Indus Foundation, Hyd, Hyderabad V. CIT, (Exemptions), Hyd, Hyderabad

ITA 960/HYD/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3053 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-01-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 21-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION HYDERABAD 500 034. PAN AABTT8010G VS. THE CIT (EXEMPTIONS) AAYAKAR BHAVAN HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. PSRVV SURYA RAO FOR REVENUE : MR. KONDA RAMESH DATE OF HEARING : 28.01.2016 DATE OF PRONOUNCEMENT : 10 .02.2016 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y. 2012- 2013. ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CIT (E) REJECTING ASSESSEES APPLICATION FOR REGISTRATION U NDER SECTION 12AA OF THE I.T. ACT, 1961. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A TRUST FORMED BY A TRUST DEED EXECUTED ON 23.04.2010 , FILED AN APPLICATION IN FORM-10A ON 13.02.2012 SEEKING REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT. SI NCE THE ASSESSEE COULD NOT FURNISH THE REQUIRED INFORMATION TO VARIOUS QUERIES RAISED BY THE CIT(E) AND ALSO COULD NOT PRODUCE THE BOOKS OF ACCOUNT FOR VERIFICATION, THE APPLICATION FOR REGISTRATION WAS REJECTED BY THE CI T(E) VIDE 2 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD ORDERS DATED 31.07.2012. ON APPEAL FILED BY THE ASS ESSEE, THE ORDER OF THE DIT(E) WAS SET ASIDE BY THE TRIBUN AL IN ITA.NO.1527/HYD/2012 DATED 22.02.2013 AND DIRECTED THE CIT(E) TO RECONSIDER THE APPLICATION AFTER GIVI NG THE ASSESSEE ADEQUATE OPPORTUNITY OF HEARING. CONSEQUEN T THERETO, CIT(E) RECONSIDERED THE ASSESSEES SUBMISS IONS AND CALLED FOR THE VARIOUS DETAILS WHICH WERE FURNI SHED BY THE REPRESENTATIVE OF THE ASSESSEE. THE CIT(E) PERU SED THE TRUST DEED FILED BY THE ASSESSEE AND OBSERVED THAT THE ASSESSEE INSTITUTION IS ESTABLISHED TO PROVIDE AND PROMOTE EDUCATION EITHER ON ITS OWN OR THROUGH CORROBORATIV E PROGRAMMES AND TO PROVIDE VARIOUS SERVICES IN RELAT ION TO EDUCATION. THE CIT(E) OBSERVED THAT THE ASSESSEE I S MAINLY INVOLVED IN THE ACTIVITY OF HOLDING VARIOUS EDUCATIONAL SUMMITS IN ASSOCIATION WITH INDUS FOUNDATION INC. USA. FOREIGN PROGRAMME PARTNER, WIT H WHICH IT HAS ALSO ENTERED INTO TWO MOUS DATED 28.05.2010. ON PERUSAL OF BOTH THE MOUS, THE CIT(E) NOTICED THAT THE MOU IS SIGNED BY MR. S.B. ANUMOLU, AS PRESIDENT OF THE INDUS FOUNDATION INC. WHO IS ALSO THE MANAGING TRUSTEE OF THE ASSESSEE TRUST AND THE SECO ND MOU IS SIGNED BY JOHN BOLTON, CEO OF THE INDUS FOUNDATION INC. AND ON BEHALF OF THE ASSESSEE TRUST IT IS SIGNED BY MR. S.B. ANUMOLU AS THE AUTHORISED REPRESENTATIVE OF THE INDUS FOUNDATION INC. HE OBSE RVED THAT THE MANAGING TRUSTEE MR. S.B. ANUMOLU IS ALSO HOLDING AN IMPORTANT POSITION IN THE FOREIGN PARTNE R I.E., INDUS FOUNDATION INC. USA. HE OBSERVED THAT THE MO U IS ENTERED FOR THE PURPOSE OF HOLDING EDUCATIONAL SUMM ITS IN 3 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD INDIA AND THE ROLE AND ACTIVITIES OF THE ASSESSEE A ND THE SAID FOREIGN PARTNER ARE INDICATED THEREIN AND EVEN PART OF THE EXPENDITURE, FOR HOLDING SUCH SUMMITS, TO BE OW NED BY THE RESPECTIVE PARTIES WAS ALSO INDICATED THEREI N. HE OBSERVED THAT AS PER THE FIRST MOU, THE PARTICIPATI ON FEE WILL BE AROUND RS.3000 PER PERSON IN EACH CITY, WHE REAS, IN THE SECOND MOU, IT IS MENTIONED THAT THERE WILL BE NO PARTICIPATION FEE FOR STUDENTS AND FURTHER THAT PARTICIPATION FEE WILL BE DETERMINED AND DECIDED FR OM TIME TO TIME AFTER TAKING INTO ACCOUNT THE COST INVOLVED IN HOSTING THE EVENTS. IT WAS ALSO OBSERVED THAT ALL T HE REVENUES ACCRUING FROM THE SUMMITS BY WAY OF PARTICIPATION FEE AND SPONSORSHIP WILL BE DEPOSITED INTO THE BANK ACCOUNT IN INDIAN BANK UNDER THE NAME IND IA FOUNDATION AND THAT ALL THE EXPENSES INCURRED IN I NDIA FOR ORGANIZING THE SUMMITS INCLUDING HOTEL ACCOMMODATION, EVENT VENUE RENTALS ETC., WILL BE PA ID BY THE FOUNDATION. FROM THE SECOND MOU I.E., CIT(E) OBSERVED THAT THE EXPENDITURE INCURRED BY THE ASSOC IATE I.E., THE FOREIGN PARTNER, IN RELATION TO THE EVENT HOSTED BY THE FOUNDATION, WILL BE TAKEN INTO ACCOUNT BY THE FOUNDATION FROM TIME TO TIME AND FURTHER THAT THE PARTICIPATION FEE CHARGED BY THE ASSESSEE FROM VARI OUS PARTICIPANTS SHOWN IN THE INCOME AND EXPENDITURE ACCOUNT FOR DIFFERENT ACCOUNTING YEARS, MAY INCLUDE EXPENDITURE INCURRED FOR MOBILIZING FOREIGN INSTITU TIONS/ UNIVERSITIES FOR PARTICIPATING IN SUCH EDUCATIONAL SUMMITS HOSTED BY THE ASSESSEE TRUST IN INDIA. THUS, THE CI T(E) OBSERVED THAT THE ACTIVITIES OF THE ASSESSEE ARE BO TH IN 4 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD INDIA AS WELL AS OUTSIDE INDIA AND THEREFORE, THE A SSESSEE IS NOT ELIGIBLE FOR REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT. FURTHER, HE ALSO NOTICED THAT THE OBJECTS OF THE ASSESSEE INCLUDE CHARITABLE AS WELL AS NON-CHARITAB LE ACTIVITIES. THEREFORE, HE REJECTED THE ASSESSEES A PPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT AGAINST WHICH, THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORI TIES BELOW AND SUBMITTED THAT THE MAIN OBJECT OF THE ASS ESSEE WAS TO HELP THE PEOPLE IN PURSUING EDUCATION AT ALL LEVELS, INCLUDING HIGHER EDUCATION AND RESEARCH IN ANY FIEL D, WITHOUT ANY DISTINCTION OF CASTE, CREED, RACE OR SE X. HE HAS SUBMITTED THAT THE OTHER OBJECTS ARE ONLY INCID ENTAL TO THE MAIN OBJECTS AND THE ASSESSEE HAS NOT CARRIED O UT ANY ACTIVITY OUTSIDE INDIA DURING THE RELEVANT ASSESSME NT YEAR. HE HAS ALSO DRAWN OUR ATTENTION TO THE FINANC IALS OF THE ASSESSEE TRUST TO DEMONSTRATE THAT THE EXPENDIT URE INCURRED BY THE FOREIGN PARTNER HAS BEEN REDUCED FR OM THE CLAIM OF EXPENDITURE FOR THE YEAR ENDING 31.03.2011 . THUS, ACCORDING TO HIM, ASSESSEE HAS BEEN CARRYING ON EDUCATIONAL ACTIVITIES WHICH ARE CHARITABLE IN NATU RE AND THE ASSESSEE IS THUS ELIGIBLE FOR REGISTRATION UNDE R SECTION 12AA OF THE I.T. ACT. HE PLACED RELIANCE UPON THE F OLLOWING DECISIONS IN SUPPORT OF THIS CONTENTION. 1. GEORGE INSTITUTE & GLOBAL HEALTH VS. DIT(E), HYDERABAD (2014) 49 TAXMANN.COM 248 (HYDERABAD TRIB.) 5 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD 2. INTERNATIONAL BHAKTIVEDANTA INSTITUTE TRUST VS. DIT(E), HYDERABAD (2014) 42 TAXMANN.COM 330 (HYDERABAD TRIB.) 3.1. IN SUPPORT OF HIS CONTENTION THAT EVEN IF THE ACTIVITIES OF A TRUST ARE EXTENDED OUTSIDE INDIA, A S LONG AS THE PROPERTY IS HELD WHOLLY AND EXCLUSIVELY UNDER T RUST FOR CHARITABLE AND RELIGIOUS PURPOSES AS PROVIDED UNDER SECTION 11 OF THE ACT, THEN, SUCH A TRUST, SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS, WILL BE ENTITLED T O REGISTRATION, THE LD. COUNSEL FOR THE ASSESSEE RELI ED UPON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF CRITICAL ART & MEDIA PRACTICES VS. DIT(E), MUMBAI (2015) 56 TAXMANN.COM 118 (MUMBAI TRIB.). THUS, ACCORDING T O THE LD. COUNSEL FOR THE ASSESSEE, THE CIT(E) HAS DE NIED THE REGISTRATION ERRONEOUSLY. 4. THE LD. D.R., ON THE OTHER HAND, DREW OUR ATTENTION TO VARIOUS CLAUSES OF OBJECTS OF THE TRUS T DEED, TO DEMONSTRATE THAT ASSESSEE INTENDS TO CARRY ON THE ACTIVITIES BOTH IN INDIA AS WELL AS OUTSIDE INDIA A ND THAT THERE IS NO LIMITATION ON THE UTILISATION OF FUNDS OUTSIDE INDIA. THUS, ACCORDING TO HIM, THE CIT(E) HAS PROPE RLY APPRECIATED THE FACTS IN REJECTING ASSESSEES APPLI CATION FOR REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT . HE ALSO TRIED TO DISTINGUISH THE CASE LAW RELIED UPON BY TH E LD. COUNSEL FOR THE ASSESSEE. 5. HAVING REGARD TO THE RIVAL CONTENTION S AND THE MATERIAL ON RECORD AS WELL AS THE TRUST DEED AN D VARIOUS CLAUSES THEREOF, WE FIND THAT ASSESSEE ONLY 6 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD INTENDS TO FACILITATE THE EDUCATION PROGRAMMES IN A ND OUTSIDE INDIA, BUT IS NOT CARRYING ON THE EDUCATION ACTIVITIES AS SUCH. IT INTENDS TO BE A FACILITATOR BY HOLDING VARIOUS SUMMITS, PARTICULARLY, IN THE FIELD OF HIGH ER EDUCATION BY BRINGING IN FOREIGN UNIVERSITIES. FURT HER, THE ASSESSEE ALSO INTENDS TO DEVELOP, PROCESS, EXPORT A ND MARKET ALL TYPES OF EDUCATIONAL MATERIAL AND SOFTWA RE BOTH IN INDIA AND ABROAD. WE FIND THAT THE ACTIVITIES OF THE ASSESSEE ARE NOT RESTRICTED TO INDIA, NOR IS THE AP PLICATION OF INCOME EARNED BY THE ASSESSEE RESTRICTED TO APPL ICATION OF THE SAME WITHIN INDIA. THE RELIANCE OF THE ASSES SEE ON THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL AT HYDERABAD IN THE CASE OF INTERNATIONAL BHAKTIVEDANT A INSTITUTE TRUST VS. DIT(E) (CITED SUPRA), IS, IN OU R OPINION, MISPLACED, AS, IN THE SAID CASE, THE TRIBUNAL HAS O BSERVED THAT THE TRUST DEED ITSELF PROVIDES FOR A CLAUSE TH AT THE AREA OF OPERATION WAS THROUGHOUT INDIA AND FURTHER THAT EVEN IF ACTIVITIES EXPANDS TO PLACES OUTSIDE INDIA, THOSE OUTSIDE ACTIVITIES WOULD NOT BE FUNDED THROUGH THE INDIAN FUNDS. THE TRIBUNAL HAS OBSERVED THAT THE ASSESSEE THEREIN HAD NOT CARRIED OUT ACTIVITIES OUTSIDE INDI A AND THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD TO SHOW THAT THE FUNDS HAVE BEEN APPLIED OUTSIDE THE COUNTRY. IT WAS, UNDER THESE CIRCUMSTANCES, THAT THE TRIBUNAL HAS HE LD THAT THE ASSESSEE THEREIN, WAS ELIGIBLE FOR REGISTR ATION UNDER SECTION 12AA OF THE I.T. ACT. IN THE CASE BEF ORE US, WE FIND THAT THERE IS NO SUCH CLAUSE IN THE TRUST D EED BUT IN FACT, THE TRUST DEED PROVIDES FOR APPLICATION OF FUNDS TO THE ACTIVITIES MENTIONED IN BOTH THE MAIN AS WELL A S THE 7 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD SUBSIDIARY OR ANCILLARY OR INCIDENTAL OBJECTS OF TH E TRUST. THEREFORE, THE SAID DECISION IS NOT APPLICABLE TO T HE FACTS OF THE CASE BEFORE US. THE OTHER JUDGMENT RELIED UP ON BY THE LD. COUNSEL FOR THE ASSESSEE IS ONLY TO THE EFF ECT THAT THE ASSESSEE CAN CARRY ON BOTH CHARITABLE AS WELL A S NON- CHARITABLE ACTIVITIES AND THE DIT(E)/CIT(E) AT THE TIME OF GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT CANNOT STEP INTO THE SHOES OF THE A.O. TO EXAMINE WHETHER ASSESSEE HAS CARRIED OUT ANY ACTIVITY WITH PROFIT M OTIVE OR THAT THERE IS VIOLATION OF CONDITIONS LAID DOWN UND ER SECTION 11 BUT IS ONLY TO SEE IF THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATURE. IN THE CASE BEFO RE US, WE FIND THAT ASSESSEE IS NOT CARRYING ON THE CHARIT ABLE ACTIVITY OF IMPARTING EDUCATION, BUT IS ONLY HOLDIN G EDUCATION SUMMITS TO FACILITATE AND HELP PEOPLE IN PURSUING HIGHER EDUCATION BY IDENTIFYING FOREIGN AN D INDIAN INSTITUTES ETC. THEREFORE, WE FIND THAT ASSE SSEE IS ALSO NOT CARRYING ON THE CHARITABLE ACTIVITY AS REQ UIRED UNDER SECTION 2(15) OF THE I.T. ACT. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE C IT(E) DENYING THE REGISTRATION UNDER SECTION 12AA OF THE I.T. ACT. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. 8 ITA.NO.960/HYD/2015 M/S. INDUS FOUNDATION, HYDERABAD ORDER PRONOUNCED IN THE OPEN COURT ON 10.02.2016 SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 10 TH FEBRUARY, 2016 VBP/- COPY TO 1. M/S. INDUS FOUNDATION, HYDERABAD 500 034. C/O. A. RAMACHANDRA RAO & CO., 3-6-369/A/11, 1 ST FLOOR, STREET NO.1, HIMAYATNAGAR, HYDERABAD 029. 2. THE CIT(E), AAYAKAR BHAVAN, HYDERABAD. 3. THE INCOME TAX OFFICER (E), WARD - 2, HYDERABAD. 4. D.R. ITAT A BENCH, HYDERABAD 5. GUARD FILE