Meenakshi Amma Endowment Trust, Bangalore V. DIT(Exemption), Bangalore

ITA 641/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0644 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-11-2009
• Assessment Year: misc
• Appeal Filed On: 19-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI S PATIL
• Assessee Lawyers: GOUTHAMA
• Keywords: Charitable institution; Cancellation of registration
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

PAGE 1 OF 7 ITA NOS.640 & 641/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B' BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M. ITA NOS.640 & 641/BANG/09 MEENAKSHI AMMA ENDOWMENT TRUST, NO.375, 15TH MAIN, 3RD CROSS, KORAMANGALA, BANGALORE-560 034. - APPELLANT VS THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE. - RESPONDENT APPELLANT BY : SHRI GOUTHAMA RESPONDENT BY : SMT. SWATI S PATIL O R D E R PER GEORGE GEORGE K : THESE APPEALS FILED BY THE ASSESSEE-TRUST IS DIRECTED AGAINST TWO SEPARATE ORDERS OF DIT(EXEMPTI ONS) BOTH DATED 13.4.2009. THE DIT(EXEMPTIONS) BY THE ORDERS HAS DENIED THE BENEFIT OF REGISTRATION U/S 12AA AND HAS NOT GIVEN APPROVAL U/S 80G(5) OF THE ACT. 2. FIRST WE SHALL DEAL WITH THE ISSUE OF GRANTING OF REGISTRATION TO THE TRUST. THE ASSESSEE-TRUST WAS FORMED ON 23.1.2008. THE TRUST FILED AN APPLICATION FOR REGIS TRATION U/S 12A ON 31.10.2008. THE DIT(EXEMPTIONS) WAS OF THE VIEW THAT PAGE 2 OF 7 ITA NOS.640 & 641/BANG/2009 2 THE DESIGNATED OFFICER WAS TO EXAMINE THE 'OBJECTS OF THE TRUST AND GENUINENESS OF THE ACTIVITIES OF THE TRUS T'. HE HELD THAT IN THE INSTANT CASE, AS NO ACTIVITIES HAVE BEE N CONDUCTED, IT IS NOT POSSIBLE TO VERIFY THE GENUINENESS OF THE TRU ST AND DENIED THE BENEFIT OF REGISTRATION U/S 12AA AND CONSEQUENT LY 80G APPROVAL WAS ALSO DENIED. THE ASSESSEE, BEING AGG RIEVED BY THE ABOVE SAID ORDERS OF THE DIT(EXEMPTIONS), HAD FILED THESE APPEALS. 3. THE LEARNED AR DREW OUR ATTENTION TO THE DECISI ON OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST V DIR ECTOR OF INCOME TAX (EXEMPTIONS) 285 ITR 327. THE LEARNE D AR SUBMITTED THAT AT THE TIME OF REGISTRATION, THE LEA RNED DIT(EXEMPTIONS) IS REQUIRED TO LOOK AT THE OBJECTS OF THE TRUST. THE LEARNED DIT(EXEMPTIONS) IS NOT TO LOOK INTO THE SOURCE OF INCOME BUT HAS ONLY TO SEE AS TO HOW THE I NCOME IS APPLIED. IF THE SAME IS APPLIED FOR CHARITABLE REL IGIOUS PURPOSES, THEN THE TRUST IS TO BE ALLOWED REGISTRAT ION. 4. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER OF THE LEARNED DIT(EXEMPTIONS). 5. WE HAVE HEARD BOTH THE PARTIES. ON THE ISSUE O F REGISTRATION U/S 12AA, THE HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST 285 ITR 327 HAS MADE IT CLEAR ABOUT WHAT IS TO BE S EEN BY THE PAGE 3 OF 7 ITA NOS.640 & 641/BANG/2009 3 AUTHORITY GRANTING REGISTRATION AT THE TIME WHEN APP LICATION FOR REGISTRATION IS FILED. IT WILL BE USEFUL TO REPROD UCE THE FOLLOWING OBSERVATIONS OF THE HON'BLE JURISDICTIONA L HIGH COURT:- 'SECTION 11 OF THE ACT DEALS WITH EXEMPTION AVAILABLE TO INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES. EXEMPTION FROM TAX WILL BE ALLOWED ONLY IN RESPECT OF THE INCOME ACTUALLY APPLIED TO THE PURPOSES OF THE TRUST. INCOME DERIVED FROM TRUST PROPERTY MUST BE DETERMINED ON COMMERCIAL PRINCIPLES. IN ORDER TO BE ELIGIBLE FOR THE AFORESAID EXEMPTION THE ASSESSEE HAS TO GET THE TRUST REGISTERED UNDER SECTION 12A OF THE ACT. THE ASSESSEE HAS TO MAKE AN APPLICATION IN THE PRESCRIBED FORM AND COMPLY WITH THE OTHER LEGAL RETIREMENTS MENTIONED IN THE AFORESAID SECTION. ON RECEIPT OF SUCH APPLICATION FOR REGISTRATION THE COMMISSIONER IS UNDER AN OBLIGATION TO FOLLOW THE PROCEDURE PRESCRIBED UNDER SECTION 12AA BEFORE HE GRANTS OR REFUSES REGISTRATION. WHAT HE IS EXPECTED TO DO ON RECEIPT OF SUCH AN APPLICATION IS, HE SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRUST IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION. IN ADDITION TO SECURING INFORMATION IN THE AFORESAID MANNER, IT IS OPEN TO THE COMMISSIONER TO MAKE SUCH ENQUIRIES AS HE DEEMS NECESSARY IN THIS BEHALF. HAVING REGARD TO THE SCHEME OF SECTIONS 11, 12 AND 13 ULTIMATELY WHAT THE COMMISSIONER HAS TO LOOK INTO IS NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER PAGE 4 OF 7 ITA NOS.640 & 641/BANG/2009 4 SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE SATISFACTION OF THE COMMISSIONER SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE AFORESAID PURPOSES WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMPTION. FOR ARRIVING AT SUCH SATISFACTION PRIMARILY HE HAS TO LOOK AT THE OBJECT OF THE TRUST, WHEN THE SAME IS REDUCED INTO WRITING IN THE FORM OF TRUST DEED. IF ON THE DATE OF THE APPLICATION THE TRUST HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E. TOWARDS THE OBJECT OF THE TRUST. THEREFORE, FOR THE PURPOSE OF REGISTRATION UNDER SECTION 12AA OF THE ACT, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED BY THE TRUST. SUB-SECTION (3) OF SECTION 12AA OF THE ACT PROVIDES THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. THEREFORE, SUFFICIENT SAFEGUARD IS PROVIDED UNDER THE ACT FOR PAGE 5 OF 7 ITA NOS.640 & 641/BANG/2009 5 CANCELLATION OF REGISTRATION OBTAINED BY THE ASSESSEE, IN THE EVENT OF ITS MISUSING THOSE PROVISIONS'. 6. IN THE INSTANT CASE, THE TRUST HAS BEEN ESTABLI SHED BY WAY OF TRUST DEED DATED 23.01.2008. AS PER THE TR UST DEED, EACH OF THE TRUSTEES CONTRIBUTED A SUM OF RS.1000/- EACH AS CORPUS OF THE TRUST FUND. WHEN THE SUM HAS BEEN IN TRODUCED AS CORPUS OF THE TRUST FUND, THEN THE SAME CANNOT BE U TILIZED AND ONLY THE INCOME FROM SUCH TRUST FUND CAN BE APPLIED FOR CHARITABLE ACTIVITIES. THE TRUST APPLIED FOR REGIS TRATION ON 31.10.2008. HENCE, AT THE TIME OF APPLICATION FOR THE REGISTRATION, THE TRUST HAS NOT STARTED THE ACTIVIT IES. THE LEARNED DIT(EXEMPTIONS) HAS NOT NOTICED THAT ANY INC OME OF THE TRUST HAS BEEN APPLIED FOR NON-CHARITABLE ACTIV ITIES. BEFORE THE LEARNED DIT(EXEMPTIONS) IT WAS MADE CLEAR THAT THE TRUST WILL DO THE ACTIVITIES AS MENTIONED IN THE TRUST DE ED. HENCE, THERE WAS NO INTENTION OF THE TRUST NOT TO INITIATE CHARITABLE ACTIVITIES. THE OBJECTS OF THE TRUST AS SEEN FROM THE TRUST DEED ARE OF CHARITABLE NATURE. CONSIDERING THE DEC ISION OF THE JURISDICTIONAL HIGH COURT, WE FEEL THAT THE TRUST I S ENTITLED FOR REGISTRATION U/S 12AA. THE GRANTING OF REGISTRATIO N TO THE TRUST IS CONSIDERED AS PROPER AND JUSTIFIABLE AS TH E REVENUE HAS POWER UNDER SUB-SECTION (3) OF SECTION 12AA TO CANC EL THE REGISTRATION IN CASE THE AUTHORITY CONCERNED IS SATI SFIED THAT THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR ARE NOT BEING PAGE 6 OF 7 ITA NOS.640 & 641/BANG/2009 6 CARRIED OUT IN ACCORDANCE OF THE OBJECTS OF THE TRU ST OR INSTITUTION. 7. THE LEARNED DIT(EXEMPTIONS) HAS NOT GRANTED RECOGNITION U/S 80G(5) BECAUSE THE APPLICATION OF T HE TRUST WAS REJECTED FOR REGISTRATION U/S 12AA. ONE OF THE REQ UIREMENTS TO GET RECOGNITION U/S 80G IS THAT THE INCOME OF TH E TRUST SHOULD BE EXEMPT U/S 11 AND 12A OF THE I T ACT. AS WE HAVE ALREADY DIRECTED THAT THE TRUST IS TO BE GRANTED REG ISTRATION; THEREFORE, THE RECOGNITION U/S 80G CANNOT BE REFUSE D ON THE GROUND THAT THE APPLICATION OF THE TRUST FOR REGIST RATION HAS BEEN REJECTED. IF OTHER CONDITIONS ARE SATISFIED T HEN THE LEARNED DIT(EXEMPTIONS) WILL GRANT RECOGNITION TO T HE TRUST U/S 80G(5). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE AGAIN ST REFUSAL OF REGISTRATION IS ALLOWED WHILE THE APPEAL AGAINST REFUSAL OF RECOGNITION U/S 80G(5) IS TREATED AS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 20TH NOVEMBER, 2009. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DTD.20/11/2009 PAGE 7 OF 7 ITA NOS.640 & 641/BANG/2009 7 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT( A) CONCERNED.4. THE CIT CONCERNED. 5. THE DR 6. GUAR D FILE. 7. GF, ITAT, NEW DELHI. MSP/13.11. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.