURE WITH REFERENCE TO RECEIPTS OF A.YS. 2004 - 05 TO 2006 - 07 AND 2011 - 12 WITHOUT CONSIDERING THE CA PITAL EXPENDITURE FOR SCHOOL BUILDING AND THE LAW THAT PROVISO TO SECTION 2 (15) OF THE ACT WITH REFERENCE TO COMMERCIAL ACTIVITIES DOES NOT APPLY TO EDUCATION AND MEDICAL RELIEF. 5. BECAUSE THE LD. COMMISSIONER OF INCOME - TAX HAS ERRED IN LAW AND ON FACTS IN CANCELLING U/S 12AA (3) THE REGISTRATION GRANTED U/S 12AA (1) (B) (I) OF THE INCOME - TAX ACT WITHOUT APPRECIATING THE EXPLANATION GIVEN BY THE ASSESSEE IN RESPECT OF EACH AND EVERY ISSUE RAISED IN THE SHOW CAUSE NOTICE. 3. LEARNED A.R. OF THE ASSESSEE REITERATED THE SAME CONTENTIONS, WHICH WERE RAISED BEFORE LEARNED CIT. HE ALSO SUBMITTED THAT THE AMENDED OBJECTS OF THE SOCIETY DATED 21/09/2002 ARE AVAILABLE ON PAGE NO. 141 OF THE PAPER BOOK. HE ALSO SUBMITTED THAT IN ASSESSEES OWN CASE, THE MATTER REACHED UP TO TRIBUNAL DURING THE PROCEEDINGS FOR GRANTING REGISTRATION U/S 12A AND THE ISSUE WAS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AS PER ITS ORDER DATED 31/03/2008 REPORTED IN 24 SOT 62. HE ALSO SUBMITTED 3 THAT THE COPY OF TRIBUNAL DECISI ON IS AVAILABLE ON PAGES 148 TO 155 OF THE PAPER BOOK. IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA 5 & 6 OF THE TRIBUNAL DECISION AVAILABLE ON PAGES 152 AND 153 OF THE PAPER BOOK. HE SUBMITTED THAT THESE FACTS WERE DULY CONSIDERED BY THE TRIBUNAL THAT FEES WERE BEING CHARGED BY THE ASSESSEE AND IN SPITE OF THIS, IT WAS HELD BY THE TRIBUNAL THAT REGISTRATION CANNOT BE REFUSED TO THE ASSESSEE SOCIETY. HE ALSO SUBMITTED THAT COPIES OF LETTERS FROM THE STATE GOVERNMENT, DETERMINING FEE STRUCTURE OF THE PR IVATE MEDICAL COLLEGES, ENGINEERING COLLEGES ETC. ARE AVAILABLE FROM PAGES 142 TO 147 OF THE PAPER BOOK AND IT CAN BE SEEN THAT THE FEES BEING CHARGED BY THE ASSESSEE SOCIETY IS LESS THAN THE PRESCRIBED FEES AND THEREFORE, THE ORDER PASSED BY LEARNED CIT, CANCELLING THE REGISTRATION, IS NOT PROPER. 4. AS AGAINST THIS, LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT. HE ALSO SUBMITTED THAT THE DECISION OF LEARNED CIT IS ON THE BASIS THAT THE SOCIETY IS NOT BEING RUN ACCORDING TO THE OBJECT S AND THUS CONTRAVENES THE PROVISIONS OF SECTION 12AA(3) OF THE INCOME TAX ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IN DISPUTE HAS BEEN DECIDED BY LEARNED CIT AGAINST THE ASSESSEE AS PER PARA 5 OF HIS ORDER, WHICH IS REP RODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 5. FINALLY, IT WAS POINTED OUT TO THE ASSESSEE THAT THE SOCIETY IS BEING RUN AS ON COMMERCIAL VENTURE AND IS EARNING PROFIT AND IS NOT BEING RUN AS A CHARITABLE ORGANIZATION. THE ASSESSEE HAS EXPLAINED THAT ALTHOUGH THE ACTIVITIES OF THE ASSESSEE HAVE RESULTED IN A SURPLUS IN A.Y.'S 2007 - 08 TO A.Y. 2009 - 10, IF THE AMOUNTS CAPITALIZED IN THESE YEAR IS ALSO CONSIDERED THEN, THERE IS A DEFICIT INSTEAD OF SURPLUS IN ALL THE YEARS. VARIOUS CASE LAWS HAVE BEEN CITED IN WHICH IT HAS BEEN HELD THAT CAPITAL EXPENDITURE IS ALSO REGARDED AS APPLICATION OF INCOME FOR CHARITABLE PURPOSE. 