Global Manava Seva Trust, Bangalore V. DIT(Exemptions), Bangalore

ITA 733/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0712 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JASON P BOAZ
• Assessee Lawyers: VISHNU MOORTHY H
• Keywords: Charitable institution; Cancellation of registration
• Section: 12A; 12AA; 12

Judgement Text

PAGE 1 OF 11 ITA NO.733/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A' BEFORE SHRI K P T THANGAL, VICE PRESIDENT AND SHRI N L KALRA, A.M. ITA NO.733/BANG/09 (ASST. YEAR 2009-2010) GLOBAL MANAVA SEVA TRUST, 13TH B CROSS, NEAR SHANKAR NAG MEMORIAL PARK, 1ST PHASE, YELAHANKA NEW TOWN, BANGALORE-64. - APPELLANT VS THE DIRECTOR OF INCOME TAX (EXEMPTIONS), BANGALORE. - RESPONDENT APPELLANT BY : SHRI VISHNU MOORTHY H. RESPONDENT BY : SHRI JASON P BOAZ O R D E R PER N L KALRA : THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER U/S 12AA(1)(B)(II) OF THE I T ACT DATED 26TH MAY, 20 09 BY DIT(EXEMPTIONS), BANGALORE. 2. THE ASSESEE APPLIED FOR GRANT OF REGISTRATION U /S 12A OF THE I T ACT ON 17TH NOVEMBER, 2008. AS PER THE LEARNED DIT(EXEMPTIONS), REGISTRATION CAN BE GRANTE D IN CASE THE AUTHORITY, GRANTING REGISTRATION, IS SATISFIED A BOUT THE PAGE 2 OF 11 ITA NO.733/BANG/2009 2 OBJECTS OF THE TRUST AND GENUINENESS OF THE ACTIVIT IES OF THE TRUST. THE LEARNED DIT(EXEMPTIONS) WAS OF THE OPIN ION THAT THE FOLLOWING OBJECT CLAUSES WERE HAVING COMMERCIAL INGREDIENTS:- 4.(C) TO CREATE ORGANIZE RUN COLLEGES, SCHOOLS, INSTITUTES AND OTHER CENTERS OF LEARNING AND OPENING HOSPITALS, RECREATION CENTERS, ORPHANAGES AND LIBRARIES. 4.(D) TO PROVIDE/CONDUCT MUSIC CLASS, DANCE, LITERARY, PHYSICAL EDUCATION, SPORTS AND OTHER EXTRA CURRICULAR ACTIVITIES FOR THE CHILDREN. 4.(H) TO CONSTRUCT EQUIP AND MAINTAIN THESE INSTITUTIONS AND TO CREATE THE MEANS OF RAISING REVENUE FOR THE TRUST. 3. IT WAS FURTHER OBSERVED THAT THE OBJECT CLAUSES OF THE TRUST HAVE NOT BEEN ACTED UPON; BUT IN CASE REG ISTRATION IS ALLOWED, THEN IT WILL BE DIFFICULT TO REVOKE REGIST RATION BECAUSE COMMERCIAL ACTIVITIES WILL HAVE THE SANCTION OF THE OBJECT CLAUSES. THE ACTIVITY OF THE TRUST IS MAINLY CONDUCT ING YOGA/NATUROPATHY CAMPS. THERE IS A PROPOSAL TO START A 40- BEDDED HOSPITAL IN ALTERNATIVE SYSTEM OF MEDICINE. FROM THE ACCOUNTS AND GRANT-IN-AID LETTER, THE LEARNED DIT(E XEMPTIONS) OBSERVED THAT THE ASSESSEE IS NOT RUNNING A HOSPITA L UNDER THE TRUST, IT HAS CONDUCTED ONLY CAMPS FOR YOGA/AYURVEDA. THE COMMENCEMENT OF A HOSPITAL IS ONLY A PROPOSED ACTIVI TY. THE PAGE 3 OF 11 ITA NO.733/BANG/2009 3 ONLY EVIDENCE TO SUBSTANTIATE THE PROPOSED HOSPITAL IS A NO OBJECTION LETTER FROM THE OWNER OF THE PREMISES AT NO.151, 13TH B CROSS, YELAHANKA, BANGALORE. SUCH EVIDENCE IS NOT CONVINCING. THE ACTIVITY OF RUNNING 'OM PRAKRUTHI AROGYADHAMA' IN THE NAME OF THE TRUST IS NOT EVIDENC ED BY ANY DOCUMENTATION. THE LEARNED DIT(EXEMPTIONS) HELD TH AT THE ACTIVITY OF CONDUCTING CAMPS FALLS UNDER 'GENERAL PU BLIC UTILITY LIMB' OF THE DEFINITION OF THE 'CHARITABLE PURPOSE' AS PER SECTION 2(15) OF THE ACT. THE ASSESSEE HAS MENTIO NED THAT IT HAS RECEIVED DONATIONS, BUT ACCORDING TO THE DIT(EX EMPTIONS), THE NOMENCLATURE GIVEN DOES NOT REPRESENT THE REAL ESSENCE OF THE RECEIPT. THE ASSESSEE HAS RECEIVED FEES AND HA S MENTIONED THE SAME AS DONATION. THE LEARNED DIT(EXEMPTIONS) H ELD THAT IT IS NOT POSSIBLE TO VERIFY THE GENUINENESS OF THE TRU ST AS ALSO OF ITS OBJECTS AND ACTIVITIES. THE APPLICATION FILED FOR REGISTRATION U/S 12A OF THE I T ACT WAS REJECTED. 4. DURING THE COURSE OF PROCEEDINGS BEFORE US, THE LEARNED AR HAS FILED A PAPER BOOK CONTAINING WRITTE N SUBMISSIONS. THE LEARNED AR DREW OUR ATTENTION TO THE MAIN OBJECTS OF THE TRUST. THE LEARNED AR SUBMITTED THA T THE MAIN OBJECTS OF THE TRUST WERE TO PROVIDE EDUCATION AND TO PROVIDE MEDICAL RELIEF. HENCE, IT CANNOT BE SAID THAT THE OBJECTS OF THE TRUST ARE COVERED UNDER THE 'GENERAL PUBLIC UTILITY LIMB'. THE LEARNED AR DREW OUR ATTENTION TO CIRCULAR NO.11 OF 2008 DATED DECEMBER 19, 2008, IN WHICH IT WAS CLARIFIED THAT T HE PROVISO PAGE 4 OF 11 ITA NO.733/BANG/2009 4 INSERTED TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS ADVANCEMENT OF ANY OTHER OBJECTS OF GENER AL PUBLIC UTILITY. THE LEARNED AR SUBMITTED THAT THE TRUST WA S REGISTERED IN THE YEAR 2004 UNDER THE TRUST ACT. TH E TRUST HAS APPLIED FOR THE REGISTRATION U/S 12A BEFORE COM MENCING THE ACTIVITIES. THE TRUST REQUIRES FUNDS TO START THE ACTIVITIES AND IF REGISTRATION IS NOT GRANTED, THEN THE TRUST WILL HAVE TO FACE THE BURDEN OF TAX. IT WAS SUBMITTED THAT THE TRUST HAS TO APPLY FOR REGISTRATION WITHIN A PERIOD OF ONE YEAR AN D THIS SHOW THAT THE REGISTRATION IS TO BE APPLIED AND THEREAFT ER, THE ACTIVITIES ARE TO BE STARTED. THE REVENUE HAS ALWA YS A REMEDY TO CANCEL THE REGISTRATION IN CASE THE TRUST VIOLAT ES ANY OF THE CONDITIONS STIPULATED IN SECTION 11 TO 13 OF THE I T ACT. 5. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THA T THE TRUST WAS REGISTERED UNDER THE TRUST ACT IN 200 4 AND APPLIED FOR REGISTRATION U/S 12A IN THE YEAR 2008. DURING THIS PERIOD OF FOUR YEARS, THE TRUST HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITY WORTH MENTIONING. BEFORE GRANTI NG REGISTRATION, THE AUTHORITY CONCERNED IS REQUIRED TO VERIFY THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. WHEN N O ACTIVITIES HAVE BEEN CARRIED OUT THEN GENUINENESS OF THE ACTIV ITIES CANNOT BE EXAMINED. THE LEARNED DR DREW OUR ATTENTION TO THE FACTS MENTIONED IN THE GROUNDS OF APPEAL BY THE ASSESSEE. IN THE GROUNDS OF APPEAL, IT HAS BEEN MENTIONED THAT THE T RUSTEES HAVE GIVEN A CONFIRMATION THAT THE TRUST WILL NOT CARRY O UT ALL THE PAGE 5 OF 11 ITA NO.733/BANG/2009 5 ACTIVITIES STATED IN TRUST DEED AND WILL CARRY ONLY T HE MEDICAL RELIEF IN THE ALTERNATIVE SYSTEM OF MEDICINE. SUCH SUBMISSION IMPLIEDLY IS AN ADMISSION OF THE FACT THAT CERTAIN O BJECTS OF THE TRUST ARE NOT CHARITABLE. THE LEARNED DR DREW OUR ATTENTION TO THE DECISION OF THIS BENCH IN THE CASE OF DBA FOUND ATION. THE LEARNED DR SUBMITTED THAT THE BANGALORE TRIBUNAL IN THE CASE OF DBA FOUNDATION V DIRECTOR OF INCOME TAX (EXEMPTI ONS) VIDE ORDER DATED 27TH JANUARY, 2009 OBSERVED THAT THE ASS ESSEE TRUST COULD NOT SUBSTANTIATE ITS CLAIM BY BRINGING O UT THE CARRYING ON CHARITABLE ACTIVITY. SINCE IN THE INSTAN T CASE, CHARITABLE ACTIVITIES HAVE NOT BEEN CARRIED OUT, TH EREFORE, THE REGISTRATION CANNOT BE GIVEN. 6. WE HAVE HEARD BOTH THE PARTIES. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANJEEVAMM A HANUMANTHE GOWDA CHARITABLE TRUST V DIRECTOR OF INC OME TAX (EXEMPTIONS) 285 ITR 327 HAD AN OCCASION TO CONSIDE R AS TO HOW THE CIT(A) IS SATISFIED BEFORE GRANTING REGISTR ATION U/S 12A OF THE I T ACT. THE HON'BLE JURISDICTIONAL HIG H COURT AT PAGE 329 OBSERVED AS UNDER:- 'HAVING REGARD TO THE SCHEME OF SECTIONS 11, 12 AND 13 ULTIMATELY WHAT THE COMMISSIONER HAS TO LOOK INTO IS NOT THE SOURCE OF INCOME TO THE TRUST BUT WHETHER SUCH INCOME IS APPLIED FOR CHARITABLE OR RELIGIOUS PURPOSES. THE SATISFACTION OF THE COMMISSIONER SHOULD PAGE 6 OF 11 ITA NO.733/BANG/2009 6 BE REGARDING THE APPLICATION OF THE INCOME OF THE TRUST FOR THE AFORESAID PURPOSES WHICH ONLY ENTITLES THE ASSESSEE TO CLAIM EXEMPTION. FOR ARRIVING AT SUCH SATISFACTION PRIMARILY 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 TRUST HAS RECEIVED INCOME FROM ITS PROPERTY, THEN FIND OUT HOW THE SAID INCOME HAS BEEN EXPENDED, AND WHETHER IT CAN BE SAID THAT THE INCOME IS UTILIZED TOWARDS CHARITABLE AND RELIGIOUS PURPOSES, I.E., TOWARDS THE OBJECT OF THE TRUST. THEREFORE, FOR THE PURPOSE OF REGISTRATION UNDER SECTION 12AA OF THE ACT, 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 APPLIED TO CHARITABLE OR RELIGIOUS PURPOSE AND NOT THE NATURE OF THE ACTIVITY BY WHICH THE INCOME WAS DERIVED BY THE TRUST. SUB-SECTION (3) OF SECTION 12AA OF THE ACT PROVIDES THAT WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANTED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION. THEREFORE, SUFFICIENT SAFEGUARD IS PAGE 7 OF 11 ITA NO.733/BANG/2009 7 PROVIDED UNDER THE ACT FOR CANCELLATION OF REGISTRATION OBTAINED BY THE ASSESSEE, IN THE EVENT OF ITS MISUSING THOSE PROVISIONS'. 7. WE HAVE ALREADY REPRODUCED OBJECT CLAUSES 4(C), 4(D) AND 4(H) ABOUT WHICH THE LEARNED DIT(EXEMPTION S) HAS MENTIONED THAT SUCH OBJECT CLAUSES APPEARED TO BE O F COMMERCIAL NATURE. CLAUSE 4(C) IS COVERED UNDER TH E OBJECT CLAUSE OF EDUCATION. CLAUSE 4(D) IS ALSO COVERED U NDER THE OBJECT CLAUSE OF EDUCATION. FOR THIS PROPOSITION, WE RELY ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF ECUMENICAL CHRISTIAN CENTRE V CIT 139 ITR 226. CLA USE 4(H) REFERS TO THE MAINTENANCE OF INSTITUTION FOR THE PU RPOSES OF RAISING REVENUE. SINCE THE INSTITUTIONS, WHICH ARE TO BE CREATED OR RUN FOR THE PURPOSE OF EDUCATION, THEREFORE, PRO VISO TO SECTION 2(15) WILL NOT BE APPLICABLE IN VIEW OF CIR CULAR NO.11 OF 2008 DATED 19TH DECEMBER, 2008. VIDE THIS CIRCULAR , THE BOARD HAS MENTIONED THAT THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL APPLY ONLY TO ENTITIES WHOSE PURPOSE IS AD VANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IN THE I NSTANT CASE, IT CANNOT BE SAID THAT THE PURPOSE OF THE TRUST IS ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE C IRCULAR DOES NOT SAY THAT IF THE TRUST ACTS WITHIN THE PURPOSE OF EDUCATION AS WELL AS ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY, THEN THE NEWLY INSERTED PROVISO TO SECTION 2 (15) WILL APPLY. THE LEARNED DIT(EXEMPTIONS) HAS MENTIONED TH AT THE PAGE 8 OF 11 ITA NO.733/BANG/2009 8 TRUST IS PROPOSING TO CREATE A 40 BEDDED HOSPITAL I N THE ALTERNATIVE SYSTEM OF MEDICINE. SUCH OBJECT IS COVE RED UNDER THE MEDICAL RELIEF AND IS NOT HIT BY PROVISO TO SECT ION 2(15). 8. THE HON'BLE APEX COURT DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE JUDG EMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT V SHRI DIGAMBER JAIN MANDIR. THE SLP WAS DISMISSED AND THE DISMISS AL IS REPORTED IN 310 ITR (2) (ST.) AS UNDER:- 'WHETHER TRUST SHOULD SHOW ENTITLEMENT TO EXEMPTION 9-1-2009 : THEIR LORDSHIPS S H KAPADIA AND AFTAB ALAM JJ DISMISSED THE DEPARTMENT'S SPECIAL LEAVE PETITION AGAINST THE JUDGEMENT DATED FEBRUARY 25, 2008 OF THE RAJASTHAN HIGH COURT IN ITA NO.106 OF 2006 WHEREBY THE HIGH COURT DISMISSED THE DEPARTMENT'S APPEAL HOLDING, FOLLOWING 246 ITR 532, THAT IN ORDER TO GET REGISTRATION UNDER SECTION 12A OF THE ACT, THE INSTITUTION NEED NOT FIRST ESTABLISH ITS CLAIM TO EXEMPTION UNDER SECTIONS 11 AND 12 THAT THE QUESTION OF EXEMPTIONS UNDER SECTIONS 11 AND 12 OF THE ACT WOULD COME ONLY AT THE TIME WHEN IT IS ASSESSED TO TAX AND THAT AT THE STAGE OF ENQUIRY, THE COMMISSIONER COULD NOT INSIST THAT THE TRUST SHOW THE APPLICATION OF FUNDS: CIT V SHRI DIGAMBER JAIN MANDIR : SLP (C) NO.1307 OF 2009'. PAGE 9 OF 11 ITA NO.733/BANG/2009 9 9. THE HON'BLE MADRAS HIGH COURT, ON THE BASIS OF WHICH THE HON'BLE RAJASTHAN HIGH COURT DECIDING THE ISSUE, HELD IN THE CASE OF NEW LIFE IN CHRIST EVANGELISTIC ASSO CIATION V CIT 246 ITR 532 AS UNDER:- 'HELD, THAT, IN THE INSTANT CASE, THERE WAS NO QUESTION OF CONSIDERING HOW THE INCOME OF THE SOCIETY WOULD BE APPLIED. THE VIEW OF THE COMMISSIONER THAT UNLESS THE RELIGIOUS ASPECT OF THE SOCIETY WAS REMOVED FROM THE BYE-LAWS, THE APPLICATION COULD NOT BE TAKEN FOR CONSIDERATION WAS CLEARLY ERRONEOUS. AT THIS STAGE OF ENQUIRY, THE COMMISSIONER COULD NOT INSIST UPON THE SOCIETY SHOWING THAT ITS INCOME WAS NOT GOING TO BE SPENT FOR RELIGIOUS PURPOSES. THE REJECTION OF THE APPLICATION UNDER SECTION1 2A WAS NOT JUSTIFIED. (CIT DIRECTED TO CONSIDER THE APPLICATION)'. 10. MOREOVER, THE ASSESSEE HAS GIVEN AN UNDERTAKIN G TO THE REVENUE THAT IT WILL ONLY PURSUE THE OBJECT O F STARTING A 40 BEDDED HOSPITAL AND WILL ONLY PURSUE THOSE OBJECT S WHOSE PURPOSE IS EDUCATION OR MEDICAL RELIEF. THE REVENU E HAS ALWAYS A REMEDY TO CANCEL THE REGISTRATION IN CASE THE ASSE SSEE DOES NOT SATISFY THE REQUIREMENTS OF SECTION 11 R.W.S. 2( 15) OF THE I T ACT. THE TRUST NEEDS FUNDS AND FUNDS CAN BE C OLLECTED THROUGH DONATIONS. IN CASE, THE TRUST IS NOT REGIS TERED, THEN DONORS WILL NOT COME FORWARD FOR MAKING DONATIONS. KEEPING THAT THING IN MIND, PERHAPS, THE TRUST APPLIED FOR REGISTRATION IN PAGE 10 OF 11 ITA NO.733/BANG/2009 10 THE YEAR 2008 SO THAT IT MAY BE ABLE TO ACHIEVE THE P URPOSE FOR WHICH THE TRUST HAS BEEN SET UP. MOREOVER, THE LEA RNED DIT(EXEMPTIONS) OBSERVED THAT THE DONATIONS RECEIVE D WERE ESSENTIALLY FEES FOR YOGA CAMPS/CLASSES. FOR THIS P URPOSE, THERE IS NO MATERIAL ON RECORD. THE ASSESSEE HAS I SSUED RECEIPTS AND THESE RECEIPTS MENTIONED THAT THE AMOU NTS RECEIVED ARE IN THE FORM OF DONATION. HENCE, IN AB SENCE OF ANY EVIDENCE, IT CANNOT BE SAID THAT THE ASSESSEE COLLE CTED FEES AND THEREFORE, IT IS HIT BY PROVISO TO SECTION 2(15) OF THE I T ACT. 11. WE HAVE GONE THROUGH THE DECISION OF THIS BENC H IN THE CASE OF DBA FOUNDATION. IN THAT CASE, THE T RUSTEES WERE IN SERVICE FOR MORE THAN THREE DECADES. DURING THA T PERIOD, NO CHARITABLE ACTIVITIES WERE DONE. IN THAT CASE, THE ASSESSEE WAS NOT ABLE TO ESTABLISH AS TO HOW IT WILL UNDERTAKE V ARIOUS ACTIVITIES WITH A CORPUS OF RS.10,000/-. HOWEVER, IN THE INSTANT CASE, IT HAS BEEN MENTIONED THAT THE TRUST WILL COL LECT DONATIONS FOR SETTING UP 40 BEDDED HOSPITAL. REVENUE WILL AL SO BE RAISED THROUGH THE EDUCATIONAL INSTITUTIONS FOR THE PURPOS E OF CONSTRUCTING THE HOSPITAL. HENCE, THE DECISION IN THE CASE OF DBA FOUNDATION IS DISTINGUISHABLE AND IS NOT APPLIC ABLE IN THE PRESENT CASE. 12. CONSIDERING THE ABOVE DISCUSSION, WE ARE OF TH E OPINION THAT REGISTRATION IS REQUIRED TO BE GIVEN T O THE ASSESSEE PAGE 11 OF 11 ITA NO.733/BANG/2009 11 AND ACCORDINGLY, THE LEARNED DIT(EXEMPTIONS) IS DIRE CTED TO ALLOW REGISTRATION. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30TH NOVEMBER, 2009. SD/- SD/- (K P T THANGAL) (N L KALRA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DTD.30/11/2009 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT( A) CONCERNED.4. THE CIT CONCERNED. 5. THE DR 6. GUAR D FILE. 7. GF, ITAT, NEW DELHI. MSP/25.11. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.