Sivananda Supatha Foundation, Tadepallegudem V. THE CIT, Rajahmundry

ITA 649/VIZ/2013

• Counselvise Citation: 64925314 RSA 2013
• Duration Of Justice: 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 04-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Charitable institution; Corroborative evidences
• Section: 80G; 12AA; 11

Judgement Text

ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 649 & 650 /VIZAG/ 2013 ASSESSMENT YEAR : NA SIVANANDA SUPATHA FOUNDATION TADEPALLIGUDEM VS. CIT RAJAHMUNDRY (APPELLANT) (RESPONDENT) PAN NO.AASCS 4705P ASSESSEE BY: SHRI C. SUBRAHMANYAM, CA REVENUE BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 05.03.2014 DATE OF PRONOUNCEMENT : 07.03.2014 ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER:- THESE TWO APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS OF CIT RAJAHMUNDRY REJECTING ASSESSEES APPL ICATION FOR GRANT OF REGISTRATION U/S 12AA OF THE INCOME-TAX ACT AND APP ROVAL U/S 80G OF THE ACT. ITA NO.649/VIZAG/2013: 2. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE RE JECTION OF ITS APPLICATION FOR REGISTRATION U/S 12AA OF THE ACT. BRIEFLY, THE FACTS ARE, THE ASSESSEE A COMPANY INCORPORATED U/S 25 OF THE COMPA NIES ACT, 1956 CAME INTO EXISTENCE VIDE CERTIFICATE OF INCORPORATION DA TED 13.12.2012 ISSUED BY THE REGISTRAR OF COMPANIES, ANDHRA PRADESH. THE CO MPANY AS PER THE MEMORANDUM AND ARTICLE OF ASSOCIATION IS SET UP WIT H THE FOLLOWING MAIN OBJECTS: ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 2 1. TO ESTABLISH, PROMOTE, ENCOURAGE, SUPPORT, ASSIST, AID AND ADVANCE EDUCATIONAL INSTITUTIONS BY PROMOTING SCHOO LS, COLLEGES, UNIVERSITY(S) FOR PRE-PRIMARY, PRIMARY, SECONDARY, UNDERGRADUATE, POST-GRADUATE, DOCTORAL, POST-DOCTOR AL, VOCATIONAL OR OTHERWISE IN VARIOUS BRANCHES OR FIEL DS OF EDUCATION WITHOUT OR MINIMAL FEES. 2. TO DISSEMINATE THE KNOWLEDGE OF SANATHANA DHARMA AN D ARSHA VIGNANA THROUGH PRINT AND ELECTRONIC MEDIA BY PUBLI SHING PERIODICALS - MONTHLY / BI-MONTHLY / QUARTERLY - IN ENGLISH, TELUGU AND OTHER INDIAN LANGUAGES, THE TOPICS BEING EDUCATION ABOUT RELIGIONS, HISTORY OF INDIA AND OF THE WORLD, CULTURE - INDIAN & ASIAN - INCLUDING TRANSLATED LITERATURE FR OM ENGLISH, TELUGU AND HINDI AND VICE-VERSA AND USE THE PROCEED S, IF ANY OBTAINED FOR PURSUING MAIN OBJECTS OF THE COMPANY. 3 TO ESTABLISH, RUN, MAINTAIN OR ASSIST ANY MEDICAL INST ITUTIONS, NURSING HOME, OR CLINICS OR TO GRANT ASSISTANCE TO NEEDY AND INDIGENT PERSONS FOR MEETING THE COST OF MEDICAL TREATMENT AND SUPPORT INDIVIDUALS/ORGANIZATIONS FOR CONDUCTING ME DICAL CAMPS FOR THE POOR AND TO ACQUIRE, RUN, OR ASSIST INDIVID UALS AND ORGANISATIONS IN PROVIDING PARA MEDICAL FACILITIES LIKE AMBULANCES, PROVIDE GENERIC MEDICINES AND PHYSICAL ASSISTANCE T O OLD AGE PEOPLE. 4. TO PROVIDE RELIEF TO THE POOR BY GIVING FINANCIAL O R OTHER ASSISTANCE IN KIND BYWAY OF FREE DISTRIBUTION OF BO OKS, NOTEBOOKS, CLOTHES, UNIFORMS OR MEALS. 5. TO PROTECT COWS AND BOVINE CATTLE FROM PREMATURE DE ATH, NEGLECT AND DETERIORATION AND DESTRUCTION AND TO SAVE BOVIN E CATTLE BY IMPROVING THEIR BREED AND RAISING THEIR LIVING STAN DARD BY MAINTAINING GOSHALA AND TO SPREAD THE MESSAGE OF IM PORTANCE OF PROTECTION OF COWS IN THE SOCIETY, AND SUPPORT INDIVIDUALS/ORGANIZATIONS DOING THE SAME. 3. THE ASSESSEE CLAIMING ITSELF TO BE A CHARITABLE INSTITUTION MADE AN APPLICATION IN THE PRESCRIBED MANNER BEFORE THE CIT(A) SEEKING REGISTRATION U/S 12AA OF THE ACT. THE CIT CALLED U PON THE ASSESSEE TO PRODUCE BILLS FOR PURCHASE OF FIXED ASSETS AND COPI ES OF RECEIPT FOR DONATION. IN RESPONSE TO THE QUERY MADE BY THE CIT , THE ASSESSEE FILED A LETTER DATED 13.05.2013 ENCLOSING THEREWITH DECLARATION U/S 13(1)(C) OF THE ACT, FORM NO.10B DATED 09.05.2013, INCOME AND EXPENDITURE STATEMENT FOR THE PERIOD 01.04.2012 TO 31.12.2013, BALANCE SHEET FOR THE PERIOD 01.04.2012 TO 31.03.20 13. THE ASSESSEE ALSO FURNISHED THE DONATION RECEIPTS BEARING NOS.1 TO 13 ISSUED DURING THE PERIOD FEBRUARY AND MARCH, 2013, LABOUR ACCOUNT COPY OF DONATION ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 3 FOR THE PERIOD 01.04.2012 TO 31.12.2013, DETAILS OF DONORS AND ALSO BILLS AND VOUCHERS FOR PURCHASE OF ASSETS. THE CIT ON EXAMINING THE INCOME AND EXPENDITURE STATEMENT FOR THE PERIOD 01. 04.2012 TO 31.03.2013 NOTICED THAT THE ASSESSEE COMPANY HAD RE CEIVED DONATIONS OF RS.8,96,226/- AND SHOWN EXCESS OF INCOME OVER EX PENDITURE OF RS.8,80,256/- THEREBY INCURRING EXPENDITURE OF RS.1 5,970/- ONLY. FROM THE STATUS REPORT OF ACTIVITIES OF THE COMPANY, THE CIT NOTED THAT THE ASSESSEE HAD PAID TUITION FEE OF RS.6,000/- TO TWO STUDENTS AND HAS GIVEN SOME DONATION TO SPANDANA ORGANISATION AND SO ME OTHER INVOICES TOWARDS PURCHASE OF CLOTH, ETC. THERE IS NO OTHER SUBSTANTIAL ACTIVITY. HE FURTHER NOTED THAT THE ASSESSEE HAS P UBLISHED TWO BOOKS WHICH IS NOT AS PER THE OBJECT NO.2 OF THE ASSESSEE . HE FURTHER NOTED THAT THE BOOKS PUBLISHED WERE SOLD AND AN AMOUNT OF RS.66,800/- WAS RECEIVED FROM 01.04.2013 TO 03.09.2013 WHICH ACCORD ING TO THE CIT CONSTITUTES BUSINESS ACTIVITY FOR WHICH SEPARATE BO OKS HAVE TO BE MAINTAINED BY THE ASSESSEE AND SUCH BUSINESS HAS TO BE INCIDENTAL TO THE OBJECT OF THE COMPANY. THE CIT NOTED THAT THOU GH THE ASSESSEE IS HAVING 45 INCIDENTAL ANCILLARY OBJECTS FOR ATTAININ G REMAINING OBJECTS, IT HAS NOT CONDUCTED ANY WORTHWHILE ACTIVITIES AS PER THE MAIN OBJECTS OR OBJECTS INCIDENTAL OR ANCILLARY TO THE ATTAINING OF THE MAIN OBJECTS. THE CIT ULTIMATELY REJECTED THE APPLICATION OF THE ASSE SSEE BY OBSERVING AS UNDER: THE PROVISIONS OF SECTION 12AA OF THE I.T. ACT ARE VERY CLEAR AS IT IS MENTIONED IN THAT SECTION THAT THE GENUINENESS OF T HE ACTIVITIES HAVE TO BE CONSIDERED APART FROM THE OBJECTS OF A TRUST / SOCIETY / INSTITUTION. IF THERE ARE NO ACTIVITIES, THE GENUINENESS OF THE ACTIVITIES CANNOT BE ASCERTAINED AND THE PROVISION S ARE NOT IMPLEMENTABLE. 7. FOR GRANTING REGISTRATION U/S.12AA, THE OBJECTS OF THE TRUST AS WELL AS GENUINENESS OF THE ACTIVITIES HAVE TO BE CONSIDE RED. IN VIEW OF THE FOREGOING DISCUSSION AND SINCE THE COMPANY I S YET TO CONDUCT ITS ACTIVITIES ACCORDING TO THE MEMORANDUM OF ASSOC IATION, THE APPLICATION FILED BY THE COMPANY IS NOT MAINTAINABL E AND APPLICATION IN FORM NO.10A DATED 22-03-2013 FILED ON 22-03-2013 FOR GRANT OF REGISTRATION U/S.12AA OF THE I.T. ACT IS LIABLE TO BE REJECTED, AND IS HEREBY REJECTED. ______ ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 4 4. THE LD. A.R. TAKING US THROUGH THE OBJECTS OF TH E COMPANY SUBMITTED THAT THE CIT HAS NOT RAISED ANY DOUBT WITH REGARD T O THE CHARITABLE OBJECT OF THE COMPANY. IT WAS SUBMITTED THAT THE ONLY GROUND ON WHICH THE CIT HAS REFUSED TO GRANT REGISTRATION IS THAT THE ASSESSEE HAS NOT CARRIED ON ANY SUBSTANTIAL CHARITABLE ACTIVITY. IN THIS CONTEXT, THE LD. A.R. SUBMITTED THAT FROM THE DATE OF ITS INCEPTION, THE ASSESSEE HAD UN DERTAKEN CHARITABLE ACTIVITIES IN FURTHERANCE OF ITS MAIN OBJECTS BY PA YING AN AMOUNT OF RS.12,000/- TOWARDS FEE OF TWO STUDENTS STUDYING IN MAHATI ENGLISH MEDIUM SCHOOL. THE COMPANY HAS PUBLISHED TWO BOOKS TITLED AS `BHARATIYATA 3 RD & 4 TH HAVING ISBN NO. AND HAS INCURRED EXPENDITURE OF RS.1,20,000/- TOWARDS PRINTING AND PUBLISHING THE BOOKS. IT IS SUBMITTED THAT THE COMPANY HAS INCURRED EXPENDITURE OF RS.13,275/- IN PURCHASING C LOTHS AND BLANKETS FOR CHILDREN WHO ARE MENTALLY RETARDED AND ARE LOOKED A FTER BY A NGO BY NAME SPANDANA ORGANISATION. THE LD. A.R. SUBMITTED TH AT THE CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE THOUGH WAS D EMONSTRATED BEFORE THE CIT BY FURNISHING INCOME AND EXPENDITURE STATEMENT AND BALANCE SHEET ALONG WITH SUPPORTING EVIDENCES BUT THE CIT WITHOUT APPRE CIATING THEM REJECTED THE ASSESSEES APPLICATION. THE LD. A.R. SUBMITTED THA T AS PER THE FINANCIAL STATEMENTS UP TO 31.01.2014, THE ASSESSEE HAS RECEI VED GENERAL DONATIONS OF RS.11,45,300/- AND CORPUS DONATIONS OF RS.17 LAKHS. DURING THE FINANCIAL YEAR 2013-14, ASSESSEE HAS PUBLISHED AND DISTRIBUTE D BOOKS BESIDES CARRYING OUT OTHER CHARITABLE ACTIVITIES. IT WAS SUBMITTED THAT THE ASSESSEE HAS PLANNED A LAY OUT TO SPEND ABOUT RS.90 LAKHS FOR DE VELOPING THE INFRASTRUCTURE FOR CARRYING OUT THE OBJECTS. THE L D. A.R. THEREFORE SUBMITTED THAT IN VIEW OF SUCH FACTS, THE CIT WAS TOTALLY UNJ USTIFIED IN REJECTING THE ASSESSEES APPLICATION FOR REGISTRATION ON THE GROU ND THAT THE ASSESSEE HAS NOT CARRIED OUT ANY SUBSTANTIAL ACTIVITY AS PER ITS OBJECT. IN SUPPORT OF SUCH CONTENTION, THE LD. A.R. RELIED ON THE FOLLOWING DE CISIONS: (1990) 185 ITR 634 (ALL) (2011) 50 DTR 243 (KAR) (2000) 246 ITR 532 (MAD.) (2013) 355 ITR 361 (DEL) HIGH COURT OF GUJARAT IN CIT VS. SATHVARA EDUCATION FOUNDATION ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 5 5. THE LD. D.R. ON THE OTHER HAND SUPPORTING THE OR DER OF THE CIT SUBMITTED THAT AS THE ASSESSEE HAS NOT CARRIED OUT ANY SUBSTANTIAL ACTIVITIES AND WHATEVER ACTIVITIES WERE CARRIED OUT LIKE PUBLI SHING OF BOOKS, ETC. IS NOT IN CONSONANCE WITH THE OBJECTS OF THE SOCIETY, REGISTR ATION U/S 12AA OF THE ACT WAS RIGHTLY REFUSED. 6. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE RECORDS AND MATERIALS. WE HAVE CAREFULLY EXAMINED THE DECI SIONS PLACED BEFORE US. ON A PERUSAL OF THE ORDER OF THE CIT, IT BECOMES CL EAR THAT HE HAS REFUSED TO GRANT REGISTRATION U/S 12AA OF THE ACT MAINLY ON TH E GROUND THAT THE ASSESSEE HAS NOT CONDUCTED ITS ACTIVITIES AS PER THE OBJECTS MENTIONED IN THE MEMORANDUM OF ASSOCIATION. IN THIS CONTEXT, IT HAS TO BE NOTED THAT THE CIT HAS NOT DISPUTED THE FACT THAT THE ASSESSEE CAME IN TO EXISTENCE ON 13.12.2012. IT APPLIED FOR REGISTRATION ON 22.03.20 13. THEREFORE, THE CIT WAS NOT CORRECT IN OBSERVING THAT IT HAS NOT CARRIE D OUT ANY ACTIVITY IN FURTHERANCE OF ITS OBJECTS WHEN THE COMPANY HAS COM E INTO OPERATION FOR A PERIOD OF 6 MONTHS. FURTHER, IT HAS TO BE NOTED TH AT THE ASSESSEE HAS FURNISHED ALL THE INFORMATIONS CALLED FOR BY THE CI T IN COURSE OF PROCEEDING BEFORE HIM WHICH IS VERY MUCH EVIDENT FROM THE ORDE R OF THE CIT ITSELF. FROM THE FACTS DISCUSSED BY THE CIT, IT IS ALSO CLEAR TH AT THE ASSESSEE CARRIED OUT SOME CHARITABLE ACTIVITY, THOUGH IN A SMALL SCALE, BUT THAT IS UNDERSTANDABLE CONSIDERING THE FACT THAT THE ASSESSEE HAS COME INT O EXISTENCE ONLY FROM 13.12.2012. THEREFORE, IT WAS NOT PROPER ON THE PA RT OF THE CIT TO REJECT THE APPLICATION SOLELY ON THE GROUND THAT THE ASSESSEE HAS NOT COMMENCED CHARITABLE ACTIVITIES AS PER ITS OBJECTS. WHEN HE HAS NOT EXPRESSED ANY DOUBT WITH REGARD TO THE CHARITABLE OBJECT OF THE ASSESSE E AND WHEN THERE IS NO OTHER MATERIAL BEFORE HIM TO CONCLUDE THAT ASSESSEE S ACTIVITIES ARE NOT GENUINE, THERE IS NO REASON TO REFUSE REGISTRATION U/S 12AA OF THE ACT. THE GRANT OF REGISTRATION U/S 12AA OF THE ACT DOES NOT AUTOMATICALLY ENTITLE THE ASSESSEE FOR EXEMPTION U/S 11 OF THE ACT. THE ASSE SSING OFFICER IS EMPOWERED UNDER THE ACT TO LOOK INTO BOTH THE GENUI NENESS OF THE ACTIVITIES AND APPLICATION OF FUND AND IN CASE OF ANY VIOLATIO N OF THE PROVISIONS CONTAINED UNDER SECTION 11 TO 13 OF THE ACT, THE AS SESSEE WOULD NOT BE ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 6 ENTITLED FOR EXEMPTION U/S 11 AND WOULD BE SUBJECTE D TO TAX. THAT BEING THE CASE, IN OUR VIEW, REFUSAL OF GRANT OF REGISTRATION U/S 12AA OF THE ACT IS NOT JUSTIFIED SOLELY ON THE GROUND THAT THE ASSESSEE HA S NOT COMMENCED ITS ACTIVITIES. WE ARE SUPPORTED IN OUR VIEW BY THE DE CISIONS RELIED UPON BY THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT AND DIRECT HIM TO GRANT REGISTRATION U/S 12AA OF THE AC T TO THE ASSESSEE. 7. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ITA NO.650/VIZAG/2013: 8. THIS APPEAL IS AGAINST THE ORDER DATED 10.09.201 3 OF THE CIT REJECTING ASSESSEES APPLICATION FOR GRANT OF APPROVAL U/S 80 G OF THE ACT. ON A PERUSAL OF THE ORDER OF THE CIT, IT HAS TO BE SEEN THAT HE HAS REJECTED THE ASSESSEES APPLICATION IN FORM NO.10G IN CONSEQUENCE TO THE OR DER PASSED BY HIM REJECTING ASSESSEES APPLICATION FOR GRANT OF REGIS TRATION U/S 12AA OF THE ACT. AS WE HAVE DIRECTED, THE CIT TO GRANT REGISTRATION U/S 12AA OF THE ACT TO THE ASSESSEE, WE SET ASIDE THE IMPUGNED ORDER AND DIREC T HIM TO GRANT APPROVAL U/S 80G OF THE ACT TO THE ASSESSEE SUBJECT TO FULFI LLMENT OF CONDITIONS LAID DOWN UNDER SUB CLAUSE (I) TO SUB CLAUSE (V) OF SECT ION 80G(5) OF THE ACT. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE A RE CONSIDERED TO BE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 7 TH MAR14 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 7 TH MARCH, 2014 ITA NO.649/VIZAG/2013 SIVANANDA SUPATHA FOUNDATION, TADEPALLIGUDEM 7 COPY TO 1 SIVANANDA SUPATHA FOUNDATION, D.NO.2-6-3, DR. V. HANUMANTHA RAO MEMORIAL COMPLEX, JUBLIE ROAD, TADEPALLIGUDEM-53410 1 2 CIT RAJAHMUNDRY 3 THE CIT(A), RAJAHMUNDRY 4 THE DR, ITAT, VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM