PRAGAT PRATISHTHAN, MUMBAI V. DIT (E), MUMBAI

ITA 6445/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7570 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: misc
• Appeal Filed On: 01-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: ARUN SATHE
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA.6445/MUM/2010 PRAGATI PRATISHTHAN, 17, CHANCHAL SMRUTI, G.D. AMBEDKAR MARG, WADLA, MUMBAI -400 031 ...... APPELLANT VS THE DIRECTOR OF INCOME-TAX (EXEMPTION), ROOM NO.616, 6TH FLOOR, PIRAMAL CHAMBER, PAREL, MUMBAI -400 012 ..... RESPONDENT PAN: AAATP 3595 P APPELLANT BY: SHRI ARUN SATHE & MS. AARTI SATHE RESPONDENT BY: SHRI A.K. NAYAK DATE OF HEARING: 24.01.2012 DATE OF PRONOUNCEMENT: 21.03.2012 O R D E R PER R.S. PADVEKAR, JM : IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. DIRECTOR OF INCOME-TAX (EXEMPTION), MUMB AI DATED 01.07.2010 PASSED U/S.80J OF THE INCOME-TAX ACT DEC LINED TO GRANT THE APPROVAL UNDER SAID SECTION. THE ASSESSEE HAS TAKEN THE MULTIPLE GROUNDS, WHICH READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE DIRECTOR OF THE INCOME-TAX (EXEMPTION) (HE REINAFTER REFERRED TO D.I.T.(E)) ERRED IN REFUSING TO GRANT , FOR CONTINUATION OF RECOGNITION TO THE APPELLANT-TRUST UNDER SECTION 80G OF THE INCOME-TAX ACT, 1961 (HEREINAFTE R SAID THE ACT) ON THE GROUND THAT THE OBJECT OF THE TRU ST CAME TO BE AMENDED VIDE SCHEDULE-III SUBMITTED TO THE CHARI TY COMMISSIONER ON 6TH JUNE, 2006. IT IS SUBMITTED TH AT THIS ITA 6445/M/2010 PRAGATI PRATISHTHAN 2 AMENDMENT WAS ALLOWED BY THE DEPUTY CHARITY COMMISSIONER, GREATER MUMBAI REGION, MUMBAI ON 16TH OCTOBER, 2007. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE ORDER PASSED BY THE LEARNED D.I.T.(E), MUMBAI, UNDER SECT ION 80G OF THE ACT AND ALSO THE ORDER CANCELLING THE RE GISTRATION UNDER SECTION 80G OF THE ACT AND ALSO THE ORDER CAN CELLING THE REGISTRATION UNDER SECTION 12A OF THE ACT AND R EFUSING TO GRANT A CERTIFICATE OF EXEMPTION UNDER SECTION 80G OF THE ACT IS BAD-IN-LAW AND WITHOUT ANY JURISDICTION AND CONT RARY TO THE PROVISIONS OF SECTIONS 12A, 12AA AND SECTION 80 G OF THE ACT. 3. THE LEARNED D.I.T.(E) FAILED TO APPRECIATE THAT BY THE SAID AMENDMENT TO THE OBJECTS CLAUSE, THERE WAS NO DELET ION IN THE ORIGINAL OBJECTS CLAUSE AND THE SAME WAS NOT DETRIMENTAL TO THE OBJECTS OF THE APPELLANT-TRUST. THE AMENDMENT WAS PURELY MADE FOR THE SMOOTH WORKING OF THE APPELLANT-TRUST, AND IT IS IN THE NATURE OF A SUPPLEMENTARY OBJECT FOR THE SMOOTH WORKING OF THE APPELLANT-TRUST. 4. THE LEARNED D.I.T.