JHULELAL EDUCAITON FOUNDATION, NAVI MUMBAI V. DIT (E), MUMBAI

ITA 737/MUM/2013

• Counselvise Citation: 73719914 RSA 2013
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 27-08-2014
• Assessment Year: 2012-2013
• Appeal Filed On: 28-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTVA
• Assessee Lawyers: SSH S S PHADKAR
• Keywords: Charitable institution
• Section: 11; 12AA

Judgement Text

, INCOME TAX APPELLATE TRIBUNALMUMBAI BENCH ES J MUMBAI , ! '', # BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND SANJAY G ARG,JUDICIAL MEMBER /. ITA NO.737/MUM/2013, $ $ $ $ % % % % / ASSESSMENT YEAR-2012-13 JHULELAL EDUCATION FOUNDATION BLDG. NO. F-9, FLAT NO.2, NOOPUR CHS LTD. SECTOR-22, KOPAR KHAIRNE, NAVI MUMBAI-400 709 PAN:AABTJ5986B V/S. DIT (E) 6 TH FLOOR, PIRAMAL CHAMBERS, PARAL, LALBAUG, MUMBAI-400 012 ( &' / // / APPELLANT) ( )*&' / RESPONDENT) $ +, $ +, $ +, $ +, - - - - / / / / ASSESSEE BY : S/SH. S.S. PHADKAR . - / REVENUE BY : SH. S.D. SHRIVASTVA $ $ $ $ . .. . ,/ ,/ ,/ ,/ / // / DATE OF HEARING : 19 /11/2014 01% . ,/ / DATE OF PRONOUNCEMENT : 26/11/2014 2 / O R D E R PER RAJENDRA, A.M. $ : CHALLENGING THE ORDER DATED 28.12.2012 OF THE DIREC TOR INCOME-TAX(EXEMPTION),MUMBAI(DIT-E) THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL : I)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED D.I.T.(E) ERRED IN NOT GRANTING REGISTRATION U/S.12AA R.W.RULE 17A OF THE INCOME TAX ACT 1961 & RULES 1962 RESPECTIVELY. II)ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED D.IT.(E) ERRED IN HOLDING THAT THE OBJECTS OF THE TRUST ARE NOT COVERED WITHI N THE AMBIT OF CHARITABLE PURPOSE AS DEFINED U/S. 2(15) OF THE INCOME TAX ACT, 1961. III)THE APPELLANT CRAVES, LEAVE TO ADD, ALTER, AMEN D OR DELETE ANY GROUND(S) OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. THE ASSESSEE TRUST FILED AN APPLICATION FOR REGISTR ATION U/S.12A OF THE ACT ON 15.06.2012.THE TRUST HAD BEEN CONSTITUTED BY A DEED OF TRUST DATED 17.09 .2010.IT WAS REGISTERED WITH THE CHARITY COMMISSIONER,MUMBAI ON 17.01.2011.ON RECEIVING AN A PPLICATION FILED BY THE ASSESSEE FOR GRANTING REGISTRATION,THE DIT-E ISSUED A NOTICE TO PRODUCE CERTAIN DOCUMENTS.AFTER SCRUTINISING THE SAME, HE HELD THAT AS PER THE PROVISIONS OF SECTION 12AA (1)(B)A TRUST WAS TO BE GRANTED REGISTRATION IF THE COMMISSIONER WAS SATISFIED ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES,THAT BOTH THE REQUIREMENTS WERE CUMULATI VE AND NOT ALTERNATIVE,THAT THE TRUST DEED CONTAINED CHARITABLE AS WELL AS NON-CHARITABLE COMM ERCIAL OBJECTS SUCH AS OF COMPUTER CENTER, INDUSTRIAL & TECHNICAL INSTITUTIONS, RUNNING STUDY- CENTRES, & COACHING CENTRE, ESTABLISHMENT OF EMPLOYMENT BUREAUS.HE REFERRED TO THE CASES OF JAIP UR CHARITABLE TRUST (81ITR1),YOGIRAJ CHARI - TABLE TRUST(103ITR777)BIHAR INSTITUTE OF MINING & M INE SURVEYING(208 ITR 608)SAURASHTRA EDUCATION FOUNDATION (273 ITR 139).HE ALSO HELD THA T ONE OF THE OBJECTS OF THE ASSESSEE TRUST WAS TO PROMOTE, ASSIST AND/OR MAINTAIN ALL ACTIVITIES B Y WHATSOEVER CARRIED ON OR WHEREVER CARRIED ON IN INDIA AND THE WHOLE WORLD IN CONFORMITY WITH THE OB JECTS OF THE TRUST,THAT THERE IS NO BINDING LEGAL OBLIGATION ON THE TRUSTEES TO APPLY INCOME/ TRUST FUNDS SOLELY FOR CHARITABLE PURPOSES,THAT THE TRUSTEES ARE AT LIBERTY TO DECIDE FROM TIME TO TIME THE PARTICULAR OBJECTS OF THE TRUST FOR WHICH THE INCOME OF THE TRUST WOULD BE APPLIED,THAT THE TRUST EES ENJOYED FULL DISCRETION TO APPLY THE INCOME OF THE TRUST TOWARDS ATTAINMENT OF ANY ONE OR MORE OF ITS OBJECTS.HE RELIED UPON THE ORDER OF STATE BANK OF INDIA(169ITR298).HE FINALLY HELD THAT IT WA S IMMATERIAL IN WHAT MANNER THE OBJECTS WOULD 2 ITA NO.737/MUM/2013 JHULELAL EDUCATION FOUNDATION BE CARRIED OUT AT A LATER POINT OF TIME,THAT THERE WAS NO ROOM FOR NON CHARITABLE/COMMERCIAL OBJECTS IN A TRUST DEED CREATING A PUBLIC CHARITABLE TRUST, THERE COULD BE NO DOUBT THAT ANY ACTIVITY IN PURSUI T OF OBJECT EMBODIED IN CLAUSE (XXXIII) OF THE TRUST DEED WOULD ENTAIL APPLICATION OF FUNDS OF THE ASSESSEE OUTSIDE INDIA SO AS TO RENDER IT INELIGIBL E FOR EXEMPTION,THAT THE SAID CLAUSE CONTRAVENES TH E PROVISIONS OF SECTION 11(1) WHEREIN IT HAD BEEN SPE CIFICALLY PROVIDED THAT THE APPLICATION OF INCOME OF THE TRUST HAD TO BE FOR PURPOSES WITHIN INDIA IN ORDER TO BE ELIGIBLE FOR EXEMPTION,THAT THE ASSESSEE TRUST HAS FAILED TO COMPLY WITH THE MANDAT ORY REQUIREMENTS PRESCRIBED U/S.12AA OF THE ACT.AS A RESULT,HE REJECTED THE APPLICATION FILED B Y THE ASSESSEE. 3. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT NONE OF THE THREE CLAUSES OBJECTED BY THE DIT(E)WERE NON-CHARITABLE,THAT CL.VI DEALT WITH IMP ARTING MODERN EDUCATION AND PROVIDING SHELTER,FOOD ETC.TO THE STUDENTS IRRESPECTIVE OF CA ST,CREED,RELIGION OR RACE,THAT CL.XXV PERTAINED TO ESTABLISH AND RUN EDUCATIONAL INSTITUTIONS,THAT CL. XXXIII WAS ABOUT CARRYING OUT ACTIVITIES IN INDIA OR OUTSIDE INDIA,THAT REFUSAL TO GRANT REGISTRATION WAS NOT AS PER LAW,THAT ALL THESE OBJECTS CLAUSES FELL UNDER EDUCATION/GENERAL PUBLIC UTILITY AND FULF ILLED ALL THE CONDITION AS PER SECTION 2(15) OF THE ACT,THAT OBJECT OF ESTABLISHMENT OF EMPLOYMENT BUR EAUS WAS IN THE NATURE ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY,THAT NO COMMERCIAL ACTIVI TY WAS INVOLVED WAS PROVIDING THESE SERVICES AND NO CESS OR FEES WAS GOING TO BE CHARGED TO THE YOUT H TO WHOM THE SERVICE WERE TO BE OFFERED,THAT RUNNING STUDY CENTRES,TUITION CENTRES AND COACHING CENTRES WAS PART OF EDUCATIONAL ACTIVITIES,THAT CLAUSE (XXXIII) OF ITS OBJECTS WAS ALSO AN OBJECT O F GENERAL PUBLIC UTILITY WHICH DID NOT INVOLVE CARRYING ON ANY ACTIVITY OF PROFIT.HE RELIED UPON T HE CASES OF DAWOODI BOHARA JAMAT(43 TAXMANN.COM.243),SAMUDRA INSTITUTE OF MARITIME STUD IES TRUST (49TAXMANN.510) AND M K NAMBYAR SARAF LAW CHARITABLE TRUST (140TAXMAN616)DE LIVERED BY THE HONBLE SUPREME COURT,BOMBAY HIGH COURT AND DELHI HIGH COURT RESPEC TIVELY. DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDE R OF THE DIT(E). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.WE FIND THAT THE ASSESSEE-TRUST HAD FILED AN APPLICATION FOR REGISTRATION U/S.12A OF TH E ACT ON 15.06.2012,THAT THE TRUST WAS CONSTITUTED BY A DEED OF TRUST DATED 17.09.2010,THAT IT WAS REG ISTERED WITH THE CHARITY COMMISSIONER,MUMBAI,THAT THAT DIT-E VIDE HIS ORDER DATED 28.12.2012 REFUSED THE REGISTRATION TO IT.IT IS FURTHER FOUND THAT AS PER THE DIT-E THE TR UST HAD CHARITABLE AS WELL AS NON CHARITABLE OBJECT S, THAT IT IMMATERIAL IN WHAT MANNER THESE OBJECTS WOU LD BE CARRIED OUT AT A LATER STAGE,THAT CL.XXXIII WAS NOT IN CONFORMITY WITH SECTION 11(1) OF THE ACT ,THAT THERE WAS DOUBT ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST.IN SHORT,HE HAD OBJECTE D TO CLAUSE VI,XXV AND XXXIII OF THE TRUST DEED.WE WOULD LIKE TO REPRODUCE THE SAID CLAUSES: CL.VI- TO ASSIST THE UNEMPLOYED YOUTH IN FINDING JOBS OR B ECOMING SELF EMPLOYED IN FINDING JOBS OR BECOMING SELF EMPLOYED THROUGH THE ESTABLISHMENT OF EMPLOYMENT BUREAUS AND OTHER FACILITIES NEEDED AND TO CREATE AWARENESS OF CAREER OPTIONS AN D TO PROVIDE THE OPPORTUNITIES UNDER GOVERNMENT SCHEMES AND TO WORK FOR THE YOUTH DEVELO PMENT ACTIVITIES. CL.XXV- (XXV)TO OPEN, FOUND, ESTABLISH, PROMOTE, SET UP, RU N, MAINTAIN, ASSIST, FINANCE, SUPPORT AND/OR AID OR HELP IN THE SETTING UP AND/OR MAINTAINING