BHAGWAN MAHAVIR PURUSHORTH, Jaipur V. CIT, Jaipur

ITA 645/JPR/2011

• Counselvise Citation: 64523114 RSA 2011
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 28-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJIV SIGANI
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, A JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L. KALRA) ITA NOS.645 & 646/JP/2011 U/S-80(5)(VI) & 12AA BHAGWAN MAHAVIR PURUSHARTH PRERNA NIDHI VS. COMMI SSIONER OF INCOME TAX NYAS, JAIPUR II, JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV SIGANI RESPONDENT BY : SHRI SUNIL MATHUR DATE OF HEARING: 21.12.2011 DATE OF PRONOUNCEMENT: 06.01.2012 ORDER PER SHRI N.L. KALRA, A.M. 1. THE ASSESSEE HAS FILED APPEALS AGAINST ORDER OF LD. CIT U/S 12AA AND 80 G OF THE I.T. ACT. FIRST WE WILL TAKE UP APPEAL AGAINST ORDER U/S 12AA OF THE I.T. ACT. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS AS UNDER: IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LD. CIT HAS ERRED IN NOT GRANTING THE REGISTRATION U/S 12AA OF THE INCOME TA X ACT, 1961. THE ACTION OF THE LD. CIT IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAI NST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY DIRECTING THE LD. CIT TO G RANT THE REGISTRATION U/S 12AA. 2. THE TRUST FILED AN APPLICATION IN FORM NO.10A FO R SEEKING REGISTRATION U/S 12AA OF THE I.T. ACT ON 10.12.2010. THE LD. CIT PROVIDED AN OPP ORTUNITY TO THE ASSESSEE TO EXPLAIN THE OBJECTS OF THE TRUST AND TO SHOW THE GENUINENESS OF ACTIVITIES OF THE TRUST. THE OBJECT OF THE TRUST IS TO SUPPORT STUDENTS FOR EDUCATION, MEDICAL RELIE F, TO SUPPORT WIDOWS TO SUPPORT MARRIAGE OF DAUGHTERS OF ECONOMICALLY WEAKER SECTIONS OF THE SO CIETY. FROM THE ACTIVITIES OF THE TRUST, THE LD. CIT NOTICED THAT IT HAS PROVIDED SCHOLARSHIP TO NEE DY POOR STUDENTS. THE LD. CIT NOTICED THAT THE TRUST HAS GIVEN SCHOLARSHIP TO 4 STUDENTS AND ALL S UCH STUDENTS BELONG TO PARTICULAR COMMUNITY I.E. JAIN. ACCORDING TO LD. CIT, THE CHARITABLE INSTITUT ION SHOULD NOT WORK ONLY FOR A PARTICULAR 2 RELIGIOUS COMMUNITY. THE LD. CIT HAS REFERRED TO TH E PROVISION OF SECTION 13(1)(B) WHICH READS AS UNDER: NOTHING CONTAINED IN SECTION 11 [OR SECTION 12] SHA LL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE P ERSON IN RECEIPT THEREOF. (A) ANY PART OF THE INCOME FROM THE PROPERTY HELD U NDER A TRUST FOR PRIVATE RELIGIOUS PURPOSES WHICH DOES NOT ENSURE FOR THE BE NEFIT OF THE PUBLIC. (B) IN THE CASE OF A TRUST FOR CHARITABLE PURPOSE O R A CHARITABLE INSTITUTION CREATED OR ESTABLISHED AFTER THE COMMENCEMENT OF TH IS ACT, ANY INCOME THEREOF IF THE TRUST OR INSTITUTION IS CREATED OR E STABLISHED FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. 3. THE LD. CIT DID NOT ALLOW REGISTRATION AFTER OBS ERVING AS UNDER: IN VIEW OF ABOVE DISCUSSION IT IS APPARENT THAT THE TRUST HAS STARTED CHARITABLE ACTIVITIES BUT THESE ARE FOR THE BENEFIT OF A PARTI CULAR RELIGIOUS COMMUNITY I.E. JAIN WHICH IS IN VIOLATION OF PROVISIONS OF SECTI ON 13(1)(B). THE CASE IS NOT COVERED IN EXPLANATION-2 OF SECTION 13(1)(B) ALSO. THEREFORE IT IS NOT ELIGIBLE FOR REGISTRATION U/S 12AA OF THE ACT, HENCE ITS APPLICA TION IS HEREBY REJECTED. 4. BEFORE US THE LD. A/R HAS FILED THE WRITTEN SUBM ISSIONS AS UNDER: CONDITIONS RELEVANT AT THE TIME OF APPROVAL U/S 1 2AA: THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER CLAUSE (A) OF SECTION 12A, S HALL- A CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE T RUST OR INSTITUTION AS THE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH A INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND B. AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF TH E TRUST OR INSTITUTION GENUINENESS OF ITS ACTIVITIES, HE- (I) SHALL PASS AN ORDER IN WRITING REGISTERING TH E TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPELLANT THE OBJECTS AS WELL AS THE ACTIVITIES OF THE APPELL ANT TRUST ARE CHARITABLE IN NATURE, WHICH IS NOT DISPUTED BY THE LD. CIT. VIOLA TION OF SECTION 13(1)(B) HAS TO BE SEEN AT THE TIME OF ASSESSMENT AND, THEREFORE, A T THIS STAGE APPELLANT TRUST IS ENTITLED TO 12AA APPROVAL. 3 RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOU NCEMENT OF THE JURISDICTIONAL HIGH COURT: CIT VS. SHRI DIGAMBER JAIN MANDIR, CHAKSU (2009 2 9 DTR (RAJ.)65 WE FIND NO INDICATION THAT IN ORDER TO BE ABLE TO GET REGISTRATION UNDER S.12A OF THE ACT, THE INSTITUTION MUST FIRST ESTABLISH AS TO HOW IT WOULD BE ABLE TO CLAIM THE EXEMPTION UNDER SS. 11 AND 12. WE FIND OURSELVES IN AGREEMENT WITH THE VIEW OF THE MADRAS HIGH COURT THAT THE QUESTION OF EXEMPTIO NS UNDER SS. 11 AND 12 OF THE ACT OR AS THE CASE MAY BE, UNDER S.80G OF THE ACT, WOULD COME ONLY WHEN SUCH EXEMPTIONS ARE CLAIMED BY THE TRUST AT THE TIME WHE N IT IS ASSESSED TO TAX. FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUDIC IAL PRONOUNCEMENTS: NATIONAL ASSOCIATION OF MUSLIMS FOUNDATION VS. DIRE CTOR OF INCOME TAX (EXEMPTIONS) (2011) 136 TTJ (HYD)(UO)66 ITO, KOTA VS. EMMANUEL BIBLE INSTITUTE SAMITI, KO TA ITA NO.866/JP/2010 THE SOCIETY OF PRESENTATION SISTERS VS. INCOME TAX OFFICER (2009)125 TTJ (COCH) (TM) 909 IN VIEW OF ABOVE THE ACTION OF LD. CIT OF NOT GRANT ING THE REGISTRATION UNDER SECTION 12AA AND 80G(5) OF THE ACT IS UNJUSTIFIED A ND LD. CIT BE DIRECTED TO GRANT APPROVAL U/S 12AA AND 80G. 5. THE LD. D/R HAS ALSO FILED WRITTEN SUBMISSIONS A ND THESE ARE REPRODUCED AS UNDER: IN THIS RESPECT, IT IS SUBMITTED THAT AT THE TIME O F GRANTING REGISTRATION U/S 12AA, THE CIT IS REQUIRED TO SATISFY HIMSELF ABOUT THE OB JECTS OF THE TRUST AND THE GENUINENESS OF ACTIVITIES. WHILE SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST, THE CIT HAS TO EXAMINE WHETHER AS PER SECTION 11 OF THE I.T. ACT, THE PROPERTY OF THE TRUST HAS BEEN HELD WHOLLY FOR CHARITABLE OR RE LIGIOUS PURPOSES OR NOT. WHILE EXAMINING THE GENUINENESS OF THE ACTIVITIES, CIT HA S BE EXAMINE IF THE ACTIVITIES ARE BEING CARRIED OUT AS PER THE OBJECTS OF THE TRU ST AND AS PER THE REQUIREMENTS OF SECTION 11 OR NOT. IN THIS CASE, THE ASSESSEE TRUST HAS CLAIMED THAT I T IS A CHARITABLE TRUST AND ITS OBJECTS INVOLVE PROVIDING EDUCATIONAL, MEDICAL ASSI STANCE TO POOR STUDENTS AND OTHER SUPPORT TO THE DAUGHTERS AND WIDOWS OF ECONOM ICALLY WEAKER SECTIONS OF THE SOCIETY. BUT WHILE EXAMINING THE ACTIVITIES OF THE ASSESSEE, LD. CIT FOUND THAT EDUCATIONAL SCHOLARSHIP HAS BEEN GIVEN TO THE STUDE NTS OF ONLY JAIN COMMUNITY WHICH IS VIOLATIVE OF THE PROVISIONS OF SECTION 13( 1)(B). THEREFORE, THE ACTIVITIES OF THE ASSESSEE CANNOT BE SAID TO BE IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 11. THEREFORE, LD. CIT HAS REJECTED THE REGISTRATION U/ S 12AA OF THE ASSESSEE. ON THIS ISSUE, RELIANCE IS PLACED ON THE DECISION O F HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF SHRI DHAKAD SAMAJ DHARMSHALA B HAWAN TRUST (2008) 302 4 ITR 321 (MP)(COPY ENCLOSED). IN THIS CASE, THE ASSE SSEE TRUST WAS SET UP WITH THE OBJECT OF PROVIDING DHARAMSHALA FACILITIES TO THE P ILGRIMS VISITING UJJAIN. THOUGH AS PER THE OBJECTS OF THE TRUST, THE DHARAMSHALA FA CILITY WAS OPEN TO ALL COMMUNITIES BUT HONBLE HIGH COURT NOTED THAT THE C HARGES TAKEN FROM THE MEMBERS OF DHAKAD COMMUNITY WERE LESS AND THOSE FRO M OTHERS WERE MANY TIMES MORE THAN THE MEMBERS OF DHAKAD COMMUNITY. HONBLE HIGH COURT FIRST HELD THAT THE ASSESSEE WAS A CHARITABLE TRUST AND NOT A RELIG IOUS TRUST AND THEREFORE, IT WOULD BE LIABLE FOR COVERAGE U/S 13(1)(B). SECONDLY , HONBLE HIGH COURT HELD THAT TAKING OF CONCESSIONAL OR TOKEN CHARGES FROM DHAKAD COMMUNITY MEANT THAT THE TRUST WAS CREATED FOR THE BENEFIT OF A PARTICULAR R ELIGIOUS COMMUNITY OR CASTE. THEREFORE, THIS ASSESSEE TRUST VIOLATED THE PROVISI ONS OF SECTION 13 (1)(B) AND WAS NOT ELIGIBLE FOR REGISTRATION U/S 12AA. IN THE CASE OF THE ASSESSEE TRUST UNDER CONSIDERATI ON IN THIS APPEAL THOUGH THE TRUST IS CREATED FOR CHARITABLE PURPOSES AND ITS OB JECTS ARE OPEN FOR THE BENEFIT OF ALL BUT IN PRACTICE, IT IS FOUND THAT THE BENEFITS ARE BEING PROVIDED TO THE STUDENTS OF ONLY JAIN COMMUNITY. IN THE CASE OF SHRI DHAKA D SAMAJ (SUPRA), THE ALLOWING OF CONCESSIONAL FACILITIES TO ONE COMMUNIT Y/CASTE AS COMPARED TO OTHERS WAS TREATED AS VIOLATIVE OF PROVISIONS OF SECTION 1 3(1)(B). HENCE, IN THE CASE OF OUR ASSESSEE ALSO PROVIDING SCHOLARSHIP TO STUDENTS OF ONLY ONE COMMUNITY SHOULD BE TREATED AS VIOLATIVE OF THE PROVISIONS OF SECTIO N 13(1)(B) AND THE REGISTRATION U/S 12AA SHOULD NOT BE ALLOWED. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT LD. CIT HAS RIGHTLY REJECTED THE REGISTRATION OF THE ASSESSEE U/S 12AA. 6. WE HAVE HEARD BOTH THE PARTIES. WE HAVE REPRODUC ED SECTION 13(1) OF THE I.T. ACT IN EARLIER PARA. IT CONTAINS A NON-OBSTANTE CLAUSE THA T NOTHING CONTAINED IN SECTION 11 OR 12 SHALL OPERATE SO AS TO EXCLUDE THE TOTAL INCOME OF THE PR EVIOUS YEAR. HEADING OF SECTION 11 AND 12 ARE AS UNDER: SECTION 11 INCOME FROM PROPERTY HELD FOR CHARITABL E OR RELIGIOUS PURPOSES. SECTION 12 INCOME OF TRUSTS OR INSTITUTIONS FROM C ONTRIBUTIONS. 7. PROCEDURE FOR REGISTRATION IS GIVEN IN SECTION 1 2AA. SECTION 13(1(B) DOES NOT SAY THAT CONDITION MENTIONED SHALL APPLY TO SECTION 12AA WHI CH IS APPLICABLE FOR REGISTRATION. SECTION 13(1) REFERS TO THE PREVIOUS YEAR AND REGISTRATION IS NOT FOR A PARTICULAR PREVIOUS YEAR. IF CONDITIONS OF SECTION 13(1)(B) ARE VIOLATED THEN EX EMPTION U/S 11 BE NOT GIVEN. THE BASIS PURPOSE IS NOT TO ALLOW EXEMPTION OF INCOME IF THE TRUSTEES MAKE SOME VIOLATION IN SOME PARTICULAR YEAR 5 BUT SUCH VIOLATION WILL NOT EFFECT THE REGISTRATION . IT IS NOT THE CASE OF REVENUE THAT STUDENTS WERE NOT BELONGING TO POOR FAMILIES. IT IS NOT ESTABLISH ED THAT TRUST DID NOT GIVE SCHOLARSHIP TO POOR STUDENTS OF OTHER CASTE, IN CASE SUCH APPLICATIONS WERE FILED. 8. EVEN RELIGIOUS TRUSTS ARE ENTITLED FOR REGISTRAT ION. REFERENCE IS MADE TO THE FOLLOWING DECISIONS: CIT V SHRI DIGAMBER JAIN MANDIR 29 DTR 65 (RAJ) ITO KOTA V EMMANUEL BIBLE INSTITUTE SAMITI KOTA 14 0 TTJ 508 (JP) SHIYA DAWOODI BOHRA JAMAT V CIT 133 ITD 271 (AHM) 9. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CAS E OF DCIT V/S COSMOPOLITAN EDUCATION SOCIETY 244 ITR 494 HAS REFERRED TO THE OBSERVATION OF LD. CIT (A) IN WHICH IT WAS MENTIONED THAT IF THERE WAS ANY MISUTILISATION OR MISMANAGEME NT THEN ACTION SHOULD BE TAKEN AGAINST THE MEMBERS OF THE SOCIETY BUT FROM THE RECORDS IT WAS ESTABLISHED THAT ANY AMOUNT OF FUNDS WERE NOT UTILIZED FOR EDUCATIONAL PURPOSES. IN THE INSTANT C ASES, SCHOLARSHIPS HAVE BEEN GIVEN TO POOR STUDENTS AND IT IS NOT A CASE THAT SCHOLARSHIPS WER E GIVEN TO A STUDENT WHO WAS NOT POOR. 10. WE THEREFORE FEEL THAT LD. CIT WILL ALLOW REGIS TRATION U/S 12AA FROM THE FIRST DAY OF THE FINANCIAL YEAR IN WHICH APPLICATION IS MADE. 11. THE LD. CIT HAS NOT APPROVED THE TRUST U/S 80G AS THE TRUST WAS NOT ALLOWED REGISTRATION. SINCE WE HAD ALREADY HELD THAT THE TRUST IS ENTITLE D FOR REGISTRATION HENCE THE LD. CIT WILL RECONSIDER THE APPLICATION OF TRUST U/S 80G OF I.T. ACT. WHILE CONSIDERING THE APPROVAL U/S 80G OF THE I.T. ACT, THE LD. CIT MAY CONSIDER THE FOLLOWIN G OBSERVATIONS FROM THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF UMAID CHAR ITABLE TRUST V/S UNION OF INDIA 307 ITR 226. 6 THE LINE OF DISTINCTION BETWEEN RELIGIOUS PURPOSES AND CHARITABLE PURPOSES IS VERY THIN AND NO WATERLIGHT COMPARTMENT BETWEEN THE TWO ACTIVITIES CAN BE ESTABLISHED UNLESS THE OBJECTIVE OF THE CHARITABLE TRUST IN QUESTION ITSELF IS TO SPEND ITS INCOME FOR A PARTICULAR RELIGION AND IT I S SO FOUND IN THE TRUST DEED, THE I.T. DEPARTMENT CAN NOT REJECT THE RENEWAL OF THE T RUST AS CHAIRATABLE TRUST UNDER SECTION 80G OF THE I.T. ACT, MERELY BECAUSE ONE PAR TICULAR EXPENDITURE IS FOR AN ACTIVITY WHICH MAY BE TERMED AS SPENDING FOR A PART ICULAR RELIGION. 12. IN THE RESULT APPEAL OF THE ASSESSEE AGAINST OR DER U/S 12AA IS ALLOWED WHILE APPEAL AGAINST ORDER U/S 80 G IS ALLOWED FOR STASTICAL PUR POSES. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.01 .2012 SD/- SD/- (R.K.GUPTA) (N.L.KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06.01.2012 *S.KUMAR* COPY FORWARDED TO:- 1. BHAGWAN MAHAVIR PURUSHARTH PRERNA NIDHI NYAS, JA IPUR. 2. COMMISSIONER OF INCOME TAX-II, JAIPUR. 3. THE CIT 4. THE CIT(A), 5. THE D/R, ITAT, JAIPUR 6. THE GUARD FILE IN ITA NOS.645 & 646/JP/2011 BY ORDER A.R., I.T.A.T., JAIPUR 7