M/s O.P. Munjal Foundations, Ludhiana V. The Commissioner of Income Tax (Exemption), Chandigarh

ITA 76/ASR/2016

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0521 (ITAT-AMRITSAR)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2016
• Assessment Year: misc
• Appeal Filed On: 01-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Competent authority
• Section: 11A; 80G; 12A; 12AA

Judgement Text

ITA NO.76(ASR)/2016 2 III) COPIES OF ACCOUNTS OF THE INSTITUTION SINCE ITS INC EPTION OR DURING THE LAST 3 YEARS WHICHEVER IS LESS. 3. THE GENERAL INTERPRETATION OF RULE 11AA IS THAT SOCIETY SHOULD HAVE REGISTRATION U/S 12AA AND BE IN EXISTEN CE AND ACTIVE. IT IS ALSO MANDATED THAT THE SOCIETY ALSO MAINTAINS REGULAR BOOKS OF ACCOUNTS OF ITS RECEIPTS EXPENDITURE AS PER CONDITI ON (IV) OF SUB- SECTION (5) OF 80G. 4. SUB-RULE (4) OF RULE 11A FURTHER LAYS DOWN THAT WHERE THE COMMISSIONER IS SATISFIED THAT ALL CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SECTION(5) OF 80G ARE FULFILLED B Y INSTITUTION OR FUND, HE SHALL RECORD SUCH SATISFACTION IN WRITING AND GR ANT TO THE INSTITUTION OR FUND. 5. SINCE THE SOCIETY IS AT NASCENT STAGE, IT CANNOT BE ASCERTAINED AS TO WHETHER THE SOCIETY IS APPLYING I TS FUNDS OR NOT ON ITS PROPOSED ACTIVITIES. I AM OF THE VIEW THAT T HE PRESENT APPLICATION IS PREMATURE AND THE ACTIVITIES OF THE TRUST, IN THE PRESENT CASE, CANNOT BE CORROBORATED VIS--VIS THE CONDITIONS LAID DOWN IN SECTION 80G. THE REQUEST FOR APPROVAL U/S 8 0G(5)(VI) BY THE TRUST IS THUS REJECTED. 3. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFOR E US. 4. THE LD. CIT(A), IT IS SEEN, HAS REJECTED THE ASS ESSEES APPLICATION HOLDING THAT THE ASSESSEE SOCIETY BEING AT A NASC ENT STAGE, IT WAS NOT ASCERTAINABLE AS TO WHETHER THE FUNDS OF THE SOCIE TY WERE BEING APPLIED FOR ITS PROPOSED ACTIVITIES AND THAT SO, THE APPLIC ATION OF THE ASSESSEE WAS PRE-MATURE AND ITS ACTIVITIES COULD NOT BE CORROBO RATED WITH THE CONDITIONS LAID DOWN IN SECTION 80G. THE ITO (EXE MPTIONS), VIDE LETTER DATED 05.08.2015 (APB 102), ASKED THE ASSESSEE TO P ROVIDE THE FOLLOWING INFORMATION: I) COPY OF ORDER GRANTING APPROVAL U/S 12AA BY THE COMPETENT AUTHORITY. II) COPY OF MEMORANDUM OF ASSOCIATION/TRUST DEED ALONG WITH COPY OF REGISTRATION NUMBER ALLOTTED BY THE CIT IF THE TRUST DEED/MEMORANDUM OF ASSOCIATION IS IN ANY OTHER LANG UAGE ITA NO.76(ASR)/2016 4 VI) THE TRUST HAS NOT APPLIED ITS INCOME FOR ANY PU RPOSE OUTSIDE INDIA. VI) SINCE THIS IS A NEWLY ESTABLISHED TRUST W.E.F. 1.4.2015 HENCE THIS QUERY IS NOT APPLICABLE IN THIS CASE. 6. THE DCIT (HQ.), VIDE LETTER DATED 02.11.2015 (A PB 5), ASKED FOR FURTHER INFORMATION, AS FOLLOWS: DATED: - 02.11.2015 TO M/ S O.P.MUNJAL FOUNDATION HERO NAGAR, G.T. ROAD, LUDHIANA SUB: FIXING OF DATE IN RELATION TO APPLICATION U/S 80G OF INCOME TAX ACT, 1961 -REG- PLEASE REFER TO YOUR APPLICATION U/S 80G FILED ON 1 3.05.2015. 2. IN THIS CONNECTION, I HAVE BEEN DIRECTED TO REQU EST YOU TO PLEASE FURNISH THE FOLLOWING DOCUMENTS: I) ORIGINAL AND CERTIFIED COPY OF MEMORANDUM OF AS SOCIATION OF THE SOCIETY/COMPANY/TRUST, COPY OF REGISTRATION U/S 12A . II) ORIGINAL AND CERTIFIED COPY OF REGISTRATION OF TRUST DEED AND BYE LAWS OF THE SOCIETY / COMPANY /TRUST. IIII DETAILS OF NAMES AND ADDRESSES OF THE SETTLER, TRUSTEES, MEMBERS OF THE TRUST/SOCIETY/COMPANY, PAN NO. IF THERE IS A NY CHANGE PLEASE GIVE THE DETAILS OF THE SAME. IV) WHETHER THE APPLICATION U/S 80G HAS BEEN MADE FOR T HE FIRST TIME. IF NOT THE DETAILS OF EARLIER APPLICATION. V) COPIES OF THE LAST THREE I.T. RETURNS FILED AND FOR M NO. 10B. VI) COPIES OF AUDITED BALANCE SHEETS OF LAST THREE YEAR S, AUDIT REPORT, INCOME RECEIPTS. VII) NOTE ON ACTIVITIES WITH SUPPORTING DOCUMENTS OF TRUST/SOCIETY/COMPANY, NATURE OF A/C RECEIPTS. VIII) BOOKS OF ACCOUNTS OF CURRENT FINANCIAL YEAR. IX) RECEIPT BOOKS SHOWING THE RECEIPT OF DONATION (IF ANY), FCRA APPROVAL OR RETURN TO MHA IF FOREIGN CONTRIBUTION. X) ANY OTHER DOCUMENT/ DETAIL RELIED UPON BY YOU IN SU PPORT OF YOUR APPLICATION. XI) CORPUS DETAILS WITH DOCUMENTARY EVIDENCES. 3. YOU ARE REQUESTED TO EITHER ATTEND PERSONALLY OR THROUGH AUTHORIZED REPRESENTATIVE ON 09.11.2015 AT 12.30 P.M. IN THIS OFFICE. SD/- DY. COMMISSIONER OF INCOME TAX (HQ) CHANDIGARH. ITA NO.76(ASR)/2016 6 7) THE TRUST HAS BEEN SETTLED AND ESTABLISHED TO C ARRY OUT ACTIVITIES IN THE AREAS RELATING TO SOCIAL RESPONSIBILITY IN TERMS OF THE OBJECTS CLAUSE OF THE TRUST DEED. AT PRESENT, THIS TRUST HAS UNDERTAKEN A PROJECT FOR EXECUTION CALLED 'RAKHBAGH REDEVELOPMENT PROJECT' FOR THE BENEFIT OF GENERAL PUBLIC. THIS PUBLIC PARK IS OWNED BY MUNICIPAL CORPORATION OF LUDHIANA. THE GIST OF PROJECT IS THAT RAKH BAGH PARK IS THE BIGGEST PUBLIC PARK OF LUDHIANA CITY SPREAD OVER AN APPROX. AREA OF 13 ACRES IN THE HEART OF CITY AND OFFERING LUSH GREEN ENVIRONMENT TO THE COMMON PEOPLE. UNDERSTANDI NG THE IMPORTANCE OF GOOD PUBLIC PARK FOR A COMMON MAN, THIS PROJECT HAS BEEN SPONSORED TO RENOVATE AND DEVELOP ENVIRONMENTAL SUSTAINABILITY AND HEALTHY HA BITS FOR THE INHABITANTS OF THE LUDHIANA CITY AND OTHER PERSONS VISITING THE PARK. THIS PROJECT HAS BEEN UNDERTAKEN TO UPGRADE THE EXISTING GARDEN WITH GREE N BELTS, CYCLING TRACKS INCLUDING CYCLING CLUB TO ENCOURAGE HEALTH ACTIVITY , FOUNTAINS, ENHANCING LIGHTING IN PARK FOR ITS BETTER USE IN LATE EVENING, LANDSCA PING BY PLANTATION OF MORE SAPLINGS, HEALTH CENTRE INCLUDING YOGA/MEDITATION A CTIVITIES, IMPROVEMENT OF BASIC INFRASTRUCTURE, A TOY TRAIN RIDE FOR CHILDREN, SANI TATION AND OTHER AMENITIES AND UTILITIES FOR THE BENEFIT OF GENERAL PUBLIC. 8) LEDGER AND CASH BOOK OF THE TRUST FOR THE PERIO D FROM 1.4.15 TILL DATE IS BEING PRODUCED. 9) DETAIL OF DONATIONS RECEIVED FROM M/S.HERO CYCL ES LTD. IS ENCLOSED. ALL THE DONATIONS HAVE BEEN RECEIVED THROUGH CHEQUES. N O FOREIGN DONATION HAS BEEN RECEIVED BY THE TRUST TILL DATE. 10) AS STATED ABOVE, THE TRUST HAS BEEN SETTLED AN D ESTABLISHED TO UNDERTAKE AND CARRY OUT ACTIVITIES RELATING TO CORPORATE SOCI AL RESPONSIBILITY AS DEFINED IN CLAUSE 4 OF THE TRUST DEED. DETAILS OF HEAD-WISE PAYMENTS MADE/EXPENDITURE INCU RRED FOR THE ONGOING PROJECT REFERRED IN PARA-(VII) ABOVE TILL DATE IS ENCLOSED. BANK ACCOUNT AS PER BOOKS OF ACCOUNT ALONGWITH BANK STATEMENT WITH ICICI BANK, F EROZEGANDHI MARKET, LUDHIANA IS ENCLOSED. 11) THE TRUST HAS BEEN ESTABLISHED WITH INITIAL CO RPUS OF RS.51000/- RECEIVED BY CHEQUE FROM SETTLER M/S. HERO CYCLES LTD., HERO NAGAR, G.T.ROAD, LUDHIANA PAN; AAACH4073P AND THEREAFTER THE ACCRETION IS ON ACCOUNT OF DONATIONS RECEIVED. 8. THE ASSESSEE ALSO FILED FURTHER REPLY DATED 24.1 1.2015 (APB 11), STATING AS FOLLOWS: ITA NO.76(ASR)/2016 8 ACCOUNT (APB-9) OF THE ASSESSEE, FOR THE PERIOD 1. 4.2015 TO 10.11.2015 DONATIONS RECEIVED TO THE EXTENT OF RS. 75 LACS HAV E BEEN SHOWN AS FOLLOWS: DONATION RECEIVED LEDGER ACCOUNT 1-APR-2015 TO 10-NOV-2015 PARTICULARS VCH TYPE VCH NO. DEBIT CREDIT CL BANK LTD A/C NO.001705011169 IOSITED CHEQUE NO FROM M -ERO CYCLES LTD DATED 23.06.15 RECEIPT 2 10,00,000.00 ;ICI BANK LTD A/C NO.001705011169 EPOSITED CHEQUE NO 258135 DATED '.8 07.15 FROM M/S HERO CYCLES LTD RECEIPT 3 30,00,000.00 ICICI BANK LTD A/C NO.001705011169 DEPOSITED CH NO 258313 DATED 16.07. 15 FROM M/S HERO CYCLES LTD RECEIPT 4 5,00,000.00 ICICI BANK LTD A/C NO.001705011169 DEPOSITED CH NO 259986 DATED 12.09. 15 FROM HERO CYCLE LTD RECEIPT 5 5,00,000.00 Y ICICI BANK LTD A/C NO.001705011169 DEPOSITED CHEQUE NO 260571 DATED 31.10.15 RECEIPT 7 15,00,000.00 BY ICICI BANK LTD A/C NO.001705011169 DEPOSITED CHEQUE RECEIPT 8 5,00,000.00 BY ICICI BANK LTD A/C NO.001705011169 AMOUNT TFD.FROM M/S HERO CYCLES LTD RECEIPT 9 5,00,000.00 TO CLOSING BALANCE 75,00,000.00 75,00,000.00 75,00,000.00 75,00,000.00 10. THE ASSESSES HEAD-WISE EXPENSES OF RAKH BAGH ( APB-10) AMOUNTING TO RS.69,68,006/- AS FOLLOWS: I DETAIL OF HEAD WISE EXPENSES OF RAKH BAGH 16.11.20 15 PARTICULARS FIXED /CURRENT ASSETS EXPS. ITA NO.76(ASR)/2016 10 NOT BE USED, DIRECTLY OR INDIRECTLY, FOR THE PURPOS ES OF SUCH BUSINESS;]] (II) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED DOES NOT, OR THE RULES GOVERNING THE INSTITUTION OR FUND DO NOT, CONTAIN ANY PROVISION FOR THE TRANSFER OR APPLICATI ON AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF TH E INSTITUTION OR FUND FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOS E; (III) THE INSTITUTION OR FUND IS NOT EXPRESSED TO B E FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; (IV) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCO UNTS OF ITS RECEIPTS AND EXPENDITURE; [* * *] (V) THE INSTITUTION OR FUND IS EITHER CONSTITUTED A S A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRA TION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT AC T IN FORCE IN ANY PART OF INDIA OR UNDER SECTION 25 OF THE COMPANIES ACT, 1956 (1 OF 1956), OR IS A UNIVERSITY ESTABLISHED BY LAW, OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGNISED BY THE GOVERNMEN T OR BY A UNIVERSITY ESTABLISHED BY LAW, OR AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW, [***]] OR IS AN INSTITUTION FIN ANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A LOCAL AUTHORITY; [***] [(VI) IN RELATION TO DONATIONS MADE AFTER THE 31ST DAY OF MARCH, 1992, THE INSTITUTION OR FUND IS FOR THE TIME BEING APPRO VED BY THE COMMISSIONER IN ACCORDANCE WITH RULES MADE IN THIS BEHALF; (VII) WHERE ANY INSTITUTION OR FUND HAD BEEN APPROV ED UNDER CLAUSE (VI) FOR THE PREVIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2007 AND ENDING ON THE 31ST DAY OF MARCH, 2008, SUCH INSTITU TION OR FUND SHALL, FOR THE PURPOSES OF THIS SECTION AND NOTWITH STANDING ANYTHING CONTAINED IN THE PROVISO TO CLAUSE (15) OF SECTION 2 , BE DEEMED TO HAVE BEEN,- (A) ESTABLISHED FOR CHARITABLE PURPOSES FOR THE PRE VIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009; AND (B) APPROVED UNDER THE SAID CLAUSE (VI) FOR THE PRE VIOUS YEAR BEGINNING ON THE 1ST DAY OF APRIL, 2008 AND ENDING ON THE 31ST DAY OF MARCH, 2009. ITA NO.76(ASR)/2016 12 PROVIDING NOTE BOOKS TO SCHOOL CHILDREN AND THE FL OW OF FINANCE MADE THIS POSSIBLE, SUCH FINANCE HAVING COME BY WAY OF R ECEIPT OF DONATIONS ONLY. THE HONBLE HIGH COURT HELD THAT THE RECOGNIT ION U/S 80G WILL BE ONE OF THE FACTORS TO INDUCE DONORS TO DONATE FUNDS TO THE TRUST. IN THE PRESENT CASE, THE REJECTION OF THE APPLICATION OF T HE ASSESSEE, DESPITE ALL THE CONDITIONS OF SECTION 80G HAVING BEEN MET, PER CONTRA, WOULD ACT AS A DISSUADING FACTOR FOR DONATIONS TO COME IN. 16. IN VINAYAKA VIDYANIKETAN, INDIRANAGA VS. CIT (EXEMPTION), 2 TMI 746 (BANG) (CLPB 4-8), IT HAS BEEN HELD THAT IT IS ONLY AFTER THE ACTIVITIES OF THE TRUST ARE COMMENCED, THAT THE GENUINENESS O F ITS OBJECTS CAN BE EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDING S AFTER THE GRANT OF THE REGISTRATION, WHEREAS IN THE PRESENT CASE, SINC E THE CONDITIONS PRESCRIBED U/S 80G STAND COMPLIED WITH, THE APPROVA L U/S 80G OUGHT TO BE GRANTED. 17. IN SRI NARAYANA GURU PRASADITHA SANGA VS. CIT , 379 ITR 450 (KAR.) (CLPB 9-14), IT HAS BEEN HELD THAT WHILE EXA MINING AN APPLICATION FOR APPROVAL U/S 80G, COMPLIANCE WITH THE MANDATE O F RULE 11AA IS INDEED TO BE COMPLIED WITH. 18. NO DECISION CONTRARY TO THE ABOVE CASE LAWS HAS BEEN CITED BEFORE US BY THE DEPARTMENT.