UNIVERSAL WELFARE AND EDUCAITON FOUNDATION, MUMBAI V. DIT (E), MUMBAI

ITA 7730/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83503 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 30-07-2014
• Assessment Year: 2012-2013
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMBIT MISHRA
• Assessee Lawyers: K SIVARAM
• Keywords: Charitable institution; Source of fund
• Section: 80G; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO. 7730/MUM/2012 (ASSESSMENT YEAR: 2012-13) UNIVERSAL WELFARE AND EDUCATION VS. DIRECTOR OF INCOME TAX FOUNDATION 1ST FLOOR, FILKA BLDG, DAFTARY ROAD OPP. MALAD STATION, MUMBAI 400097 (EXEMPTION) 6TH FLOOR, PIRAMAL CHAMBERS PAREL, MUMBAI 400012 PAN - AABCV1182B APPELLANT RESPONDENT APPELLANT BY: SHRI K. SIVARAM RESPONDENT BY: SHRI SAMBIT MISHRA DATE OF HEARING: 30.07.2014 DATE OF PRONOUNCEMENT: 06.08.2014 O R D E R PER D. MANMOHAN, V.P. THIS APPEAL BY THE ASSESSEE COMPANY IS DIRECTED AGA INST THE ORDER PASSED BY THE DIT (EXEMPTION) UNDER SECTION 12AA OF THE ACT. 2. THE ASSESSEE COMPANY HAS FILED AN APPLICATION FOR R EGISTRATION UNDER SECTION 12A OF THE ACT. IT IS A COMPANY FORMED UNDE R SECTION 25 OF THE COMPANIES ACT AS A NON-PROFIT ORGANISATION. THE OBJ ECTS OF THE TRUST WERE TO PROMOTE AND POPULARISE EDUCATION. THE TRUST WAS INC ORPORATED ON 01.06.2009. IT DESERVES TO BE NOTICED THAT THE ASSE SSEE MADE AN APPLICATION FOR REGISTRATION UNDER SECTION 12A OF THE ACT ON 27 .07.2009 WHICH WAS REJECTED BY THE DIT (EXEMPTION) ON 26.02.2010 ON TH E GROUND THAT THE OBJECTS OF THE TRUST EXTEND TO THE TERRITORIES BEYO ND INDIA AND THEY ARE COMMERCIAL IN NATURE. THEREAFTER THE ASSESSEE MADE APPROPRIATE AMENDMENTS TO THE MEMORANDUM OF ASSOCIATION AND OBJ ECT CLAUSE AND AGAIN APPLIED FOR REGISTRATION ON 20.04.2012. VIDE ORDER DATED 30.12.2012 THE DIT (EXEMPTION) REJECTED THE APPLICATION. HE HA S TAKEN INTO CONSIDERATION THE MEMORANDUM OF ASSOCIATION AND ITS MAIN OBJECT, I.E. TO PROMOTE AND POPULARISE EDUCATION IN CITIES TO H IGHLIGHT THAT IT WAS ITA NO. 7730/MUM/2012 UNIVERSAL WELFARE AND EDUCATION FOUNDATION 2 MAINLY INTENDED TO START A SCHOOL AND EVEN IN THE L ETTER ADDRESSED TO THE DIT IT WAS STATED THAT THE COMPANY BELIEVES IN STARTING A SCHOOL WHEREAS THE PROPOSED ACTIVITY OF ESTABLISHING THE SCHOOL DOES N OT FIND A SPECIFIC MENTION IN ANY OF THE CLAUSES. IN OTHER WORDS, THE SAID ACT IVITY OF SETTING UP OF SCHOOL HAS NOT BEEN INCORPORATED AND THUS IT DOES NOT SATI SFY THE TEST OF CARRYING ON CHARITABLE ACTIVITY. 3. VIDE LETTER DATED 19.10.2012 THE ASSESSEE SUBMITTED THAT IT HAS NOT CARRIED OUT ANY ACTIVITY TILL DATE BECAUSE IT CAN C OMMENCE ONLY WHEN REGISTRATION IS GRANTED UNDER SECTION 12AA AND SECTION 80G OF TH E ACT. THE LEARNED DIT (EXEMPTION) WAS OF THE OPINION THAT THE PLEA IS CON TRARY TO THE PROVISIONS OF THE ACT. IN OTHER WORDS, WHERE NO ACTIVITY WAS UNDERTAK EN BY THE APPLICANT IT CANNOT SATISFY THE TEST OF GENUINENESS OF ITS ACTIVITY. IT IS A CONDITION PRESCRIBED FOR GRANTING OF REGISTRATION. HE THUS CONCLUDED THAT TH E ASSESSEE COMPANY FAILED TO COMPLY WITH THE MANDATORY REQUIREMENTS PRESCRIBED U NDER SECTION 12AA READ WITH RULE 17A AND ACCORDINGLY REJECTED THE REGISTRA TION. 4. AGGRIEVED, ASSESSEE CONTENDED BEFORE THE TRIBUNAL T HAT THE INTENTION OF THE ASSESSEE COMPANY IS VERY BROAD, I.E. TO PROM OTE AND POPULARISE EDUCATION IN CITIES, URBAN AND RURAL AREAS FOR THE BENEFIT OF STUDENTS, TEACHERS, YOUNG ENTREPRENEURS, HANDICAPPED, HOUSEWI VES, ETC. BY VARIOUS MEANS SUCH AS ORGANISING EXHIBITIONS, SEMINARS, LEC TURES AND OTHER MODES AND IT NOWHERE SPECIFIES THAT SUCH ACTIVITY WOULD B E DONE ONLY BY RUNNING A SCHOOL. IN FACT THE LETTER INDICATES THE VISION OF THE COMPANY, I.E. REVIVING EDUCATION IN INDIA BY RAISING A SCHOOL WHICH DOES N OT INDICATE THAT IT HAS COMMENCED THE SCHOOL BUT BY ANY MODE SET OUT IN THE MAIN OBJECT SO THAT IT CAN HELP THE ABOVE MENTIONED CATEGORIES IN GETTING SOME TRAINING OR KNOWLEDGE AND SUCH ACTIVITY CAN BE COMMENCED ONLY W HEN THE ASSESSEE GATHERS ITS SOURCE OF FUND. THUS COMMENCEMENT OF AC TIVITY CANNOT BE LINKED UP WITH GRANTING OF REGISTRATION AS OTHERWISE THE A SSESSEE CANNOT RAISE FUNDS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITT ED THAT THE MAIN OBJECT WAS TO SET UP A CHARITABLE TRUST AND IN FACT THE DI T (EXEMPTION) HAS DENIED THE CLAIM OF REGISTRATION MAINLY ON THE GROUND THAT THE ASSESSEE HAS NOT UNDERTAKEN ANY ACTIVITY WHEREAS THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF DIT (EXEMPTION) VS. PANNA LALBHAI FOUNDATION 35 TAXMANN.COM.104 HELD ITA NO. 7730/MUM/2012 UNIVERSAL WELFARE AND EDUCATION FOUNDATION 3 THAT THE AO HAS TO SATISFY HIMSELF WITH REGARD TO T HE CHARITABLE NATURE OF THE OBJECTS AND GENUINENESS OF THE INTENDED ACTIVITIES BUT IT IS NOT NECESSARY THAT THE ACTIVITY SHOULD COMMENCE AT THE TIME OF RE GISTRATION ITSELF. HE THUS SUBMITTED THAT THE LEARNED DIT ERRED IN REJECTING T HE CLAIM OF REGISTRATION MAINLY ON THE GROUND THAT THE ASSESSEE HAS NOT COMM ENCED ITS ACTIVITIES. 5. ON THE OTHER HAND, THE LEARNED D.R. RELIED UPON THE ORDER PASSED BY THE LEARNED DIT (EXEMPTION) AND SUBMITTED THAT THE OBJECT CLAUSE IS NOT CLEAR AS TO HOW THEY ARE GOING TO COMMENCE THE ACTI VITIES. IN OTHER WORDS, THE MODE COMMENCEMENT OF ACTIVITIES IS VAGUE AND IN FACT IT HAS NOT COMMENCED ITS ACTIVITIES AND THUS THE LEARNED DIT ( EXEMPTION) WAS JUSTIFIED IN REJECTING THE REQUEST FOR REGISTRATION, UNDER SE CTION 12AA OF THE ACT. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. WE HAVE CAREFULLY GONE THROUGH THE MEMORAND UM OF ASSOCIATION AND ALSO THE REASONS GIVEN BY THE LEARNED DIT (EXEMPTIO N). IT IS NOT IN DISPUTE THAT THE MAIN OBJECT, I.E. TO PROMOTE AND POPULARIS E EDUCATION FOR THE BENEFIT OF HANDICAPPED, HOUSEWIVES, ETC. CANNOT BE SAID TO BE NON-CHARITABLE OBJECT. SO LONG AS THE OBJECT IS OF CHARITABLE NATURE REGIS TRATION CANNOT BE REJECTED MAINLY ON THE GROUND THAT IT HAS NOT COMMENCED IT A CTIVITY. SINCE COMMENCEMENT WOULD INVARIABLY OR IN MOST OF THE CAS ES DEPEND UPON GATHERING OF FUNDS WHICH EVENT CAN TAKE PLACE ONLY UPON OBTAINING NECESSARY PERMISSION FROM THE TAX AUTHORITIES SUCH AS APPROVAL OF THE CHARITABLE ACTIVITY AND REGISTRATION UNDER SECTION 12AA OF THE ACT. THIS VIEW OF OURS IS ALSO SUPPORTED BY THE HON'BLE GUJARAT HI GH COURT IN THE CASE CITED SUPRA. HAVING REGARD TO THE CIRCUMSTANCES OF THE CA SE WE ARE OF THE VIEW THAT IT IS A FIT CASE FOR GRANTING OF REGISTRATION. THE AO IS ALWAYS FREE TO CONSIDER ALLOWABILITY OF EXEMPTION AT THE TIME OF A SSESSMENT. WITH THESE OBSERVATIONS THE MATTER IS SET ASIDE TO THE FILE OF THE DIT. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST, 2014. SD/- SD/- ( B.R. BASKARAN ) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 6 TH AUGUST, 2014 ITA NO. 7730/MUM/2012 UNIVERSAL WELFARE AND EDUCATION FOUNDATION 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) , MUMBAI 4. THE CIT , MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.