Ajit Educational & Public Welfare Society, Sangrur V. Chief Commissioner of Income Tax, Ludhiana

ITA 874/CHANDI/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5200 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-09-2016
• Assessment Year: misc
• Appeal Filed On: 04-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Benefit of exemption
• Section: 143(3); 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 874/CHD/2015 (UNDER SECTION 10(23C)(VI) ) AJIT EDUCATIONAL & PUBLIC VS THE CHIEF CIT, WELFARE SOCIETY, LUDHIANA. PATIALA ROAD, SUNAM DISTT. SANGRUR. PAN: AACTA5901A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI SUSHIL KUMAR, CIT-DR DATE OF HEARING : 07.03.2017 DATE OF PRONOUNCEMENT : 25.04.2017 O R D E R PER ANNAPURNA GUPTA,AM THE APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST ORDER OF LD.CHIEF CIT, LUDHIANA REJECTING T HE ASSESSEES APPLICATION FOR APPROVAL UNDER SECTION 10(23C)(VI) OF THE INCOME TAX ACT,1961. 2. THE ASSESSEE HAS IN THE PRESENT APPEAL CHALLENGE D THE REJECTION OF GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT RAISING THE FOLLOWING GROUND S OF APPEAL : 1. THAT THE WORTHY CHIEF COMMISSIONER OF INCOME TAX , LUDHIANA HAS ERRED IN REJECTING THE APPELLANT'S APPLICATION FOR GRANT OF APPROVAL U/S 10(23C) (VI) OF THE INCOME TAX ACT 1961. 2. THAT THE APPLICATION FOR GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) HAS BEEN REJECTED AGAINST THE FACTS AND CIRCUMSTANCES O F THE CASE BY NOT CONSIDERING OUR SUBMISSIONS PROPERLY. 2 3. THE BRIEF FACTS RELATING TO THE CASE ARE THAT TH E ASSESSEE HAD FILED AN APPLICATION IN FORM NO. 56D D ATED 24.09.2014 REQUESTING FOR GRANT OF EXEMPTION/APPROV AL UNDER SECTION 10(23C)(IV) OF THE ACT FOR ASSESSMENT YEAR 2014-15. THE LD. CHIEF CIT REJECTED THE APPLICATIO N FILED BY THE ASSESSEE FOR THE REASON THAT THE DISSOLUTION CLAUSE IN THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE SOCIETY STATED THAT ALL MOVEABLE AND IMMOVEABLE PROPERTY OF THE SOCIETY WOULD REMAIN WIT H THE CHAIRMAN, PRESIDENT AND SECRETARY JOINTLY ON DISSOLUTION OF THE SOCIETY TILL SOME REGULAR CONSTI TUTED BODY TOOK CHARGE OF THE MANAGING COMMITTEE. THE LD . CHIEF COMMISSIONER HELD THAT BY VIRTUE OF THIS CLAU SE, BENEFIT WOULD ENTAIL TO THESE PERSONS WHO ARE MENTI ONED IN SECTION 13(3) OF THE ACT. FURTHER, LD. CHIEF COMMISSIONER HELD THAT THERE IS NO DISSOLUTION CLAU SE ON HOW THE SOCIETYS PROPERTIES OR FUNDS WOULD BE U SED IN THE EVENT OF DISSOLUTION. THE LD. CHIEF COMMISS IONER HELD THAT THERE IS, THEREFORE, A POSSIBILITY OF FUN DS OR PROPERTIES OF THE SOCIETY BEING MISUSED IN THE EVEN T OF DISSOLUTION AND THEREFORE, FOR THIS REASON, THE LD. CHIEF COMMISSIONER HELD THAT THE ASSESSEE IS NOT ELIGIBLE FOR APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT. 4. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING BEFORE US, LD. COUN SEL FOR THE ASSESSEE STATED THAT THE REJECTION OF APPRO VAL 3 WAS NOT AS PER LAW SINCE THE LD. CHIEF COMMISSIONER HAD NOT DOUBTED THE BONAFIDES OF THE ASSESSEE SOCIETY. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT NEITHER TH E AIMS AND OBJECTS OF THE ASSESSEE SOCIETY HAD BEEN DOUBTE D WHICH HAD BEEN STATED TO BE FOR THE PURPOSE OF PROV IDING EDUCATION IN THE FIELD OF MEDICINE, HEALTH CARE, ENGINEERING, TECHNICAL EDUCATION ALONGWITH PRIMARY AND SECONDARY EDUCATION TO THE STUDENTS AND FOR PROVIDI NG MEDICAL SERVICES. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE SUBMISSIONS MADE BEFORE THE LD . CHIEF CIT IN THIS REGARD AND ALSO THE COPY OF MEMORANDUM OF ASSOCIATION OF THE SOCIETY PLACED AT PAPER BOOK PAGE 9 PLACED BEFORE US. THE LD. COUNSE L FOR THE ASSESSEE FURTHER STATED THAT THE CHIEF CIT HAD ALSO NOT DOUBTED THE ACTIVITIES OF THE ASSESSEE SOCIETY. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION IN THIS REGARD TO THE SUBMISSIONS MADE BEFORE THE CHIEF CIT IN WHICH IT WAS STATED THAT IT WAS RUNNING A NURSING COLLEGE ON THE LAND OWNED BY IT WHICH WAS RECEIVED AS DONATION FROM ONE SHRI JOGINDER SINGH. THE LD. COU NSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE SOCIETY IS AFFILIATED UNDER THE INDIAN NURSING COUN CIL, NEW DELHI FOR VARIOUS PROGRAMS AND COURSES. COPY OF THE AFFILIATION LETTER WAS ALSO FILED BEFORE THE CHIEF CIT AND ALSO PLACED BEFORE US AT PAPER BOOK PAGE NO. 18. TH E LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE FACTS AND SUBMISSIONS MADE BEFORE LD.CHIEF CIT THAT THE ASSESSEE SOCIETY IS AFFILIATED WITH BABA FARID UNIV ERSITY 4 OF HEALTH SCIENCE, FARIDKOT ALSO, COPY OF AFFILIATI ON LETTER OF WHICH WAS ENCLOSED AT PAPER BOOK PAGE NO. 18. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT NO ADV ERSE VIEW HAS BEEN TAKEN ON THE ACTIVITIES CARRIED OUT B Y THE ASSESSEE BY THE LD. CHIEF CIT. THE LD. COUNSEL FU RTHER SUBMITTED THAT IT HAD BEEN ASSESSED UNDER SECTION 143(3) OF THE ACT FOR THE PRECEDING YEAR I.E. ASSES SMENT YEAR 2012-13 AND IT HAD BEEN CATEGORICALLY FOUND B Y THE AO THAT THE OBJECT OF THE ASSESSEE SOCIETY WAS EDUCATIONAL AND IT WAS EXISTING SOLELY FOR EDUCATIO NAL PURPOSES RUNNING AN EDUCATIONAL INSTITUTE AT SUNAM, DISTRICT SANGRUR. THE LD. COUNSEL STATED THAT THE REASON FOR REJECTING THE APPROVAL BEING THE DISSOLU TION CLAUSE WHICH WAS READ BY THE LD. CHIEF CIT AS PROVI DING BENEFIT TO THE MANAGING COMMITTEE OF THE TRUST IN T HE EVENT OF DISSOLUTION OF THE TRUST, WAS A FARFETCHED IMAGINATION OF THE LD. CHIEF CIT AND IT WAS NOT REL EVANT FOR THE PURPOSE OF GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CHIEF CIT IN THIS REGARD. 7. WE HAVE HEARD SUBMISSIONS OF THE PARTIES, GONE THROUGH THE ORDER OF THE LD. CHIEF CIT AND ALSO PER USED THE DOCUMENTS RELIED UPON BEFORE US. 8. THE ISSUE BEFORE US RELATES TO GRANT OF APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT. THE SCOPE OF 5 POWERS OF THE CHIEF COMMISSIONER OF INCOME TAX BEFO RE GRANTING APPROVAL UNDER THE SAID CLAUSE HAVE BEEN PROVIDED IN THE SECOND PROVISO TO SECTION 10(23C)(V I) WHICH STATES AS UNDER : PROVIDED FURTHER THAT THE PRESCRIBED AUTHORITY, BEFORE APPROVING ANY FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, UNDER SU BCLAUSE ( IV ) OR SUB-CLAUSE ( V ) OR SUB-CLAUSE ( VI ) OR SUB-CLAUSE ( VIA ), MAY CALL FOR SUCH DOCUMENTS (INCLUDING AUDITED ANNUAL ACCOUNTS) OR INFORMATION FROM THE FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, AS THE CASE MAY BE, A S IT THINKS NECESSARY IN ORDER TO SATISFY ITSELF ABOUT THE GENUINENESS OF TH E ACTIVITIES OF SUCH FUND OR TRUST OR INSTITUTION OR ANY UNIVERSITY OR OTHER EDU CATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION, AS THE CASE MAY BE, AND THE PRESCRIBED AUTHORITY MAY ALSO MAKE SUCH INQUIRIES AS IT DEEMS NECESSARY IN THIS BEHALF:] 9. A BARE PERUSAL OF THE ABOVE PROVISO REVEALS THA T THE SCOPE OF POWERS FOR GRANTING APPROVAL UNDER SEC TION 10(23C)(VI) OF THE ACT IS LIMITED TO SATISFYING HIM SELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF SUCH FUN DS OR TRUST OR INSTITUTION OR UNIVERSITY OR OTHER TECHNIC AL INSTITUTION OF THE APPLICANT SOCIETY. 10. IN THE PRESENT CASE, WE FIND THAT ON QUERIES R AISED BY THE LD.CHIEF CIT, THE ASSESSEE HAD MADE DETAILED SUBMISSIONS BEFORE THE LD. CHIEF CIT OUT-LINING THE OBJECTS FOR WHICH IT WAS ESTABLISHED AND THE ACTIVI TIES BEING UNDERTAKEN BY IT. THE ASSESSEE HAD STATED TH AT ITS AIMS AND OBJECTS ARE PROVIDING EDUCATION IN THE FIELD 6 OF MEDICINE, HEALTHCARE, ENGINEERING, TECHNICAL EDUCATION ALONG WITH PRIMARY AND SECONDARY EDUCATIO N TO THE STUDENTS AND FOR PROVIDING MEDICAL SERVICES. COPY OF THE AIMS AND OBJECTS BEING PART OF THE MEMORANDUM OF ASSOCIATION WAS ALSO FILED BEFORE THE LD. CHIEF CIT. FURTHER, THE APPLICANT ASSESSEE HAD STA TED THAT IT WAS RUNNING A NURSING COLLEGE ON THE LAND O WNED BY IT AND THAT THE ASSESSEE SOCIETY WAS REGISTERED WITH THE INDIAN NURSING COUNCIL, NEW DELHI FOR VARIOUS PROGRAMS AND COURSES. COPY OF THE AFFILIATION LETT ER OF THE INDIAN NURSING COUNCIL WAS ALSO ENCLOSED. IT W AS ALSO SUBMITTED THAT THE ASSESSEE SOCIETY WAS AFFILI ATED WITH BABA FARID UNIVERSITY OF HEALTH SCIENCES, FARI DKOT AND COPY OF AFFILIATION LETTER WAS ALSO ENCLOSED. 11. WE FIND THAT BASED ON THE ABOVE INQUIRY CONDUCT ED BY THE LD.CHIEF CIT AND THE DOCUMENTS PLACED BEFORE HIM, NO ADVERSE VIEW REGARDING EITHER THE OBJECTS O R THE ACTIVITIES OF THE ASSESSEE SOCIETY NOT BEING WHOLLY FOR THE PURPOSE OF EDUCATION, WHICH IS A SINE QUA NON F OR THE PURPOSE OF CLAIMING EXEMPTION U/S 10(23C)(VI), HAS BEEN TAKEN BY HIM. THEREFORE IT IS EVIDENT THAT LD .CHIEF CIT WAS SATISFIED THAT THE ASSESSEE SOCIETY WAS FO RMED AND EXISTED SOLELY FOR EDUCATIONAL PURPOSES. FURTHE R, UNDISPUTEDLY, IN THE ASSESSMENT ORDER PASSED FOR TH E A.Y 2012-13 THE ASSESSING OFFICER HAD CATEGORICALLY FOUND AND STATED THAT THE ASSESSEE SOCIETY WAS EXIS TING SOLELY FOR EDUCATIONAL PURPOSE AND RUNNING AN 7 EDUCATIONAL INSTITUTION AND WAS THUS ELIGIBLE TO CL AIM EXEMPTION UNDER SECTION 10(23C)(IIIAD) OF THE INCOM E TAX ACT.LD.CHIEF CIT ,WE FIND, HAS NOT BROUGHT ANY FACT ON RECORD POINTING TOWARDS ANY CHANGE IN THE FACT SITUATION SINCE A.Y 2012-13 SO AS TO HOLD THAT THE ASSESSEE SOCIETY WAS NOT EXISTING WHOLLY FOR THE PU RPOSE OF EDUCATION.SINCE THE SCOPE OF THE POWERS OF THE L D. CHIEF CIT, FOR THE PURPOSE OF GRANTING APPROVAL U/S 10(23C)(VI) WAS ONLY WITH REGARD TO EXAMINING WHET HER THE ACTIVITIES OF THE ASSESSEE SOCIETY WERE GENUINE OR NOT AND NO ADVERSE VIEW HAVING BEEN TAKEN IN THIS REGAR D BY LD. CHIEF CIT, WE FIND THAT THERE WAS NO REASON AT ALL WITH THE LD. CHIEF COMMISSIONER TO HAVE DENIED APPR OVAL TO THE ASSESSEE SOCIETY UNDER SECTION 10(23C)(VI) O F THE ACT. 12. THE REASON GIVEN BY THE LD. CHIEF CIT DENYING APPROVAL IS THAT THE DISSOLUTION CLAUSE MENTIONED I N THE MEMORANDUM OF ASSOCIATION STATED THAT IN THE EVENT OF DISSOLUTION, ALL THE MOVABLE AND IMMOVABLE PROPERTY OF THE APPLICANT SOCIETY WOULD REMAIN WITH THE CHAIRMA N, PRESIDENT AND SECRETARY. THE LD.CHIEF CIT HELD THAT THIS WOULD RESULT IN BENEFIT ENURING TO SPECIFIED PERSON S AS MENTIONED IN SECTION 13(3) OF INCOME TAX ACT, HENCE MAKING IT INELIGIBLE FOR GRANT OF APPROVAL . 13. WE FIND NO MERIT IN THIS CONTENTION OF THE LD. CHIEF CIT. FIRSTLY, THE PROVISIONS OF SECTION 13(3) OF T HE ACT ARE NOT RELEVANT FOR THE PURPOSE OF GRANTING APPROV AL 8 UNDER SECTION 10(23C)(VI) OF INCOME TAX ACT. AS ST ATED ABOVE, THE ONLY ISSUE TO BE EXAMINED IS THE GENUINE NESS OF THE ACTIVITIES OF THE TRUST. THE BENEFIT ACCRUI NG TO PERSONS SPECIFIED UNDER SECTION 13(3) CAST NO REFLE CTION ON THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. EVEN OTHERWISE SECTION 13 OF INCOME TAX ACT IS RELEVANT ONLY FOR THE PURPOSE OF EXEMPTION GRANTED UNDER SECTION 11 OF THE ACT AND IS NOT RELEVANT FOR THE PURPOSES OF EXEMPTION GRANTED U/S 10(23C)(VI) OF THE ACT AT ALL . MOREOVER EVEN FOR THE PURPOSES OF REGISTRATION GRAN TED U/S 12AA FOR CLAIMING EXEMPTION U/S 11 OF THE ACT, COURTS HAVE HELD THAT SECTION 13 HAS NO RELEVANCE A ND NEED NOT BE CONSIDERED WHILE GRANTING REGISTRATION .IT HAS BEEN HELD THAT THE PROVISIONS OF SECTION 13 BEC OME APPLICABLE ONLY AFTER REGISTRATION HAS BEEN GRANTED AND IS RELEVANT ONLY FOR THE PURPOSE OF DENYING EXEMPTI ON IN CERTAIN CIRCUMSTANCES AS STATED THEREUNDER. THE APE X COURT IN THE CASE OF CIT VS DAWOODI BOHARA JAMAT (2014)364 ITR 31(SC)HAS STATED SO AT PARA 42 OF I TS ORDER AS UNDER: 42. WE WOULD NOW PROCEED TO EXAMINE THE OBJECTS UNDER T HE PROVISIONS OF SECTION 13(1)(B) OF THE ACT. IT BECOM ES AMPLY CLEAR FROM THE LANGUAGE EMPLOYED IN THE PROVISIONS THAT SECTIO N 13 IS IN THE NATURE OF AN EXEMPTION FROM APPLICABILITY OF SECTIONS 11 O R 12 AND THE EXAMINATION OF ITS APPLICABILITY WOULD ONLY ARISE A T THE STAGE OF CLAIM UNDER SECTIONS 11 OR 12. THUS, WHERE THE INCOME OF A TRUST IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11, THE ELIGIBILITY FOR CLA IMING EXEMPTION OUGHT TO BE TESTED ON THE TOUCHSTONE OF THE PROVISIONS OF SECTION 13. IN THE INSTANT CASE, IT BEING ESTABLISHED THAT THE RESPOND ENT-TRUST IS A PUBLIC CHARITABLE AND RELIGIOUS TRUST ELIGIBLE FOR CLAIMIN G EXEMPTION UNDER SECTION 11, IT BECOMES RELEVANT TO TEST IT ON THE A NVIL OF SECTION 13. 13(I) EVEN OTHERWISE, WE AGREE WITH THE LD. COUNS EL FOR THE ASSESSEE, THAT LD. CHIEF COMMISSIONER HAS DENI ED 9 APPROVAL NOT BECAUSE THE ACTIVITIES PRESENTLY BEING CARRIED OUT BY THE ASSESSEE HAVE BEEN FOUND TO BE N OT GENUINE BUT FOR THE REASON THAT AN EVENT MAY OCCUR IN FUTURE BENEFITTING CERTAIN SPECIFIED PERSONS ,THE OCCURRENCE OF THE EVENT BEING ALSO NOT DEFINITE. TH E REASON FOR DENYING APPROVAL IS FAR FETCHED AND AGAI NST THE GRAIN AND SPIRIT OF THE SECTION WHICH EXTENDS T HE BENEFIT OF EXEMPTION FROM TAX TO SOCIETIES, INSTITU TIONS ETC., ENGAGED WHOLLY IN THE ACTIVITY OF PROVIDING EDUCATION. UNDOUBTEDLY, A CONTINGENCY OCCURRING IN THE FUTURE CANNOT CHANGE THE FACT SITUATION IN THE PRE SENT. 14. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER O F LD. CHIEF CIT AND DIRECT THAT THE ASSESSEE SOCIETY BE GRANTED APPROVAL UNDER SECTION 10(23C)(VI) OF INCO ME TAX ACT, 1961. 15. THE APPEAL OF THE ASSESSEE, THEREFORE, STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) ( ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH APRIL, 2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD