Karandhai Tamil Sangam, Thanjavur V. CIT, Trichy

ITA 960/CHNY/2011

• Counselvise Citation: 96021714 RSA 2011
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR STAND ING
• Assessee Lawyers: K MEENAKSHISUNDARAM ITP
• Keywords: Charitable institution
• Section: 12AA; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.960(MDS)/2011 ASSESSMENT YEAR: 2010-11 KARANDHAI TAMIL SANGAM, 1922, SESHAIYA SASTHRIYAR ROAD, KARUTHATTANGUDI, THANJAVUR. PAN AABTK6593P VS. THE COMMISSIONER OF INCOME-TAX-II, TIRUCHIRAPALLI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.MEENAKSHISUNDARAM, ITP RESPONDENT BY: SHRI KEB RENGARAJAN, JR.STAND ING COUNSEL. DATE OF HEARING : 9 TH AUGUST, 2011 DATE OF PRONOUNCEMENT : 9 TH AUGUST, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX-II - - ITA NO.960 OF 2011 2 AT TIRUCHIRAPALLI. THE COMMISSIONER OF INCOME-TAX BY HIS ORDER DATED 29-4-2011 HAS REJECTED THE APPLICATION PUT IN BY THE ASSESSEE IN FORM 10A FOR GRANT OF REGISTRATION UNDE R SECTION 12AA OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE SOCIETY WAS FORMED ON 14-5-1911 AND REGISTERED ITSELF AS A SOCIETY ON 1-5-1914. TH E OBJECTS OF THE SOCIETY AS GIVEN IN CHAPTER II OF THE MEMORANDUM OF ASSOCIATION AND BYE-LAWS OF THE SOCIETY ARE TO ADVANCE AND IMPR OVE THE CAUSE AND CONDITION OF TAMIL AND TAMILIANS, TO PROM OTE FRIENDLY AND SOCIAL INTERCOURSE AMONG THE MEMBERS, TO MAINTA IN THE CHARITABLE INSTITUTION OF TAMILIANS, TO AFFORD FACI LITIES FOR THE PHYSICAL, MORAL, SOCIAL AND EDUCATIONAL IMPROVEMENT OF ITS MEMBERS AND TO HELP THE INDUSTRIAL AND ECONOMIC ADV ANCEMENT OF TAMILIANS. IN PURSUANCE OF ITS OBJECTS THE SOCI ETY IS RUNNING EIGHT INSTITUTIONS. SOME OF THE INSTITUTIONS ARE A IDED, SOME ARE SELF FINANCED AND SOME ARE PARTLY AIDED AND PARTLY SELF FINANCED. THE AIDED INSTITUTIONS ARE UMAMAHESWARANAR HIGHER S ECONDARY SCHOOL, RADHAKRISHNA ELEMENTARY SCHOOL AND ORPHANAG E STUDENT HOME. PARTLY AIDED INSTITUTION IS UMAMAHES WARANAR ARTS COLLEGE. SELF FINANCING INSTITUTIONS ARE UMAM AHESWARANAR - - ITA NO.960 OF 2011 3 TEACHER TRAINING SCHOOL, PALANISAMY ITI, UMAMAHESWA RNAR B.ED. COLLEGE AND S.R.NURSERY SCHOOL. 3. THERE WAS A SURVEY CARRIED OUT ON 4-8-2010 IN T HE BACKDROP OF SOME ALLEGATIONS LEVELED AGAINST THE AS SESSEE SOCIETY. THEREUPON THE ASSESSEE SOCIETY SOUGHT FOR GETTING REGISTERED UNDER SECTION 12AA OF THE ACT. 4. BUT THE COMMISSIONER OF INCOME-TAX FOUND THAT T HE ASSESSEE HAS NOT FURNISHED AUDITED ACCOUNTS IN FORM 10B AND THE DETAILED ACCOUNTS OF THE ABOVE STATED EIGHT INS TITUTIONS. THE COMMISSIONER OF INCOME-TAX HAS NOTED A NUMBER OF DE FECTS IN THE ACCOUNTS SUCH AS TRANSFER OF SURPLUS FUNDS FROM ONE INSTITUTION TO ANOTHER, ESPECIALLY TO SANGAM AS DON ATION. HE ALSO ALLEGED THAT THE ASSESSEE IS ACCEPTING DONATIONS FO R ADMITTING STUDENTS TO DIFFERENT COURSES. 5. APART FROM THE ABOVE ACCOUNTING AND TECHNICAL LAPSES ON THE PART OF THE ASSESSEE, THE MOST IMPORT ANT OBJECTION RAISED BY THE COMMISSIONER OF INCOME-TAX IS THAT TH E ASSESSEE TALKS ONLY ABOUT PROMOTING AND ADVANCING THE INTERE STS OF TAMILIANS AND THAT OBJECT GOES AGAINST THE GRAIN OF NATIONAL INTEGRATION. HE HELD THAT SUCH A SOCIETY MIGHT HAV E BEEN - - ITA NO.960 OF 2011 4 JUSTIFIED IN PRE INDEPENDENT INDIA, BUT NOT AFTER I NDEPENDENCE. HE HELD THAT ANY SUCH SOCIETY WHICH PROMOTES REGION ALISM AND SECTARIAN VIEWS NEED NOT BE ENCOURAGED AT THE EXPEN SE OF THE EXCHEQUER. HE OBSERVED THAT WHEN THERE ARE TEEMING MILLIONS FINDING IT DIFFICULT TO SURVIVE AND MAKE BOTH ENDS MEET, GRANTING OF TAX EXEMPTION TO SUCH SOCIETY, WHICH PROMOTES REGIO NALISM AND SECTARIAN INTEREST, DOES NOT HAVE SANCTION OF THE C ONSTITUTION AND OUGHT NOT TO BE ALLOWED BY ANY WING OF THE GOVERNME NT. HE HELD THAT SOME OF THE OBJECTS OF THE SOCIETY CANNOT BE C ONSIDERED AS CHARITABLE AS SOME OF THE OBJECTS GO AGAINST THE GR AIN OF NATIONAL INTEGRATION. 6. THEREAFTER, DISCUSSING A NUMBER OF DECISIONS AN D REFERRING TO VARIOUS DICTIONARIES, HE FINALLY HELD THAT THE ASSESSEE IS NOT ENTITLED FOR REGISTRATION UNDER SECTION 12AA . 7. TO BRING DOWN A LONG STORY TO SHORT, THE COMMISSIONER OF INCOME-TAX HAS HELD THAT THE ASSESS EE IS NOT A CHARITABLE INSTITUTION ENTITLED FOR REGISTRATION UN DER SECTION 12AA OF THE ACT. FIRST OF ALL LET US DEAL WITH THE MOST VOCIFEROUS OBJECTION RAISED BY THE COMMISSIONER OF INCOME-TAX AGAINST THE ASSESSEE SOCIETY. THE OBJECTION OF THE COMMISSIONE R OF - - ITA NO.960 OF 2011 5 INCOME-TAX IS THAT THE ASSESSEE SOCIETY HAS BEEN ES TABLISHED WITH THE SOLE OBJECT OF PROMOTING THE INTERESTS OF TAMILIANS. IT IS THE VIEW OF THE COMMISSIONER OF INCOME-TAX THAT THE SOCIETY WAS ESTABLISHED IN 1911 AND DURING THOSE DAYS OF PRE IN DEPENDENCE, SUCH ACTIVITIES COULD HAVE BEEN JUSTIFIED, BUT, AFT ER INDEPENDENCE, INDIA BEING ONE NATION, SUCH SECTARIA N ACTIVITIES COULD NOT BE TREATED AS CHARITABLE IN NATURE AS THE Y ULTIMATELY GO AGAINST THE SPIRIT OF NATIONAL UNITY AND INTEGRATIO N. 8. WE DO NOT UNDERSTAND WHAT MADE THE COMMISSIONER OF INCOME-TAX TO THINK SO EMOTIONALLY ON THE OBJECTIVES OF THE ASSESSEE SOCIETY. THE INCOME-TAX ACT NOWHERE STATES WITH REFERENCE TO THE LAW RELATING TO CHARIT ABLE SOCIETIES THAT AN INSTITUTION SHOULD NOT CONCENTRATE ON THE I MPROVEMENT OF A PARTICULAR LINGUISTIC STATE. IT IS TO BE SEEN TH AT THE STATES IN INDIA THEMSELVES HAVE BEEN FORMED ON THE BASIS OF L ANGUAGE. IN OTHER WORDS, THE STATES IN INDIA ARE LINGUISTIC IN NATURE. IF THE PROPOSITION LAID DOWN BY THE COMMISSIONER OF INCOME -TAX IS ACCEPTED, FORMATION OF STATES ON THE BASIS OF LANGU AGES IS ALSO AGAINST THE SPIRIT OF NATIONAL UNITY AND NATIONAL I NTEGRATION. RECENTLY, UNION GOVERNMENT THEMSELVES HAVE GRANTED TAMIL, - - ITA NO.960 OF 2011 6 THE STATUS OF CLASSICAL LANGUAGE. THESE MATTERS ARE NOT THE RELEVANT POINTS TO BE DISCUSSED IN THE CONTEXT OF S ECTION 12AA OF THE INCOME-TAX ACT, 1961. THE PERSONAL VIEWS OF TH E AUTHORITIES ARE NOT THE PARAMETERS TO FOLLOW WHILE ADJUDICATING AN ISSUE. LAW RELATING TO CHARITY, AS GIVEN IN THE INCOME-TAX ACT, DOES NOT PROHIBIT AN INSTITUTION FROM WORKING FOR THE UPLIFT MENT AND BETTERMENT OF A PARTICULAR LINQUISTIC GROUP. MOREOV ER, WHAT IS THE ESSENCE OF A CHARITABLE INSTITUTION FOR THE PURPOSE OF INCOME-TAX ACT IS SERVICE TO THE PUBLIC. THE HONBLE SUPREME COURT HAS HELD IN UMPTEEN NUMBER OF CASES THAT A LARGE BLOCK OF PEOPLE, IDENTIFIED ON ANY OF THE ACCEPTABLE TESTS, ARE TO B E CONSIDERED AS PUBLIC FOR THE PURPOSE OF CHARITY. IN THAT WAY SCH OOL CHILDREN ARE PUBLIC, TEACHERS ARE PUBLIC, DOCTORS AT LARGE ARE P UBLIC AND SOLDIERS AS A WHOLE ARE PUBLIC. MEMBERS OF A TRADE ASSOCIATION ARE PUBLIC. PUBLIC DOES NOT MEAN THE ENTIRE POPU LATION OF ALL THE STATES IN INDIA. 9. FEELING OF BEING TAMILIAN IS NOT ANTI NATIONAL. AS FAR AS TAMILIANS ARE CONCERNED, TAMIL IS THEIR MOTHER T ONGUE. AS FAR AS PUNJABIS ARE CONCERNED PUNJABI IS THEIR MOTHER T ONGUE. THEREFORE, TO PREACH TAMIL OR PUNJABI AND TO PROMOT E TAMIL OR - - ITA NO.960 OF 2011 7 PUNJABI CULTURE OR TO HELP TAMIL OR PUNJABI PEOPLE DO NOT BECOME ANTI NATIONAL OR GO AGAINST THE PRINCIPLES OF NATIO NAL INTEGRATION. THE SALIENT FEATURE OF INDIAN SOCIETY IS UNITY IN DIVERSITY. 10. WE ARE OF THE VIEW THAT TAMILIANS AS A GROUP AMOUNTS TO PUBLIC AND THEREFORE LAWFUL ACTIVITIES U NDERTAKEN BY AN INSTITUTION FOR THE OVERALL PROSPERITY OF TAMILI ANS SHOULD BE TREATED AS CHARITABLE ACTIVITIES. 11. NOW, GOING TO MORE DETAILS, ALL THE INSTITUTIO NS OF THE ASSESSEE SOCIETY ARE RUNNING EDUCATIONAL INSTITUTIO NS. EDUCATIONAL ACTIVITY IS CONSIDERED AS ONE AMONG THE CHARITABLE ACTIVITIES. THE ASSESSEE IS ALSO RUNNING AN ORPHAN AGE. RUNNING AN ORPHANAGE IS NOTHING BUT A NOBLE CHARITABLE ACTI VITY. THE COMMISSIONER OF INCOME-TAX HAS OBJECTED TO ACCEPTIN G OF DONATIONS/CAPITATION FEES AT THE TIME OF ADMISSION INTO DIFFERENT COURSES. OFCOURSE, CAPITATION FEE AS SUCH IS AN UN LAWFUL THING AND A CURSE ON OUR SOCIETY. BUT THE INCOME-TAX ACT IS NOT LOOKING BEHIND SUCH EVENTS TO FIND OUT THE MORAL RIGHTEOUSN ESS OF SUCH ACTS. OBJECTION CAN BE TAKEN ONLY IF THE DONATIONS ARE MADE INVOLUNTARILY. THE COMMISSIONER OF INCOME-TAX HAS NO CASE THAT THE STUDENTS HAD DONATED OUT OF COMPULSION OR FORCE . THEREFORE - - ITA NO.960 OF 2011 8 IT IS TO BE PRESUMED THAT THE STUDENTS WHO SOUGHT A DMISSION IN THE INSTITUTIONS RUN BY THE ASSESSEE HAD GIVEN THE DONATIONS VOLUNTARILY. SO, FOR THE LIMITED PURPOSE OF INCOME -TAX ACT, THE DONATIONS COLLECTED BY THE ASSESSEE SOCIETY ARE TO BE TREATED AS VOLUNTARILY CONTRIBUTIONS. VOLUNTARY CONTRIBUTIONS ARE IN THE NATURE OF INCOME OF A CHARITABLE SOCIETY. 12. HAVING STATED SO, THE NEXT QUESTION TO BE LOOK ED INTO IS WHETHER THE ASSESSEE HAS APPLIED ANY OF ITS FUNDS FOR PURPOSES OTHER THAN CHARITABLE ACTIVITIES. THERE I S NOTHING ON RECORD TO SHOW THAT THE ASSESSEE HAS APPLIED ITS FU NDS FOR NON CHARITABLE OR RELIGIOUS PURPOSES. 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, W E FIND THAT APART FROM THE PERSONAL OBSERVATIONS MADE BY T HE COMMISSIONER OF INCOME-TAX, THERE ARE NO LEGALLY SU STAINABLE REASONS TO DENY REGISTRATION TO THE SOCIETY UNDER S ECTION 12AA OF THE INCOME-TAX ACT, 1961. 14. WE FIND THAT THE ASSESSEE IS ELIGIBLE FOR REG ISTRATION UNDER SECTION 12AA. AS THE SOCIETY HAS BEEN ESTABL ISHED ALMOST A CENTURY AGO AND HAS BEEN CARRYING ON EDUCATIONAL ACTIVITIES, THE ASSESSEE SHOULD BE GRANTED REGISTRATION RETROSP ECTIVELY. IF - - ITA NO.960 OF 2011 9 ANY FORMALITIES LIKE AUDITING, PRESENTATION OF ACCO UNTS AND FILING FORMS ARE CALLED FOR, THE ASSESSEE MAY BE GIVEN A R EASONABLE OPPORTUNITY TO COMPLY WITH THOSE PROCEDURAL REQUIRE MENTS. ACCORDINGLY, THE COMMISSIONER OF INCOME-TAX IS DIRE CTED TO GRANT RETROSPECTIVE REGISTRATION TO THE ASSESSEE UNDER SE CTION 12AA OF THE INCOME-TAX ACT, 1961. 15. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 9 TH DAY OF AUGUST, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 9 TH AUGUST, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.