Dammu Peddalingaaiah and Dr. Chandra Sekhar Charitable Trust, Hyderabad V. Dir. of IT (Exemptions), Hyderabad

ITA 671/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66309 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 03-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: E S RANGANATH
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.671/HYD/2012 DAMMU PEDDALINGAIAH AND DR. CHANDRA SEKHAR CARITABLE TRUST, HYDERABAD. .... APPELLANT PAN:AABTD 4895 P VS. DIT (E), HYDERABAD. RESPONDENT APPELLANT BY : SHRI E.S. RANGANATH RESPONDENT BY : SHRI M.H. NAIK DATE OF HEARING : 22-08-2012 DATE OF PRONOUNCEMENT : 05-10-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29-2-2012 OF DIRECTOR OF INCOME-TAX (EX EMPTIONS), HYDERABAD REJECTING THE ASSESSEES APPLICATION IN F ORM NO.10A FOR REGISTRATION U/S 12A OF THE ACT. THE ASSESSEE-TRU ST HAS RAISED AS MANY AS SEVEN GROUNDS BEFORE US. 2. BRIEFLY THE FACTS ARE THE ASSESSEE IS A TRUST CO NSTITUTED ON 17-12-2009 BY THE SETTLER, SRI DAMMU RAMAKRISHNAIAH , A RETIRED IAS OFFICER, IN MEMORY OF HIS LATE FATHER, SRI DAMM U PEDDALINGAIAH AND HIS MISSING SON, DR. CHANDRA SEKH AR. THE 2 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. TRUST IS DULY REGISTERED AND THE SETTLER PROVIDED A SUM OF RS.10,000/- AS A FUND TOWARDS CORPUS OF THE TRUST. THE OBJECT OF THE TRUST AS PER THE TRUST DEED ARE :- (1) CONSTRUCTION AND RUNNING OF SCHOOLS, COLLEGES, EDUCATIONAL INSTITUTIONS, PUBLICATIONS OF BOOKS, AR TICLE, ORDERS ETC., OF EMINENT WRITERS. CENTRES FOR POOR FEEDING AND HOMES FOR THE AGED FOR THE BENEFIT OF T HE PUBLIC. (2) PROVIDING FOR GRANTS, SCHOLARSHIPS, FELLOWSHIPS AND OTHER FORMS OF FINANCIAL ASSISTANCE TO THE NEEDY AND DESERVING STUDENTS FOR PURSUING EDUCATION, VOCATION AL TRAINING, SKILL DEVELOPMENT ETC. (3) GRANTING OF FINANCIAL ASSISTANCE TO NAY EDUCATI ONAL INSTITUTION FOR GRANTING SCHOLARSHIPS, PRIZES, MEDA LS, AWARDS FOR EXCELLENCE IN STUDIES, SPORTS AND SCIENT IFIC RESEARCH, DISTRIBUTION OF BOOKS AND NOTE BOOKS FOR POOR AND DESERVING STUDENTS. 4) ESTABLISHMENT, CONDUCT, MAINTENANCE OF CLINICAL LABORATORIES, HOSPITALS, NURSING HOMES, DISPENSARIE S AND INSTITUTIONS OF SIMILAR NATURE AND PROVIDING FINANCIAL ASSISTANCE TO THE DESERVING PERSONS FOR MEDICAL TREATMENT IN ANY MEDICAL INSTITUTION. 5) EXTENDING FINANCIAL ASSISTANCE FOR HE POOR LIVIN G IN POVERTY STRICKEN CONDITIONS. 6) EXTENDING FINANCIAL ASSISTANCE TO THE POOR CHILD REN TO ENABLE THEM TO PURSUE THEIR EDUCATION. 3 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. 7) PROVIDING FINANCIAL ASSISTANCE FOR PERFORMING ANNADHANAM AND FEEDING THE POOR DIRECTLY AND THROUG H OTHER INSTITUTIONS. 8) ESTABLISHMENT, CONDUCT, MAINTENANCE OF OLD AGE H OMES, HOMES FOR PHYSICALLY CHALLENGED MEN, WOMEN AND CHILDREN AND PERSONS WITH SIMILAR DISABILITIES AND ALSO FOR GRANTING FINANCIAL ASSISTANCE TO INSTITUTIONS PERFORMING SIMILAR ACTIVITIES. 9) PROVIDING FOR OR CONTRIBUTING TO EDUCATION AND S CIENTIFIC RESEARCH AND DEV ELOPEMENT 10) PROVIDING RELIEF TO THE POOR AND ADVANCING ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 11) THE TRUST WILL NOT CARRY OUT ANY ACTIVITIES WIT H THE INTENTION OF EARNING PROFIT AND WILL PERFORM WITH S ERVICE MOTIVE ONLY 12) NO ACTIVITIES OF THE TRUST WILL BE CARRIED OUT OUTSIDE INDIA. 3. THE ASSESSEE APPLIED FOR REGISTRATION U/S 12A OF THE ACT IN THE PRESCRIBED MANNER BEFORE THE DIT (E), HYDERABAD . THE DIT (E) ISSUED A QUESTIONNAIRE TO THE ASSESSEE REQUESTI NG HIM TO FURNISH DETAILS ON THE POINTS RAISED IN THE QUESTIO NNAIRE AND PRODUCE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS FOR D IFFERENT ACCOUNTING YEARS. THE ASSESSEE PRODUCED THE DETAIL S ASKED FOR. THE DIT (E) AFTER EXAMINING THE DETAILS FURNISHED B Y THE ASSESSEE REJECTED THE APPLICATION ON THE FOLLOWING REASONS:- I) THE TRUST DEED DID NOT INDICATE THE DETAILS OF PAYMENT OF RS.10,000 MADE BY THE SETTLER 4 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. II) THE SETTLER WHO IS THE FIRST MANAGING TRUSTEE IS EXCLUSIVE DISCRETIONARY POWER WITH HIM FOR MANAGING THE AFFAIRS OF THE TRUST. III) THE SETTLER HAS ABSOLUTE DISCRETION FOR APPOINTING THE TREASURER. IV) THE PERSONS WHO HAVE SIGNED AS WITNESS IN THE TRUST DEED ARE NOT INDEPENDENT PERSONS BUT ARE TWO TRUSTEES. V) THOUGH CLAUSE-14 OF THE TRUST DEED PROVIDES THAT TH E TRUSTEES SHALL HOLD HONORARY OFFICE AND SHALL NOT BE ENTITLED TO ANY SALARY, ALLOWANCES OR PERQUISITES, EXCEPT FOR THE REIMBURSEMENT OF ACTUAL EXPENSES INCURRED IN CONNECTION WITH ATTENDING TO THE TRUST MATTER BUT THE CASH BOOK MAINTAINED BY THE TRUST REVEALS THAT PAYMENTS WERE MADE TOWARDS HONORARIUM TO THE TRUSTEE BY NAME SRI A. GOPAL VI) CASH BOOK HAS NOT BEEN MAINTAINED PROPERLY. VII) THE PAYMENTS MADE TO DIFFERENT PERSONS TOWARDS OLD AGE PENSION\-ORPHAN/DESTITUTE AND SUCH PAYMENTS ARE NOT IN CONSONANCE WITH THE OBJECTIVES OF THE TRUST AS MENTIONED IN THE TRUST DEED. 4. THE LEARNED AR SUBMITTED BEFORE US THAT IT IS NO T MANDATORY TO MENTION THE MODE OF PAYMENT IN THE TRUST DEED. HOWEVER, THE TRUST DEED CLEARLY MENTIONS THE DETAILS OF THE SETTLEMENT AMOUNT AT PAGE-11 OF THE TRUST DEED. SO FAR AS THE OBSERVATION OF THE DIT (E) IS CONCERNED THAT THE MANAGING TRUSTE E VIZ., THE SETTER IS VESTED WITH ABSOLUTE POWER IN RUNNING OF THE AFFAIRS OF THE TRUST AND APPOINTING A TREASURER, THE LEARNED A R SUBMITTED THAT THE POWER OF MANAGING TRUSTEE TO REMOVE A TRUS TEE IS NOT ABSOLUTE AND HE HAS TO FOLLOW CERTAIN PRINCIPLES VI Z., (I) TRUSTEE IS 5 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. SUFFERING FROM PHYSICAL OR MENTAL DISABILITY OR IF HE IS ACCUSED OR MISFEASANCE OF TRUST FUNDS OR PROPERTY OR MISCONDUC T ONLY AFTER CONDUCTING ENQUIRY IF THE ALLEGATIONS ARE FOUND TO BE CORRECT THEN OF THE MANAGING TRUSTEE IS EMPOWERED TO REMOVE ANY TRUSTEE FROM THE TRUST AND ITS OFFICES SINCE THE CONTINUANC E OF SUCH PERSON WILL NOT BE CONGENIAL TO THE ACTIVITIES OF THE TRUS T. THEREFORE, THERE IS NO OVER-RIDING POWER WITH THE MANAGING TRU STEE AS HAS BEEN ALLEGED BY THE DIT (E). SIMILARLY, THE TRUST DEED CLEARLY STIPULATES THE ROLE AND RESPONSIBILITY AND POWERS O F THE MANAGING TRUSTEE. THEREFORE, THE CONCLUSION ARRIVED AT BY T HE DIT (E) THAT MANAGING TRUSTEE IS VESTED WITH ABSOLUTE POWERS IS NOT CORRECT. THE LEARNED AR FURTHER SUBMITTED THAT SO FAR AS ALL EGATION OF PAYMENTS OF HONORARIUM IS CONCERNED IT IS NOTHING BUT ONLY RE- IMBURSEMENT OF EXPENSES. COUNTERING THE ALLEGATION OF DIT (E) THAT THE CASH BOOKS ARE NOT PROPERLY MAINTAINED, LE ARNED AR SUBMITTED THAT THE FINDING OF THE DIT (E) IS NOT PR OPER. THE CASH BOOK CANNOT BE SAID TO HAVE NOT BEEN MAINTAINED PRO PERLY ONLY BECAUSE THE ADDRESSES OF THE BENEFICIARIES ARE NOT RECORDED IN THE CASH BOOK. THE PAYMENTS TO THE BENEFICIARIES THRO UGH MOS, AND ACKNOWLEDGMENTS WERE ALSO RECEIVED FROM THE BENEFIC IARIES. THESE FACTS HAVE NOT BEEN VERIFIED THOUGH COPIES OF THE MOS WERE SUBMITTED BEFORE THE DIT (E). SO FAR AS THE FINDING OF THE DIT (E) TO THE EFFECT THAT THE PAYMENTS MADE TOWARDS OLD AG E PENSION- ORPHAN/DESTITUTE WHICH ARE NOT IN CONSONANCE WITH T HE OBJECTIVES OF THE TRUST, THE LD. AR SUBMITTED THAT THE FUNDS W ERE UTILISED FOR BY THE TRUST FOR FURTHERANCE OF ITS OBJECTIVES BY P ROVIDING OLD AGE PENSIONS, ORPHANS AND DESTITUTE AND THESE ACTIVITIE S ARE FULLY COVERED UNDER THE OBJECTS OF THE TRUST AS SPECIFIED IN THE TRUST DEED. THE LEARNED AR FURTHER SUBMITTED THAT WHILE CONSIDERING AN APPLICATION OF REGISTRATION U/S 12A OF THE ACT, DIT (E) IS NOT REQUIRED TO EXAMINE THE FINANCIAL STATEMENT AND UTI LISATION OF ITS 6 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. PROPERTY. THE DIT (E) IS REQUIRED TO SEE WHETHER T HE OBJECTS OF THE SOCIETY ARE IN THE NATURE OF CHARITABLE PURPOSE OR NOT. ONCE THE DIT (E) IS SATISFIED THAT THE OBJECTS OF THE AS SESSEE ARE FOR CHARITABLE PURPOSE, THEN REGISTRATION U/S 12A HAS T O BE GRANTED. IN SUPPORT OF SUCH CONTENTION, THE LEARNED AR RELIE D UPON A DECISION OF ITAT IN ITA NO.1709/HYD/2008 DATED 1-7- 2009 IN THE CASE OF SPORTS AUTHORITY OF ANDHRA PRADESH, HYDERA BAD VS. DIT(E). 5 ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE O RDER OF THE DIT (E). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD. ON EXAMINING THE R EASONS SHOWN FOR REJECTING THE APPLICATION U/S 12A, WE FIND THAT THE DIT (E) HAS NOT PROPERLY CONSIDERED THE MATTER. IT IS NOT NECE SSARY THAT THE DETAILS OF PAYMENT OF RS.10,000 HAVE TO BE MENTIONE D IN THE TRUST DEED. THAT APART THE DIT (E) HAS REACHED A C ONCLUSION THAT THE MANAGING TRUSTEE WHO HAPPENS TO BE THE SETTLER IS VESTED WITH ABSOLUTE DISCRETIONARY POWER FOR REMOVING A TR USTEE AND APPOINTING A TREASURER. IT APPEARS THAT THE DIT (E ) HAS COME TO THE AFORESAID CONCLUSION WITHOUT PROPERLY CONSIDERI NG THE RECITALS IN THE TRUST DEED. SIMILARLY, THE ASSESSEES CLAIM THAT THE PAYMENTS TO SRI A. GOPAL ARE ONLY IN THE NATURE OF REIMBURSEMENT OF EXPENSES, REQUIRES VERIFICATION. THE OBJECT OF T HE TRUST AS NARRATED BY THE ASSESSEE ALSO PROVIDES FOR CENTRES FOR FEEDING, HOMES FOR AGED. THEREFORE, THE OBSERVATION MADE B Y THE DIT (E) THAT THE PAYMENT TO VARIOUS PERSONS TOWARDS OLD AGE PENSION, ORPHAN AND DESTITUTE ARE NOT IN CONSONANCE WITH THE OBJECTIVES OF THE TRUST IS WITHOUT PROPERLY LOOKING INTO AND APP RECIATING THE OBJECTIVES OF THE TRUST. CONSIDERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ENTIRE 7 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST. ISSUE OF REGISTRATION U/S 12A OF THE ACT NEEDS TO B E LOOKED INTO AFRESH BY THE DIT (E). WE THEREFORE RESTORE THIS M ATTER BACK TO THE FILE OF THE DIT (E) WHO SHALL CONSIDER THE SAME AFRESH BY MAKING PROPER ENQUIRY AND AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE BEFORE FINALISING TH IS MATTER. THE DIT (E) SHALL KEEP IN MIND THE ORDER OF THE ITAT, H YDERABAD BENCH MENTIONED SUPRA WHILE DECIDING THE ISSUE. 7. IN THE RESULT, THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE COURT ON 05 -10-2012. SD/- SD /- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 5 TH OCTOBER, 2012. COPY TO:- 1) C/O SRI B. VIJAYA KUMAR & CO., CAS, 101, SRI SHAILA JA NIVAS, BHAVANI NAGAR, HYDERABAD. 2) THE DIT (EXEMPTIONS), HYDERABAD. 3)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERA BAD. JM R* 8 ITA NO.671 OF 2012 DP AND DR. CHANDRASEKHAR CHARITABLE TRUST.