(E) FAILED TO APPRECIATE THAT THERE IS NO SUBSTANTIAL CHANGE IN THE OBJECTS CLAUSE OF THE APP ELLANT- TRUST AND IT CONTINUES TO BE A CHARITABLE TRUST AND FURTHER FAILED TO APPRECIATE THAT THE ADDITION / AMENDMENT WAS ALLOWED BY THE DEPUTY CHARITY COMMISSIONER, GREATER MUMBAI REGION, MUMBAI, WHICH IS PURELY TECHNICAL IN NATURE. 5. THE LEARNED D.I.T.(E) ERRED IN PLACING RELIANCE ON THE JUDGMENTS IN CASE OF SAKTHI CHARITIES VERSUS CIT RE PORTED IN 149 ITR PAGE NO.624 AND IN SAKTHI CHARITIES VERS US CIT IN 182 ITR PAGE NO.483 TO DECIDE THE ISSUE IN THE P RESENT ITA 6445/M/2010 PRAGATI PRATISHTHAN 3 CASE, AND FAILED TO APPRECIATE THAT THE FACTS OF TH E PRESENT CASE IN FACT HE OUGHT TO HAVE APPRECIATE THAT THE F ACTS OF THE PRESENT CASE IN FACT HE OUGHT TO HAVE APPRECIAT ED THAT THE OBSERVATION OF THE HONBLE MADRAS HIGH COURT ON PAGE NO.632 IN JUDGMENT OF SAKTHI CHARITIES VERSUS CIT R EPORTED IN 149 ITR PAGE NO.624 ARE SUPPORTING APPELLANTS C ASE. 2. FACTS: THE ASSESSEE, WHICH IS A TRUST, FILED AN APPLICATION FOR GETTING THE APPROVAL U/S.80G OF THE INCOME-TAX ACT ON 11.01.2010. WHILE PROCESSING THE APPLICATION LD. DIT (EXEMPTION ) NOTICED THAT THE ASSESSEE-TRUST HAS AMENDED THE OBJECTS CLAUSE IN ME MORANDUM OF TRUST. THE LD. DIT (EXEMPTION) ASKED THE ASSESSEE T O FURNISH THE DETAILS OF THE SAID AMENDMENTS AS WELL AS INSERTION OF THE NEW OBJECT CLAUSE WHICH IS INTIMATED TO THE CHARITY COMMISSION ER. THE ASSESSEE- TRUST HAS BEEN GRANTED REGISTRATION U/S.12A OF THE INCOME-TAX ACT. THE LD. DIT (EXEMPTION) HAS OBSERVED THAT THE REGIS TRATION U/S.12A OF THE INCOME-TAX ACT WAS GRANTED ON SPECIFIC OBJECTS OF THE TRUST AND AS THE ASSESSEE HAS CHANGED THE OBJECTS OF THE TRUST, THE REGISTRATION GRANTED U/S.12A DOES NOT SURVIVE AND DEEMED TO HAVE BEEN CANCELLED FROM THE DARE OF CHANGE MADE IN THE OBJECTS. THE L D. DIT (EXEMPTION) RELIED ON THE DECISION IN THE CASE OF ALLAHABAD HIG H COURT IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE AND ANOTHER VS. UNION OF INDIA 291 ITR 116. THE LD. DIT (EXEMPTION) ALSO OBSERVED THA T ONE OF THE CONDITIONS FOR GRANTING THE CERTIFICATE OF EXEMPTIO N U/S.80G IS THAT THE ASSESSEE SHOULD BE HAVING A VALID REGISTRATION U/S. 12A OF THE ACT. AS OBSERVED BY THE LD. DIT (EXEMPTION) THE ASSESSEE TR UST ADMITTED THAT UNFORTUNATELY THEY OVERLOOK THE MATTER IN RESPECT O F THE CHANGES MADE IN THE OBJECT CLAUSE OF THE ASSESSEE TRUST. THE LD . DIT (EXEMPTION) FRAMED FOLLOWING ISSUES: (I) THE EFFECT OF CHANGES IN THE OBJECT OF THE TRUS T AFTER REGISTRATION GRANTED U/S.12A; (II) THE VALIDITY OF THE TRUST-DEED AS A RESULT OF ADDITION OR DELETION IN THE OBJECT CLAUSE OF THE TRUST-DEED; ITA 6445/M/2010 PRAGATI PRATISHTHAN 4 (III) CAN CERTIFICATE ISSUED U/S.80G BE GRANTED EVEN THOU GH THE ASSESSEE TRUST HAS NO REGISTRATION U/S.12A? 3. THE ASSESSEE-TRUST RESISTED THE ACTION OF THE LD . DIT (EXEMPTION) BY TAKING THE STAND THAT CANCELLATION O F THE REGISTRATION U/S.12A CAN ONLY BE DONE U/S.12AA(3) OF THE ACT IF THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR NOT BEING CARRIED OUT IN A CCORDANCE WITH THE OBJECTS OF THE TRUST. THE LD. DIT (EXEMPTION) PLAC ED HEAVY RELIANCE IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE & ANR. (SUPRA) AND FINALLY HELD THAT THE ASSESSEE SUO MOTO ALTERED THE OBJECT OF THE TRUST-DEED, AND HENCE, THE REGISTRATION GRANTED U/S.12A DOES NO T SURVIVE AS VERY FOUNDATION OF THE REGISTRATION GRANTED U/S.12A HAS GONE. THE LD. DIT (EXEMPTION) REJECTED THE APPLICATION OF THE ASSESSE E FILED U/S.80G OF THE INCOME-TAX ACT. NOW, THE ASSESSEE HAS CHALLENG ED THE IMPUGNED ORDER OF THE LD. DIT (EXEMPTION). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. WE FIND THAT THE ORIGINAL OBJECTS OF THE TRUST-DEED WERE AS UNDER: THE AIMS OF THE PRATISHTHAN SHALL BE TO INFORM AND EDUCATE THE MASSES OF THE COUNTRY IN ALL ASPECTS OF THEIR LIFE THROUGH ALL CONVENTIONAL, MODERN AND NOVEL MEDIA, IN ORDER TO M AKE THE PEOPLE CONSCIOUS OF THEIR RIGHTS AND DUTIES AND TO PROMOTE ACTIVITIES AND MOVEMENTS TO ENABLE THEM TO ACHIEVE THE SAME. THE SUBJECTS OF INFORMATION AND EDUCATION WILL BE A LL PERVADING, OF ACADEMIC, CULTURAL, SOCIAL, SCIENTIFIC OR LINGUISTI C AND LITERARY PURSUITS OF ORIENTAL AS WELL AS OCCIDENTAL NATURE. TO IMPROVE THE ECONOMIC CONDITIONS OF THE MASSES IN GENERAL AND WEAKER SECTIONS OF THE SOCIETY IN PARTICULAR, SUCH AS, SCHEDULE CASTES & SCHEDULED TRIBES, I.E. ADIVASIS & HARIJANS AND SUCH OTHER BACKWARD COMMUNITIES 5. THE ANNUAL GENERAL BODY OF THE ASSESSEE-TRUST AM ENDED THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIATION (M.A .) AND REPORTED ITA 6445/M/2010 PRAGATI PRATISHTHAN 5 THE CHANGE U/S.22 OF THE BOMBAY PUBLIC TRUST ACT, 1 950 TO THE DY. CHARITY COMMISSIONER, GREATER MUMBAI, MUMBAI. AS P ER THE ORIGINAL OBJECT OF THE TRUST, THEIR AIM WAS TO EDUCATE MASSE S OF THE COUNTRY IN ALL ASPECTS OF THEIR LIFE THROUGH ALL CONVENTIONAL, MODERN & NOVEL WAYS IN ORDER TO MAKE PEOPLE CONSCIOUS OF THEIR RIGHTS & DUTIES AND ALSO IMPROVE ECONOMIC CONDITIONS OF THE MASSES IN GENERA L AND WEAKER SECTIONS OF THE SOCIETY IN PARTICULAR, SUCH AS SCHE DULE CASTES & SCHEDULED TRIBES I.E. ADIVASIS & HARIJANS AND SUCH OTHER BACKWARD COMMUNITIES. 6. AFTER THE AMENDMENT, THE OBJECT CLAUSE READ AS U NDER: THE AIMS OF THE PRATISHTHAN SHALL BE TO INFORM AND EDUCATE THE MASSES OF THE COUNTRY IN ALL ASPECTS OF THEIR LIFE THROUGH ALL CONVENTIONAL, MODERN AND NOVEL MEDIA, IN ORDER TO M AKE THE PEOPLE CONSCIOUS OF THEIR RIGHTS AND DUTIES AND TO PROMOTE ACTIVITIES AND MOVEMENTS TO ENABLE THEM TO ACHIEVE THE SAME. THE SUBJECTS OF INFORMATION AND EDUCATION WILL BE A LL PERVADING OF ACADEMIC, CULTURAL SOCIAL, SCIENTIFIC OR LINGUISTIC AND LITERARY PURSUITS OF ORIENTAL AS WELL AS OCCIDENTAL NATURE. TO ALLEVIATE POVERTY AND BRING ABOUT BETTER LIVIN G CONDITIONS MUTUAL CO-OPERATION AND UNITY AMONG VILLAGERS AND I N GENERAL RURAL DEVELOPMENT BY IMPLEMENTING KHADI AND VILLAGE INDUSTRIES PROGRAMMES. 7. IT IS CLEAR FROM THE ABOVE AMENDED OBJECT THAT O NE OF THE BASIC OBJECT HAS BEEN TOTALLY ALTERED I.E. TO IMPROVE TH E ECONOMIC CONDITIONS OF THE WEAKER SECTIONS OF THE SOCIETY SUCH AS SCHED ULED CASTES & SCHEDULED TRIBES I.E. ADIVASIS & HARIJANS ETC. AND BY DELETING THE SAME THE ASSESSEE TRUST HAS CHANGED ITS AIMS BY DIV ERTING TO THE RURAL DEVELOPMENT BY IMPLEMENTING THE KHADI AND VILLAGE INDUSTRIES PROGRAMMES. ONCE THE OBJECTS OF THE TRUST ARE CHA NGED THEN WHAT CONSEQUENCES WILL FOLLOW HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF ALLAHABAD AGRICUL TURAL INSTITUTE AND ANR. (SUPRA) AND IT IS HELD AS UNDER: ITA 6445/M/2010 PRAGATI PRATISHTHAN 6 THE ARGUMENT IS MISCONCEIVED. THE REGISTRATION IS GRANTED BY THE CIT. IT CAN BE CANCELLED BY THE CIT UNDER S.12A A(3). HOWEVER, THE WORDS OF THAT STATUTORY PROVISION SHOW THAT IT APPLIES WHERE THE OBJECTS OF THE TRUST OR INSTITUTION REMAIN THE SAME ON PAPER, BUT THE ACTUAL ACTIVITIES OF SUCH TRUST OR INSTITUT ION ARE CONTRARY TO THE SAID OBJECTS OR ARE FICTITIOUS OR FRAUDULENT OR NOT GENUINE OR NOT WITHIN THE SCOPE OF THOSE OBJECTS. HOWEVER, WHE RE THE OBJECTS OF THE TRUST OR INSTITUTION, WHICH WERE THE BASIS O F GRANT OF REGISTRATION, ARE ALTERED AFTER SUCH GRANT OF REGIS TRATION, THE VERY FOUNDATION OF THE REGISTRATION HAVING BEEN REMOVED BY A VOLUNTARY ACT OF THE ASSESSEE, THE REGISTRATION WOU LD NOT SURVIVE. THE IMMEDIATE INTIMATION REQUIRED TO BE GIVEN BY TH E ASSESSEE TO THE CIT IS PERHAPS MERELY TO ENABLE HIM TO KEEP HIS (CITS) RECORDS UPDATED. IF, FOR THE SAKE OF ARGUMENT, IT I S ASSUMED THAT THE INTIMATION IS REQUIRED TO BE GIVEN TO ENABLE TH E CIT TO EXERCISE THE POWER OF CANCELLATION, EVEN THEN WHERE THE PETI TIONERS HAD FAILED TO GIVE SUCH INTIMATION, THEY CANNOT BE PERM ITTED, IN THE DISCRETIONARY JURISDICTION UNDER ART. 226 OF THE CO NSTITUTION OF INDIA, TO PLEAD THE DEFENCE THAT THE CIT HAS NOT CA NCELLED THE REGISTRATION. FURTHER, IN A SITUATION WHERE THE OBJ ECTS OF THE TRUST OR INSTITUTION HAVE BEEN ALTERED WHOLESALE AFTER TH E GRANT OF REGISTRATION AND INTIMATION OF THE ALTERATION HAS N OT BEEN GIVEN TO THE CIT, THE ORDER OF THE ASSESSING AUTHORITY ON TH E ASSUMPTION THAT THE REGISTRATION, WHICH WAS GRANTED ON THE BAS IS OF A PARTICULAR REPRESENTATION, HELD OUT BY THE ASSESSEE NO LONGER SURVIVES OR HOLDS GOOD, WOULD NOT CALL FOR INTERFER ENCE BY THIS COURT IN EXERCISE OF ITS EQUITABLE AND DISCRETIONAR Y JURISDICTION. TO SUM UP, WE ARE UNABLE TO EXERCISE OUR DISCRETION TO ENABLE THE ASSESSEE TO CONTINUE TO UTILIZE AND ENJOY THE REGIS TRATION DESPITE THE WHOLESALE CHANGE IN THE OBJECTS WITHOUT GIVING ITS IMMEDIATE INTIMATION TO THE CIT. 8. ADMITTEDLY, IN THE PRESENT CASE, THE ASSESSEE WA S GRANTED REGISTRATION U/S.12A OF THE ACT. THE LD. COUNSEL A RGUED THAT THE ITA 6445/M/2010 PRAGATI PRATISHTHAN 7 AMENDMENT MADE TO THE OBJECTS OF THE TRUST IS NOT E FFECTIVE AS THE SAME HAS NOT APPROVED BY THE CHARITY COMMISSIONER. WE FIND NO FORCE IN THE ARGUMENT OF LD. COUNSEL. AS PER THE A MENDED-DEED FILED BEFORE LD. DIT (EXEMPTION) AS WELL AS BEFORE US, WE FIND THAT THE ASSESSEE HAS AMENDED OBJECT CLAUSE OF THE TRUST-DEE D WHICH HAS BEEN APPROVED IN THE GENERAL BODY. WE FURTHER FIND THAT THE REGISTRATION WAS GRANTED TO THE ASSESSEE U/S.12A ON THE BASIS OF THE OBJECT OF THE ASSESSEE-TRUST AT THE TIME OF APPLICATION AND IF TH E SAID OBJECTS ARE CHANGED THEN AUTOMATICALLY THE REGISTRATION GRANTED U/S.12A DOES NOT SURVIVE. THE ARGUMENT OF LD. COUNSEL THAT CANCELLA TION PROCEDURE IS PRESCRIBED U/S.12AA(3) OF THE ACT AND HENCE, IT CAN NOT BE PRESUMED ONCE THERE IS AN AMENDMENT TO THE OBJECTS OF THE TR UST-DEED THE REGISTRATION GRANTED U/S.12A IS AUTOMATICALLY CANCE LLED. SAID ARGUMENT HAS ALSO BEEN CONSIDERED IN CASE OF ALLAH ABAD AGRICULTURE INSTITUTE & ANR (SUPRA). ONE OF THE CONDITIONS FO R GRANT OF CERTIFICATE U/S.80G IS THE VALID REGISTRATION U/S.12A/12AA. IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE AND ANOTHER (SUPRA ) THE HONBLE ALLAHABAD HIGH COURT HAS HELD THAT ONCE THE OBJECTS OF THE TRUST- DEEDS ARE CHANGED WHICH WAS THE FOUNDATION FOR GRAN TING REGISTRATION U/S.12A THE REGISTRATION DOES NOT SURVIVE AND IT IS DEEMED TO HAVE BEEN CANCELLED ON THE DATE OF AMENDMENT TO THE OBJE CT OF THE TRUST. 9. AFTER GIVING OUR ANXIOUS CONSIDERATION TO THE RE ASONS GIVEN BY THE LD. DIT (EXEMPTION) WE FIND NO REASON TO INTERF ERE WITH THE ORDER REJECTING THE APPLICATION OF THE ASSESSEE U/S.80G. 10. IN THE RESULT, ASSESSEES APPEAL STANDS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST DAY OF MARCH, 2012. SD/- ( R.S. SYAL ) ACCOUTANT MEMBER SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 21ST MARCH, 2012 ITA 6445/M/2010 PRAGATI PRATISHTHAN 8 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE DIT (E),MUMBAI. 4) THE CIT- ___/ DIT ____CONCERNED , MUMBAI. 5) THE D.R. C BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN