Suguna CharItable Trust, Coimbatore V. ITO, Coimbatore

MA 325/CHNY/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5549 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 17-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 05-12-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Rectification of order; Charitable institution; Reasonable cause; Benefit of exemption; Cancellation of registration

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ' # , $ #% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER M.A.NO. 325/MDS/2016 (IN ITA NO. 2172/MDS/2014) / ASSESSMENT YEAR : 2010-11 M/S. SUGUNA CHARITABLE TRUST , 5-A, SATHYAMOORTHY ROAD, RAM NAGAR, COIMBATORE-641009 PAN AACTS0371C (APPLICANT) V. THE INCOME-TAX OFFICER, COMPANY WARD I, COIMBATORE. RESPONDENT) APPLICANT BY : SHRI R. MEENAKSHI SUNDARAM, ADVOCATE RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT / DATE OF HEARING : 17.03.2017 / DATE OF PRONOUNCEMENT : 05.05.2017 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE SEEKS TO RECALL / FOR RECTIFICATION OF THE TRIBUNAL ORDER DA TED 29.6.2016 IN ITA NO. 2172/MDS/2014. 2. IN THIS CASE, THE ASSESSEE CAME IN APPEAL BEFOR E THIS TRIBUNAL WITH REGARD TO DENIAL OF EXEMPTION U/S.11 OF THE ACT. - - MA 325/16 2 2.1 THE TRIBUNAL DISMISSED THE GROUND TAKEN BY THE ASSESSEE OBSERVING THAT THE ACTIVITY CARRIED ON BY THE ASSES SEE IS A BUSINESS ACTIVITY AND THE PROVISIONS OF THE SECTION 11(4A) OF THE ACT IS APPLICABLE AND THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S.11 OF THE ACT AS RUNNING OF SUGUNA AUDITORIUM HALL IS A BUSINESS ACTIVITY OF ASSESSEE AND NOT INCIDENTAL TO THE MAIN OBJECTIVE OF THE ASSESSEE. 3. FURTHER, IT WAS OBSERVED THAT THE JUDGEMENT OF S UPREME COURT IN THE CASE OF THANTHI TRUST (2000) 247 ITR 7 85, WHEREIN HELD THAT THE TRUST CARRIED ON THE BUSINESS OF A N EWSPAPER AND THAT BUSINESS ITSELF WAS HELD UNDER TRUST. THE CHA RITABLE OBJECT OF THE TRUST WAS THE IMPARTING OF EDUCATION WHICH FALL S U/S.2(15) OF THE ACT. THE NEWSPAPER BUSINESS WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST, NAMELY THAT OF IMPARTING EDUCATION AND THE PROFITS OF THE NEWSPAPER BUSINESS ARE UTILIZED BY THE TRUST FOR ACHIEVING THE OBJECT OF IMPARTING EDUCATION. IN THIS CASE, THERE IS NO SUCH NEXUS BETWEEN THE ACTIV ITIES CARRIED ON AND THE OBJECTS OF THE ASSESSEE THAT CAN CONSTIT UTE AN ACTIVITY INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS, NAMELY , TO PROMOTE - - MA 325/16 3 CAUSE OF CHARITY, MISSION ACTIVITIES, WELFARE, EMPL OYMENT, DIFFUSION OF USEFUL KNOWLEDGE, UPLIFTMENT AND EDUCA TION AND TO CREATE AN AWARENESS OF SELF-RELIANCE AMONG THE MEMB ERS OF THE PUBLIC ETC. WE ARE THEREFORE, OF THE OPINION THAT THE OBSERVATIONS OF THE SUPREME COURT MUST BE UNDERSTOOD AND APPRECI ATED IN THE BACKGROUND OF THE FACT THAT IN THAT CASE AND SH OULD NOT BE EXTENDED INDISCRIMINATELY TO ALL CASES. BEING SO, WE ARE INCLINED TO HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR ANY E XEMPTION U/S.11 OF THE I.T.ACT. 3.1 IN THE GROUNDS OF APPEAL BEFORE THE TRIBUNAL, T HE ASSESSEE TRUST HAS CONTENDED THAT ITS MAIN OBJECT I S EDUCATION AND IT IS RUNNING SCHOOLS, POLYTECHNIC, COLLEGE AND INDUSTRIAL TRAINING CENTRE, ENJOYING THE BENEFIT OF EXEMPTION IN RESPECT OF ITS INCOME AND THAT THE AUDITORIUM IS LET OUT ON RENT F OR THE PURPOSE OF AUGMENTING THE RESOURCE REQUIRED FOR CARRYING OU T THE PRIMARY AND DOMINANT OBJECT VIZ., EDUCATION AND ON SUCH FAC TS THE PROVISO TO SEC.2(15) OF THE ACT IS NOT ATTRACTED TO BRING THE INCOME FROM AUDITORIUM TO TAX. - - MA 325/16 4 3.2 THE AR SUBMITTED THAT ITS TOTAL RECEIPTS FOR TH E YEAR ENDED 31.3.2010 IS 6,27,66,984/- AND THE AUDITORIUM RECEIPTS, AS PER SEPARATE ACCOUNTS MAINTAINED 78,75,320/- I.E. LESS THAN 20 PERCENT OF THE TOTAL RECEIPTS AND AS SUCH IT IS MAI N PROVISION THAT EDUCATION ALONE IS APPLICABLE AND THE PROVISO IS NO T APPLICABLE TO THE APPLICANT. 3.3 THE LD.A.R SUBMITTED THAT CIRCULAR NO.21 OF 20 16 DATED 27 TH MAY, 2016 (CLARIFICATION REGARDING CANCELLATION OF REGISTRATION U/S.12AA OF THE ACT, IN CERTAIN CIRCUMSTANCES) IS RELEVANT IN CONSIDERING THE APPLICABILITY OF THE PROVISO TO SEC .2(15) OF THE ACT. 3.4 THE AR IS FURTHER SUBMITTED THAT IN DIRECTOR OF INCOME-TAX (EXEMPTIONS) VS. KHAR GYMKHANA (385 ITR 162 BOM), THE BOMBAY HIGH COURT HAS IN DECIDING AN APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 2009-10, CONSIDERED THE NEW PRO VISO INTRODUCED BY THE FINANCE ACT, 2015 (W.E.F. APRIL 1 , 2016) CHANGING THE CUT OFF BENCH MARK AS 20% OF THE TOT AL RECEIPTS INSTEAD OF THE FIXED LIMIT OF 25 LAKHS AND THE CBDTS CIRCULAR - - MA 325/16 5 NO.21 OF 2016 DATED 27 TH MAY, 2016 AND HELD THAT THE NEW PROVISO WOULD APPLY IN THAT CASE (FOR ASSESSMENT YE AR 2009-10), WHEN THERE IS NO CHANGE IN THE NATURE OF THE ACTIVI TIES OF THE ASSESSEE DURING THE ASSESSMENT YEAR IN QUESTION. 3.5 THE AR SUBMITTED THAT IN THE LIGHT OF THE SUPRE ME COURT JUDGMENTS, CBDTS CIRCULAR AND THE JUDGMENT OF THE BOMBAY HIGH COURT, THE ASSESSEES INCOME FROM THE AUDITOR IUM ISZ ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT. 3.6 THE A.R PRAYED THAT THE TRIBUNAL MAY BE PLEASED TO CONSIDER THE SUBMISSIONS MADE BEFORE THE BENCH, WH ICH WAS OMITTED TO BE CONSIDERED BY THE TRIBUNAL AND THE TR IBUNAL ORDER DATED 29.6.2016 IN ITA NO. 2172/MDS/2014 MAY BE REC ALLED. 3.7 ON THE OTHER HAND, LD.D.R RELIED ON THE ORDER O F TRIBUNAL . 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY THIS IS THE MISCELL ANEOUS APPLICATION WHICH CANNOT BE ENTERTAINED U/S. 254(2) OF THE INCOME-TAX ACT, 1961 AS THE LD.A.R WANTED TO REVIEW THE ORDER OF TRIBUNAL. IT IS WELL SETTLED THAT STATUTORY AUTH ORITY CANNOT - - MA 325/16 6 EXERCISE POWER OF REVIEW UNLESS SUCH POWER IS EXPRE SSLY CONFERRED. THERE IS NO EXPRESS POWER OF REVIEW CONF ERRED ON THIS TRIBUNAL. EVEN OTHERWISE, THE SCOPE OF REVIEW DOES NOT EXTENT TO RE-HEARING OF THE CASE ON MERIT. IT IS HELD IN THE CASE OF CIT VS. PEARL WOOLLEN MILLS (330 ITR 164): HELD, THAT THE TRIBUNAL COULD NOT READJUDICATE THE MATTER UNDER SECTION 254(2). I T IS WELL SETTLED THAT A STATUTORY AUTHORITY CANNOT EXERCISE POWER OF REVIEW UNLESS SUCH POWER IS EXPRESSLY CONFERRED. THERE WAS NO EXP RESS POWER OF REVIEW CONFERRED ON THE TRIBUNAL. EVEN OTHERWISE , THE SCOPE OF REVIEW DID NOT EXTENT TO REHEARING A CASE ON THE MERITS. NEITHER BY INVOKING INHERENT POWER NOR THE PRINCIPL E OF MISTAKE OF COURT NOT PREJUDICING A LITIGANT NOR BY INVOLVING D OCTRINE OF INCIDENTAL POWER, COULD THE TRIBUNAL REVERSE A DECI SION ON THE MERITS. THE TRIBUNAL WAS NOT JUSTIFIED IN RECALLING ITS PREVIOUS FINDING RESTORING THE ADDITION, MORE SO WHEN AN APP LICATION FOR THE SAME RELIEF HAD BEEN EARLIER DISMISSED. 4.1. THE SCOPE AND AMBIT OF APPLICATION OF SECTION 254(2) IS VERY LIMITED. THE SAME IS RESTRICTED TO RECTIFICATION OF MISTAKES APPARENT FROM THE RECORD. WE SHALL FIRST DEAL WITH THE QUESTION OF THE POWER OF THE TRIBUNAL TO RECALL AN ORDER IN ITS ENTIRETY. - - MA 325/16 7 RECALLING THE ENTIRE ORDER OBVIOUSLY WOULD MEAN PAS SING OF A FRESH ORDER. THAT DOES NOT APPEAR TO BE THE LEGISLA TIVE INTENT. THE ORDER PASSED BY THE TRIBUNAL UNDER S. 254(1) IS THE EFFECTIVE ORDER SO FAR AS THE APPEAL IS CONCERNED. ANY ORDER PASSED UNDER S. 254(2) EITHER ALLOWING THE AMENDMENT OR REFUSING TO AMEND GETS MERGED WITH THE ORIGINAL ORDER PASSED. THE ORD ER AS AMENDED OR REMAINING UNAMENDED IS THE EFFECTIVE ORD ER FOR ALL PRACTICAL PURPOSES. AN ORDER UNDER S. 254(2) DOES N OT HAVE EXISTENCE DE HORS THE ORDER UNDER S. 254(1). RECALL ING OF THE ORDER IS NOT PERMISSIBLE UNDER S. 254(2). RECALLING OF AN ORDER AUTOMATICALLY NECESSITATES REHEARING AND RE-ADJUDIC ATION OF THE ENTIRE SUBJECT-MATTER OF APPEAL. THE DISPUTE NO LON GER REMAINS RESTRICTED TO ANY MISTAKE SOUGHT TO BE RECTIFIED. P OWER TO RECALL AN ORDER IS PRESCRIBED IN TERMS OF RULE 24 OF THE I TAT RULES, 1963, AND THAT TOO ONLY IN CASE WHERE THE ASSESSEE SHOWS THAT IT HAD A REASONABLE CAUSE FOR BEING ABSENT AT A TIME W HEN THE APPEAL WAS TAKEN UP AND WAS DECIDED EX-PARTE. JUDGE D IN THE ABOVE BACKGROUND THE ORDER PASSED BY THE TRIBUNAL I S INDEFENSIBLE. - - MA 325/16 8 4.2 THE WORDS USED IN S. 254(2) ARE SHALL MAKE SU CH AMENDMENT, IF THE MISTAKE IS BROUGHT TO ITS NOTICE. CLEARLY, IF THERE IS A MISTAKE, THEN AN AMENDMENT IS REQUIRED T O BE CARRIED OUT IN THE ORIGINAL ORDER TO CORRECT THAT PARTICULA R MISTAKE. THE PROVISION DOES NOT INDICATE THAT THE TRIBUNAL CAN R ECALL THE ENTIRE ORDER AND PASS A FRESH DECISION. THAT WOULD AMOUNT TO A REVIEW OF THE ENTIRE ORDER AND THAT IS NOT PERMISSIBLE UND ER THE IT ACT. THE POWER TO RECTIFY A MISTAKE UNDER S. 254(2) CANN OT BE USED FOR RECALLING THE ENTIRE ORDER. NO POWER OF REVIEW HAS BEEN GIVEN TO THE TRIBUNAL UNDER THE IT ACT. THUS, WHAT IT COU LD NOT DO DIRECTLY COULD NOT BE ALLOWED TO BE DONE INDIRECTLY . 4.3 IN THE CASE OF CIT VS. HINDUSTAN COCA COLA BEV ERAGES (P) LTD. (2007) 207 CTR (DEL) 119; (2007) 293 ITR 1 63 (DEL), THEIR LORDSHIPS WHILE CONSIDERING THE POWERS OF THE TRIBUNAL UNDER S. 254(2) OF THE IT ACT, 1961 OBSERVED AS UND ER: UNDER S. 254(2) OF THE IT ACT, 1961, THE TRIBUNAL HAS THE PO WER TO RECTIFY MISTAKES IN ITS ORDER. HOWEVER, IT IS PLAIN THAT TH E POWER TO RECTIFY A MISTAKE IS NOT EQUIVALENT TO A POWER TO REVIEW OR RECALL THE ORDER SOUGHT TO BE RECTIFIED. RECTIFICATION IS A SP ECIES OF THE - - MA 325/16 9 LARGER CONCEPT OF REVIEW. ALTHOUGH IT IS POSSIBLE T HAT THE PRE- REQUISITE FOR EXERCISE OF EITHER POWER MAY BE SIMIL AR (A MISTAKE APPARENT FROM THE RECORD), BY ITS VERY NATURE THE P OWER TO RECTIFY A MISTAKE CANNOT RESULT IN THE RECALL AND REVIEW OF THE ORDER SOUGHT TO BE RECTIFIED. 4.4 THUS THE SCOPE AND AMBIT OF APPLICATION U/S. 2 54(2) IS AS FOLLOWS: (A) FIRSTLY, THE SCOPE AND AMBIT OF APPLIC ATION OF S. 254(2) OF IT ACT IS RESTRICTED TO RECTIFICATION OF THE MISTAKES APPARENT FROM THE RECORD. (B) SECONDLY, THAT NO PAR TY APPEARING BEFORE THE TRIBUNAL SHOULD SUFFER ON ACCOUNT OF ANY MISTAKE COMMITTED BY THE TRIBUNAL AND IF THE PREJUDICE HAS RESULTED TO THE PARTY, WHICH PREJUDICE IS ATTRIBUTABLE TO THE TRIBU NALS MISTAKE/ERROR OR OMISSION, AND WHICH AN ERROR IS A MANIFEST ERROR, THEN THE TRIBUNAL WOULD BE JUSTIFIED IN RECTIFYING ITS MISTAKE. THE RULE OF PRECEDENT IS AN IMPORTANT ASPECT OF LEGAL CERTAINTY IN THE RULE OF LAW AND THAT PRINCIPLE IS NOT OBLITERATED B Y S. 254(2) OF THE ACT AND NON-CONSIDERATION OF PRECEDENT BY THE TRIBU NAL CAUSES A PREJUDICE TO THE ASSESSEE. (C) THIRDLY, POWER TO RE CTIFY A MISTAKE IS NOT EQUIVALENT TO A POWER TO REVIEW OR RECALL TH E ORDER SOUGHT - - MA 325/16 10 TO BE RECTIFIED. (D) FOURTHLY, UNDER S. 254(2) AN O VERSIGHT OF A FACT CANNOT CONSTITUTE AN APPARENT MISTAKE RECTIFIABLE U NDER THE SECTION. (E) FIFTHLY, FAILURE ON THE PART OF THE TR IBUNAL TO CONSIDER AN ARGUMENT ADVANCED BY EITHER PARTY FOR ARRIVING A T A CONCLUSION IS NOT AN ERROR APPARENT ON RECORD, ALTHOUGH IT MAY BE AN ERROR OF JUDGEMENT. (F) SIXTHLY, EVEN IF ON THE BASIS OF A W RONG CONCLUSION THE TRIBUNAL HAS NOT ALLOWED A CLAIM OF THE PARTY I T WILL NOT BE A GROUND FOR MOVING AN APPLICATION UNDER S. 254(2) OF THE ACT. (G) LASTLY, IN THE GARB OF AN APPLICATION FOR RECTIFICA TION UNDER S. 254(2) THE ASSESSEE CANNOT BE PERMITTED TO REOPEN A ND REARGUE THE WHOLE MATTER AS THE SAME IS BEYOND THE SCOPE OF S. 254(2) OF THE IT ACT. 4.5 .KEEPING IN MIND THE ABOVE PARAMETERS, NOW WE P ROCEED TO CONSIDER AND DISPOSE OF THE MISCELLANEOUS APPLIC ATION FILED BY THE ASSESSEE AS UNDER. 5. IN THIS REGARD, WE WOULD LIKE TO MENTION THAT IN THE ORDER, THE TRIBUNAL FIRST METICULOUSLY MENTIONED THE ARGUM ENTS OF THE LEARNED AR FOR THE ASSESSEE, THE POINTS RAISED BY H IM THEN THE - - MA 325/16 11 RELEVANT CASE-LAWS RELIED UPON BY THE AR OF THE ASS ESSEE. THEREAFTER, THE TRIBUNAL CONSIDERED THE SAME AND PA SSED A SPEAKING ORDER FOR NOT ENTERTAINING THE CLAIM OF TH E ASSESSEE. WHILE REJECTING THE CLAIM OF THE ASSESSEE THE TRIBU NAL PLACED RELIANCE ON THE JUDGEMENT OF SUPREME COURT AND ALSO TRIBUNAL ORDER. THUS, IN VIEW OF OUR DETAILED DISCUSSION AND APPLYING THE RATIO OF THE DECISION OF THE APEX COURT, WE CONCLUD ED THAT THE CIT(A) IS JUSTIFIED IN REJECTING THE EXEMPTION U/S. 11 OF THE I.T. ACT, 1961 . 5.1. FURTHER, FROM THE ORDER OF THE TRIBUNAL DATED 29.06.2016, IT IS EVIDENT THAT THE TRIBUNAL CONSIDERED THE ARGUMENTS OF THE ASSESSEES COUNSEL AS WELL AS THE RATIO OF THE DECI SIONS OF THE SUPREME COURT ELABORATELY DISCUSSING THE SAME IN TH E ORDER. HENCE, IT CANNOT BE SAID THAT THE TRIBUNAL HAS NOT CONSIDERED THE CASE-LAW CITED BY THE LEARNED AR FOR THE ASSESSEE A S ALLEGED IN THE MISCELLANEOUS APPLICATION. ON THE CONTRARY, THE TRIBUNAL IN THE ORDER, AFTER TAKING NOTE OF THE CASE-LAW RELIED UPON BY THE PARTIES, GAVE THE FINDINGS. - - MA 325/16 12 5.2. ARTICLE 141 OF THE CONSTITUTION OF INDIA PRO VIDES THAT THE LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS AND TRIBUNALS IN THE INDIAN TERRITORY. THE DECLARAT ION OF LAW IS COMPLETE AS SOON AS THE JUDGEMENT IS PRONOUNCED. 6. IN THE RESULT, THE MA FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUNCED ON 05 TH MAY, 2017 AT CHENNAI. SD/- SD/- ( ) ( !'# $ ) %&'(')*+,'-. /0')1-'&223'-4. 567 /JUDICIAL MEMBER 89 67:;;2+)<')<=>,?>- !95 /CHENNAI, @6' /DATED, THE 05 TH MAY, 2017. K S SUNDARAM A69B C8DEF9D / COPY TO: 1 . E8 / APPELLANT 3. AA G E8. / CIT(A) 5. DHI J / DR 2. / RESPONDENT 4. AA G / CIT 6. IKL8 / GF