A.D.I.T.E.I(2), MUMBAI V. FELLOWWHIP OF THE PHYSICALLY HANDICAPPTED, MUMBAI

ITA 5802/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8634 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 17-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 16-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJARSHI DWIVEDI
• Assessee Lawyers: VIPUL B JOSHI
• Keywords: Business income; Charitable institution
• Section: 12A; 12; 10; 11

Judgement Text

ITA NO.5802 OF 2011 FELLOWSHIP OF THE PHYSICALLY HAN DICAPPED MUMBAI PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 5802/MUM/2011 (ASSESSMENT YEAR: 2008-09) ADIT (E)-(2), ROOM NO.504, PIRAMAL CHAMBERS, 5 TH FLOOR, PAREL, MUMBAI 400 012 VS. FELLOWSHIP OF THE PHYSICALLY HANDICAPPED, FPH BUILDING, LALA LAJPATRAI MARG, HAJI ALI, MUMBAI 400 034 PAN: AAATF 0551 D (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI RAJARSHI DWIVEDI, DR ASSESSEE BY: SHRI VIPUL B. JOSHI DATE OF HEARING: 17/09/2012 DATE OF PRONOUNCEMENT: 19/10/2012 O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER S OF THE CIT (A)-1 MUMBAI, DATED 8.5.2011. WE HAVE HEARD LD. DR AND LD. COUNSEL FOR ASSESSEE. 2. BRIEFLY STATED, ASSESSEE, AN AOP TRUST FILED TOTAL INCOME AT NIL. AO WAS OF THE OPINION THAT ASSESSEE CLAIMED EX EMPTION UNDER SECTION 10(23C)(IIIAD)/(IIIAE), WHEREAS IT WAS ASSE SSEES CONTENTION THAT IT CLAIMED EXEMPTION UNDER SECTION 11. AO DENI ED THE CLAIM OF EXEMPTION UNDER SECTION 10(23C) STATING THAT ASSESS EE DOES NOT FULFILL THE CONDITIONS. IN ADDITION AO WAS ALSO OF THE OPINION THAT ASSESSEE, BEING GRANTED REGISTRATION UNDER SECTION 12A BY THE CIT ON THE BASIS OF THE MEMORANDUM OF ASSOCIATION DATED 16.02.1956, MADE SUBSTANTIAL CHANGES IN THE SAID MEMORANDUM OF ASSOCIATION. RELYING ON THE DECISION OF THE HON'BLE HIGH COURT O F ALLAHABAD IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE AND AN OTHER VS. UNION ITA NO.5802 OF 2011 FELLOWSHIP OF THE PHYSICALLY HAN DICAPPED MUMBAI PAGE 2 OF 5 OF INDIA, 291 ITR 116, AO WAS OF THE OPINION THAT T HERE IS VIOLATION OF PROVISIONS OF SECTION 12A AND ASSESSEE SHOULD HA VE OBTAINED FRESH REGISTRATION IN FORM 10A AS PER RULE 17B OF T HE I.T. RULES, 1962. IN VIEW OF THIS THE TOTAL INCOME OF ASSESSEE WAS COMPUTED WITHOUT ALLOWING BENEFIT UNDER SECTION 11. THE THIR D CONTENTION THAT WAS TAKEN BY AO WAS THAT ASSESSEE HAD RENTED OUT IT S PREMISES TO VODAFONE, RELIANCE COMMUNICATION LTD, JYOTI PUBLICI TY AND WAS ALSO RENTING OUT THE HALL FOR MARRIAGES AND PARTIES ETC., AND HAS AVAILED SPECIAL SERVICES FROM M/S THAKKAR CATERERS FROM WHOM IT RECEIVED AN AMOUNT OF ` .15,40,000/-. AS THE RENT AND SERVICE CHARGES RECEIVED ARE TO THE TUNE OF ` .19,28,758/-, THESE ARE CONSIDERED AS BUSINESS RECEIPTS AND IT CONTRAVENED THE PROVISIONS OF SECTION 11 OF THE I.T. ACT. AO WAS OF THE OPINION T HAT ASSESSEE IS NOT BEHAVING AS A CHARITABLE ORGANIZATION AND THE CHARA CTER AND FOCUS OF ASSESSEE HAS BECOME COMMERCIAL. FOR THESE REASON S, AO DENIED THE BENEFIT OF SECTION 11 AND ASSESSED THE INCOME A T ` .78,34,490/- BY CONSIDERING THE CORPUS RECEIPTS AS INCOME OF THE YEAR IN ADDITION TO THE SURPLUS IN THE INCOME EXPENDITURE A/C. 3. THE LEARNED CIT (A) AFTER CONSIDERING THE SUBMISSIO NS OF ASSESSEE AND EXAMINING THE RECORD GAVE A FINDING TH AT ASSESSEE HAD MENTIONED EXEMPTION UNDER SECTION 10 IN THE COMPUTATION STATEMENT ONLY WHEREAS IN THE RETURN FILED, ASSESSE E CLAIM WAS UNDER SECTION 11 ONLY. SINCE THE COLUMN PERTAINS TO SECTION 10 WAS STRUCK OFF AND DEDUCTION CLAIMED UNDER SECTION 11 I N THE RETURN OF INCOME, THE CIT (A) WAS OF THE OPINION THAT ASSESSE ES CLAIM WAS ONLY UNDER SECTION 11. THE CIT(A) ALSO FURTHER NOTI CED THAT THIS FACT WAS BROUGHT TO THE NOTICE OF AO DURING THE ASSESSME NT PROCEEDINGS AND AO HAD IGNORED THIS. HE WAS ALSO OF THE FURTHER OPINION THAT THE ASSESSEE IS NOT CONDUCTING ANY COMMERCIAL ACTIVITY BY RENTING THE PROPERTY FOR ESTABLISHING CELL TOWERS AND ADVERTISE MENT BOARDS ON THE TOP OF THE BUILDING. THE RENTAL INCOME SHOULD B E TREATED AS ITA NO.5802 OF 2011 FELLOWSHIP OF THE PHYSICALLY HAN DICAPPED MUMBAI PAGE 3 OF 5 INCOME FROM HOUSE PROPERTY AND NOT BUSINESS INCOME AND INCOME ARISING OUT OF THE HOUSE PROPERTY SHOULD BE REGARDE D AS PROPERTY INCOME FOR THE PURPOSE OF THE TRUST. HE FURTHER NOT ED THAT ASSESSEE TRUST IS IMPARTING EDUCATION, MEDICAL HELP AND EVEN FINANCIAL AID TO PHYSICALLY HANDICAPPED PERSONS AND WAS RECEIVING GR ANT FROM STATE GOVERNMENT THROUGH THE DIRECTOR OF SOCIAL WELFARE, MAHARASHTRA STATE. HE FURTHER RECORDED THE FACT THAT ASSESSEE H AS NEVER AMENDED THE OBJECTS OF THE TRUST. HOWEVER, THE AMENDMENTS W ERE MADE IN THE RULES AND REGULATIONS I.E. CHANGE IN THE FINANC IAL YEAR FROM JANUARY TO DECEMBER TO APRIL TO MARCH AND FOR AMEND ING THE PERIOD OF HOLDING THE OFFICE BY BOARD OF THE COMMITTEE OR FOR REVISING THE MEMBERSHIP FEES ETC. FOR MAKING SUCH AMENDMENTS IT WAS NOTED THAT THE MAIN OBJECT OF THE TRUST HAS NOT BEEN AMEN DED AND THEREFORE, THE REGISTRATION GRANTED BY THE DIT(E) U NDER SECTION 12A IS STILL VALID AND AO CANNOT IGNORE THIS FACT SO LO NG AS REGISTRATION WAS AVAILABLE TO ASSESSEE. HE ALSO DISTINGUISHED TH E RATIO OF THE JUDGMENT OF THE HON'BLE ALLAHABAD HIGH COURT RELIED UPON BY AO TO NOTE THAT IN THAT CASE THE BASIS OF MEMORANDUM OF A SSOCIATION WAS CHANGED, WHEREAS IN THIS CASE IT IS ONLY PROCEDURAL RULES THAT WERE AMENDED. THEREFORE, THERE IS NO CHANGE IN THE OBJEC TS OF THE TRUST AS SUCH. HE ACCORDINGLY DIRECTED AO TO ALLOW EXEMPT ION AS CLAIMED UNDER SECTION 11 BY ASSESSEE TRUST. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS AND EXAMINI NG THE RECORD, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DISTURB THE FINDINGS OF THE CIT (A). FIRST OF ALL, AO CONSIDERE D THAT ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(23) WHEREAS IN T HE RETURN OF INCOME IT CORRECTLY CLAIMED DEDUCTION UNDER SECTION 11. THIS IS A FACTUAL ASPECT WHICH WAS EXAMINED BY THE CIT (A) AN D IT WAS NOT COUNTERED BY THE REVENUE. WITH REFERENCE TO THE EXP LOITATION OF THE PROPERTIES BY ASSESSEE WHILE LETTING OUT THE TERRAC E FOR ADVERTISEMENTS AND FOR PLACING CELL PHONE TOWERS, T HIS INCOME ITA NO.5802 OF 2011 FELLOWSHIP OF THE PHYSICALLY HAN DICAPPED MUMBAI PAGE 4 OF 5 CANNOT BE CONSIDERED AS BUSINESS INCOME. SINCE THE PURPOSE OF THE TRUST IS CHARITABLE IN NATURE, IT WOULD NOT LOOSE T HE CHARACTER OF CHARITABLE PURPOSE BECAUSE SOME PROFITS ARISES FROM OTHER ACTIVITY. THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COU RT IN THE CASE OF ADD.CIT VS. SURAT ART SILK CLOTH MANUFACTURERS A SSOCIATION, 121 ITR 1 (SC) WILL APPLY TO THE FACTS OF THE CASE. MOR EOVER THE INCOME FROM RENT AS RIGHTLY NOTED BY THE CIT (A) CANNOT BE ASSESSED AS BUSINESS INCOME AS IT BECOMES INCOME FROM HOUSE PRO PERTY ONLY. THEREFORE, THE FINDING OF CIT (A) THAT ASSESSEE IS IN THE BUSINESS AND USING THE TRUST FOR ITS COMMERCIAL ACTIVITY IS NOT CORRECT. FURTHER AS SEEN FROM THE ANNUAL REPORT PLACED ON RECORD, ASSES SEE HAD RECEIPTS OF TRAINING CENTRE AT ` .20,35,860/-, RECEIPTS FROM STATE GOVERNMENT TO AN EXTENT OF ` .32.58 LAKHS ETC., IN ADDITION TO GENERAL DONATIONS , DIVIDENDS, INTERESTS AND COMPENSATION SERVICE CHARG ES. THE RENT RECEIVED IS ONLY ` .12.59 LAKHS AND SERVICE CHARGES ARE ` .9.44 LAKHS, WHICH ARE MEAGER AND INCIDENTAL TO THE MAIN ACTIVIT Y OF THE TRUST. FURTHER ONCE REGISTRATION UNDER SECTION 12A IS GRAN TED BY THE CIT, THE BENEFIT THEREOF CANNOT BE DENIED BY AO UNLESS T HERE ARE VIOLATION AS PROVIDED UNDER SECTION 11, 12 AND 13 O F THE I.T. ACT. THESE PRINCIPLES WERE ESTABLISHED BY THE FOLLOWING DECISIONS: (I) ACIT VS. SURAT CITY GYMKHANA (2008) 300 ITR 214 (SC ) (II) HIRALAL BHAGWATI VS. CIT (2000) 246 ITR 188 (GUJ.) 5. SINCE THERE IS NO CHANGE IN THE OBJECT OF ASSESSEE AND AS ASSESSEE CONTINUE TO INVOLVE ITSELF IN CHARITABLE P URPOSE FOR THE HELP OF PHYSICALLY HANDICAPPED PERSONS AND WAS RECEIVING GRANT IN AID FROM GOVT. OF MAHARASHTRA, WE ARE OF THE OPINION TH AT AOS OBSERVATIONS THAT ASSESSEE CHANGED THE MEMORANDUM O F ASSOCIATION SO THAT FRESH REGISTRATION IS REQUIRED DOES NOT HOLD GOOD. THEREFORE, FOR ALL THESE REASONS, WE UPHOLD THE ORD ER OF THE CIT (A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE. ITA NO.5802 OF 2011 FELLOWSHIP OF THE PHYSICALLY HAN DICAPPED MUMBAI PAGE 5 OF 5 6. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH OCTOBER, 2012. SD/- SD/- ( I.P. BANSAL ) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 19 TH OCTOBER, 2012. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI