Tiruchirappalli Multipurpose Social Service Society, CHENNAI V. ACIT, Trichy

ITA 654/CHNY/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9610 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-01-2016
• Assessment Year: misc
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYACIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Charitable institution
• Section: 80G; 12AA; 12

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.654/MDS/2013 M/S.TIRUCHIRAPPALLI MULTIPURPOSE SOCIAL SERVICE SOCIETY, 49K, BHARATHIYAR SALAI, TRICHY-620 001. VS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I(2), TRICHY PAN:AAATT0330Q ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. S.SRIDHAR, ADVOCATE /RESPONDENT BY : MR. PATHLAVATH PEERYA,CIT /DATE OF HEARING : 22 ND JANUARY, 2016 /DATE OF PRONOUNCEMENT : 6 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX-1, TIRUCHIRAPPALLI DATED 15.03.2013 IN C.NO.6162E(49)/ CIT- I/1997-98 CANCELLING THE REGISTRATION GRANTED TO T HE ASSESSEE UNDER SECTION 12AA OF THE ACT. 2. THE ASSESSEE IN ITS APPEAL HAS RAISED SEVERAL GR OUNDS, HOWEVER, THE CRUX OF THE ISSUE IS AS FOLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D IN CANCELLING THE REGISTRATION GRANTED TO THE ASSES SEE UNDER SECTION 12AA OF THE ACT. 2 ITA NO.654 /MDS/2013 II) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D IN REJECTING THE APPLICATION OF THE ASSESSEE SOCIET Y FOR RENEWAL UNDER SECTION 80G OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED UNDER SECTION 12A(A) OF THE ACT AND EXE MPTION UNDER SECTION 80G WAS GRANTED TO THE ASSESSEE UPTO 31.03.2008. THE ASSESSEE SOCIETY FILED AN APPLICATI ON BEFORE THE CIT FOR RENEWAL OF EXEMPTION UNDER SECTION 80G OF THE ACT. ON EXAMINING THE CASE OF THE ASSESSEE, THE LE ARNED COMMISSIONER OF INCOME TAX OBSERVED AS FOLLOWS:- I) THE ASSESSEE HAD STATED IN THE FORM C FILED BEFORE THE HOME MINISTRY STATING THAT THE ASSESSEE IS A CHRISTIAN ORGANIZATION. II) THE SOCIETY WAS RUNNING AN ITI AND WOMENS HOSTEL ON COMMERCIAL BASIS AND NO SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR THOSE ACTIVITIES. III) THE SOCIETY HAD INCURRED EXPENDITURE ON DIOCES E FUNCTIONS WHICH IS RELIGIOUS IN NATURE. 4. AFTER FURTHER EXAMINATION OF THE ACTIVITIES OF T HE ASSESSEE TRUST THE LEARNED COMMISSIONER OF INCOME T AX, 3 ITA NO.654 /MDS/2013 DECIDED TO CANCEL THE REGISTRATION GRANTED UNDER SE CTION 12A(A) OF THE ACT DUE TO THE FOLLOWING REASONS:- A) IN THE SHOW CAUSE NOTICE, IT WAS MENTIONED THAT T HE SOCIETY HAS MENTIONED IN FORM-C AS CHRISTIAN. THIS FACT WAS NOT DISPUTED, BUT THE AUTHORIZED REPRESENTATIVE TRIED TO DEFEND THE SAME. B) THE SOCIETY HAS ALSO NOT DISPUTED THE FACT THAT THE Y HAVE SPENT CERTAIN AMOUNT FOR A RELIGIOUS FUNCTION OF DI OCESE. IN FACT PAGE-2 OF THE REPLY FILED BY THE SOCIETY, IT C OULD BE SEEN THAT THEY HAVE ADMITTED TO HAVE CONTRIBUTED A SUM OF RS.13,000/- TO THE FUNCTION OF DIOCESE, WHICH IS MA INLY A RELIGIOUS FUNCTION OF CHRISTIANS. C) THE SOCIETY, IN ITS WRITTEN SUBMISSION HAS MENTIONE D THAT SEPARATE BOOKS OF ACCOUNTS WERE MAINTAINED FOR THE COMMERCIAL ACTIVITIES OF SOCIETY. THE CIT IN HIS SH OW CAUSE NOTICE HAS CLEARLY MENTIONED THAT NO SUCH BOO KS WERE MAINTAINED AND EVEN DURING THE HEARING BEFORE THE UNDERSIGNED, THE ASSESSEE SOCIETY HAS NOT PRODUCED THE SAME TO DISPUTE THE CONTENTION RAISED BY THE DEPART MENT. E) IN PARA 2.5 OF THE SHOW CAUSE NOTICE, IT WAS CLEARL Y MENTIONED THAT ACTIVITIES CARRIED OUT BY THE SOCIET Y ARE ONLY GENERATING SURPLUS OUT OF RUNNING A SCHOOL, HO STEL, ETC FOR BEING UTILIZED TOWARDS CHARITY WHICH HAS NO T BEEN DONE AT ALL ANY OF THE TWO FINANCIAL YEARS. THE INF ERENCE IS EVIDENT FROM THE FACT THAT NO EXPENDITURE TOWARDS A NY CHARITABLE ACTIVITY AS PER THE TRUST DEED HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT OR INCOME AND EXPEND ITURE ACCOUNT. THEREFORE, THE BASIC QUESTION I.E 'WHERE IS CHARITY?' HAS REMAINED UNANSWERED IN THE THREE FINANCIAL YEARS. IN THE ABSENCE OF ANY CHARITABLE ACTIVITY, T HE INCOME OF THE TRUST WILL NOT BE EXEMPT U/S. 11(1)(A ) OF THE IT ACT, WHICH PRESUPPOSES THAT AT LEAST 85% OF THE INCOME OF THE SOCIETY IS APPLIED FOR CHARITABLE PURPOSES I N INDIA DURING THE RELEVANT PREVIOUS YEAR. THIS STATUTORY C ONDITION HAS, THEREFORE, NOT BEEN MET FOR ANY OF THESE THREE FINANCIAL YEARS. THIS FACT OF NON-COMPLIANCE OF THE 4 ITA NO.654 /MDS/2013 STATUTORY CONDITION WAS NOT DISPUTED BY THE ASSESSE E SOCIETY IN ITS REPLY. THE SAME IMPLIES THAT THE SOC IETY HAS VIOLATED THE CONDITION AND HENCE THE SOCIETY IS NOT ENTITLED FOR REGISTRATION UNDER SECTION 12AA OF THE IT ACT, 1961. F) AGAINST THE REFUSAL OF GRANTING EXEMPTION ULS 80G, ALMOST IN SIMILAR CONDITIONS, THE SOCIETY HAS GONE ON APPE AL TO ITAT AND HON'BLE ITAT, CHENNAI HAS UPHELD THE CONTENTION OF THE DEPARTMENT THAT THERE IS NO CHARI TY IN THE ACTIVITIES OF THE SOCIETY, VIDE ITS ORDER DATED 31- 1-2013, ITA NO. 1844/MDS/2012 - A BENCH CHENNAI. IN THIS ORDER, THE HON'BLE ITAT CHENNAI PASSED VERY DETAILED ORDER AFTER DISCUSSING VARIOUS CONTENTIONS OF ASSESSEE SOCIETY AND CAME TO A CONCLUSION THAT THERE IS NO CHARITY AND I N THE GARB OF CHARITABLE ACTIVITIES THE ORGANIZATION SHOU LD NOT BE ALLOWED TO CARRY OUT THE COMMERCIAL ACTIVITY AND TAKE ADVANTAGE OF BENEFITS ATTACHED WITH THE WORD 'CHARI TABLE' UNDER VARIOUS PROVISIONS OF THE LAW. IN THE SAME OR DER, THE HON'BLE ITAT, CHENNAI HAS FURTHER MENTIONED THAT TH E CIT HAS PASSED A VERY REASONED ORDER. SINCE, THE HON'BL E ITAT HAS CONFIRMED THE CONTENTION OF THE DEPARTMENT THAT THERE IS NO CHARITY IN THIS SOCIETY AND HUGE SURPL US IS BEING MADE IN THESE COMMERCIAL ACTIVITIES. G) WHILE GIVING REPLY, THE SOCIETY HAS RELIED ON THE D ECISION OF CHENNAI BENCH IN THE CASE OF ST MARY CHRISTIAN CHARITABLE TRUST 11 ITR(TRIBUNAL) 205 CHENNAI, FERNANDES HOSPITAL EDUCATIONAL FOUNDATION 51 DTR 38 1 AND H.P. ENVIRONMENT PROTECTION BOARD 28 DTR 289. THESE CASES LAW FILED BY AND RELIED ON BY THE ASSES SEE WERE PERUSED. THE UNDERSIGNED IS OF THE CONSIDERED VIEW THAT FACTS AND CIRCUMSTANCES IN THESE CASES ARE COMPLETELY DIFFERENT AND DISTINGUISHABLE AND HENCE THESE CASE LAWS ARE NOT APPLICABLE TO THE FACTS OF THIS C ASE. IN ALL THESE CASES THE HON'BLE ITAT HAS UPHELD THE 'CONTEN TION OF CHARITY' OF THE TRUST AND HENCE FAVOURED THE ASS ESSEE, WHEREAS IN OUR CASE, HON'BLE ITAT HAS ALREADY COME TO A CONCLUSION THAT THERE ARE NO CHARITABLE ACTIVITIES IN THIS SOCIETY AND HAS RIGHTLY DENIED THE BENEFIT OF SEE 1 2AA OF THE SOCIETY. IN THE CASES-LAW RELIED ON BY THE ASSE SSEE SOCIETY, THEY HAVE NOT INCURRED EXPENDITURE TOWARDS 5 ITA NO.654 /MDS/2013 RELIGIOUS FUNCTION AND IT WAS NOT MENTIONED THAT TH EY HAVE FILED BEFORE THE HOME MINISTRY THAT THEY BELONGING TO A PARTICULAR RELIGION. THUS, IN VIEW OF THE FACT THAT IN ASSESSEE'S OWN CASE, THE HON'BLE ITAT TOOK THE VIEW THAT THERE IS NO CHARITY, THE BENEFITS OF TRUST ARE NOT AVAILABLE TO THIS SOCIETY. 5. WITH THE ABOVE OBSERVATION, THE LEARNED COMM ISSIONER OF INCOME TAX CAME TO THE CONCLUSION THAT THE ASSES SEE HAD NOT COMPLIED WITH THE PROVISIONS OF SECTION 11(1)(A ) OF THE ACT. THE LEARNED COMMISSIONER OF INCOME TAX ALSO T OOK CUE FROM THE ORDERS OF THE CHENNAI BENCH OF THE TRIBUNA L CITED SUPRA THAT WHEN AN ORGANIZATION CONTRIBUTES TOWARDS RELIGIOUS FUNCTIONS AND CONDUCTS ITS ACTIVITIES ON COMMERCIAL BASIS RATHER THAN IN THE NATURE OF CHARITY, REGISTRATION GRANTED UNDER SECTION 12AA OUGHT TO BE CANCELLED, AND ACCORDINGL Y HE CANCELLED THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECTION 12A(A) OF THE ACT. 6. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTE D BEFORE US THAT THE OBJECT OF THE ASSESSEE SOCIETY IS ONLY CHARITY AND THEREFORE THE REGISTRATION GRANTED UNDER SECTION 12 A(A) OF THE ACT CANNOT BE WITHDRAWN. HE FURTHER SUBMITTED THAT AT THE MOST THE INCOME OF THE SOCIETY CAN ONLY BE TAXED, I F IT VIOLATES 6 ITA NO.654 /MDS/2013 THE PROVISIONS OF THE ACT. HENCE, IT WAS PLEADED TH AT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX MAY BE SE T ASIDE. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND ARGUED IN SUPPORT OF THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX BY REITERATING HIS FINDI NGS. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND C AREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. ON EXAMI NING THE OBJECTS OF THE ASSESSEE SOCIETY, IT IS OBVIOUS THAT THE SOCIETY EXISTS FOR CHARITABLE PURPOSES. THE OBJECTS OF THE SOCIETY ARE REPRODUCED HEREIN BELOW FOR REFERENCE:- A) TO PERFORM WORKS OF CHARITY FOR THOSE IN NEED IRRESPECTIVE OF CASTE, RACE, COMMUNITY OR CREED. B) TO ENGAGE IN SOCIAL SERVICE ACTIVITIES AIMED AT IMPROVING THE LIVING CONDITIONS AND GENERAL WELFARE OF THE POOR, PARTICULARLY FARMERS AND OTHER WORKING PE OPLE AS WELL AS POOR AND INDIGENT PERSONS WHATEVER OCCUPATIONS IRRESPECTIVE OF CASTE, RACE, COMMUNITY OR CREED. 7 ITA NO.654 /MDS/2013 C) TO ESTABLISH, CONDUCT, MANAGE, ADMINISTER, EQUIP CLOSE DOWN OR DISPOSE OFF SOCIAL WELFARE CENTERS, S OCIAL TRAINING CENTERS, TECHNICAL SCHOOLS, SOCIAL INSTITU TIONS, DISPENSARIES, HOSPITAL, CLUBS, WORK GUILDS, RECREAT IONAL CENTERS, ORPHANAGES, SCHOOLS AND OTHER RELATED INSTITUTIONS, TO PROMOTE THE OBJECTS OF THE SOCIETY . 9. WHEN THE OBJECTS OF THE SOCIETY ARE ONLY FO R THE PURPOSE OF CHARITY, THEN THE REGISTRATION GRANTED UNDER SEC TION 12A(A) OF THE ACT CANNOT BE WITHDRAWN UNLESS THE ACTIVITIE S OF THE SOCIETY ARE NOT GENUINE AND NOT CARRIED OUT IN ACCO RDANCE WITH THE OBJECTS OF THE INSTITUTION. IN THE CASE OF THE ASSESSEE, THE GRIEVANCE OF THE LEARNED COMMISSIONER OF INCOME TAX IS THAT THE ASSESSEE IS INDULGING IN RELIGIOUS ACTIVIT IES AND ALSO ENGAGED IN COMMERCIAL ACTIVITIES. HOWEVER, HE HAS NOT EXPLAINED AS TO HOW THE ASSESSEE IS INDULGING IN CO MMERCIAL ACTIVITIES AND TO WHAT EXTENT THE INCOME OF THE TRU ST IS APPLIED FOR RELIGIOUS ACTIVITIES. COLLECTING FEES FROM STUD ENTS FOR IMPARTING EDUCATION THROUGH GOVERNMENT RECOGNIZED I TI OR COLLECTING NOMINAL RENT FOR HOSTEL ACCOMMODATION FR OM WOMEN CANNOT BE CONSIDERED TO BE COMMERCIAL ACTIVIT IES. FURTHER, IF THE SOCIETY VIOLATES ITS OBJECTS BY IND ULGENCING IN 8 ITA NO.654 /MDS/2013 ANY NON CHARITABLE ACTIVITIES OR RELIGIOUS ACTIVITI ES, HOWEVER CONDUCTS ITSELF PREDOMINANTLY IN CHARITABLE ACTIVIT IES THEN THE EXEMPTION GRANTED UNDER SECTION 12A(A) OF THE ACT CANNOT BE WITHDRAWN, BUT ONLY THE AMOUNT SPENT OUTSIDE THE SC OPE OF THE OBJECTS OF THE SOCIETY CAN BE TAXED. ON PERUSIN G THE PAPER BOOK FILED BY THE ASSESSEE AND EXAMINING THE RECEIPTS & PAYMENT ACCOUNT ENCLOSED THEREIN, WE FIND THAT TH E ASSESSEE TRUST IS CONDUCTING MULTI VARIOUS ACTIVITI ES WHICH APPEARS TO BE CHARITABLE. HOWEVER, IN THE INTEREST OF JUSTICE, WE REMIT THE MATTER BACK TO THE FILE OF THE LEARNED COMMISSIONER OF INCOME TAX TO EXAMINING THE PAPER B OOK FILED BEFORE US BY THE ASSESSEE AND TO VERIFY THE A CTIVITIES CONDUCTED BY THE ASSESSEE AND ALSO ANY OTHER RELEVA NT MATERIAL WHICH WAS NOT BEFORE THE LEARNED COMMISSIO NER OF INCOME TAX ON THE EARLIER OCCASION TO JUSTIFY THE S TAND OF THE ASSESSEE AND THEREAFTER DECIDE THE MATTER IN ACCORD ANCE WITH MERIT AND LAW. THE LEARNED COMMISSIONER OF INCOME TAX SHALL ALSO EXAMINE WHETHER THE CHARITABLE ACTIVITIE S OF THE ASSESSEE ARE EXTENDED TO THE PUBLIC AT LARGE WITHOU T DISCRIMINATION OF CASTE, COLOUR, CREED AND RELIGION AND ALSO DRAW STRENGTH FROM THE DECISION OF VARIOUS JUDICIAL AUTHORITIES 9 ITA NO.654 /MDS/2013 WHILE ARRIVING AT HIS DECISION. BOTH THE GROUNDS RA ISED BY THE ASSESSEE ARE DISPOSED OFF ACCORDINGLY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) ! # / JUDICIAL MEMBER # / ACCOUNTANT MEMBER /CHENNAI, & /DATED 6 TH APRIL, 2016 SOMU !() *) /COPY TO: 1. APPELLANT 2. RESPONDENT 3. + () /CIT(A) 4. + /CIT 5. ) !!/ /DR 6. 2 /