Arya Vysya Seva Sangham, Peddapuram V. The CIT, Rajahmundry, Rajahmundry

ITA 683/VIZ/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3735 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 21-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHUPAL REDDY
• Assessee Lawyers: C V S MURTHYAR
• Keywords: Gift; Charitable institution; Cancellation of registration
• Section: 12AA

Judgement Text

ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.683/VIZAG/2013 ( / ASSESSMENT YEAR: NA) ARYA VYSYA SEVA SANGHAM PEDDAPURAM VS. CIT RAJAHMUNDRY [PAN: AADTA7728A ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI C.V.S. MURTHY,AR / RESPONDENT BY : SHRI M. BHUPAL REDDY, DR / DATE OF HEARING : 23.05.2016 / DATE OF PRONOUNCEMENT : 17.06.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT, RAJAHMUNDRY DATED 25.9.2013. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A SOCIET Y REGISTERED UNDER THE SOCIETIES REGISTRATION ACT DATED 7.1.2013. THE ASSESSEE SOCIETY HAS ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 2 FILED AN APPLICATION IN FORM NO.10A DATED 20.3.2013 FOR REGISTRATION U/S 12AA OF THE ACT ALONG WITH FOLLOWING OBJECTIVES: I) TO ESTABLISH A WELL EQUIPPED LIBRARY WITH THE GO OD BOOKS INTENDED FOR EDUCATING THE MEMBERS OF THE SOCIETY. II) TO PROMOTE THE FEELING OF INTEGRITY. III) TO ESTABLISH SCHOOLS TO ERADICATE ILLITERACY. IV) TO REMIT FEE POOR SCHOOL GOING CHILDREN AND DIS TRIBUTION OF BOOKS. V) TO EXTEND FINANCIAL HELP TO THE POOR PATIENTS TO WARDS MEDICAL AND OPERATION CHARGES. VI) TO ENCOURAGE THE MERITORIOUS STUDENTS BY GIVING GIFTS, TO EXTEND HELP FOR THEIR EDUCATION AND STAY. VII) TO PERMEATE POLIO DROPS TO THE CHILDREN ON 2 ND OF EVERY MONTH WITH THE HELP OF ROTARY CLUB AND TO GIVE VACCINATION AND MEDICATION ON 22 ND OF EVERY MONTH TO THE NEEDY FREE OF COST, IRRESPECTIVE OF CASTE, CREED, RELIGION AND GENDER. VIII) TO EXTEND FINANCIAL HELP TO PERFORM THE FINAL RITUALS IN DEATH CASES. IX) TO STRIVE FOR CONSTRUCTION OF A COMMUNITY HALL FOR FACILITATING THE PUBLIC. X) TO CONDUCT MEDICAL CAMPS, TO CONDUCT CAMPS FOR I NTRODUCING THE BRIDES AND BRIDEGROOMS. XI) TO CONSTRUCT WATER TANKS, TO STRIVE FOR BRINGIN G THE ECOLOGICAL BALANCE, AND TO PROTECT THE ENVIRONMENT. XII) TO IMPART CULTURAL SKILLS TO THE MEMBERS IN LE ISURE TIMES. XIII) TO WORK FOR DEVELOPING THE SPORTS AND TO COND UCT GAMES. XIV) TO ERADICATE POVERTY AND ILLITERACY, TO EXTEND MEDICAL HELP IRRESPECTIVE OF THE CASTE, CREED, RELIGION AND GENDER. TO WORK UNITEDLY FOR THE DEVELOPMENT OF INDIANS. XV) IN FUTURE, IT IS PROPOSED TO UNDERTAKE ANY DEVEL OPMENTAL ACTIVITY AND TO REMOVE THE ACTIVITY WHICH IS FOUND NOT SIGNIFICA NT. 3. THE LD. COMMISSIONER AFTER EXAMINING THE ABOVE D ETAILS AND OTHER RELEVANT DOCUMENTS, HE IS OF THE OPINION THAT THOUG H THE OBJECTS OF THE SOCIETY ARE CHARITABLE IN NATURE NO WORTHWHILE ACTI VITIES ARE CONDUCTED BY THE SOCIETY SINCE ITS INCEPTION EXCEPT PLAN APPR OVAL FOR BUILDING CONSTRUCTION, BANK CHARGES AND SOCIETY REGISTRATION . 4. ON BEING AGGRIEVED ASSESSEE CARRIED MATTER IN AP PEAL BEFORE THE TRIBUNAL. ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 3 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSEE SOCIETY IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT ON 7.1.2013 APPLIED FOR REGISTRATION U/S 12AA OF THE A CT ON 30.3.2013. THE COMMISSIONER REJECTED THE ASSESSEES REQUEST REGIST RATION U/S 12AA OF THE ACT BY ORDER DATED 25.9.2013 ON THE GROUND THAT ASSESSEE SOCIETY HAS NOT CARRIED OUT ANY WORTHWHILE ACTIVITIES AS PE R THE OBJECTS OF THE SOCIETY EXCEPT PLAN APPROVAL AND SOME OTHER REGISTR ATION CHARGES. WE FIND THAT THE ASSESSEE SOCIETY IS EXISTED IN THE MO NTH OF JANUARY, 2013 APPLIED FOR REGISTRATION U/S 12AA OF THE ACT IN THE MONTH OF MARCH, 2013, WITHIN 3 MONTHS IT IS NOT POSSIBLE FOR THE ASSESSEE TO CARRY OUT THE ACTIVITIES FOR WHICH IT IS ESTABLISHED. THE MAIN O BJECT OF THE SOCIETY IS TO ESTABLISH A WELL EQUIPPED LIBRARY. FOR THAT PURPOS E, THE ASSESSEE HAS TAKEN A PLAN APPROVAL TO CONSTRUCT A BUILDING AND I NCURRED AN EXPENDITURE OF RS.61,00,410/-. SO THE ASSESSEE HAS STARTED ITS OPERATIONS TO ACHIEVE THE OBJECTS FOR WHICH IT IS E XISTED. IT IS NOT THE CASE OF THE COMMISSIONER THAT THE ASSESSEE IS EXIST ED FOR NON-CHARITABLE PURPOSE. THE ONLY OBJECTION RAISED BY THE COMMISSI ONER IS THAT THE ASSESSEE HAS NOT CARRIED OUT ANY ACTIVITIES AS PER ITS OBJECTS. IN OUR OPINION, THE OBJECTION RAISED BY THE LD. COMMISSION ER IS NOT CORRECT FOR THE REASON THAT THE ASSESSEE SOCIETY IS EXISTED VER Y RECENTLY AND ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 4 THEREFORE IT WILL TAKE SOME TIME TO START ITS OPERA TIONS TO ACHIEVE THE OBJECTS AS PER THE TRUST DEED. IT IS NOT POSSIBLE FOR THE ASSESSEE TO ACHIEVE ALL THE OBJECTS. IN THIS CASE, THE ASSESS EE WANTED TO CONSTRUCT A BUILDING FOR THE PURPOSE OF ESTABLISHMENT OF LIBR ARY FOR WHICH THE TRUST HAS APPLIED FOR APPROVAL BEFORE THE COMPETENT AUTHO RITY THAT IT HAS INCURRED CERTAIN EXPENDITURE. THE LD. COMMISSIONER HIMSELF HAS ACCEPTED THAT THE OBJECTS OF THE ASSESSEE ARE CHARI TABLE IN NATURE. HOWEVER, HE HAS REJECTED THE REGISTRATION U/S 12AA OF THE ACT FOR THE REASON THAT THE SOCIETY HAS NOT COMMENCED ITS OPERA TIONS. IN OUR OPINION, HAVING ACCEPTED THE ASSESSEE TRUST AS CHAR ITABLE IN NATURE, REJECTING ON THE GROUND OF NON- COMMENCEMENT OF OPE RATIONS AND NOT GRANTING REGISTRATION U/S 12AA OF THE ACT BY THE LD . COMMISSIONER IS PRE- MATURED. THE INCOME TAX ACT PROVIDED SAFEGUARDS TH AT WHETHER TRUST OR INSTITUTION GRANTED REGISTRATION U/S 12AA OF THE ACT AND SUBSEQUENTLY CIT SATISFIED THAT THE ACTIVITIES OF THE TRUST OR I NSTITUTION ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJ ECTS OF THE TRUST OR INSTITUTION AS THE CASE MAY BE, HE SHALL HAVE A POW ER OF CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. THEREFO RE, SUFFICIENT SAFEGUARD IS PROVIDED UNDER THE ACT FOR CANCELLATION OF REGISTRA TION OBTAINED BY THE ASSESSEE IN THE EVENT OF ITS MISUSING THOSE PROVISI ONS AND THEREFORE BY CONSIDERING FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO BY CONSIDERING ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 5 OBJECTS OF THE SOCIETY, WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S 12AA OF THE ACT. 6. UNDER SIMILAR CIRCUMSTANCES, THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCOME-TAX (EXEMPTIONS) 285 ITR 327 HAS CONSIDERED THE ISSUE AND OBSERVED AS FOLLOWS: HAVING REGARD TO THE SCHEME OF SS. 11, 12 AND 13 UL TIMATELY WHAT THE CIT HAS TO LOOK INTO IS NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPO SES. THE SATISFACTION OF THE CIT SHOULD BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE AFORESAID PURPOSES WHICH ONLY ENTITLES THE ASSE SSEE TO CLAIM EXEMPTION. FOR ARRIVING AT SUCH SATISFACTION PRIMAR ILY HE HAS TO LOOK AT THE OBJECT OF THE TRUST, WHEN THE SAME IS REDUCED INTO WRITING IN THE FORM OF TRUST DEED. IF ON THE DATE OF THE APPLICATION THE TR UST HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOM E HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOME IS UTILI ZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E., TOWARDS THE OBJECT OF THE TRUST. THEREFORE, FOR THE PURPOSE OF REGISTRATION UNDER S. 12A, WHAT THE AUTHORITIES HAVE TO SATISFY IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION AND HOW THE INCOME DERIVED FROM THE TRUST PROPERTY IS A PPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVIT Y BY WHICH THE INCOME WAS DERIVED TO THE TRUST. SUB-S. (3) OF S. 12AA PRO VIDES THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UND ER CLI. (B) OF SUB-S. (1) AND SUBSEQUENTLY THE CIT IS SATISFIED THAT THE ACTI VITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CAS E MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUC H TRUST OR INSTITUTION. THEREFORE, SUFFICIENT SAFEGUARD IS PROVIDED UNDER T HE ACT FOR CANCELLATION OF REGISTRATION OBTAINED BY THE ASSESSEE, IN THE EV ENT OF ITS MISUSING THOSE PROVISIONS. ORDER DT. 24TH JUNE, 2002 PASSED BY THE DIRECTOR OF IT (EXEMPTION) .ID THE ORDER DT. 2ND AUG., 2005 PASSED BY THE TRIBUNAL ARE HEREBY SET ASIDE AND THE MATTER IS REMANDED BACK TO THE DIRECTOR OF IT (EXEMPTION) FOR FRESH CONSIDERATION IN ACCORDANCE W ITH LAW AND IN THE LIGHT OF THE OBSERVATION MADE ABOVE AFTER GIVING AN OPPOR TUNITY TO APPELLANT TO SUBSTANTIATE ITS CLAIM. ITA NO.683/VIZAG/2013 ARYA VYSYA SEVA SANGHAM, PEDDAPURAM 6 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND ALSO FOLLOWING THE DECISION OF KARNATAKA HIGH COURT , WE CANCEL THE ORDER PASSED BY THE LD. COMMISSIONER AND GRANTED THE REGI STRATION U/S 12AA OF THE ACT TO THE ASSESSEE TRUST. ORDERED ACCORDIN GLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17 TH JUN16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 17.06.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT ARYA VYSYA SEVA SANGHAM, DR.NO.6 -10-5, RAJUGARI VEEDHI, PEDDAPURAM-533 437. 2. / THE RESPONDENT THE CIT, RAJAHMUNDRY. 3. THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), RAJAHMUJNDRY 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM