SHRI SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA, MUMBAI v. D.C.I.T.(EXEMPTION), MUMBAI

ITA 1849/MUM/2011 | misc
Pronouncement Date: 09-09-2011 | Result: Allowed

Appeal Details

RSA Number 184919914 RSA 2011
Assessee PAN AAATS2694E
Bench Mumbai
Appeal Number ITA 1849/MUM/2011
Duration Of Justice 6 month(s) 5 day(s)
Appellant SHRI SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA, MUMBAI
Respondent D.C.I.T.(EXEMPTION), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 09-09-2011
Date Of Final Hearing 29-08-2011
Next Hearing Date 29-08-2011
Assessment Year misc
Appeal Filed On 04-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI N.V.VASUDEVAN(J.M) & SHRI R.K.PANDA (A .M) ITA NO.1849/MUM/2011 SHRI SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA PLOT NO.293 COMRADE HARBANSLAL MARG SION(E) MUMBAI 400 022. PAN:AAATS 2694E (APPELLANT) VS. DIRECTOR OF INCOME TAX (EXEMPTION) 6 TH FLOOR PIRMAL CHAMBERS LALBAUG MUMBAI 400 012. (RESPONDENT) APPELLANT BY : SHRI G.P.TRIVEDI RESPONDENT BY : SHRI ARVIND SONDE ADVOCATE ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY SRI SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA CHARITABLE TRUST (HEREINAFTER REFERRED AS A PPELLANT SABHA) AGAINST THE ORDER DT.2.2.2011 OF THE DIRECTOR OF INCOME TAX (EXEMPTION) MUMBAI (DIT)PASSED U/S.12AA(3) OF THE INCOME TAX ACT 1961 (THE ACT). 2. THE APPELLANT SABHA IS REGISTERED AS A SOCIETY U NDER THE SOCIETIES REGISTRATION ACT AND ALSO AS A CHARITABLE INSTITUTI ON UNDER THE BOMBAY TRUSTS ACT 1950. THE APPELLANT SABHA WAS ALSO GRA NTED REGISTRATION UNDER SEC.12AA OF THE ACT. 3. UNDER SECTION 11 OF THE ACT INCOME FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES WILL NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN OTHER WORDS SUCH INCOME WOULD NOT BE TAXAB LE. ONE OF THE CONDITIONS FOR AVAILING OF EXEMPTION U/S.11 OF THE ACT IS THAT THE TRUST OR ITA NO.1849/MUM/2011 2 INSTITUTION HAS TO MAKE AN APPLICATION FOR REGISTRA TION OF THE TRUST OR INSTITUTION IN THE PRESCRIBED FORM AND IN THE PRESC RIBED MANNER AND SUCH TRUST OR INSTITUTION SHOULD BE REGISTERED UNDER SEC TION 12AA OF THE ACT. REGISTRATION U/S.12AA OF THE ACT WILL BE GRANTED ON LY AFTER THE COMMISSIONER IS SATISFIED THAT THE OBJECTS OF THE TRUST OR INSTI TUTION ARE CHARITABLE AND THE ACTIVITIES OF THE TRUST OR INSTITUTION ARE GENUINE. THERE IS NO DISPUTE THAT THE APPELLANT SABHA IN THE PRESENT CASE WAS GRANTED SUC H REGISTRATION U/S.12AA OF THE ACT AND ITS ASSESSMENTS WERE BEING COMPLETED ON THE BASIS THAT THERE EXISTS A VALID REGISTRATION U/S.12AA OF THE ACT. 4. THE ADDL.DIRECTOR OF INCOME TAX (EXEMPTIONS) R ANGE-1 MUMBAI DURING THE SCRUTINY ASSESSMENT PROCEEDINGS OF THE APPELLA NT SABHA NOTICED THAT THE APPELLANT SABHA HAD AMENDED ITS OBJECTS CLAUSE SINCE JANUARY 2008 BY INCORPORATING CLAUSE 3(III) IN THE OBJECTS CLAUSE O F ITS MEMORANDUM OF ASSOCIATION. THE OBJECTS OF THE APPELLANT SABHA AS IT EXISTED AFTER SUCH AMENDMENT ARE AS FOLLOWS: 3. THE OBJECTS OF THE SABHA ARE: (I) SECULAR EDUCATION IN MUSIC DANCE DRAMA CULTURE AND OTHER FINE ARTS. (II) MEDICAL RELIEF HEALTH SERVICES AND YOGA AND WITHO UT PREJUDICE TO THE GENERALITY OF THE ABOVE; (A) TO PROMOTE ADVANCE AND PROPAGATE MUSIC LITERA TURE DANCE DRAMA AND OTHER FINE ARTS IN ALL FORMS AND BY ALL L EGITIMATE MEANS AND WITHOUT DEROGATION TO THE GENERALITY OF SECULAR EDUCATION. (B) TO ORGANIZE AND/OR CONDUCT OR ARRANGE TO CONDUC T SCHOOLS/COLLEGES IN FINE ARTS SEMINARS/SYMPOSIA C ONCERTS COMPETITIONS DEMONSTRATIONS LECTURES FILM SHOWS MUSIC DANCE AND DRAMA FESTIVALS FOR THE ATTAINMENT OF THE OBJEC TS OF THE SABHA AND TO PROVIDE FACILITIES FOR ADVANCEMENT OF SUCH E DUCATION PUBLICATIONS ARCHIVES AND LIBRARIES AND OTHER SIMI LAR MEANS. (C) TO AWARD SCHOLARSHIPS STIPENDS HONOURS AND PR IZES AND OTHER FORMS OF ENCOURAGEMENT/ ASSISTANCE FOR LEARNING/PRO PAGATING MUSIC DANCE DRAMA AND OTHER FINE ARTS IN PURSUANCE OF THE ABOVE OBJECTS. ITA NO.1849/MUM/2011 3 (D) TO UNDERTAKE AND PROMOTE SCIENTIFIC RESEARCH FO R EXTENSION OF KNOWLEDGE IN RELATION TO FINE ARTS IN ALL THEIR BRA NCHES. (E) TO PROVIDE MEDICAL RELIEF TO ANY PERSON IRRESPE CTIVE OF CASTE OR CREED AND TO ESTABLISH MEDICAL CENTRES/HOSPITALS FO R PROVIDING MEDICAL SERVICES AND ALSO TO UNDERTAKE AND PROMOTE EDUCATION AND RESEARCH IN MEDICAL SCIENCE AND ALLIED ACTIVITIES. (F) TO PROVIDE SERVICES IN THE FIELDS OF COMMUNITY HEALTH SERVICES YOGA AND NUTRITION. (G) TO ENGAGE IN ALL OTHER LAWFUL AND ALLIED ACTIVI TIES AS MAY BE INCIDENTAL OR CONDUCIVE TO THE PROMOTION AND FURTHE RANCE OF ANY OR ALL THE OBJECTS OF THE SABHA. (H) TO CARRY ON THE AFORESAID OBJECTS EITHER BY ITS ELF OR IN ASSOCIATION WITH OTHERS. (III) TO AFFILIATE AND/OR TAKE OVER/MERGE/HAVE ANY ARRANG EMENT WITH ANY OTHER TRUST/SOCIETY OR INSTITUTION HAVING SIMILAR OBJECTS WITH OR WITHOUT ITS ASSETS AND ON SUCH TER MS AND CONDITIONS AS MAY BE DECIDED UPON BY THE SABHA. (CLAUSE (III) ADDED BY AMENDMENT OF THE MEMORANDUM OF ASSOCIATION WITH EFFECT FROM 26.9.2004) 4. THE ADDL.DIRECTOR OF INCOME TAX (EXEMPTIONS) RA NGE-1 MUMBAI (ADIT)BY HIS LETTER DATED 16.11.2009 INFORMED THE D IRECTOR OF INCOME TAX (EXEMPTION) MUMBAI THAT THE AMENDMENT TO THE OBJEC TS CLAUSE OF THE MEMORANDUM BY INSERTING CLAUSE 3 (III) HAS NOT BEEN INTIMATED NOR A FRESH APPLICATION WAS MADE FOR GRANT OF REGISTRATION TO T HE DIT. IT HAS FURTHER INFORMED IN THE SAID LETTER THAT THE HONBLE ALLAHA BAD HIGH COURT IN THE CASE OF ALLAHABAD AGRICULTURE INSTITUTE VS. UNION OF IND IA 291 ITR 116 (ALL) HAS HELD THAT WHEREVER THERE IS CHANGE IN THE OBJECTS O F AN INSTITUTION THE INSTITUTION HAS TO MAKE A FRESH APPLICATION FOR GRA NT OF REGISTRATION U/S.12A OF THE ACT AND GET CONCURRENCE OF THE DEPARTMENT. ITA NO.1849/MUM/2011 4 5. THE REASONS WHY THE APPELLANT SABHA HAD TO MAKE THE AMENDMENT TO THE OBJECTS CLAUSE OF ITS MEMORANDUM ARE AS FOLLOWS: THERE WAS A SOCIETY BY NAME BHARATIYA MUSIC & ARTS SOCIETY (HEREINAFTER REFERRED TO AS THE SOCIETY ). THE SOCIETY WAS RE GISTERED UNDER THE SOCIETIES REGISTRATION ACT AND ALSO AS A PUBLIC CHARITABLE TR UST WITH THE OFFICE OF THE CHARITY COMMISSIONER GREATER MUMBAI REGION MUMBAI . ITS OBJECTS WERE (A) TO CONDUCT CLASSES ESTABLISH AND RUN SCHOOLS OR CO LLEGES FOR THE STUDY OF MUSIC DANCE AND ALLIED ARTS WHICH INCLUDE INTER ALIA. (B) TO AFFILIATE THE INSTITUTION OR INSTITUTIONS SO EST ABLISHED WITH THE ABOVE OBJECT IN VIEW WITH UNIVERSITIES ACADEMICS O R CENTRES OF LEARNING DEEMED PROPER BY SOCIETY. (C) TO RECEIVE GRANTS IN AID AND ENDOWMENTS FROM GOVER NMENTS UNIVERSITIES OR LIKE BODIES AND TO AWARD STIPENDS SCHOLARSHIPS PRIZES AND CONFER DIPLOMAS AWARDS AND OTHER CONCE SSIONS TO DESERVING MEN WOMEN AND CHILDREN WHO STUDY IN THE SOCIETYS SCHOOLS AND CLASSES AND WHO PARTICIPATE IN COMPETIT IONS SEMINARS CONFERENCES FESTIVALS AND OTHER EVENTS RUN BY THE SOCIETY. (D) TO PROMOTE AND DEVELOP INDIAN MUSIC DANCE CULTURE AND ALLIED ARTS IN GENERAL. (E) TO DO SUCH OTHER THINGS WHICH MAY BE CONDUCIVE TO T HE OBJECTS OF THE SOCIETY MENTIONED ABOVE. THE SOCIETY COULD NOT FUNCTION EFFECTIVELY AS ITS S ANGEETHA VIDYALAYA (THE FINE ARTS WING) EXPERIENCED SHARP DECLINE IN ENROLM ENT OF MEMBERS AND FURTHER THE QUALITY AND THE NUMBER OF MUSICAL PROGR AMMES DECLINED AS A SEQUEL TO THE REDUCTION IN THE MEMBERSHIP. THE SOC IETY WAS PURSUING ITS ACTIVITIES IN A BUILDING COMPLEX THAT REQUIRED EXTE NSIVE REPAIRS AND RENOVATION DUE TO PASSAGE OF TIME AND WEATHER CONDI TIONS. BUT SINCE THE FINANCIAL RESOURCES AT THE DISPOSAL OF THE SOCIETY WERE MEAGER IT WAS INADEQUATE TO CARRY OUT MAJOR REPAIRS AS TO BE ABLE TO SPEND ON MAINTENANCE OF THE BUILDING COMPLEX. FURTHER THE SOCIETY DID NOT FORESEE ANY POSSIBILITY TO BE ABLE TO MOBILIZE RESOURCES TO MEET THE FINANC IAL REQUIREMENTS. THEREFORE TO PERPETUATE THE CAUSE SOCIETY IN ITS ANNUAL GENERAL MEETING OF THE MEMBERS HELD ON 16 TH DECEMBER 2004 AND AGAIN IN THE EXTRAORDINARY MEETING OF THE MEMBERS HELD ON 12 TH SEPTEMBER 2004 UNANIMOUSLY APPROVED THE PROPOSAL TO AMALGAMATE THE SOCIETY WIT H THE APPELLANT SABHA. ITA NO.1849/MUM/2011 5 SIMILARLY THE APPELLANT SABHA IN THEIR EXTRAORDINA RY GENERAL MEETING HELD ON 26 TH SEPTEMBER 2004 PASSED THE REQUISITE RESOLUTION TO GIVE EFFECT TO THE AMALGAMATION OF THE SOCIETY WITH THE APPELLANT SABH A. A SCHEME OF AMALGAMATION BETWEEN THE TWO INSTITUTIONS REGISTERE D UNDER THE PROVISIONS OF THE BOMBAY PUBLIC TRUST ACT AND SOCIETY REGISTRA TION ACT CAN BE GIVEN EFFECT TO ON THE BASIS OF AN APPLICATION TO BE MADE IN THIS BEHALF TO THE CHARITY COMMISSIONER GREATER MUMBAI REGION MUMBAI UNDER SECTION 50A(2) OF THE BOMBAY PUBLIC TRUSTS ACT 1950 AND TH E CHARITY COMMISSIONER IF HE IS SATISFIED IS EMPOWERED TO P ASS AN ORDER APPROVING THE AMALGAMATION. AN APPLICATION FOR APPROVAL OF T HE AMALGAMATION OF THE APPELLANT SABHA WITH THE SOCIETY WAS MADE. IN THE APPLICATION FOR RECOGNIZING THE AMALGAMATION IT WAS MENTIONED THAT POST AMALGAMATION THE COMBINED INSTITUTION WOULD BE CONTINUED TO BE CALLE D AS SHANMUKHANANDA FINE ARTS & SANGEETHA SABHA. SINCE THERE WAS NO S PECIFIC POWER IN THE MEMORANDUM OF ASSOCIATION OF THE APPELLANT SABHA TO MERGE WITH ANY OTHER SOCIETY OR INSTITUTION HAVING SIMILAR OBJECTS BY W AY OF AMENDMENT TO THE OBJECTS CLAUSE 3 (III) WAS INSERTED BY PASSING NE CESSARY RESOLUTION IN THE EXTRA ORDINARY GENERAL MEETING HELD ON 26.9.2004. THIS THE BACKGROUND UNDER WHICH THE AMENDMENT BY WHICH CLAUSE 3 (III) R EFERRED TO IN THE EARLIER PART OF THIS ORDER WAS INSERTED IN THE OBJECTS CLAU SE OF THE MEMORANDUM OF ASSOCIATION. THE CHARITY COMMISSIONER BY ORDER DAT ED 18.12.2007 ALLOWED THE APPLICATION FOR MERGER OF THE APPELLANT SABHA W ITH THE SOCIETY. 6. ON RECEIPT OF THE AFORESAID LETTER FROM THE ADIT THE DIT ISSUED A NOTICE DATED 13.9.2010 POINTING OUT THAT THE APPELL ANT SABHA CHANGED ITS OBJECT AFTER GRANT OF REGISTRATION U/S.12A OF THE A CT AND THAT THE ALTERATION IN THE OBJECTS CLAUSE WAS SIGNIFICANT. IT WAS FURTHER POINTED OUT THAT IN THE CASE OF SIGNIFICANT CHANGE IN THE OBJECTS CLAUSE T HE VERY FOUNDATION OF REGISTRATION GRANTED U/S.12AA BASED ON THE ORIGINAL OBJECT CLAUSE WILL NO LONGER SURVIVE AND IT WAS INCUMBENT ON THE PART OF THE APPELLANT SABHA TO HAVE APPLIED FOR FRESH REGISTRATION. IT WAS ALSO P OINTED OUT BY THE DIT THAT ITA NO.1849/MUM/2011 6 FORM NO.10-A IN WHICH APPLICATION FOR REGISTRATION U/S.12AA HAS TO BE MADE CONTAINS INSTRUCTION THAT IN THE EVENT OF CHANGE OF OBJECTS CLAUSE THE REVENUE SHOULD BE INFORMED ABOUT THE SAME. THE DIT FURTHER REQUESTED THE APPELLANT SABHA TO SEEK FRESH REGISTRATION AND ALSO INFORMED THE APPELLANT SABHA THAT ITS REGISTRATION GRANTED ALREADY WILL BE WITHDRAWN FROM THE DATE ON WHICH THE OBJECTS CLAUSE IN THE MEMORANDUM OF AS SOCIATION HAVE BEEN AMENDED. 7. BY ITS REPLY DATED 4.10.2010 THE APPELLANT SABH A BROUGHT TO THE NOTICE OF THE DIT THE FACTS WITH REGARD TO THE AMEN DMENT AND AMALGAMATION OF THE APPELLANT SABHA WITH THE SOCIETY WHICH WE H AVE NARRATED IN THE EARLIER PARAGRAPHS. IT WAS FURTHER SUBMITTED THAT THERE WA S NO CHANGE IN THE OBJECTS FOR WHICH THE APPELLANT SABHA EXISTED AND T HE AMENDMENT IN QUESTION WAS ONLY FOR ENABLING AMALGAMATION UNDER T HE BOMBAY PUBLIC TRUSTS ACT 1950. IT WAS FURTHER POINTED OUT THAT THE ABOVE STATEMENT THAT THIS APPLICATION WAS ONLY FOR THE PURPOSE OF OBTAIN ING THE APPROVAL OF THE CHARITY COMMISSIONER FOR THE PURPOSE OF BRINGING AB OUT AMALGAMATION OF THE TWO INSTITUTIONS. IT WAS FURTHER POINTED OUT T HAT THE APPELLANT SABHA AS WELL AS THE SOCIETY HAD COMMON OBJECTS AND THEREFOR E THERE WAS NO AMENDMENT AS SUCH THAT WAS CARRIED OUT TO THE OBJEC T SET OUT IN THE MEMORANDUM AND ARTICLES OF ASSOCIATION. 8. BY THE IMPUGNED ORDER THE DIT HELD THAT THE OBJ ECTS OF THE APPELLANT SABHA AND THE SOCIETY WERE NOT ONE AND THE SAME. I N THIS REGARD THE DIT HAS SUMMARIED THE MAIN OBJECTS OF THE APPELLANT SAB HA AND THE SOCIETY AS FOLLOWS: ITA NO.1849/MUM/2011 7 OBJECT OF THE SABHA THE OBJECTS OF SABHA ARE SECULAR EDUCATION IN D ANCE MUSIC DRAMA CULTURAL AND OTHER FINE ARTS MEDICAL RELIEF HEALT H SERVICES YOGA SCIENTIFIC RESEARCH AND OTHER CHARITABLE OBJECTS. OBJECTS OF THE SOCIETY TO CONDUCT CLASSES ESTABLISH AND RUN SCHOOLS/COLL EGES FOR THE STUDY OF MUSIC DANCE AND ALLIED ARTS IN GENERAL ETC. 9. IN THE OPINION OF THE DIT THE OBJECTS OF THE AP PELLANT SABHA AND THE SOCIETY WERE DIFFERENT AND THEREFORE THE MERGER OF THE APPELLANT SABHA WITH THE SOCIETY RESULTS IN CHANGE OF OBJECTS OF THE APP ELLANT SABHA. THEREAFTER THE DIT REFERRED TO THE DECISION OF THE HONBLE ALL AHABAD HIGH COURT IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE (SUPRA) AN D HELD THAT CHANGE OF OBJECTS OF A TRUST OR INSTITUTION WITHOUT THE CONCU RRENCE OF DIT (EXEMPTION) WOULD RESULT IN WITHDRAWAL OF THE REGISTRATION GRAN TED U/S.12A OF THE ACT. THE APPELLANT SABHA CONTENDED BEFORE THE DIT THAT T HERE IS NO CHANGE IN THE OBJECTS OF THE APPELLANT SABHA EVEN AFTER THE MERGE R AND THAT THE OBJECTS CONTINUE TO BE THE SAME AS IT EXISTED BEFORE THE ME RGER AND THAT THE OBJECTS OF THE SOCIETY ARE IDENTICAL TO THE APPELLANT SABHA . THE DIT HOWEVER HELD THAT THE APPELLANT SABHA CANNOT DECIDE FOR ITSELF W HETHER THERE WAS CHANGE IN THE OBJECTS OR NOT AND THAT IT WAS THE AUTHORITY WHICH GRANTED REGISTRATION THAT HAS TO DECIDE WHETHER THERE WAS CHANGE OF OBJE CTS OR NOT AND THAT THE APPELLANT SABHA OUGHT TO HAVE APPROACHED THE DIT(EX EMPTION) FOR REGISTRATION AFRESH. FOR THE ABOVE REASONS THE DIT WITHDREW THE REGISTRATION GRANTED TO THE APPELLANT SABHA. 10. AGGRIEVED BY THE AFORESAID ORDER OF THE DIT TH E APPELLANT SABHA IS IN APPEAL BEFORE THE TRIBUNAL. 11. THE LEARNED COUNSEL FOR THE APPELLANT SABHA AFT ER REFERRING TO THE FACTUAL BACKGROUND OF THE CASE FIRSTLY SUBMITTED TH AT THE DIT FAILED TO TAKE INTO CONSIDERATION THE DIFFERENCE BETWEEN POWER CON FERRED ON THE TRUST OR INSTITUTION AND THE OBJECTS OF A TRUST OR INSTITUTI ON EXISTING FOR CHARITABLE ITA NO.1849/MUM/2011 8 PURPOSE. HIS SUBMISSION WAS THAT THE PRIMARY OR DO MINANT PURPOSE OF THE TRUST IF CHARITABLE ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABLE BUT WHICH IS MERELY ANCILLARY OR INCIDENTAL TO THE PRIM ARY OR DOMINANT PURPOSE WOULD NOT PREVENT THE TRUST BEING A VALID CHARITY. HIS SUBMISSION WAS THAT THE AMENDMENT OF THE OBJECTS CLAUSE OF THE MEMORAND UM OF THE APPELLANT SABHA WAS ONLY TO ENABLE IT TO CARRY ON THE MAIN OB JECTS OF THE TRUST. IN THIS REGARD OUR ATTENTION WAS DRAWN TO THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF YOGIRAJ CHARITY TRUST VS. CIT 103 ITR 777(SC) WHEREIN IT WAS HELD THAT IF THE PRIMARY OR DOMINANT PURPOSE OF A TRUST WAS CHARITABLE ANOTHER OBJECT WHICH BY ITSELF MAY NOT BE CHARITABL E BUT WHICH IS MERELY ANCILLARY OR INCIDENTAL TO THE PRIMARY OR DOMINANT PURPOSE WOULD NOT PREVENT THE TRUST FROM BEING A VALID CHARITY. IN PARTICULA R OUR ATTENTION WAS DRAWN TO A PASSAGE IN THE SAID JUDGEMENT WHEREIN THE HON BLE SUPREME COURT HAS OBSERVED THAT A CLEAR DISTINCTION MUST BE DRAWN BET WEEN THE OBJECT OF A TRUST AND POWERS CONFERRED UPON THE TRUSTEES AS INCIDENTA L TO THE CARRYING OUT OF THE OBJECT. IF THE ONLY OBJECT OF A TRUST IS THE C ONSTRUCTION AND MAINTENANCE OF A SWIMMING BATH WHICH IS A PURPOSE OF GENERAL PU BLIC UTILITY THE FACT THAT THE TRUSTEES ARE GIVEN THE POWER TO SUPPLY OR SELL REFRESHMENTS TO PERSONS WHO RESORT TO THE BATH WOULD NOT MAKE THE TRUST ANY THE LESS CHARITABLE. FURTHER REFERENCE WAS MADE TO THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. FEDERATION OF INDIAN CHAMBERS O F COMMERCE & INDUSTRY 130 ITR 186 (SC) AND DECISION OF ITAT DELHI IN THE CASE OF IILM FOUNDATION ACADEMY VS. CIT (2011) 44 SOT 37 (DEL) FOR IDENTICA L PROPOSITION AS STATED ABOVE. 12. HIS NEXT SUBMISSION WAS THAT THE CONCLUSION OF THE DIT THAT THERE WAS CHANGE IN THE OBJECTS CLAUSE OF THE MEMORANDUM OF T HE APPELLANT SABHA IS ERRONEOUS. IN THIS REGARD HE POINTED OUT THAT THE OBJECTS OF THE APPELLANT SABHA AS WELL AS THE SOCIETY WERE IDENTICAL AND THE OBSERVATION OF THE DIT THAT THEY WERE DIFFERENT IS ERRONEOUS. IT WAS ALSO SUBMITTED THAT THE AMENDMENT TO THE APPELLANT SABHAS MEMORANDUM OF AS SOCIATION WAS THE ITA NO.1849/MUM/2011 9 POWER TO MERGE WITH A SOCIETY HAVING SIMILAR OBJECT S AS THAT OF THE APPELLANT SABHA. THE FACT THAT PURSUANT TO SUCH AMENDMENT OF THE OBJECTS CLAUSE THE MERGER OF THE APPELLANT SABHA WITH THE SOCIETY WAS APPROVED BY THE BOMBAY CHARITY COMMISSIONER WOULD BY ITSELF SHOW T HAT THE OBJECTS OF THE APPELLANT SABHA AND THE SOCIETY ARE ONE AND THE SAM E. IN THIS REGARD IT WAS ALSO SUBMITTED THAT EVEN IF ONE WERE TO ASSUME THAT THE OBJECTS OF THE APPELLANT SABHA AND THE SOCIETY WERE DIFFERENT IT WAS ONLY THE MAIN OR DOMINANT OBJECTS THAT HAS TO BE SEEN. 13. HIS NEXT SUBMISSION WAS THAT THE DECISION OF TH E HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ALLAHABAD AGRICULTURAL SO CIETY (SUPRA) IS A CASE WHERE THERE WAS A DRASTIC CHANGE OF OBJECTS. OUR A TTENTION WAS DRAWN TO THE FOLLOWING OBSERVATION OF THE HONBLE HIGH COURT AT PAGE-120 OF THE REPORT WE HAVE NOT BEEN SHOWN THAT THE ORIGINAL OBJECTS AND T HE ALTERED OBJECTS OF THE PETITIONER IN ITS MEMORANDUM OF ASSOCIATION ARE PRA CTICALLY THE SAME OR ARE CHARITABLE. IT WAS SUBMITTED THAT THE RATIO LAID DOWN IN THE SAID CASE HAS TO BE READ IN THE CONTEXT OF THE ABOVE FACTS OF THE SA ID CASE. IT WAS ALSO SUBMITTED THAT IN THE CASE OF THE APPELLANT SABHA THE VERY FOUNDATION IS NOT REMOVED AND THE OBJECTS EVEN AFTER MERGER CONTINUES TO BE CHARITABLE. 14. THE NEXT SUBMISSION WAS THAT U/S.12AA(3) OF TH E ACT CANCELLATION OF REGISTRATION IS POSSIBLE ONLY WHEN TWO CONDITIONS A RE SATISFIED VIZ. (A) THE ACTIVITIES OF THE INSTITUTION ARE NOT GENUINE OR (B ) ACTIVITIES ARE NOT BEING OUT IN ACCORDANCE WITH ITS OBJECTS. IT WAS ARGUED THAT IN THE IMPUGNED ORDER THERE IS NO SUCH FINDING GIVEN BY THE DIT AND WITHO UT SUCH FINDING THE POWER TO CANCEL REGISTRATION CANNOT BE EXERCISED. 15. THE LEARNED D.R. RELIED ON THE ORDER OF THE DIT . IT WAS SUBMITTED BY HIM THAT IT WAS THE DUTY OF THE APPELLANT SABHA TO INTIMATE THE REGISTERING AUTHORITY IN THE EVENT OF CHANGE OF OBJECTS. IT WA S ALSO SUBMITTED THAT FORM ITA NO.1849/MUM/2011 10 NO.10-A OF THE RULES WHICH IS THE APPLICATION FORM PRESCRIBED FOR GRANT OF REGISTRATION U/S.12AA OF THE ACT CONTAINS A SPECIF IC NOTE THAT IN THE EVENT OF CHANGE OF OBJECTS THE ASSESSEE HAS TO INFORM THE AU THORITY. IT WAS HIS SUBMISSION THAT REGISTRATION CONFERS A RIGHT OF EXE MPTION OF INCOME AND THE TRUST OR INSTITUTION HAS A CORRESPONDING DUTY TO IN TIMATE CHANGE OF OBJECTS BASED ON WHICH THE REGISTRATION WAS GRANTED. 16. IN HIS REJOINDER THE LEARNED COUNSEL FOR THE AP PELLANT SABHA SUBMITTED THAT THE NOTE IN FORM NO.10-A OF THE INCOME TAX RUL ES 1962 DOES NOT SPECIFY THE CONSEQUENCES IN THE EVENT OF FAILURE TO COMPLY WITH THOSE DIRECTIONS. IT WAS HIS SUBMISSION THAT THE CONSEQUENCES OF CANCELL ATION OF REGISTRATION ARE SERIOUS AND A NOTE GIVEN IN THE FORM SPECIFIED BY T HE RULES CANNOT BE THE FOUNDATION TO EXERCISE SUCH POWER. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE POWER TO CANCEL REGISTRATION ALREADY GRANTED U/S.12AA OF THE ACT IS CONTAINED IN SEC.12AA (3) OF THE ACT AND IT READS AS FOLLOWS: (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) AND SUBSEQUENTL Y THE COMMISSIONER IS SATISFIED THAT THE ACTIVITIES OF SU CH TRUST OR INSTITUTION ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACC ORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION AS THE CASE MA Y BE HE SHALL PASS AN ORDER IN WRITING CANCELLING THE REGISTRATION OF SUC H TRUST OR INSTITUTION. PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSED UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A R EASONABLE OPPORTUNITY OF BEING HEARD. THE POWER TO CANCEL REGISTRATION ALREADY GRANTED CA N BE DONE IN TWO SITUATIONS; (A) SATISFACTION OF THE COMMISSIONER THAT THE ACTIV ITIES OF THE TRUST OR INSTITUTION ARE NOT GENUINE (B) SATISFACTION OF THE COMMISSIONER THAT THE ACTIV ITIES OF THE TRUST OR INSTITUTION ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION. ITA NO.1849/MUM/2011 11 18. IN THE IMPUGNED ORDER THERE IS NO FINDING ON TH E SATISFACTION OF ANY OF THE ABOVE TWO CONDITIONS. THE OBJECTS OF THE APPEL LANT SABHA ARE CHARITABLE AND ON THIS ASPECT THERE IS NO DISPUTE OR DOUBT. T HERE IS NO FINDING THAT THE OBJECTS OF THE SOCIETY THAT MERGED WITH THE APPELLA NT SABHA ARE NOT CHARITABLE. A MERE FINDING THAT THE OBJECTS OF THE SOCIETY AND THE APPELLANT SABHA ARE NOT SIMILAR WOULD NOT BE SUFFICIENT TO EX ERCISE THE POWER U/S.12AA (3) OF THE ACT WITHOUT GIVING A FINDING THAT THE SO CIETYS OBJECTS ARE NOT CHARITABLE. ON THIS SCORE THE IMPUGNED ORDER IS LI ABLE TO SET ASIDE. 19. APART FROM THE ABOVE WE ALSO AGREE WITH THE S UBMISSION ON BEHALF OF THE APPELLANT SABHA THAT THE OBJECTS OF THE SOCIETY ARE IDENTICAL TO THAT THE APPELLANT SABHA AND THE DITS FINDING THAT THEY ARE NOT ONE AND THE SAME IS WITHOUT ANY BASIS. THE OBJECT OF THE APPELLANT SABH A ARE SECULAR EDUCATION IN DANCE MUSIC DRAMA CULTURAL AND OTHER FINE ART S MEDICAL RELIEF HEALTH SERVICES YOGA SCIENTIFIC RESEARCH AND OTHER CHARIT ABLE OBJECTS. THE OBJECTS OF THE SOCIETY ARE TO CONDUCT CLASSES ESTABLISH AND R UN SCHOOLS/COLLEGES FOR THE STUDY OF MUSIC DANCE AND ALLIED ARTS IN GENERA L ETC. BOTH HAVE COMMON OBJECT OF RUNNING SCHOOL FOR STUDY OF MUSIC DANCE AND ALLIED ARTS. THE OTHER OBJECTS OF THE APPELLANT SABHA ARE ADMITTEDLY CHARI TABLE. THE OBJECTS OF THE SOCIETY ARE ALSO CHARITABLE. WE SEE NO GROUND ON W HICH THE DIT CAME TO THE CONCLUSION THAT THE TWO OBJECTS ARE DIFFERENT. WE HOLD THAT THE OBJECTS OF THE APPELLANT SABHA AS WELL AS THE SOCIETY ARE CHARITAB LE. THE TWO OBJECTS ARE ALSO SIMILAR. THE AMENDMENT TO THE APPELLANT SABHA S MEMORANDUM OF ASSOCIATION WAS THE POWER TO MERGE WITH A SOCIETY H AVING SIMILAR OBJECTS AS THAT OF THE APPELLANT SABHA. THE FACT THAT PURSUAN T TO SUCH AMENDMENT OF THE OBJECTS CLAUSE THE MERGER OF THE APPELLANT SAB HA WITH THE SOCIETY WAS APPROVED BY THE BOMBAY CHARITY COMMISSIONER WOULD BY ITSELF SHOW THAT THE OBJECTS OF THE APPELLANT SABHA AND THE SOCIETY ARE SIMILAR. 20. THERE IS ALSO SUBSTANCE IN THE ARGUMENT ON BEHA LF OF THE APPELLANT SABHA THAT THERE WAS IN FACT NO AMENDMENT TO THE OB JECTS AT ALL. THE ITA NO.1849/MUM/2011 12 AMENDMENT TO THE APPELLANT SABHAS MEMORANDUM OF AS SOCIATION MERELY CONFERRED A POWER TO AMALGAMATE WITH OTHER SOCIETY OR INSTITUTION HAVING SIMILAR OBJECTS AS THAT OF THE APPELLANT SABHA. T HE DIT HAS FAILED TO NOTE DISTINCTION BETWEEN POWER OF TRUST OR INSTITUTION A ND THE OBJECTS OF THE TRUST OR INSTITUTION AS EXPLAINED IN THE VARIOUS JUDICIAL DECISION REFERRED TO BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE FACT THAT TH E APPELLANT SABHA HAS POWER TO AMALGAMATE WITH OTHER INSTITUTIONS HAVING SIMILAR OBJECTS CANNOT BY ITSELF LEAD TO A CONCLUSION THAT ITS OBJECTS HAV E BEEN AMENDED. THIS POWER EVEN ASSUMING IS AN AMENDMENT OF THE OBJECTS CANNOT LEAD TO THE CONCLUSION OF VIOLATION OF THE CONDITIONS MENTIONED IN SEC.12AA (3) OF THE ACT FOR CANCELLATION OF REGISTRATION. THE AMENDMENT SH OULD ULTIMATELY RESULT IN THE OBJECTS OF THE TRUST OR INSTITUTION BECOMING NO N CHARITABLE. THE AMENDMENT IS A MERE POWER CONFERRED ON THE TRUST OR OTHER INSTITUTION. IT HAS TO BE SHOWN ON FACTS THAT ANY AMENDMENT TO THE OBJECTS CLAUSE HAS RESULTED IN THE TRUST OR INSTITUTION BECOMING NON C HARITABLE IN CHARACTER. THERE IS NO SUCH FINDING IN THE IMPUGNED ORDER AND EVEN ON THIS GROUND THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 21. THE DECISION OF THE HONBLE ALLAHABAD HIGH COU RT IN OUR VIEW IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. AS RI GHTLY CONTENDED ON BEHALF OF THE APPELLANT IN THAT CASE THERE WAS A DRASTIC CHAN GE OF OBJECTS. THE HONBLE HIGH COURT HAS SPECIFICALLY NOTED THE FAILURE OF TH E ASSESSEE IN THAT CASE TO SHOW THAT THE ALTERED OBJECTS AND THE ORIGINAL OBJE CTS WERE THE SAME AND THAT THEY WERE CHARITABLE. THE RATIO LAID DOWN IN THE S AID CASE HAS TO BE READ IN THE CONTEXT OF THE ABOVE FACTS OF THE SAID CASE. I N THE CASE OF THE APPELLANT SABHA THE OBJECTS CONTINUE TO BE THE SAME EVEN AFT ER MERGER WITH SOCIETY AND THE OBJECTS ARE CHARITABLE AND THEREFORE THE VE RY FOUNDATION ON WHICH THE REGISTRATION WAS GRANTED TO THE APPELLANT SABHA IS NOT REMOVED. ITA NO.1849/MUM/2011 13 22. FOR THE REASONS GIVEN ABOVE WE QUASH THE IMP UGNED ORDER U/S.12AA(3) OF THE ACT AND ALLOW THE APPEAL. 23. IN THE RESULT THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH DAY OF SEPT. 2011. SD/- SD/- (R.K.PANDA ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 9 TH SEPT.2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3 . THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RE BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.1849/MUM/2011 14 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 5.9.2011 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 7.9.2011 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER