ITO, Rishikesh V. Shri Devlok Tirth Yatra Samiti, Uttrakhand

ITA 5622/DEL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7384 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Benefit of exemption; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE S H.I.C.SUDHIR , JUDICIAL MEMBER AND SH. J.S.REDDY, ACCOUNTANT MEMBER I.T.A .NO. 5622/ DEL/201 2 (ASSESSMENT YEAR - 2009 - 10 ) ITO, WARD - 1, RISHIKESH (APPELLANT) VS SHRI. DEVLOK TIRTH YATRA SAMITI, 233 - BANKHANDI, RISHIKESH PA N - AAHTS4866P (RESPONDENT) APPELLANT BY SMT. P ARWINDER KAUR, SR. DR RESPONDENT BY SH. ROHAN KHARE, ADV. ORDER PER I.C.SUDHIR, JM THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS: - 1. THE LD. CIT(A) HAS ERRED IN ALLOWED THE BENEFIT OF EXEMPTION U/S 11 OF THE I.T.ACT, 1961 TO THE ASSESSEE - SOCIETY, AS PER THE AMENDED PROVISIONS OF SEC. 2(15) OF THE I.T.ACT, 1961, AS THE ACTIVITIES OF THE ASSESSE E - SOCIETY ARE IN THE NATURE OF BUSINESS FOR A CESS OR FEE, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 2. THE LD. CIT(A) HAS ERRED IN LAW IN DIRECTING THE AO TO RE - EXAMINE THE INFORMATION/DOCUMENTS TO BE PRODUCED BY THE ASSESSEE BEFORE THE AO, AFRESH, AS THE ASSESSEE HAS ALREADY BEEN CONFRONTED WITH THE DOCUMENTS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER THE CIT(A) CAN ONLY AS FOR A REMAND REPORT DURING COURSE OF APPELLATE PROCEEDINGS AND NO AU THORITY TO SET ASIDE THE CASE. 2. AT THE OUTSET OF HEARING THE LD. AR POINTED OUT THAT THE ISSUE RAISED IN THE GROUNDS IS COVERED BY THE DECISION OF HON BLE HIGH COURT OF UTTARAKHAND IN THE CASE OF CIT VS ALL SAINTS , COLLEGE SOCIETIES AND OTHERS ITA NO. - 282 TO 287/ 2007 AND OTHERS. HE ALSO CITED THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF AHMEDABAD URBAN DEVELOPMENT AUTHORITY VS DRIT(2011) 335 ITR 575 (GUJ.). 2 I.T.A .NO. 5622 /DEL/201 2 3. THE LD. SR. DR ON THE OTHER HAND PLACED RELIANCE ON THE ASSESSMENT ORDER THAT WI TH THIS CONTENTION THAT THE ASSESSEE WAS DOING BUSINESS ACTIVITIES AND THE DECISION RELIED UPON BY THE LD. AR HAVING DISTINGUISHABLE FACTS ARE NOT APPLICABLE IN THE PRESENT CASE AS IN THOSE CASES THE ASSESSES WERE IMPARTING EDUCATION. 4. CONSIDERED THE ARG UMENTS ADVANCED BY THE PARTIES AND HAVE GONE THROUGH THE DECISION S RELIED UPON. 5. THE ISSUE INVOLVED IN THE PRESENT CASE AS TO WHETHER THE AO WAS CORRECT IN DISALLOWING CLAIM FOR EXEMPTION U/S 11 OF THE ACT MADE BY THE ASSESSEE AND ASSESS ITS INCOME UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROVISION WHEN THE REGISTRATION GRANTED U/S 12A OF THE ACT TO THE ASSESSEE WAS IN OPERATION? 6. THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF THE ORGANIZING TOURS TO RELIGIOUS AND HISTORICAL PLACES IN INDIA FOR G ENERAL PUBLIC ON PAYMENT BASIS. IT WAS ENGAGED IN THE ACTIVITY OF ORGANISING PILGRIMAGE TRIPS TO VARIOUS PLACE S OF RELIGIOUS IMPORTANCE. DURING THE PREVIOUS YEAR IT HAD ORGANIZED SIX SUCH TRIPS AND ALL OF THESE WERE PILGRIMAGES. APART FROM THIS IT ALSO CARRIED OUT VARIOUS CHARITABLE ACTIVITIES SUCH AS ENVIRONMENTAL AWARENESS, CULTURAL TALKS AND DEBATE, RUNNING A CHARITABLE HOSPITAL AND PROVIDING MEDICAL RELIEF ETC. IT IS DULY REGISTERED U/S 12A OF THE ACT. THE AO DENIED EXEMPTION U/S 11 OF THE ACT ON THE BASIS THAT THE ASSESS E E IS A BUSINESS ENTITY AND ITS INCOME WAS CHARGEABLE TO TAX AS PROFITS AND GAINS OF BUSINESS. HE CHARGED THE SURPLUS OF RS. 18,90,319/ - TO TAX. THE LD. CIT(A) AFTER DISCUSSING THE CASE OF THE ASSESSEE IN DETAIL HAS ALLOWED THE CLAIMED EXEMPTION AND IN RESULT THE ADDITION HAS BEEN DELETED. 7. THE LD. CIT(A ) HAS GIVEN HIS CONCLUSIVE FINDING ON THE ISSU E IN PARA 1.5 OF THE ORDER, REPRODUCED HEREUNDER: - 1.5. BEFORE THE INTRODUCTION OF SECTION 12AA OF THE I.T.ACT BY THE FINANCE (NO .2) ACT, 1996 W.E.F 01.04.1997. REGISTRATION TO CHARITABLE OR RELIGIOUS ENTITIES WAS GRANTED U/S 12A OF THE I.T.ACT. THE EXISTING PROVISION OF SECTION 3 I.T.A .NO. 5622 /DEL/201 2 12AA(3) OF THE I.T.ACT ENVISAGES CANCELLATION OF REGISTRATION GRANTED U/S 12AA (1)(B) (W.E.F 01.10.2004 ) AS WELL AS U/S 12A (W.E.F 01.06.2010) OF THE I.T.ACT. BUT BEFORE THAT THERE WAS NO PROVISION FOR CANCELLATION OF REGISTRATION. THERE ARE A NUMBER OF DECISIONS TO THE EFFECT THAT THE CIT HAD NO POWER TO CANCEL THE REGISTRATION TILL THE ENABLING PROVISIO N WAS INSERTED IN SECTION 12AA(3). IN THIS SITUATION, IF IT IS LAID DOWN AS A GENERAL PROPOSITION THAT THE CIT WAS NOT ENTITLED TO CANCEL THE REGISTRATION AND THE AO WAS NOT ENTITLED TO EXAMINE THE OBJECTS OR ACTIVITIES OF THE TRUST (FOR THE PURPOSE OF DE TERMINING WHETHER THEY WERE ACTUALLY CHARITABLE OR RELIGIOUS IN NATURE BUT TO WHOM REGISTRATION HAD BEEN GRANTED ERRONEOUSLY. THUS, THE PROPOSITION THAT, AS LONG AS REGISTRATION GRANTED BY THE CIT IS IN PLACE , THE AO IS PRECLUDED FROM EXAMINING WHETHER TH E OBJECTS/ACTIVITIES OF THE ASSESSEE ARE CHARITABLE/RELIGIOUS OR NOT APPEARS TO BE DOUBTFUL IN THE CONTEXT OF THE PERIOD BEFORE THE PROVISION FOR CANCELLATION OF REGISTRATION WAS ENACTED BUT, IN A LIKE THE ONE AT HAND WHERE REGISTRATION WAS GRANTED TO THE ASSESSEE U/S 12AA W.E.F 08.10.2008, IT WOULD BE APPROPRIATE THAT, IN CASE THE AO FINDS THAT THE OBJECTS OR ACTIVITIES OF AN ASSESSEE ARE NOT RELIGIOUS/CHARITABLE IN NATURE, HE SHOULD MAKE A REFERENCE TO THE CIT POINTING OUT TH E DEFECTS AND RECOMMENDING THE CANCELLATION OF REGISTRATION. FI THE CIT IS SATISFIED AND CANCELS THE REGISTRATION, THE AO WOULD BE ENTITLED TO DENY THE BENEFIT OF EXEMPTION. THE DECISION CITED BY THE ASSESSEE SUPPORTS THIS VIEW. THUS THERE IS SUBSTANCE I N THE ASSESSEE S CONTENTION THAT SINCE THE REGISTRATION GRANTED TO IT U/S 12AA OF THE I.T.ACT WAS IN P LACE, THE A O WAS PRECLUDED FROM DENYING THE BENEFIT OF EXEMPTION ON THE BASIS OF HIS INDEPENDE NT ANALYSIS THAT IS OBJECTS OR ACTIVATED WERE NOT CHARITABL E IN NATURE. THE ISSUE, HOWEVER, IS ONLY ACADEMIC IN SO FAR AS THE ASSESSEE HAS BEEN FOUND TO BE PURSUING OBJECTS WHICH ARE CHARITABLE AS WELL AS RELIGIOUS IN NATURE (AS DISCUSSED ABOVE). THE AO S OBSERVATION REGARDING THE ACTIVITY BEING CONDUCTED AS A BUSINESS BY SH RI SHIVCHARAN LAL AGARWAL IN THE PAST MAY BE FACTUALLY CORRECT. BUT, CONSIDERING THAT THE ASSESSEE WAS CONSTITUTED AS AN ENTITY ON 11.04.2008 AND GOT REGISTRATION U/S 12AA OF THE I.T.ACT W.E.F 08.10.2008, THE PAST COMMERCIAL ACTIVITY OF ITS OFFICE - BEARERS, EVEN THOUGH UNDER THE SAME BRAND NAME, CANNOT CAST A SHADOW OF TAINT ON IT. UNLESS THE ASSESSEE IS TAINTED BY THE FAILURE TO SATISFY THE PROCEDURAL REQUIREMENTS FOR EXEMPTION, THE BENEFIT OF EXEMPTION CANNOT BE DENIED TO IT SIMPLY BECAUSE THE PERSONS CONNECTED WITH IT WERE CARRYING OUT SIMILAR ACTIVITIES AS A BUSINESS IN THE PAST OR, FOR THAT MATTER, ARE CARRYING OUT THE SAME EVEN AT PRESENT SEPARATELY IN THEIR PERSONAL CAPACITY. 8. WE FIND THAT THE VIEW TAKEN BY THE LD. CIT(A) IS COVER ED BY THE DECISION OF HON BLE HIGH COURT OF UTTARAKHAND IN THE CASE OF C IT VS ALL SAINTS, COLLEGE 4 I.T.A .NO. 5622 /DEL/201 2 SOCIETIES (SUPRA) . I N ITS JUDGEMENT , T HE HON BLE HIGH COURT HAS GIVEN ITS FINDING IN PARA - 3 , REPRODUCED HEREUNDER: - 3. IN THE INSTANT CASES. ASSESSEES ARE TRUSTS ESTABLISHED WHOLLY FOR THE PURPOSES OF IMPARTING EDUCATION. THEY RECEIVED CONTRIBUTIONS FROM THEIR PUPIL FOR THE PURPOSE OF IMPARTING EDUCATION TO THEM. MERELY BECAUSE THE ASSESSEES MADE CONTRIBUTIONS TO ANOTHER TRUSTS, ALSO REGISTERED UNDER SECTI ON1 2A OF THE ACT AND BECAUSE, IN SOME OF THE YEARS, THEIR REVENUE WAS MORE THAN THEIR EXPENDITURE; DESPITE NON - CANCELLATION OF THEIR REGISTRATION UNDER SECTION 12A OF THE ACT, THE ASSESSING AUTHORITY, IN A MOST BLATANT MANNER, HELD THAT THE ASSESSEES ARE NOT ENTITLED TO THE BENEFITS OF SECTIONS 11 AND 12 OF THE ACT. THAT HAS BEEN CORRECTED BY THE COMMISSIONER OF APPEALS AND RE - AFFIRMED BY THE TRIBUNAL. THE PRESENT APPEALS HAVE BEEN FILED WITHOUT ANY JUST REASON. THE FACT REMAINS THAT, WHILE SECTION 12A O F THE ACT SPEAKS ABOUT REGISTRATION, SECTION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. SUB - SECTION (3) THEREOF MAKES IT ABSOLUTELY CLEAR, IN WHAT CIRCUMSTANCES, REGISTRATION MAY BE CANCELLED AND WHO CAN DO SO. IN THE EVENT, HAVING HAD CONSIDERED TH E RETURNS AND OTHER DOCUMENTS FILED BY THE ASSESSEE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEES ARE NO LONGER ENTITLED TO THE REGISTRATION, IT WOULD HAVE BEEN OBLIGATORY ON ITS PART TO BRING THE SAME TO THE NOTICE OF THE COMMISSIONER FOR THE PURPOSE OF DE - REGISTRATION OF THE ASSESSEES. INSTEAD OF THAT, IN A MOST MALA FIDE MANNER, HE ASSESSED THE ASSESSEES. WE ARE OF THE VIEW THA T THE COMMISSIONER OF APPEALS AND THE TRIBUNAL HAVE CONCLUDED THE MATTER, REQUIRING NO INTERFERENCE IN APPEALS BY THE HIGH COURT. 9. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF A H MEDABAD URBAN DEVELOPMENT AUTHORITY VS DRIT (SUPRA) HOLDING THAT ON THE DATE WHEN THE ASSESSME NT ORDER WAS FRAMED , THE INCOME O F THE PETITIONER WAS EXEMPT ENTIRETY AND THE AO COULD NOT HAVE TRAVELLED BEYOND THE CERTIFICATES OF REGISTRATION GRANTED U/S 12AA , ONCE THE PROCEDURE IS COMPLETE A S PROVIDED IN SUB - SECTION ( 1 ) OF THE SECTION 12AA AND A CERTIFICATE ISSUED GRANTING REGISTRATI ON TO THE TRUST OR INSTITUTION , I T IS APPARENT THAT THE SAME IS A DOCUMENT EVIDENC ING SATISFACTION THAT CONDITIONS LAID DOWN IN SECTION 12A STAND FULFILLED. THE FACT OF THE CERTIFICATE CANNOT BE IGNORED BY THE AO BY ADOPTING A STAND THAT THE TRUST OR 5 I.T.A .NO. 5622 /DEL/201 2 INST ITUTION IS NOT FULFILLING CONDITIONS FOR APPLICABILITY OF SECTION 11 & 12 OF THE ACT. 10. WE THUS FIND THA T THE FIRST APPELLATE ORDER ON THE ISSUE IS FULLY SUPPORTED BY T H E ABOVE CITED DECISION S . WE ARE THUS NOT INCLINED INTERFERE THEREWITH. THE SAME IS UPHELD. THE GROUND S ARE THUS REJECTED. 11. IN THE RESULT THE APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH OF OCTOBER 2014. SD/ - SD/ - ( J . S.R EDDY ) ( I.C.SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 / 1 0/2014 *AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI