Akshara Jyoti Foundation, Bangalore v. DIT, Bangalore

PAGE 1 OF 6 ITA NO.1236/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI GEORGE GEORGE K. J.M. AND SHRI A MOHAN ALANKAMONY A.M. ITA NO.1236/BANG/2009 AKSHARA JYOTI FOUNDATION NO.28 1 ST FLOOR 7 TH CROSS CUBBONPET BANGALORE-02. - APPELLANT VS DIRECTOR OF INCOME-TAX (EXEMPTIONS) BANGALORE-1. - RESPONDENT APPELLANT BY : SHRI N NAGARAJ RESPONDENT BY : SHRI JASON P BOAZ O R D E R PER GEORGE GEORGE K : THIS APPEAL OF THE ASSESSEE-TRUST IS DIRECTED AG AINST THE DIRECTOR OF INCOME-TAX (EXEMPTIONS)'S ORDER DATED 1 6.10.2009 REFUSING RECOGNITION U/S 80G OF THE I T ACT. 2. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE-TRUST WAS CONSTITUTED BY DEED DATED 18.10.2004. THE TRUST WAS REGISTERED U/S 12A W.E.F . 18.10.2004 AND GRANTED RECOGNITION U/S 80G FOR THE PERIOD 1/4/2006 TO 31/3/2009. THE ASSESSEE TRUST APPLIED FOR GRANT OF RENEWAL OF RECOGNITION U/S 80G OF THE ACT ON 31.3.2009. THE SAID APPLICATION FOR RENEWAL OF RECOGNITION U/S 80G WAS REJECTED BY THE DIRECTOR OF INCOME-TAX PAGE 2 OF 6 ITA NO.1236/BANG/2009 2 (EXEMPTIONS) VIDE HIS ORDER DATED 16.10.2009 FOR TH E FOLLOWING REASONS:- THAT THE CHARITABLE PURPOSE OF THE TRUST IS DEFEATED BECAUSE OF THE ALLOTMENT OF CIVIC AMENITY SITE FOR THE PURPOSE OF LIBRARY INVOKING CLAUSE (II) OF SUB-SECTION (5) OF SECTION 80G AND THAT THE ACCOUNTS HAVE NOT BEEN AUDITED IN TERMS OF AUDIT CLAUSE OF THE TRUST DEED INVOKING CLAUSE (IV) OF SUB-SECTION (5) OF SECTION 80G. 3. BEING AGGRIEVED BY THE ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) REFUSING RENEWAL OF RECOGNI TION U/S 80G THE ASSESSEE-TRUST IS IN APPEAL BEFORE US. 4. THE MANAGING TRUSTEE SHRI N NAGARAJU ADVOCATE APPEARED BEFORE US. HE HAS FILED A PAPER BOOK RUNN ING INTO 42 PAGES INTER ALIA CONTAINING COPY OF THE APPLICATION IN FORM 10G COPY OF THE TRUST DEED NOTE ON ACTIVITIES OF THE T RUST ETC. THE CONTENT OF THE PAPER BOOK IS CERTIFIED AS FURNISHED BEFORE THE AUTHORITIES BELOW. THE MANAGING TRUSTEE SHRI N NAG ARAJU TOOK US THROUGH VARIOUS CLAUSES AND OBJECTS OF THE TRUST DE ED. THE MAIN OBJECTS OF THE TRUST DEED AMONG OTHERS ARE AS FOL LOWS:- A) TO PROMOTE ADVANCE AND ENCOURAGE AND/OR AID IN HELPING PROMOTING ADVANCING AND ENCOURAGING PRIMARY SECONDARY AND HIGHER EDUCATION.. B) TO ESTABLISH OPEN FOUND PROMOTE SET-UP RUN MAINTAIN ASSIST FINANCE SUPPORT AND/OR AID TO OR HELP IN SETTING UP AND/OR MAINTAINING AND/OR RUNNING EDUCATIONAL INSTITUTIONS LIKE SCHOOLS COLLEGES AND OTHER INSTITUTIONS OR ESTABLISHMENTS PAGE 3 OF 6 ITA NO.1236/BANG/2009 3 FOR HIGHER AND ADVANCED EDUCATION AND FOR PROMOTION AND ADVANCEMENT OF KNOWLEDGE IN ARTS SCIENCE TECHNOLOGY LAW LITERATURE HUMANITIES AND OTHER USEFUL SUBJECTS IN ALL FIELDS. C) TO CREATE HIGHER LEVELS OF INTELLECTUAL ABILITIES . D) TO GRANT PAY OR GIVE SCHOLARSHIPS STIPENDS PRIZE S REWARDS ALLOWANCE AND OTHER FINANCIAL ASSISTANCE O R HELP IN CASH OR KIND TO STUDENTS WITH A VIEW TO HEL P THEM IN PROSECUTING THEIR STUDIES IN SCHOOLS COLLEGES EDUCATIONAL INSTITUTIONS TECHNICAL INSTITUTIONS ART SCHOOLS INSTITUTIONS TEACHING COMMERCIAL AND OTHER ARTS. 4.1 IT WAS SUBMITTED THAT THE FIRST MISSION OF THE TRUST WAS TO ENCOURAGE THE STUDENTS. ENCOURAGEMENT IS THE BE ST FORM OF SUPPORT WHICH GIVES A STUDENT THE MORAL AND MENTAL SUPPORT AND IMBIBES CONFIDENCE IN HIM/HER IN FURTHERANCE OF STU DIES. IN TERMS OF CLAUSES (A) AND (D) OF THE MAIN OBJECTS THE ASS ESSEE TRUST HAS STARTED A SCHEME CALLED AKSHARA JYOTHI AWARD SCHE ME TO ENCOURAGE THE STUDENTS WHO SECURE THE HIGHEST MARK S IN THE CLASS BY PRESENTING HIM/HER WITH A MEMENTO A CERTIFICATE AND A GIFT/CASH. IT WAS STATED THAT THE SCHEME IS PROMOT ED TO ENCOURAGE THE BRILLIANT STUDENTS IN SOME SELECTED (GOVERNMENT ) SCHOOLS. HOWEVER THE PRIZE MONEY TO BE DISTRIBUTED/GIFTED D EPENDS UPON THE FUNDS/BUDGET WITH THE TRUST. THE TRUST HAS DISTRIB UTED NEARLY SIXTY AWARDS TO SUCH STUDENTS. THE PHOTOGRAPHS FURNISHED DEMONSTRATE THE SUCCESS OF THIS SCHEME. IT WAS CONTENDED THAT THIS ACTIVITY IS A CONTINUING CHARITABLE/EDUCATIONAL ACTIVITY OF THE T RUST WHICH WAS NOT NOTICED AND NOTED BY THE RESPONDENT/DEPARTMENT. PAGE 4 OF 6 ITA NO.1236/BANG/2009 4 4.2 IT WAS FURTHER SUBMITTED THAT IN TERMS OF CLAU SE (B) OF THE MAIN OBJECTS THE TRUST HAS STARTED A PRE-PRIMA RY SCHOOL KNOWN AS LITTLE CITIZENS IN 6 TH CROSS CUBBONPET AT BANGALORE. THE SCHOOL WAS REGISTERED/RECOGNIZED BY THE GOVERNMENT OF KARNATAKA VIDE LETTER IN C4-S.NO.160/2006-07 DATED 20.04.2006 . HOWEVER THE SCHOOL WAS NOT SUCCESSFUL BECAUSE OF THE BUILDI NG ALTHOUGH THE STAFF AND OTHER FACILITIES WERE GOOD. AS THE TRUST INCURRED LOSSES IN RUNNING THE SCHOOL IT WAS TEMPORARILY CLOSED TO BE STARTED IN A GOOD LOCATION VERY SHORTLY. IT WAS NOT APPRECIATED THA T RUNNING THE SCHOOL IS ONE OF THE MANY CHARITABLE/EDUCATIONAL OB JECTS OF THE TRUST AND NOT THE ONLY OBJECT OF THE TRUST. 4.3 THE ASSESSEE-TRUST ALSO SUBMITTED THAT IN TERM S OF CLAUSE (B) OF THE MAIN OBJECTS THE TRUST WANTED TO START OTHER INSTITUTIONS FOR PROMOTION AND ADVANCEMENT OF KNOWL EDGE IN ARTS SCIENCE TECHNOLOGY LAW LITERATURE HUMANITIES AND OTHER USEFUL SUBJECTS IN ALL FIELDS. THE TRUST WAS GRANTED A C IVIC AMENITY SITE NO.3(P)515 CWS-HBCS-HAL 3 RD STAGE UNDER A LEASE FOR 30 YEARS FOR A DIGITAL LIBRARY. 5. THE LEARNED DR ON THE OTHER HAND SUPPORTED TH E FINDINGS/CONCLUSION OF THE DIRECTOR OF INCOME-TAX ( EXEMPTIONS). 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIALS ON RECORD AND HAVE GONE THROUGH THE PAPER BOOK FILED BY THE ASSESSEE TRUST. IN ORDER TO APPRECIATE THE PUR POSE AND FUNCTION OF THE TRUST THE TRUST DEED HAS TO BE READ AS A WH OLE AND NO SINGLE CLAUSE CAN BE READ IN ISOLATION. RUNNING OF SCHOOL IS ONE OF THE PAGE 5 OF 6 ITA NO.1236/BANG/2009 5 MANY CHARITABLE/ EDUCATIONAL OBJECTS OF THE TRUST A ND NOT THE ONLY OBJECT OF THE TRUST. THE ASSESSEE VIDE LETTER DATE D 30.9.2009 HAD BROUGHT TO THE NOTICE OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) THE SCHOOL WHICH WAS RUN BY THE ASSESSEE WAS DISCO NTINUED ON ACCOUNT OF LACK OF INFRA-STRUCTURE. IT WAS FURTHER STATED IN THE LETTER THAT THE ASSESSEE TRUST WAS ON THE LOOK OUT OF SUIT ABLE LEASE ACCOMMODATION IN OTHER PARTS OF THE CITY FOR RE-STA RTING OF THE SCHOOL. AS MENTIONED EARLIER RUNNING OF THE SCHOO L IS ONLY ONE OF THE OBJECTS OF THE ASSESSEE-TRUST. THE OTHER MAIN OBJECTS WHICH ARE MENTIONED IN CLAUSE (B) READS AS FOLLOWS:- TO START OTHER INSTITUTIONS FOR PROMOTION AND ADVANCEMENT OF KNOWLEDGE IN ARTS SCIENCE TECHNOLOGY LAW LITERATURE HUMANITIES AND OTHER USEFUL SUBJECTS IN ALL FIELDS. THE ASSESSEE TRUST WAS GRANTED A CIVIC AMENITY SITE NO.3(P) 515 CWC LAYOUT HAL 3 RD STAGE BANGALORE FOR A LEASE PERIOD OF 30 YEARS. THE PURPOSE FOR WHICH IT WAS GRANTED TO ASS ESSEE-TRUST IS TO SET UP A LIBRARY AND DIGITAL LIBRARY. WE HAVE PE RUSED THE CIVIC AMENITY SITE AND POSSESSION CERTIFICATE GIVEN BY TH E BANGALORE DEVELOPMENT AUTHORITY WHICH IS PLACED ON RECORD AT PAGE 41 OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE. THE CIVIC AM ENITY SITES ARE GRANTED ONLY FOR NON-PROFIT MAKING ORGANIZATIONS. THE SITE IS INALIENABLE DURING THE PERIOD OF 30 YEARS OF LEASE. THE POSSESSION OF THIS SITE DOES NOT MILITATE AGAINST THE OBJECTS OF THE TRUST BUT IT IS IN FURTHERANCE OF ITS CHARITABLE/EDUCATIONAL PURPOS ES. HENCE THE FINDING OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) THAT THE TRUST PAGE 6 OF 6 ITA NO.1236/BANG/2009 6 DOES NOT EXIST FOR CHARITABLE PURPOSE IS FACTUALLY NOT CORRECT AND LEGALLY NOT TENABLE. 6.1 THERE IS NO NEED IN TERMS OF SECTION 12A(B) TO FILE AN AUDIT REPORT IN FORM 10B AND HENCE SAME WAS NOT ANN EXED WITH THE STATEMENT. THE AUDITED ACCOUNTS FOR THE YEAR ENDING 31.3.2006 31.3.2007 AND 31.3.2008 ARE PLACED ON RECORD (PAGES 6 TO 14 OF THE PAPER BOOK). IT WAS ALSO OPINED IN VARIOUS DECISIO NS THAT FILING OF AUDITED REPORT IN FORM 10B IS NOT MANDATORY BUT ONL Y DIRECTORY. IN TERMS OF SECTION 80G(5)(IV) THE DIRECTOR OF INCOME -TAX (EXEMPTIONS) HAS TO EXAMINE REGULAR ACCOUNTS OF REC EIPTS AND EXPENDITURE OF TRUST. SINCE IT IS MENTIONED IN TH E IMPUGNED ORDER THAT BOOK OF ACCOUNTS WERE NOT PRODUCED FOR LIMITE D PURPOSE OF EXAMINING THE SAME MATTER IS REMITTED TO DIRECTOR OF INCOME-TAX (EXEMPTIONS) IN THE INTEREST OF JUSTICE AND EQUITY. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ORDER PRONOUNCED ON FRIDAY THE 28 TH DAY OF MAY 2010 AT BANGALORE. SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) TH E CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. (7) GUARD FILE NEW DELHI. MSP/26.5/28.5 BY ORDER ASST. REGISTRAR ITAT BANGALORE.