Chennai Port Trust, CHENNAI V. DDIT, CHENNAI

ITA 821/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51993 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 13-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K RAMESH
• Assessee Lawyers: K MEENATCHISUNDARAMCA
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 820 /MDS/2011 ASSESSMENT YEAR : -- M/S. CHENNAI PORT TRUST, RAJAJI SALAI, CHENNAI-600 001. V. THE DIRECTOR OF INCOME-TAX, (EXEMPTIONS), CHENNAI. (PAN: AAALC0025B) A N D I.T.A. NO. 821/MDS/2011 ASSESSMENT YEAR 2005-06 M/S. CHENNAI PORT TRUST, V. THE DY. DIRECTOR OF INCOME TAX, RAJAJI SALAI, CHENNAI-600 001. EXEMPTIONS-II, CHENNAI. (APPELLANT) (RESPONDENTS) APPELLANT BY : SHRI K.MEENATCHI SUNDARAM,CA RESPONDENT BY : SHRI K RAMESH, CIT-DR DATE OF HEARING : 13-10-2011 DATE OF PRONOUNCEMENT : 21-10-2011 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : ITA NO. 820/MDS/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE LEARNED DIRECTOR OF INCOME I.T.A. NOS. 820 & 821/MDS/2011 2 TAX (EXEMPTIONS) IN DIT(E)NO.2(1135)/2005-06 DATED 16 -03-2011 WITHDRAWING THE REGISTRATION GRANTED TO THE ASSESSEE BY INVOKING TH E PROVISIONS OF SECTION 12AA(3) OF THE INCOME-TAX ACT, 1961 (THE ACT FOR SHORT). ITA NO. 821/MDS/2011 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF T HE LEARNED CIT(APPEALS)-IX, CHENNAI IN ITA NO. 50/09-10 DATED 23-3-2011 FOR THE ASSESSMENT YEAR 2005-06 WHEREIN THE LEARNED CIT(A) HAD UPHELD THE ACTION OF THE ASSESSING OFFICER IN CHANGING THE STATUS OF THE ASSESSEE FROM LOCAL AUT HORITY TO AOP (TRUST). AS BOTH THE APPEALS RELATE TO THE SAME ASSESSEE, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. SHRI K. MEENATCHI SUNDARAM, CA REPRESENTED ON BE HALF OF THE ASSESSEE AND SHRI K. RAMESH, LEARNED CIT-DR REPRESENTED ON BEHAL F OF THE REVENUE. 3. ITA NO. 820/MDS/2011: IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE IS CHENNAI PORT TR UST WHICH IS IN EXISTENCE FOR OVER 125 YEARS AND THE ASSESSEE IS GOVERNED BY THE PROVI SIONS OF THE MAJOR PORT TRUSTS ACT, 1963 WHICH IS A CENTRAL ACT. IT WAS THE SUBMIS SION THAT THE ASSESSEE HAD BEEN GRANTED REGISTRATION U/S 12AA OF THE ACT VIDE ORDE R NO. 2(1035)/05-06 DATED 16- 06-2008 W.E.F. 01-04-2002. IT WAS THE SUBMISSION T HAT THIS REGISTRATION HAD BEEN WITHDRAWN BY THE LEARNED DIT BY INVOKING HIS POWERS UNDER SECTION 12AA(3) OF THE ACT. IT WAS THE SUBMISSION THAT AS PER THE PROVISI ONS OF SECTION 12AA(3) THE REGISTRATION COULD BE WITHDRAWN ONLY IF IT WAS FOUN D THAT THE ASSESSEE TRUST WAS NOT GENUINE OR THAT ITS ACTIVITIES WERE NOT BEING CONDU CTED IN ACCORDANCE WITH ITS I.T.A. NOS. 820 & 821/MDS/2011 3 OBJECTS. IT WAS THE SUBMISSION THAT DUE TO THE AME NDMENT TO SEC. 2(15) OF THE ACT W.E.F. 01-04-2009, THE ACTIVITIES OF THE ASSESSEE W ERE HELD TO FALL OUTSIDE THE PURVIEW OF CHARITABLE PURPOSE. IT WAS THE SUBMIS SION THAT ADMITTEDLY THE ASSESSEE HAD ALSO RECOGNIZED THE AMENDMENT TO SEC. 2(15) AND FROM THE ASSESSMENT YEAR 2009-10 THE ASSESSEE HAS NOT CLAIMED THE STATUS OF CHARITABLE TRUST AND HAS ALSO NOT BEEN CLAIMING THE BENEFITS OF DEDUCTION UNDER S ECTIONS 11 AND 12 OF THE ACT. IT WAS THE SUBMISSION THAT THE CANCELLATION OF REGISTR ATION UNDER SECTION 12AA BY INVOKING THE PROVISIONS OF SEC. 12AA (3) WAS ONLY D ISPUTED. IT WAS THE SUBMISSION THAT OTHER THAN THIS THE ASSESSEE WAS NOT IN CHALLE NGE ON ANY OF THE OTHER ISSUES INSOFAR AS IT WAS FAIRLY ADMITTED THAT THE ASSESSEE WAS LIABLE TO PAY TAX ON ITS INCOME. 4. IN REPLY, THE LEARNED DR SUBMITTED THAT THE ASSE SSEE ITSELF HAD MADE A REQUEST TO THE LEARNED DIT FOR CANCELLATION OF ITS REGISTRATION U/S 12AA VIDE LETTER DATED 18-01-2010. IT WAS THE SUBMISSION THAT AS TH E ACTIVITIES OF THE ASSESSEE DID NOT FALL WITHIN THE PROVISIONS OF SEC. 2(15) OF THE ACT, THE GENUINENESS OF THE ASSESSEE TRUST WAS LIABLE TO BE EXAMINED IN LINE WI TH THE PROVISIONS OF SEC. 2(15) AND AS THERE WAS A VIOLATION ON ACCOUNT OF THE AMEN DMENT TO THE LAW, THE WITHDRAWAL OF THE REGISTRATION WAS LIABLE TO BE UPH ELD. 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THOUGH IT IS TRUE THAT THE ASSESSEE HAD REQUESTED FOR THE CANCEL LATION OF THE REGISTRATION, THE ASSESSEE HAD ALSO WITHDRAWN SUCH REQUEST. I.T.A. NOS. 820 & 821/MDS/2011 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE PROVISIONS OF SECTION 12AA(3) OF THE ACT SHOWS THAT THE CANCELLAT ION OF THE REGISTRATION GRANTED UNDER SECTION 12A COULD BE DONE ONLY IF THE COMMISS IONER IS SATISFIED THAT THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE NOT CARR IED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. THUS SECTION 12AA(3) IS NOT TALKING OF THE GENUINENESS OF THE TRUST OR THE INSTITUTION. IT IS THE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION THAT IS BEING DISCUSSED. CLEARLY, THE REGISTRATION UNDER SECTION 12AA IS IN REGARD TO A TRUST CREATED FOR CH ARITABLE OR RELIGIOUS PURPOSES. THIS IS ON ACCOUNT OF THE WORDINGS IN SEC.12A(1) RE AD WITH SECTIONS 11 AND 12 OF THE ACT. SECTION 11(1)(A) TALKS OF THE INCOME DERI VED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. CHARITABLE PURPOSE IS DEFINED IN SECTION 2(15) OF THE ACT. ADMITTEDLY, THE ASSESSEE HAS ACCEPTED THAT IT DOES NOT FALL WITHIN THE PROVISIONS OF SEC. 2(15) OF THE ACT. TH EREFORE, ITS ACTIVITIES, ADMITTEDLY, ARE NOT CHARITABLE PURPOSE. ONCE THIS IS SO, THE G ENUINENESS OF THE ACTIVITIES OF THE TRUST OR INSTITUTION FALLING OUTSIDE THE PURVIEW OF SEC. 2(15) WOULD BECOME NON- GENUINE SO FAR AS THE CONDITIONS REQUIRED UNDER SEC TIONS 11 AND 12 READ WITH SEC. 2(15) ARE CONCERNED. ONCE THIS IS SO, IT WOULD VE RY WELL TO BE WITHIN THE POWERS OF THE LEARNED CIT/DIT TO CANCEL THE REGISTRATION. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CANCELLATION OF THE REGISTRATION UNDE R SECTION 12AA AS DONE BY THE LEARNED DIT IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. 7. IN ANY CASE, AS ADMITTED BY THE LEARNED AUTHORIS ED REPRESENTATIVE, THE CANCELLATION OF THE REGISTRATION UNDER SECTION 12AA WOULD HAVE NO REVENUE IMPACT I.T.A. NOS. 820 & 821/MDS/2011 5 ON THE ASSESSEE. THIS HAS FAIRLY BEEN AGREED AND W E WOULD LIKE TO COMPLIMENT THE LEARNED AUTHORISED REPRESENTATIVE FOR HAVING ADMITT ED THAT THE REGISTRATION UNDER SECTION 12AA OF THE ACT WAS SOUGHT TO BE PROTECTED ONLY FOR THE PURPOSE OF, OTHER THAN REGISTRATION, BENEFITS THAT ACCOMPANY A CHARIT ABLE TRUST. WE MAY FURTHER ADD HERE THAT THE ASSESSEE WAS WELL AWARE THAT IT WAS N OT ENTITLED TO THE REGISTRATION UNDER SECTION 12AA AND IT HAD ALSO MADE THE APPLICA TION BEFORE THE LEARNED DIT FOR THE CANCELLATION OF THE REGISTRATION AND NOTHING HA S BEEN PLACED BEFORE US TO SHOW THAT THE ASSESSEE HAS MADE ANY LETTER WITHDRAWING I TS LETTER DT. JANUARY, 2010. IN THE CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE STAND S DISMISSED. 8. ITA NO. 821/MDS/2011: IT WAS SUBMITTED BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE HAD FILED ITS RETU RN OF INCOME AS A LOCAL AUTHORITY AND THIS STATUS HAD BEEN MODIFIED IN THE ORDER GIVI NG EFFECT TO THE ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT THE ORI GINAL RETURN OF INCOME WAS FILED FOR THE ASSESSMENT YEAR 2005-06 ON 28-10-2005 WHERE IN THE STATUS WAS DISCLOSED AS LOCAL AUTHORITY. AN ASSESSMENT ORDER CAME TO BE PASSED ON 17-12-2007 WHEREIN THE STATUS OF THE ASSESSEE HAS BEEN RECOGNI ZED AS LOCAL AUTHORITY. SUBSEQUENTLY, VIDE AN ORDER DATED 01-12-2009 WHEREI N THE ORDERS OF THE APPELLATE AUTHORITY, BEING THE LEARNED CIT(A) UNDER THE ACT, HAD BEEN GIVEN EFFECT TO AND THE STATUS OF THE ASSESSEE HAD BEEN ADOPTED AS AOP (TR UST) WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND WITHOUT GIVING ANY REASONS. IT WAS THE SUBMISSION THAT THE ASSESSEE HAVING DISCLOSED THE S TATUS OF LOCAL AUTHORITY AND THE SAME HAVING BEEN ACCEPTED, THE STATUS COULD NOT BE CHANGED. I.T.A. NOS. 820 & 821/MDS/2011 6 9. IN REPLY, THE LEARNED DR VEHEMENTLY SUPPORTED TH E ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT THE STATUS OF LOCAL AUTHORITY WAS NOT APPLICABLE TO THE ASSESSEE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PE RUSAL OF THE ORIGINAL ASSESSMENT ORDER PASSED ON 17-12-2007 FOR THE ASSES SMENT YEAR 2005-06 SHOWS THAT THE ASSESSEE HAS BEEN RECOGNIZED IN THE STATUS OF LOCAL AUTHORITY. THIS HAS ALSO BEEN ADMITTED IN THE ASSESSMENT ORDER. THIS I SSUE WAS NOT THE SUBJECT MATTER OF APPEAL BEFORE THE APPELLATE AUTHORITIES. IN THE SE CIRCUMSTANCES, OBVIOUSLY, THE STATUS CANNOT BE MODIFIED IN AN ORDER GIVING EFFECT TO THE ORDER OF THE APPELLATE AUTHORITIES. IN THE CIRCUMSTANCES, WE ARE OF THE V IEW THAT THE STATUS OF THE ASSESSEE IS LIABLE TO BE HELD ONLY AS LOCAL AUTHOR ITY. CONSEQUENTLY, THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE ASSESSEE UNDER TH E STATUS OF LOCAL AUTHORITY. IN THE CIRCUMSTANCES, THE APPEAL OF THE ASSESSEE IS AL LOWED. 11. IN THE RESULT, ITA NO. 820/MDS/2011 IS DISMISSE D AND ITA NO. 821/MDS/2011 IS ALLOWED. 12. THE ORDER WAS PRONOUNCED IN THE COURT ON 21/10/ 11. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 21 ST OCTOBER, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE