SURAT HOSPITAL TRUST ASSOCIATION OF SEVENTH DAY ADVENTIST, MUMBAI V. DIT (E), MUMBAI

ITA 764/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49480 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH MR B JAYA KUMAR
• Keywords: Charitable institution
• Section: 12A; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO.764/MUM/10 SURAT HOSPITAL TRUST ASSOCIATION OF SEVENTH DAY ADVENTIST, 16, CLUE ROAD, MARATHA MANDIR ROAD, BYCULLA, MUMBAI. PAN : AACTS0768F VS. DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI. APPELLANT. RESPONDENT. APPELLANT BY : MR. RASESH SHAH. RESPONDENT BY : MR. B. JAYA KUMAR. O R D E R PER PRAMOD KUMAR : BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HAS CALLED INTO QUESTION CORRECTNESS OF ORDER DATED 16.10.2009, PASSED BY TH E DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI, ON THE FOLLOWING GROUNDS : ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED DIRECTOR OF INCOME TAX (EXEMPTION), HAS ERRED IN WITHDRAWING THE REGISTRATION U/S.12A OF TH E I.T. ACT, 1961 FROM THE DATE OF CHANGE IN NAME AND CHANGE IN OBJEC T CLAUSE OF MEMORANDUM OF ASSOCIATION I.E. 10.08.2002. IT IS THEREFORE PRAYED THAT ORDER OF WITHDRAWAL OF REGISTRATION U/S.12AA OF THE I.T. ACT, 1961 MAY PLEASE BE CANCEL LED. ITA NO.764/MUM//10 - 2 - 2. BRIEFLY STATED, THE MATERIAL FACTS ARE AS FOLLOW S. THE ASSESSEE WAS GRANTED REGISTRATION U/S.12A OF THE INCOME TAX ACT, 1961, B Y THE VIRTUE OF DIT(E)S ORDER DATED 5.10.1999. ON 1 ST SEPT., 2009, THE ASSESSEE APPLIED FOR CHANGE OF NAME IN THE REGISTRATION SO GRANTED. WHEN THIS APP LICATION, ALONG WITH REVISED MEMORANDUM OF ASSOCIATION, CAME UP FOR CONSIDERATIO N OF THE DIT(E), HE NOTICED THAT THERE IS AN AMENDMENT IN OBJECT NO.1, 2, 3(A) AND 3(C) OF THE MEMORANDUM AND THERE ARE TWO NEW OBJECTS. ON THESE FACTS, LEARNED DIT(E) DECLINED TO EFFECT CHANGE IN NAME IN THE REGISTRATI ON GRANTED, AND HELD THAT THE REGISTRATION GRANTED U/S.12A CEASES TO BE VALID AS THE OBJECTS OF THE ASSESSEE ARE MODIFIED. WHILE DOING SO, LEARNED DIT(E) OBSERVED AS FOLLOWS : IN THE CASE OF THE APPLICANT THERE IS NO DISPUTE AS TO THE FACT THAT THERE ARE CHANGES IN THE OBJECT CLAUSE OF THE TRUST . IN THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF ALLAHABAD AGRIC ULTURAL INSTITUTE AND ANOTHER VS. UNION OF INDIA (291 ITR 116) IT HAS BEEN MENTIONED THAT REGISTRATION IS GRANTED BY THE COMMISSIONER TO CHARITABLE TRUST U/S.12A OF THE INCOME TAX ACT, 1961 ON THE BASIS OF THE MEMORANDUM OF ASSOCIATION AS ON DATE. THE WORDS OF THAT STATU TORY PROVISION SHOW THAT IT APPLIES WHERE THE OBJECTS OF THE TRUST OR I NSTITUTION REMAINS THE SAME. HOWEVER, WHERE THE OBJECTS OF THE TRUST OR I NSTITUTION, WHICH WERE THE BASIS FOR THE GRANT OF REGISTRATION, ARE A LTERED AFTER SUCH GRANT OF REGISTRATION, THE VERY FOUNDATION OF THE REGISTR ATION HAVING BEEN REMOVED BY A VOLUNTARY ACT OF THE ASSESSEE, THE REG ISTRATION COULD NOT SURVIVE. FURTHER, IN THE APPLICATION FOR REGISTRATION U/S.1 2A FILED IN FORM NO.10A CONTAINS AN UNDERTAKING WHICH REQUIRES THE A PPLICANT TO COMMUNICATE THE ALTERATION IN THE TERMS OF THE TRUS T OR IN THE RULES GOVERNING THE INSTITUTION. CONSIDERING THESE FACTS THE REGISTRATION WAS ITA NO.764/MUM//10 - 3 - GRANTED U/S.12A OF THE ACT. BUT APPLICANT HAS NOT INFORMED THIS OFFICE ABOUT THE CHANGE IN THE OBJECT CLAUSE TO THIS OFFIC E. AS SUCH THE REGISTRATION U/S.12A STANDS WITHDRAWN FROM THE DATE ON WHICH THE OBJECTS WERE AMENDED. CONSIDERING THE FACT THAT THERE IS CHANGE IN THE O BJECT OF THE TRUST AFTER THE REGISTRATION WAS GRANTED U/S.12A OF THE ACT, AS PER THE DECISION OF HONBLE ALLAHABAD HIGH COURT REPORTED AT 291 ITR 11 6, THE REGISTRATION GRANTED U/S.12A STANDS WITHDRAWN FROM THE DATE THE CHANGE HAS OCCURRED. HENCE, YOUR APPLICATION FOR C HANGE OF NAME CANNOT BE ENTERTAINED. IN FACT, A FRESH APPLICATIO N FOR REGISTRATION HAS TO BE FILED. 3. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE LEGAL BASIS OF DITS IMPUGNED S TAND RESTS ON HIS RELIANCE ON HONBLE ALLAHABAD HIGH COURTS JUDGMENT IN THE C ASE OF ALLAHABAD AGRICULTURAL INSTITUTE VS. UNION OF INDIA (291 ITR 116) AND THE FACT THAT THERE HAS BEEN A CHANGE IN THE OBJECTS OF THE ASSESSEE. IT IS, THEREFORE, NECESSARY TO FIRST UNDERSTAND AND APPRECIATE THE JUDGMENT SO REN DERED BY HONBLE ALLAHABAD HIGH COURT. THAT WAS A CASE IN WHICH ASSESSEE WAS GRANTED REGISTRATION U/S.12A ON THE BASIS SIX OBJECTIVES OF THE ASSESSEE TRUST, AS SET OUT IN ITS MEMORANDUM OF ASSOCIATION. SUBSEQUENTLY, HOWEVER, ASSESSEE MO DIFIED THESE OBJECTIVES AND SUBSTITUTED THE SAME BY FOURTEEN REVISED OBJECTIVES . ON THESE FACTS, AS NOTED BY HONBLE HIGH COURT, ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS ITA NO.764/MUM//10 - 4 - TO WHY IT MAY NOT BE INFERRED THAT REGISTRATION U/ S.12A OF THE ACT, GRANTED TO THE SURAT HOSPITAL TRUST ASSOCIATION OF SEVENTH DAY ADVENTIST DOES NOT SURVIVE DUE TO SAID CHANGES/ALTERATIONS IN THE OBJECTS, AND , CONSEQUENTLY, WHY THE BENEFITS OF SECTIONS 11 AND 12 OF THE ACT BE NOT DE NIED TO THEM. THE ASSESSING OFFICER HAD ALSO NOTED THAT THE PRESENT MEMORANDU M ALSO INCLUDES CERTAIN OBJECTS WHICH ARE ENTIRELY DIFFERENT FROM THE OBJEC TS ON THE BASIS OF WHICH REGISTRATION U/S.12A WAS GRANTED AS ALSO THE FACT THAT REVISED OBJECTIVES INCLUDED CERTAIN OBJECTS WHICH ARE RELIGIOUS IN NA TURE. UPON CONSIDERING ASSESSEES REPLY TO THIS SHOW CAUSE NOTICE, THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE REGISTRATION GRANTED TO THE ASSESSEE WOULD NOT SURVIVE AFTER THE WHOLESALE CHANGE IN THE OBJECTS OF THE SURAT HOSPIT AL TRUST ASSOCIATION OF SEVENTH DAY ADVENTIST AND, THEREFORE SURAT HOSPITAL TRUST ASSOCIATION OF SEVENTH DAY ADVENTISTS CASE WOULD BE TREATED AS IF THEY HAD NO REGISTRATION U/S.12A OF THE ACT. AGGRIEVED BY THE STAND SO TAK EN BY THE ASSESSING OFFICER, THE ASSESSEE FILED A WRIT PETITION BEFORE HONBLE H IGH COURT ON THE GROUND THAT CIT (OR DIT) ALONE HAS THE POWERS TO CANCEL THE RE GISTRATION GRANTED TO THE ASSESSEE, AND IN THE ABSENCE OF A SPECIFIC CANCELLA TION OF REGISTRATION BY THE CIT (OR DIT), THE ITO COULD NOT HAVE HELD THE REGISTRAT ION TO BE NON-EXISTENT, EXPIRED OR HAVING BECOME REDUNDANT, BECAUSE SUCH A DECISION BY THE ITO WOULD ITA NO.764/MUM//10 - 5 - VIRTUALLY MEAN EXERCISE BY ITO OF THE POWERS CONFER RED UPON THE CIT BY THE STATUTE. HONBLE HIGH COURT NOTED THAT WE HAVE N OT BEEN SHOWN THAT THE ORIGINAL OBJECTS AND ALTERED OBJECTS OF THE SURAT H OSPITAL TRUST ASSOCIATION OF SEVENTH DAY ADVENTIST ARE PRACTICALLY THE SAME OR A RE CHARITABLE AND ADDED THAT PRIMA FACIE, SUCH ISSUES ARE PURE QUESTIONS O F FAT. IT WAS IN THIS BACK DROP THAT HONBLE HIGH COURT OBSERVED THAT WHERE O BJECTS OF THE TRUST OR INSTITUTION, WHICH WERE THE BASIS OF GRANT OF REGI STRATION, ARE ALTERED AFTER SUCH GRANT OF REGISTRATION, THE VERY FOUNDATION OF REGIS TRATION HAVING BEEN REMOVED BY THE ASSESSEE, THE REGISTRATION WOULD NOT SURVIVE . THEIR LORDSHIPS THEN REFERRED THE LIMITATION OF WRIT JURISDICTION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, AND CONCLUDED THE PARAGRAPH BY OBSERVING THAT, TO SUM UP, WE ARE UNABLE TO EXERCISE OUR DISCRETION (UNDER ARTICLE 22 6) TO ENABLE THE ASSESSEE TO CONTINUE TO UTILIZE AND ENJOY REGISTRATION DESPITE WHOLESALE CHANGES IN THE OBJECTS WITHOUT GIVING ITS IMMEDIATE ATTENTION TO CIT. 6. THE SHORT QUESTION WHICH WE HAVE TO ADJUDICATE I S THAT WHETHER, IN THE LIGHT OF HONBLE ALLAHABAD HIGH COURTS RULING (SUP RA), THE DIT WAS JUSTIFIED IN HOLDING THAT REGISTRATION GRANTED TO THE ASSESSEE U /S. 12A CEASES TO HOLD GOOD IN LAW. ITA NO.764/MUM//10 - 6 - 7. IT IS INTERESTING TO NOTE THAT THE OBSERVATION M ADE BY HONBLE ALLAHABAD HIGH COURT, WHICH IS THE SOLE BASIS FOR DITS IMPUG NED STAND, WAS ON THE FACT THAT WHOLESALE CHANGES WERE MADE IN THE OBJECTS CLA USE. IT WAS NOT EVEN THE ISSUE BEFORE HONBLE HIGH COURT WHETHER AN AMENDMEN T IN OBJECTS CLAUSE, BY ITSELF, WOULD RENDER THE REGISTRATION REDUNDANT, AN D THE ASSESSEE DID NOT DEMONSTRATE, AS SPECIFICALLY NOTED BY THEIR LORDSHI PS, THAT ORIGINAL OBJECTS AND REVISED OBJECTS ARE PRACTICALLY THE SAME OR EVEN CH ARITABLE. TO APPLY THE OBSERVATION MADE BY HONBLE HIGH COURT ON THESE FAC TS ON THE CASE BEFORE US WHEREIN IT IS AN UNCONTROVERTED STAND OF THE ASSESS EE THAT OBJECTS ARE PRACTICALLY THE SAME OR, IN ANY EVENT, WHOLLY CHARITABLE, WOULD BE CLEARLY CONTRARY TO THE FOLLOWING WORDS OF GUIDANCE OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS. SUN ENGINEERING WORKS PVT. LTD. (198 ITR 297) : IT IS NEITHER DESIRABLE NOR PERMISSIBLE TO PICK O UT A WORD OR A SENTENCE FROM THE JUDGMENT , DIVORCED FROM THE CON TEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE LAW DECLARED BY THE COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSERVATIONS FROM THE JUDGMENT HAVE TO BE CONSIDERE D IN THE LIGHT OF QUESTIONS BEFORE THE COURT. A DECISION OF THE COUR T TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT WAS RENDERED. 8. EQUALLY IMPORTANT IS THE FACT THAT IT WAS DURING THE ASSESSMENT PROCEEDINGS, AND AFTER SATISFYING HIMSELF THAT THER E ARE MATERIALLY SIGNIFICANT VARIATIONS IN ORIGINAL AND REVISED OBJECTS CLAUSE, THAT THE ASSESSING OFFICER HELD ITA NO.764/MUM//10 - 7 - THAT REGISTRATION GRANTED TO THE ASSESSEE DOES NOT SURVIVE. IN THE CASE BEFORE US, THIS ASPECT OF THE MATTER IS NOT EVEN EXAMINED WHET HER THE CHANGES IN OBJECT CLAUSE ARE SUCH SO AS TO IMPACT ASSESSEES ELIGIBIL ITY FOR REGISTRATION U/S.12A. WHETHER A REGISTRATION CEASES TO HOLD GOOD DUE TO C HANGE IN THE OBJECTS CLAUSE IS A DECISION TO BE TAKEN BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS, AND AFTER GIVING THE ASSESSEE DUE AND FAIR OPPORTUNITY OF HEARING TO THE ASSESSEE. HOWEVER, WHEN DIT HIMSELF DECIDES TH AT ASPECT OF THE MATTER WITHOUT EVEN HEARING THE ASSESSEE, HE VIRTUALLY PRE -EMPTS THE DECISION OF A SUBORDINATE OFFICER, I.E. THE ASSESSING OFFICER. T HE STAND OF THE LEARNED DIT CANNOT THUS BE UPHELD. 9. WE HAVE NOTED THAT IT IS NOT EVEN THE CASE OF TH E REVENUE THAT REGISTRATION U/S.12A HAS BEEN WITHDRAWN ON MERITS, BECAUSE, AS N OTED ABOVE, THE IMPUGNED LETTER MERELY STATES THAT REGISTRATION U/S.12A CEAS ES TO BE VALID IN VIEW OF AMENDMENTS IN OBJECT CLAUSE. THIS STAND OF THE DIT , FOR THE DETAILED REASONS SET OUT ABOVE, NOT SUSTAINABLE IN LAW. THE MERE FACT OF CHANGE IN OBJECTS, BY ITSELF, DOES NOT RENDER THE REGISTRATION REDUNDANT. WHAT I S TO BE SEEN IS WHETHER THE CHANGES ARE SUCH SO AS TO IMPACT ELIGIBILITY OF THE ASSESSEE FOR REGISTRATION U/S.12A. OBVIOUSLY, THEREFORE, ASSESSEE IS TO BE G IVEN AN OPPORTUNITY OF HEARING TO PRESENT HIS CASE, AND THE SUBMISSION THAT THE AS SESSEE MAY LIKE TO MAKE ARE TO ITA NO.764/MUM//10 - 8 - BE EXAMINED ON MERITS, BY WAY OF A SPEAKING ORDER A ND IN ACCORDANCE WITH THE LAW. THE DECISION SO TAKEN WILL DETERMINE WHETHER THE ASSESSEE WILL BE ENTITLED TO REGISTRATION U/S.12A POST AMENDMENTS IN THE OBJE CTS CLAUSE. 10. FOR THE REASONS SET OUT ABOVE, WE DEEM IT FIT A ND PROPER TO VACATE THE IMPUGNED ORDER PASSED BY THE DIT BUT REMIT THE MATT ER BACK TO HIM TO DECIDE, ON MERITS AND IN TERMS OF DIRECTION ABOVE, WHETHER OR NOT POST THE SUBJECT AMENDMENTS IN THE OBJECTS CLAUSE, ASSESSEE IS ENTIT LED TO REGISTRATION U/S. 12A. 11. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 15.07.2011. SD/- SD/- (VIJAY PAL RAO) (PRAMOD KUMAR) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DT.15.07.2011. *GPR TRUE COPY COPY TO : 1. THE ASSESSEE. 2. THE ASSESSING OFFICER. 3. CIT(APPEALS) 4. CIT 5. DEPARTMENTAL REPRESENTATIVE, ITAT, MUMBAI. 6. GUARD FILE.