I M C Society of ITI-Vadia, AMRELI V. The Commr. of Income Tax-III, Rajkot, RAJKOT-GUJARAT

ITA 668/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2276 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-12-2015
• Assessment Year: misc
• Appeal Filed On: 20-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDEY
• Assessee Lawyers: RD LALCHANDANI
• Keywords: Charitable institution
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER [CONDUCTED THROUGH E - CO URT AT AHMEDABAD] IMC SOCIETY OF ITI - VADIA, C/O. ITI - VADIA, MARU PARVAT, KRUSHAPARA, VADIA - 365480, DIST. AMRELI PAN: AAATI9423M (APPELLANT) VS COMMISSIONER OF INCOME TAX, RAJKOT - III, R AJKOT (RESPONDENT) REVENUE BY : S H RI YOGESH PANDEY , D . R. ASSESSEE BY: S H RI R.D. LALCHANDANI , A.R. DATE OF HEARING : 03 - 1 2 - 2 015 DATE OF PRONOUNCEMENT : 26 - 02 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIAL MEMBER : - THI S ASSESSEE S APPEAL AR ISES FROM ORDER OF THE CIT(A) - II I, RAJKOT DATED 2 9 - 09 - 2014 IN APPEAL NO. CIT.R.III / 12AA / 82/2013 - 14 , DENYING REGISTRATION IN PROCEEDINGS UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 668 / RJT /20 14 A SSESSMENT YEAR : NA I.T.A NO. 668 /RJT /20 14 A.Y. NA PAGE NO IMC SOCIETY OF ITI - VADIA VS. CIT 2 2. WE COME TO THE FACTS OF THE INSTANT CASE. THE ASSESSEE - SOCIETY FILED ITS REGISTRATION PETITION BEFORE THE CIT U/S. 12AA OF THE ACT. IT HAS BEEN SET UP BY EXECUTION OF A MEMORANDUM OF AGREEMENT BETWEEN GOVT. OF INDIA, GUJARAT GOVERNMENT ALONG WITH AN INDUSTRIAL PARTNER M/S. PIPAPAV SHIPYARD LT D. ALL OF THEM CAN APPOINT FIVE MEMBERS EACH FOR INSTITUTE MANAGEMENT . THE ASSESSEE S OBJECTS INTER ALIA READ S AS FOLLOWS: - 1 . THE MAIN OBJECT OF SOCIETY OF IMPROVING THE QUALITY OF TRAINING LEADING TO BETTER ERNPLOYABILITY OF TRAINEES AND UPGRADATION OF INDUSTRIAL TRAINING INSTITUTE (ITI). 2. THE MAIN OBJECT OF INCORPORATION OF THE SOCIETY IS UPGRADATION OF INDUSTRIAL TRAINING INSTITUTE (ITI) AND CONVERT IT INTO 'CENTRE OF EXCELLEN CE' THROUGH IT, INDUSTRIAL TRAINING INSTITUTE IMPROVE IN TRAINING WITH QUALITATIVE AND TECHNOLOGY DEMANDS OF THE INDUSTRIES AND EXPANDING UNIVERSE OF K NOWLEDGE AND IMPROVE EMPLOYMENT. 3. IN NORMAL COURSE, SOCIETY SHALL WORK ON NO - PROFIT - NO - LOSS BASIS. HO WEVER, ENSURE DURING THE PERIOD, TO BE SELF - SUFFICIENT FOR ITS EXPENDITURE AND LIABILITIES. 3. IT EMERGES THAT THE STATE GOVERNMENT REGULATES ASSESSEE S ITI S ADMISSION TO THE TUNE OF 80% STRENGTH. THE ASSESSEE S INDUSTRIAL PARTNER FINALIZES THE REMAINI NG 20% OF THE ADMISSION STRENGTH . WE COME TO THE IMPUGNED REGI STR ATION PROCEEDINGS. THE CIT WAS OF THE VIEW THAT ASSESSEE S CHARITABLE ACTIVITIES ARE YET TO COMMENCE. HE NOTICED THAT ITS DEVELOPMENT PLAN INDICATED THAT THE SAME SOUGHT TO ALLOW INDUSTRIA L WORKERS FOR TRAINING AT INSTITUTE ON PAYMENT BASIS FOR HONING OF THEIR SPECIAL SKILLS IN LIEU OF CHARGING MONEY, EXECUTED MAINTENANCE CONTRACTS OF SPECIAL EQUIPMENT WIRING WITH GOVT . /SEMI GOVT . , NEARBY INDUSTRIES AND NGOS AND PROVIDED INDUSTRIAL I.T.A NO. 668 /RJT /20 14 A.Y. NA PAGE NO IMC SOCIETY OF ITI - VADIA VS. CIT 3 EQUIPMEN TS TO INDUSTRIES ON RENTAL BASIS ETC. HE FINDS THE SAME TO BE OF COMMERCIAL NATURE. THE CIT THER EAFTER TAKES COGNIZANCE OF ASSE SSEE S OTHER CLAUSES AS UNDER: - I. PRODUCTION AND JOB WORK WILL BE DONE AND SERVICES WILL BE UTILIZED TO GENERATE REVENU E AND MAKE TRAINING MORE EFFECTIVE AND VIABLE. II. REVENUE WILL BE GENERATED BY THE TESTING AND CERTIFICATION CHARGE. III IN PLANT TRAINING WILL DEVELOP THE INVOLVEMENT OF INDUSTRIES. IV. EXCHANGE OF FACULTIES AND TRANSFER OF TECHNOLOGY A N D KNOWLEDGE OF INSTITUTE AND INDUSTRIES THROUGH IMC. V. BY IMPARTING TRAINING IN SHORT TERM COURSES TO WORKERS OF INDUSTRIES AS PER THEIR NEEDS. 4 . ALL THIS MATERIAL LED THE CIT TO CONCLUDE THE ASSESSEE TO BE A BODY CARRYING OUT ACTIVITIES IN FURTHERAN CE TO COMMERCIAL OBJECTS. HE REJECTS ITS SECTION 12AA REGISTRATION VIDE ORDER UNDER CHALLENGE LEAVING THE ASSESSEE AGGRIEVED. 5 . WE HAVE HEARD BOTH THE LD. REPRESENTATIVES REITERATING THEIR RESPECTIVE STANDS. THERE CAN HARDLY BE ANY DISPUTE THAT NON - COM MENCEMENT OF CHARITABLE ACTIVITIES IS NOT A GROUND TO REJECT SECTION 12AA REGI STRATION AS HELD BY HON BLE MAD RAS HIGH COURT IN ( 2013 ) 354 ITR 219 DIT VS. MEENAKSHI AMMA ENDOWMENT TRUST. THE CIT S REASONING ON THIS SCORE (SUPRA) IS ACCORDINGLY REVERSED. 6. WE COME TO HIS LATTER FINDINGS REJECTING ASSESSEE S REGISTRATION U/S. 12AA BY HOLDING IT TO HAVE BEEN SET UP IN FURTHERANCE TO ITS COMMERCIAL OBJECTS AND CLAUSES EXTRACTED HEREINABOVE . WE FIND THAT A CO - ORDINATE BENCH IN CASE OF KAPURTHALA IMPROVEMENT TRUST VS. CIT I.T.A NO. 668 /RJT /20 14 A.Y. NA PAGE NO IMC SOCIETY OF ITI - VADIA VS. CIT 4 (2015) 155 ITD 570 (AMRITSAR) DEALS WITH A SIMILAR CASE OF AN IMPROVEMENT TRUST SEEKING SECTION 12AA REGISTRATION. IT TAKES COGNIZANCE OF FIRST PROVISO TO SECTION 2(15) APPLICABLE W.E.F. 01 - 04 - 2005 STIPULATING ADVANCEMENT OF ANY OTHER OBJEC T OF GENERAL PUBLIC UTILITY AS NOT A CHARITABLE PURPOSE IF IT INVOLVES ANY COMMERCIAL ELEMENT THEREIN. LD. CO - ORDINATE BENCH HOLDS THAT THIS PROVISO IS NOT RELEVANT ON THE ISSUE OF GRANTING, DENIAL OR WITHDRAWAL OF SECTION 12AA REGISTRATION SINCE THE SAME APPLIES ONLY FOR THE PURPOSE OF SECTION 11 EXEMPTION AT ASSESSMENT STAGE ON YEAR TO YEAR BASIS. SIMILAR INTERPRETATION HAS BEEN GIVEN TO SECOND PROVISO TO THE VERY STATUTORY PROVISION RESTRICTING OPERATION OF TH E FORMER ONE ONLY IN CASE AGGREGATE RECEIPT FROM THE ACTIVITIES IN QUESTION EXCEED RS. 25 LACS W .E.F. 01 - 04 - 2012. IT CONCLUDES IN OTHER WORDS THAT THE MOMENTS AGGREGATE RECEIPTS FROM SUCH COMMERCIAL ACTIVITIES CROSS THRESHOLD LIMIT OF RS. 25 LACS, AN ASSESSEE IS NOT ENTITLED FOR SECTION 11 EXEMPT ION RELIEF. WE REVERT BACK TO ASSESSEE S OBJECT IN THE INSTANT CASE. THERE IS A CLEAR - CUT STIPULATION THAT IT SHALL WORK ON NO PROFIT NO LOSS BASIS ONLY TO BE SELF - SUFFICIENT FOR EXPENDITURE AND LIABILITY. WE ARE OF THE OPINION THAT ITS OBJECTS AND ESTA BLISHMENT OF AN INDUSTRIAL TRAINING INSTITUTE DEVELOPED FOR SKILL DEVELOPMENT PROGRAMME FOR ENSURING BETTER EMPLOYABILITY OF ITS TRAINEES. WE TAKE INTO ACCOUNT ALL THESE FACTS AND CIRCUMSTANCES AND HOLD THAT THE CIT HAS ERRED IN DENYING ASSESSEE THE IMPU GNED REGISTRATION SOUGHT U/S. 12AA OF THE ACT. WE DRAW SUPPORT FROM LD. CO - ORDINATE BENCH DECISION HEREINABOVE. IT IS MADE CLEAR THAT IT SHALL BE OPEN FOR THE ASSESSING OFFICER TO EXAMINE THE ISSUE AS PER LAW AND IN VIEW OF ABOVE STATED I.T.A NO. 668 /RJT /20 14 A.Y. NA PAGE NO IMC SOCIETY OF ITI - VADIA VS. CIT 5 CO - ORDINATE DECIS ION IN THE COURSE OF ASSESSMENT ON YEAR TO YEAR BASIS. 7. THIS ASSESSEE S IS ALLOWED IN ABOVE TERMS. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 26 - 02 - 201 6 SD/ - SD/ - (PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 26 /02 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLAT E TRIBUNAL, RAJKOT