Govardhan Foundation, Kolkata V. CIT(Exemption), Kolkata, Kolkata

ITA 767/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0792 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANAND R BAIWAR
• Assessee Lawyers: D S DAMLE
• Keywords: Charitable institution; Benefit of exemption; Cancellation of registration
• Section: 80G; 12A; 12AA; 11

Judgement Text

GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P. M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NO.767/KOL/2017 (ASSESSMENT YEAR: 2012-13) GOVARDHAN FOUNDATION APPELLANT [PAN: AAATG 2360 F] VS CIT(EXEMPTIONS), KOLKATA RESPONDENT FOR THE APPELLANT : SHRI D.S. DAMLE, FCA FOR THE RESPONDENT : SHRI ANAND R. BAIWAR, CIT - DR DATE OF HEARING : 31.08.2017 DATE OF PRONOUNCEMENT : 29.11.2017 ORDER SHRI S.S. VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 28.02.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (EXEMPTION S), KOLKATA WHEREIN HE CANCELLED REGISTRATION GRANTED U/S 12AA OF THE INCOME TAX ACT FOR SHORT THE ACT HEREINAFTER. 2. DURING THE COURSE OF PROCEEDINGS U/S 12AA(3) OF THE ACT, THE RESPONDENT HEREIN FOUND FROM THE RECORDS THAT THE A SSESSEE PAID RS.1.5 CRORES & RS.0.85 CRORES TO MODERN INDIAN SCH OOL FOR SHORT MIS HEREINAFTER , CHOBHAR, KATHMANDU, NEPAL ON 01.12.2011 & 04.03.2 015 RESPECTIVELY AND WAS OF THE OPINION THAT THE ASSESS EE APPLIED ITS FUNDS OUTSIDE INDIA CONTRARY TO THE PROVISIONS OF S EC. 11(1)(A) OF THE ACT AND U/S 11(1)(C) OF THE ACT FOR NOT OBTAINING P RIOR APPROVAL FROM THE CBDT BY GENERAL OR SPECIAL ORDER FOR APPLICATIO N OF FUNDS OUTSIDE INDIA. GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 2 3. IN RESPONSE TO THE SAID OBJECTIONS, THE ASSESSEE FILED SUBMISSIONS DT:25-04-2016 BY STATING THAT THE ASSES SEE WAS REGISTERED U/S 12A OF THE ACT AND THERE IS NO PROHI BITION FOR DONATION TO MIS IS AN EDUCATIONAL INSTITUTION IN NEPAL IN TERMS OF CLAUSE 4(A) OF THE TRUST DEED. FURTHER, IT WAS CONTENDED THAT S HRI R.S. SARAF WHO IS THE PRESIDENT OF MANAGING COMMITTEE OF MIS IS NOT THE BENEFICIARY AND HE IS NOT ENTITLED FOR ANY PROFIT FROM MIS . THE SECTION 11 OF THE ACT SHALL NOT APPLY, IF ANY PART OF INCOME OR ANY P ROPERTY OF THE TRUST IS APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT O F ANY CONCERN IN WHICH TRUSTEE IS NOT ENTITLED TO LESS THAN 25% OF THE PRO FIT OF SUCH CONCERN AND PLEADED NO VIOLATION SECTION 13(1) OF THE ACT. THE ASSESSEE ALSO FILED 1 .COPIES OF TRUST DEED, CERTIFICATE U/S 12A AND 80G OF CHATRAL JIWANDAN TRUST, 2 .DONATION RECEIVED AND PAID IN CHATRAL JIWANDAN TRUST, 3. BALANCE SHEET AND INCOME & EXPENDITURE OF CHATRAL J IWANDAN TRUST, 4. BALANCE SHEET AND INCOME & EXPENDITURE ACCOUNT OF A SSESSEE AND 5. MEMORANDUM / TRUST DEED OF MIS . 4. THE RESPONDENT, CONSIDERING THE ABOVE, FOUND THE SUBMISSION OF THE ASSESSEE WAS NOT TENABLE. THE RESPONDENT OBS ERVED THAT THE BENEFIT OF EXEMPTION U/S 11(1)(A) OF THE ACT COULD BE CLAIMED ONLY WHEN THE DONATION IS MADE WITHIN INDIA AND NO PRIOR APPROVAL WAS OBTAINED BY THE ASSESSEE U/S 11(1)(C) OF THE ACT TO PAY DONATION OUTSIDE INDIA AND OPINED THAT THE ASSESSEE INDULGED IN BOGUS ACTIVITIES AND FOR VIOLATION OF PROVISIONS U/SECS 11(1)(A) AND 11(1)(C) OF THE ACT ISSUED A SHOW CAUSE NOTICE DATED 31.10.2 016 TO THE ASSESSEE SEEKING EXPLANATION WHY THE REGISTRATION G RANTED U/S 12A OF THE ACT SHOULD NOT BE CANCELLED FOR INDULGING IN FA KE ACTIVITIES. 5. ACCORDING TO THE RESPONDENT, THE ASSESSEE DID NO T COMPLY AND FILED NO WRITTEN SUBMISSIONS IN RESPONSE TO THE SHO W CAUSE NOTICE DATED 31.10.2016 AND HELD THAT THE ACTIVITIES OF TH E ASSESSEE ARE NOT GENUINE AND ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 3 OBJECTIVES OF THE TRUST AND CANCELLED THE REGISTRAT ION GRANTED U/S 12A OF THE ACT VIDE HIS ORDER DT:28-02-2017. 6. AGGRIEVED, THE ASSESSEE IS BEFORE US. THE LD. AR SUBMITS THAT CLAUSE-4 OF THE TRUST DEED DATED 17.08.1995 DOES NO T DEBAR ASSESSEE TO APPLY ITS FUNDS FOR CHARITABLE PURPOSE OUTSIDE INDIA AS ITS OBJECTIVE WAS TO GIVE GOOD QUALITY EDUCATION TO THE SAID INDIAN EDUCATIONAL INSTITUTION WHICH WAS FORMED TO GIVE HI GH QUALITY EDUCATION BOTH TRADITIONAL AND INNOVATIVE MEANS AND SUPPORTING THE SAME PLACED ON RECORD TRUST DEED DT:17-08-1995 AND MAGAZINES MIS FOR YEARS 2012, 2013, 2014 AND 2015. THE LD. AR PLA CED RELIANCE ON THE DECISION OF HONBLE HIGH COURT OF MADRAS IN THE CASE OF M/S TAMIL NADU CRICKET ASSOCIATION VS. DCIT(EXEMPTIONS) & OTHERS REPORTED IN 360 ITR 633 (MAD) AND ARGUED THAT THE RESPONDENT HA S NO POWER TO CANCEL THE REGISTRATION. THE RESPONDENT HAS EMPOWER ED ONLY TO EXAMINE WHETHER THE ASSESSEE CONDUCTING ITS ACTIVIT IES FOR CHARITABLE PURPOSES IN ACCORDANCE WITH THE OBJECTS OR THE ACTI VITIES OF THE ASSESSEE WERE GENUINE OR NOT. THE LD. AR SUBMITS TH AT THE RESPONDENT IS WRONG AND HIS JURISDICTION IN CANCELL ING THE REGISTRATION GRANTED U/S 12A WITHOUT MAKING ANY REFERENCE TO THE CONDITIONS AS CONTEMPLATED SUB-SECTION 3 OF SECTION 12AA OF THE A CT THAT ITS CHARITABLE PURPOSES NOT WITHIN OBJECTS AND THE ACTI VITIES ARE INGENUINE. THE LD. AR PRAYED TO ALLOW THIS APPEAL W ITH A DIRECTION TO CIT(E) TO GRANT REGISTRATION U/S 12A OF THE ACT. 7. THE LD. DR SUBMITS THAT THE CIT(E) EXAMINED THE FACTS AND CIRCUMSTANCES IN ACCORDANCE WITH PROVISIONS CONTAIN ED IN SECS. 11(1)(A) AND SECTION 11(1)(C) OF THE ACT AND FOUND THE ASSESSEE APPLIED ITS FUNDS OUTSIDE INDIA WITHOUT TAKING ANY APPROVAL FROM CBDT IN GENERAL OR SPECIAL ORDER. THE FACTS OF INDU LGING IN FAKE ACTIVITIES WERE ESTABLISHED FROM THE RECORDS VIOLAT ING THE STATUTORY PROVISIONS AND ALSO BEYOND THE OBJECTIVES OF THE TR UST DEED. THE LD. DR SUBMITS THAT THE CIT(E) RIGHTLY CANCELLED THE RE GISTRATION AS THE GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 4 ASSESSEE FAILED TO GIVE ANY REPLY IN RESPONSE TO TH E SHOW CAUSE NOTICE 31.10.2016. THE LD. DR VEHEMENTLY OPPOSED THE RELIE F SOUGHT BY THE ASSESSEE BEFORE THIS TRIBUNAL AND PRAYED TO DISMISS THE APPEAL AND RELIED ON THE ORDER OF CIT(E). 8. HEARD BOTH AND PERUSED THE MATERIALS AVAILABLE O N RECORD INCLUDING THE TRUST DEED DT:17-08-1995 AND MAGAZINE S FOR YEARS 2012, 2013, 2014 AND 2015. IT IS OBSERVED FROM THE RECORD THAT THE ASSESSEE APPLIED ITS FUNDS OUTSIDE INDIA WHERE THE SAID RECIPIENT INSTITUTION WAS NOT REGISTERED IN INDIA U/S 12A OF THE ACT. THE CONTENTION OF THE LD. CIT(E) WAS THAT U/S 11(1)(A) & 11(1)(C) EXPLAINS THE APPLICATIONS OF CHARITY SHOULD BE WITHIN INDIA AND IF AT ALL THE APPLICATION OF CHARITY IS TO BE APPLIED OUTSIDE IND IA, THERE MUST BE AN APPROVAL FROM CBDT BY GENERAL OR SPECIAL ORDER. IT IS OBSERVED FROM THE SUBMISSIONS MADE BY THE ASSESSEE THROUGH A LETT ER DATED 25.04.2016 CONTENDING THAT THERE IS NO BAR IN THE T RUST DEED OF THE ASSESSEE TO DONATE FUNDS OUTSIDE INDIA AND SHRI R.S . SARAF, THE PRESIDENT OF MANAGING COMMITTEE OF MIS , IS NOT THE BENEFICIARY AND IS NOT ENTITLED TO PROFIT IN MIS SITUATED IN NEPAL. IT WAS CONTENDED THAT SECTION 11 DOES NOT APPLY IN A SITUATION IF TH E TRUSTEE IS ENTITLED NOT LESS THAN 25% OF PROFIT OF THE SAID CONCERN I.E. MIS OF NEPAL. 9. THEREFORE, A QUESTION ARISES BEFORE US, WHETHER THE SAID ACTION OF ASSESSEE DONATING THE FUNDS OUT OF INDIA VIOLATI NG PROVISIONS OF INCOME TAX ACT CONSTITUTES A CASE FOR RESPONDENT FO R CANCELLATION OF REGISTRATION GRANTED U/S 12A OF THE ACT. 10. THE LD. AR PLACED RELIANCE IN THE DECISION OF H ONBLE HIGH COURT OF MADRAS IN THE CASE OF TAMILNADU CRICKET ASSOCIATION SUPRA REPORTED IN 360 ITR 633 (MAD) TO SAY THAT THE INCOME DONATED IS A TRANSACTIONS TO BE CONSIDERED IN TERMS OF CLAIM U/S 11 OF THE ACT WHETHER IT IS TO BE INCLUDED IN THE TOTAL INCOME OF THE RECIPIENT AND WHETHER THE TRUST WOULD BE ENTITLED TO CLAIM OF ITS ACTIONS VIOLATING GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 5 PROVISIONS OF THE ACT IN CONSONANCE WITHIN THE CLAU SE 4A OF THE DEED AND NON APPLICABILITY SECTION 11 OF THE ACT, THE E NTIRE MATTERS TO BE CONSIDERED AT THE TIME OF ASSESSMENT, BUT NOT IN TH E HANDS OF RESPONDENT UNDER SUBSECTION 3 OF 12AA OF THE ACT. 11. WE SHALL EXAMINE THE FACTS OF THE CASE INVOLVED IN THE CASE OF TAMILNADU CRICKET ASSOCIATION SUPRA AS RELIED ON BY THE LD. AR. THE FACTS THEREIN ARE THAT THE TAMILNADU CRICKET ASSOCI ATION THE ASSESSEE THEREIN IS A MEMBER OF BOARD OF CRICKET CONTROL OF INDIA FOR SHORT BCCI HEREAFTER WHICH IS A MEMBER OF INTERNATIONAL CRICKET COUNCIL. THE SAID BCCI HOLDS TEST MATCHES AND ONE DAY INTERNATIONAL M ATCHES WITH VISITING FOREIGN TEAMS AND ALLOTS TO VARIOUS MEMBER CRICKET ASSOCIATIONS WHICH ORGANIZES MATCHES IN THE STADIUM S OF STATE CRICKET ASSOCIATIONS. THE STATE CRICKET ASSOCIATION INCURS EXPENDITURE FOR THE CONDUCT OF SUCH MATCHES AND IS ENTITLED TO ALL IN-S TADIA SPONSORSHIPS, ADVERTISEMENTS, BEVERAGE REVENUES. THE BCCI EARNS R EVENUES BY WAY OF SPONSORSHIPS AND MEDIA RIGHTS AS WELL AS FRA NCHISE REVENUES FOR THE INDIAN PREMIER LEAGUES FOR SHORT IPL HEREAFTER . THE SAID BCCI DISTRIBUTES 70% OF THE REVENUES TO MEMBER CRICKET A SSOCIATIONS, THEREBY, THE ASSESSEE THEREIN THE TAMILNADU CRICKET ASSOCIATION RECEIVED REVENUE FROM BCCI. THE CIT(E) OPINED THAT DOMINANT ACTIVITIES ARE IN THE NATURE OF TRADE, COMMERCE AND BUSINESS AND BY INVOKING SECTION 12AA OF THE ACT READ WITH SECTION 2(15) OF THE ACT AND HELD THE SAID RECEIPT IN THE HANDS OF TAMILNADU CRICKET ASSOCIATION INVOLVED A COMMERCIAL TRADING ACTIVITY, ACCORDINGLY, REGISTRATION WAS CANCELLED U/S 12AA(3) OF THE ACT. THE JURISDICTIONAL TRIBUNAL UPHELD THE CANCELLATION ORDER OF THE CIT(E ). THE HONBLE HIGH COURT OF MADRAS HELD THAT THESE CONSIDERATIONS ARE NOT GERMANE IN CONSIDERING THE QUESTION AS TO WHETHER THE ACTIVITI ES ARE GENUINE OR CARRIED ON IN ACCORDANCE WITH THE OBJECTS AND IT IS FOR THE AO TO TAKE NOTE OF ALL FACTS, WHILE CONSIDERING THE SAME U/S 1 1 OF THE ACT AND DISAPPROVED THE FINDING OF THE TRIBUNAL IN CONFIRMI NG THE ACTION OF CIT(E) IN CANCELLING THE REGISTRATION U/S 12AA(3) O F THE ACT. GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 6 12. IN THE PRESENT CASE THAT THE RESPONDENT HAS FOU ND THAT THE ASSESSEE HAS PAID DONATIONS FOR CHARITY OUTSIDE IN DIA CONTRARY TO THE PROVISIONS OF SECTIONS 11(1)(A) AND 11(1)(C) OF TH E ACT. IN OUR OPINION, THIS MAY BECOME POINT FOR CONSIDERATION FO R DISALLOWANCE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT IS THE DUTY OF AO TO TAKE NOTE OF ALL FACTS, WHILE CONSIDERING THE SA ME U/S 11 OF THE ACT AND THUS, THE RATIO ENUNCIATED BY THE HONBLE HIGH COURT OF MADRAS IS APPLICABLE TO THE ISSUE ON HAND. IN OUR OPINION, TH E RESPONDENT HAVING EXERCISING POWERS U/S 12AA OF THE ACT HAS TO SATISFY THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION AND THE RESPONDENT IS EMPOWERED TO EXAMINE ALL THE DETAILS OF THE TRUST OR INSTITUTION WHICH HAS GOT REGISTRATION U/S 12A IN T ERMS OF EXERCISING ITS POWER UNDER SUB-SECTION 3 OF SECTION 12AA OF TH E ACT. WE FIND NO ADVERSE REMARK MADE BY THE RESPONDENT REGARDING THE ACTIVITIES OF THE ASSESSEE ARE NOT IN ACCORDANCE WITH THE OBJECTS AND ITS ACTIVIES ARE NOT GENUINE. THEREFORE, IN OUR OPINION, EXERCIS ING JURISDICTION UNDER SUB-SECTION 3 OF SECTION 12AA OF THE ACT IN C ANCELLING THE REGISTRATION BY THE RESPONDENT IS NOT MAINTAINABLE AND THUS, IT IS SET ASIDE. GROUND NOS 1 TO 4 RAISED BY ASSESSEE IN THI S REGARD SUCCEEDS AND ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.2017. SD/- SD/- P. M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29.11.2017 PLACE : KOLKATA RS(SPS) GOVARDHAN FOUNDATION I.T.A NO.767/KOL/2017 ASSESSMENT YEAR: 2012-13 PAGE | 7 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT GOVARDHAN FOUNDATION, 15, INDIA EXCHANGE PLACE, 1 ST FLOOR, KOLKATA 1. 2 RESPONDENT CIT(EXEMPTIONS), 10B, MIDDLETON ROW, 6 TH FLOOR, KOLKATA 71. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKAT A //TRUE COPY// BY ORDER, SR.PS/H.O.O ITAT, KOLKATA