Parur Taluk Merchants Welfare Society, Aluva V. CIT, Cochin

ITA 973/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58278 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-02-2012
• Assessment Year: misc
• Appeal Filed On: 24-11-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHA
• Assessee Lawyers: P BALAKRISHNAN
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

1 ITA NOS.972 & 973/COCH/2008 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 972/COCH/2008 THE PARUR TOWN MECHANTS ASSOCIATION VS THE COMMIS SIONER OF INCOME-TAX, VYAPARABHAVAN, CHENDAMANGALAM JUNCTION KOCHI PAN : AAAAP0904H (APPELLANT) (RESPONDENT) I.T.A NO. 973/COCH/2008 THE PARUR TALUK MECHANTS WELFARE SOCIETY VS THE COM MISSIONER OF INCOME-TAX, VYAPARABHAVAN, CHENDAMANGALAM JUNCTION KOCHI PAN : AABTP0731G (APPELLANT) (RESPONDENT) APPELLANTS BY : SHRI P BALAKRISHNAN RESPONDENT BY : SMT. VIJAYAPRABHA DATE OF HEARING : 09-02-2012 DATE OF PRONOUNCEMENT : 17-02-2012 O R D E R PER N.R.S. GANESAN (JM) THESE APPEALS FILED BY TWO DIFFERENT ASSESSEES ARE DIRECTED AGAINST THE TWO INDEPENDENT ORDERS OF THE COMMISSIONER OF INCOME-TAX , KOCHI, BOTH DATED 25-08- 2008 REJECTING APPLICATIONS FILED BY THE ASSESSEES FOR REGISTRATION U/S 12AA OF INCOME-TAX ACT, 1961. 2 ITA NOS.972 & 973/COCH/2008 2. SHRI P BALAKRISHNAN, THE LD.COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE SOCIETIES APPLIED FOR REGISTRATION U/S 12A A OF THE INCOME-TAX ACT AS CHARITABLE INSTITUTION ON 29-10-2004. HOWEVER, THE C OMMISSIONER OF INCOME-TAX DISMISSED THE APPLICATIONS OF THE ASSESSES BY INDEP ENDENT ORDERS BOTH DATED 25- 08-2008. REFERRING TO THE PROVISIONS OF SECTION 12A A OF THE ACT, THE LD.REPRESENTATIVE SUBMITTED THAT THE COMMISSIONER O F INCOME-TAX HAS TO PASS ORDER IN WRITING EITHER BY REJECTING OR BY GRANTING THE REGISTRATION WITHIN A PERIOD OF SIX MONTHS FROM THE DATE OF RECEIPT OF APPLICATI ON. UNFORTUNATELY, THE COMMISSIONER OF INCOME-TAX HAS NOT PASSED ANY ORDER IN BOTH THESE CASES WITHIN SIX MONTHS AS PROVIDED IN THE STATUTORY PROVISION. THEREFORE, ACCORDING TO THE LD.COUNSEL, ON EXPIRY OF SIX MONTHS THE REGISTRATIO N U/S 12AA OF THE ACT IS DEEMED TO BE GRANTED. THE LD.COUNSEL PLACED HIS RELIANCE ON THE DECISION OF THE DELHI SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF BHAGW AD SWARUP SHRI DEVRAHA BABA MEMORIAL SHRI HARI PARMARTH DHAM TRUST VS COMMISSIO NER OF INCOME-TAX (2008) 299 ITR (AT) 161 (DEL)(SB). 3. ON THE CONTRARY, SMT. VIJAYAPRABHA, THE LD.DR SU BMITTED THAT ON TECHNICAL GROUND REGISTRATION CANNOT BE GRANTED. MERELY BECA USE ORDER WAS NOT PASSED WITHIN THE PERIOD OF SIX MONTHS, IT CANNOT BE SAID THAT THE REGISTRATION WAS DEEMED TO BE GRANTED. IT IS THE OBLIGATION OF THE ADMINISTRATIVE COMMISSIONER TO EXAMINE THE OBJECT TO THE TRUST / SOCIETY AND TO FI ND OUT WHETHER THE ASSESSEES ARE IN FACT CHARITABLE INSTITUTION AS DEFINED IN SE CTION 12AA OF THE ACT. THEREFORE, MERELY BECAUSE THERE WAS SOME DELAY IN PASSING THE ORDERS, IT WILL NOT AUTOMATICALLY RESULT IN GRANT OF REGISTRATION. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULL Y GONE THROUGH THE PROVISIONS 3 ITA NOS.972 & 973/COCH/2008 OF SECTION 12AA OF THE ACT MORE PARTICULARLY SUB SE CTION (2) TO SECTION 12AA OF THE ACT. SUB SECTION (2) OF SECTION 12AA CLEARLY S AYS THAT EVERY ORDER GRANTING OR REFUSING APPLICATION UNDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY OF SIX MONTHS FROM THE END OF THE MONTH IN W HICH THE APPLICATION WAS RECEIVED. THE DELHI SPECIAL BENCH OF THIS TRIBUNAL HAD AN OCCASION TO EXAMINE THIS ISSUE AND FOUND THAT THE FAILURE OF THE COMMIS SIONER IN PASSING THE ORDER WITHIN THE PERIOD PRESCRIBED IN SUB-SECTION (2) OF S ECTION 12AA WOULD RESULT IN GRANT OF REGISTRATION U/S 12AA OF THE ACT. REFERRI NG TO THE APPREHENSIONS RAISED BY THE DEPARTMENT THAT IF NO ORDER WAS PASSED WITHI N SIX MONTHS THE TRUST / SOCIETY WHICH ARE NOT ENTITLED FOR REGISTRATION MAY ALSO DEEMED TO BE REGISTERED U/S 12AA OF THE ACT, AFTER EXAMINING THE PROVISIONS OF SUB SECTION (3) OF SECTION 12AA, THE SPECIAL BENCH OF THIS TRIBUNAL FOUND THAT THE LEGISLATURE HAS CONFERRED POWER ON THE COMMISSIONER UNDER SUB CLAUSE (3) OF S ECTION 12AA TO CANCEL THE REGISTRATION ON THE BASIS OF THE ENQUIRIES CONCLUDE D BY HIM BEYOND THE TIME LIMIT. THEREFORE, IF THE COMMISSIONER HAS COME TO THE CONC LUSION ON THE BASIS OF THE ENQUIRIES MADE BY HIM AFTER THE EXPIRY OF THE TIME LIMIT GRANTED UNDER SUB- SECTION (2) OF SECTION 12AA, IT IS OPEN TO THE COMM ISSIONER TO CANCEL THE REGISTRATION DEEMED TO BE GRANTED. IN THIS CASE, A DMITTEDLY, THE ORDERS WERE NOT PASSED WITHIN THE PERIOD OF SIX MONTHS. THEREFORE, THE CONTENTION OF THE REVENUE THAT MERELY BECAUSE NO ORDER WAS PASSED TECHNICALLY IT CANNOT BE SAID THAT REGISTRATION WAS GRANTED HAS NO MERIT AT ALL. IN V IEW OF THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL, THIS TRIBUNAL IS OF THE OPI NION THAT THE REGISTRATION IS DEEMED TO BE GRANTED ON EXPIRY OF TIME LIMIT OF SIX MONTHS PROVIDED UNDER SECTION 12AA(2) OF THE ACT. BUT IT IS OPEN TO THE COMMISSIONER TO EXAMINE THE MATTER AND IF HE IS NOT SATISFIED WITH THE OBJECT O F THE TRUST, IT IS ALWAYS OPEN TO THE COMMISSIONER TO CANCEL THE REGISTRATION AS PROV IDED UNDER SECTION 12AA(3) OF THE ACT. WE HAVE ALSO GONE THROUGH THE OBJECT OF T HE ASSESSEE SOCIETY. PRIMA 4 ITA NOS.972 & 973/COCH/2008 FACIE IT APPEARS THAT ASSESSEE TRUST IS PROVIDING S ERVICE TO THE TRADERS. THEREFORE, IT NEEDS TO BE EXAMINED IN DETAIL IN THE LIGHT OF T HE PROVISO TO SECTION 2(15) OF THE ACT. 5. WE HAVE ALSO CAREFULLY GONE THROUGH THE PROVISIO NS OF SECTION 2(15) OF THE INCOME-TAX ACT. THE LEGISLATURE BY THE FINANCE ACT, 2008 WITH EFFECT FROM 01-04- 2009 INTRODUCED PROVISO EXPLAINING THE ADVANCEMENT OF OTHER OBJECT OF PUBLIC UTILITY. THE PROVISO TO SECTION 2(15) CLEARLY SAYS THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY. THEREFORE, IF THE OBJECT OF THE TRUST IS TO PROVIDE SERVICES TO THE TRADERS FOR A CESS OR FEE, THEN IT CANNOT BE A CHARITABLE OBJECT. A F URTHER PROVISO WAS INTRODUCED CONFINING THE FIRST PROVISO TO ONLY THOSE INSTITUTI ONS / TRUSTS WHOSE INCOME EXCEED RS.10 LAKHS. THEREFORE, THESE MATTERS NEED TO BE EX AMINED BY THE COMMISSIONER. 6. IN THE GROUNDS OF APPEAL, THE ASSESSES HAVE TAKEN A GROUND REGARDING DELAY IN FILING THE APPLICATION FOR REGISTRATION. PROBABLY, THE COMMISSIONER HAS NOT DISCUSSED THIS ASPECT SINCE HE REJECTED THE APP LICATION OF THE ASSESSEE U/S 12AA OF THE ACT. IN VIEW OF THE DECISION OF THE SP ECIAL BENCH OF THIS TRIBUNAL, SINCE THE IMPUGNED ORDERS WERE PASSED AFTER EXPIRY OF TIME LIMIT OF SIX MONTHS FROM THE DATE OF RECEIPT OF THE APPLICATION, THE RE GISTRATION IN BOTH THE APPEALS UNDER CONSIDERATION WAS DEEMED TO BE GRANTED. THER EFORE, IT IS INCUMBENT ON THE COMMISSIONER TO EXAMINE THE REASONS FOR THE DEL AY IN FILING THE APPLICATION 5 ITA NOS.972 & 973/COCH/2008 FOR REGISTRATION. IF THE COMMISSIONER IS SATISFIED ABOUT THE REASONS FOR DELAY, IT IS OPEN TO HIM TO GRANT REGISTRATION FROM THE DATE OF ESTABLISHMENT OF THE SOCIETY. HOWEVER, IT IS OPEN TO THE COMMISSIONER TO CANCEL T HE REGISTRATION PROVIDED HE FINDS THE OBJECT OF THE TRUST IS NOT CHARITABLE ONE AS PROVIDED IN SECTION 2(15) OF THE INCOME-TAX ACT, 1961. 7. IN VIEW OF THE ABOVE DISCUSSION, THE ORDERS OF T HE COMMISSIONER ARE SET ASIDE. SINCE THE COMMISSIONER HAS NOT EXAMINED THE OBJECT OF THE TRUST / SOCIETY IN BOTH THE CASES, IT IS OPEN TO THE COMMISSIONER T O EXAMINE THE MATTER AFRESH AND IF HE FINDS THAT THE OBJECT OF THE SOCIETY IS N OT GENUINE OR NOT CHARITABLE, THE COMMISSIONER MAY CANCEL THE DEEMED REGISTRATION IN THE CASE OF BOTH THE ASSESSES IN EXERCISE OF HIS POWERS U/S 12AA(3) OF T HE ACT. HOWEVER, IT IS MADE CLEAR THAT THE COMMISSIONER SHALL COMPLETE THE ENQU IRY, IF ANY, WITHIN A PERIOD OF FOUR MONTHS FROM THE DATE OF RECEIPT OF COPY OF THI S ORDER AND PASS NECESSARY ORDERS ON MERIT WITHOUT BEING INFLUENCED BY ANY OF THE OBSERVATIONS MADE BY THE TRIBUNAL IN THIS ORDER. 8. WITH THE ABOVE OBSERVATIONS, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED, FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF FEBRUARY, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 17 TH FEBRUARY, 2012 PK/- 6 ITA NOS.972 & 973/COCH/2008 COPY TO: 1. THE PARUR TOWN MERCHANTS ASSOSICATIN / THE PARUR T ALUK MERCHANTS WELFARE SOCIETY, VYAPARABHAVAN, CHENDAMANGALAM JUNCTION, N. PAUR 2. THE COMMISSIONER OF INCOME-TAX, KOCHI 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH