Shri.Yathiraja Ramanuja Trust, Bangalore V. DIT(E), Bangalore

ITA 80/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9421 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-08-2009
• Assessment Year: misc
• Appeal Filed On: 29-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI S PATIL
• Assessee Lawyers: D VINAY
• Keywords: Charitable institution; Principle of natural justice
• Section: 80G; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.L.KALRA, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE, K, JUDICIAL MEMBER ITA NO.80(BANG)/2009 SRI YATHIRAJA RAMANUJA TRUST, YATHIRAJA MUTT BLDG., NO.199, 2 ND MAIN ROAD (SAMPIGE ROAD), MALLESWARAM, BANGALORE. .... APPELLANT VS. DIRECTOR OF INCOME-TAX (EXEMPTION) BANGALORE. .... RESPONDENT APPELLANT BY : SHRI D.VINAY. RESPONDENT BY : SMT.SWATI S.PATIL. O R D E R PER GEORGE GEORGE K, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED DIRECTOR OF INCOME-TAX (EXEMPTION) [DI T(E) FOR SHORT] DATED 28-11-2008. 2. IN THIS APPEAL 12 GROUNDS ARE RAISED, ALL THE GR OUNDS RELATE TO THE ISSUE OF LEARNED DIT(E)S REFUSAL TO RENEW THE APPROVAL U/S 80G(5)(VI) OF THE INCOME-TAX ACT, 1961 ['THE ACT' FOR SHORT]. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE AS SESSEE- TRUST WAS ESTABLISHED BY TRUST DEED DATED 27-1-1993 . THE ASSESSEE-TRUST FILED APPLICATION ON 9-5-2008 SEEKIN G RENEWAL OF ITA 80/B/2009 PAGE 2 OF 7 APPROVAL U/S 80G OF THE ACT. CERTAIN DEFICIENCIES WERE FOUND IN THE DOCUMENT FILED ALONG WITH APPLICATION. HENCE, BY LETTER DATED 9-7-2009, ITO (E) CALLED FOR DETAILS. FURTHER TO S HOW CAUSE NOTICE, ASSESSEE-TRUST FILED DETAILS. ASSESSEE-TRU ST WAS REQUESTED TO FILE ITS EXPLANATION IN SUPPORT OF ITS CLAIM. SI NCE ASSESSEES TRUST DEED DID NOT COMPLY WITH THE DETAILS, LEARNED DIT(E) PASSED ORDER REFUSING TO RENEW THE APPROVAL U/S 80G BY HOLDING THUS: A. THE ACTIVITY OF THE TRUST TO CONDUCT TUTORIAL CLAS SES FOR VARIOUS COURSES AT BEST COULD BE CONSIDERED AS TUITIONS PROVIDED TO THE STUDENTS. THIS IS NOT AN ACTIVITY WHICH FALLS WITHIN THE PURVIEW OF EDUCATIO N UNDER THE DEFINITION OF CHARITABLE AS PER SECTION 2(15) OF THE IT ACT. THIS ACTIVITY OF THE TRUST IS COMMERCIAL IN NATURE AND DOES NOT FALL WITHIN THE PURVIEW OF EDUCATION AS DEFINED BY THE HONBLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS. CIT (1975) 101 ITR 234. B. THE OBJECT OF THE TRUST TO PUBLISH PERIODICALS, NEW S LETTERS ETC.IS AN ACTIVITY BEING DISSEMINATION OF KNOWLEDGE WHICH FALLS UNDER THE CATEGORY GENERAL PUBLIC UTILITY. THIS ACTIVITY OF TRUST IS COMMERCIA L IN NATURE IN VIEW OF THE INSERTION OF PROVISO TO SECTI ON 2(15) OF THE IT ACT. C. THE OBJECT OF THE TRUST TO CONSTRUCT, MAINTAIN, RUN TEMPLES IS AN ACTIVITY WHICH IS RELIGIOUS IN NATURE AND SUCH ACTIVITY UNDERTAKEN BY A CHARITABLE TRUST IS CONTRAVENTION TO SECTION 13(1)(B) OF THE IT ACT. D. THE OBJECT OF THE TRUST TO CONSTRUCT, MANAGE, RUN KALYANA MANTAPA, COMMUNITY CENTRES FOR ITA 80/B/2009 PAGE 3 OF 7 CONDUCTING SEMINARS, MARRIAGES AND OTHER SOCIAL FUNCTIONS IS AN ACTIVITY WHICH IS COMMERCIAL IN NATURE. THIS ACTIVITY HAS BEEN RIGHTLY DECIDED BY THE HONBLE HIGH COURT IN THE CASE OF CIT VS. HALAI NEMON ASSOCIATION REPORTED IN 243 ITR 439 TO BE COMPUTED UNDER THE HEAD BUSINESS. THE APPLICANT TRUST IN ITS ACCOUNT FURNISHED ALONG WITH THE APPLICATION ALSO SHOWS HALL RENT RECEIVED ON ACCOUNT OF THIS ACTIVITY. 4. AGGRIEVED BY THE ORDER OF THE DIT(E), ASSESSEE IS IN APPEAL BEFORE US. LEARNED COUNSEL FOR ASSESSEE SOU GHT TO REBUT THE FINDINGS/POINTS RAISED BY THE DIT(E) WHILE REFU SING RENEWAL OF APPROVAL U/S 80G OF THE ACT AND THE SAME ARE REPROD UCED BELOW: SL. NO. CONTENTIONS OF THE DIT(E) FOR REJECTION OF APPROVAL U/S 80G SUBMISSIONS BEFORE THE ITAT 1. CLAUSE F OF THE TRUST DEED TUTORIAL CLASSES AMOUNTS TO TUITIONS TO STUDENTS AND DOES NOT FALL WITHIN THE PURVIEW OF EDUCATION. RELIES ON THE DECISION IN 101 ITR 234(SC) LOK SHIKSHANA TRUST THE HONBLE HC OF KARNATAKA IN THE FOLLOWING CASES HAS HELD THAT IMPARTING EDUCATION IN DIFFERENT FIELDS IS EDUCATIONAL ACTIVITY: 139 ITR 226 ECUMENICAL CHRISTIAN CENTRE VS. CIT 150 ITR 142 CIT VS. SARASWATH POOR STUDENTS FUND 225 ITR 1010 (SC) THIAGARAJAR CHARITIES VS. ADDL. CIT & ANR. 2. CLAUSE I OF THE TRUST DEED PUBLISHING PERIODICALS/NEWS LETTERS ETC., AMOUNTS TO DISSEMINATION OF KNOWLEDGE WHICH FALLS UNDER THE CATEGORY OF GENERAL PUBLIC UTILITY AND THUS COMMERCIAL IN NATURE AND OUTSIDE THE PURVIEW OF IN THE FOLLOWING CASES, COURTS HAVE HELD THAT DISSEMINATION OF KNOWLEDGE FOR THE BENEFIT OF GENERAL PUBLIC AMOUNTS TO CHARITABLE ACTIVITY. 134 ITR 421(ALL) GANGA PRASAD VERMA MEMORIAL SOCIETY VS. CIT ITA 80/B/2009 PAGE 4 OF 7 S.2(15) OF THE ACT. 258 ITR 548(RAJ) CIT VS. JODHPUR CHARTERED ACCOUNTANTS SOCIETY. 3. CLAUSE J OF THE TRUST DEED TO CONSTRUCT, MAINTAIN, RUN TEMPLES IS RELIGIOUS IN NATURE AND SUCH ACTIVITY UNDERTAKEN BY A CHARITABLE TRUST IS IN CONTRAVENTION TO S.13(1)(B) OF THE ACT. IN THE CASE OF CIT VS. PULLIKAL MEDICAL FOUNDATION, 210 ITR 299 (KER) PARA 16 IT WAS NOTED THAT CHARITABLE ACTIVITY INCLUDES RELIGIOUS ACTIVITY. EVEN AS PER BLACKS LAW DICTIONARY, 6 TH EDITION CHARITABLE ACTIVITY INCLUDES RELIGIOUS ACTIVITY, BUT NOT EXCLUSIVE RELIGIOUS TEACHING. FURTHER, IN THE INSTANT TRUST, THERE IS NO RESTRICTION BASED ON CASTE, RED OR RELIGION AND IS FOR PUBLIC AT LARGE. THERE IS NO CONTRAVENTION OF S.13(1)(B) ALSO. 4. OBJECT OF THE TRUST TO CONSTRUCT, MANAGE, RUN KALYANA MANTAPS, COMMUNITY CENTRES IS COMMERCIAL IN NATURE AS HELD IN 243 ITR 439 IN CIT VS. HALAI NEMON ASSOCIATION. FURTHER DIT MENTIONS THAT THE ACCOUNTS OF THE TRUST SHOWS HALL RENT RECEIVED. IN THE FOLLOWING CASES, IT WAS HELD THAT MERELY BECAUSE RENT IS RECEIVED BY THE TRUST, EXEMPTION U/S 11 CANNOT BE DENIED. 300 ITR 365 (MAD) CIT VS. SRI RAO BAHADUR ADK DHARMARAJA EDUCATIONAL CHARITY TRUST. FURTHER, IN THE CASE OF CIT VS. SENGUNTHAR THIRUMANA MANDAPAM REPORTED IN 298 ITR 330 (MAD), IT WAS HELD THAT CONSTRUCTION OF KALYANA MANTAP AND LETTING OUT TO LOCAL PEOPLE SATISFIED THE CHARITABLE OBJECT EVEN THOUGH THE TRUST HAD NOT DIVERTED THE ACCUMULATED FUND FOR ANY OTHER CHARITABLE PURPOSE. ON THE OTHER HAND, LEARNED DR SUPPORTED THE FINDIN GS OF THE LEARNED DIT(E). 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL ON RECORD. FINANCE (NO.2) BILL, 2009 (314 ITR (ST. ) 148 & 149) ITA 80/B/2009 PAGE 5 OF 7 HAS PROPOSED TO OMIT THE PROVISO TO SECTION 80G(5)( VI) OF THE ACT. NOTES ON CLAUSES ON FINANCE (NO.2) BILL, 2009 EXPLA INS THE EFFECT OF PROPOSED OMISSION AND THE SAME IS REPRODUCED BEL OW FOR THE SAKE OF CLARITY: CLAUSE 33 OF THE BILL SEEKS TO AMEND SECTION 80G OF THE INCOME-TAX ACT, RELATING TO DEDUCTIONS IN RE SPECT OF DONATIONS TO CERTAIN FUNDS, CHARITABLE INSTITUTI ONS, ETC. THE EXISTING PROVISO TO CLAUSE (VI) OF SUB-SECTION (5) OF SAID SECTION PROVIDES THAT THE APPROVAL GRAN TED BY THE COMMISSIONER TO ANY INSTITUTION OR FUND SHALL H AVE THE EFFECT FOR SUCH NUMBER OF ASSESSMENT YEAR NOR EXCEEDING FIVE ASSESSMENT YEARS, AS MAY BE SPECIFIE D IN THE APPROVAL. THE PROPOSED AMENDMENT SEEKS TO OMIT THE PROVISO TO CLAUSE (VI) OF SUB-SECTION (5) OF SECTIO N 80G SO AS TO DO AWAY WITH THE TIME LIMIT SPECIFIED IN THE AFORESAID PROVISO. THE PROPOSED AMENDMENT WILL TAKE EFFECT FROM 1 ST DAY OF OCTOBER, 2009. THE EXISTING PROVISIONS CONTAINED IN SUB-SECTION (5) OF THE SAID SECTION PROVIDES THAT THE DEDUCTION UNDER SUB-SECTION (1) IS AVAILABLE TO DONATIONS MADE TO A NY INSTITUTION OR FUND IF IT IS ESTABLISHED FOR A CHAR ITABLE PURPOSE AND IT FULFILS SUCH OTHER CONDITIONS AS ARE SPECIFIED. CLAUSE (15) OF SECTION 2 OF THE SAID ACT DEFINES CHARITABLE PURPOSE TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY. HOWEVER, TH E PROVISO TO THE SAID CLAUSE PROVIDES THAT ADVANCEME NT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NO T BE A ITA 80/B/2009 PAGE 6 OF 7 CHARITABLE PURPOSE IF IT INVOLVES THE CARRYING ON O F (I) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS; OR (II) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELAT ION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF A USE OR APPLICATION OR RETENTION OF THE INCOME FROM ANY SUC H ACTIVITY. THE PROPOSED AMENDMENT SEEKS TO PROVIDE THAT IF ANY INSTITUTION OR FUND HAD BEEN APPROVED UNDER CLA USE (VI) OF SUB-SECTION (5) OF SECTION 80G FOR THE PREV IOUS YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2007 AND ENDING ON THE 31 ST DAY OF MARCH, 2008, SUCH INSTITUTION OR FUND SHALL, FOR THE PURPOSES OF AFORESAID SECTION AND NOTWITHSTANDING ANYTHING CONTAINED IN THE PROVISO T O CLAUSE (15) OF SECTION 2, BE DEEMED TO HAVE BEEN (A ) ESTABLISHED FOR CHARITABLE PURPOSES FOR THE PREVIOU S YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2008 AND ENDING ON THE 31 ST DAY OF MARCH, 2009; (B) APPROVED UNDER SAID CLAUSE (VI) FOR THE PREVIOUS YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2008 AND ENDING ON THE 31 ST DAY OF MARCH,2009. THIS AMENDMENT WILL TAKE EFFECT RETROSPECTIVELY FRO M 1 ST APRIL 2009 AND WILL, ACCORDINGLY, APPLY IN RELATION TO ASSESSMENT YEAR 2009-2010 ONLY. (EM PHASIS OURS) IN THE INSTANT CASE, ASSESSEE HAS BEEN GRANTED 80G APPROVAL UP TO 31-3-2008 BY THE ORDER OF THE DIT(E) DATED 8-12- 2006. HENCE, THE PROPOSED AMENDMENT WILL HAVE APPLICATION IN ASSESSEES CASE. MORE OVER, ASSESSEE HAS NOT BEEN HEARD IN THE MATTER AND HENCE, THERE IS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. ASSESSEES LETTER DATED 27-11-2008, WHERE IN ASSESSEES EXPLANATION HAS BEEN DETAILED, HAS NOT BEEN CONSIDE RED BY THE ITA 80/B/2009 PAGE 7 OF 7 DIT(E) WHILE PASSING THE ORDER ON 28-11-2008. FROM THIS POINT OF VIEW ALSO, ORDER OF THE DIT(E) REQUIRES RE-EXAMI NATION. ACCORDINGLY, WE RESTORE THE MATTER TO THE FILE OF T HE DIT(E) FOR FRESH CONSIDERATION. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13TH AUGUST, 2009. SD/- SD/- (N.L.KALRA) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE: D A T E D : 13TH AUGUST,2009. EKS* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT 4 DR, ITAT, BANGALORE. 5 GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRA R, ITAT, BANGALORE.