Thapar Aahar Society, Patiala V. CIT, Patiala

ITA 902/CHANDI/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8707 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-01-2015
• Assessment Year: 2012-2013
• Appeal Filed On: 31-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Charitable institution
• Section: 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 902/CHD/2012 ASSESSMENT YEAR : 2012-13 THAPAR AAHAR SOCIETY, VS. THE C.I.T., THAPAR UNIVERSITY CAMPUS, PATIALA BHADSON ROAD, PATIALA. PAN: AACAT5763E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURJEET SINGH RESPONDENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 22.01.2015 DATE OF PRONOUNCEMENT : 28.01.2015 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX, PA TIALA DATED 10.7.2012, REJECTING THE APPLICATION FOR REGI STRATION UNDER SECTION 12AA OF THE INCOME TAX ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED APPLICATION IN PRESCRIBED FORM FOR GRANT OF REGISTR ATION ON 2.2.2012. THE LEARNED COMMISSIONER OF INCOME TAX ON EXAMINATION OF THE DOCUMENTS FILED ALONGWITH THE AP PLICATION, FOUND THAT THE TRUST HAS BEEN CREATED ON 28.04.2011 . THE DECLARED AIMS AND OBJECTS OF THE TRUST INCLUDE ''TO MANAGE AND RUN THE CANTEENS, TO PROVIDE THE FOOD TO NEEDY AND POOR 2 STUDENTS AND OTHER PEOPLE, TO SET UP THE CANTEEN IN COLLEGES, VILLAGES, SCHOOL, GOVT. OFFICE AND NON-GOVT. OFFICE , FACTORIES, HOSPITALS, POOR VILLAGES IN INDIA AND ABROAD, TO OR GANIZE THE SPECIAL PROGRAMME AND STAGE SHOWS FOR THE PEOPLE TO MOTIVATION FOR PURCHASE AND EAT THE HYGIENIC AND HE ALTHY FOOD, TO PROVIDE THE PEOPLE ALL TYPES OF FOOD ITEMS FOR EXAMPLE FRUIT, GREEN VEGETABLES, DALL, RICE AT REASONABLE R ATES, TO PROVIDE FREE ALL FOOD ITEMS FOR POOR/NEEDY STUDENTS AND ALSO TO THE STUDENTS WHO ARE OTHERWISE INCAPABLE OR HANDICAPPED ETC. (EMPHASIS SUPPLIED). 3. THE INCOME & EXPENDITURE STATEMENT FOR THE YEAR ENDING 31.03.2012 REVEALS THAT HARDLY ANY EXPENDITURE HAD BEEN INCURRED BY THE ASSESSEE TOWARDS FULFILLMENT OF ITS AVOWED AIMS AND OBJECTS. THE SOCIETY ITSELF HAS STATED VID E LETTER DATED 11.06.2012 ADDRESSED TO THE ASSESSING OFFICER THAT NO FREE FOOD HAS BEEN SERVED TO ANY NEEDY AND POOR STU DENT AND NO CANTEENS, AS MENTIONED IN THE AIMS AND OBJECTS O F THE SOCIETY HAVE BEEN SET UP IN ANY OTHER ORGANIZATION, OTHER THAN IN THE UNIVERSITY CAMPUS AND NO SPECIAL PROGRAMMES HAVE BEEN ORGANIZED TO MAKE AWARE AND MOTIVATE THE PEOPL E WITH REGARD TO HYGIENIC FOOD. THUS, IT WAS OBSERVED THA T THE ASSESSEE SOCIETY HAD NOT MADE ANY EXPENDITURE WORTH THE NAMES ON THE AVOWED AIMS AND OBJECTS OF THE INSTITU TION, WHICH IS A PRE-CONDITION FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT,1961. 4. THE LEARNED COMMISSIONER OF INCOME TAX ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THE APPLICAT ION FOR 3 REGISTRATION MAY NOT BE REJECTED SINCE THE ACTIVITI ES CARRIED OUT BY THE ASSESSEE SOCIETY ARE NOT JUSTIFIED VIS- -VIS AVOWED AIMS AND OBJECTS OF THE SOCIETY. THE GP RATE SHOW N BY THE ASSESSEE SOCIETY IS 14.8% WHICH IS COMPATIBLE WITH OTHER ASSESSES IN THE SAME LINE OF BUSINESS. THIS INDIC ATED THAT THE SOCIETY IS RUNNING ITS BUSINESS ON WELL UNDERST OOD COMMERCIAL LINES, HAVING NO CHARITABLE PURPOSE AND THUS NOT COVERED UNDER THE WELL UNDERSTOOD MEANING OF THE TE RM ADVANCEMENT OF OBJECT OF GENERAL PUBLIC UTILITY, AS MENTIONED IN INCOME TAX ACT. THE ASSESSEE SUBMITT ED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX THAT THE GP RATE IN THE CASE OF EATABLE BUSINESS VARIES FROM 30% TO 50% AND THAT SOME MINIMUM GP IS REQUIRED TO MAINTAIN THE CONTINU ITY OF PERSONS EMPLOYED FOR THE PROJECT AND TO BUY UTENSIL S, CROCKERY AND OTHER REQUIRED ASSETS. IT WAS REITERATED THAT THE FOOD IS BEING SERVED AT THE MUCH LOWER RATE COMPARED TO EA TING JOINTS AND THE STUDENTS COMING FROM ALL OVER THE COUNTRY A ND ABROAD ARE MADE WORRY-FREE VIS--VIS THEIR FOOD REQUIREMEN TS AND THUS THE OBJECT OF THE ADVANCEMENT OF OBJECT OF GEN ERAL PUBLIC UTILITY IS FULLY MET BY THE ASSESSEE SOCIETY. 5. THE LEARNED COMMISSIONER OF INCOME TAX ON CONSIDERATION OF THE MATERIAL ON RECORD REJECTED TH E APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX IN PARAS 6 TO 7 OF THE IMPUGNED ORDER ARE REPRO DUCED AS UNDER : 4 6. FROM THE REPLIES/COMMENTS FURNISHED BY THE ASSE SSEE, IT IS APPARENT THAT THE SOCIETY IS RUNNING ITS BUSINESS O N COMMERCIAL LINES, HAVING NO CHARITABLE PURPOSE, AS UNDERSTOOD AND DEFINED UNDER THE INCOME-TAX ACT, 1961 . NEEDLESS TO REITERATE THAT SECTION 2(15) OF THE I.T .ACT DEFINES CHARITABLE PURPOSES TO INCLUDE 'RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PUR POSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, .. IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY.' THE PROVISIONS OF THE FIRST PROVISO TO SECTION 2(15) ARE FU LLY APPLICABLE IN THE CASE OF THE APPLICANTS OF THE SOCIETY ARE PURE LY COMMERCIAL. NO FREE FOOD HAS EVER BEEN PROVIDED TO THE POOR STU DENTS OR PUBLIC AT LARGE, AS IS CONCEDED BY THE ASSESSEE. BY INCORPO RATING SOME AIMS AND OBJECTS IN THE MEMORANDUM WHICH APPEAR TO BE 'CHARITABLE', THE APPLICANT HAS TRIED TO CAMOUFLAGE I TS COMMERCIAL ACTIVITIES OF RUNNING AND MANAGING THE FOOD CANTEEN. 7. ON THE BASIS OF THE ABOVE FACTUAL POSITION, 1 AM O F THE VIEW THAT THE APPLICANT TRUST DOES NOT FULFILL THE CONDITIONS, AS ENVIS AGED IN THE PROVISIONS OF INCOME-TAX ACT, FOR GRAM OF REGISTRAT ION U/S 12AA. ACCORDINGLY, ANY CLAIM FOR CHARITABLE ACTIVITIES AND GENUINENESS OF THE TRUST CANNOT BE ACCEPTED AND REGISTRATION U/S 1 2AA OF THE L.T. ACT, 1961 CANNOT BE ALLOWED TO THE APPLICANT SOCIETY. ACCORDINGLY, THE APPLICATION FOR REGISTRATION U/S 12 AA IS HEREBY REJECTED. 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. 7. THE LEARNED COUNSEL FOR ASSESSEE REFERRED TO AIM S AND OBJECTS OF THE SOCIETY WHICH MAINLY CONTAINED FOR R UNNING OF THE CANTEEN IN THE UNIVERSITY CAMPUS, WHICH IS ALSO NOTED IN 5 THE IMPUGNED ORDER. THE LEARNED COUNSEL FOR ASSES SEE DURING THE COURSE OF ARGUMENTS ALSO ADMITTED THE ASSESSEE RUNNING CANTEEN IN THE UNIVERSITY CAMPUS AT THE LOWER RATE AND NO OTHER ACTIVITIES HAVE BEEN DONE. THE COPY OF INCOM E AND EXPENDITURE ACCOUNT FROM 1.4.2010 TO 31.3.2011 IS F ILED AT PAGE 12 OF THE PAPER BOOK TO SHOW THAT AFTER DOING THE ACTIVITIES OF THE ASSESSEE FOR RUNNING CANTEEN, THE ASSESSEE SOCIETY HAS EARNED NET PROFIT OF RS.2,28,348/-. T HE INCOME AND EXPENDITURE ACCOUNT FOR THE PERIODS 1.4.2011 TO 31.3.2012 IS FILED AT PAGE 18 OF THE PAPER BOOK TO SHOW THAT THE ASSESSEE HAS EARNED NET INCOME/PROFIT IN A SUM OF RS.4,03,811/- AFTER DOING THE ACTIVITIES OF RUNNING THE CANTEEN. THE LEARNED COUNSEL FOR ASSESSEE ALSO FI LED RATE LIST OF COMPARATIVE BUSINESS TO SHOW THAT THE ASSESSEE I S CHARGING LESSER RATE. HE HAS SUBMITTED THAT AT THE STAGE O F GRANT OF REGISTRATION, IT IS NOT TO BE SEEN WHETHER THE ASSE SSEE WAS YET TO WORK TOWARDS ITS OBJECTS. THE COMMISSIONER COU LD NOT DENY REGISTRATION ON THE GROUND THAT IT WAS NOT UTI LIZING ITS INCOME FOR CHARITABLE PURPOSE AT THE STAGE OF GRANT ING OF REGISTRATION. HE HAS RELIED UPON THE FOLLOWING D ECISIONS IN SUPPORT OF THIS PROPOSITION : I) CIT VS. B.K.K. MEMORIAL TRUST, 29 TXMANN.COM, 286 (P&H) II) CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST 15 TAXMANN.COM 123 (P&H) III) CIT VS. JANKI JI EDUCATION SOCIETY 39 TAXMANN.COM 2 (P&H) IV) CIT VS. RED ROSE SCHOOL 212 CTR (ALL) 394 6 8. THE LEARNED D.R FOR THE REVENUE, HOWEVER, STATED THAT THE ASSESSEE IS RUNNING THE BUSINESS OF CANTEEN IN THE UNIVERSITY CAMPUS AND AIMS AND OBJECTS OF ASSESSEE ARE TO RUN CANTEEN, WHICH THE ASSESSEE IS RUNNING. THEREFORE , IT IS NOT A CASE WHERE THE ASSESSEE HAS YET TO COMMENCE ITS BUS INESS ACTIVITIES. THEREFORE, SINCE THE ASSESSEE IS DOING THE ACTIVITIES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, THERE FORE, THE ASSESSEE IS NOT DOING ANY CHARITY. MERELY BECAUSE LOWER RATES OF FOOD ITEMS HAVE BEEN CHARGED BY THE ASSESS EE, IS NO GROUND TO SHOW THAT THE ASSESSEE IS DOING THE ACTIV ITIES FOR CHARITABLE PURPOSE. 9. CONSIDERATION OF THE FACTS OF THE CASE AND MATER IAL ON RECORD, WE DO NOT FIND ANY MERIT IN THE APPEAL OF T HE ASSESSEE. IT IS ADMITTED FACT THAT THE AIMS AND OBJECTS OF AS SESSEE SOCIETY ARE SOLELY TO RUN THE CANTEEN AT DIFFERENT PLACES. PRESENTLY, THE ASSESSEE IS RUNNING CANTEEN IN THE U NIVERSITY CAMPUS AND IS PROVIDING FOODS TO THE STUDENTS AS PE R SUBMISSIONS OF LEARNED COUNSEL FOR ASSESSEE. AS N OTED ABOVE IN THE YEARS ENDING 31.3.2011 AND 31.3.2012, THE IN COME AND EXPENDITURE ACCOUNT DISCLOSED THAT THE ASSESSEE EAR NED NET PROFIT AFTER MEETING OUT THE EXPENSES. THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE DID ANY CHARITABLE ACTIVI TIES IN RUNNING THE CANTEEN IN UNIVERSITY CAMPUS AND IN FAC T EARN PROFIT THEREFROM. SIMPLY BECAUSE THE ASSESSEE CHARGED L OWER RATES AS PER THE CONTENTION OF THE ASSESSEE IS NO GROUND TO SHOW THAT THE ASSESSEE EXISTED FOR ANY CHARITABLE PURPOS E. THE ASSESSEE HAS ALREADY FORMED THE CANTEEN IN UNIVERSI TY 7 CAMPUS. THEREFORE, IT IS NOT A CASE THAT THE ASSE SSEE HAS TO WORK FURTHER TOWARDS ITS OBJECTS. THE CRUX OF THE AIMS AND OBJECTS AND INCOME AND EXPENDITURE ACCOUNT FOUND ON RECORD CLEARLY PROVE THAT THE ASSESSEE IS RUNNING THE CANT EEN IN UNIVERSITY CAMPUS, WHICH IS IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE LEARNED COMMISSIONER OF INCOME T AX WAS, THEREFORE, JUSTIFIED IN REFERRING TO THE PROVISIONS OF SECTION 2(15) OF THE ACT, WHICH DEFINES THE MEANING OF CHAR ITABLE PURPOSE AND PROVIDES THE EXCEPTION TO THE SAME THAT IN CASE THE ACTIVITIES WOULD BE IN THE NATURE OF TRADE, COM MERCE OR BUSINESS, THE SAID ACTIVITIES OF THE ASSESSEE COULD NOT BE TREATED AS CHARITABLE IN NATURE. THE FOOD IS ESSE NTIAL ITEM AND EVERYBODY HAS TO TAKE FOOD EVERY DAY WHETHER AT THE LOWER RATE OR THE HIGHER RATE. IT IS THE NECESSITY OF L IFE. THEREFORE, THE ASSESSEE IS NOT DOING ANY EXTRA-ORDINARY ACTIVI TY EXCEPT PROVIDING THE FOOD ITEMS IN THE CANTEEN RUN IN THE UNIVERSITY CAMPUS, WHICH IS ONLY ESSENTIAL ITEM. THEREFORE, THE GOODS WHICH IS USED EVERY DAY BY EVERY ONE COULD NOT BE E QUATED WITH ANY CHARITABLE ACTIVITIES UNLESS IT IS PROVIDE D FREE OF COST TO THE POOR. THE ASSESSEE ADMITTEDLY IS DOING BUSI NESS ACTIVITIES IN THE UNIVERSITY CAMPUS BY RUNNING CANT EEN AND SELLING FOOD ITEMS AND EARNING PROFIT THEREON. TH EREFORE, BY NO STRETCH OF IMAGINATION, THE SAID ACTIVITY COULD BE TREATED AS CHARITABLE IN NATURE. EVEN IF THE SAME BUSINESS I NSTITUTION MAY SUFFER A LOSS IN ORDINARY COURSE OF BUSINESS CA NNOT BE TREATED AS CHARITABLE INSTITUTION. THE DECISIONS CITED BY THE LEARNED COUNSEL FOR ASSESSEE ARE, THEREFORE, NOT AP PLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSE SSEE IS NOT 8 DOING ANYTHING FOR ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THEREFORE, ITS ACTIVITIES ARE PURE LY COMMERCIAL IN NATURE AND WOULD FALL WITHIN THE DEFINITION OF T RADE AND BUSINESS. THE LEARNED COMMISSIONER OF INCOME TAX W AS, THEREFORE, JUSTIFIED IN REJECTING THE APPLICATION F OR REGISTRATION UNDER SECTION 12AA OF THE ACT. WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. THE SAME IS ACCORDING LY, DISMISSED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JANUARY, 2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 28 TH JANUARY, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH