Elshaddai Prayer House, Secunderabad, Hyderabad V. ICIT (Exemptions), Hyderabad, Hyderabad

ITA 647/HYD/2015

• Counselvise Citation: [2016] 128 COUNSELVISE.COM (IT) 9767 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-11-2015
• Assessment Year: 2015-2016
• Appeal Filed On: 13-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K. MYTHILI RANI
• Keywords: Charitable institution
• Section: 12; 11; 80G; 12A; 12AA

Judgement Text

ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.647/HYD/2015 (ASSESSMENT YEAR: 2015-16) ELSHADDAI PRAYER HOUSE SECUNDERABAD PAN: AAATE 5914 F VS COMMISSIONER OF INCOME TAX (EXEMPTIONS) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHURAM FOR REVENUE : SMT. K. MYTHILI RANI , CIT (DR) DATE OF HEARING : 14.01.2016 DATE OF PRONOUNCEMENT : 07.04.2016 O R D E R PER SMT.P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR A.Y 2015-16 AGAINST THE REJECTION OF THE ASSESSEES APPLICATION FOR REGISTR ATION U/S 12AA OF THE I.T. ACT. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE TR UST FILED AN APPLICATION IN FORM NO.10A ON 16.10.2014 SEEKING RE GISTRATION U/S 12AA OF THE I.T. ACT, VIDE LETTER DATED 28.11.2 014. THE CIT (EXEMPTIONS) ISSUED A QUESTIONNAIRE TO THE ASSESSEE REQUIRING THE ASSESSEE TO PRODUCE ITS ORIGINAL TRUST DEED FOR VERIFICATION AND ALSO TO FURNISH DETAILED INFORMATION ON SPECIFIC PO INTS RAISED THEREIN. IN RESPONSE, ASSESSEE FURNISHED THE REQUIR ED DETAILS. ON PERUSAL OF THE SAME, THE CIT (EXEMPTIONS) OBSERVED THAT THE ACTUAL OBJECTS IN THE CASE OF THE ASSESSEE ARE NOT KNOWN AS THEY MERELY MENTION CARRYING ON ALL KINDS OF RELIGIOUS AND CHARITABLE WORK. THEREFORE, IN THE ABSENCE OF SPECIFIC OBJECT S OF RELIGIOUS ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 2 OF 8 AND CHARITABLE ACTIVITIES TO BE CARRIED ON BY THE ASSESSEE, THE CIT (E) REJECTED THE ASSESSEES APPLICATION FOR REG ISTRATION U/S 12AA OF THE ACT, AGAINST WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD COUNSEL FOR THE ASSESSEE REITERATED THE C ONTENTIONS RAISED BY THE ASSESSEE BEFORE THE CIT (E) AND STATE D THAT THE OBJECTS OF THE ASSESSEE ARE BOTH RELIGIOUS AND CHAR ITABLE IN NATURE AND THEREFORE REGISTRATION U/S 12AA OF THE A CT OUGHT TO HAVE BEEN GRANTED. HE HAS ALSO FILED A PAPER BOOK C ONTAINING PAGES 1 TO 52 IN SUPPORT OF HIS CONTENTIONS AND ALS O RELIED UPON THE OBJECTS CLAUSE OF THE TRUST DEED. HE ALSO RELIE D UPON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ONTENTION: 1) GANGABAI CHARTIES VS. CIT & ANR, 1992. (197 ITR 0416) 2) REHOBOTH MISSION VS. DIRECTOR OF INCOME TAX (E) (ITA NO.352/HYD/2010, A.Y 2010-11), DATED 26 TH MAY, 2010. THE LD DR HOWEVER, SUPPORTED THE ORDERS OF THE CIT (EXEMPTIONS) AND DISTINGUISHED THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE WITH THE FACTS OF THE CASE BEFORE US. 4. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE HAS FILED THE COP Y OF THE TRUST DEED AT PAGES 9 TO 29 OF THE PAPER BOOK. CLAUSE 3 O F THE TRUST DEED ENUMERATES THE AIMS AND OBJECTIVES OF THE ASSE SSEES TRUST WHICH ARE AS UNDER: A. TO CARRY ON, RUN, ESTABLISH, MAINTAIN ALL KINDS OF RELIGIOUS WORKS AND ACTIVITIES, CHARITABLE WORKS AN D ACTIVITIES. ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 3 OF 8 B. TO COLLABORATE AND COOPERATE WITH GOVT. AND NON- GOVT. ORGANIZATIONS TO UNDERTAKE PROGRAMMES ON COMMON PROBLEMS RELATING TO RELIGIOUS WORKS AND ACTIVITIES, CHARITABLE WORKS AND ACTIVITIES. C. TO START, RUN, CARRY ON ALL KIND OF WORK AND ACTIVITIES AS PRESCRIBED BY THE PROVISIONS AND APPLICABLE INCOME TAX ACT FOR RELIGIOUS AND CHARITABLE TRUST. D. THE OBJECTS OF THE TRUST SHALL BE ENJOYED BY ALL IRRESPECTIVE OF CASTE, CREED AND RELIGION. E. GENERALLY TO DO SUCH ACTS, DEEDS AND OTHER THINGS, WHICH ARE INCIDENTAL UNDER CONDUCTS TO THE ATTAINMENT OF ALL OR ANY OF THE ABOVE OBJECTS. 5. FROM A READING OF THE ABOVE OBJECTS OF THE TRUST , IT IS TRUE THAT IT IS NOT CLEAR AS TO THE EXACT NATURE OF THE RELIGIOUS AND CHARITABLE ACTIVITIES PROPOSED TO BE CARRIED OUT BY THE ASSESSEE. SECTION 2(15) OF THE ACT DEFINES CHARITABLE PURPOS E TO INCLUDE: 1.RELIEF OF THE POOR. 2.EDUCATION. 3.MEDICAL RELIEF. 4.PRESERVATION OF ENVIRONMENT (INCLUDING WATER SHED S, FOREST AND WILD LIFE). 5.PRESERVATION OF MONUMENTS OR PLACES OF HISTORIC I NTERESTS AND 6.THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PU BLIC UTILITY. 6. FROM THE ABOVE, IT IS CLEAR THAT THE DEFINITION OF CHARITABLE PURPOSE IS AN INCLUSIVE DEFINITION AND IS WIDE ENOU GH TO ENCOMPASS WITHIN IT ANY OTHER ACTIVITY NOT MENTIONE D IN THE SAID DEFINITION BUT IS CHARITABLE IN NATURE. IN THE CASE BEFORE US, THE ASSESSEE HAS APPLIED FOR REGISTRATION U/S 12A OF TH E ACT. REGISTRATION U/S 12A OF THE ACT IS THE CONDITION PR ECEDENT FOR CLAIMING EXEMPTION U/S 11 OF THE ACT. FOR THIS PURP OSE, THE ASSESSEE HAS TO APPLY IN THE REQUIRED FORM TO THE C IT (E). THE CIT ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 4 OF 8 (E) BEFORE GRANT OF REGISTRATION U/S 12A OF THE ACT HAS TO SATISFY HIMSELF ABOUT THE CHARITABLE NATURE OF THE ACTIVITY , THE INCOME OF WHICH IF APPLIED FOR THE SAID PURPOSES IS TO BE EXE MPT FROM TAX U/S 11 OF THE ACT. IN THE CASE BEFORE US, THE CIT ( E) WAS OF THE OPINION THAT, MERE MENTION OF THE WORD RELIGIOUS A ND CHARITABLE WILL NOT BE SUFFICIENT COMPLIANCE OF SECTION 12A OF THE ACT AND THAT THE ASSESSEE HAS TO SPECIFY THE CHARITABLE ACT IVITY INTENDED TO BE CARRIED ON BY IT AND IN THE ABSENCE OF SUCH S PECIFIC MENTION OF THE ACTIVITY, THE REGISTRATION U/S 12AA OF THE A CT CANNOT BE ALLOWED. 7. THE LD COUNSEL HAD RELIED UPON VARIOUS DECISIONS CITED SUPRA. THEREFORE, LET US EXAMINE THE APPLICABILITY THEREOF TO THE FACTS OF THE CASE BEFORE US. WE FIND THAT IN THE CA SE OF GANGABAI CHARITIES, THE HON'BLE SUPREME COURT WAS DEALING WI TH THE ALLOWABILITY OF EXEMPTION U/S 11 AND NOT THE ELIGIB ILITY FOR REGISTRATION U/S 12A OF THE ACT AND AFTER REFERRING TO VARIOUS CLAUSES OF THE TRUST DEED THEREIN, THE HON'BLE COUR T HAS, AT PARAS 5 & 6, HELD AS UNDER: ON A CAREFUL READING OF THE TRUST DEED IT IS NOT POSSIBLE TO CULL OUT IN CLEAR TERMS A SPECIFIC CHARITABLE/ RELIGIOUS OBJECT TO CONCLUDE THAT THE TRUST WAS SET UP WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSE. THE 'RELIGIOUS, CHARITABLE, CULTURAL AND SOCIAL' PURPOSES REFERRED TO IN THE DEED ARE NOT AVOWED AS THE OBJECTIVES OF THE TRUST ITSELF. WHAT THE FOUNDER OF THE TRUST INTENDED TO CONVEY WAS THAT THE BUILDING TO BE CONSTRUCTED OUT OF THE FUND S PROVIDED BY HER AND SUPPLEMENTED FROM OTHER SOURCES, MUST BE HELD FOR THE BENEFIT OF THE PUBLIC FOR BEING USED BY THEM FOR RELIGIOUS, CHARITABLE, CULTURAL OR SOCIAL PURPOSES. ONE CANNOT READ THE CONTENTS OF TRUST DEED AS THE OBJECTS OF THE TRUST; THESE ARE ONLY THE OBJECTS OF THOSE WHO WISH TO PUT THE TRUST PROPERTY TO USE. IT IS NOWHERE STATED IN ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 5 OF 8 THE TRUST DEED THAT THE TRUST ITSELF HAS BEEN CREAT ED FOR THE PURPOSE OF CARRYING OUT ANY OF SUCH OBJECTIVES. THE HOLDING AND CONDUCTING OF RELIGIOUS DISCOURSES AND THE RUNNING OF SCHOOLS FOR THE DEVELOPMENT OF SANSKRIT HAVE ALSO BEEN MENTIONED FROM THE POINT OF VIEW OF THE USERS OF THE TRUST PROPERTY. THESE ARE SOME OF THE PURPOSES FOR WHICH THE PUBLIC CAN BE PERMITTED TO USE THE PROPERTY. THE CRUX OF THE STATUTORY EXEMPTION UNDER S. 11(1)(A) IS NOT THE INCOME EARNED FROM PROPERTY HELD UNDER THE TRUST BUT THE ACTUAL APPLICATION OF THE SAID INCOME FOR RELIGIOUS AND CHARITABLE PURPOSE. IT IS, THEREFORE, NECESSARY TO INDICATE IN THE TRUST DEED THE BROAD OBJECTIVES FOR WHICH THE INCOME DERIVED FROM THE PROPERTY IS TO BE UTILISED. THERE IS NO MENTION IN THE TRUST DEED AS TO HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS TO BE UTILISED. THE PUBLIC USES THE BUILDING ON PAYMENT OF RENT TO THE TRUSTEES. WHAT IS TO BE DONE WITH TH E MONEY SO COLLECTED HAS NOT BEEN PROVIDED IN THE TRUST DEED. THERE IS NO MANDATE IN THE TRUST DEED THAT THE INCOME DERIVED FROM THE TRUST PROPERTY IS TO BE SPENT ON RELIGIOUS OR CHARITABLE PURPOSES. ON A PROPER CONSTRUCTION OF THE TRUST DEED IT DOES NOT MEET THE REQUIREMENT OF S. 11 (L)(A). 8. IT IS THE CASE OF THE ASSESSEE THAT UNLIKE IN TH E CASE BEFORE THE HON'BLE APEX COURT WHERE ONLY THE INTENTION OF THE TRUSTEES IS CLEAR AND NOT THE AIMS AND OBJECTS, IN THE CASE BEFORE US, THE AIMS AND OBJECTS OF THE TRUST AS REPRODUCED IN THE TRUST DEED ARE CLEAR THAT THE INCOME IS TO BE APPLIED TOWARDS RELI GIOUS AND CHARITABLE ACTIVITIES AND, THEREFORE, THOUGH SPECIF IC ACTIVITY IS NOT MENTIONED THEREIN, THE ABOVE JUDGMENT IS APPLICABLE TO THE CASE BEFORE US AND APPLICATION OF INCOME IS NOT TO BE EX AMINED AT THE STAGE OF REGISTRATION U/S 12A OF THE ACT. WE AGREE WITH THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE . IN THE CASE OF REHOBOTH MISSION V. DIT (E) (CITED SUPRA), THE I TAT WAS DEALING WITH THE CASE OF A TRUST HAVING MIXED OBJEC TS OF BOTH CHARITABLE AND RELIGIOUS ACTIVITIES AND IT WAS HELD THAT SUCH A ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 6 OF 8 TRUST IS NOT DEBARRED FROM REGISTRATION. FURTHER, W E ALSO FIND THAT THE DECISIONS OF THE HON'BLE MADRAS HIGH COURT AND ALLAHABAD HIGH COURT IN THE FOLLOWING CASES ARE ALSO APPLICAB LE TO THE FACTS OF THE CASE BEFORE US. A) NEW LIFE IN CHRIST EVANGELISTIC ASSOCIATION VS. CIT & ANOTHER (246 ITR 532) (MADRAS HIGH COURT). B) FIFTH GENERATION EDUCATION SOCIETY VS. CIT (186 ITR 634) ALLAHABAD HIGH COURT 9. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF N EW LIFE IN CHRIST EVANGELISTIC ASSOCIATION VS. CIT & ANOTHER ( CITED SUPRA), HAS HELD THAT: A PERUSAL OF THE PROVISIONS OF SECTION 12A OF THE INCOME TAX ACT, 1961 WOULD SHOW THAT UNLESS A SOCIETY OR T RUST, AS THE CASE MAY BE, IS REGISTERED U/S 12A OF THE AC T, IT WOULD NOT BE ENTITLED TO CLAIM THE BENEFITS U/S 11 AND 12 OF THE ACT. THE CAPTION OF THE SECTION SAYS CONDIT IONS AS TO THE REGISTRATION OF THE TRUST. THE TWO CONDITIO NS WHICH ARE PROVIDED ARE FIRSTLY, THAT THE PERSON CONCERNED SHOULD HAVE MADE AN APPLICATION FOR REGISTRATION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE AUTHORITIES NAMED IN THAT SECTION BEFORE THE FIRST DAY OF JULY, 1973, OR BEFORE THE EXPIRY OF THE PERIOD OF O NE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR ESTAB LISHMENT OF THE INSTITUTION. THE SECOND CONDITION PROVIDES F OR THE KEEPING OF THE ACCOUNTS IN A PARTICULAR MANNER AND FURTHER THAT SUCH ACCOUNTS SHOULD BE AUDITED. THE LANGUAGE OF THE SECTION DOES NOT SHOW THAT IN ORDER TO BE ABLE TO GET REGISTRATION U/S 12A OF THE ACT, THERE IS NECESSITY OF FIRST ESTABLISHING AS TO HOW THE CONCE RNED INSTITUTION OR, AS THE CASE MAY BE THE SOCIETY WOUL D BE ABLE TO CLAIM THE EXEMPTIONS U/S 11 AND 12 OF THE A CT. THERE IS NOTHING IN THE LANGUAGE TO SUGGEST THAT AN INSTITUTION OF A RELIGIOUS NATURE IS PRECLUDED FROM GETTING REGISTRATION U/S 12A OF THE ACT. THE QUESTION OF EXEMPTIONS U/S 11 AND 12 OF THE ACT OR, AS THE CASE MAY BE, U/S 80G OF THE ACT, WOULD COME ONLY WHEN THE SA ID EXEMPTIONS ARE CLAIMED BY THE SOCIETY AT THE TIME W HEN IT IS ASSESSED TO TAX. TO CONSIDER WHETHER THE SAID SOCIETY WOULD BE ENTITLED TO THE BENEFITS U/S 11 AN D 12 ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 7 OF 8 OF THE ACT OR, AS THE CASE MAY BE, U/S 80G OF THE A CT WOULD BE PREJUDGING THE ISSUE BEFORE THE GRANT OF T HE CERTIFICATE. AT THE STAGE OF GRANT OF CERTIFICATE U /S 12A OF THE ACT, THE ONLY ENQUIRY WHICH WOULD POSSIBLY BE M ADE WOULD BE WHETHER THE SOCIETY HAS ACTUALLY MADE AN APPLICATION IN TIME AND WHETHER THE ACCOUNTS OF THE SOCIETY ARE MAINTAINED IN THE MANNER AS SUGGESTED B Y THE SAID SECTION. BEYOND THAT, THE SCOPE OF ENQUIRY WOULD NOT GO: 10. FOR COMING TO THIS CONCLUSION, THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF FIFTH GENERATIO N EDUCATION SOCIETY (CITED SUPRA) WAS REFERRED TO. WE FIND THAT THE HON'BLE ALLAHABAD HIGH COURT AFTER CONSIDERING THE PROVISIO N OF SECTION 12A HAS HELD AS UNDER: A READING OF THE SECTION SHOWS THAT THE REGISTRATI ON U/S 12A IS A PRE-CONDITION FOR AVAILING OF THE BENE FIT UNDER SECTIONS 11 AND 12. SECTION 11 PROVIDES FOR EXEMPTION OF INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSES. SECTION 12 IS IN THE NATURE OF EXPLANATIO N TO SECTION 11. BEFORE A PERSON CAN CLAIM THE BENEFI T OF SECTION 11 OR SECTION 12 AS THE CASE MAY BE, HE MUS T OBTAIN REGISTRATION U/S 12A. THE APPLICATION FOR REGISTRATION U/S 12A HAS TO BE MADE IN FORM NO.10A PRESCRIBED BY RULE 17A BEFORE THE EXPIRY OF ONE YEA R FROM THE DATE OF CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION, WHICHEVER IS LATE R. IT HAS TO BE MADE BY THE PERSON IN RECEIPT OF THE INCO ME OF THE TRUST. IT IS EVIDENT THAT, AT THIS STAGE, THE COMMISSIONER IS NOT TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM NO.10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE WHETHER TH E OBJECTS OF THE TRUST ARE CHARITABLE OR NOT. AT THIS STAGE, IT IS NOT PROPER TO EXAMINE THE APPLICATION OF INCOME. ITA NO.647 OF 2015 ELSHADDAI PRAYER HOUSE SECUNDERA BAD PAGE 8 OF 8 THE ORDER IMPUGNED DOES NOT SAY THAT THE OBJECTS OF THE SOCIETY ARE NOT CHARITABLE IN NATURE; IT MERELY SAYS THAT THEY ARE GENERAL IN NATURE. JUST BECAUSE THEY ARE GENERAL, THEY DO NOT CEASE TO BE CHARITABL E. THE COMMISSIONER HAS ALSO OBSERVED THAT NO ACTIVITY HAS BEEN CARRIED ON BY THE SOCIETY. IT IS ALSO NOT THE REQUIREMENT OF SECTION 12A OF THE ACT. NOR HAS SECT ION 80G ANY RELEVANCE AT THIS STAGE. THE IMPUGNED ORDER CANNOT, THEREFORE, BE SUSTAINED AND IT IS QUASHED. 11. THUS, RESPECTFULLY FOLLOWING THE ABOVE DECISION S, WE DIRECT THE CIT (E) TO RECONSIDER THE ASSESSEES APPLICATIO N FOR REGISTRATION U/S 12A OF THE ACT IN THE LIGHT OF THE ABOVE DECISIONS. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH OF APRIL, 2016. SD/ - SD/ - (B. RAMAKOTAIAH) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 7 TH APRIL, 2016. VNODAN/SPS COPY TO: 1. ELSHADDAI PRAYER HOUSE, C/O K. VASANTKUMAR/A.V.RAGHURAM/P.VINOD, ADVOCATES, 610 BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD 500001 2. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) HYDERAB AD 3. INCOME TAX OFFICER EXEMPTIONS WARD-1 HYDERABAD 4. THE DR, ITAT, HYDERABAD 5. GUARD FILE BY ORDER