Panchganga Foundation, V. CIT, Varanasi

ITA 76/ALLD/2014

• Counselvise Citation: 7620714 RSA 2014
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 04-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJKUMAR LACHHIRAMKA
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ALLAHABAD BENCH, ALLAHABAD BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT ME MBER ITA NO. 75 & 76/A/2014 PANCHGANGA FOUNDATION, VS. THE COMMISSIONER OF B-27/88G, NEW COLONY, I.T. VARANASI. RAVINDRAPURI, VARANASI. (PAN: AACTP 3480 H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHISH BANSAL, ADVOCATE & SHRI SAURABH AGRAWAL, C.A. RESPONDENT BY : SHRI RAJ KUMAR LACHHIRAMKA, CIT/DR DATE OF HEARING : 28.05.2014 DATE OF PRONOUNCEMENT : 30.05.2014 ORDER PER BHAVNESH SAINI, J.M.: BOTH THE APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST DIFFERENT ORDERS OF LD. CIT, VARANASI DATED 07.01.2014, REJECTING THE APPLI CATIONS U/S. 12AA OF THE IT ACT AND APPROVAL U/S. 80G(5) OF THE IT ACT. 2. THE ASSESSEE FILED APPLICATION FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE IT ACT BEFORE THE LD. CIT, VARANA SI IN PRESCRIBED FORM. THE LD. CIT IN THE IMPUGNED ORDER NOTED THAT THE ASSESSEE F ILED SOME REQUIRED DETAILS AND ON THE NEXT DATE OF HEARING FURTHER DETAILS WERE NO T FILED. IT WAS NOTICED THAT NO ITA NO. 75 & 76/A/2014 2 ACTIVITY OF CHARITY HAS BEEN PERFORMED BY THE ASSES SEE TRUST TILL DATE. THEREFORE, ONLY EXPRESSING ITS INTENTION TO PERFORM CHARITABLE ACTIVITIES DOES NOT ENTITLE THE TRUST FOR REGISTRATION U/S. 12A UNTIL CHARITABLE AC TIVITIES MENTIONED IN THE TRUST DEED ACTUALLY COMMENCE. IT WAS ALSO OBSERVED THAT AS PER BY-LAWS OF THE TRUST DEED, DR. HEMANT GUPTA WILL REMAIN MANAGING TRUSTEE FOR HIS W HOLE LIFE AND IN ABSENCE OF SUPPORTING DOCUMENTS, THE APPLICATION FOR REGISTRAT ION U/S. 12AA AND APPROVAL U/S. 80G(5) WERE REJECTED. THE ASSESSEE IS IN APPEAL ABO VE. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS IN THE IMPUGNED ORDER AND MATERIAL ON RECO RD. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE DEED OF THE TRUST AS FILED IN THE PAPER BOOK AND STATED THAT THE ASSESSEE TRUST WAS CREATED FOR CHARITABLE PURPO SE ONLY FOR ENVIRONMENTAL DEVELOPMENT, MEDICAL ASSISTANCE, EDUCATIONAL DEVELO PMENT AND HUMAN RESOURCES DEVELOPMENT AND TO CARRY OUT OTHER CHARITABLE WORK FOR THE WELFARE AND BENEFIT OF COMMUNITY AT LARGE. HE HAS SUBMITTED THAT ALL THESE OBJECTS INCLUDING PRESERVATION OF ENVIRONMENT AND RELATED ONES ARE CHARITABLE IN N ATURE U/S. 2(15) OF THE IT ACT WHICH HAVE NOT BEEN DISPUTED BY THE LD. CIT IN THE IMPUGNED ORDER. HE HAS, THEREFORE, SUBMITTED THAT SINCE THE OBJECTS OF ASSE SSEE TRUST ARE CHARITABLE IN NATURE AND HAVE NOT BEEN DISPUTED BY THE LD. CIT, THEREFOR E, MERE NON-COMMENCEMENT OF CHARITABLE ACTIVITIES WOULD NOT LEAD TO CANCELLATIO N OF REGISTRATION AND APPROVAL U/S. 80G(5) OF THE ACT. HE HAS SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ITA NO. 75 & 76/A/2014 3 ASSESSEE BY THE ORDER OF THE ITAT, AGRA BENCH IN TH E CASE OF VINAY MEMORIAL EDUCATIONAL TRUST VS. CIT-II, AGRA DATED 28.02.2014 , IN WHICH THE APPEAL WAS ALLOWED BY FOLLOWING THE JUDGMENT OF JURISDICTIONAL ALLAHABAD HIGH COURT. THE ENTIRE ORDER IS REPRODUCED AS UNDER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF LD. CIT-II, AGRA DATED 18.09.2013, REJECTING THE APPLIC ATION U/S. 12AA OF THE IT ACT. 2. THE ASSESSEE TRUST MOVED FOR GRANT OF REGISTRATI ON U/S. 12AA OF THE IT ACT. THE LD. CIT NOTED THAT THE ASSESSEE TRU ST IS YET TO BEGIN ITS ACTIVITIES. ONLY LAND HAS BEEN PURCHASED ON WHICH S CHOOL BUILDING IS UNDER CONSTRUCTION. THE LD. CIT, THEREFORE, HELD TH AT SINCE CHARITABLE ACTIVITIES HAVE NOT YET STARTED, THEREFORE, HE WAS UNABLE TO SATISFY HIMSELF REGARDING THE GENUINENESS OF CHARITABLE ACT IVITIES UNDERTAKEN BY THE TRUST. THE APPLICATION WAS ACCORDINGLY REJEC TED. 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE ISSUE IS NOW COVERED BY THE ORDER OF HONBLE ALLAHA BAD HIGH CURT IN THE CASE OF HARDAYAL CHARITABLE & EDUCATIONAL TRUST VS. CIT REPORTED IN 355 ITR 534, IN WHICH IT WAS HELD AS UNDER : THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL TH E HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF R EGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, WHICH IS NECESS ARY FOR CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE ACT, THE COM MISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVIT IES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS IN ITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCA TIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, A ND RECEIVES DONATIONS, THE REGISTRATION UNDER SECTION 12AA CANN OT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE ONLY THE G ENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WH ICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMISSIONER OF INCOM E TAX AT SUCH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENE SS OF THE OBJECTS AND NOT THE ACTIVITIES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE ITA NO. 75 & 76/A/2014 4 TRUST OR SOCIETY CANNOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS AT THAT SUCH INITI AL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED. IT IS NOT DENIED THAT FOR SUBSEQUENT YEAR THE APPE LLANT HAS BEEN GRANTED EXEMPTION UNDER SECTION 12AA AND HAS ALSO B EEN APPROVED UNDER SECTION 80G OF THE ACT, SUBJECT TO CERTAIN CO NDITIONS. IF THE COMMISSIONER OF INCOME TAX WAS SATISFIED WITH THE G ENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUBSEQUENT ASSESSMENT YEAR, THE REFUSAL OF THE REGISTRATION FOR THE PREVIOUS ASSESSMENT YEAR 2 011-12 WAS NOT JUSTIFIED. THE QUESTION OF EXEMPTION OF THE APPLICATION OF IN COME RECEIVED BY WAY OF DONATION, IS A SEPARATE ISSUE AND WHICH M AY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN IS FILED BY THE TRUS T AND IS EXAMINED BY THE INCOME TAX OFFICER. THE QUESTION AS TO WHETH ER THE DONATIONS BY THE SOCIETIES WAS THE EXPENDITURE OF THE TRUST F OR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXAMINED AT THE TIME OF EXAMINING THE RETURN. 3.1 HE HAS FURTHER SUBMITTED THAT THE ASSESSEE SOLE LY EXISTS FOR EDUCATIONAL PURPOSES WHICH HAVE NOT BEEN DISPUTED. THEREFORE, THE ASSESSEE IS ENTITLED FOR REGISTRATION. THE LD. DR A CCEPTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE J UDGMENT OF HONBLE ALLAHABAD HIGH COURT. 4. ON CONSIDERATION OF THE MATERIAL ON RECORD IN TH E LIGHT OF DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF HARDAYAL CHARITABLE & EDUCATIONAL TRUST (SUPRA), WE SET ASID E THE IMPUGNED ORDER AND DIRECT THE LD. CIT TO GRANT REGISTRATION TO THE ASSESSEE U/S. 12AA OF THE IT ACT IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ITA NO. 75 & 76/A/2014 5 HE HAS ALSO REFERRED TO DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. BABA KARTAR SINGH DUKKI EDUCATIONAL TRUST, 42 TAXMAN.COM 17, IN WHICH IT WAS HELD THIS APART, THERE APPEARS TO BE A MISCONCEPTION AMO NGST OFFICERS EXERCISING POWER UNDER SECTION 12AA OF THE ACT THAT IF A TRUSTEE IS A LIFE LONG MEMBER OF A TRUST, IT AUTOMA TICALLY RAISES AN INFERENCE THAT THE TRUST IS NOT CHARITABLE. THE FAC T THAT A TRUSTEE IS A LIFE MEMBER, MAY BE RELEVANT BUT CANNOT BY ITSELF L EAD TO A FINDING THAT THE TRUST IS NOT CHARITABLE. HE HAS ALSO SUBMITTED THAT SINCE THE ASSESSEE LATER ON STARTED CARRYING OUT CHARITABLE ACTIVITIES, THEREFORE, THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5) OF THE IT ACT. HE HAS PLACED COPIES OF NEWSPAPER CUTTINGS IN SUPPORT OF THE ARGUMENTS. 3.1 ON CONSIDERATION OF THE ABOVE, WE ARE OF THE VI EW, THE ASSESSEE IS ENTITLED FOR REGISTRATION AS WELL AS APPROVAL IN THE ABOVE PROVI SIONS. THE OBJECTS OF THE ASSESSEE BEING CHARITABLE HAVE NOT BEEN DISPUTED IN THE IMPU GNED ORDER. THE TRUST DEED ALSO SUPPORTS THE ARGUMENTS OF THE LD. COUNSEL FOR THE A SSESSEE THAT THE OBJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE. MERELY BEC AUSE THE ASSESSEE HAS NOT CARRIED OUT SUCH ACTIVITIES WOULD NOT DISENTITLE THE ASSESS EE FOR REGISTRATION. THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF I TAT, AGRA BENCH IN THE CASE OF VINAY MEMORIAL EDUCATIONAL TRUST(SUPRA) IN WHICH FO LLOWING THE DECISION OF ALLAHABAD HIGH COURT, THE REGISTRATION U/S. 12A WAS GRANTED. FURTHER OBJECTION OF ITA NO. 75 & 76/A/2014 6 THE LD. CIT THAT THE MANAGING TRUSTEE WAS FOR WHOLE LIFE, WAS ALSO NOT CONSIDERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BABA KARTAR SINGH DUKKI EDUCAT IONAL TRUST (SUPRA). THEREFORE, ALL THE OBJECTIONS OF THE LD. CIT IN THE IMPUGNED ORDER HAVE BEEN MET BY THE ASSESSEE. THE APPLICATION U/S. 80G(5) WAS REJEC TED BECAUSE THE REGISTRATION U/S. 12AA HAS BEEN REFUSED BY THE LD CIT, WHICH IS CONSE QUENTIAL IN NATURE. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) OF THE ACT. WE ACCORDI NGLY SET ASIDE THE IMPUGNED ORDER AND DIRECT THE LD. CIT(A) TO ISSUE REGISTRATI ON U/S. 12AA AND APPROVAL U/S. 80G(5)(VI) ACCORDINGLY WITHIN ONE MONTH FROM THE DA TE OF THIS ORDER. 4. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (J. SUDHAKAR REDDY) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, ALLAHABAD 6. GUARD FILE ASSTT. REGISTRAR TRUE COPY