AND/OR AID OR HELP IN THE SETTING UP AND/OR MAINTAINING AND/OR RUNNING SCHOOLS, COLLEGES, LECTURE HALLS,TEA CHING CLASSES, TRAINING CENTERS, VOCATIONAL CENTERS , GUIDANCE CENTERS,MANAGEMENT CENTERS/SCHOOL AND OTHE R ESTABLISHMENTS OR INSTITUTIONS FOR ADVANCEMENT OF EDUCATION AND OF KNOWLEDGE IN ARTS, SCIENCE, LITERATURE,HUMANITIES AND ALL OTHER USEFUL SUBJECTS IN ALL THEIR MAINTENANCE (XXV)TO OPEN, FOUND, ESTABLISH, PROMOTE, SET UP, RU N, MAINTAIN, ASSIST, FINANCE, SUPPORT AND/OR AID OR HELP IN THE SETTING UP AND/OR MAINTAINING AND/OR AID OR HELP IN THE SETTING UP AND/OR MAINTAINING AND/OR RUNNING SCHOOLS, COLLEGES, LECTURE HALLS,TEA CHING CLASSES, TRAINING CENTERS, VOCATIONAL CENTERS , GUIDANCE CENTERS,MANAGEMENT CENTERS/SCHOOL AND OTHE R ESTABLISHMENTS OR INSTITUTIONS FOR ADVANCEMENT OF EDUCATION AND OF KNOWLEDGE IN ARTS, SCIENCE, LITERATURE,HUMANITIES AND ALL OTHER 3 ITA NO.737/MUM/2013 JHULELAL EDUCATION FOUNDATION USEFUL SUBJECTS IN ALL THEIR MAINTENANCE CL.XXXIII- TO PROMOTE, ASSIST AND/OR MAINTAIN ALL ACTIVITIES B Y WHATSOEVER CARRIED ON OR WHEREVER CARRIED ON IN INDIA AND THE WHOLE WORLD IN CONFORMITY WITH THE OB JECTS OF THE TRUST AND AS ARE CONDUCTIVE TO THE WELL BEING AND GENERAL WELFARE OF NATION OR ARE CON DUCTIVE FOR ADVANCEMENT OF ANY OBJECTS OR OBJECTS OF GENERAL PUBLIC UTILITY NOT INVOLVING/ CA RRYING ON ANY ACTIVITY FOR PROFIT. IN OUR OPINION,OBJECT MENTIONED IN CL.VI IS A PURE CHARITABLE OBJECT.ESTABLISHMENT OF EMPLOY -MENT BUREAUS FOR UNEMPLOYED YOUTH TO HELP THEM CANNOT BE HELD A COMMERCIAL ACTIVITY. NOR CAN IT BE HELD TO BE A PROFIT DRIVEN VENTURE.CL.XXV TALKS OF ESTABLISHING EDUCATIONAL INSTITUTIONS FOR ADVANCEMENT OF EDUCATION.PROVISIONS OF SECTION2(15) CLEARLY MENTION THAT IMPARTING EDUCATION IS A CHARITABLE ACTIVITY.WITHOUT ESTABLISHING INSTITUTIO NS NO ONE CAN IMPART FORMAL OR INFORMAL TRAINING.THEREFORE,TO HOLD THAT INCLUDING AN OBJECT OF ESTABLISHING EDUCATIONAL INSTITUTION IN THE TRU ST DEED WOULD DISENTITLE THE ORGANISATION FROM OBTAINI NG REGISTRATION IS NOT PROPER.IF THE TURST ,IN COMING YEARS,DOES NOT TAKE UP THE EDUCATIONAL ACTIV ITIES OR STARTS COMMERCIAL ACTIVITIES THAT ARE NOT CHARITABLE THE AO CAN TAKE APPROPRIATE ACTION WHILE ASSESSING THE INCOME OF THE TRUST FOR THAT PARTICULAR YEAR.BUT,AT THE TIME OF GRANTING REGISTR ATION WHAT IS TO BE SEEN IS THE OBJECTS AS MENTIONE D IN THE DEED AND NOT TO IMAGINE AS WHAT WOULD HAPPEN IN SUCCEEDING YEARS. SECONDLY,ALL THE CLAUSES OF TRUST HAVE TO CONSIDERED AS A WHOLE WHILE TAKING DECISION ABOUT REGISTRATION OF A TRUST.FROM BOTH THE ANGLES THE DECISION OF THE DIT-E IS NOT ENDORSA BLE.WE ARE OF THE OPINION THAT NONE OF THE THREE OBJECTS MAKE THE TRUST A PROFITABLE ORGANISATION.NO W WE WILL DISCUSS CL.XXXIII OF THE TRUST DEED.THE OBJECTION OF THE DIT-E IS THAT THE CLAUSE PROVIDES FOR SPENDING OF TRUST INCOME OUTSIDE INDIA.WE ARE OF THE OPINION THE STAGE FOR APPLICATI ON OF INCOME IS YET TO ARRIVE AND AT THAT TIME THE AO CAN TAKE ACTION AS PER LAW.WE FIND THAT IN THE C ASE OF M K NAMBYAR SARAF LAW CHARITABLE TRUST THE HONBLE DELHI HIGH COURT HAS DEALT WITH T HE SAME ISSUE.IN THAT CASE THE ASSESSEE-TRUST HAD FILED APPLICATION FOR REGISTRATION U/S.12A AND RECO GNITION UNDER SECTION 80G.THE DIT-E REJECTED THE SAME ON THE GROUND THAT THE ASSESSEE ITSELF HAD ADM ITTED THAT THE ACTIVITIES WOULD BE EXTENDED OUTSIDE INDIA AS PER THE OBJECTS LAID DOWN.HONBLE DEHLI,WHILE DECIDING THE WRIT FILED BY THE ASSESSEE,HELD AS UNDER: SO FAR AS THE BENEFIT OF SECTION 11 (I)(A) IS CONCE RNED, IT CAN BE EXTENDED ONLY TO THE EXTENT TO WHIC H SUCH INCOME IS APPLIED TO SUCH PURPOSES IN INDIA. H OWEVER, IF INCOME IS APPLIED TO THE PURPOSES OUTSIDE INDIA, THEN CLAUSE (C) WILL BE APPLICABLE AND ([THE PERMISSION IS GRANTED BY THE BOARD EITHER BY GENERAL OR SPECIAL ORDER, THEN BENEFIT CAN BE EX TENDED.SECTION I2AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. THIS SECTION DOES NOT REFER TO THE AC TIVITIES IN INDIA OR OUTSIDE INDIA. IT REFERS TO APPLICATION OF INCOME FOR CHARITABLE OR RELIGIOUS P URPOSE IN INDIA AS ALSO WITH DIRECTION OR ORDER OF THE BOARD FOR APPLICATION OF INCOME OUTSIDE INDIA. IT IS ALSO A FACT THAT THE ASSESSEE-TRUST WILL HAVE TO FILE RETURN OF INCOME OF EVERY YEAR.IF THE AO FINDS THAT THE ACTIVITIES CARRIED OUT BY IT ARE NOT CHARITABLE,HE CAN TAKE SUITABLE ACTION.NOT ONLY T HIS, IN CERTAIN CIRCUMSTANCES THE DIT-E IS EMPOWERED TO CANCEL THE REGISTRATION GRANTED TO THE TRUST. THEREFORE AT THE TIME OF REGISTRATION WHAT THE DIT- E IS TO LOOK IN TO IS AS WHETHER THE OBJECTS ARE PRIMA FACIE CHARITABLE OR NOT.IN THE CASE UNDER CON SIDERATION,ALL THE THREE CLAUSES OBJECTED TO BY THE DIT-E,CANNOT BE TERMED COMMERCIAL /NON-CHARITABLE N ATURE. NOW WE WOULD LIKE TO DISCUSS THE CASES RELIED UPON BY THE DIT-E.THE MATTER OF JAIPUR CHARITABLE TRUST (SUPRA)DEALS WITH INDIAN INCOME TAX ACT,1922. SECONDLY,IN THAT MATTER THE TRUST WAS AUTHORISED TO CARRY OUT BUSINESS ACTIVITIES.SIMILAR ARE THE FA CTS OF THE CASE OF YOGIRAJ CHARITABLE TRUST(SUPRA). IN THE CASE OF BIHAR INSTITUTE OF MINING & MINE SURVEY ING(SUPRA) HONBLE PATNA HIGH COURT HAS HELD THAT THE RUNNING OF A PRIVATE COACHING INSTITUTE FO R THE PURPOSE OF TRAINING THE STUDENTS TO APPEAR AT SOME SPECIFIED EXAMINATIONS UPON TAKING SPECIFIED S UM FROM THE TRAINEES WOULD NOT BRING THE PETITIONER WITHIN THE PROVISIONS OF SECTIONS 2(15) OF THE ACT.WE FIND THAT THE ASSESSEE TRUST IS NOT CREATED FOR TRAINING STUDENTS FOR SPECIFIED EXAMS A ND CHARGING FEES FOR SUCH TRAINING.NONE OF THE 4 ITA NO.737/MUM/2013 JHULELAL EDUCATION FOUNDATION CLAUSES PROVIDES FOR CHARGING SUM FOR TRAINING. IN THE CASE OF SAURASHTRA EDUCATION FOUNDATION (SUPRA)IT WAS FOUND THAT THE ASSESSEE WAS CONDUCTI NG ENGLISH IMPROVEMENT CLASSES FOR STANDARDS X, XI AND XII AND ALSO CONDUCTING GUIDANCE CLASSES FOR C.A.ENTRANCE EXAMINATION.CONSIDERING THOSE PARTICULAR FACTS IT WAS HELD THAT THE ACTIVITIES CA RRIED OUT BY THE TRUST WERE NOT OF CHARITABLE NATUR E.IN THE MATTER BEFORE US,ISSUE IS OF GRANTING OF REGIST RATION.AS HELD EARLIER,IF AT A LATER STAGE THE AO FINDS OUT THAT THE ACTIVITIES CARRIED OUT BY THE AS SESSEE ARE NOT IN ACCORDING WITH THE PROVISIONS OF THE ACT,HE CAN ALWAYS TAKE APPROPRIATE ACTION.BUT, AT THE STAGE OF REGISTRATION WHAT IS TO BE SEEN IS WHETHER THE OBJECTS DO NOT FALL IN THE CATEGORY OF CHARITABLE ACTIVITIES OR NOT.THE CASES RELIED UPON BY THE AR OF THE ASSESSEE SUPPORT THE VIEW THAT THE ACTIVITIES CANNOT BE HELD NON CHARITABLE. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US,WE ARE OF THE OPINION THAT THE OBJECTS OF THE ASSESSEE-TRUST WERE CHARITABLE AND I T SHOULD HAVE BEEN GRANTED REGISTRATION BY THE DIT-E.EFFECTIVE GROUND OF APPEAL IS ALLOWED IN FAVO UR OF THE ASSESSEE. AS A RESULT ,FILED BY THE ASSESSEE STANDS ALLOWED. 3,4 $ +, 5 6 . ' 7 . , 8 9. ORDER PRONOUNCED IN TH E OPEN COURT ON 26TH NOVEMBER, 2014. 2 . 01% ; <$ 26 $ 1 . ' = SD/- SD/- ( / RAJENDRA) (SANJAY GARG / '' ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI, <$ /DATE: 26.11.2014 2 2 2 2 . .. . ),> ),> ),> ),> ?>%, ?>%, ?>%, ?>%,/ COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / )*&' 3. THE CONCERNED CIT(A)/ @ A , 4. THE CONCERNED CIT / @ A 5. DR J BENCH, ITAT, MUMBAI / >B' ),$ , ... 6. GUARD FILE/ ' 3 *>, ), //TRUE COPY// 2$ / BY ORDER, C/8 DY./ASST. REGISTRAR , /ITAT, MUMBAI