L Chanan Ram Memorial Trust, Patiala V. CIT (Exemptions), Chandigarh

ITA 783/CHANDI/2015

• Counselvise Citation: [2015] 128 COUNSELVISE.COM (IT) 9789 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 26-11-2015
• Assessment Year: 2015-2016
• Appeal Filed On: 14-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Keywords: Charitable institution; Opportunity of being heard; Set aside
• Section: 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.RANO JAIN, ACCOUNTANT MEMBER ITA NO. 784 & 783/CHD/2015 ASSESSMENT YEAR: 2015-16 L. CHANAN RAM MEMORIAL TRUST, VS THE CIT(EXEMPTION S) 107, AEKTA AVENUE, CHANDIGARH. PARTAP NAGAR, PATIALA. PAN: AABTL2351E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIBHOR GARG RESPONDENT BY : SHRI SUSHIL VERMAN DATE OF HEARING : 26.11.2015 DATE OF PRONOUNCEMENT : 27.11.2015 O R D E R PER BHAVNESH SAINI,JM BOTH THE APPEALS BY ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF CIT (EXEMPTION) CHANDIGARH DATE D 14.09.2015 UNDER SECTION 12AA AND 80G(5) OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE FILED APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT BEFORE CIT (EXEMPTION) CHANDIGARH. THE CIT (EXEMPTION), IN ORDER TO ASCERTAIN THE GENUINENESS OF THE TRUST HAS ASKED FOR THE ORIGINAL AND CERTIFIED COPY OF THE TRUST DEED, BY-LAWS, MEMORANDUM OF ASSOCIATION, NOTE ON ACTIVITIES WITH SUPPORTING DOCUMENTS, BOOKS OF ACCOUNT OF CURRENT FINANCIAL YEAR, RECEIPTS OF DONA TION, 2 IF ANY AND ANY OTHER DOCUMENT IN SUPPORT OF THE APPLICATION. THE CIT (EXEMPTION) AS PER BALANCE SH EET ON 31.03.2015 FOUND THAT ASSESSEE HAS SPENT GENERAL EXPENSES AND ALSO EXPENSES OF RS. 32,777/- AS AID T O GOVERNMENT SCHOOL. NO SUPPORTING DOCUMENT WAS, HOWEVER, FILED TO PROVE THAT THESE EXPENSES HAVE ACTUALLY BEEN MADE ON ANY CHARITABLE ACTIVITY. AS PER CLAUSE 6 OF THE TRUST DEED ALSO, IT WAS FOUND THAT TRUSTEES COULD SELL, DISPOSE OF THE MOVABLE AND IMMOVABLE PROPERTY OR LET OUT IMMOVABLE PROPERTIES IN THEIR ABSOLUTE DISCRETION. IT WAS, THEREFORE, NOTE D THAT THE ABSOLUTE POWERS OF THE TRUSTEES CLEARLY ATTRACT THE PROVISIONS OF SECTION 13(1)(C) OF THE INCOME TAX AC T AND ACCORDINGLY, REGISTRATION UNDER SECTION 12AA WAS DENIED. SINCE REGISTRATION APPLICATION WAS CANCELL ED, THEREFORE, APPROVAL UNDER SECTION 80G(5) OF THE ACT WAS ALSO DENIED. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE DOCUMENTS WITH SUPPORTING BILLS AND VOUCHERS WE RE PRODUCED BEFORE CIT (EXEMPTION) AS WELL AS BEFORE I TO (EXEMPTION). COPIES OF THE REPLIES FILED BEFORE TH EM HAVE BEEN REFERRED TO IN WHICH SAME FACTS HAVE BEEN MENTIONED THAT BILLS PAID BY ASSESSEE ON CHARITABLE ACTIVITY BEING PRODUCED IN SUPPORT OF THE SAME. HE HAS ALSO REFERRED TO TRUST DEED IN WHICH IN PARA 8, IT IS EXPRESSLY MENTIONED THAT TRUSTEES WILL NOT BE ENTIT LED TO RECEIVE ANY REMUNERATION AS TRUSTEES BUT THEY MAY B E 3 REIMBURSED OF THE EXPENSES ACTUALLY CLAIMED BY THEM IN CONNECTION WITH THE WORK OF THE TRUST. HE HAS ALSO REFERRED TO PARA 11 OF THE TRUST DEED TO SHOW THAT NO PART OF THE TRUST PROPERTY CAN BE APPLIED FOR ANY O THER PURPOSES EXCEPT FOR WELFARE PURPOSES AND ALL THE PO WERS SHALL BE RESTRICTED TO BE SAME AND IN THE EVENT OF DISSOLUTION OF THE TRUST, THE FUNDS WITH THE TRUST WILL BE DONATED TO THE OTHER TRUST OR INSTITUTION HAVING SI MILAR OBJECTS. THE LD. COUNSEL FOR THE ASSESSEE, THEREFO RE, SUBMITTED THAT THE CIT (EXEMPTION) DID NOT CONSIDER THE ISSUE IN PROPER PERSPECTIVE AND HAS PICKED UP FEW W ORDS FROM THE TRUST DEED ONLY. HE HAS RELIED UPON DECIS ION OF ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RED ROSE SCHOOL 212 CTR 394 IN WHICH IT WAS HELD AS UNDER : SEC. 12AA DOES NOT SPEAK ANYWHERE THAT THE CIT, WH ILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITU TION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SU CH INSTITUTION IS EARNING PROFIT; CIT WAS NOT JUSTIFIE D IN REFUSING REGISTRATION UNDER S. 12AA TO ASSESSEE EDUCATIONAL SOCIETY AND TRIBUNAL WAS JUSTIFIED IN G RANTING THE SAME. 3(I) HE HAS ALSO RELIED UPON UNREPORTED DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS BABA DEEP SINGH EDUCATIONAL SOCIETY, ITA NO. 881/2010 DATED 13.10.2011 IN WHICH HON'BLE HIGH COU RT FOLLOWING THE DECISION IN THE CASE OF RED ROSE SCHO OL (SUPRA) HELD THAT WHEN ASSESSEE SOCIETY ADMITTEDLY RUNNING A POLYTECHNIC COLLEGE AND THE ACTIVITIES WE RE INTERWOVEN FOR FURTHERING THE PROJECTS AND ACTIVITI ES 4 PERTAINING TO EDUCATION, THE TRIBUNAL RIGHTLY DIREC TED THAT REGISTRATION BE GRANTED TO THE SOCIETY WITH TH E RIDER THAT THE SAME COULD ALWAYS BE CANCELLED IF IT CAME TO THE NOTICE OF THE CIT THAT SOCIETY WAS NOT CARRYING ON THE ACTIVITIES AS PER ITS OBJECTS. 3(II) ON THE OTHER HAND, LD. DR RELIED UPON IMPUGNE D ORDERS. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND FACTS OF THE CASE, WE ARE OF THE VIEW THAT MATTER R EQUIRES RE-CONSIDERATION AT THE LEVEL OF THE CIT (EXEMPTION ). THE ASSESSEE HAS FILED COPY OF THE TRUST DEED WHICH INDICATED MANY OBJECTS OF THE ASSESSEE TRUST WHICH PRIMA-FACIE APPEARS TO BE CHARITABLE IN NATURE. TH E CIT (EXEMPTION) DID NOT ADVERSELY POINT OUT ANYTHING AGAINST THE ASSESSEE WITH REGARD TO OBJECTS OF THE ASSESSEE SOCIETY. THE CIT (EXEMPTION) HOWEVER, NOT ED THAT ASSESSEE HAS SPENT THE AMOUNT BEING AID TO THE GOVERNMENT SCHOOL BUT NO SUPPORTING DOCUMENTS HAVE BEEN SUPPLIED. HOWEVER, THE REPLIES FILED BEFORE I TO (EXEMPTION) AND CIT (EXEMPTION) CLEARLY FIND MENTIO N THAT BILLS WERE PRODUCED BEFORE THEM FOR THEIR PERU SAL. FURTHER, CIT (EXEMPTION) HAS REFERRED TO SOME OF TH E CLAUSES FROM PARA 6 OF THE OBJECTS OF THE ASSESSEE TRUST ACCORDING TO WHICH, THE TRUSTEES COULD SELL OR DISP OSE OFF THE PROPERTIES OF THE TRUST OR TO LET OUT THE S AME. HOWEVER, THE OTHER CLAUSE OF THE TRUST DEED SHOWS T HAT TRUSTEES SHALL NOT BE ENTITLED FOR ANY REMUNERATION AND 5 TRUST PROPERTY CAN BE APPLIED FOR WELFARE PURPOSES AND ALL POWERS SHALL BE SUBJECT TO RESTRICTIONS AND LIMITATIONS AS CONTAINED IN THE TRUST DEED AND FURT HER, IN CASE OF DISSOLUTION OF THE TRUST, THE PROPERTIES OF THE TRUST WOULD COME TO THE SIMILAR SOCIETY OR TRUST. THEREFORE, IT APPEARS THAT CIT (EXEMPTION) DID NOT CONSIDER THE ISSUE IN PROPER PERSPECTIVE WHILE REFU SING TO GRANT REGISTRATION TO THE ASSESSEE. FURTHER, ACCORDING TO SECTION 12AA OF THE INCOME TAX ACT, AT THE TIME OF GRANT OF REGISTRATION UNDER SECTION 12AA, C IT COULD EXAMINE THE OBJECTS AND GENUINENESS OF ITS ACTIVITIES ON WHICH NO ADVERSE COMMENTS HAVE BEEN GIVEN BY CIT (EXEMPTION). THEREFORE, THE PROVISION S OF SECTION 13(1)(C) OF THE ACT COULD NOT BE TAKEN INTO CONSIDERATION AT THIS STAGE WHICH APPEARS NOT VIOLA TED IN THIS CASE. FURTHER, ON GOING THROUGH THE ENTIRE TRUST DEED, IT APPEARS THAT CIT (EXEMPTION) HAS GONE THRO UGH ONLY SOME OF THE SUB-PARAS FROM THE TRUST DEED AND DID NOT CONSIDER THE ISSUE IN PROPER PERSPECTIVE AND DI D NOT CONSIDER THE ENTIRE TRUST DEED FOR THE PURPOSE OF G RANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THE DECISION CITED BY LD. COUNSEL FOR THE ASSESSEE CLEA RLY SUPPORTS THE FACT THAT THE MATTER REQUIRES RE- CONSIDERATION AT THE LEVEL OF THE CIT (EXEMPTION). 5. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF CIT (EXEMPTION) REFUSING TO GRANT REGISTRATION UNDER SE CTION 12AA OF THE INCOME TAX ACT AND RESTORE THE MATTER I N 6 ISSUE TO HIS FILE WITH DIRECTION TO RE-DECIDE THE I SSUE BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING H EARD TO THE ASSESSEE STRICTLY IN ACCORDANCE WITH LAW AS OBSERVED IN THE ORDERS. 6. THE APPROVAL UNDER SECTION 80G(5) OF THE ACT HAV E BEEN DENIED BECAUSE REGISTRATION APPLICATION HAVE B EEN DISMISSED. SINCE THE REGISTRATION MATTER IS RESTOR ED TO THE FILE OF CIT (EXEMPTION), THEREFORE, THIS MATTER ALSO REQUIRES RE-CONSIDERATION BY CIT (EXEMPTION) CHANDIGARH. HIS ORDER ON THE SUBJECT IS ALSO SET A SIDE AND MATTER IN ISSUE IS RESTORED TO HIS FILE WITH DI RECTION TO RE-DECIDE THE ISSUE OF APPROVAL UNDER SECTION 80 G(5) IN ACCORDANCE WITH LAW BY GIVING REASONABLE SUFFICI ENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. IN THE RESULT, BOTH APPEALS OF ASSESSEE ARE ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 TH NOV., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD