Bar Council of Delhi, New Delhi V. CIT(E), New Delhi

ITA 9333/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 9766 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 04-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY GOEL
• Keywords: Charitable institution; Set aside
• Section: 80G; 12A; 12AA; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) (THROUGH VIDEO CONFERENE) SHRI R.K. PANDA, ACCOUNTANT MEMBER AND BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.9333/DEL./2019 BAR COUNCIL OF DELHI, VS. CIT (EXEMPTION), 2/6, SIRI FORT INSTITUTIONAL AREA, NEW DELHI. ANDREWS GANJ, S.O. SHAHPUR JAT, NEW DELHI 110 049. (PAN : AAGFB5063Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.S. AGARWAL, SENIOR ADVOCATE MRS. PREM LATA BANSAL, SENIOR ADVOCATE SHRI R.P. MALL, ADVOCATE SHRI MADHUR AGARWAL, ADVOCATE SHRI DIVYANSHU AGARWAL, ADVOCATE REVENUE BY : SHRI SANJAY GOEL, CIT DR DATE OF HEARING : 24.06.2020 DATE OF ORDER : 02.07.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, BAR COUNCIL OF DELHI (HEREINAFTER REFER RED TO AS THE APPELLANT) BY FILING THE PRESENT APPEAL SOUGH T TO SET ASIDE THE IMPUGNED ORDER DATED 27.09.2019 PASSED BY THE COMMI SSIONER OF INCOME - TAX (EXEMPTION), NEW DELHI ON THE GROUNDS INTER ALIA THAT :- ITA NO.9333/DEL./2019 2 1. THAT THE LD. CIT HAS ERRED IN REJECTING THE AP PLICATION FILED BY BAR COUNCIL OF DELHI SEEKING REGISTRATION U/S 12A (A) OF THE INCOME TAX ACT. 2. THAT THE LD. CIT HAS ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 12AA ARE NOT APPLICABLE TO BAR COUNCIL O F DELHI. 3. THAT THE LD. CIT HAS ERRED IN HOLDING THAT THE GENUINENESS OF THE ACTIVITIES OF THE COUNCIL COULD NOT BE ASCERTAINED WHEN THE ACCOUNTS OF THE COUNCIL WERE V ERY MUCH BEFORE THE LD. COMMISSIONER. 4. THAT THE LD. CIT HAS ERRED IN DENYING THE APPROV AL U/S 80G OF THE ACT HOLDING THAT THE CHARITABLE ACTIVITI ES OF THE COUNCIL COULD NOT BE SUBSTANTIATED, HOWEVER ACTIVIT IES OF THE COUNCIL WERE APPARENT FORM THE MEMORANDUM AND ACCOU NTS OF THE COUNCIL. 2. ASSESSEE BY FILING SEPARATE APPLICATION SOUGHT T O CONDONE THE DELAY OF 2 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. KEEPING IN VIEW THE FACT THAT DUE TO SUDDEN SICKNES S OF SHRI RAM AVTAR, ADVOCATE, ENGAGED AS COUNSEL IN THIS CASE, W HO REMAINED ADMITTED IN THE HOSPITAL, WHICH IS A REASONABLE CAU SE, THE DELAY OF 2 DAYS IN FILING THE PRESENT APPEAL IS HEREBY CONDONE D. 3. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : APPLICATION DATED 15.03.2019 IN FORM NO.10A AND 10G MOVED BY THE APPELLANT SEEKING REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE AC T) WERE REJECTED BY THE LD. CIT (E) ON THE GROUNDS INTER AL IA THAT SINCE THE APPELLANT HAS FAILED TO FURNISH BALANCE SHEET AND I NCOME & EXPENDITURE ACCOUNT FOR THE FY 2018-19 DESPITE CALL ED FOR, THE ITA NO.9333/DEL./2019 3 CONDITIONS LAID DOWN U/S 12AA ARE NOT SATISFIED AND THAT THE NAME OF THE BAR COUNCIL OF DELHI DOES NOT APPEAR IN APPR OVED ASSOCIATION/INSTITUTION NOTIFIED BY THE GOVERNMENT THUS NOT A CHARITABLE INSTITUTION WITHIN THE MEANING OF SECTIO N 2(15) OF THE ACT. 4. FEELING AGGRIEVED, THE APPELLANT HAS COME UP BEF ORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. UNDISPUTEDLY, APPELLANT HAS BEEN ESTABLISHED WIT H OBJECT TO CONTROL, SUPERVISE, REGULATE OR ENCOURAGEMENT OF TH E PROFESSION OF LAW FOR WHICH THERE IS A SEPARATE PROVISION IN THE ACT AS CONTAINED U/S 10(23A) OF THE ACT FOR EXEMPTING ITS INCOME WHI CH SHALL NOT BE INCLUDED IN ITS TOTAL INCOME. LD. CIT (E) PROCEEDED TO REJECT THE APPLICATION U/S 12AA AND CONSEQUENT EXEMPTION U/S 8 0G OF THE ACT ON TWO GROUNDS INTER ALIA THAT (I) IN THE ABSEN CE OF FINANCIALS OF FY 2018-19, THE GENUINENESS OF THE ACTIVITIES OF TH E APPELLANT COULD NOT BE ESTABLISHED; AND (II) THAT THE APPELLANT IS NOT A NOTIFIED INSTITUTION BY THE GOVERNMENT OF INDIA. ITA NO.9333/DEL./2019 4 7. LD. AR FOR THE APPELLANT CHALLENGING THE IMPUGNE D ORDER CONTENDED INTER ALIA THAT AT THE TIME OF GRANT OF R EGISTRATION, THE LD. CIT (E) IS ONLY TO SATISFY HIMSELF ABOUT THE OBJECT OF THE TRUST/ INSTITUTION AND GENUINENESS OF ITS ACTIVITIES THAT THE APPELLANT IS A STATUTORY INSTITUTION HAVING BEEN ESTABLISHED U/S 3 (1)(F) OF THE FINANCE ACT, 1961 AND IS DULY NOTIFIED BY THE GOVER NMENT AND RELIED UPON THE DECISIONS RENDERED BY HONBLE SUPREME COURT IN THE CASES OF CIT VS. BAR COUNCIL OF MAHARASHTRA CIT ED AS 130 ITR 28 & AMERICAN HOTEL AND LODGING ASSOCIATION EDU CATIONAL INSTITUTE VS. CBDT & ORS. 301 ITR 86, HONBLE BOMBA Y HIGH COURT IN BAR COUNCIL OF MAHARASHTRA VS. CIT REPORTE D IN 126 ITR 27, HONBLE KERALA HIGH COURT IN SREE ANJANEYA MEDI CAL TRUST VS. CIT 382 ITR 399 AND HONBLE PUNJAB & HARYANA HI GH COURT IN CIT VS. BABA KARTAR SINGH DUKKI EDUCATIONAL TRUS T (2014) 221 TAXMAN 493 (P&H) . 8. LD. DR FOR THE REVENUE SUPPORTED THE ORDER PASSE D BY THE LD. CIT (E) BY CONTENDING INTER ALIA THAT IN ORDER TO FIND OUT REAL PURPOSE OF THE TRUST/INSTITUTION, THE BASIC FINANCI AL STATEMENTS OF FY 2018-19 WAS REQUIRED WHICH THE APPELLANT HAS NOT FU RNISHED; THAT ONE MORE OPPORTUNITY BE GIVEN TO THE APPELLANT TO F URNISH ALL THE NECESSARY DOCUMENTS TO BE EXAMINED BY LD. CIT (E) A ND RELIED UPON THE JUDGMENTS RENDERED BY HONBLE APEX COURT A S WELL AS ITA NO.9333/DEL./2019 5 VARIOUS HIGH COURTS VIZ. CIT VS. WILSONIA COLLEGE SOCIETY (2017- TIOL-1051-HC-ALL-IT), JAMMU DEVELOPMENT AUTHORITY V S. UOI (2014-TIOL-115-SC-IT), CIT VS. NATIONAL INSTITU TE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY 315 IT R 428 (UTTARANCHAL), CIT VS. A.R. TRUST 402 ITR 161 (ALLA HABAD), SHRI NATHJI EDUCATION FOUNDATION VS. CIT ITA NO.809/LKW/ 2014, SELF EMPLOYERS SERVICE SOCIETY VS. CIT 247 ITR 18 ( KERALA) AND KIRTI CHAND TARAWATI CH. TRUST VS. DIT 232 ITR 11 ( DELHI) . 9. FIRST OF ALL, LD. AR FOR THE APPELLANT DREW OUR ATTENTION TOWARDS NOTIFICATION DATED 09.08.1966 AVAILABLE AT PAGE 109 OF THE PAPER BOOK 2, ISSUED BY MINISTRY OF FINANCE, GOVERN MENT OF INDIA, GRANTING APPROVAL TO THE APPELLANT W.E.F 22.01.1962 IN TERMS OF CLAUSE (II) OF PROVISO TO SECTION 10(23A) OF THE AC T. THE APPELLANT ALSO BROUGHT ON RECORD COPY OF NOTIFICATION (SUPRA) GRANTING APPROVAL TO THE APPELLANT VIDE COMMUNICATION DATED 24.12.2019 ISSUED BY MINISTRY OF FINANCE, GOVERNMENT OF INDIA, AVAILABLE AT PAGES 176 TO 187 OF THE PAPER BOOK. BARE PERUSAL O F THE NOTIFICATION (SUPRA) GOES TO PROVE THAT LD. CIT (E) HAS FAILED TO TAKE NOTE OF THE FACT THAT VIDE NOTIFICATION (SUPRA), TH E APPELLANT HAS BEEN DULY APPROVED/NOTIFIED INSTITUTION FOR THE PUR POSE OF SECTION 10(23) OF THE ACT. ITA NO.9333/DEL./2019 6 10. NOW, THE NEXT QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER ACTIVITIES OF THE APPELLANT BAR CO UNCIL/ PROFESSIONAL BODY WHICH IS TO CONTROL, SUPERVISE AN D REGULATE PROFESSION IS NOT A CHARITABLE WITHIN THE MEANING O F DEFINITION CONTAINED U/S 2(15) OF THE ACT AS HAS BEEN HELD BY THE LD. CIT(E)? 11. HONBLE APEX COURT IN CASE OF CIT VS. BAR COUNCIL OF MAHARASHTRA CITED AS 130 ITR 28, AFFIRMING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN CASE OF BAR COUNCIL OF MAHARASHTRA VS. CIT REPORTED IN 126 ITR 27, HELD THAT PRIMARY AND DOMINANT PURPOSE OF AN INSTITUTION LIKE THE APP ELLANT IS THE ADVANCEMENT OF THE OBJECT OF GENERAL PUBLIC UTILITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT AND AS SUCH, TH E INCOME FROM SECURITIES HELD BY THE APPELLANT WOULD BE EXEMPT FR OM ANY TAX LIABILITY U/S 11 OF THE ACT. OPERATIVE PART OF THE JUDGMENT (SUPRA) IS EXTRACTED FOR READY PERUSAL AS UNDER :- IN OTHER WORDS, THE DOMINANT PURPOSE OF A STATE B AR COUNCIL AS REFLECTED BY THE VARIOUS OBLIGATORY FUNC TIONS IS TO ENSURE QUALITY SERVICE OF COMPETENT LAWYERS TO THE LITIGATING PUBLIC, TO SPREAD LEGAL LITERACY, PROMOTE LAW REFOR MS AND PROVIDE LEGAL ASSISTANCE TO THE POOR WHILE THE BENEFIT ACCR UING TO THE LAWYER MEMBERS IS INCIDENTAL. IT IS TRUE THAT SUB S . (2) PROVIDES THAT A STATE BAR COUNCIL MAY CONSTITUTE ONE OR MORE FUNDS FOR THE PURPOSE OF GIVING FINANCIAL ASSISTANCE TO ORGAN ISE WELFARE SCHEMES FOR THE INDIGENT, DISABLED OR OTHER ADVOCAT ES ; BUT IT IS AN OPTIONAL OR DISCRETIONARY FUNCTION TO BE UNDERTAKEN BY THE COUNCIL. APART FROM THAT, ADMITTEDLY, THE ASSESSEE COUNCIL HAS NOT SO FAR CONSTITUTED ANY SUCH FUND FOR THE PURPOSE SP ECIFIED IN THE INSTANT CASE. AS AND WHEN SUCH A FUND IS CONSTITUTE D, A QUESTION MAY ARISE FOR CONSIDERATION AND THE COURT MAY HAVE TO DECIDE WHETHER THE FUNCTION SO UNDERTAKEN BY A STATE BAR C OUNCIL HAS BECOME THE DOMINANT PURPOSE FOR WHICH THAT COUNCIL IS OPERATING. HAVING REGARD TO THE PREAMBLE OF THE ACT AND THE ITA NO.9333/DEL./2019 7 NATURE OF THE VARIOUS OBLIGATORY FUNCTIONS INCLUDIN G THE ONE UNDER CL. (D) ENJOINED UPON EVERY STATE BAR COUNCIL UNDER S. 6(1) OF THE ACT, IT IS CLEAR THAT THE PRIMARY OR DOMINAN T PURPOSE OF AN INSTITUTION LIKE THE ASSESSEE COUNCIL IS THE ADVANC EMENT OF THE OBJECT OF GENERAL PUBLIC UTILITY WITHIN THE MEANING OF S. 2(15) OF THE ACT, AND AS SUCH THE INCOME FROM SECURITIES HEL D BY THE ASSESSEE COUNCIL WOULD BE EXEMPT FROM ANY TAX LIABI LITY UNDER S. 11 OF THE ACT. 12. NOW, THE NEXT QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE LD. CIT (E) IS EMPOWERED TO REJE CT THE REGISTRATION AND CONSEQUENT EXEMPTION U/S 12AA AND 80G OF THE ACT DUE TO NON-FURNISHING OF FINANCIALS OF FY 2018- 19? 13. IT IS SETTLED PROPOSITION OF LAW THAT FOR THE P URPOSE OF REGISTRATION U/S 12AA OF THE ACT, THE THRESHOLD CON DITION I.E. GENUINENESS OF THE ACTIVITIES IS TO BE DECIDED WITH THE OBJECT CLAUSE OF INSTITUTION. IN OTHER WORDS, WHEN THE OBJECT OF THE INSTITUTION, THE APPELLANT IN THIS CASE, IS PROVED TO BE CHARITA BLE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT AS HAS BEEN HEL D BY HONBLE APEX COURT IN THE IDENTICAL FACTS AND CIRCUMSTANCES IN A CASE OF BAR COUNCIL OF MAHARASHTRA (SUPRA), FURTHER SCRUTINY OF THE FINANCIALS OF THE APPELLANT ARE NOT REQUIRED BECAUS E IT IS OTHERWISE WITHIN THE PURVIEW OF AO TO EXAMINE AT THE TIME OF ASSESSMENT IF THE APPELLANT IS ENTITLED TO EXEMPTION U/S 11 OF TH E ACT. 14. HONBLE KERALA HIGH COURT IN SREE ANJANEYA MEDICAL TRUST VS. CIT 382 ITR 399 HELD THAT, NO EXAMINATION OF MODUS OF THE ITA NO.9333/DEL./2019 8 APPLICATION OF THE FUNDS OF THE TRUSTEE COMMITTEE O R AN EXAMINATION OF THE ETHICAL BACKGROUND OF ITS SETTLER IS CALLED FOR WHILE CONSIDERING AN APPLICATION FOR REGISTRATION. THE S TAGE FOR CONSIDERATION OF THE RELEVANCE OF THE OBJECT OF THE ASSESSEE AND THE APPLICATION OF ITS FUNDS ARISES AT THE TIME OF ASSE SSMENT. 15. HONBLE APEX COURT IN CASE OF CIT VS. ANDHRA CHAMBER OF COMMERCE (1965) 55 ITR 722 (SC) HELD THAT AN OBJECT BENEFICIAL TO A SECTION OF THE PUBLIC WAS AN OBJECT OF GENERAL PUBLIC UTILITY, AS IN THE CASE OF APPELLANT, WHICH IS WORKING TO CONTR OL, SUPERVISE AND REGULATE A PROFESSION FOR THE BENEFIT OF LAWYERS CO MMUNITY AT LARGE. OPERATIVE PART OF THE JUDGMENT IS AS UNDER :- THAT THE EXPRESSION 'OBJECT OF GENERAL PUBLIC UTIL ITY' WAS NOT RESTRICTED TO OBJECTS BENEFICIAL TO THE WHOLE OF MA NKIND. AN OBJECT BENEFICIAL TO A SECTION OF THE PUBLIC WAS AN OBJECT OF GENERAL PUBLIC UTILITY. TO SERVE A CHARITABLE PURPOSE, IT W AS NOT NECESSARY THAT THE OBJECT SHOULD BE TO BENEFIT THE WHOLE OF M ANKIND OR EVEN ALL PERSONS LIVING IN A PARTICULAR COUNTRY OR PROVI NCE. IT WAS SUFFICIENT IF THE INTENTION WAS TO BENEFIT A SECTIO N OF THE PUBLIC AS DISTINGUISHED FROM SPECIFIED INDIVIDUALS. THE SECTI ON OF THE COMMUNITY SOUGHT TO BE BENEFITED MUST UNDOUBTEDLY B E SUFFICIENTLY DEFINED AND IDENTIFIABLE BY SOME COMMO N QUALITY OF A PUBLIC OR IMPERSONAL NATURE: WHERE THERE IS NO COMM ON QUALITY UNITING THE POTENTIAL BENEFICIARIES INTO A CLASS, I T MIGHT NOT BE REGARDED AS VALID. 16. HONBLE DELHI HIGH COURT IN CASE OF DIT VS. FOUNDATION OF OPHTHALMIC & OPTOMETRY RESEARCH EDUCATION CENTRE 35 5 ITR 361 (DEL.) HAS HELD TO THE EXTENT THAT EVEN IF THERE IS NO COMMENCEMENT OF CHARITABLE ACTIVITIES, REGISTRATION U/S 12AA OF THE ACT CANNOT BE DENIED BECAUSE THE STATUTE DOES N OT PROHIBIT OR ITA NO.9333/DEL./2019 9 ENJOIN THE COMMISSIONER FROM REGISTERING A TRUST SO LELY BASED UPON ITS OBJECTS WITHOUT ANY ACTIVITY IN CASE OF A NEWLY REGISTERED TRUST. 17. IN VIEW OF THE MATTER, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(E) HAS ERRED IN DECLINING THE REGISTRATION U/S 12AA OF THE ACT ON THE GROUND THAT FINANCIALS OF FY 2018-19 HAV E NOT BEEN FURNISHED BY THE APPELLANT. 18. FURTHERMORE, CURSORY FINDINGS RETURNED BY THE L D. CIT (E) IN THE IMPUGNED ORDER THAT, THE PROVISIONS OF SECTION 11 TO 13 SPECIFICALLY SECTION 12AA ARE NOT APPLICABLE TO SUC H ORGANISATION OR INSTITUTION , IS NOT CORRECT INTERPRETATION OF LAW AS HONBLE A PEX COURT IN THE JUDGMENT CITED AS CIT VS. BAR COUNCIL OF MAHARASHTRA (SUPRA) HELD THAT TWO PROVISIONS VIZ. SECTION 11 & SECTION 10(23A) ARE NOT MUTUALLY EXCLUSIVE BUT OPER ATED UNDER DIFFERENT CIRCUMSTANCES. SO, MERELY ON THE BASIS O F THE FACT THAT INCOME OF THE APPELLANT EXEMPTED U/S 10(23A) IS NOT A BAR TO CLAIM DEDUCTION IN ASSESSMENT U/S 11 OF THE ACT, AS SUCH INCOME IS TO BE EXCLUDED U/S 11 OF THE ACT. 19. FURTHERMORE, THE APPELLANT HAD FURNISHED FINANC IALS OF FYS 2016-17 & 2017-18 BUT THE LD. CIT (E), WITHOUT MAKI NG ANY ADVERSE FINDINGS ON THE SAME, PROCEEDED TO REJECT T HE REGISTRATION ON THE GROUND THAT FINANCIALS OF FY 2018-19 HAVE NO T BEEN FURNISHED. THOUGHT IT IS NOT A REQUIREMENT OF LAW TO FURNISH THE ITA NO.9333/DEL./2019 10 FINANCIALS AS REQUIRED BY THE LD. CIT (E) THE APPEL LANT HAS COME UP WITH ARGUMENT THAT NOW THE FINANCIALS OF FY 2018-19 ARE AVAILABLE AND THEY ARE READY TO FURNISH THE SAME. 20. IN VIEW OF WHAT HAS BEEN DISCUSSED IN THE PRECE DING PARAS, WE ARE OF THE CONSIDERED VIEW THAT THE APPELLANT BE ING ENGAGED IN SAFEGUARDING THE RIGHTS, PRIVILEGES AND INTEREST OF THE ADVOCATES, ITS DOMINATING PURPOSE IS THE ADVANCEMENT OF GENERAL PU BLIC UTILITY WITHIN THE MEANING OF SECTION 2(15) OF THE ACT, AS SUCH, GENUINENESS OF ITS ACTIVITIES AND OBJECT OF CHARITA BLE PURPOSE IS PROVED, THUS ENTITLED FOR REGISTRATION U/S 12AA AND CONSEQUENT EXEMPTION U/S 80G. CONSEQUENTLY, APPEAL FILED BY T HE APPELLANT IS ALLOWED DIRECTING THE LD. CIT (E) TO PROVIDE REGIST RATION U/S 12AA AND CONSEQUENT EXEMPTION U/S 80G OF THE ACT TO THE APPELLANT. ORDER PRONOUNCED IN OPEN COURT ON THIS 2 ND DAY OF JULY , 2020. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE DAY OF JULY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(E), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.