Jan Jagruti Sarvajanik Education Charitable Trust, RAJKOT-GUJARAT V. The Commissioner of Income Tax, Rajkot-II, RAJKOT-GUJARAT

ITA 93/RJT/2011

• Counselvise Citation: 9324914 RSA 2011
• Duration Of Justice: 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: misc
• Appeal Filed On: 10-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Keywords: Charitable institution; Opportunity of being heard
• Section: 12A; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH SMC, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) I.T.A. NO. 93/RJT/2011 JAN JAGRUTI SARVAJANIK EDUCATION VS THE CIT, RAJKOT -II CHARITABLE TRUST, JASDAN RAJKOT C/O KALPESH S DOSHI & CO, CAS 411, COSMO COMPLEX MAHILA COLLEGE CIRCLE RAJKOT 360 001 PAN : AABTJ1912F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KALPESH DOSHI RESPONDENT BY: SHRI JAI RAJ KUMAR O R D E R A.L. GEHLOT : THIS APPEAL BY ASSESSEE IS DIRECTED A GAINST THE ORDER OF CIT-II, RAJKOT DATED 31-01-2011. 2. THE ASSESSEE CHALLENGES THE REJECTION OF THE APP LICATION U/S 12A(1)(AA) FOR REGISTRATION U/S 12AA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E TRUST CAME INTO EXISTENCE ON 01-02-2007 BY EXECUTING A TRUST DEED. THE TRUST DEED WAS REGISTERED WITH THE CHARITY COMMISSIONER ON 08-06-2007. THE TRUST FILE D AN APPLICATION U/S 12A(1)(AA) OF THE ACT IN FROM NO.10A FOR REGISTRATI ON ON 07-07-2010. THE COMMISSIONER OBSERVED THAT THE ONLY SOURCE OF INCOM E OF THE TRUST WAS FEES RECEIVED FROM THE STUDENTS AND NO DONATIONS OR ANY GRANTS WERE RECEIVED BY THE TRUST. TO CONSIDER THE TRUSTS ACTIVITY AS A CHARI TABLE ONE BENEFITING OF THE STUDENTS, THE STUDENTS SHOULD HAVE BEEN GIVEN ACCOM MODATION IN THE HOSTEL FREE OF COST, NOT BY BURDENING THEM. BY GETTING THE FEE S, THE TRUST PROVIDED THE HOSTEL FACILITIES TO THE STUDENTS ON RENTAL BASIS. BY STR ETCH OF ANY IMAGINATION, THIS CANNOT BE CONSIDERED A CHARITABLE ACTIVITY. IT IS PERTINENT TO NOTE THAT THERE IS NO ITA NO.93//RJT/2011 2 BAR ON ANY TRUST IN CARRYING OUT BUSINESS ACTIVITY TO MAKE PROFITS, PROVIDED SUCH PROFITS SHOULD BE DIVERTED FOR CHARITABLE ACTIVITIE S. HERE IT IS NOT SO. ACCORDINGLY, THE COMMISSIONER DID NOT GRANT REGISTRATION U/S 12A A AS, ACCORDING TO HIM, THE TRUST IS NOT ELIGIBLE FOR REGISTRATION UNDER SECTIO N 12AAAS THE TRUST INVOLVED IN A COMMERCIAL ACTIVITY EARNING PROFIT FOR THE BENEFIT OF THE TRUSTEES. 4. I HAVE HEARD THE LEARNED REPRESENTATIVE OF THE P ARTIES, RECORD PERUSED. SECTION 12A(1) LAID DOWN CERTAIN CONDITIONS FOR APP LICABILITY OF SECTIONS 11 & 12. SECTION 12A(1)(A) PRESCRIBED THAT THE PERSON IN REC EIPT OF THE INCOME HAS MADE AN APPLICATION FOR REGISTRATION OF THE TRUST OR INS TITUTION IN THE PRESCRIBED FORM AND IN THE PRESCRIBED MANNER TO THE COMMISSIONER BEFORE THE PRESCRIBED PERIOD. SECTION 12AA PROVIDES THE PROCEDURE FOR REGISTRATIO N. THE SAID SECTION PROVIDES THAT THE COMMISSIONER ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF TRUST SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE TRU ST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF ACTIVITIES OF THE TRUST AND MAY ALSO MAKE SUCH ENQUIRIES AS HE MAY DE EM NECESSARY IN THIS BEHALF AND AFTER SATISFYING HIMSELF ABOUT THE OBJEC T OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES HE SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR REFUSING TO REGISTER THE TRUST. ON PLAIN READING OF THE SAID SECTION 12AA. I FIND THAT AT THE TIME OF GRANTING REGISTRATION, THE COMMISSIONER HAS LIMITED POWER ONLY TO EXAMINE THE OBJECTS OF THE TRUST AND GENUIN ENESS OF ACTIVITIES OF THE TRUST AND FOR THAT PURPOSE HE MAY CALL SUCH DOCUMENT OR I NFORMATION FROM THE TRUST. THE APPLICATION OF INCOME WHETHER FOR THE PURPOSE O F OBJECT OF TRUST IS TO BE EXAMINED AT THE TIME OF ASSESSMENT PROCEEDINGS AND NOT AT THE TIME OF GRANTING REGISTRATION. 5. THIS DISTINGUISHMENT OF EXAMINATION WHILE GRATIN G REGISTRATION AND ASSESSMENT PROCEEDING IS CLEARLY LAID DOWN IN THE R ELEVANT PROVISIONS AND THAT IS THE REASON THE SECTION 12AA(3) PROVIDES THAT - ITA NO.93//RJT/2011 3 (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGISTRATION AT ANY TIME UNDER SECTION 12A AS IT STOOD BEFORE ITS A MENDMENT BY THE FINANCE (NO.2) ACT, 1996 (33 OF 1996) AND SUBSEQUEN TLY THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIE D OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION, AS THE CASE MAY BE, HE SHALL PASS AN ORDER IN WRITING CANCELING THE REGISTRATION OF SUCH TRUST OR INSTITUTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASS ED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD. 6. IN THE LIGHT OF ABOVE DISCUSSION IF I CONSIDER T HE FACTS OF THE CASE UNDER CONSIDERATION I FIND THAT THE SOLE REASON FOR REFUS AL OF REGISTRATION TO THE ASSESSEE TRUST IS THAT THE ASSESSEE TRUST COLLECTS FEES FROM THE STUDENTS AND PROVIDE HOSTEL ACCOMMODATION OTHERWISE THERE IS NO DISPUTE ABOUT T HE CHARITABLE ACTIVITIES CARRIED OUT BY THE ASSESSEE IN THE FIELD OF RUNNING SCHOOL, CARRYING OUT LITERACY CAMPAIGN, ETC. HERE, THE CONTENTION OF THE ASSESSE E IS THAT IF THE PURPOSE OR OBJECT OF A TRUST IS CHARITABLE, THE CIRCUMSTANCES THAT IT IS PAID FOR DOES NOT ALTER ITS CHARACTER NOR IS IT NECESSARY IN ORDER TO CONST ITUTE A CHARITY AND IT SHOULD PROVIDE SOMETHING FOR NOTHING OR LESS THAN IT COSTS OR FOR LESS THAN ITS ORDINARY VALUE AND THAT THE PURPOSE OF ADVANCEMENT OF EDUCAT ION DOES NOT CEASE TO BE CHARITABLE MERELY BECAUSE EDUCATION IS NOT CONFINED TO THE POOR AND IT EXTENDS TO PROFESSIONAL OR COMMERCIAL EDUCATION, AS WELL A TO HIGHER EDUCATION. THERE IS NOTHING WHICH IS NECESSARILY INCONSISTENT WITH A PU RELY CHARITABLE OBJECT, IN THE INCLUSION IN THE ORGANIZATION OF A CHARITABLE ASSOC IATION OF SOME DEPARTMENT INTENDED TO BE RUN AT A PROFIT, AND SO TO CONTRIBUT E TO THE ACCOMPLISHMENT OF THE ASSOCIATIONS CHARITABLE PURPOSES. FOR THIS PROPOS ITION, THE LD.AR RELIED UPON THE JUDGMENT IN THE CASE OF CIT VS PULIKKAL MEDICAL FOU NDATION PVT LTD 210 ITR 299 (KER). I FIND MERIT IN THE CONTENTION OF THE LD.AR OF THE ASSESSEE. THE COMMISSIONER COULD NOT POINT OUT ANY MATERIAL IN HI S ORDER NOR THE SAME IS AVAILABLE ON RECORD BASED ON WHICH IT CAN BE SAID T HAT THE OBJECT OF THE TRUST WAS NOT CHARITABLE. CONTRARY, I FIND THAT THE OBJECTS OF THE TRUST ARE FOR CHARITY. FOR THE ITA NO.93//RJT/2011 4 PURPOSE OF READY REFERENCE, THE FREE ENGLISH TRANSL ATION OF RELEVANT OBJECTS AND OTHER CLAUSES OF THE TRUST FILED BY ASSESSEE ARE RE PRODUCED AS UNDER: OBJECTIVES OF TRUST:- THE TRUST WILL WORK FOR THE FOLLOWING OBJECTIVES WITHOUT ANY BIAS TO CASTE, CREED OR RELIGION. 1. EDUCATIONAL RELATED:- TO WORK FOR THE DEVELOPMENT OF SOCIETY KEEPING IN VIEW THE NATIONAL OBJECTIVES WITHOUT ANY BIAS TO ANY TYPE OF CASTE, CREED & RELIGION. TO ESTABLISH, RUN, & MANAGE EDUCATIONAL INSTITUTIO N SUCH AS PRE-PRIMARY, SECONDARY, HOSTELS SCHOOLS & COLLEGES. ALSO TO GIVE FINANCIAL OR ANY OTHER HELP TO SUCH INSTITUTIO NS. TO INCUR EXPENSES FOR ESTABLISHING, MAINTAINING & REPAIRING OFFICE BUILDING OF INSTITUTION, TENEMENT OF STAFFS, ETC. TO ESTABLISH, RUN & MAINTAIN SCHOOLS FOR THE STUDE NTS. ALSO TO GIVE FINANCIAL OR ANY OTHER HELP TO SUCH SCHOOLS . TO ESTABLISH LIBRARY FOR STUDENTS. TO MAKE NECESSARY ARRANGEMENTS FOR CAREER ORIENTED GUIDANCE TO STUDEN TS. TO GIVE SCHOLARSHIPS, BOOKS, ETC. FOR THE TECHNICA L AND FINANCIAL ADVANCEMENT OF STUDENTS. TO GIVE FINANCIAL AND SUCH OTHER HELPS TO THE STUD ENTS. TO RUN CLASSES FOR OLD-AGED PEOPLE. TO RUN & MANA GE CLASSES OF INTERNET, COMPUTER, SINGING, DANCE-DRAMA , DRAWINGS, SPORTS ACTIVITIES. TO DO ACTIVITIES FOR THE EDUCATION & DEVELOPMENT O F PLAYHOUSE, AAGANVADI, PRIMARY & SECONDARY EDUCATION , HIGH SCHOOLS, AND HOSTEL SCHOOLS, COLLEGES, COMPUTER-INT ERNET KNOWLEDGE. TO GIVE & TAKE THE DONATION FROM COLLEGE AND OTHER INSTITUTION ALSO PROVIDE & MANAGE FOOD (MADHY AHAN BHOJAN) IN THE SCHOOLS OF RAJKOT JURISDICTION. TO HELP SCHOOL STUDENTS IN ALL KINDS FOR THEIR EDUCATION. TO DO WORK RELATING TO DEVELOPMENT OF ANY KIND & T O HELP STUDENTS IN ALL WAYS. ALSO ANY TYPE OF FINANCIAL O R OTHER HELP WILL BE PROVIDED TO ANY INSTITUTIONS FOR DEVELOPMEN TAL PURPOSE. TO GIVE THE KNOWLEDGE ON THE SUBJECTS LIKE ASTROLO GY, PALMIST, VASTUSHASHTRA, JAIN ASTROLOGY, ASTRONOMY, ETC. WITH A VIEW TO MAINTAIN THE TRADITION OF THE INDIAN CULTUR E BY PUBLISHING IN BOOKS, MAGAZINES & NEWSPAPERS INHERIT ED FROM OUR ANCIENT SAGES. 2. MEDICAL RELIEF:- 3. OBJECT OF SERVICING IN CREMATION PROCESS:- ITA NO.93//RJT/2011 5 4. GAUSHALA:- 5. TREE PLANTATION:- DUTIES AND POWERS OF TRUSTEES:- THE TRUSTEES OF THI S TRUST WILL ACCEPT THE DONA5TIONS OR MAKE ARRANGEMENTS FOR THE SAME. TO USE & MANAGE THE INCOME RECEIVED FROM THE ABOVE MENTIONED SOURCES (AFTER DEDUCTING THE NECESSARY PETTY EXPENSES) TO A CHIEVE THE OBJECTS OF THE TRUST. DISSOLUTION:- IN CASE THE TRUST IS TO BE DISSOLVED DUE TO ANY CIRCUMSTANCES, THEN IT IS TO BE CARRIED ON IN ACCOR DANCE WITH THE RULES AND REGULATIONS UNDER BOMBAY PUBLIC TRUST AC T. I MAY MENTION THAT SECTION 12AA DOES NOT SPEAK ANYW HERE THAT THE COMMISSIONER, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION SHALL SEE THAT THE INCOME DERIVED BY THE TRUST HAS NOT BEEN SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUTION IS EARNING PROFIT OR MISUSING THE INCOM E DERIVED BY SUCH CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES THOUGH M AY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INC OME AT THE TIME OF ASSESSMENT BUT IN MY VIEW, IT CANNOT BE CONSIDERED TO BE SYNON YM TO THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. IN THE LIGHT OF ABOVE DIS CUSSION, I FIND THAT THE TRUST HAS SATISFIED THE CONDITIONS AS REGARDS THE OBJECTS AND GENUINENESS OF THE ACTIVITIES. THEREFORE, THE ASSESSEE TRUST IS ENTITLED FOR REGIS TRATION U/S 12AA OF THE ACT. I DIRECT THE COMMISSIONER TO ALLOW THE REGISTRATION T O THE TRUST U/S 12AA OF THE ACT. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08-04-2011. SD/- (A.L. GEHLOT) ACCOUNTANT MEMBER RAJKOT, DT : 08 TH APRIL, 2011 PK/- ITA NO.93//RJT/2011 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-II, RAJKOT 4. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT