M.R. Educational Trust, Yamunanagar V. CIT, Panchkula

ITA 841/CHANDI/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9984 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-09-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 08-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.841/CHD/2014 (ASSESSMENT YEAR : 2011-12) M.R. EDUCATIONAL TRUST, VS. THE C.I.T., VILLAGE CHANDA KHERI, PANCHKULA. PO BILASPUR, DISTT. YAMUNANAGAR. PAN: AACTM2567N APPELLANT BY : S/SHRI AJAY JAIN & ROHIT KAURA RESPONDENT BY : SHRI SUSHIL KUMAR, CIT DR DATE OF HEARING : 02.05.2016 DATE OF PRONOUNCEMENT : 23.05.2016 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX, PANCHKULA DATED 11.8.2014 FOR ASSESSMENT YEAR 2011 -12. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A TRUST REGISTERED WITH THE JOINT REGIS TRAR, BILASPUR VIDE REGISTRATION NO.912 DATED 14.6.2011 A ND HAD FILED AN APPLICATION FOR REGISTRATION UNDER SEC TION 12A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) IN FORM NO.10A ON 27.3.2014. THE COMMISSIONER OF INCOME TA X, 2 PANCHKULA REJECTED THE APPLICATION OF THE ASSESSEE FOR GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT VIDE HER ORDER DATED 11.8.2014. THE REASON GIVEN BY HER IN THE ORDER FOR REJECTION OF REGISTRATION IS THAT THE TRU ST DEED HAD NOT PROVIDED FOR A DISSOLUTION CLAUSE FOR USE O F NET ASSETS OF THE TRUST FOR ITS OBJECTS IN CASE OF DISS OLUTION. THE SECOND OBJECTION WAS THAT THE SCHOOL IS RUN BY ONE FAMILY HEADED BY FATHER AS SETTLER-CUM-PRESIDENT A ND TWO SONS AS TRUSTEES. FURTHER BY STATING THE RECEIPT, EXPENSES AND ALSO SURPLUS FOR THE LAST THREE YEARS, SHE STAT ED THAT IT IS CLEAR THAT THE PROFIT IS THE MAIN MOTIVE OF T HE ASSESSEE. NEXT OBJECTION WAS THAT THE TRUST WAS N OT REGISTERED UNDER THE HARYANA REGISTRATION & REGULAT ION OF SOCIETIES REGISTRATION ACT, 2012 AND THE LAST OBJEC TION WAS THAT THE RIGHT TO EDUCATION ACT, 2010 IS NOT IMPLEM ENTED BY THE SCHOOL. 3. AGGRIEVED BY THIS ORDER, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING FOLLOWING GROUNDS O F APPEAL : 1. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTI NG THE REGISTRATION U/S 12AA WITHOUT CONFRONTING ANY OF TH E FOUR GROUNDS MADE BASIS FOR REJECTION OF THE SAID REGIST RATION. 2. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTING THE REGISTRATION U/S 12AA BY HOLDING THAT THE TRUST DEE D DOES NOT PROVIDE FOR DISSOLUTION CLAUSE WHEREAS THE SAME IS CLEARLY MENTIONED IN CLAUSE NO. 14 OF THE TR UST DEED. 3 3. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTIN G THE REGISTRATION U/S 12AA ON THE GROUND THAT SCHOOL IS RUN BY ONE FAMILY COMPRISING OF A FATHER AND HIS TWO SO NS WHEREAS, THERE ARE SEVEN TRUSTEES, THE OTHER FOUR C OME FROM DIFFERENT FAMILIES. 4. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTIN G THE REGISTRATION U/S 12AA ON THE GROUND THAT THE MAIN MOTIVE IS PROFIT THOUGH MORE THAN 85% HAS BEEN APPL IED ON THE OBJECTS. 5. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTIN G THE REGISTRATION U/S 12AA ON THE GROUND THAT THE TRUST IS NOT REGISTERED UNDER THE NEW HARYANA REGISTRATION & REGULATION OF SOCIETIES REGISTRATION ACT, 2012, IGN ORING THAT THE APPELLANT IS A TRUST AND NOT A SOCIETY, DULY RE GISTERED WITH THE JOINT/DY. REGISTRAR BILASPUR. 6. THAT THE LEARNED CIT IS NOT JUSTIFIED IN REJECTIN G THE REGISTRATION U/S 12AA ON THE GROUND THAT RIGHT TO EDUCATION ACT 2010 IS NOT IMPLEMENTED, DESPITE THE FACT THAT RTE ACT IS NOT RELEVANT UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. 7. FOR THESE AND OTHER REASONS, THAT MAY BE URGED AT TH E TIME OF HEARING, THE APPELLANT PRAYS FOR RELIEF. 4. WITH RESPECT TO THE DISSOLUTION CLAUSE, THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE COPY OF THE TRUST DEED ENCLOSED WITH THE PAPER BOOK FILED BY THE ASSESSEE, WHEREBY AT CLAUSE 14 THE MANNER IN WHICH THE ASSETS OF THE ASSESSEE ARE TO BE DISPOSED OFF AT THE TIME OF DISSOLUTION ARE PROVIDED. NO BENEFIT T O ANY PERSON BEING FOUNDER MEMBER OR DIRECTOR IS GIVEN AT THE TIME OF DISSOLUTION. AS REGARDS TO THE SCHOOL BEIN G RUN BY 4 ONE FAMILY, IT WAS STATED THAT THE LEARNED COMMISSI ONER OF INCOME TAX IN HER ORDER HAS NOT STATED WHAT IS THE BASIS OF SUCH AN ALLEGATION. IT WAS STATED THAT OUT OF S EVEN MEMBERS, ONLY THREE BELONG TO ONE FAMILY AND ALL OT HER FOUR ARE FROM DIFFERENT FAMILIES, WHICH MAKES FOR F IVE FAMILIES IN TOTAL. WITH RESPECT TO THE ALLEGATION OF SURPLUS ARISING IN THE LAST THREE YEARS, IT WAS STATED THAT THE SURPLUS HAS COME OUT OF THE ACTIVITIES INCIDENTAL T O THE CHARITABLE OBJECTS OF THE ASSESSEE SOCIETY. IT WAS FURTHER STATED THAT THE PROFIT WAS NOT MAIN MOTIVE OF THE A SSESSEE TRUST. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HON'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE C ASE OF PINEGROVE INTERNATIONAL CHARITABLE TRUST VS. UNION OF INDIA & OTHERS, 327 ITR 73 (P&H). FURTHER, IT WAS SATED THAT THE ASSESSEE IS A TRUST UNDER THE INDIAN TRUST ACT, 1882 AND REGISTERED AS SUCH WITH THE SUB REGISTRAR, BILASPUR. THE ASSESSEE IS NOT A SOCIETY BUT A TRUS T. THEREFORE, THE PROVISIONS OF HARYANA REGISTRATION & REGULATION OF SOCIETIES REGISTRATION ACT, 2012 ARE NOT APPLICABLE TO THE ASSESSEE. FURTHER, IT WAS STATED THAT THERE IS NO RELEVANCE OF RIGHT TO EDUCATION ACT FOR GIVING REGISTRATION UNDER SECTION 12A OF THE ACT. FOR TH IS, RELIANCE WAS PLACED ON THE ORDER OF THE I.T.A.T., D ELHI BENCH IN THE CASE OF GIAN GANGA VOCATIONAL EDUCATIO NAL SOCIETY VS. CIT (2013) 35 TAXMANN.COM 17 (DEL). RE LIANCE WAS ALSO PLACED ON A LATEST ORDER OF THE I.T.A.T., CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF M/ S KIDS-R-KIDS INTERNATIONAL EDUCATIONAL & SOCIAL WELF ARE 5 TRUST VS. PR.CCIT IN ITA NO.781/CHD/2015, DATED 10.3.2016. 5. THE LEARNED D.R. RELIED ON THE ORDER OF THE COMMISSIONER OF INCOME TAX AND STATED THAT THE DOMI NANT OBJECT OF THE ASSESSEE IS PROFIT MAKING WHICH IS QU ITE EVIDENT FROM THE SURPLUS GENERATED BY IT IN THE LAS T FEW YEARS. FOR THE PROPOSITION THAT WHEN THE SCHOOL WA S RUNNING ON COMMERCIAL LINES UNDER THE GUISE OF CHAR ITABLE PURPOSE, NO REGISTRATION UNDER SECTION 12A OF THE A CT SHOULD BE GRANTED. RELIANCE WAS PLACED ON A JUDGM ENT OF THE KERALA HIGH COURT IN THE CASE OF DAWN EDUCATIO NAL CHARITABLE TRUST VS. CIT (2015) 60 TAXMANN.COM 126 (KERALA). A JUDGMENT OF HON'BLE SUPREME COURT IN T HE CASE OF INDIAN CHAMBER OF COMMERCE & INDUSTRY VS. CIT (1975) 101 ITR 796 (SC) WAS ALSO RELIED UPON BY THE LEARNED D.R. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. FROM THE PERUSAL OF THE ORDER OF THE COMMISSIONER O F INCOME TAX, WE SEE THAT SHE HAS RAISED FOUR REASONS FOR NOT GRANTING REGISTRATION UNDER SECTION 12A OF THE ACT TO THE ASSESSEE TRUST. FIRST REASON GIVEN BY HER READ S AS FOLLOWS : A) THE TRUST DEED HAS NOT PROVIDED FOR A DISSOLUTION CLAUSE FOR USE OF NET ASSETS OF THE TRUST FOR ITS OBJECTS IN CASE OF 6 DISSOLUTION AND BAR ON REVERSION OF NET ASSETS TO FOUNDER, MEMBERS, DIRECTORS ETC. 7. FOR THIS, WHEN WE PERUSE THE COPY OF TRUST DEED FILED BY THE ASSESSEE IN THE PAPER BOOK, WE SEE AT PAGE 15 OF THE TRUST DEED, CLAUSE 14,WHICH READS AS UNDER : 14. ASSETS AND LIABILITIES ACCRUED BY TRUST, ALL ITS BRANCHES AND INSTITUTIONS WILL BE PROPERTY OF THE TRUST .IF T HE TRUST FAIL DUE TO SOME OR OTHER GROUNDS IT SHALL BE MERGED WITH SOME OTHER TRUST/SOCIETY WITH SIMILAR OBJECTS AND IF PURPOSE OF THE TRUST IS CHANGED, THE SAME WILL ALSO BE CHARITABLE / SOCIAL IN NATURE WITH THE RESOLUTION OF THE TRUSTEES BY CONSENSUS. THE DUTIES OF ALL THE OFFICERS AND MEMBERS SHALL BE TO WORK FOR THE BETTERMENT AND PROGRESS OF THE TRUST, AS PER THE DECISION OF THE TRUSTE ES. 8. FROM THE PERUSAL OF THE ABOVE CLAUSE, WE SEE THAT THE MANDATE OF THE SAID CLAUSE IS TO TRANSFER THE REMAINING ASSETS AND LIABILITIES OF THE ASSESSEE TO A SIMILAR TRUST AT THE TIME OF DISSOLUTION. THERE IS NO INTENTION OF GIVING BENEFIT TO A SPECIFIC PERSON OU T OF WHATEVER REMAINS IN THE HANDS OF THE ASSESSEE TRUST . THEREFORE, WE SEE NO REASON FOR DOUBTING THE SAID C LAUSE. 9. THE SECOND OBJECTION RAISED BY THE COMMISSIONER OF INCOME TAX IS AS FOLLOWS : B) THE SCHOOL IS RUN BY ONE FAMILY HEADED BY FATHER AS SETTLOR CUM PRESIDENT AND TWO SONS AS TRUSTEES. PROFIT IS THE MAIN MOTIVE AS IS CLEAR FROM THE TABLE BELOW SHOWING SURPLUS IN LAST THREE YEARS :- 7 F.Y. RECEIPT EXPENDITURE SURPLUS 31.03.2011 78,65,346 77,10,068 1,55,278 31.03.2012 96,05,110 94,21,111 1,83,999 31.03.2013 99,86,470 97,13,008 2,73,462 10. THE COMMISSIONER OF INCOME TAX HAS DOUBTED THE CHARITABLE NATURE OF THE ASSESSEE IN VIEW OF TH E FACT THAT THE TRUST IS BEING HEADED BY FATHER AS SETTLER -CUM- PRESIDENT WHILE TWO OF HIS SONS ARE TRUSTEES. IN T HIS REGARD, THOUGH THE LEARNED COUNSEL FOR THE ASSESSEE HAS GIVEN US AN EXPLANATION THAT OUT OF SEVEN MEMBERS O F THE TRUST ONLY THREE BELONG TO ONE FAMILY AND OTHER FOU R BELONG TO DIFFERENT FOUR FAMILIES MEANING THEREBY T HAT THERE ARE FIVE DIFFERENT FAMILIES INVOLVED AND NOT ONE. HOWEVER, WE FIND NO RELEVANCE OF THE FACT THAT THE TRUST IS BEING HEADED BY THE MEMBERS OF ONLY ONE FAMILY. EV EN IF A TRUST IS RUN BY ONLY ONE FAMILY, THERE IS NO BAR ON SUCH TRUST TO BE REGISTERED UNDER SECTION 12A OF THE ACT . AT THE TIME OF GRANTING REGISTRATION WHAT THE COMMISSIONER OF INCOME TAX HAS TO SEE IS THAT THE OBJECTS OF THE TR UST ARE CHARITABLE IN NATURE AND THE ACTIVITIES OF THE SAME ARE GENUINE. THE FACT WHETHER SOME BENEFIT DIRECTLY OR INDIRECTLY IS BEING DIVERTED TO ONE FAMILY, CAN BE TAKEN CARE OF BY THE ASSESSING OFFICER AT THE TIME OF MAK ING THE ASSESSMENT AND GRANTING EXEMPTION UNDER SECTION 11 OF THE ACT. SECTION 13 OF THE ACT PROVIDES FOR REFUS ING EXEMPTION UNDER SECTION 11 OF THE ACT IN SUCH CASES WHICH 8 THE ASSESSING OFFICER CAN EXAMINE ON YEARLY BASIS I N EVERY ASSESSMENT YEAR. 11. THIRD ISSUE RAISED BY THE COMMISSIONER OF INCOME TAX IS AS FOLLOWS : C) THE TRUST IS NOT REGISTERED UNDER THE NEW HARYANA REGISTRATION & REGULATION OF SOCIETIES REGISTRATION ACT, 2012. 12. IN THIS REGARD, WE FIND OURSELVES IN AGREEMENT WITH THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE PROVISIONS OF HARYANA REGISTRATIO N & REGULATION OF SOCIETIES REGISTRATION ACT, 2012 ARE APPLICABLE TO THE SOCIETY ONLY. THE ASSESSEE IS A TRUST FORMED UNDER THE INDIAN TRUST 1882 AND HAS BEEN DUL Y REGISTERED WITH SUB-REGISTRAR, BILASPUR. THERE IS N O BAR UNDER THE INCOME TAX ACT TO GIVE REGISTRATION UNDER SECTION 12A OF THE ACT TO A TRUST. THERE IS NO PRO VISION WHICH SAYS THAT ONLY SOCIETIES CAN BE REGISTERED UN DER SECTION 12A OF THE ACT. THEREFORE, WE DO NOT FIND THIS OBJECTION RAISED BY THE COMMISSIONER OF INCOME TAX BEING AS PER LAW. 13. THE LAST OBJECTION RAISED BY THE COMMISSIONER OF INCOME TAX READS AS UNDER : D) RIGHT TO EDUCATION ACT 2010 IS NOT IMPLEMENTED BY THE SCHOOL. 14. WITH RESPECT TO THE SAID OBJECTION, WE ARE IN AGREEMENT WITH THE ARGUMENT OF THE LEARNED COUNSEL FOR 9 THE ASSESSEE THAT THE ISSUE IS COVERED BY THE ORDER OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF KIDS-R-K IDS INTERNATIONAL EDUCATIONAL & SOCIAL WELFARE TRUST (S UPRA), WHEREBY IT HAS BEEN VERY CATEGORICALLY HELD THAT TH E ISSUE OF SCHOOL COMPLYING WITH THE PROVISIONS OF THE RTE ACT IS NOT A RELEVANT CONSIDERATION TO BE TAKEN CARE OF BY THE COMMISSIONER OF INCOME TAX AT THE TIME OF REGISTRAT ION UNDER SECTION 12A OF THE ACT. 15. BEFORE PARTING, WE WOULD LIKE TO DEAL WITH THE CASE LAWS RELIED ON BY THE LEARNED D.R. IN THE CAS E OF DAWN EDUCATION TRUST (SUPRA), THE APPLICATION OF REGISTRATION UNDER SECTION 12A WAS REJECTED IN VIEW OF THE FACT THAT HEFTY SUMS WERE BEING CHARGED FROM THE STUDENTS. THERE IS NO SUCH FINDING IN THE PRESENT CASE. ALSO THERE IS A JUDGMENT OF THE JURISDICTIONAL PUNJ AB & HARYANA HIGH COURT IN THE CASE OF PINEGROVE INTERN ATIONAL CHARITABLE TRUST (SUPRA), WHEREBY IT HAS BEEN VERY CATEGORICALLY HELD THAT THE FACT THAT THE INSTITUTI ON HAS EARNED PROFITS CANNOT BE THE DECIDING FACTOR TO CON CLUDE THAT THE EDUCATIONAL INSTITUTION EXISTS FOR PROFITS . THIS JUDGMENT HAS ALSO BEEN LATER AFFIRMED BY THE HON'BL E SUPREME COURT. AS REGARDS THE HON'BLE SUPREME COUR T IN THE CASE OF INDIAN CHAMBER OF COMMERCE & INDUSTRY (SUPRA), THE JUDGMENT WAS RENDERED IN THE CONTEXT O F GRANTING EXEMPTION UNDER SECTION 11 OF THE ACT. WE DO NOT HAVE ANY QUARREL ABOUT THE SAID PROPOSITION, AS WE HAVE ALREADY HELD THAT THESE ISSUES CAN BE TAKEN CA RE OF 10 BY THE ASSESSING OFFICER AT THE TIME OF GRANTING EX EMPTION UNDER SECTION 11 OF THE ACT. IN VIEW OF THE FACT T HAT THE COMMISSIONER OF INCOME TAX IN HER ORDER HAS NOWHERE DOUBTED THE CHARITABLE NATURE OF THE OBJECTS OF THE SOCIETY AS WELL AS THE GENUINENESS OF THE ACTIVITY, WE HERE BY DIRECT THE COMMISSIONER OF INCOME TAX TO GRANT REGISTRATION TO THE ASSESSEE UNDER SECTION 12A OF T HE ACT. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF MAY, 2016. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 23 RD MAY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE D R. ASSISTANT REGISTRAR, ITAT, CHANDIGARH