MATRU VANDANA TRUST, MUMBAI V. DIT (E), MUMBAI

ITA 9003/MUM/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88345 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-02-2015
• Assessment Year: misc
• Appeal Filed On: 24-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Keywords: Charitable institution; Question of law; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 9003/MUM/2010 MATRU VANDANA TRUST 472, MOHAN NIWAS, 3 RD FLOOR, BLOCK NO.1/2B, OPP. MAHESHWARI UDYAN, MATUNGA (CR.), MUMBAI-400 019 VS. DIT(E), MUMBAI ! ./PAN/GIR NO. ( ' /APPELLANT ) : ( #$ ' / RESPONDENT ) '%& / APPELLANT BY : SHRI DHARMESH SHAH #$ '%& / RESPONDENT BY : SHRI S. J. SINGH ' ()%*+ / DATE OF HEARING : 04.02.2015 ,-.%*+ / DATE OF PRONOUNCEMENT : 20.02.2015 /0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE DIRECTOR OF INCOME TAX (EXEMPTION), MUMBAI (DIT(E) FOR SHORT) DATED 25.10.2010, U/S. 12AA(1)(B)(II) R/W S.12A OF THE INCOME TAX ACT, 196 1 (THE ACT HEREINAFTER). THE ISSUE 2. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS THE VALIDITY OR OTHERWISE IN LAW OF THE REJECTION OF THE ASSESSEES APPLICATION FOR REG ISTRATION U/S.12AA OF THE ACT. THE APPELLANT-TRUST, FORMED ON 05.10.2009, MOVED THE SA ID APPLICATION WITH THE COMPETENT 2 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) AUTHORITY UNDER THE ACT ON 19.04.2010 IN THE PRESCR IBED FORM, FURNISHING THE DETAILS AS CALLED FOR FROM TIME TO TIME. THE BASIS OF THE DENI AL OF THE ASSESSEES CLAIM BY THE LD. DIT(E) IS THAT NO ACTIVITY HAD BEEN CARRIED OUT BY THE APPELLANT-TRUST SUBSEQUENT TO ITS CREATION, EVEN UP TO THE TIME ITS APPLICATION WAS DISPOSED OF BY IT. THE LD. DIT(E), AS THE COMPETENT AUTHORITY, IS REQUIRED BY LAW, I.E., SECT ION 12AA(1)(B), TO BE SATISFIED ABOUT: A) THE OBJECTS OF THE TRUST; AND B) THE GENUINENESS OF ITS ACTIVITIES. A POSITIVE SATISFACTION WITH REGARD TO THE GENUINEN ESS OF THE ACTIVITIES COULD NOT BE ARRIVED AT IN THE ABSENCE OF CONDUCT OF THE ACTIVIT IES. HENCE, A LACK OF THE SAID SATISFACTION OR, RATHER, THE MATERIAL THAT COULD ENABLE THE SAME , WOULD RESULT IN A CORRESPONDING DENIAL OF THE ASSESSEES APPLICATION FOR REGISTRATION AS A CHARITABLE TRUST OR INSTITUTION. THIS SUMS UP THE REVENUES CASE. BEFORE US, ARGUMENTS FOR AND AGAINST THIS PROPOSITION WERE ASSUMED BY THE PARTIES, I.E., ON THIS ASPECT OF THE MATTER ONLY. THE ISSUE ARISING, AS WE DISCERN, IS A PURE QUESTION OF LAW, I.E., THE POWER OF THE COMPETENT AUTHORITY TO DENY REGISTRATION SOLELY ON THE GROUND THAT THE ASSESSEE HAD NOT COMMENCED ITS ACTIVITIES. DISCUSSION 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 WE SHALL BEGIN BY REPRODUCING THE RELEVANT PART OF THE PROVISION OF SECTION 12AA, WHICH DELINEATES THE PROCEDURE TO BE ADOPTED FOR AC CORDING OR OTHERWISE REGISTRATION AS A CHARITABLE ENTITY UNDER THE ACT: PROCEDURE FOR REGISTRATION. 12AA. (1) THE PRINCIPAL COMMISSIONER OR COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUT ION MADE UNDER CLAUSE ( A ) OR CLAUSE ( AA ) OF SUB-SECTION (1) OF SECTION 12A, SHALL ( A ) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE T RUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND ( B ) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE ( I ) SHALL PASS AN ORDER IN WRITING REGISTERING THE TR UST OR INSTITUTION; 3 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) ( II ) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDER I N WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE ( II ) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. 3.2 WITHOUT DOUBT, THE COMPETENT AUTHORITY IS, AS P ER THE SCHEME OR PROCEDURE OF REGISTRATION, AS CONTEMPLATED U/S.12AA, REQUIRED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST AND THE GENUINENESS OF ITS ACTIVITIES. F OR THE PURPOSE, HE HAS THE POWER TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE APPLICAN T AS HE THINKS NECESSARY. HOW, HOWEVER, WE WONDER THE ABSENCE OF ANY ACTIVITY, BY ITSELF LEAD TO THE SATISFACTION QUA THE GENUINENESS OF THE APPLICANTS ACTIVITIES. PUT DIFFERENTLY, HOW COULD UNDER SUCH CIRCUMSTANCES ANY DISSATISFACTION BE EXPRESSED QUA THE GENUINENESS OF THE ACTIVITIES ? THERE COULD AFTER ALL BE NO PRESUMPTION THAT EITHER NO ACTIVITIES WOULD EVER BE CARRIED OUT, OR WOULD BE CARRIED OUT IN A MANNER WHICH IS NOT IN ACCORDANCE OR CONSISTENT WITH ITS OBJECTS. AT BEST, ONE COULD ISSUE A DISCLAIMER STAT ING THAT HE IS UNDER THE CIRCUMSTANCES OR ON THE BASIS OF THE MATERIAL ON RECORD UNABLE TO EX PRESS ANY POSITIVE SATISFACTION WITH REGARD TO THE GENUINENESS OF THE ACTIVITIES. CERTAI NLY, ACTIVITY, IF PRESENT, WOULD BE ENQUIRED INTO, I.E., AS REGARDS ITS GENUINENESS. EQ UALLY, THE LD. DIT(E) COULD ALSO ENQUIRE INTO THE CIRCUMSTANCES RESPONSIBLE FOR THE NON-COMM ENCEMENT OF THE ACTIVITIES BY THE TRUST OR THE ENTITY SEEKING REGISTRATION. THE WHOLE PREMISE OF THE PROVISION, AS WE UNDERSTAND FROM ITS HOLISTIC READING, IS A STATE OF SATISFACTION BY THE COMPETENT AUTHORITY WITH REGARD TO THE NATURE OF THE OBJECTS, I.E., QUA THEIR BEING CHARITABLE, LEGITIMATE, ETC., AND A GENUINE AND BONA FIDE INTENT TO PURSUE THOSE OBJECTS. THE DECISION REJEC TING THE ASSESSEES APPLICATION COULD AFTER ALL ONLY BE BASE D ON AN ABSENCE OF SUCH SATISFACTION OR, RATHER, EXISTENCE OF A POSITIVE NON-SATISFACTION, I .E., DIS-SATISFACTION, WITH EITHER THE APPELLANTS OBJECTS OR ITS ACTIVITIES. A SATISFACT ION WITH REGARD TO THE GENUINENESS OF THE ACTIVITIES PRESUPPOSES THEIR EXISTENCE. THE LAW, HO WEVER, DOES NOT EITHER POSTULATE A WAITING PERIOD FOR THE ASSESSEE TO APPLY FOR REGIST RATION, I.E., AFTER ITS FORMATION, OR FOR IT TO CARRY OUT THE ACTIVITIES FOR A CERTAIN LENGTH OF TIME BEFORE IT COULD SEEK REGISTRATION, 4 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) MAKING, IMPLICITLY, THEIR BEING CARRIED ON A PRECON DITION THERE-FOR. IN FACT, IN THE MYRIAD SITUATIONS THAT ARISE IN GENERAL OR PUBLIC LIFE, IT IS DIFFICULT TO STIPULATE SUCH A TIME FRAME, WHICH WOULD VARY WITH CIRCUMSTANCES AS ALSO THE NAT URE AND TYPE OF ACTIVITY TO BE CARRIED OUT; THE PROJECT SIZE; ACCESS TO MATERIAL AND FINAN CIAL RESOURCES, ETC. HOW COULD, AFTER ALL, ACTIVITY BE CARRIED OUT WITHOUT ADEQUATE FUNDING OR RESOURCES AT ITS COMMAND? AND MARSHALING WHICH MAY TAKE TIME. AGAIN, SUCH A LINE OF ENQUIRY MAY LEAD TO A FURTHER QUESTION AS TO THE PERIOD OF TIME FOR WHICH THE ACT IVITIES ARE ON BEFORE A SATISFACTION QUA THEIR GENUINENESS COULD BE EXPRESSED. THESE ARE IN FACT ALL MATTERS OF FACT, AS ARE THE VARIOUS PARAMETERS, BEING INFERENCES OF FACT, ON TH E BASIS OF WHICH A DECISION QUA THE GENUINENESS OR OTHERWISE OF THE ACTIVITIES WOULD AR ISE IN A PARTICULAR CASE. THERE COULD, FOR EXAMPLE, BE CIRCUMSTANCES OR MATERIAL ON RECORD TO SUGGEST THAT THE TRUST, THOUGH PURPORTEDLY FOR CHARITABLE PURPOSES, AND SET UP FOR LONG, IS SO FOR AN ULTERIOR PURPOSE. OR, TAKE A CASE WHERE IT HAS NO PLAUSIBLE REASON FOR NO T COMMENCING ANY ACTIVITY DESPITE LAPSE OF CONSIDERABLE TIME, SO THAT THE FACT OF NON -COMMENCEMENT COULD BE A SUPPORTIVE, ALONG WITH THE OTHER CORROBORATIVE FACTS AND CIRCUM STANCES, ENABLING A FINDING OF NON- SATISFACTION QUA THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. 3.3 THE PROVISION OF LAW, THUS, READ MEANINGFULLY A ND CONTEXTUALLY, LEADS TO AN EXISTENCE OF DISSATISFACTION AS REGARDS THE GENUINE NESS OF ITS ACTIVITIES AS A QUALIFYING CONDITION FOR DENIAL OF REGISTRATION ON THAT GROUND . THIS IS FURTHER SUPPORTED BY THE LEGAL POSITION THAT IF AT ANY TIME SUBSEQUENTLY THE ENTIT Y IS FOUND TO BE PURSUING ACTIVITIES WHICH ARE NOT GENUINE OR NOT IN ACCORDANCE WITH ITS OBJECTS, THE REGISTRATION GRANTED COULD BE CANCELLED U/S.12AA(3). THIS VIEW IS IN FACT SUPP ORTED BY A SERIES OF DECISIONS RELIED UPON BEFORE US BY THE LD. AR, AS UNDER, SO THAT THE ISSUE IS NO LONGER RES INTEGRA : 1) DIT(E) VS. PANNALALBHAI FOUNDATION [2013] 35 TAXMANN.COM 104 (GUJ); 2) DIT VS. FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEAR CH EDUCATION CENTRE [2012] 254 CTR 133 (DEL); 3) DIT(E) VS. MEENAKSHI AMMA ENDOWMENT TRUST [2011] 50 DTR 243 (KAR); 4) CIT VS. KUTCHI DASA OSWAL MOTO PARIWAR AMBAMA TRUST [2014] 362 ITR 194 (GUJ); 5 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) 5) FIFTH GENERATION EDUCATION SOCIETY VS. CIT [1990] 185 ITR 634 (ALL); 6) UNIVERSAL WELFARE AND EDUCATION FOUNDATION VS. DIT( E) (IN ITA NO. 7730/MUM/2012 DATED 06.08.2014); 7) BIOMEDICAL FOUNDATION OF INDIA VS. DIT(E) (IN ITA NO. 4420/MUM/2011 DATED 10.10.2012); AND 8) M. L. MEYYAPPAN VS. DIT (IN ITA NO. 2073 & 2074/MDS/2010 DATED 19.10.2011) AS WOULD BE APPARENT FROM THEIR READING, THE COURTS HAVE CONSISTENTLY HELD THAT THE COMPETENT AUTHORITY IS ENTITLED, AND IS RATHER OBLI GED, TO TAKE INTO ACCOUNT ALL THE CIRCUMSTANCES TO ARRIVE AT A VIEW WITH REGARD TO TH E GENUINENESS OR OTHERWISE OF THE ASSESSEES ACTIVITIES, SO THAT THOUGH A RELEVANT FA CTOR, COULD NOT BY ITSELF BE DECISIVE OF THE MATTER. THE DECISION IN THE CASE OF AMAN SHIV MANDIR TRUST (REGD.) VS. CIT [2008] 296 ITR 415 (P&H), RELIED UPON BY THE REVENUE BEFORE US , IS RENDERED ON THE FACTS OF THE CASE, EVEN AS WAS FOUND BY THE HONBLE DELHI HIGH C OURT IN FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTRE (SUPRA). THE APPLICATION FOR REGISTRATION U/S.12A WAS MADE BY THE TRUST IN AN ALMOST DEFENSIVE MANNER . IN THE FACTS OF THAT CASE, THE ACTIVITIES WERE BEING CARRIED ON FOR MORE THAN THRE E YEARS PRIOR TO THE APPLICATION, AND IT WAS ONLY AFTER THE DISCREPANCIES IN THE FORM OF NON -DEDUCTION OF TAX AT SOURCE SURFACED THAT IT APPLIED FOR REGISTRATION. SUBSTANTIAL AMOUN TS HAD IN FACT BEEN COLLECTED AND KEPT IN THE BANK IN THE FORM OF FIXED DEPOSITS WITHOUT ANY CORRESPONDING CHARITABLE ACTIVITY. IN THE PRESENT CASE, AS EXPLAINED DURING HEARING BY TH E LD. AR, THE ASSESSEE WAS IN FACT IN THE PROCESS OF ACQUIRING LAND, I.E., FOR THE CONSTRUCTI ON OF AN OLD AGE HOME, IN THE NAME OF ONE OF ITS TRUSTEES. THE SAME BEING UNDER PROCESS AT T HE RELEVANT TIME, WAS EXPLAINED TO THE LD. DIT(E), AND FOR WHICH REFERENCE WAS MADE BY HIM TO PARA 3 OF THE IMPUGNED ORDER. THE EFFORTS HAVE SINCE BORNE FRUIT, HE WOULD INFORM US, WITH THE APPELLANT ACQUIRING LAND ON A 99 YEAR LEASE BASIS. THE INITIATION OF THE PRO CESS FOR ACQUIRING THE LAND BY THE TRUSTEE/S, THOUGH IN THEIR OWN NAME/S, IN-AS-MUCH A S A CHANGE OF USER OF AGRICULTURAL LAND COULD ONLY BE APPLIED FOR SUBSEQUENTLY AND BY AN IN DIVIDUAL, WOULD ITSELF BE UNDER THE CIRCUMSTANCES REGARDED AS COMMENCEMENT OF ITS ACT IVITIES BY THE APPLICANT-TRUST. WE HAVE ALREADY INDICATED THAT THERE COULD BE NUMBER O F REASONS OR CIRCUMSTANCES LEADING TO 6 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) NON-COMMENCEMENT OF ACTIVITIES BY AN OTHERWISE GENU INE TRUST, SO THAT WHAT IS OF PRIME RELEVANCE IS THE NATURE OF THE OBJECTS AS WELL AS A N INTENT TO PURSUE THE SAME, MAY BE IN FUTURE. THE OTHER DECISIONS CITED BY THE LD. DIT(E) IN SUPPORT OF HIS DECISION PER THE IMPUGNED ORDER, VIZ. CIT VS. AGRICULTURAL PRODUCE AND MARKET COMMITTEE [2007] 291 ITR 419 (BOM); SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. D IT(E) [2006] 285 ITR 327 (KAR); AND CIT VS. RED ROSE SCHOOL [2007] 163 TAXMAN 19 (ALL), HAVE BEEN PURSUED, TO FIND THEM AS INAPPLICABLE IN THE FACTS OF THE CASE. IN FACT, ALL OF THEM TURN ON THE FACTS AND CIRCUMSTANCES OF THEIR RESPECTIVE CAS ES, AND THE ONLY RATIO THAT WE DISCERN IS THAT THE REVENUE AUTHORITIES ARE REQUIRED TO APPLY THEIR MIND TO THE MATTER; EXAMINING THE ACTIVITIES BEING CARRIED OUT, AND DRAWING REASONABL E INFERENCES THERE-FROM. THE SAME CANNOT BE THEREFORE TAKEN AS SUPPORTIVE OF THE REVE NUES CASE. DECISION 4. NO DISSATISFACTION WITH REGARD TO THE OBJECTS OF THE TRUST, WHICH REPRESENTS THE OTHER LIMB OR ASPECT ON WHICH THE LD. DIT(E)) IS REQUIRED TO SATISFY HIMSELF, HAS BEEN EXPRESSED BY HIM, NOR ANY SUCH RESERVATION STANDS BROUGHT OUT BEFORE US DURING HEARING. UNDER THE CIRCUMSTANCES, WE, IN VIEW OF THE FOREGOING, ARE OF THE CLEAR VIEW THAT THE DENIAL OF REGISTRATION BY THE LD. DIT(E) IS NOT SUSTAINABLE B OTH IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE, ACCORDINGLY, SET ASI DE THE IMPUGNED ORDER, AND DIRECT ACCEPTANCE OF THE ASSESSEES APPLICATION. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. 1.*23451*% ( 6 *%*7 ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 20, 2015 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / / ACCOUNTANT MEMBER ' 8) MUMBAI; 9/ DATED : 20.02.2015 (3 ROSHANI , SR. PS 7 ITA NO. 9003/MUM/2010 MATRU VANDANA TRUST VS.DIT(E) !'#$ %$&' COPY OF THE ORDER FORWARDED TO : 1. ' / THE APPELLANT 2. #$ ' / THE RESPONDENT 3. ' :* ; < / THE CIT(A) 4. ' :* / CIT - CONCERNED 5. =(>?#3*3@4 +@4. ' 8) / DR, ITAT, MUMBAI 6. ?5A) GUARD FILE ' / BY ORDER, (/') * (DY./ASSTT. REGISTRAR) , ' 8) / ITAT, MUMBAI