CDSL BENEFICIAL OWNERS PROTECTION FUND, MUMBAI V. DIT (E), MUMBAI

ITA 5927/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9348 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-11-2012
• Assessment Year: misc
• Appeal Filed On: 24-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRIJA DAYAL
• Assessee Lawyers: A H DALAL
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTAT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO.7935/M/2010 I.T.A. NO.5927/M/2011 CDSL BENEFICIAL OWNERS PROTECTION FUND, P.J. TOWERS, 17 TH FLOOR, DALAL STREET, FORT, MUMBAI 400 012. PAN: AAATC8601K VS. THE DIT (E), PIRAMAL CHAMBERS, 6 TH FLOOR, PAREL, MUMBAI 400 012. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI A.H. DALAL RESPONDENT BY : SHRI GIRIJA DAYAL, CIT-DR DATE OF HEARING: 8.11.2012 DA TE OF ORDER:23.11.2012 O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE TWO APPEALS UNDER CONSIDERATION AND THEY ARE FILED BY THE ASSESSEE AGAINST TWO DIFFERENT ORDERS OF THE SAME DIRECTOR O F INCOME TAX (EXEMPTION), MUMBAI DATED 22.09.2010 AND 30.6.2011 RESPECTIVELY. DISPUTE RELATES TO THE REJECTION OF REGISTRATION U/S 12AA OF THE ACT. 2. THE GROUNDS RAISED IN BOTH THESE APPEALS REVOLVE AROUND THE GRIEVANCE OF THE ASSESSEE AGAINST THE ORDER OF THE DIT (E), MUMBAI W HO REJECTED THE REQUEST FOR REGISTRATION OF THE ASSESSEE U/S 12A OF THE I.T. ACT, 1961. IN THE GROUNDS, IT W AS ARGUED THAT THE DIT (E) FAILED TO PROVIDE OPPORTUNI TY OF PERSONAL HEARING BEFORE REJECTING THE REGISTRATION. REFERRING TO THE ORDER S OF THE DIT (E) DATED 22.9.2010, LD COUNSEL MENTIONED THAT THE DIT (E) HAS COME TO A PR EMATURE CONCLUSION ABOUT THE GENUINENESS OF THE OBJECTS AND CHARITABLE ACTIVITIE S OF THE ASSESSEE. WHILE IT IS THE FACT THAT THE ASSESSEE HAS NOT STARTED THE CHARITAB LE ACTIVITIES IN THE INITIAL YEAR OF ITS INSTITUTION, DIT (E) UNFAIRLY HELD THAT THE ASSESSE E HAS NOT DONE ANY CHARITABLE ACTIVITIES. HE FURTHER ARGUED THAT THE DIT (E) SHOU LD HAVE GRANTED REGISTRATION U/S 12AA OF THE ACT IN THE YEAR UNDER CONSIDERATION INS TEAD OF REJECTING THE SAME WHEN THE ASSESSEE IS FOUND INDULGED IN THE UNCHARITABLE ACTIVITIES. IN THE PROCESS, THE DIT 2 (E) FAILED TO PERFORM HIS DUTIES AND FAILED TO APPR ECIATE THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF AMAN SHI V MANDIR TRUST VS. CIT (296 ITR 415) FOR THE PROPOSITION THAT THE TRUST WAS NOT BECOME NON-GENUINE IF NO MONEY WAS SPENT DURING THE PAST FIVE YEARS. CONSIDE RING THE FACT, DIT (E) HAS A POWER OF REVOCATION OF THE REGISTRATION VIDE SECTIO N 12AA (3) OF THE ACT, DIT (E) SHOULD HAVE FIRST GRANTED REGISTRATION IN THIS YEAR , INSTEAD OF REJECTING THE REGISTRATION OF TRUST MERELY FOR NON-SPENDING OF AN Y EXPENDITURE IN ACCORDANCE WITH THE PRINCIPLE OF LAW. 2.1. FURTHER, REFERRING TO THE ORDER OF DIT (E) DAT ED 30.6.2011, LD COUNSEL MENTIONED THAT THE DIT (E) CAME TO PREMATURE CONCLU SION THAT THE ASSESSEE IS NOT A CHARITABLE INSTITUTION AND IT IS NOT HAVING ANY CHA RACTER OF PUBLIC CHARITABLE TRUST. IN THE PROCESS, THE DIT (E) FAILED TO SEE THAT ASSESSE E IS A CHARITABLE ENTITY AND IS ABLE TO CATER TO THE NEEDS OF THE PUBLIC AT LARGE AND TH E CHARITABLE ACTIVITY INCLUDES NOT ONLY MAINTAINING A FUND FOR THE PROTECTION OF THE TARGET PEOPLE AND BENEFIT OF MEMBERS OF THE PUBLIC WHO INVEST IN, HOLD ON OR TRA NSACT IN THE SECURITIES IN DEMATERIALIZED FORM THROUGH THE SETTLER BUT ALSO IN DEMNIFY AGAINST THE LOSSES ON ACCOUNT OF NEGLIGENCE, BREACH ETC. WHICH ARE COMMIT TED BY THE SETTLER OR ITS DEPOSITORY PARTICIPANT OR THEIR RESPECTIVE EMPLOYEE S. ASSESSEE BROUGHT OUR ATTENTION TO VARIOUS PAPERS AND THE OBJECT CLAUSES FILED IN T HE PAPER BOOK TO DEMONSTRATE THAT ASSESSEE HAS OBJECTS OF EDUCATING THE TARGET PEOPLE BY WAY OF WORKSHOPS, TEACHING ETC. AND MENTIONED THAT THE ASSESSEE HAS CONDUCTED VARIOUS SUCH WORKSHOPS IN ACCORDANCE WITH THE OBJECTS OF THE TRUST AND PAGE N O. 40 ONWARDS OF THE PAPER BOOK ARE RELEVANT IN THIS REGARD. FURTHER, LD COUNSEL M ENTIONED THAT THE OTHER DIT (E)/CITS HAVE GRANTED REGISTRATION U/S 12A IN RESPE CT OF STOCK EXCHANGE CUSTOMERS PROTECTION FUND AND THE DIT SHOULD HAVE GRANTED REG ISTRATION TO THE CASE OF ASSESSEE TOO. IN THIS REGARD, LD COUNSEL DEMONSTRATE D THE COMMONNESS OF THE OBJECTS OF THESE ASSESESEES AND RELIED ON THOSE ORD ERS. HE HAS ALSO REFERRED TO THE FACT THAT THE EXEMPTION WAS GRANTED U/S 12A IN RESP ECT OF THAT STOCK EXCHANGE CUSTOMERS PROTECTION FUND. FURTHER, LD COUNSEL FI LED A COMPILATION OF JUDGMENTS IN SUPPORTING THE ASSESSEES CASE AND PROVING THAT THE ASSESSEE IS CHARITABLE IN NATURE AND THE TARGET GROUP CONSTITUTES PUBLIC AT LARGE IN WHICH CASE REGISTRATION SHOULD NOT 3 BE REJECTED WITH OR WITHOUT ANY EXPENDITURE BEING R ECORDED IN THE CONCERNED YEAR. SOME OF THE DECISIONS AND CONCLUSIONS OF THE SAID D ECISIONS ARE MENTIONED HEREUNDER. 1. CONCLUSION FROM THE JUDGMENT OF HONBLE HIGH COURT OF KARNATA KA IN THE CASE OF DIT (E) VS. MEENAKSHI AMMA ENDOWMENT TRUST (2011) 50 DTR (KAR) 243 READS AS UNDER: ASSESSEE TRUST HAVE APPLIED FOR REGISTRATION UNDER SECTION 12A WITHIN A SPAN OF EIGHT MONTHS OF ITS FORMATION, REG ISTRATION COULD NOT BE REFUSED ON THE GROUND THAT IT HAD NOT YET COMMENCED ANY ACTIVITY; IN SUCH A CASE, OBJECTS OF THE TRUST HAVE TO BE EXAMIN ED TO ASCERTAIN ITS GENUINENESS. 2. DIT VS. FOUNDATION OF OPHTHALMIC EDUCATION CENTR E ITA NO.1687 OF 2010 DT 16.8.2012 (DEL) 3. SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS . DIT (285 ITR 327) (KAR) 4. AMAN SHIV MANDIR TRUST VS. CIT (296 ITR 415) (P& H) 5. CIT VS. AGRICULTURAL PRODUCE & MARKET COMMITTEE 291 ITR 419 (BOM) 6. CIT VS. RED ROSE SHOOK (212 CTR (ALL) 394) 7. HYDERABAD STOCK EXCHANGE VS. CIT 66 ITR 195 8. CIT VS. BANGALORE STOCK EXCHANGE 115 ITR 493 9. CIT VS. MADRAS STOCK EXCHANGE (105 ITR 546) 10. CIT VS. AP CHAMBER OF COMMERCE (55 ITR 722) (SC ) 11. CIT VS. AP CHAMBER OF COMMERCE (130 ITR 184) (S C) 2.2. SUBSEQUENTLY, LD COUNSEL ALSO MENTIONED THAT T HESE DECISIONS WERE NOT EXAMINED BY THE REVENUE AUTHORITIES AT THE RELEVANT POINT OF TIME. AS PER THE COUNSEL, IF THE BENCH FEELS FIT, BOTH THE APPEALS M AY BE SET ASIDE TO THE FILES OF DIT (E) FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF T HE ABOVE SAID DECISIONS AND ALSO FOR WANT OF A SPEAKING ORDER OF THE DIT (E). 3. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE DIT (E). 4. ON HEARING BOTH THE PARTIES AND ALSO PERUSING TH E ORDERS OF THE DIT (E), WE FIND THAT THERE IS A NECESSITY FOR SPEAKING ORDERS ON VARIOUS ISSUES RAISED BY THE LD AR CONSIDERING THE SET LEGAL PRINCIPLE ON THE SUBJE CT. THEY ARE: (I) WHETHER THE REGISTRATION SHOULD BE REJECTED IN THE INITIAL YEAR S OF THEIR INSTITUTION OF THE ASSESSEE WHEN THERE IS NO INCOME OR EXPENDITURE RECORDED BY THE ASSESSEE; (II) WHETHER THE BENEFICIAL OWNERS PROTECTION FUND IS MEANT FOR A TARGET GROUP CONSTITUTES PUBLIC AT LARGE; (III) IN PRINCIPLE, WHETHER THE OBJECTS HAVE ANY OBJECTIONABLE OR NON-CHARITABLE FROM ANY ANGLE; (IV) WHETHER THE ACTIVITIES OF THE ASSESSEE REPORTED BY THE ASSESSEE 4 IN SUBSEQUENT YEAR ARE ADEQUATE ENOUGH TO INFER THE CHARITABLE NATURE OF THE OBJECTS OF THE ASSESSEE ETC. THEREFORE, DIT (E) IS DIRECTE D TO PASS A SPEAKING ORDERS AFTER CONSIDERING THE ABOVE ISSUES IN THE SHADOW OF THE J UDGMENTS CITED ABOVE AS WELL AS THE OTHER COMPARABLE CASES, WHICH ARE BROUGHT TO OU R NOTICE, WHERE THE APPLICATIONS FOR THE REGISTRATION WAS CONSIDERED FAVORABLY BY DI T(E) OF OTHER JURISDICTIONS NAMED BY THE LD COUNSEL FOR THE ASSESSEE. DIT (E) SHALL A LSO HONOR THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT SUCH AS THE ONES CITE D ABOVE. THE ASSESSEE IS DIRECTED TO FURNISH RELEVANT INFORMATION TO STRENGT HEN HIS ARGUMENTS MENTIONED ABOVE. ACCORDINGLY, GROUNDS RAISED IN BOTH THE APP EAL OF THE ASSESSEE ARE SET ASIDE . 5. IN THE RESULT, APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF NOVEMBER, 2012. SD/- SD/- (VIVEK VARMA) (D. KA RUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 23.11.2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (A), CONCERNED. 4. THE CIT CONCERNED. 5. THE DR C, BENCH, ITAT, MUMBAI. 6. GUARD FILE. // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI