Vivek vardhini Education Society's Trust, Hyderabad V. Director of Income Tax, Hyderabad

ITA 57/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66155 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2011
• Assessment Year: 2010-2011
• Appeal Filed On: 15-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: AJAY GANDHI
• Keywords: Charitable institution; Non compliance; Revocable transfer
• Section: 80G; 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.57/HYD/2010 ASSESSMENT YEAR : 2010-11 VIVEK VARDHINI EDUCATION SOCIETYS TRUST, HYDERABAD. PAN: AAATV 4545 P .... APPELLANT VS. DIRECTOR OF INCOME-TAX (E), HYDERABAD. RESPONDENT APPELLANT BY : SHRI AJAY GANDHI RESPONDENT BY : SHRI K. VISWANATHAM DATE OF HEARING : 21-06-2012 DATE OF PRONOUNCEMENT: 10-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 11-12-2009 PASSED BY THE DIT (E), HYDER ABAD REJECTING THE ASSESSEES APPLICATION FOR RENEWAL OF BENEFIT U/S 80G OF THE ACT. 2. BRIEFLY THE FACTS ARE THE ASSESSEE WAS REGISTERE D AS A CHARITABLE TRUST U/S 12A OF THE ACT WITH EFFECT FRO M 1-4-1999 BY AN ORDER DATED 13-6-2000 OF THE CIT, AP, HYDERABAD. APPROVAL 2 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD . WAS ALSO GRANTED U/S 80G (5)(VI) OF THE ACT FOR THE PERIOD FROM 1- 4-2008 TO 31-8-2009 BY THE DIT (E), HYDERABAD. 3. THE ASSESSEE APPLIED FOR RENEWAL OF APPROVAL U/S 80G IN THE PRESCRIBED MANNER IN FORM NO.10G BEFORE THE DIT (E) , HYDERABAD. THE DIT (E) REJECTED THE APPLICATION FO R RENEWAL OF APPROVAL CITING THE FOLLOWING REASONS:- 1. THERE ARE NO OBJECTS IN THE TRUST DEED AND THE SETTLERS OBJECTS CANNOT BE THE OBJECTS OF THE TRUS T. 2. THE APPLICATION OF INCOME IS NOT IN ACCORDANCE WITH THE TRUST DEED, THEREBY THE TRUST AS VIOLATED THE PROVISIONS OF SEC./11 AND IN TURN THE PROVISIONS OF SEC. 80G(5)(1). 3. THE TRUST IS GIVING DONATIONS TO THE SETTLER. THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC. 112(2) OF THE IT ACT, AS INTER TRUST DONATIONS ARE NOT PERMISSIBLE. 4. THE PROPERTIES STATED TO BE OWNED BY THE TRUST WERE NEVER TRANSFERRED BY THE SETTLER AND THE ASSETS REFLECTED IN THE BALANCE SHEET OF THE TRUST ARE LEGALLY OWNED BY THE SOCIETY. THUS, THE ASSESSEES CASE IS SQUARELY COVERED BY SEC.60 AND 61 OF THE IT ACT. THE SETTLER HAS TRANSFERRED THE INCOME WITHOU T TRANSFER OF THE ASSETS AND IN MY VIEW, IT IS A REVOCABLE TRANSFER. 5. THERE IS NO POWER WITH THE TRUSTEES TO APPLY THE INCOME FOR THE CHARITABLE ACTIVITIES. 3 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD . 4 . THE LEARNED AR FOR THE ASSESSEE SUBMITTED BEFOR E US THAT THE REASONS ON WHICH THE APPLICATION FOR RENEWAL H AS BEEN REJECTED ARE NOT VALID REASONS. THE LEARNED AR CON TENDED THAT THE DIT (E) HAS NOT GIVEN ANY REASON AS TO WHY THE TRUST CANNOT HAVE THE SAME OBJECT AS THAT OF SOCIETY. THE LEARN ED AR FURTHER CONTENDED THAT THE DIT (E) IS NOT REQUIRED UNDER TH E PROVISIONS OF THE ACT TO EXAMINE THE APPLICATION OF INCOME AT THE TIME OF CONSIDERING THE APPLICATION FOR RENEWAL OF APPROVAL U/S 80G*5)(1) OF THE ACT. THE EXAMINATION OF APPLICATION OF INC OME FOR CHARITABLE PURPOSES IS TO BE LOOKED INTO BY THE AO IN COURSE OF ASSESSMENT PROCEEDINGS. IT WAS THE CONTENTION OF T HE LD. AR THAT ONCE THE TRUST IS REGISTERED U/S 12A OF THE ACT AND WAS GRANTED APPROVAL U/S 80G(5), RENEWAL OF APPROVAL SHOULD NOT BE REJECTED FOR VIOLATION OF PROVISIONS CONTAINED U/S 11 OF THE ACT. IN SUPPORT OF SUCH ARGUMENT, THE LD. AR RELIED UPON THE FOLLOW ING DECISIONS:- I) SONEPAT HINDU EDUCATIONAL & CHARITABLE SOCIETY VS. CIT & ANR. (278 ITR 262 ( P & H) II) CIT VS. GAUR BRAHMIN VIDYA PRACHARINI SABHA (203 TAXMAN 226 (P & H) III) NN DESAI CHARITABLE TRUST VS. CIT 246 ITR 452 (GUJ. ) THE LEARNED AR FURTHER SUBMITTED THAT THE ALLEGATIO N OF DIT(E) THAT THE ASSESSEE HAS VIOLATED THE PROVISION CONTAI NED U/S 11(2) OF THE ACT BY RESORTING TO INTER TRUST DONATIONS IS ALSO NOT TENABLE. IN THIS REGARD, THE LEARNED AR RELIED UPON THE FOLL OWING DECISIONS. 4 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD . 1. CIT VS. SRI RAM MEMORIAL FOUNDATION (269 ITR 35 (DE L) 2. DIT(E) VS. BAGRI FOUNDATION (2010) 233 CTR (DEL) 53 8 3. CIT VS. SARLADEVI SARABHAI TRUST (172 ITR 688 (GUJ .) 5. THE LEARNED DR STRONGLY SUPPORTED THE ORDER PASS ED BY THE DIT (E) IN REJECTING THE ASSESSEES APPLICATION FOR RENEWAL. 6. WE HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND HAVE ALSO EXAMINED THE DECISIONS CITIED AT THE BAR. ON A BARE READING OF THE REASONS FOR REJECTION OF RENE WAL AS CONTAINED IN PARA-4 OF THE ORDER PASSED BY THE DIT (E) WHICH IS QUOTED HEREINABOVE APPEARS TO BE VAGUE TOO GENERALI SED AND SPECIOUS TO BE ACCEPTED. THE TRUST DEED COPY OF WH ICH IS AT PAGE- 12 OF THE PAPER BOOK, IN CLEAR TERMS PROVIDES THAT OBJECT OF THE TRUST SHALL BE SAME AS IS MENTIONED IN THE CONSTITU TION OF THE SOCIETY. THE OBJECT OF THE SOCIETY HAS BEEN SPELT O UT IN CLAUSE-3 OF THE CONSTITUTION WHICH IS AT PAGE-29 OF THE PAPE R BOOK. THE DIT (E) HAS NOT GIVEN ANY REASON WHY THE TRUST CANN OT HAVE THE SAME OBJECT AS THAT OF THE SOCIETY. IT IS SEEN FRO M RECORDS THAT WITH THE OBJECT CLAUSE, THE ASSESSEE TRUST WAS GRAN TED REGISTRATION U/S 12A OF THE ACT AND ALSO APPROVAL U /S 80G(5)(VI) WAS GRANTED FOR THE PERIOD FROM 1-4-2008 TO 31-3-02 009. THERE BEING NO CHANGE IN THE CIRCUMSTANCES, THERE IS NO J USTIFIABLE REASON TO TAKE A DIFFERENT VIEW WHILE CONSIDERING T HE APPLICATION FOR RENEWAL OF APPROVAL U/S 80G OF THE ACT. THE DI T (E) HAS ALLEGED THAT APPLICATION OF INCOME IS NOT IN ACCORD ANCE WITH THE TRUST DEED THEREBY, THE TRUST HAS VIOLATED THE PROV ISIONS OF SECTION 80G(5)(1) OF THE ACT. HOWEVER, THE DIT (E) HAS NOT MENTIONED ANY SPECIFIC INSTANCE OF VIOLATION BY THE TRUST. ON THE CONTRARY, THE LEARNED AR REFERRING TO THE AUDITED S TATEMENT OF ACCOUNTS DEMONSTRATED THAT INCOME OF THE TRUST WAS APPLIED IN 5 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD . ACCORDANCE WITH THE PROVISIONS OF THE ACT. IT IS A LSO THE SETTLED POSITION OF LAW THAT WHILE CONSIDERING AN APPLICATI ON FOR RENEWAL OF APPROVAL GRANTED U/S 80G THE AUTHORITY CONCERNED CANNOT STEP INTO THE SHOES OF THE AO AND EXAMINE THE APPLICATIO N OR TAXABILITY OF INCOME. ONCE THE TRUST IS REGISTERED U/S 12A AN D WAS GRANTED APPROVAL U/S 80G (5) RENEWAL OF APPROVAL SHOULD NOT BE REJECTED FOR ALLEGED NON COMPLIANCE WITH THE PROVISIONS OF S ECTION 11. SIMILARLY, THE ALLEGATION OF DIT (E) THAT THE PROVI SIONS OF SECTION 11(2) ARE VIOLATED BECAUSE OF INTER TRUST DONATIONS IS ALSO NOT SUSTAINABLE IN LAW. DIFFERENT HIGH COURTS HAVE HEL D THAT DONATIONS OF INCOME FROM ONE CHARITABLE TRUST TO AN OTHER CHARITABLE TRUST SHOULD BE TREATED AS APPLICATION O F INCOME FOR CHARITABLE PURPOSE. THE DECISIONS CITED BY THE LD. AR FULLY SUPPORTS THIS VIEW. THE REASONING OF THE DIT (E) TH AT THE TRANSFER OF INCOME BY THE SETTLER WITHOUT TRANSFERRING THE A SSETS IS REVOCABLE TRANSFER IS ALSO CONTRARY TO THE FACTS ON RECORD AND IS UNTENABLE. THE TRUST DEED CLEARLY MENTIONS THAT THE PROPERTIES OF THE SOCIETY IS VESTED WITH THE TRUST, THEREFORE THE CONCLUSION OF THE DIT (E) IS WITHOUT ANY BASIS. IN THE AFORESAID VIEW OF THE MATTER, THE ORDER PASSED BY THE DIT (E) REJECTING T HE APPLICATION FOR RENEWAL OF APPROVAL U/S 80G (5) IS UNSUSTAINABL E IN LAW AND THEREFORE HAS TO BE SET ASIDE. IN VIEW OF THE ABOV E, WE DIRECT THE DIT (E) TO ALLOW ASSESSEES APPLICATION FOR RENEWAL OF APPROVAL U/S 80G (5) OF THE ACT. HENCE THE GROUNDS RAISED BY TH E ASSESSEE ARE ALLOWED. 6 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD . 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 10 - 8-2012. SD/- SD /- (D. KARUNAKARA RAO) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH AUGUST, 2012. COPY TO:- 1) C/O GANDHI & GANDHI, CAS, 1002, PAIGAH PLAZA, BASHEERBAGH, HYDERABAD. 2) DIT (E), 3 RD FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 7 ITA NO. 57 OF 2011 VIVEK VARDHANI EDUCATION SOCIETYS TRUST, HYDERABAD .