P.R.Chellaram Charitable Trust, Secunderabad V. DIT (E), Hyderabad

ITA 596/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69729 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 29-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: LAXMINIVAS SHARMA
• Keywords: Charitable institution
• Section: 80G; 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST, APPELLANT SECUNDERABAD. (PAN AAATP5608 H) VS. DIRECTOR OF INCOME-TAX(EXEMPTION), RESPONDEN T HYDERABAD. (PAN AAACU2690P) APPELLANT BY : SHRI LAXMI NIVAS SHARMA RESPONDENT BY : SHRI D. SUDHAKAR RAO DATE OF HEARING : 05/08/2013 DATE OF PRONOUNCEMENT : 1 4/08/2013 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 22/02/2013 PASSED BY THE DIT(E), HYDERABAD RE JECTING THE ASSESSEES APPLICATION SEEKING APPROVAL U/S 80G(5) OF THE ACT. 2. BRIEFLY THE FACTS RELATING TO THE ISSUE IN DISPU TE ARE THAT THE ASSESSEE IS A TRUST REGISTERED U/S 12A OF THE A CT. THE ASSESSEE APPLIED IN THE PRESCRIBED MANNER IN FORM N O. 10G TO THE DIT(E) SEEKING APPROVAL U/S 80G(5)(VI) OF THE ACT. THE DIT(E) ISSUED A QUESTIONNAIRE TO THE ASSESSEE CALLING UPON IT TO FURNISH CERTAIN INFORMATION. AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE AND EXAMINING THE INFORMATION FURNISHED, T HE DIT(E) ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 2 REJECTED THE ASSESSEES APPLICATION ON THE REASONI NG THAT THE ASSESSEE IS PROCURING GOODS FROM MANUFACTURERS AND SELLING THEM TO STUDENTS WHICH IS A COMMERCIAL ACTIVITY AND HENC E, THE ASSESSEE IS NOT ENTITLED FOR APPROVAL U/S 80G(5)(VI ) OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID RODER OF THE DIT(E) BEFORE THE ITAT. THE ITAT IN APPEAL NO. 565/H/12 DATED 10/ 08/2012 DISPOSED OFF THE APPEAL BY ISSUING A DIRECTION IN T HE FOLLOWING MANNER: 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIE S AND PERUSED THE RECORD. IN THIS CASE, THE APPROVAL UNDE R SECTION 80G OF THE ACT ASIDE THE ISSUE WITH RESPECT TO APPROVAL UNDER 80G OF THE ACT TO THE DIT(E), WHO SHALL EXAMINE WHETHER OR NOT THE CONDITIONS SET OUT IN SECTION 80G(5) (I) TO (V) ARE SATISFIED. IF THE ASSESSEE WAS DENIED BY THE DIT(E) ONLY ON THE REASO N THAT INSTITUTION IS PROCURING THE GOODS FROM MANUFACTURE RS AND GIVING THIS TO THE STUDENTS FOR SALE. THE ASSESSEE HAS CO NTENDED THAT NO SUCH ACTIVITIES CAN BE ESTABLISHED FROM FINANCIA L STATEMENTS OR RECORDS. WE SET HAS SATISFIED THE ABOVE CONDITIONS, THERE IS NO REASON TO DENY THE APPROVAL UNDER SECTION 80G OF TH E ACT BY THE DIT(E). 3. AFTER THE MATTER WAS REMANDED BACK TO THE DIT(E) , HE AGAIN ISSUED A FRESH NOTICE TO THE ASSESSEE. IN COU RSE OF PROCEEDING, THE DIT(E) APART FROM SEEKING INFORMATI ON ON THE SALE OF CERTAIN GOODS TO THE STUDENTS, THE DIT(E) ALSO C ALLED UPON THE ASSESSEE TO CLARIFY WITH REGARD TO THE STATUS OF TH E 3 FLATS REFERRED TO IN HIS EARLIER ORDER . IN COMPLIANCE TO THE QUER Y MADE BY THE DIT(E), THE ASSESSEE APPEARED BEFORE HIM AND SUBMIT TED COPIES OF TRIAL BALANCE, PROVISIONAL INCOME AND EXPENDITUR E ACCOUNT AND BALANCE SHEET AS ON DATE. THE ASSESSEE ALSO FURNISH ED EXPLANATION WITH REGARD TO 3 FLATS, WHICH ARE STILL UNDER CONST RUCTION. IT WAS EXPLAINED BEFORE THE DIT(E) BY THE ASSESSEE THAT TH E TRUST DOES NOT CARRY OUT ANY ACTIVITY OF PROCUREMENT OF GOODS FROM MANUFACTURER AND SELLING THEM TO THE STUDENTS. THE DIT(E), HOWEVER, DID NOT ACCEPT THE EXPLANATION OF THE ASSE SSEE AND HELD ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 3 THAT THE ASSESSEE IS NOT ENTITLED FOR AVAILING APPR OVAL U/S 80G(5)(VI) OF THE ACT BY HOLDING AS UNDER: 6. FURTHER, IT WAS NOTICED THAT THE ASSESSEE TRUST IS REGULARLY PAYING SERVICE TAX OR ITS TURNOVER RECEIV ED FROM SUCH COMMERCIAL TRAINING COURSES IMPARTED THROUGH T HE SAID COMPUTER TRAINING INSTITUTE RUN BY IT AND IS ALSO F ILING NECESSARY RETURNS ON THAT ACCOUNT BEFORE THE CUSTOM S & CENTRAL EXCISE & SERVICE TAX AUTHORITIES. AS SEEN F ROM THE RETURN IN FORM NO. ST-3, FILED BEFORE THE SAID AUTH ORITY PERTAINING TO THE FINANCIAL YEAR 2009-10, THE ASSES SEE HAS ADMITTED ITS SERVICE AS COMMERCIAL TRAINING AND CO ACHING. THE SAME IS MENTIONED AGAINST THE COLUMN CATEGORY OF SERVICE AND THE GROSS AMOUNT OF SERVICE FOR THE PE RIOD FROM OCTOBER TO MARCH IN THAT RETURN, ARE SHOWN AT RS. 13,55,033/-. SIMILARLY, IN SUCH RETURN FILED FOR TH E FINANCIAL YEAR 2011-012 [ FOR THE PERIOD APRIL - SEPTEMBER] W HILE ADMITTING THE SAME NATURE OF SERVICE, THE GROSS VAL UE OF THE SERVICE PROVIDED DURING THAT PERIOD IS SHOWN AT RS. 24,77,516/-/. IN SUCH RETURN FILED FOR THE NEXT SIX MONTHS OF THAT FINANCIAL YEAR I.E., OCTOBER MARCH, WHILE AD MITTING THE SAME NATURE OF SERVICE I.E., COMMERCIAL TRAINING AN D COACHING, THE GROSS AMOUNT RECEIVED AGAINST SERVICE DURING THAT PERIOD, IS SHOWN AT RS. 13,07,980/-. FROM THE AFOREMENTIONED NATURE OF SERVICE RENDERED, AS ADMIT TED BY THE ASSESSEE-TRUST, IN THOSE RETURNS FILED BEFORE T HE SAID AUTHORITIES, IN MY VIEW, THE ASSESSEE TRUST, IN THI S CASE, CANNOT BE CONSIDERED AS A FULLY CHARITABLE INSTITUT ION, AND HENCE, IT CANNOT BE GRANTED APPROVAL U/S 80G(5)(VI) OF THE ACT. 4. THE DIT(E) FURTHER HELD THAT THE ASSESSEE IS ALS O NOT ENTITLED FOR EXEMPTION OF ITS INCOME U/S 11 OF THE ACT, AS THERE IS VIOLATION OF PROVISIONS OF SECTION 13(1)(C)(II) REA D WITH SECTION 13(3)(A) AND 13(3)(CC) OF THE ACT AS THE INVESTMENT IN ACQUIRING FLATS FOR PERSONAL USE OF THE TRUSTEES INCLUDING FO UNDER OF THE TRUST. HE, THEREFORE, HELD THAT THE ASSESSEE DOES N OT SATISFY THE CONDITIONS STIPULATED IN CLAUSE (1) TO SUB-SECTION (5) OF SECTION 80G AND AS SUCH IS NOT ELIGIBLE FOR APPROVAL U/S 80 G(5) OF THE ACT. WITH THE AFORESAID OBSERVATION, THE DIT(E) REJECTED THE APPLICATION FOR APPROVAL U/S 80(G) OF THE ACT. ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 4 5. THE LEARNED AR OF THE ASSESSEE SUBMITTED BEFORE US THAT REGISTRATION GRANTED U/S 12A OF THE ACT HAS NOT BEE N WITHDRAWN/CANCELLED BY THE PRESCRIBED AUTHORITY. HE NCE, APPROVAL U/S 80G(V) CANNOT BE DENIED TO THE ASSESSEE. IT WA S FURTHER CONTENDED BY THE LEARNED AR THAT THE REASONS ON WHI CH THE DIT(E) HAS REJECTED APPLICATION OF THE ASSESSEE ARE VAGUE REASONS AND NOT BASED ON MATERIALS ON RECORD AS THE DIT(E) HAS NOT CONSIDERED THE EVIDENCES PRODUCED BEFORE HIM WHILE COMING TO HIS CONCLUSION. IT WAS SUBMITTED THAT THERE IS NO MATE RIAL ON RECORD TO SUGGEST THAT THE ASSESSEE HAS PROCURED GOODS FRO M MANUFACTURERS AND SOLD THEM TO THE STUDENTS. IT WAS FURTHER SUBMITTED THAT ONLY THE STUDY MATERIALS INTERNALLY GENERATED BY THE ASSESSEE WERE GIVEN TO THE STUDENTS AND NOTHING HAS BEEN SOLD TO THE STUDENTS AS THE ASSESSEE IS ONLY ENGAGE D IN IMPARTING EDUCATION/TRAINING IN COMPUTERS. IN SUPPORT OF HIS CONTENTION, THE LEARNED AR REFERRED TO THE DOCUMENTS SUBMITTED IN T HE FORM OF PAPER BOOK, WHICH WERE ALSO SUBMITTED BEFORE THE DI T(E) IN COURSE OF HEARING BEFORE HIM. SO FAR AS THE ALLEGAT ION OF THE DIT(E) THAT THE ASSESSEE HAS INVESTED IN ACQUIRING FLATS FOR THE PERSONAL USE OF TRUSTEES, WHICH VIOLATED PROVISIONS OF SECTION 13(1)(C) OF THE ACT AND 13(3)(E) OF THE ACT, THE LE ARNED AR STRONGLY REFUTING SUCH ALLEGATION OF THE DIT(E) SUB MITTED THAT THE FLATS WERE ACQUIRED FOR THE PURPOSE OF USING THEM A S GIRLS HOSTEL FOR THE GIRL STUDENTS COMING FOR STUDY FROM OUTSTAT ION AND NOT FOR THE USE OF THE TRUSTEES AS ALLEGED BY THE DIT(E). I T WAS FURTHER SUBMITTED THAT TWO FLATS ACQUIRED BY THE ASSESSEE A RE STILL UNDER CONSTRUCTION AND NOT YET BEEN COMPLETED. IN THIS CO NTEXT, THE LEARNED AR FILED AN AFFIDAVIT OF THE TRUSTEE SHRI B .S. RAJMANI. THE LEARNED AR, THEREFORE, SUBMITTED THAT REJECTION OF APPLICATION FOR GRANT OF APPROVAL U/S 80G(5) (VI) OF THE ACT BEING WITHOUT VALID REASONS IS LEGALLY UNSUSTAINABLE. ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 5 6. THE LEARNED DR, ON THE OTHER HAND, SUBMITTED THA T THE FINDING OF THE DIT(E) IN PARA 6 OF THE ORDER CLEARL Y ESTABLISHES THE FACT THAT THE ASSESSEE IS NOT FULLY ENGAGED IN CHAR ITABLE ACTIVITIES BUT SOME AMOUNT OF COMMERCIAL ACTIVITY IS ALSO CARR IED ON BY THE ASSESSEE FOR EARNING PROFIT. IT WAS FURTHER SUBMITT ED BY HIM THAT THE ASSESSEE HAS ALSO UTILIZED TRUST FOUND FOR THE BENEFIT OF TRUSTEES BY ACQUIRING FLATS FOR THE PERSONAL USE OF THE TRUSTEES. HE, THEREFORE, CONTENDED THAT DENIAL OF APPROVAL U/ S 80G(5) IS JUSTIFIED. 7. WE HAVE HEARD CONTENTIONS OF THE PARTIES AND PER USED THE MATERIALS ON RECORD. AS CAN BE SEEN FROM THE DI RECTION OF THE TRIBUNAL IN ITS EARLIER ORDER (SUPRA) WHILE REMITTI NG THE MATTER BACK TO THE FILE OF THE DIT(E), THE TRIBUNAL HAS DI RECTED HIM TO EXAMINE THE ISSUE OF PROCUREMENT OF GOODS FROM MANU FACTURERS AND SELLING THEM TO THE STUDENTS. HOWEVER, ON PERUS AL OF THE ORDER OF THE DIT(E), IT IS TO BE SEEN THAT HE HAS T RAVELLED BEYOND THE DIRECTION OF THE TRIBUNAL BY RAKING UP THE ISSU E OF INVESTMENT IN FLATS FOR THE PERSONAL USE OF TRUSTEES, WHICH WA S NOT THE DIRECTION OF THE TRIBUNAL WHILE REMITTING THE MATTE R BACK TO HIM. BE THAT AS IT MAY, SO FAR AS ALLEGATION OF SALE OF GOODS BY PROCURING FROM MANUFACTURERS TO THE STUDENTS IS CON CERNED, WE FIND FROM THE MATERIAL ON RECORD THAT THERE IS NOTH ING BROUGHT ON RECORD, WHICH CAN SUGGEST THAT THE ASSESSEE HAS PRO CURED GOODS FROM MANUFACTURERS AND SOLD THEM TO STUDENTS. ON EX AMINATION OF THE INCOME AND EXPENDITURE ACCOUNT, IT IS SEEN THAT THE ASSESSEE HAS ONLY SOLD SOME STUDY MATERIAL TO THE STUDENTS W HICH ARE INTERNALLY GENERATED BY HIM. IT IS ALSO A FACT THAT THE ASSESSEE IS ONLY ENGAGED IN IMPARTING EDUCATION/TRAINING IN COM PUTER, HENCE, THERE CANNOT BE SALE OF ANY MATERIAL BY PROCURING F ROM MANUFACTURERS. THAT BESIDES IT IS A FACT ON RECORD THAT THE ASSESSEE IS REGISTERED AS A CHARITABLE TRUST U/S 12 A OF THE ACT AND ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 6 THE REGISTRATION GRANTED IS CONTINUING TILL DATE. T HEREFORE, THERE CANNOT BE ANY DOUBT OR SUSPICION WITH REGARD TO THE MAIN OBJECT OF THE ASSESSEE, WHICH IS CHARITABLE IN NATURE. THE LAW IS WELL SETTLED THAT FOR THE PURPOSE OF ACHIEVING THE MAIN CHARITABLE OBJECT, A TRUST IS NOT PRECLUDED FROM CARRYING ON A NY BUSINESS ACTIVITY AND EARNING PROFIT THERE FROM WHICH IS ANC ILLARY AND INCIDENTAL TO THE MAIN OBJECT OF THE TRUST AND PROF IT EARNED IS ALSO UTILIZED FOR ACHIEVING THE MAIN OBJECT OF THE TRUST . 8. IT CAN BE MENTIONED HERE THAT MANY EDUCATIONAL INSTITUTIONS WHOSE MAIN OBJECT IS CHARITABLE IN NAT URE AND REGISTERED AS SUCH ALSO RUN SUBSIDIZED CANTEENS IN THEIR PREMISES FOR THE BENEFIT OF THE STUDENTS AND STAFF AS WELL A S ALSO SELL BOOKS, UNIFORMS ETC TO THE STUDENTS BUT SUCH ACTIVITIES CA NNOT BE CONSIDERED TO BE COMMERCIAL ACTIVITIES AND FOR THE PURPOSE OF PROFITS CONTRARY TO THE MAIN OBJECT OF THE TRUST OR INSTITUTION. 9. SO FAR AS THE OTHER ALLEGATION OF THE DIT(E) WIT H REGARD TO INVESTMENT IN ACQUISITION OF FLATS FOR THE PERSO NAL BENEFIT OF THE TRUSTEES IS CONCERNED, WE FIND THAT THE DIT(E) HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH SUCH FACT. IN S UCH VIEW OF THE MATTER, THE CONTENTION OF THE ASSESSEE THAT THE FLA TS, STILL UNDER CONSTRUCTION, ARE FOR THE PURPOSE OF GIRL HOSTEL FO R THE OUTSTATION GIRL STUDENTS CANNOT BE DISBELIEVED. THAT BESIDES A LL THESE ISSUES CAN BE EXAMINED AT THE STAGE OF ASSESSMENT PROCEEDI NG WHILE CONSIDERING THE ASSESSEES CLAIM OF EXEMPTION U/S 1 1 OF THE ACT. AT THE STAGE OF GRANT OF APPROVAL U/S 80G(5) OF THE ACT, THE DIT(E) IS NOT REQUIRED TO LOOK INTO ALL THESE ISSUE S. THE ONLY THING WHICH REQUIRES CONSIDERATION AT THE TIME OF GRANT O F APPROVAL U/S 80G(5) OF THE ACT WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE IN NATURE OR NOT. IN THE PRESENT CASE, THERE CANNOT BE ANY DOUBT WITH REGARD TO THE CHARITABLE OBJECT OF THE TRUST A S IT HAS BEEN ITA NO. 596/HYD/2013 P.R. CHELLARAM CHARITABLE TRUST 7 GRANTED REGISTRATION U/S 12A OF THE ACT, WHICH HAS NOT BEEN WITHDRAWN/CANCELLED TILL DATE. IN THE AFORESAID VIE W OF THE MATTER, THE ASSESSEE IS ENTITLED FOR APPROVAL U/S 80G(5) OF THE ACT. WE, THEREFORE, SET ASIDE THE ORDER OF THE DIT(E) AND DI RECT HIM TO GRANT APPROVAL TO THE ASSESSEE U/S 80G(5)(VI) OF TH E ACT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 14/08/2013. SD/- SD/- (CHANDRA POOJARI) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMB ER HYDERABAD, DATED: 14 TH AUGUST, 2013. KV COPY TO:- 1) P.R. CHELLARAM CHARITABLE TRUST, D.NO. 1-1-109, OPP. TELEPHONE EXCHANGE, R.P. ROAD, SECUNDERABAD 500 0 03.. 2) DIT(E), HYDERABAD. 3) ADIT(E)-III, HYDERABAD. 4) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T ., HYDERABAD.