HEMDHA MODI RESOURCES PVT. LTD., Jaipur V. CIT-EXEMPTION, Jaipur

ITA 679/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5393 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: misc
• Appeal Filed On: 14-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI CIT DHK
• Keywords: Charitable institution; Capital expenditure
• Section: 80G; 12A; 12AA

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOE FLAG ;KNO] YS[KK LNL; ,OA YFYR DQEKJ] U;KF ;D LNL; DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM & SHRI LALIET K UMAR, JM VK;DJ VIHY LA-@ ITA NO.679/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : HEMDHA MEDI RESOURCES PVT. LTD.S-8 AMARPALI MARG, NEAR MTS TOWER, VAISHAKI NAGAR, JAIPUR CUKE VS. COMMISSIONER OF INCOME TAX (EXEMPTIONS), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AACCH 4147 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.S. KOTHARI (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.04.2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 26/04/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (EXEMPTIONS), JAIPUR DATED 16.07.2015 WHEREIN THE A SSESSEE HAS TAKEN THE FOLLOWING GROUND OF APPEAL: THE LD. COMMISSIONER OF INCOME TAX (EXEM.) HAS ERRE D ON FACTS AND IN LAW IN REJECTING THE APPLICATION OF ASSESSEE SEEKIN G EXEMPTION U/S 80G(5) ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 2 OF THE IT ACT, 1961. HE HAS FURTHER ERRED IN HOLDI NG THAT ASSESSEE HAS NOT STARTED THE ACTIVITIES AS PER THE OBJECT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE WAS INCORPORATED ON 25.05.2010 UNDER THE COMPANIES ACT, 1956 IN THE NAM E OF HEMDHA MEDI RESOURCES PVT. LTD. IT WAS GIVEN A LICENSE U/S 25 OF THE COMPANIES ACT, 1956 ON 13.10.2012 BY THE REGISTRAR OF COMPANIES, RAJASTHAN . THEREAFTER , ITS NAME WAS CHANGED TO HEMDHA MEDI RESOURCES AND A FRESH CERTIFICATE OF INCORPORATION CONSEQUENT UPON THE CHANGE OF NAME WA S ISSUED ON 29.10.2012 BY THE REGISTRAR OF COMPANIES, RAJASTHAN. THE MAIN OBJECT OF THE COMPANY FOR WHICH IT IS INCORPORATED IS REPRODUCED AS UNDER: 2.1 THE LD AR SUBMITTED THAT AN APPLICATION FOR REG ISTRATION U/S 12A AND FOR GRANT OF APPROVAL U/S 80G(5)(VI) OF THE IT ACT, 196 1 WAS INITIALLY FILED ON 02.09.2013. HOWEVER, BOTH THE APPLICATIONS WERE RE JECTED BY THE CIT VIDE ORDER DATED 28.03.2014. THE APPLICATION FOR REGISTR ATION U/S 12A WAS REJECTED ON THE GROUND THAT THE ASSESSEE WAS NOT CARRYING O UT ANY CHARITABLE ACTIVITY AND THE APPLICATION FOR GRANT OF APPROVAL U/S 80G(5 )(VI) WAS REJECTED ON THE GROUND THAT AS ASSESSEE IS NOT REGISTERED U/S 12AA, IT IS NOT ELIGIBLE FOR APPROVAL U/S 80G(5)(VI). 2.2 THE ASSESSEE, THEREAFTER AGAIN APPLIED FOR REGI STRATION U/S 12A AND APPROVAL U/S 80G(5) ON 25.06.2014. REGISTRATION U/S 12AA WAS GRANTED TO THE ASSESSEE VIDE LETTER DATED 14.11.2014. HOWEVER, TH E APPLICATION FOR GRANT OF APPROVAL U/S 80G(5)(VI) WAS REJECTED ON THE GROUND THAT REGISTRATION CERTIFICATE U/S 12AA WAS NOT ENCLOSED WITH THE APPLICATION. ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 3 2.3 THE ASSESSEE, THEREFORE, VIDE LETTER DATED 05.1 0.2015 AGAIN FILED AN APPLICATION FOR GRANT OF APPROVAL U/S 80G(5)(VI) AL ONGWITH FORM NO. 10G REGISTRATION CERTIFICATE DATED 14.11.2014 U/S 12AA , NOTES ON ACTIVITIES OF THE INSTITUTION, COPY OF PAN CARD, COPY OF AUDITED FINA NCIAL STATEMENT ALONGWITH RETURN OF INCOME PRECEDING THREE YEARS AND MEMORAND UM AND ARTICLE OF ASSOCIATION. 2.4 THE CIT ISSUED LETTER DATED 07.01.2015 REQUIRIN G THE ASSESSEE TO FURNISH CERTAIN INFORMATION/DOCUMENTS WHICH WAS FURNISHED B Y THE ASSESSEE VIDE LETTER DATED 18.02.2015 FILED ON 01.06.2015. AGAIN VIDE LETTER DATED 19.06.2015 ASSESSEE SUBMITTED THE STATUS OF WORKING AND ACTIVITIES DONE BY IT. 2.5 THE CIT BY PERUSING SEC. 80G(5) R.W.R. 11AA HEL D THAT AT THE TIME OF GRANT OF EXEMPTION U/S 80G(5), DUE IMPORTANT HAS TO BE GI VEN TO THE ACTIVITIES CARRIED OUT BY THE ORGANIZATION AND MAINTENANCE OF ACCOUNTS . HOWEVER, NO ACTIVITIES HAS BEEN STARTED BY THE ASSESSEE AS PER THE OBJECTS AND ONLY CAPITAL EXPENDITURE LIKE ACQUISITION OF LAND, CONVERSION OF LAND, APPOINTMENT OF ARCHITECT, SOIL TESTING ETC. IS DONE AND IN A PERI OD OF MORE THAN FIVE YEARS, ASSESSEE COULD NOT CARRY OUT ANY ACTIVITY IN ACCORD ANCE WITH THE OBJECTS OF THE COMPANY. ACCORDINGLY, THE CIT REJECTED THE APPLICA TION OF ASSESSEE FOR GRANT OF EXEMPTION U/S 80G(5) OF THE IT ACT, 1961. 2.6 THE LD. AR HAS SUBMITTED THAT RULE 11 AA OF TH E IT RULES, 1962 PROVIDES THAT THE APPLICATION FOR APPROVAL OF ANY INSTITUTIO N OR TRUST U/S 80G(5)(VI) OF THE IT ACT, 1961 SHALL BE IN FORM NO. 10G AND BE ACCOMP ANIED BY ANY OF REGISTRATION CERTIFICATE U/S 12A, NOTES ON THE ACTI VITIES OF THE INSTITUTION AND COPY OF ACCOUNTS OF THE INSTITUTION OF LAST THREE Y EARS. IN THE PRESENT CASE, ALL THESE REQUIREMENTS ARE FULFILLED. THE CIT HAS ALSO ACCEPTED THAT ASSESSEE HAS TAKEN STEPS FOR IMPLEMENTATION OF ITS OBJECTS IN A S MUCH AS IT HAS ACQUIRED THE ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 4 LAND, CONVERTED THE LAND FOR INSTITUTIONAL USE FOR SETTING UP THE HOSPITAL PROJECT, APPOINTED THE ARCHITECT., CARRIED OUT SOIL TESTING ETC. ALL THESE ACTIVITIES ARE TOWARDS THE OBJECT OF THE TRUST. THEREFORE, THE OB SERVATION OF CIT THAT NO ACTIVITY HAS BEEN STARTED BY THE ASSESSEE/LOOKING T O THE INSIGNIFICANT NATURE OF THE ACTIVITIES, THE CASE DOES NOT SEEMS TO BE FIT F OR GRANTING EXEMPTION U/S 80G AT THIS STAGE IS INCORRECT AND ALSO CONTRADICTORY T O EACH OTHER. IT IS SUBMITTED THAT THE EARLIER OCCASION, APPROVA L U/S 80G WAS NOT ALLOWED FOR THE REASON THAT THE APPLICATION IS NOT ACCOMPANIES BY REGISTRATION CERTIFICATE U/S 12AA. THE ASSESSEE WITH THE PRESEN T APPLICATION HAS ENCLOSED REGISTRATION CERTIFICATE U/S 12AA DATED 14.11.2014. THUS WHEN ASSESSEE HAS SATISFIED ALL THE CONDITIONS FOR GRANT OF APPROVAL U/S 80G, THE ORDER PASSED BY CIT REFUSING SUCH APPROVAL ONLY ON SURMISES AND CON JECTURES SIS BAD IN LAW. OTHERWISE, ALSO ONCE ASSESSEE HAS TAKEN THE STEPS FOR ESTABLISHMENT OF THE HOSPITAL AND MEDICAL COLLEGE, IT CANNOT BE SAID THAT ASSESSEE HAS NOT YET COMMENCED ANY ACTIVITY. FURTHER, THE GENUINENESS OF THE OBJECTS AND ITS ACTIVITIES ARE NOT DOUBTED BY THE CIT. HENCE, HA VING GRANTED REGISTRATION U/S 12AA, THERE IS NO REASON NOT TO GRANT APPROVAL U/S 80G. RELIANCE IN THIS CONNECTION IS PLACED IN CASE OF HARDAYAL CHARITABLE AND EDUCATIONAL TRUST VS. CIT (2013) 355 ITR 0534 (ALL.) (HC). 2.7 THE LD. CIT(EXEMPT.) WHILE REJECTING THE APPELL ANTS APPLICATION UNDER SECTION 80G(5) HAS GIVEN HIS FINDINGS AS UNDER: ON VERIFICATION OF THE INCOME AND EXPENDITURE ACCO UNT IT IS SEEN THAT NO ACTIVITIES HAS BEEN STARTED BY THE APPLICANT AS PER THE OBJECTS. THE COMPANY IS DOING ONLY CAPITAL EXPENDITURE LIKE ACQUISITION OF LAND, CONVERSION OF LAND, APPOINTMENT OF ARCHITECT, SOIL TESTING ETC. IN A P ERIOD OF MORE THAN FIVE YEARS ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 5 THE ASSESSEE COULD NOT CARRY OUT ANY OF THE ACTIVIT IES IN ACCORDANCE WITH THE OBJECTS OF THE COMPANY. SEEING THE INSIGNIFICANT N ATURE OF ACTIVITY THE CASE DOES NOT SEEMS TO BE FIT FOR GRANTING EXEMPTION U/S 80G AT THIS STAGE. THEREFORE, ITS APPLICATION IN FORM NO. 10G SEEKING EXEMPTION U/S 80G IS REJECTED. 2.8 LD DR IS HEARD WHO HAS RELIED UPON THE DECISION OF ITAT DELHI BENCH IN CASE OF PEARLS EDUCATIONAL INSTITUTE 36 SOT 218. 2.9 WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, IT IS INTERESTING TO NOTE THAT IT IS FOR THE THIRD TIME THAT THE APPELLANT HAS FILED THE SUBJECT APPLICATION UNDER S ECTION 80G(5) AND ON THE PREVIOUS OCCASIONS, THE REASONS CITED BY THE LD CIT VARIES FROM ASSESSEE NOT REGISTERED U/S 12AA TO REGISTRATION CERTIFICATE U/S 12AA NOT ENCLOSED WITH THE APPLICATION AND HENCE, IT IS NOT ELIGIBLE FOR APPRO VAL U/S 80G(5)(VI). THE REASONS CITED IN THE IMPUNGED ORDER STATES THAT SEEING THE INSIGNIFICANT NATURE OF ACTIVITY, THE CASE DOES NOT SEEMS TO BE FIT FOR GRA NTING EXEMPTION U/S 80G AT THIS STAGE. THE QUESTION THAT ARISES FOR CONSIDERA TION IS WHETHER THE REASON CITED BY THE LD CIT JUSTIFIES DENIAL OF APPROVAL UN DER SECTION 80G(5) OF THE ACT. ON PERUSAL OF SECTION 80G(5) AS WELL AS RULE 11AA, WHAT IS REQUIRED TO BE SEEN IS WHETHER THE INSTITUTION/FUND HAS BEEN ESTABLISHE D IN INDIA FOR A CHARITABLE PURPOSE OR NOT. SECONDLY, IT LAYS DOWN CERTAIN ADD ITIONAL CONDITIONS UNDER CLAUSE (I) TO CLAUSE (V) WHICH ARE REQUIRED TO BE F ULFILLED. RULE 11AA PROVIDES THAT WHERE THE CIT IS SATISFIED THAT ONE OR MORE OF THE CONDITIONS SPECIFIED IN CLAUSE (I) TO CLAUSE (V) OF SECTION 80G(5) ARE NOT FULFILLED, HE SHALL REJECT THE APPLICATION FOR APPROVAL AFTER RECORDING HIS REASON S FOR SUCH REJECTION. IN THE INSTANT CASE, THE APPELLANT HAS BEEN DULY REGISTERE D UNDER SECTION 12AA WHICH SHOWS BEYOND ANY DOUBT THAT LD CIT HAS ALREADY VERI FIED THE GENUINENESS OF ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 6 THE OBJECTS AND ITS ACTIVITIES ARE NOT DOUBTED BY THE CIT. HENCE, HAVING GRANTED REGISTRATION U/S 12AA, THE FIRST CONDITION REGARDING ESTABLISHMENT OF INSTITUTION FOR CHARITABLE PURPOSES IS FULFILLED. REGARDING SATISFACTION OF ADDITIONAL CONDITIONS SPECIFIED IN CLAUSE (I) TO CL AUSE (V) OF SECTION 80G(5), THERE IS NO DISPUTE AS APPARENT FROM THE ORDER OF THE LD CIT. AS CAN BE SEEN FROM REVENUES STAND OF REJECTION OF EARLIER APPLICATION S FILED BY THE APPELLANT, THE APPROVAL UNDER SECTION 80G IS CLOSELY LINKED TO APP ROVAL UNDER SECTION 12AA. NOW ONCE, THE REGISTRATION UNDER SECTION 12AA HAS B EEN GRANTED, THE APPROVAL UNDER SECTION 80G SHOULD NOT BE DENIED UNLESS THE C ASE OF THE APPELLANT FALLS UNDER NON-FULFILLMENT OF ONE OR MORE OF THE CONDITI ONS SPECIFIED IN SECTION 80G(5) WHICH IS NOT THE CASE BEFORE US. REGARDING THE ACTIVITIES CARRIED OUT BY THE APPELLANT TOWARDS ACHIEVEMENT OF ITS OBJECT FOR ESTABLISHMENT OF THE HOSPITAL AND MEDICAL COLLEGE, IT CANNOT BE SAID THA T ASSESSEE HAS NOT YET COMMENCED ANY ACTIVITY. THE CIT HAS ACCEPTED THAT A SSESSEE HAS TAKEN STEPS FOR IMPLEMENTATION OF ITS OBJECTS IN AS MUCH AS IT HAS ACQUIRED THE LAND, CONVERTED THE LAND FOR INSTITUTIONAL USE FOR SETTIN G UP THE HOSPITAL PROJECT, APPOINTED THE ARCHITECT., CARRIED OUT SOIL TESTING ETC. ALL THESE ACTIVITIES ARE TOWARDS THE ACHIEVING THE OBJECTS OF THE TRUST. TH E REGISTRATION UNDER SECTION 25 OF THE COMPANIES ACT HAS BEEN GRANTED ON 13.10.2 012, SUBSEQUENTLY THE LAND WAS ACQUIRED ON 29.3.2013 AND THEREAFTER OTHER ACTIVITIES LIKE CONVERSION OF LAND USE, APPOINTMENT OF ARCHITECTS AND SOIL TES TING HAS BEEN DONE. THE PROJECT OF SETTING UP HOSPITAL AND MEDICAL COLLEGE IS A COMPLEX PROJECT REQUIRING VARIOUS APPROVALS, CLEARANCES ETC WHICH T HE APPELLANT HAS BEEN COMPLYING WITH. IT IS CRITICAL THAT AS PART OF FUN D RAISING PROGRAMME FOR THIS PROJECT, THE APPELLANT HAS SOUGHT THE APPROVAL UNDE R SECTION 80G WHEREBY THE DONATIONS CAN BE ACCEPTED FOR APPROVED PURPOSES AND THE PROJECT CAN BE EXPEDITED. THE APPROVAL UNDER SECTION 80G WILL THU S AID AND PROVIDE THE ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 7 NECESSARY SUPPORT IN SUCCESSFUL COMPLETION OF THE P ROJECT. IN OUR VIEW, LD CIT (EXEMPTION) WAS NOT CORRECT IN DENYING THE APPROVAL UNDER SECTION 80G(5) TO THE APPELLANT. 2.10 FURTHER, WE HAVE GONE THROUGH THE DECISION OF DECISION OF COORDINATE BENCH IN CASE OF PEARLS EDUCATIONAL INSTITUTE (SUPR A). THE SAID DECISION WAS RENDERED IN THE CONTEXT OF RENEWAL OF APPROVAL UNDE R SECTION 80G AND THE FACT THAT THE APPELLANT IN THAT CASE HAD NOT COMMENCED C ONSTRUCTION ACTIVITIES EVEN AFTER 13 YEARS WHICH IS DISTINGUISHABLE ON FACTS AS STATED ABOVE. IN OUR VIEW, THE SAID DECISION DOESNT SUPPORT THE CASE OF THE R EVENUE. IN FACT, THE HONBLE ALLAHABAD HIGH COURT IN CASE OF HARDAYAL CHARITABLE AND EDUCATIONAL TRUST VS. CIT (SUPRA) IS DIRECTLY ON THE ISSUE AND SUPPORTS O UR VIEW. IN THAT CASE, ASSESSEE TRUST APPLIED FOR GRANT OF REGISTRATION U/ S 12AA AND APPROVAL U/S 80G(5). THE CIT REFUSED TO GRANT REGISTRATION AND APPROVAL ON GROUNDS THAT TRUST WAS IN PROCESS OF CONSTRUCTION OF COLLEGE FOR STUDIES AND THAT HUGE AMOUNT WAS SPENT ON ADVERTISEMENT AND PROMOTION OF BUSINESS OF ITS FAMILY CONCERN. IN SUBSEQUENT ASSESSMENT YEAR, REGISTRATI ON U/S 12AA AND APPROVAL 80G WAS GRANTED WITH CONDITIONS THAT EXEMPTION C ERTIFICATE WOULD BE EFFECTIVE FROM A.Y. 2012-13. IT WAS HELD THAT: FOR REGISTRATION U/S 12AA WHICH WAS NECESSARY FOR CLAIMING EXEMPTION U/S 11 AND 12, CIT WAS NOT REQUIRED TO LOOK INTO ACTIVITI ES, WHERE SUCH ACTIVITIES HAD NOT OR WERE IN PROCESS OF ITS INITIATION. WHERE A TRUST SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCATIONAL INSTITUTION, W AS IN PROCESS OF ESTABLISHING SUCH INSTITUTIONS, AND RECEIVES DONATIONS, REGISTRA TION U/S 12AA CANNOT BE REFUSED ON GROUND THAT TRUST HAD NOT YET COMMENCED CHARITABLE OR RELIGIOUS ACTIVITY. ENQUIRY OF THE CIT AT SUCH PRELIMINARY S TAGE SHOULD BE RESTRICTED TO ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 8 GENUINENESS OF OBJECTS AND NOT ACTIVITIES UNLESS SU CH ACTIVITIES HAD COMMENCED. 2.11 INTERESTINGLY, THE DECISION OF THE COORDINATE BENCH IN CASE OF HARDAYAL CHARITABLE AND EDUCATIONAL TRUST WHICH WAS OVERRULE D BY THE ALLAHABAD HIGH COURT WAS QUOTED BY THE REVENUE WHILE DENYING THE E XEMPTION INITIALLY TO THE APPELLANT UNDER SECTION 12AA. GIVEN THAT THE APPEL LANT HAS SUBSEQUENTLY BEEN GRANTED APPROVAL UNDER SECTION 12AA AND THE SAID DE CISION OF THE COORDINATE BENCH IS OVERRULED BY THE HIGH COURT SHOWS THAT THE APPELLANT IS WELL WITHIN ITS RIGHT TO SEEK APPROVAL UNDER SECTION 80G AS WELL. IN VIEW OF ABOVE, THE CIT(EXEMPTION) IS HEREBY DIRECTED TO GRANT APPROVAL U/S 80G(5) OF THE IT ACT, 1961 TO THE APPELLANT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 /0 4/2016. SD/- SD/- (LALIET KUMAR) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 26 / 04 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S HEMDHA MEDI RESOURCES PVT. L TD., JAIPUR 2. THE RESPONDENT- THE CIT (EXEMPTIONS), JAIPUR 3. THE CIT(A) 4. THE CIT-, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 679 /JP/15) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 679/JP/15 HEMDHA MEDI RESOURCES PVT. LTD. VS. CIT(EXEM.) JAIPUR 9