Ador Fontech Charitable Fund, Bangalore V. DIT(Exemptions), Bangalore

ITA 674/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2066 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-11-2009
• Assessment Year: 2009-2010
• Appeal Filed On: 30-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI S PATIL
• Assessee Lawyers: GEETHA D
• Keywords: Charitable institution
• Section: 80G; 12A; 10; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMB ER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO. 674/BANG/2009 ASSESSMENT YEAR : N.A. ADOR FONTECH CHARITABLE FUND, BELVIEW, 7, HAUDIN ROAD, BANGALORE 560 042. : APPELLANT VS. THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE. : RESPONDENT APPELLANT BY : SMT. GEETHA D. RESPONDENT BY : SMT. SWATI S. PATIL O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE TRUST ADOR FONTECH CH ARITABLE FUND IS DIRECTED AGAINST THE ORDER OF THE LD. DIT(E) IN REJECTING ITS APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G OF THE ACT. 2. THE ASSESSEE TRUST HAS RAISED THREE EXHAUSTIVE GROUNDS WHICH ARE ILLUSTRATIVE IN NATURE. THE CRUX OF THE ISSUE IS L ARGELY CONFINED TO THE DIT(E)S REJECTION OF ITS APPLICATION FOR RENEW AL OF RECOGNITION U/S 80G OF THE ACT. ITA NO.674/BANG/ 09 PAGE 2 OF 9 3. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE AS SESSEE TRUST HAS BEEN GRANTED REGISTRATION U/S 12A OF THE ACT AND ALSO RE COGNITION U/S 80G OF THE ACT TILL 31.3.2008. IT HAD FURNISHED ITS APPLICAT ION IN FORM NO.10G ON 1.12.2008 SEEKING APPROVAL FOR RECOGNITION U/S 80G OF THE ACT. ON SCRUTINIZING ITS APPLICATION, VERIFICATION OF ACCO UNTS AND THE ACTIVITIES OF THE ASSESSEE TRUST, AND ALSO TAKING REFUGE IN THE RULI NGS OF THE HONBLE JURISDICTIONAL HIGH COURT REPORTED IN 267 ITR 549 A ND 269 ITR 59, FOR THE REASONS SET-OUT IN THE IMPUGNED ORDER UNDER DISPUTE , THE DIT(E) HAD REJECTED THE ASSESSEE-TRUSTS APPLICATION U/S 80G O F THE ACT. 4. AGGRIEVED, THE ASSESSEE TRUST HAS COME UP WITH T HE PRESENT APPEAL. IT WAS CONTENDED BY ITS SECRETARY - WHO REPRESENT ED ON BEHALF OF THE ASSESSEE TRUST - THAT - (I) THE FUND MAY BE SMALL AND THE CHARITABLE WORK MAY B E RESTRICTED TO A FEW. NONETHELESS, GENUINE EFFORTS HAVE BEEN M ADE AND BEST ENDEVAOUR EVINCED TOWARDS A NOBLE CAUSE. IT IS AN HONEST EFFORT TO PROVIDE RELIEF TO THE UNDER-PRIVILEGED; (II) IT WAS TRUE THAT THE FUNDS DOES NOT ADVERTISE TO SE EK DONORS NOR DOES IT MAKE ITS CHARITABLE WORK ON A VERY LARGE SC ALE. YET, IT HAS NOT STOPPED ANY ONE FROM BECOMING ITS MEMBERS OR DO NORS NOR HAS IT PLACED ANY RESTRICTION IN GRANTING RELIEF. - NO DISCRIMINATION HAS BEEN MADE WHATSOEVER ON THE B ASIS OF REGION, CASTE, CREED, LANGUAGE OR GENDER. IT IS A TOTALLY OPEN FUND. FURTHER, THE OFFICER BEARERS RENDER FREE SERVICES; - THERE WERE NO FULL TIME EMPLOYEES OF THIS FUND AND THAT MAY BE THE ONLY REASON WHY THE FUND WAS NOT DRIVEN AT A FAST P ACE. THE SCALE OF THE FUND CANNOT BE A GROUND FOR REJECTION OF APPLIC ATION. FURTHER, THERE WAS NO LEGISLATION WHICH SPECIFIES THE APPLIC ABLE SCALE AND MAGNITUDE OF THE FUND. AFTER ALL, IT WAS A CHARITA BLE WORK AND SHOULD BE ADHERED TO IN THE SPIRIT OF HELPING THE NEEDY; A ND (III) THE ACTIVITIES OF THE FUNDS, THE BENEFICIARIES, REC EIPTS AND PAYMENTS HAVE BEEN DOCUMENTED WHICH HAVE BEEN APPENDED FOR P ERUSAL. ITA NO.674/BANG/ 09 PAGE 3 OF 9 4.1. ON HER PART, THE LD. D R WAS OF THE FIRM VIEW THAT THE LD.DIT(E) HAD COME TO A CONCLUSION THAT THE ASSESSEE TRUST HAD NO T SATISFIED THE GENUINENESS OF THE ACTIVITIES AS REQUIRED UNDER RUL E 11AA OF I.T.RULES AND THUS REJECTED THE ITS APPLICATION FOR RENEWAL OF R ECOGNITION. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE DIT(E) BE SUSTAINED. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND ALSO PERUSED THE RELEVANT RECORDS. 5.1. THE MAIN CAUSE FOR REJECTING THE ASSESSEE-TRUS TS APPLICATION FOR RENEWAL OF RECOGNITION BY THE LD.DIT(E) WAS THAT SO ME OF THE BENEFICIARIES ADDRESSES WERE INCOMPLETE AND NO RECEIPTS WERE FURN ISHED FOR VERIFICATION ETC., HOWEVER, THE ASSESSEE TRUST HAD FURNISHED LETTERS R ECEIVED FROM A NUMBER OF BENEFICIARIES ACKNOWLEDGING THE RECEIPT OF FUNDS , A FEW OF WHICH, ARE LISTED OUT AS UNDER: (I) VYASA VIDYANIKETHAN OF THODAPARAMBU, PERUMBAVOOR OF KERALA IN ITS LETTER DATED: 1.8.05 GRATEFULLY ACKNOWLEDGED THE RECEIPT OF RS.25000/- FROM THE TRUST; (II) SREE SATCHIDANANDA JANASEVA SAMSTE (REGD) OF UDUKUN TE, MAGADI TK, BANGALORE DIST IN ITS LETTER DATED 12.11 .2007 ACKNOWLEDGED DONATION OF RS.5000/- TO HELP POOR ORPHAN/MERITORIOUS RURAL STUDENTS; (III) MAJALGAON VIKAS PRATHISTHAN OF GAJANANNAGAR, MAJALG AON DISTRICT IN ITS LETTER DATED 28.2.2006 HAD ACKNOWLE DGED THE RECEIPT OF CONTRIBUTION MADE BY THE TRUST. MAJALGAON VIKA S PRATHISTHAN HAS BEEN WORKING FOR UNDERPRIVILEGED WOMEN AND CHIL DREN [COPY OF RECEIPT FOR RS.10000/-]. THE ASSESSEE TRUST IN ITS LETTER(S) HAD FORWARDED T HE CHEQUES TO ITA NO.674/BANG/ 09 PAGE 4 OF 9 (I) HEMAN KADAM, C/O MANASI MEDICAL SHOP NO.36, ATHARVA PURAM, OPP: KONARK VIHAR, DHANKAWADI, PUNE 43 - A/C PAY EE CHEQUE DT.26.12.2005 FOR RS.4000/- (TO REIMBURSE THE MEDI CINES PURCHASED FROM MANASI MEDICAL SHOP CASH BILLS APP ENDED); (II) MRS.MANGALA RAMESH, NO.42, MATHIKERE COLONY, NEAR. M.S.RAMAIAH COLLEGE, YESHWANTPUR, BANGALORE 54 C HEQUE NO.876411 DT.20.1.2006 FOR RS.3750/- BEING REIMBURS EMENT OF MEDICAL EXPENDITURE [CASH BILLS OF SRI VENKATESHWA RA MEDICALS, BANGALORE 54 ATTACHED] 5.1. ON A CURSORY VERIFICATION OF THE BILLS, CORRES PONDENCES, RECEIPTS, ETC. WE FIND THAT THE BENEFICIARIES COMPLETE POSTAL ADDR ESSES ARE AVAILABLE. TO OUR MIND, THE ASSESSEE TRUST HAD, IN FACT, DISCHARG ED ITS ONUS ON THIS COUNT. HOWEVER, THE LD.DIT(E)S ASSERTION, THE ADDRESS PARTICULARS OF THE RECIPIENTS ARE VAGUE AND PERTAIN TO PUNE AND CANNOT BE VERIFIED IS LACKING CONVICTION. HAD THE LD. DIT(E) DOUBTED THE BONA-F IDE OF THE ASSESSEE- TRUSTS CLAIM, SHE COULD HAVE GOT CROSS-CHECKED TH ROUGH HER COUNTERPART(S) AT PUNE. 5.2. WITH RESPECTS, WE HAVE PERUSED THE RULING OF T HE HONBLE JURISDICTIONAL HIGH COURT RELIED ON BY THE LD.DIT(E ). (I) IN THE CASE OF BANGALORE EDUCATION TRUST V. DI T (E) REPORTED IN 267 ITR 549, THE REASONING OF THE HONBLE HIGH COUR T WAS THAT THE AUTHORITIES HAVE NOTICED THAT THE APPLICATION WAS D EFECTIVE INASMUCH AS DETAILED INFORMATION WAS NOT FURNISHED. THEREFORE, THE MATERIAL WAS ASKED FOR. IT IS ALSO SEEN BY THE AUTHORITY THAT THE TRUST HAS COMMITTED A FRAUD FURNISHING THE DEPARTMENT AN AUDIT REPORT WITHOUT A CTUALLY GETTING THE ACCOUNTS AUDITED BY A QUALIFIED CHARTERED ACCOUNTAN T. THE AUTHORITY HAS ITA NO.674/BANG/ 09 PAGE 5 OF 9 ALSO NOTICED THAT IT IS A CLEAR CASE OF IRREGULAR M AINTENANCE OF ACCOUNTS. IN SO FAR AS THE ACTIVITIES ARE CONCERNED, THE AUTHORI TY HAS NOTICED THAT THE ASSESSEE HAS NOT INDICATED THE PURPOSE FOR WHICH TH E CORPUS DONATION WAS GIVEN BY THE ALLEGED DONORS. IT IS SEEN THAT THE FU ND IS BEING USED TO MAKE SUBSTANTIAL ADVANCES TO SOME OTHER PERSONS. AN INDI CATION IS GIVEN THAT THERE IS DIVERSION OF FUND. AFTER NOTICING THE MATERIAL F ACTS, THE AUTHORITY HAS REJECTED THE RENEWAL APPLICATION. WITH DUE RESPECTS, WE WOULD LIKE TO POINT OUT THAT THE ISSUE BEFORE THE HONBLE COURT WAS THAT THAT ASSESSEE HAD DIVERTED I TS FUNDS AND ALSO COMMITTED A FRAUD IN FURNISHING AN AUDIT REPORT WIT HOUT AUDITING ITS ACCOUNTS BY A QUALIFIED CA ETC., THUS, IN OUR CONSIDERED VI EW, THE CITATION OF THE DIT(E) IS DISTINGUISHABLE AND CANNOT BE APPLIED TO THE CASE ON HAND. (II) YET AN ANOTHER RULING OF THE JURISDICTIONAL H IGH COURTS IN THE CASE OF GAJAM NAGAPPA AND SON TRUST V. DIT(E) REPOR TED IN 269 ITR 59 WHEREIN THE ISSUE BEFORE THE HON BLE COURT WAS THA T THE AUTHORITY NOTICES THE FINANCIAL RESULTS FOR THE LAST THREE YEARS. THE AUTHORITY NOTICES VARIOUS FACTS SUCH AS WITHDRAWAL OF SUBSTANTIAL AMOUNT AND USING THEM THEREAFTER/USAGE OF LOGO ON THE BASIC CONCERT/WITHD RAWAL OF RS. 9 LAKHS FOR PURCHASING A SITE IN CASH/NON-AVAILABILITY OF THE S IGNATURE ON THE SPONSORSHIP AGREEMENT/AVAILABILITY OF PROGRAMMES TO A CERTAIN FEW PERSONS. IT FURTHER NOTICES THAT THE FACTS WOULD SHOW THAT T HE COMPANY IS FURTHERING ITS INTEREST BY WAY OF DISPLAYING ITS LOGO, ITS NAME AN D ADVERTISEMENT OBTAINING A MILEAGE OUT OF SUCH ACTIVITIES. AFTER NOTICING AL L THESE FACTUAL ASPECTS OF THE ITA NO.674/BANG/ 09 PAGE 6 OF 9 MATTER, THE AUTHORITY WAS NOT SATISFIED OF ANY CHAR ITABLE ACTIVITIES BEING CARRIED ON BY THE PETITIONER. SATISFACTION IS NECES SARY IN TERMS OF SECTION 80G READ WITH RULE 11AA OF THE ACT. THE FACTS OF TH E CASE WOULD SHOW THAT THE PETITIONER-TRUST HAS DONE SEVERAL ACTS WARRANTI NG NO RENEWAL. SATISFACTION IS NECESSARY ON THE PART OF THE AUTHOR ITY FOR RENEWAL PURPOSES. THE REASON GIVEN BY THE AUTHORITY CANNOT SAID TO RE QUIRE INTERFERENCE IN THE CASE ON HAND. A TRUST CANNOT BE A TOOL FOR FURTHERA NCE OF TRADE INTEREST OF ANOTHER COMMERCIAL ORGANIZATION. THE PURPOSE OF SEC TION 80G IS NOT FOR FURTHER PROMOTING COMMERCIAL ACTIVITIES. THE ORDER IS BASED ON THE MATERIAL AVAILABLE ON RECORD. NO CONTRA MATERIAL IS PLACED B EFORE THIS COURT TO DISLODGE THIS FACTUAL FINDING ARRIVED BY THE COMMIS SIONER. THEREFORE, THE AUTHORITY HAS TO LOOK INTO THE OBJECT OF THE INSTIT UTION AND ALSO THE FACTS AND CIRCUMSTANCES OF EACH CASE TO SATISFY ITSELF WITH R EGARD TO THE CHARITABLE CHARACTER AND WITH REGARD TO ITS ACTIVITIES IN TERM S OF SECTION 80G READ WITH RULE 11AA OF THE RULES. ONLY ON BEING SATISFIED WIT H THE OBJECTS, REGISTRATION OF RENEWAL IS PERMISSIBLE IN TERMS OF THE FACTS AVA ILABLE ON RECORD UNDER SECTION 80G OF THE ACT. WE ARE IN TOTAL AGREEMENT WITH THE RULING OF THE HO NBLE COURT REFERRED SUPRA. NO DOUBT, THE AUTHORITY HAD TO LOOK INTO TH E OBJECT OF THE INSTITUTION AND ALSO FACTS AND CIRCUMSTANCES OF EACH CASE TO SA TISFY ITSELF WITH REGARD TO THE CHARITABLE CHARACTER AND WITH REGARD TO ITS ACTIVITIES IN TERMS OF S.80G R.W.RULE 11AA OF THE RULES. HOWEVER, TO OUR DISMAY , THE LD. DIT(E) HAD NOT VERIFIED THE EVIDENCES PRODUCED BY THE ASSESSEE-TRU ST TO ITS TILT. INSTEAD, ITA NO.674/BANG/ 09 PAGE 7 OF 9 THE LD.DIT(E) HAD CONVENIENTLY TOOK A STAND THAT THE ADDRESS PARTICULARS OF THE RECEIPTS ARE VAGUE AND PERTAIN TO PUNE AND C ANNOT BE VERIFIED. LET US AGREE WITH HER THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF PUNE BENEFICIARY COULD NOT BE VERIFIED. HOWEVER, WHAT H AD PREVENTED THE LD.DIT(E) TO CROSS VERIFY THE OTHER BENEFICIARIES SPREAD OVER IN BANGALORE CITY IS A MOOT QUESTION? (III) WE QUOTE IN THE CASE OF N.N.DESAI CHARITABLE TRUST REPORTED IN 246 ITR 452, THE HONBLE HIGH COURT OF GUJARAT IN I TS WISDOM HAD DELIBERATED AN IDENTICAL ISSUE IN AN EXHAUSTIVE MAN NER AND RULED THAT (PAGE 460) THAT IS DEMONSTRATIVE OF THE SCOPE OF EN QUIRY BY THE COMMISSIONER WHILE ENQUIRING THE EXISTENCE OF CONDI TION UNDER SECTION 80G(5)(I). THAT EXTENDS TO ELIGIBILITY TO EXEMPTION UNDER VARIOUS PROVISIONS OF THE INCOME-TAX ACT REFERRED T O IN THAT SUB- SECTION, BUT NOT TO ACTUAL ASSESSMENT WHICH DEPENDS ON FULFILLMENT OF FURTHER CONDITIONS BY THE ELIGIBLE INSTITUTIONS, TRUSTS OR FUNDS. IN NONE OF THESE CASES INQUIRY OF THE COMMISSIONER UND ER SECTION 80G(5)(VI) EXTENDS TO THE ACTUAL COMPUTATION OF INC OME UNDER THE ASSESSMENT THAT IS LIKELY TO BE FRAMED WE SEE NO R EASON THAT SUCH EXERCISE CAN BE TAKEN IN RESPECT OF A TRUST WHICH IS CLAIMING EXEMPTION NOT UNDER SECTION 10 BUT UNDER SECTIONS 1 1 AND 12 OF THE ACT, ONCE THE COMMISSIONER FINDS THAT THE PERSO N WHO IS CLAIMING APPROVAL IS THE ASSESSEE WHO CLAIMED HIS I NCOME NOT LIABLE TO BE INCLUDED IN THE TAXABLE INCOME UNDER S ECTION 11 OR 12. THE ENQUIRY RELATES TO WHETHER IT IS REGISTERED UND ER SECTION 12A, WHETHER IT IS A TRUST WHOLLY FOR CHARITABLE PURPOSE S OR RELIGIOUS PURPOSES, AND WHETHER INCOME RECEIVED BY IT IS LIAB LE TO BE CONSIDERED UNDER SECTION 11, BUT IT DOES NOT GO BEY OND THAT TO EXAMINE AS AN ASSESSING OFFICER WHETHER THE INCOME RECEIVED BY IT AT THE CLOSE OF ANY PARTICULAR YEAR OR YEARS WAS O R WAS NOT ACTUALLY INCLUDED IN THE TAXABLE INCOME IN THE PAST. THIS CONSIDERATION MUST BE WHETHER THE INCOME RECEIVABLE BY IT WILL OR WILL NOT BE LIABLE TO BE CONSIDERED FOR EXCLUSION U NDER SECTION 11. SUCH ENQUIRY OBVIOUSLY CANNOT INCLUDE AN ENQUIRY WH ETHER AT THE CLOSE OF THE PREVIOUS YEAR THE DONEE WILL ACTUALLY BE ABLE TO SUSTAIN SUCH CLAIM BECAUSE OF NON-FULFILMENT OF SOM E CONDITIONS BY HIM AS TO THE APPLICABILITY OR ACCUMULATION OF INCOME, AS IT IS ITA NO.674/BANG/ 09 PAGE 8 OF 9 NOT POSSIBLE TO PREDICATE THAT IN PRAESENTI WHEN DO NATION IS MADE. AS WE HAVE NOTICED ABOVE, THAT QUESTION WOULD DEPEN D UPON THE FACTS EXISTING AT THE CLOSE OF THE ASSESSMENT YEAR AND AT THE TIME OF CONSIDERING THE APPLICATION IT CANNOT BE EXAMINED I N THE LIGHT OF WHAT IS GOING TO HAPPEN IN PENDING ASSESSMENTS IN RESPECT OF WHICH APPROVAL CERTIFICATE WAS ALREADY EXISTING AN D THE ASSESSMENT OF WHICH WOULD NOT AFFECT THE DONATIONS MADE TO THE TRUST DURING THAT YEAR. VIEWED FROM ANY ANGLE, WE ARE OF VIEW THAT THE ORDER OF THE COMMR. REFUSING APPROVAL IS FOUNDED ON WHOLLY IRRELEVANT C ONSIDERATIONS BY TRENCHING UPON THE FIELD OF THE ASSESSING OFFICER BY PRONOUN CING ON THE TAXABILITY OR NON- TAXABILITY OF ANY INCOME IN RESPECT OF THE ASSESSME NTS FOR THE PAST YEAR WHICH ARE YET TO BE COMPLETED AND DOES NOT RELATE TO A PERIOD FOR WHICH APPROVAL, IF ACCORDED, IS TO OPERATE. 6. IN AN OVERALL CONSIDERATION OF THE JUDICIAL PREC EDENTS, WE ARE OF THE UNANIMOUS VIEW THAT THE LD. DIT(E) WAS NOT JUSTIFIED IN REJECTING THE ASSESSEE TRUSTS APPLICATION FOR RENEWAL OF RECOGNI TION U/S 80G OF THE ACT. IT IS ORDERED ACCORDINGLY. 7. SINCE THE ASSESSEE-TRUSTS REQUEST FOR RENEWAL O F RECOGNITION U/S 80G OF THE ACT HAS BEEN CONCEDED, ITS OTHER GROUSE THAT THE REJECTION HAS BEEN EX-PARTE AND UNILATERAL .. HAS BECOME REDUNDANT AND, ACCORDINGLY, IGNORED. 8. IN THE RESULT, THE ASSESSEE-TRUSTS APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF DECEMBER, 2009. SD/- SD/- (SHAILENDRA KUMAR YADAV ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE, DATED, THE 18 TH DECEMBER, 2009. DS/- ITA NO.674/BANG/ 09 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.