INSTITUTE MANAGEMENT COMMITEE, Jaipur V. CIT, Jaipur

ITA 625/JPR/2011

• Counselvise Citation: 62523114 RSA 2011
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 13-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Charitable institution; Capital expenditure
• Section: 12A; 12AA; 12; 10; 11

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NO.625/JP/2011 UNDER SECTION 12AA INSTITUTE MANAGEMENT COMMITTEE VS. THE COMMISSIO NER MURLIPURA SCHEME, JAIPUR. OF INCOME-TAX, JAIPUR-III, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : WRITTEN SUBMISSION RESPONDENT BY: SHRI SUNIL MATHUR DATE OF HEARING: 22.11.2011 DATE OF PRONOUNCEMENT: 22.12.2011 ORDER PER SHRI N.L. KALRA, A.M. 1. THE ASSESSEE HAS FILED AN APPEAL AGAINST ORDER O F LD. CIT (III), JAIPUR U/S 12AA OF I.T.ACT DATED 6.4.2011. 2. GROUNDS OF APPEAL RAISED ARE AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE L EARNED COMMISSIONER OF INCOME TAX-III, JAIPUR HAS SERIOUSLY ERRED IN REJEC TING THE APPLICATION FOR GRANT OF REGISTRATION U/S 12A OF THE INCOME TAX ACT , 1961 WITHOUT GIVING ADEQUATE AND PROPER OPPORTUNITY TO THE APPELLANT. 2 THE LEARNED COMMISSIONER OF INCOME TAX-III, JAIPUR HAS FURTHER ERRED IN REJECTING THE APPLICATION BY ISSUING ONLY ONE NOTIC E WHEN THE SAME WAS NOT SERVED ON THE PROPER PERSON. 3. THE LD. CIT HAS NOT ALLOWED REGISTERATION AFTER OBSERVING AS UNDER: AS THE SANSTHAN HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES, SINCE ITS CREATION, A SHOWN CAUSE LETTER VIDE NO.2485 DATED 0 3.02.2011 FIXING THE DATE TO FILE REPLY BY 18.02.2011, WAS SENT THROUGH REGD. A.D. ON THE REGD. OFFICE AS MENTIONED IN FORM NO.10A & TRUST DEED SEE KING EXPLANATION AS TO WHY ITS APPLICATION FOR REGISTRATION U/S 12A(A) OF THE I.T. ACT, 1961 BE NOT REJECTED, IN THE LIGHT OF THE JUDGMENT OF HONB LE KERALA HIGH COURT REPORTED IN 247 ITR 18 (KER) IN THE CASE OF SELF EM PLOYERS SERVICE SOCIETY VS. CIT. BUT THIS LETTER WAS RECEIVED WITH THE REMA RKS, BY THE POSTAL AUTHORITIESINCOMPLETE ADDRESS. ANOTHER SHOW CAUSE LETTER PROVIDING FINAL OPPORTUNITY WAS ISSUED ON THE OTHER ALTERNATI VE ADDRESS OF ITS FOUNDER TRUSTEE NAMELY SH. OM PRAKASH SINGH, B-425, MURLIP URA SCHEME, JAIPUR BY REGD. A.D. VIDE NO.2868 DATED 15.3.2011 WHICH WA S DULY SERVED. HOWEVER THERE WAS NO RESPONSE IN ANY MANNER, NOR WA S ANY ADJOURNMENT SOUGHT. THE APPLICATION/DETAILS IN FORM NO.10A WAS CONSIDER ED. THERE IS NO EVIDENCE OF ANY ACTIVITY HAVING BEEN CARRIED OUT, L EAVE APART THE ACTIVITIES AS PER SEC. 2(15) OF THE I.T. ACT. THE APPLICANT HA S ALSO NOT FURNISHED REQUISITE DETAILS DESPITE THE OPPORTUNITY PROVIDED. 4. BEFORE US THE LD. A/R SUBMITTED AS UNDER: THE ASSESSEE SOCIETY VIDE APPLICATION FORM 10A FILE D APPLICATION FOR GRANTING REGISTRATION U/S 12A ON 20.10.2011 ALONGWI TH THE CERTIFIED COPY OF REGISTRATION CERTIFICATE ISSUED UNDER RAJASTHAN SOCIETY REGISTRATION ACT, 1958, OBJECTS AND BY LAWS OF THE SOCIETY, COMPLETE LIST OF PRESENT OFFICE BEARER AND MEMBERS OF THE SOCIETY. FROM THE PERUSAL OF THE MAIN OBJECTS OF THE SOCIETY , IT IS EVIDENT THAT THE SOCIETY IS EXISTING SOLELY AND EXCLUSIVELY FOR THE PURPOSE OF IMPARTING EDUCATION AND NOT FOR THE PURPOSE OF PROFITS. WHILE REJECTING THE APPLICATION U/S 12A LD. CIT(A) HAS ALLEGED THAT ASSESSEE HAS NOT AVAILED THE OPPORTUNITY OF BEING H EARD INSPITE OF SERVICE OF NOTICE, WHEN THE NOTICE IN QUESTION WAS NOT SERV ED ON THE PROPER PERSON. THE ASSESSEE EDUCATIONAL SOCIETY FULFILLS ALL THE C ONDITIONS PRESCRIBED U/S 11 AND 13 AND THE ASSESSEE SOCIETY AFTER FILING APP LICATION IN FORM 3 NO.A HAS STARTED PRIMARY CLASSES IN A RENTED BUIL DING. THE ASSESSEE SOCIETY IS IN THE LOOK OUT OF A SUITABLE BUILDING W HERE GOOD NUMBER OF STUDENTS COULD BE ACCOMMODATED, BUT SO FAR NO PROPE R PLACE HAS BEEN FOUND BEING IN RURAL AREA. THE SOCIETY IS ALSO PLAN NING TO BUILD ITS OWN PREMISES BUT BECAUSE OF PAUCITY OF FUNDS WHICH WOUL D BE AVAILABLE ONLY AFTER REGISTRATION IS GRANTED. FURTHER THE LIMITATION FOR DISPOSAL OF THE APPLICAT ION U/S 12A FILED ON 20.10.2010 WAS EXPIRING ON 30.4.2011 (I.E. WITH SIX MONTHS) THUS IN ORDER TO DISPOSE OF APPLICATION AT THE FAG-END OF THE AVA ILABLE PERIOD LD. CIT (A) MADE NO ENQUIRIES AND WITHOUT PROVIDING ADEQUATE OP PORTUNITY TO ASSESSEE TO EXPLAIN THE CASE, IN A HASTE MANNER REJ ECTED THE APPLICATION. FROM THE PERUSAL OF PROVISIONS AS CONTAINED IN SECT ION 12AA(1) IT APPEARS THAT WHILE GRANTING THE REGISTRATION LD. CIT CAN MA KE ENQUIRIES ABOUT THE GENUINENESS OF THE OBJECTS AND ACTIVITIES OF THE TR UST AND AFTER SATISFYING EITHER GRANT OR REJECT THE REGISTRATION. NO SUCH AC TION WAS TAKEN AND ONLY ON THE BASIS OF ONE NOTICE DATED 15.3.2011 WHICH TO O WAS NOT SERVED ON THE PROPER PERSON, THE APPLICATION WAS REJECTED IN HAST E, GETTING TIME BARRED. IN THIS REGARD RELIANCE IS PLACE ON THE DECISION OF HONBLE DELHIABENCH OF ITAT IN THE CASE OF ARYAN EDUCATIONAL SOCIETY VS . CIT REPORTED IN 93 ITD 546 WHEREIN IT HAS BEEN HELD AS UNDER: SECTION 12A READ WITH SECTION 2(15) OF THE INCOME TAX ACT, 1961- CHARITABLE OR RELIGIOUS TRUST-REGISTRATION OF-ASSES SEE SOCIETY WAS REGISTERED WITH OBJECT OF IMPARTING EDUCATION BY RU NNING SCHOOLS-IN 2001, IT APPLIED FOR REGISTRATION U/S 12A-COMMISSIONER HO WEVER REJECTED ASSESSEES APPLICATION HOLDING THAT ASSESSEE-INSTIT UTION WAS ENGAGED IN PROFIT MAKING IN THE NAME OF EDUCATION AS IT WAS GE NERATING SURPLUS OUT OF HEAVY FEES RECEIVED FROM STUDENTS-WHETHER SO LONG A S PROVISIONS OF SECTION 11,12 AND 12A WERE COMPLIED WITH EXEMPTION COULD NO T BE DENIED MERELY BECAUSE SOME PROFIT HAD BEEN EARNED BY ASSESSEE-HEL D YES-WHETHER CONSEQUENTLY REGISTRATION U/S 12A COULD NOT BE REFU SED FOR REASONS GIVEN BY COMMISSIONER-HELD YES. FURTHER THE LD. CIT HAS REJECTED THE APPLICATION OF THE ASSESSEE WITHOUT BRINGING ONLY MATERIAL ON RECORD THROUGH WHICH IT C OULD BE ESTABLISHED THAT ASSESSEE SOCIETY IS NOT FUNCTIONING FOR THE AT TAINMENT OF ITS MAIN OBJECTS, THUS THE SOCIETY IS ELIGIBLE FOR REGISTRAT ION U/S 12A, PARTICULARLY WHEN ONLY ONE NOTICE WAS SERVED AND THAT TWO ON A W RONG PERSON. IN VIEW OF THE HUMBLE SUBMISSIONS MADE ABOVE, THE S OCIETY PRAYS THAT THE REGISTRATION MAY KINDLY BE GRANTED TO ENABLE THE AS SESSEE SOCIETY TO ACTIVATE THE OBJECTS IN FULL SWING AND BENEFIT THE CHILDREN OF THE DOWN TRODDEN CLASS BELONGING TO VILLAGE ENVIRONMENT. EVE N THE STATE AND 4 CENTRAL GOVERNMENT ARE KEEN TO BOOST SUCH INSTITUTI ONS AND FUNDS CAN BE MADE AVAILABLE BY THEM ONCE THE INSTITUTION IS STAR TED. IT MAY ALSO BE WORTHWHILE TO RESPECTFULLY SUBMIT HE RE THAT AS PER RULES THE SOCIETY SHALL BE UNDER COMPLETE CONTROL OF THE STAT E GOVERNMENT IN TERMS OF CLAUSE (XI) WHEREIN THE INDUSTRY PARTNER HAS B EEN DEFINED WHICH MEANS ORGANIZATION SELECTED BY THE STATE GOVERNMENT FOR ASSOCIATING WITH THE TASK OF UP-GRADUATION OF THE INSTITUTION UNDER THE CENTRAL GOVERNMENT SCHEME UPGRADATION OF 1996 GOVERNMENT ITIS THROUGH PUBLIC PRIOR PARTNERSHIP, WHICH GOES TO ESTABLISH THAT THE SOCIE TY SHALL BE UNDER FULL CONTROL AND AUTHORITY OF THE STATE GOVERNMENT. 5. THE LD. A/R RELIED ON THE FOLLOWING JUDGMENTS: (I) MAHARASHTRA ACADEMY OF ENGINERRING AND EDUCATI ONAL RESEARCH V CIT 1669/PUNE 2007 DATE 8.9.2008 PUNE I.T.A.T. (II) CIT VS. KRISHI UTPADAN MANDI SAMITI [ITA NOS.8 0 TO 83 OF 2007, DATED 02.12.2009] (ALL.) [SOURCE: INCOME TAX TRIBUNAL DEC ISIONS VOL.122] WHERE A TRUST/INSTITUTION FULFILS ALL CONDITIONS OF SECTION 12A/12AA, REGISTRATION CANNOT BE DENIED ON GROUND THAT SOME C ONDITIONS OF SECTIONS 11 AND 12 ARE NOT FULFILLED. (III) 189 TAXMAN 106 CIT VS. SHRI DIGAMBER JAIN MA NDIR (RAJ.) WHETHER INSTITUTIONS OF RELIGIOUS NATURE CAN CLAIM REGISTRATION U/S 12A- HELD, YES-WHETHER IN ORDER TO BE ABLE TO GET REGIST RATION UNDER SECTION 12A, INSTITUTIONS/TRUST IS REQUIRED TO ESTABLISH AS TO HOW IT WOULD BE ABLE TO CLAIM EXEMPTION UNDER SECTIONS 11 AND 12-HELD, NO-W HETHER STATEMENT OF ASSESSEE BEFORE COMMISSIONER, THAT PURPOSE OF ITS S EEKING REGISTRATION UNDER SECTION 12A WAS TO GET APPROVAL UNDER SECTION 80G, WOULD NOT COME IN ITS WAY OF SEEKING REGISTRATION U/S 12A, IF OTHE RWISE A CASE FOR SUCH REGISTRATION WAS MADE OUT-HELD, YES. (IV) 37 DTR 105 PINEGROVE INTERNATIONAL CHARITABLE TRUST & ORS. VS. UNION OF INDIA & ORS. (P&H) EXEMPTION U/S 10(23C)(VI)-EDUCATIONAL INSTITUTION-P ROFIT MOTIVE- EVEN IF THERE REMAINS A SURPLUS AT THE HANDS OF THE EDUCATI ONAL INSTITUTION, IT WOULD BE ENTITLED TO EXEMPTION UNDER S. 10(3\23C)(V I) PROVIDED THE EDUCATIONAL INSTITUTION SOLELY EXISTS FOR EDUCATION AL PURPOSES-CAPITAL EXPENDITURE HAS TO BE DEDUCTED FROM THE GROSS INCOM E OF THE EDUCATIONAL INSTITUTION IN DETERMINING WHETHER 85 PER CENT OF T HE INCOME HAS BEEN APPLIED FOR ITS OBJECTS. (V) 315 ITR 48 CITY MONTESSORI SCHOOL (REGD.) VS. UNION OF INDIA (ALL.) S.10(23C)(VI) EDUCATIONAL INSTITUTION EXEMPTION UNDER SECTION 10 (23C)(VI)- SOCIETY PROVIDING NOT ONLY TRADITIONAL E DUCATION BUT ALSO PREPARING STUDENTS BY PROVIDING GUIDELINES TO GET A DMISSIONS IN PROFESSIONAL INSTITUTIONS TO PURSUE THEIR HIGHER ST UDIES-SOCIETY ENGAGED IN EDUCATIONAL ACTIVITIES FALLING UNDER CHARITABLE PU RPOSE SOCIETY SATISFYING ALL STATUTORY REQUIREMENTS FOR GETTING E XEMPTION UNDER SECTION 5 10(23C)(VI)- NO MATERIAL TO PROVE SURPLUS EARNED BY SOCIETY UTILIZED FOR PERSONAL PROFIT OR GAIN OF ANYONE INCLUDING FOUNDER MANAGER/DIRECTOR- CHIEF COMMISSIONER DIRECTED TO GRANT APPROVAL UNDER SECTION 10(23C)(VI). 6. ON THE OTHER HAND THE LD. D/R SUPPORTED THE ORDE R OF THE LD. CIT. 7. WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT SHOU LD CONSIDER THE OBJECTS FOR WHICH THE SOCIETY IS FORMED. IN THE FIRST YEAR, THE SOCIE TY MAY NOT BE ABLE TO GET THE FUNDS UNLESS IT GETS REGISTERATION. IT IS SUBMITTED BEFORE US TH AT FUNDS MAY BE MADE AVAILABLE BY STATE AND CENTRAL GOVT. HENCE WE RESTORE THE REGISTERATIO N ISSUE ON THE FILE OF CIT TO ALLOW REGISTERATION IN CASE THE OBJECTS ARE CHARITABLE AN D ASSESSEE HAS NOT DONE ANY ACTIVITY AGAINST THE OBJECTS. 8. THE MATTER IS RESTORED BACK AND THE APPEAL IS AL LOWED FOR STASTICAL PURPOSES. THE ORDER IS PRONOUNCED IN OPEN COURT ON 22.12.201 1 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22.12.2011 *S.KUMAR* COPY FORWARDED TO:- 1. INSTITUTE MANAGEMENT COMMITTEE, JAIPUR. 2. THE COMMISSIONER OF INCOME TAX, JAIPUR-III, JAIP UR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NO.625/JP/2011 BY ORDER SR. PRIVATE SECRETARY