Alliance Business School, Bangalore V. DIT, Bangalore

ITA 599/BANG/2011

• Counselvise Citation: 59921114 RSA 2011
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARSHA PRAKASH CITIIDR
• Assessee Lawyers: H S KUMAR
• Keywords: Opportunity of being heard
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 599/BANG/2011 ASSESSMENT YEAR : NOT APPLICABLE ALLIANCE BUSINESS SCHOOL, #100, 34 TH MAIN, 2 ND CROSS, DOLLAR SCHEME, BTM 1 ST STAGE, BANGALORE - 560 068. PAN : AAFCA7290J VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H.S. KUMAR, ADVOCATE RESPONDENT BY : SHRI HARSHA PRAKASH, CIT-II(DR) DATE OF HEARING : 26.09.2011 DATE OF PRONOUNCEMENT : 26.09.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER D ATED 31.03.2011 OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALO RE [HEREINAFTER REFERRED TO AS DIT(E) IN SHORT]. ITA NO. 599/BANG/11 PAGE 2 OF 5 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LEARNED DIT(E) IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE APPELLANT IS BAD AND ERRONEOUS IN LAW AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THAT THE LEARNED DIT(E) ERRED IN LAW AND ON FACT S IN REFUSING TO GRANT REGISTRATION U/S 12AA. 3. THAT THE LEARNED DIT(E) ERRED IN LAW AND ON FACT S IN HOLDING THAT CLAUSES 3 AND 6 OF THE OBJECT CLAUSE O F THE MEMORANDUM CONSTITUTE A COMMERCIAL ACTIVITY IGNORIN G THE FACT THAT THEY ARE ONLY INCIDENTAL TO THE OBJECT OF EDUC ATION. 4. THAT THE LEARNED DIT(E) ERRED IN LAW AND ON FACT S IN HOLDING THAT THE RECOGNITION U/S 12AA OF THE ACT CA NNOT BE GIVEN W.E.F. AY 2011-12 JUST BECAUSE THE APPELLANT WAS CO NVERTED INTO A COMPANY U/S 25 OF THE COMPANIES ACT ONLY W.E.F. 0 4.06.2010. 5. WITHOUT PREJUDICE TO GROUND NO.3, THAT THE FINDI NG OF THE LEARNED DIT(E) THAT THE OBJECTS OF THE APPELLANT PE RMIT IT TO CARRY OUT COMMERCIAL ACTIVITY AND THAT THE APPELLANT WAS A REGULAR COMMERCIAL UNDERTAKING UPTO 04.06.2010 ARE PERVERSE AND HENCE LIABLE TO BE QUASHED. 6. THAT THE ORDER HAS TRAVELED BEYOND THE SHOW CAUS E NOTICE IN SO FAR AS IT HAS BASED THE GROUND FOR REFUSAL OF RECOGNITION ON A GROUND DIFFERENT FROM THE GROUND FOR WHICH THE NOTI CE WAS ISSUED AND SUCH AN ORDER IS BAD IN LAW AND HENCE, LIABLE T O BE QUASHED. EACH OF THE ABOVE GROUND IS WITHOUT PREJUDICE TO ON E ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HONBLE INCOME-TA X APPELLATE TRIBUNAL, BANGALORE, TO ADD, DELETE, AMEND OR OTHER WISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFORE OR A T THE TIME OF HEARING OF THIS APPEAL. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE APPLIED FOR GRANT OF REGISTRATION U/S. 12AA OF THE INCOME-TAX ACT, 19 61 [HEREINAFTER REFERRED TO AS THE THE ACT] ON 18.10.2010.THE ASSESSEE WAS IN EXISTENCE SINCE 28.6.2005 AS A PRIVATE LIMITED COMPANY AND RUNNING THE BUSINESS OF ITA NO. 599/BANG/11 PAGE 3 OF 5 ALLIANCE BUSINESS SCHOOL. LATER ON, IT CONVERTED I NTO A COMPANY U/S. 25 OF THE COMPANIES ACT, 1956, I.E., A COMPANY NOT FOR PR OFIT. 4. THE ASSESSEE MOVED AN APPLICATION FOR REGISTRATI ON U/S. 12AA OF THE ACT. THE LD. DIT(E), BANGALORE, DISCUSSED OBJECT C LAUSES 1, 3 & 6 OF THE ASSESSEE AT PAGE 1 & 2 OF THE IMPUGNED ORDER AND OB SERVED THAT THE OPERATION AND OBJECTS WERE NOT CONFINED TOWARDS CHA RITABLE PURPOSE IN INDIA AND THAT THE OBJECTS WERE WITH COMMERCIAL PUR PORT. THE ASSESSEE SUBMITTED AN AFFIDAVIT DATED 29.3.11 STATING THEREI N THAT IT WOULD NOT COMMENCE ANY ACTIVITY OUTSIDE INDIA WITHOUT NECESSA RY PERMISSION FROM THE STATUTORY AUTHORITIES AND IT HAD ALSO UNDERTAKEN TO ALTER THE SHARE CAPITAL AND INCORPORATION OF IRREVOCABILITY AND INVESTMENT CLAUSES IN THE MOA OF THE ASSESSEE COMPANY AS REQUIRED UNDER THE INCOME-T AX ACT. THE LD. DIT(E) REJECTED THE APPLICATION OF THE ASSESSEE BY OBSERVING AS UNDER: 8. IN THE CONTEXT OF APPLICANTS UNDERTAKING FOR A MENDMENT AND INCORPORATING OF CERTAIN CLAUSES BY WAY OF AN A FFIDAVIT IT IS PERTINENT TO NOTE THAT NO TIME PERIOD HAS BEEN SPEC IFIED IN THE AFFIDAVIT TO EFFECT THE REQUIRED AMENDMENTS IN THE MOA. FURTHER THE AMENDMENTS IN THE MOA TO BE CARRIED OUT AT A FU TURE DATE CANNOT BE CONSIDERED AT THIS STAGE. 9. THE APPELLANTS UNDERTAKING THAT THE COMPANY WILL N OT COMMENCE ANY ACTIVITY OUTSIDE INDIA WITHOUT OBTAINI NG NECESSARY PERMISSION IS OF NO RELEVANCE AT THIS STA GE. AS PER THE OBJECT CLAUSE NO.1 MENTIONED IN PARA 2 SUPR A THE AREA OF OPERATION AND OBJECTS ARE NOT CONFINED TO I NDIA. IN THIS CONNECTION ATTENTION IS DRAWN TO PROVISIONS OF SECTION 11(1) ACCORDING TO WHICH THE INCOME OF THE TRUST/INSTITUTION HAS TO BE APPLIED FOR SUCH PURPOS ES IN INDIA. 5. NOW THE ASSESSEE IS IN APPEAL. WE HAVE CONSIDER ED THE SUBMISSIONS OF BOTH THE PARTIES AND THE MATERIAL ON RECORD. IN THE PRESENT ITA NO. 599/BANG/11 PAGE 4 OF 5 CASE, THE LD. DIT(E) HAD NOT DISCUSSED IN THE IMPUG NED ORDER THAT WHAT WERE THE SUBMISSIONS OF THE ASSESSEE. HE HAD ALSO NOT BROUGHT ON RECORD HOW AND IN WHAT MANNER THE OBJECTS OF THE ASSESSEE WERE NOT CHARITABLE IN NATURE. ALTHOUGH HE POINTED OUT THE DEFECT IN THE A FFIDAVIT BY STATING THAT NO TIME PERIOD HAD BEEN SPECIFIED IN THE AFFIDAVIT TO EFFECT THE REQUIRED AMENDMENTS IN THE MOA, HOWEVER IT APPEARS THAT HE H AD NOT GIVEN ANY OPPORTUNITY TO THE ASSESSEE TO REMOVE THE DEFECT, I F ANY. HE ALSO MENTIONED THAT THE OBJECTS OF THE ASSESSEE WERE NOT CONFINED TO INDIA, HOWEVER, NOTHING IS BROUGHT ON RECORD AS TO WHETHER THE ASSESSEE HAD UNDERTAKEN ANY OPERATION OR ACTIVITY OUTSIDE INDIA. 6. FROM THE PROVISIONS OF SECTION 12AA, IT S CRYSTA L CLEAR THAT THE COMMISSIONER ON RECEIPT OF APPLICATION FOR REGISTRA TION SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUT ION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND ALSO MAKE SUCH INQUIRI ES IN THIS BEHALF. HOWEVER, IN THE PRESENT CASE, NOTHING HAS BEEN DISCUSSED ABO UT THE ACTIVITIES OF THE ASSESSEE AND THE INFORMATION SOUGHT FOR, SO IN OUR OPINION, THIS CASE REQUIRES A FRESH ADJUDICATION AT THE LEVEL OF THE L D. DIT(E). IN THAT VIEW OF THE MATTER, WE DEEM IT APPROPRIATE TO SET ASIDE THE ISSUE BACK TO THE FILE OF LD. DIT(E) TO BE ADJUDICATED AFRESH, EXPEDITIOUSLY IN ACCORDANCE WITH THE LAW, AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ITA NO. 599/BANG/11 PAGE 5 OF 5 PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF SEPTEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAIN I ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 26 TH SEPTEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.