Carmalagiri Church, Kollam V. CIT, Trivandrum

ITA 986/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58310 (ITAT-COCHIN)
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-03-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 04-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: P ALPHONSE
• Keywords: Charitable institution
• Section: 12A; 12AA; 12; 11

Judgement Text

1 ITA NO.986/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. 986/COCH/2008 (ASSESSMENT YEAR 2008-09) CARMALAGIRI CHURCH VS COMMISSIONER OF INCOME-TAX KARIKKUZHI, MULAVANA PO TRIVANDRUM KOLLAM PAN : AABTC0298D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P ALPHONSE RESPONDENT BY : SHRI T.J. VINCENT DATE OF HEARING : 06-03-2012 DATE OF PRONOUNCEMENT : 09-03-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE ADMINISTRATIVE COMMISSIONER, TRIVANDRUM REJECTING T HE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12AA OF THE ACT AS CH ARITABLE INSTITUTION. 2. SHRI P ALPHONSE, THE LD.REPRESENTATIVE FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE IS A CATHOLIC CHURCH UNDER THE CATHOLIC DI OCESE OF QUILON. THE ASSESSEE FILED APPLICATION FOR REGISTRATION U/S 12AA ON 29-02 -2008. THE ASSESSEE HAS ALSO FILED A NOTE ALONG WITH THE APPLICATION ABOUT THE D ETAILED WORKING OF THE CHURCH. ACCORDING TO THE LD.REPRESENTTIVE, THE CATHOLIC CHU RCH IS A LEGAL ENTITY, THEREFORE, 2 ITA NO.986/COCH/2008 IT COULD NOT PRODUCE TRUST DEED BEFORE THE COMMISSI ONER WHEN IT WAS CALLED FOR. ACCORDING TO THE LD.REPRESENTATIVE, THE OBJECT OF T HE CHURCH IS WELLKNOWN. THE CATHOLIC CHURCH IS GOVERNED BY CANNON LAW WHICH PRO HIBITS DISTRIBUTION OF ASSETS / INCOME AMONGST THE MEMBERS. ACCORDING TO THE LD. REPRESENTATIVE, A TRUST CAN BE FORMED WITHOUT A TRUST DEED. UNDER RULE 17A OF THE INCOME-TAX RULES, THE ASSESSEE CAN ESTABLISH THE CREATION OF THE TRUST EI THER BY PRODUCING A TRUST DEED OR BY ANY OTHER INSTRUMENT EVIDENCING THE ESTABLISH MENT OF THE CHURCH. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE COMMISSIONER IS NOT RIGHT IN REJECTING THE APPLICATION OF THE ASSESSEE U/S 12AA OF THE ACT. THE LD.REPRESENTATIVE PLACED HIS RELIANCE ON THE JUDGME NT OF THE MADHYA PRADESH HIGH COURT IN LAXMINARAYAN MAHARAJ & ANOTHER VS COM MISSIONER OF INCOME-TAX 150 ITR 465 (MP). ACCORDING TO THE LD.REPRESENTATI VE, WHEN THE ASSESSEE HAS PRODUCED MATERIAL TO SHOW THE EXISTENCE OF THE TRU ST, THE REGISTRATION CANNOT BE REJECTED ON THE GROUND THAT NO DOCUMENT WAS PRODUCE D EVIDENCING CREATION OF THE TRUST. 3. WE HEARD, SHRI T.J. VINCENT, THE LD.DR ALSO. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE. WE HAVE ALSO GONE THROUGH THE IMPUGNED ORDER OF THE COMMISSIONER OF I NCOME-TAX. THE COMMISSIONER AFTER REFERRING TO RULE 17A OF THE INC OME-TAX RULES FOUND THAT THE ASSESSEE HAS FILED ONLY CERTIFICATE TO THE EFFECT T HAT INSTITUTION WAS ESTABLISHED UNDER CANNON LAW. THE COMMISSIONER FURTHER FOUND T HAT THE OBJECT OF THE INSTITUTION WAS NOT KNOWN. WE HAVE CAREFULLY GONE T HROUGH THE PROVISIONS OF SECTION 12A AND 12AA OF THE ACT. FOR THE PURPOSE O F GRANT OF REGISTRATION U/S 12A OF THE ACT, THE COMMISSIONER IS EMPOWERED TO CALL F OR THE DOCUMENTS OR INFORMATION FROM THE TRUST OR INSTITUTION IN ORDER TO SATISFY HIMSELF ABOUT THE 3 ITA NO.986/COCH/2008 GENUINENESS OF THE ACTIVITIES. UNDER SUB SECTION ( 3) OF SECTION 12AA, THE REGISTRATION GRANTED CAN BE CANCELLED BY THE COMMIS SIONER IN CASE THE COMMISSIONER SUBSEQUENTLY SATISFIED THAT THE ACTIVI TY OF SUCH TRUST OR INSTITUTION IS NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDAN CE WITH THE OBJECT OF THE TRUST OR INSTITUTION. THEREFORE, FOR THE PURPOSE OF GRAN T OF REGISTRATION, THE ASSESSEE HAS TO NECESSARILY ESTABLISH THE OBJECT FOR WHICH T HE TRUST / INSTITUTION WAS ESTABLISHED. IN THE CASE BEFORE US, NO MATERIAL IS AVAILABLE ON RECORD TO SUGGEST / INDICATE THE OBJECT FOR WHICH THE TRUST OR INSTITUT ION WAS ESTABLISHED. THE CONTENTION OF THE LD.REPRESENTATIVE FOR THE ASSESSE E IS THAT THE CATHOLIC CHURCH WAS ESTABLISHED FOR THE OBJECT PROVIDED IN CANNON L AW. CANNON LAW IS AN OCEAN. UNLESS THE ASSESSEE CONFINES THE OBJECTS IN WRITING AND FILES THE SAME BEFORE THE COMMISSIONER TO SHOW THAT FOR A PARTICULAR OBJECT T HE INSTITUTION OR TRUST WAS ESTABLISHED, IT IS VERY DIFFICULT FOR THE COMMISSIO NER TO APPRECIATE FOR WHAT PURPOSE THE TRUST OR INSTITUTION WAS ESTABLISHED. UNLESS AND UNTIL THE OBJECT OF THE TRUST AND GENUINENESS OF ITS ACTIVITY WAS EXAMI NED BY THE COMMISSIONER, THE ASSESSEE CANNOT CLAIM ANY REGISTRATION U/S 12A AS A MATTER OF RIGHT. IT IS ALSO PERTINENT TO KEEP IN MIND THAT MERE REGISTRATION U/S 12A WILL NOT ALLOW THE ASSESSEE TO CLAIM EXEMPTIONS U/S 11 & 12 OF THE ACT AUTOMATICALLY. THE ASSESSING OFFICER HAS TO NECESSARILY MONITOR THE APPLICATION OF FUNDS / EXPENDITURE AND THE PURPOSE FOR WHICH IT WAS INCURRED. UNLESS THE OBJE CT OF THE ASSESSEE WAS DISCLOSED IT IS VERY DIFFICULT FOR THE ASSESSING AU THORITY TO MONITOR OR EXAMINE THE APPLICATION OF FUNDS. THEREFORE, A GENERALIZED STA TEMENT THAT THE CATHOLIC CHURCH WAS ESTABLISHED UNDER THE CANNON LAW CANNOT BE CONS TRUED TO BE A CHARITABLE INSTITUTION AS IT IS. AS ALREADY OBSERVED, CANNON LAW IS AN OCEAN. ONE MAY NOT BE ABLE TO DEDUCE TO COME TO ANY CONCLUSION ABOUT THE OBJECT OF THE INSTITUTION UNDER WHICH THE CATHOLIC CHURCH WAS ESTABLISHED UND ER THE CANNON LAW. ONE MAY UNDERSTAND THAT THE CATHOLIC CHURCHS RELIGIOUS ACTIVITIES ARE GOING ON. SO 4 ITA NO.986/COCH/2008 LONG AS THE ASSESSEE IS NOT CLAIMING EXEMPTIONS U/S 11 & 12 OF THE ACT, THERE MAY NOT BE ANY PROBLEM AT ALL. BUT ONCE THE ASSESSEE I S CLAIMING EXEMPTIONS U/S 11 & 12, IT IS FOR THE ASSESSEE TO ESTABLISH THAT THE EX PENDITURE OR INCOME WAS APPLIED FOR THE PURPOSE OF SPECIFIED OBJECT. UNLESS AND UN TIL THE ASSESSEE INDICATES THE OBJECT FOR WHICH THE TRUST WAS ESTABLISHED, IT MAY BE DIFFICULT FOR THE COMMISSIONER OR THE ASSESSING AUTHORITY EITHER TO G RANT THE REGISTRATION OR TO MONITOR THE EXPENDITURE / APPLICATION OF INCOME. I T MAY NOT BE THE INTENTION OF THE LEGISLATURE TO GRANT A GENERALIZED EXEMPTION TO ALL THE RELIGIOUS INSTITUTION. IF THAT IS SO, THE INCOME-TAX ACT WOULD HAVE BEEN WORDE D LIKE THAT. FROM THE MECHANISM PROVIDED UNDER THE ACT TO MONITOR THE APP LICATION OF INCOME FOR THE PURPOSE FOR WHICH THE TRUST WAS ESTABLISHED CLEARLY SHOWS THAT THERE WAS AN OBLIGATION ON THE PART OF THE ASSESSEE TO INDICATE THE OBJECT FOR WHICH THE TRUST OR INSTITUTION WAS ESTABLISHED. THEREFORE, A MERE CON TENTION THAT THE CHURCH WAS ESTABLISHED UNDER THE CANNON LAW IS NOT TENABLE. I N OTHER WORDS, A TRUST OR INSTITUTION CANNOT BE REGISTERED ON GENERALIZED ORA L STATEMENT. 5. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT IN THE CASE OF LAXMINARAYAN MAHARAJ & AN OTHER (SUPRA). IN THE CASE BEFORE THE MADHYA PRADESH HIGH COURT, THE ASSESSEE APPLIED FOR REGISTRATION. THE ASSESSEE COULD NOT PRODUCE THE ORIGINAL TRUST D EED. IN THAT CONTEXT, THE MADHYA PRADESH HIGH COURT FOUND THAT WHEN THE TRUST IS NOT CREATED UNDER AN INSTRUMENT IT IS IMPOSSIBLE TO PRODUCE ANY CONSTITU TIVE DOCUMENT FOR EVIDENCING THE CREATION OF TRUST. REFERRING TO RULE 17A OF TH E INCOME-TAX RULES, THE HIGH COURT FOUND THAT THE PAYMENT OF PROPERTY TAX AND OT HER DOCUMENT, THOUGH NOT DIRECTLY EVIDENCING THE CREATION OF THE TRUST, OFFE R A LEGAL BASIS FOR INFERRING THE CREATION OF THE TRUST. THIS JUDGMENT OF THE MADHYA PRADESH HIGH COURT RELATES TO THE PERIOD BEFORE THE INTRODUCTION OF SECTION 12AA . SECTION 12AA WAS 5 ITA NO.986/COCH/2008 INTRODUCED IN THE STATUTE BOOK WITH EFFECT FROM 01-04 -1997. SUB SECTION (3) OF SECTION 12AA WAS INTRODUCED WITH EFFECT FROM 01-10-20 04 BY FINANCE (NO.2) ACT OF 2004 EMPOWERING THE COMMISSIONER TO CANCEL THE R EGISTRATION IN CASE THE ACTIVITY OF TRUST OR INSTITUTION ARE NOT GENUINE OR NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECT OF THE TRUST OR INSTITUT ION. AFTER INTRODUCTION OF SECTION 12AA, IN OUR OPINION, THE JUDGMENT OF THE M ADHYA PRADESH HIGH COURT MAY NOT BE OF ANY ASSISTANCE TO THE ASSESSEE. 6. IN VIEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL I S OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED FOR REGISTRATION AS CHARIT ABLE INSTITUTION. THEREFORE, THE ORDER OF THE COMMISSIONER IS CONFIRMED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 09 TH DAY OF MARCH, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 09 TH MARCH, 2012 PK/- COPY TO: 1. CARMALAGIRI CHURCH, KARIKKUZHI, MULAVANA P.O, KOLLAM 2. THE COMMISSIONER OF INCOME-TAX, TRIVANDRUM 3. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH