TEWARI CHARITABLE TRUST, MUMBAI V. DIT (E), MUMBAI

ITA 6192/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75635 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 09-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A H DALAL
• Keywords: Charitable institution; Competent authority
• Section: 80G; 2; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI . . , , BEFORE SHRI B.R.MITTAL, JM AND SHRI SANJAY ARORA, A M ./I.T.A. NO. 6192/MUM/2012 ( / ASSESSMENT YEAR: 2012-13) TEWARI CHARITABLE TRUST 3, PURSOTTAM BUILDING, M.P. MARG, OPERA HOUSE, MUMBAI-400 004 / VS. DIRECTOR OF INCOME-TAX (EXEMPTION), ROOM NO. 616, PIRAMAL CHAMBERS, PAREL, 6 TH FLOOR, LOWER PAREL, MUMBAI-400 012 ./PAN : AABTT 2668N ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI A.H. DALAL / RESPONDENT BY : SHRI GIRIJA DAYAL ! ' # / DATE OF HEARING : 09/12/2013 $%& # /DATE OF PRONOUNCEMENT : 21/02/2014 ' / O R D E R PER SANJAY ARORA, AM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE DIRECTOR OF INCOME TAX (EXEMPTION)-MUMBAI (DIT(E) FOR SHORT) DATED 01/08/2012, REJECTING THE ASSESSEES APPLICATION FOR GRANT OF CERTIFICATE U/S . 80G OF THE OF THE INCOME TAX ACT 1961 (`THE ACT HEREINAFTER). 2. THE SHORT QUESTION ARISING FOR OUR CONSIDERATION IN THE INSTANT APPEAL IS WHETHER APPROVAL U/S. 80G(5)(VI) OF THE ACT STANDS RIGHTLY DENIED TO THE ASSESSEE OR NOT. THE ASSESSEE IS A CHARITABLE TRUST, CONSTITUTED BY A TR UST DATED 16/01/2006 (PB PAGE 8-18), WITH THE MAIN OBJECTS OF RELIEF TO THE POOR; MEDICA L RELIEF; EDUCATION; AND HOUSING. IT IS ALSO REGISTERED U/S. 12A(A) OF THE ACT AS A CHAR ITABLE TRUST VIDE CERTIFICATE DATED 09/05/2008 (PB PAGE 23). APPLICATION IN THE RELEVAN T FORM FOR GRANT OF CERTIFICATE U/S. 2 ITA NO.6192/MUM/2012 TEWARI CHARITABLE TRUST VS. DIT(E) 80G WAS MOVED ON 27/6/2011. THE COMPETENT AUTHORITY , BEING THE DIT(E), ON THE BASIS FOR THE INCOME AND EXPENDITURE ACCOUNT AND BA LANCE-SHEET FOR THE PRECEDING THREE YEARS OBSERVED THAT NO CHARITABLE ACTIVITY WA S BEING PURSUED BY THE ASSESSEE. THE ENTIRE DONATION RECEIVED, WHICH WAS TOWARDS ITS COR PUS, STOOD APPLIED BY THE ASSESSEE BY WAY OF DONATIONS TO OTHER CHARITABLE TRUSTS/INST ITUTIONS. THE ASSESSEES PLEA THAT THE SAME IS COVERED BY CLAUSE 4(B) OF ITS OBJECT CLAUSE , DID NOT FIND FAVOUR WITH HIM IN-AS- MUCH AS NO EFFORTS TO GENERATE INCOME FROM THE CORP US FUNDS HAD BEEN MADE BY THE ASSESSEE. FURTHER, THE DONATION TO OTHER TRUSTS CO ULD NOT BY ITSELF BE THE MAIN OBJECT OF THE TRUST, I.E., FOR WHICH IT IS FORMED. HE, ACCORD INGLY, DENIED APPROVAL U/S. 80G(5). AGGRIEVED, THE ASSESSEE IS IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 THE ASSESSEE BEFORE US PLACED RELIANCE ON A NUM BER OF DECISIONS, VIZ. CIT VS. SARLADEVI SARABHAI TRUST [1988] 172 ITR 698 (GUJ); CIT VS. TRUSTEES OF JADI TRUST [1982] 133 ITR 494 (BOM) ; CIT VS. HINDUSTAN CHARITY TRUST [1983] 139 ITR 913 (CAL); N.N. DESAI CHARITABLE TRUST VS. CIT [2000] 246 ITR 452 (GUJ); ITO VS. ABHILASHKUMARI PUBLIC CHARITABLE TRUST [1987] 28 TTJ (DEL) 523, TO THE EFFECT THAT DONATION TO OTHER CHARITABLE (OR RELIGIOUS) TRUST W OULD AMOUNT TO APPLICATION OF INCOME FOR CHARITABLE (OR RELIGIOUS) PURPOSES, ENTITLED TO EXEMPTION U/S. 11(1)(A), SO THAT APPLICATION OF SECTION 11 IS NOT RESTRICTED TO A TR UST WHICH CARRIES ON CHARITABLE OR RELIGIOUS ACTIVITIES ITSELF; THAT AN ENQUIRY FOR TH E PURPOSES OF SECTION 80G SHOULD BE CONFINED TO FINDING IF THE INSTITUTION SATISFIES TH E PRESCRIBED CONDITIONS. 3.2 IT WOULD AT THIS STAGE BE RELEVANT TO ADVERT TO SECTION 80G, WHICH PROVIDES FOR DEDUCTION, INTER ALIA , IN RESPECT OF SUMS PAID TO ANY FUND OR INSTITUTIO N SPECIFIED IN SECTION 80G(2)(A). SECTION 80G(2)(A)(IV) IS A GENE RAL CLAUSE, WHICH READS AS: ANY OTHER FUND OR ANY OTHER INSTITUTION TO WHICH TH IS SECTION APPLIES SECTION 80G(5) ENLISTS THE CONDITIONS, FULFILLMENT OF WHICH ARE NECESSARY FOR ANY INSTITUTION OR FUND TO QUALIFY U/S. 80G(2)(A)(IV). SECTION 80G(5)(VI) FURTHER PROVIDES THAT IN RESPECT OF A DONATION MADE AFTER 31/03/1992 , THE DONEE INSTITUTION OR FUND SHOULD BE APPROVED BY THE COMMISSIONER IN ACCORDANC E WITH THE RULES MADE IN THIS BEHALF. RULE 11AA, IN TURN, POSTULATES THE SATISFAC TION OF THE COMMISSIONER OF THE 3 ITA NO.6192/MUM/2012 TEWARI CHARITABLE TRUST VS. DIT(E) CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SECTI ON 80G(5). THE COMMISSIONER IS ALSO REQUIRED TO BE SATISFIED ABOUT THE GENUINENESS OF T HE ACTIVITIES OF THE INSTITUTION OR FUND (RULE 11AA(3)). THIS PROVIDES THE LEGAL FRAME WORK FOR THE GRANT, OR NOT SO, AS THE CASE MAY BE, OF APPROVAL U/S 80G. 3.3 IN THE PRESENT CASE, THE LD. DIT(E) DOES NOT SP ECIFY THE PARTICULAR CONDITION BEING NOT SATISFIED, LEADING TO HIS WITHHOLDING THE APPROVAL OR, CORRESPONDINGLY, HOLDING THE ASSESSEE-TRUST AS NOT SATISFYING THE CO NDITION/S OF SECTION 80G(5). AS FAR AS WE ARE ABLE TO SEE, THE ASSESSEE-TRUST APPARENTL Y SATISFIES THE CONDITIONS OF 80G(5) [(I) TO (V)]; THERE BEING NO CHARGE TO CONTRARY. T HAT ITS INCOME IS LIABLE TO BE EXEMPT U/S. 11, WHICH IS THE CONDITION OF SECTION 80G(5)(I ), IS APPARENT FROM SECTION 11(1)(D), WHICH EXCLUDES CORPUS DONATIONS FROM THE AMBIT OF T OTAL INCOME, AS WELL AS THE CASE LAW HOLDING THAT DONATION TO OTHER TRUSTS/INSTITUTI ONS AMOUNTS TO APPLICATION OF INCOME U/S. 11(1)(A). AS WE INFER, THE COMPETENT AUTHORITY IS NOT SATISFIED WITH THE GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE-TRUST INASMUCH AS DONATIONS TO OTHER TRUSTS/INSTITUTIONS COULD NOT BE ITS PRINCIPAL OR M AIN CHARITABLE OBJECT, I.E., FOR WHICH THE TRUST IS FORMED. WE AGREE. SO HOWEVER, THE MOOT POINT IS IF THE TRUST OR ITS ACTIVITIES COULD BE REGARDED AS NOT GENUINE ON THAT SCORE. THE TRUST DEED STATES THE OBJECTS FOR WHICH THE TRUST IS FORMED VIDE CLAUSE 4. CLAUSE 4(B ) CLEARLY PROVIDES FOR THE TRUST FUND, INCLUDING THE CORPUS FUND, TO BE APPLIED FOR THE PU RPOSES SPECIFIED IN SUB-CLAUSES (I) TO (V) THEREOF. SUB-CLAUSE (V) IS TOWARD ADVANCEMENT A ND PROMOTION OF ANY CHARITABLE TRUST OR FOR GENERAL PUBLIC UTILITY. THE TRUST FUND IS DEFINED TO INCLUDE DONATIONS RECEIVED BY THE TRUSTEES, INCLUDING TOWARD THE CORP US OF THE TRUST AND, FURTHER, AUTHORIZE THEM TO UTILIZE THE SAME, I.E., THE TRUST FUND, FOR ANY OF THE OBJECTS SPECIFIED IN SUB-CLAUSES (I) TO (V) OF CLAUSE 4(B). THE DONAT IONS TO OTHER CHARITABLE INSTITUTIONS BY THE ASSESSEE WOULD THUS BE IN SATISFACTION OF CLAUS E 4(B) OF ITS OBJECTS AND, FURTHER, AN APPLICATION OF INCOME U/S.11(1)(A). THE ASSESSEE HA S PROVIDED NAMES OF THE FUNDS/INSTITUTIONS TO WHICH DONATIONS HAVE BEEN GIV EN BY IT (PB PAGE 22), AND WHICH INCLUDES WELL ESTABLISHED NAMES, I.E., OF ORGANIZAT IONS INVOLVED IN CHARITABLE WORKS, VIZ. UNICEF, CANCER RESEARCH, HELPAGE INDIA, ETC. I N FACT, WE OBSERVE NO CHARGE OR DOUBT AS TO THE GENUINENESS OF THE DONATIONS, I.E., AS TO THE SAME BEING CIRCULAR OR OF 4 ITA NO.6192/MUM/2012 TEWARI CHARITABLE TRUST VS. DIT(E) THE FUNDS BEING DIVERTED AND NOT FINALLY UTILIZED F OR CHARITABLE PURPOSES, ET. AL. THE REVENUES OBJECTION IS THUS NOT UNDERSTOOD, MUCH LE SS WITHIN THE FRAME WORK OF LAW. 3.4 WE HAVE, AS WOULD BE APPARENT FROM THE FOREGOIN G, REGARDED THE SATISFACTION QUA THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT FUND/INSTITUTION AS AN INDEPENDENT CONDITION, EVEN AS IT IS OPEN TO BE ARG UED THAT THE SAME, I.E., THE SAID SATISFACTION, IS NOT A SEPARATE OR INDEPENDENT COND ITION, AND HAS TO LEAD TO A FINDING AS TO THE NON-FULFILLMENT OF ANY OF THE CONDITIONS SPE CIFIED IN CLAUSES (I) TO (V) OF SECTION 80G(5) INASMUCH AS AN ORDER REJECTING THE APPLICATI ON U/S. 80G(5)(VI) HAS TO RECORD A FINDING TO THAT EFFECT, ALONG WITH THE REASONS FOR THE SAME (R. 11AA(5)). WE DID SO PROCEEDING CONSERVATIVELY, AS NO SEPARATE ARGUMENT/ S ON THIS ASPECT MATTER WAS ASSUMED BEFORE US, WHICH THOUGH COULD HAVE COUNTER ARGUMENT/S AS WELL. FURTHER, WE ARE NOT, WE MAY CLARIFY, OBLIVIOUS OF THE FACT THAT THE ASSESSEE-TRUST HAS AND, FURTHER, AS A MATTER OF REGULAR COURSE, MA DE DONATIONS OUT OF ITS CORPUS FUNDS, THUS DISSIPATING THEM, WHILE THE SAME ARE REQUIRED TO BE RETAINED AND/OR CAPITALIZED, FORMING PART OF THE CAPITAL STRUCTURE OF THE RECIPI ENT. SO HOWEVER, THE SAID COURSE, AS OBSERVED EARLIER, IS PERMISSIBLE UNDER ITS CHARTER AND, BESIDES, WOULD LEAD TO THE INFERENCE OF THE SAME BEING NOT CORPUS FUNDS, I.E., IN ESSENCE, AND THUS NOT ENTITLED TO EXEMPTION U/S. 11(1)(D). THAT IS, WOULD QUALIFY FOR EXEMPTION ONLY SUBJECT TO APPLICATION U/S. 11(1)(A), AND TOWARD WHICH THE ASS ESSEE HAS IN FACT CITED CASE LAW. THE SAME WOULD FURTHER BE A SUBJECT MATTER OF CONSIDERA TION AT THE STAGE OF ASSESSMENT AND NOT AT THE TIME OF GRANT OF APPROVAL U/S. 80-G(5). 4. IN VIEW OF THE FOREGOING, WE HAVE NO HESITATION IN, ACCEPTING THE ASSESSEES CASE, DIRECTING THE COMPETENT AUTHORITY TO GRANT AP PROVAL U/S. 80G(5)(VI) THERETO, VACATING HIS FINDINGS IN THE MATTER. WE DIRECT ACC ORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 21, 2014 SD/- SD/- (B.R.MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' MUMBAI; ( DATED. 21/02/2014 5 ITA NO.6192/MUM/2012 TEWARI CHARITABLE TRUST VS. DIT(E) . ./ SHEKHAR !' # $%&' (' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ) / CIT CONCERNED, MUMBAI 4. *!+ , -. , # -.& , ' / DR, ITAT, MUMBAI BENCH 5. , /0 1 ' / GUARD FILE. !' / BY ORDER, ) / * + (DY./ASSTT. REGISTRAR) , ' / ITAT, MUMBAI