4 THIS EXPLANATION OF THE ASSESSEE DOES NOT REVEAL THE FULL FACTS. THE COMPLETE FACTS ARE THAT ON GOING THROUGH THE APPLICATION DATED 10/04/2007, FILED ON 11/04/2007 FOR REGISTRATION U/S 12A, IT IS SEEN THAT THE ASSESSEE HAS ENCLOSED A COPY OF THE AMENDED OB JECTS OF THE SOCIETY. THESE OBJECTS ARE AMENDED AS ON 21/09/2002. CLAUSE 8 OF THE AMENDED OBJECTS READS AS FOLLOWS: FURTHER CLAUSE NO. 10 READS AS FOLLOWS: FURTHER CLAUSE NO. 11 READS AS FOLLOWS: FURTHER CLAUSE NO. 1 2 READS AS FOLLOWS: HOWEVER, ON GOING THROUGH THE ENCLOSED ACCOUNTS, IT IS SEEN THAT RECEIPTS FROM STUDENTS WERE RS.2,17,15,000/ - IN ASSESSMENT YEAR 2006 - 07, RS.67,91,250/ - IN ASSESSMENT YEAR 2005 - 06 AND RS.50,20,000/ - IN ASSESSMENT YEAR 2004 - 05. THE RECEIPTS IN SUBSEQUENT YEARS ARE MUCH HIGHER REACHING RS.6,52,92,104/ - IN ASSESSMENT YEAR 2011 - 12. THIS PROVES THAT THE ASSESSEE HAS NO INTENTION OF RUNNING THE SOCIETY ON CHARITA BLE LINES AS SET OUT IN ITS OBJECTS. IT IS VERY CLEAR THEREFORE, THAT THE SOCIETY IS NOT BEING RUN ACCORDING TO ITS OBJECTS AND HAS THUS CONTRAVENED THE PROVISIONS OF SECTION 12AA(3) OF THE INCOME TAX ACT. IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT ALL THE ACTIVITIES OF THE SOCIETY ARE NEITHER GENUINE, NOR ARE THEY BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE SOCIETY. THE SOCIETY HAS CONTRAVENED THE PROVISIONS OF SECTION 12AA(3) OF THE INCOME TAX ACT AND THEREFORE, THE REGISTRATION GRANTED T O IT VIDE ORDER NO. F.NO. - 1 / - 5 II/ / 12 / 313 / 2007 - 08 DATED 01/05/2008 IS HEREBY CANCELLED. 6. WE ALSO FEEL IT PROPER THAT THE RELEVANT PROVISIONS OF SUB SECTION (3) OF SECTION 12AA SHOULD ALSO BE REPRODUCED AND HENCE, THE SAME ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB - SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996)] ]AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUS T OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATI ON OF SUCH TRUST OR INSTITUTION : 6.1 FROM THE ABOVE P ROVISIONS OF SUB SECTION (3) OF SECTION 12AA, WE FIND THAT IN CASE, THE CIT IS SATISFIED THAT THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MA Y BE, THE CIT SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION . HENCE, WE HAVE TO EXAMINE IN THE PRESENT CASE AS TO WHETHER THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. WE FIND THAT AS PER THE AMENDED OBJECTS OF THE SOCIETY DATED 21/09/2002, AVAILABLE ON PAGE 141, OUT OF 12 SUCH OBJECTS, CLAUSE NO. 8,10,11 AND 12 OF THE AMENDED OBJECTS ARE RELEVANT AND THE SAME HAS BEEN REPRODUCED BY LEARNED CIT IN PARA 5 OF HIS ORDER, WHICH HAVE BEEN REPRODUCED BY US ALSO. AS PER THESE CLAUSES OF THE AMENDED OBJECTS OF THE SOCIETY, WE FIND THAT IT HAS BEEN PRESCRIBED IN CLAUSE 8 THAT THE ASSESSEE SOCIETY WILL MAKE ARRANGEMENT FOR FREE HEALTH EDUCATION FOR GE NERAL PUBLIC. AS PER CLAUSE 10, THE ASSESSEE SOCIETY IS SUPPOSED TO ESTABLISH DENTAL COLLEGE AND RUN IT ON FREE BASIS. SIMILARLY, AS PER CLAUSE NO. 11, THE 6 ASSESSEE SOCIETY HAS TO ARRANGE EDUCATION AND TRAINING FOR DENTAL TREATMENT AND TO PROVIDE INFORMA TION IN THIS REGARD AND TO MAKE PEOPLE AWARE IN THIS REGARD AND ALL THESE HAVE TO BE DONE FREE. AS PER CLAUSE 12 OF THE AMENDED OBJECTS, DENTAL TREATMENT HAS TO BE DONE FREE OF CHARGE. HENCE, IT IS SEEN THAT THE COLLEGE AND HOSPITAL BOTH HAS TO BE ESTABL ISHED AND RUN WITHOUT ANY CHARGE. IT IS NOT RELEVANT IN THE PRESENT DISPUTE AS TO WHETHER CHARGING FEES FOR EDUCATION AND TREATMENT IS PERMISSIBLE OR NOT. FOR THE PURPOSE OF SECTION 12AA(3), WHAT IS REQUIRED TO BE SEEN IS THAT AS TO WHETHER THE ASSESSEE SOCIETY IS RUNNING AND CARRYING OUT ITS ACTIVITIES AS PER ITS OBJECT CLAUSE. WHEN THE OBJECT CLAUSE SHOWS THAT THE EDUCATION AND TREATMENT HAS TO BE PROVIDED FREE OF COST AND THE ASSESSEE SOCIETY IS CHARGING FEES FOR THOSE FACILITIES, IT HAS TO BE ACCEPTE D THAT THE ASSESSEE SOCIETY IS NOT BEING CARRYING OUT ITS ACTIVITIES AS PER ITS OBJECT CLAUSE AND ONCE THIS IS FOUND THAT ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST, THE CIT SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF THE ASSESSEE SOCIETY U/S 12AA(3) OF THE ACT. IN THE FACTS OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF CIT. 7. NOW WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL DECISION CITED BY LEARNED A.R. OF THE A SSESSEE HAVING BEEN RENDERED IN ASSESSEES OWN CASE IN COURSE OF PROCEEDINGS FOR GRANTING REGISTRATION U/S 12AA OF THE ACT. IN OUR CONSIDERED OPINION, THIS TRIBUNAL DECISION HAS NO RELEVANCE FOR THE PRESENT DISPUTE BECAUSE FOR THE PURPOSE OF GRANTING REG ISTRATION U/S 12AA WHAT IS REQUIRED IS THAT THE CIT SHOULD SATISFY HIMSELF ABOUT THE GENUINENESS OF THE TRUST. FOR THE PURPOSE OF CANCELLING THE REGISTRATION U/S 12AA(3), WHAT IS TO BE SEEN IS THAT AS TO WHETHER THE ACTIVITIES OF THE TRUST ARE BEING CARRI ED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR NOT. WHEN THE ACTIVITIES ARE FOUND GENUINE, REGISTRATION HAS TO BE GRANTED TO A SOCIETY U/S 12A BUT IF IT IS FOUND LATER ON THAT SUCH ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST, SUCH REGISTRATION GRANTED EARLIER IS 7 LIABLE TO BE CANCELLED. HENCE, WHILE DECIDING THE ISSUE FOR GRANTING REGISTRATION TO THE ASSESSEE SOCIETY, WHAT HAS BEEN LOOKED INTO BY THE TRIBUNAL IS THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE GEN UINE. IN FACT, THIS WAS ARGUMENT OF THE ASSESSEE BEFORE THE TRIBUNAL THAT CITS JURISDICTION IS LIMITED TO SEE THE ACTIVITIES OF THE TRUST AND NOT TO LOOK THE INCOME OF THE TRUST. THE TRIBUNAL HAS FOLLOWED THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT REN DERED IN THE CASE OF CIT VS. RED ROSE SCHOOL [2007] 163 TAXMAN 19 (ALL) WHEREIN IT WAS HELD THAT T HE OBJECTS OF THE TRUST CAN BE HAD FROM THE BYE - LAWS OR THE DEED OF TRUST, AS THE CASE MAY BE AND UNLESS, OF COURSE, THE OBJECTS OF THE TRUST APPARENTLY MAKE OUT THAT THEY WERE NOT IN CONSONANCE WITH THE PUBLIC POLICY OR THAT THEY WERE NOT THE OBJECTS OF ANY CHARITABLE PURPOSE, REGISTRATION CANNOT BE REFUSED . HENCE, IT IS SEEN THAT AS PER THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT, WHAT HAS TO BE LOOKED INTO AT THE STAGE OF GRANTING REGISTRATION IS AS TO WHETHER THE OBJECTS ARE CHARITABLE OR NOT AND WHETHER THEY ARE IN CONSONANCE WITH THE PUBLIC POLICY OR NOT AND THIS IS NOT REQUIRED TO BE SEEN AT THAT STAGE AS TO WHETHER THE ACTIVITIES ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. FOR THE PURPOSE OF SUB SECTION (3) OF SECTION 12AA, THIS IS PRIMARY REQUIREMENT TO LOOK INTO AS TO WHETHER THE ACTIVITIES OF THE TRUST ARE BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR NOT. THEREFORE, THIS TRIBUNAL DECISION IN COURSE OF REGISTRATION U/S 12AA IS NOT RENDERING ANY HELP TO THE ASSESSEE. 8. REGARDING THE LETTERS OF STATE GOVERNMENT, DETERMINING FEE STRUCTURE OF PRIVATE MEDICAL COLLEGES AND ENGINEERING COLLEGES AVAILABLE ON PAGE NO. 142 TO 147, WE ARE OF THE CONSIDERED OPINION THAT EVEN THIS FACT THAT THE FEES BEING CHARGED BY THE ASSESSEE SOCIETY IS LESSER THEN THE FEES STRUCTURE OF THE STATE GOVERNMENT IS NOT RENDERING ANY HELP TO THE ASSESSEE BECAUSE WHEN AS PER THE OBJECT CLAU SE OF THE ASSESSEE ITSELF, SERVICES OF THE DENTAL EDUCATION AND TREATMENT ARE TO BE PROVIDED FREE OF COST, CHARGING ANY FEES 8 RESULTS INTO THIS THAT THE ACTIVITIES OF THE ASSESSEE SOCIETY ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT CLAUSE OF TH E ASSESSEE SOCIETY AND THEREFORE, THIS ARGUMENT OF THE ASSESSEE IS ALSO NOT RENDERING ANY HELP TO THE ASSESSEE. 9. AS PER ABOVE DISCUSSION, WE HAVE SEEN THAT THERE IS NO INFIRMITY IN THE ORDER OF LEARNED CIT. WE, THEREFORE, DECLINE TO INTERFERE IN THE OR DER OF LEARNED CIT. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 /03/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR