M/S JAIN KASUR PARIVAR TRUST, LUDHIANA V. COMMISSIONER OF INCOME TAX, ( EXAMPTION), CHANDIGARH

ITA 641/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 7750 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-04-2019
• Assessment Year: 2017-2018
• Appeal Filed On: 25-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP C HAUHAN LD
• Assessee Lawyers: K R JAIN LD
• Keywords: Charitable institution; Opportunity of being heard; Principle of natural justice; Set aside
• Section: 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.641 (ASR)/2017 ASSESSMENT YEAR:201 7-18 M/S JAIN KASUR PARIVAR TRUST, LUDHIANA. [PAN:AACTJ 4502G] VS. CIT (EXEMPTIONS), CHANDIGARH (APPELLANT) (RESPONDENT) APPELLANT BY : SH. K.R. JAIN (LD. ADV.) RESPONDENT BY: SH. SANDEEP CHAUHAN (LD. CIT- DR) DATE OF HEARING: 04.04.2019 DATE OF PRONOUNCEMENT: 23.04.2019 ORDER PER N.K.CHOUDHRY, JM: THE INSTANT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE/TRU ST AGAINST THE ORDER DATED 27.07.2017 PASSED BY THE LD. CIT (EXEMPTIONS), CHANDIGARH, U/S 12AA(1)(B)(II) OF THE I .T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT), WHEREBY THE LD. CIT (E) REJECTED THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT. 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL. 1. THAT THE ORDER OF THE LD. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2, LUDHIANA U/S 271AA OF THE INCOME TAX ACT, IMPOSING A PENALTY OF RS.37,648/- IS ARBITRARY, UNJ USTIFIED AGAINST EQUITY AND NATURAL JUSTICE. 2. THE APPEAL IS WITHIN TIME. 3. THE APPELLANT CRAVES RIGHT TO ADD ANY GROUND OF HEARING AT THE TIME OF HEARING. ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 2 3. THE APPELLANT HAS ALSO RAISED THE ADDITIONAL GROUNDS OF APPEAL. 1 . THAT THE LD. CIT(E) HAS ERRED IN LAW AND ON FACTS WHILE REJECTING THE APPLICATION FOR REGISTRATION U/S 12A. 2. THAT ON FACTS OF THE CASE CIT(E) IS NOT LEGALLY JUSTIFIED IN HOLDING THAT LACK OF DISSOLUTION CLAUSE AND BENEFIT CONFIRMED TO RESTRICTED GROUP IS ERRONEOUS AND AGAINST THE FACTS ON RECORD. THE ABOVE MENTIONED ADDITIONAL GROUNDS ARE PURELY L EGAL IN NATURE FOR WHICH ALL RELEVANT FACTS ARE ON RECORD. THEREFORE, THE SAME MAY KINDLY BE ADMITTED. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGMENT O F THE HONBLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 220 ITR PAGE 183. 4. AS THE ADDITIONAL GROUND RAISED BY THE ASSESSEE DO NOT INVOLVE ANY ADDITIONAL DOCUMENT AND/OR SUBMISSIONS TO SUB STANTIATE ITS CLAIM THEREFORE, IN VIEW OF THE DICTUM OF APEX COU RT IN NTPC LTD. VS. CIT, 229 ITR 383 (SC), THE ADDITIONAL GROUNDS ARE ADMITTED. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TRUST VI DE APPLICATION DATED 30.01.2017 FILED BEFORE THE LD. CI T(E), CHANDIGARH SOUGHT REGISTRATION U/S 12A OF THE INCOME TA X, 1961. THE APPLICATION OF THE ASSESSEE WAS TAKEN INTO CONSIDERATIO N BY THE LD. CIT(E) AND THE OPPORTUNITY OF BEING HEARD WAS G IVEN TO THE ASSESSEE/TRUST BY FIXING THE CASE ON 13.06.2017 AND THEREA FTER VIDE SHOW CAUSE NOTICE 03.07.2017 SOUGHT CERTAIN CLARI FICATIONS/ DOCUMENTS AS MENTIONED IN PARA 5 OF THE IMPUGNED ORDE R. 5.1 IN RESPONSE TO THE SAID SHOW CAUSE NOTICE, THE ASSESSEE VIDE REPLY DATED 30.06.2017 SUBMITTED THE DOCUMENTS DEMANDE D AND ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 3 ALSO ANSWERED THE QUERY RAISED BY THE LD. CIT(E). THE LD. CIT(E) AFTER PERUSAL OF THE REPLY OF THE ASSESSEE TRUST, REJECTED THE APPLICATION OF THE ASSESEE TRUST. FOR THE SAKE OF BREVITY AND READY REFERENCE THE CONCLUDING PART OF THE ORDER IS REPRODUCED HEREIN BELOW. 6. NO ONE ATTENDED ON THE DATE FIXED. HOWEVER A REPLY DATED 30.06.2017 WAS RECEIVED ON 03.07.2017 IN RESPONSE T O THE QUERY RAISED THROUGH THE SHOW CAUSE LETTER. AT 'PARA 9' O F THE REPLY DATED 30.06.2017 THE APPLICANT SELF CONFESSEDLY ADM ITTED THAT THE TRUST HAS BEEN FORMED FOR THE PURPOSE OF RELIGI OUS ACTIVITIES I.E. ADHIYATMIK SADHANA, PRAYER AND AT PRESENT TEMP LE HAS BEEN CONSTRUCTED. THE APPLICANT CLAIMED THAT THE ACTIVIT IES OF THE TRUST ARE TOTALLY RELIGIOUS AND CHARITABLE AND THE FUNDS HAVE BEEN UTILIZED FOR CONSTRUCTION OF ARADHANA BHAWAN/ PRAYE R CENTER CUM TEMPLE FOR THE USE OF PUBLIC FOR PRAYER, PRAVACHAN, BHAJAN KIRTAN AND DISCUSSION OF SPIRITUAL AND RELIGIOUS SUBJECTS. ON THE BASIS OF DOCUMENTS ON RECORD AND THE REPLY SUBMITTED BY THE APPLICANT ANOTHER SHOW CAUSE LETTER DATED 20.07.2017 WAS ISSU ED RAISING THE FOLLOWING ADDITIONAL QUERIES AND REQUESTING TO SUBMIT THE REPLY ON 24.07.2017:- (I) EXPLANATION AS TO HOW CONSTRUCTION OF TEMPLE/ PRAYE R HALL ETC. AMOUNTS TO CHARITABLE PURPOSE AS ENVISAGED IN SECTION 2(15) OF THE INCOME TAX ACT. ? (II) WHETHER THE APPLICATION FOR REGISTRATION U/S 12AA H AS BEEN FILED FOR THE FIRST TIME? FATE OF APPLICATION FILED EARLIER ENCLOSING A COPY OF THE ORDER PASSED BY THE INCOME TAX AUTHORITY FOR APPROVING/REJECTING ANY SUCH APPLICAT ION IN THE PAST. (III) MOA CONTAINS SEVERAL CLAUSES UNDER AIMS AND OBJECT S AT POINT 4(I) TO 4(XIII). EXPLANATION REGARDING ACTIVI TIES PURSUED VIS-A-VIS EACH OBJECTS ENUMERATED AT POINT 4 OF THE MOA. (IV) CLARIFICATION FOR THE CLAIM OF REGISTRATION U/S 12A A OF TIRE ACT IN ABSENCE OF DISSOLUTION CLAUSE IN THE MOA OF THE TRUST IN THE LIGHT OF SECTION 13(1)(C) OF THE ACT. ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 4 7. THE APPLICANT SUBMITTED THE REPLY TO THE QUERY R AISED VIDE ITS LETTER DATED 22.07.2017. IT HAS BEEN SELF CONFESSED LY ADMITTED BY THE APPLICANT THAT TIRE ACTIVITIES OF THE TRUST ARE AS PER CLAUSE 4(IX) AND 4(XII) OF THE TRUST DEED WHICH ARE FOR THE PERF ORMANCE OF REGULAR DHIAN, SADHNA, PRAYERS AND BHAJAN SANDHYA A ND PREACHINGS ON THE CONCEPT OF AHIMSA. THE APPLICANT HOWEVER DID NOT EXPLAIN THAT HOW SUCH ACTIVITIES FALL IN TIRE C ATEGORIES OF 'CHARITABLE PURPOSE' AS ENVISAGED IN SECTION 2(15) OF THE I.T. ACT. FINANCIAL STATEMENTS FOR THE LAST THREE YEARS REVEA L THAT THE APPLICANT TRUST HAS RECEIVED INCOME ONLY THROUGH BA NK INTEREST. DONATIONS RECEIVED HAVE BEEN UTILIZED FOR THE CONST RUCTION OF TEMPLE TREATING THE SAME AS CORPUS FUND. THE ACTIVI TIES OF THE APPLICANT TRUST DO NOT ENURE TO BE CHARITABLE IN NA TURE AND BY THE VERY NAME 'JAIN KASUR PARIVAR TRUST' ITSELF IT APPE ARS TO BE A FAMILY TRUST PURSUING RELIGIOUS ACTIVITIES OF A PRI VATE NATURE. 8. NOTWITHSTANDING THE ABOVE, THE PAPERS SUBMITTED W ERE EXAMINED. IT IS OBSERVED FROM THE COPY OF TRUST DEE D THAT IT DOES NOT INCLUDE DISSOLUTION CLAUSE. THE PROVISIONS OF S ECTION 13(L)(C) OF THE IT ACT STATES THAT 'IN CASE OF A TRUST/ SOCIETY FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INS TITUTION, ANY INCOME THEREOF (I) IF SUCH TRUST OR INSTITUTION IRAS BEEN CREATED OR E STABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TE RMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, A NY PART OF SUCH INCOME ENURES, OR (II) IF ANY PART OF INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) IS DU RING THE PREVIOUS USED OR APPLIED, DIRECTLY OR INDIRECTLY FO R THE BENEFIT OF ANY PERSON REFERRED TO IN SUB-SECTION (3 ):' IN THE ABSENCE OF THE DISSOLUTION CLAUSE, THE PRESU MPTION OF THE LAW IS THAT THE ASSETS AND LIABILITIES OF THE T RUST WILL BE DISTRIBUTED AMONGST TIRE MEMBERS OF THE TRUST IN CA SE THE ENTITY CLOSES ITS OPERATIONS OR IS DISBANDED. THE PROVISIONS OF SECTION 13(L)(C) OF THE ACT ARE CLEARLY ATTRACTED WITHOUT THIS DISSOLUTION CLAUSE. THERE IS NO SATISFACTORY RESPON SE ON THE ISSUE OF LACK OF DISSOLUTION CLAUSE IN THE TRUS T DEED. 9. IN VIEW OF THE ALL THE ABOVE THE GENUINENESS OF ACTIVITIES AND THAT OF TIRE TRUST CANNOT BE ASCERTAINED. THE LACK OF 'DISSOLUTION CLAUSE' CLEARLY IMPINGES ON THE PUBLIC CHARITABLE C HARACTER ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 5 OF THE APPLICANT WHICH IS A SINE QUA NON, IN CASES SEEKING EXEMPTION FROM TAXATION . NOT ONLY DOES IT RENDER THE DEED RESTRICTIVE AND NOT ENSURING TO THE BENEFIT OF GENE RAL PUBLIC, IT FURTHER EXACERBATES THE ISSUE THAT THE BENEFITS OF THE ENTITY IS CONFINED TO A RESTRICTED GROUP. NO EVIDENCE HAS BEE N ADDUCED IN FAVOUR OF TIRE ENTITY EXISTING FOR THE BENEFIT OF T HE GENERAL PUBLIC. THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA IN THE PRESENT CASE IS ACCORDINGLY REJECTED. 6. THE ASSESSEE ON BEING AGGRIEVED AGAINST THE ORDER OF TH E LD. CIT(E) FILED THE INSTANT APPEAL. 7. HAVING HEARD THE PARTIES AT LENGTH AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. FROM THE CONCLUDING PART AS REFERR ED ABOVE OF THE ORDER IMPUGNED, IT REFLECTS THAT THE LD. CIT(E) D ECLINED THE REGISTRATION MAINLY ON THE FOLLOWING GROUNDS : (I) THAT THE ACTIVITIES OF THE TRUST, AS PER CLAUSE 4(I X) AND 4 (XII) OF THE TRUST DEED ARE FOR THE PERFORMANCE OF RE GULAR DHIAN, SADHANA, PRAYERS AND BHAJAN SANDHYA AND PREACHINGS ON THE CONCEPT OF AHINSA. HOWEVER, THE APPELLANT DID NOT EXPLAIN THAT HOW SUCH ACTIVITIES FALL S IN THE CATEGORIES OF CHARITABLE PURPOSE AS ENVISAGED IN SECTION 2(15) OF THE I.T. ACT. (II) FINANCIAL STATEMENTS FOR THE LAST THREE YEARS REVE AL THAT THE APPLICANT TRUST HAS RECEIVED INCOME ONLY THROUGH BANK INTEREST. DONATIONS RECEIVED HAVE BEEN UTILIZED F OR THE CONSTRUCTION OF TEMPLE TREATING THE SAME AS CORPUS FUND. ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 6 (III) THE ACTIVITIES OF THE APPLICANT TRUST DO NOT ENSURE TO B E CHARITABLE IN NATURE AND BY THE VERY NAME. JAIN KASU R PARIVAR TRUST ITSELF IT APPEARS TO BE A FAMILY TRUST PURSUING RELIGIOUS ACTIVITIES OF A PRIVATE NATURE. (IV) TRUST DEED DOES NOT INCLUDE THE DISSOLUTION CLAUSE. 7.1 OUR ATTENTION WAS DRAWN TO THE AIMS AND OBJECTS OF THE TRUST WHEREIN XIII AIMS AND OBJECTS HAVE BEEN INCLUDED IN THE TRUST DEED. IN THE ORDER, IT IS OBSERVED BY THE LD. CIT(E) THAT T HE ASSESSEE TRUST HAS BEEN FORMED FOR THE PURPOSES OF RELIGIOUS ACTIVITIE S I.E., DHIAN, SADHANA, PRAYER, BHAJAN SANDHYA AND PREACHINGS AND AT PRESENT TEMPLE HAS BEEN CONSTRUCTED. FURTHER AS CLAIMED BY THE A SSESSEE, THE FUNDS HAVE BEEN UTILIZED FOR CONSTRUCTION OF ARADHA NA BHAWAN/PRAYER CENTER CUM TEMPLE FOR THE USE OF PUBLIC F OR PRAYER, PRAVACHAN, BHAJAN KIRTAN AND DISCUSSION OF SPIRITUAL AND RELIGIOUS SUBJECTS, WHICH GOES TO SHOW THAT THE ASSESSEE IS CARRYING OUT CERTAIN ACTIVITIES WHICH CAN BE TERMED AS RELIGIOUS ACTIVI TIES BUT IN OUR CONSIDERED OPINION CAN ALSO BE CONSTRUED AS A CHARITABL E ACTIVITIES. AS THERE IS NO BAR IN GRANTING A REGISTRATI ON U/S 12AA OF THE ACT TO THE APPLICATION TRUST FOR RELIGIOUS PURPOSES, THEREFORE, WE ARE NOT IN AGREEMENT WITH THE OBSERVATIONS OF THE IMP UGNED ORDER AS MENTIONED BY US IN PARA NOT 7(I) AND 7(II). 7.2 NOW COMING TO THE OBJECTION WITH REGARD TO THE NAME OF THE TRUST WHEREBY THE LD. CIT(A) HAS HELD THAT FROM THE V ERY NAME OF THE TRUST, IT APPEARS TO BE FAMILY TRUST PURSUING RELIG IOUS ACTIVITIES OF A PRIVATE NATURE. THIS OBSERVATION IS AGAINST THE A IMS AND OBJECTS OF THE ASSESSEE TRUST. IN OUR CONSIDERED VIEW, THE AIMS AND OBJECTS CANNOT BE DETERMINED ON THE BASIS OF NAME OF THE TRUST, UNTIL AND UNLESS THERE MUST BE SOME RESTRICTIONS, IN ENSUING THE AIMS AND ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 7 OBJECTS AND TRUST'S ACTIVITIES ARE OF PRIVATE IN NATURE WHICH WE REALIZED FROM ACTIVITIES AND THE AIMS AND OBJECTS OF THE ASSESSEE TRUST DO NOT APPEARS SO, AS HELD BY THE LD. CIT(A), HEN CE, THE SAID GROUND OF REJECTION IS ALSO NOT SUSTAINABLE. 7.3 NOW COMING TO THE 4 TH GROUND WHICH RELATES TO ABSENCE OF DISSOLUTION CLAUSE IN THE TRUST DEED, OUR ATTENTION WAS DRAWN BY MR. K R JAIN (LD A.R. OF THE ASSESSEE) TO THE MEMORANDUM OF ASSOCIATION AND RULES AND REGULATION OF TRUST, WHEREIN IN PARA NO.45 THE DISSOLUTION CLAUSE HAS BEEN MENTIONED INDIRECTL Y, WHICH FOR THE SAKE OF READY REFERENCE IS REPRODUCE HEREIN BEL OW. TRUST IRREVOCABLE THE TRUST HEREBY DECLARED AND CREATED SHALL BE AND REMAIN IRREVOCABLE FOR ALL TIMES. HOWEVER, BY A UNANIMOUS DECISION OF ALL THE LIFE TRUSTEES, THE SA ME MAY MERGE INTO/AMALGAMATE WITH ANY OTHER TRUST OR SOCIETY ETC. HAVING INTER ALIA THE SAID OR SIMILAR OBJECTS. SO FROM THE CLAUSE NO.45 OF THE TRUST DEED, THE DISSOLUT ION CLAUSE IS EXISTS HENCE THE INSTANT GROUND OF REJECTION IS A LSO NOT SUSTAINABLE. 7.4 THE LD. CIT(E) IN THE CONCLUDING PART OF ITS ORDER AL SO OBSERVED THAT NO EVIDENCE HAS BEEN ADDUCED IN FAVOUR OF THE ENTITY EXISTING FOR THE BENEFIT OF THE GENERAL PUBLI C. FROM THE AIMS AND OBJECTS, IT CLEARLY REFLECTS THAT THERE IS NO RE STRICTION FOR ANY CASTE, COLOUR, CREED, SECTOR, SEX, AGE AND/OR OTHER N ATURAL OR MAN-MADE DIFFERENCES AND FURTHER THE AIMS AND OBJECTS OF THE TRUST IS BENEFICIAL TO THE PUBLIC AT LARGE, HENCE THIS G ROUND OF REJECTION IS ALSO NOT SUSTAINABLE. ITA NO.641 (ASR)/2017 M/S. JAIN KASUR PARIVAR TRUST VS. CIT(E) 8 7.5 ON THE AFORESAID ANALYZATION AND OBSERVATIONS, WE ARE INCLINED TO SET ASIDE THE ORDER PASSED BY THE LD. CIT(E) AND TO ALLOW THE APPEAL OF THE ASSESSEE TRUST. CONSEQUENTLY THE LD. CIT(A) IS DIRECTED TO GRANT THE EXEMPTION U/S 12AA OF THE ACT TO THE ASSESSEE TRUST, FROM THE DATE OF APPLICATION, HOWEVER WE CLARIFY THAT THE LD. CIT(E) SHALL BE AT LIBERTY TO IM POSE CONDITION(S) IF ANY, FOUND SUITABLE AND APPROPRIATE, UNDER THE PECULIAR FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE TRUST STA NDS ALLOWED. ORDER PRONOUNCE IN THE OPEN COURT ON 23.04.2019 SD/- SD/- (SANJAY ARORA) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 23.04.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) M/S M/S JAIN KASUR PARIVAR TRUST, LUDHIANA (2) THE CIT (EXEMPTION), CHANDIGARH (3) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER