The National People Trust, Peraiyur v. CIT, Madurai

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI D BENCH CHENNAI. BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. ABRAHAM P. GEORGE A.M. I.T.A. NO. 1860/MDS/2010 THE NATIONAL PEOPLE TRUST NO.8/3/125 MANONMANI HOSPITAL II FLOOR PERAIYUR 625 703. [PAN:AABTT6153C] VS. COMMISSIONER OF INCOME TAX MADURAI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI N. QUADIR HOSEYN REVENUE BY : SHRI K.E.B. RANGAR AJAN JR. STANDING COUNSEL ORDER PER U.B.S. BEDI J.M . THIS APPEAL OF THE ASSESSEE IS DI RECTED AGAINST THE ORDER PASSED BY THE LD. CIT I MADURAI DATED 13.08.2010 WHEREBY ORDER UNDER SECTION 12AA (1)(B)(II) OF THE INCOME TAX ACT REFUSI NG REGISTRATION OF THE TRUST HAS BEEN CHALLENGED. 2. FACTS INDICATE THAT THE ASSESSEE TR UST HAS FILED ITS APPLICATION FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE IN COME TAX ACT ON 13.08.2010. AS PER THE COPY OF THE TRUST DEED APPENDED TO THE APPLICATION IN FORM NO. 10A THIS TRUST HAS BEEN CREATED ON 12.04.2004. A NO TICE OF HEARING HAS BEEN ISSUED FROM THE OFFICE OF THE CIT I MADURAI DA TED 28.07.2010 POSTING THE CASE FOR HEARING ON 13.08.2010. IN RESPONSE TO WHICH THE CA OF THE ASSESSEE ALONG WITH AUTHORISED REPRESENTATIVE AND SHRI K. MAYAN MANAGING TRUSTEE OF THE ASSESSEE TRUST APPEARED AND FILED A WRITTEN SUBMISSION ON THE APPOINTED DATE. 2.1 THE LD. CIT NOTED T HAT ALTHOUGH AS PER TRUS T DEED THE OBJECTS ARE APPARENTLY CHARITABLE IN NATUR E THE ACTIVITIES CARRIED OUT BY THE ASSESSEE TRUST I.T.A. NO.1860/MDS/10 2 ARE NOT GENUINE. REPORTS FR OM THE LOWER AUTHORITIES WE RE RECEIVED AND PERUSED. THE CIT NOTED THAT BEFORE GRANTING OR REFUSING REGIST RATION TO A TRUST SHOULD EXAMINE WHETHER (I) A GENUINE TRUST EXISTS AND (II) THE OBJECTS OF THE TRUST/TRUSTS ARE CHARITABLE IN NATURE AND THE ACTIVI TIES ARE BEING CARRI ED OUT STRICTLY IN ACCORDANCE WITH THE OBJECT CLAUSE AND THE LD. CIT WHILE DISCUSSING ABOUT CERTAIN ASPECTS HAS CONCLUDED THAT SI NCE TWO PARAMETERS I. E. GENUINENESS OF THE TRUST AND ITS CHARITABLE ACTIVITIES BE ING CARRIED OUT IN TE RMS OF TRUST DEED HAVE NOT BEEN ESTABLISHED WITH DOCUMENTAR Y EVIDENCE BEFORE HIM INSPITE OF OPPORTUNITIES ALLOWED THE BEN EFIT OF REGISTRATION CANNOT BE ALLOWED TO THE TRUST IN TERMS OF THE PROVISIONS OF SECTION 12AA( 1)(B)(II) AND ACCORDINGLY HE REJECTED THE APPLICATION OF THE ASSESSEE TRUST. 3. AGGRIEVED BY SUCH ACTION OF THE LD . CIT THE ASSESSEE FI LED APPEAL AND IT IS CONTENDED THAT THE LD. CIT ERRED IN HOLDING THAT THE ASSESSEE TRUST IS NOT ELIGIBLE FOR REGISTRATION UNDER SECTION 12AA FOR THE REASONS THAT ARE NOT GERMANE FOR CONSIDERATION OF THE APPLICATION. THE LD. CIT HAS FAILED TO APPRECIATE THAT THERE WAS NO SCOPE FOR ROVING ENQUIRY AT THE STAGE OF CONSIDERING THE APPLICATION FOR REGISTRATION UNDER SECT ION 12AA AND THE REASONS ADDUCED FOR REJECTION ARE UNTENABLE IN LA W AND THEREFORE THE ORDER OF THE CIT IS LIABLE TO BE SET ASIDE. FURTHER THE LD. CI T FAILED TO APPRECIATE THAT THE TRAINING PROGRAMMES SHG SUPPORT PROGRAMMES AWARENESS TRAI NING PROGRAMMES ARE PART AND PARCEL OF THE CHARITABLE ACTIVITIES OF THE TRUST AND HENCE THE INVOLVEMENT OF THE TRUST IN SUCH ACTIVITIES CANNOT BE A GROUND FOR REJECTION OF APPLICATION AND THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERAT ING THE SUBMISSIONS AS MADE BEFORE THE I.T.A. NO.1860/MDS/10 3 LD. CIT IT IS PLEADED THAT THE FINDINGS OF THE LD. CIT ARE NOT ONLY INCORRECT BUT BASELESS ALSO IN AS MUCH AS THE A SSESSEE TRUST HAS PRODUCED ALL RELEVANT MATERIAL SHOWING THE AIMS AND OBJECTS OF THE TRUST DETAILS OF THE BANK ACCOUNT STATEMENT OF TOTAL INCOME WITH ACKNOWL EDGEMENT STATEMENT OF TOTAL INCOME AND EXPENDITURE BALANCE SHEET AND RELEVANT DETAILS AS DESIRED BY THE LD. CIT AND IT IS NOT UNDERSTOOD WHAT REPORT HE HAS OBT AINED FROM HIS LOWE R AUTHORITIES TO TREAT THE TRUST TO BE NOT ENTITLED TO THE GRANT OF REGISTRATION WH EN HE HIMSELF HELD THAT OBJECTS ARE APPARENTLY C HARITABLE IN NATURE. IN FACT THE ASSESSEE TRUST SPENT ITS FUNDS MAINLY UNDER VARIOUS HEADS LI KE TRAINING PROGRAMME SHGS SUPPORT PROGRAMME AWARENESS TRAINING PROGRAMME ETC. WHICH ARE CONNECTED WITH THE FORMATION AND PROMOTION OF SELF-HELP GR OUPS. SINCE THE ASSESSEE TRUST MADE ARRANGEMENT FOR OBTAINING LOAN FROM THE NATIONAL IZED BANK TO THE SELF-HELP GROUP FOR WHICH IT COLLECTED SERVICE CHARGES AT THE RATE OF 1% WITH NO STRETCH OF IMAGINATION IT CANNOT BE SAID THAT SU CH ACTIVITIES OF THE ASSESSEE ARE COMMERCIAL ACTIVITIES WHEN THE EX PENSES CLAIMED TO HAVE SPENT UNDER ADMINISTRATIVE EXPENSES ARE MORE T HAN THE AMOUNT SPENT FOR SO-CALLED CHARITABLE ACTIVITIES AND NON-MENTIONING THE ADDRESSES OF T HE DONORS ON THE RECEIPTS CANNOT LEAD TO THE CONCLUSION THAT THE ASSESSEE TRUST IS NOT A CHARITABLE IN NATURE WHEN DONATIONS HAVE BEEN PROPERLY ACCEPTED AND PROPERLY ACCOUNTED IN THE BOOKS OF ACCOUNTS SO THE ACTION OF T HE LD. CIT IS NOT CORRECT IN REFUSING TO GRANT REGISTRATION. IT WAS THUS ARGUED FO R GIVING DIRECTION THE CONCERNED CIT TO GRANT REGISTRATION. I.T.A. NO.1860/MDS/10 4 4. THE LD. DR WHILE RELYING UPON T HE BASIS AND REASONING HAS PLEADED FOR CONFIRMATION OF THE IMPUGNED OR DER AS THE ASSESSEE TRUST IS STATED TO HAVE RECEIVED DONATION FROM CERTAIN PERSON WHOSE NAME AND ADDR ESSES HAVE NOT BEEN PROVIDED IN THE RECEIPTS GIVEN TO THE DONOR AND NEITHER ANY OTHER CORROBORATIVE EVIDENCE HAS BEEN PRODUCED NOR BOOKS OF ACCOUNTS WERE THERE TO VERIFY SUCH RECEIPTS SO THE LD. CI T HAS TAKEN A JUST AND PROPER VIEW WHOSE ACTION REQUIRES CONFIRMATION WHICH MAY BE CONFIRMED. 5. WE HAVE HEARD BOTH THE SIDES CONSIDERED THE MATERIAL ON RECORD AND ORDER OF THE LD. CIT DATED 13.08.2010 RE FUSING TO GRANT REGISTRATION UNDER SECTION 12AA IN THIS CASE AND FIND THAT AS PER MATERIAL AVA ILABLE ON RECORD AND PRODUCED BEFORE THIS BENCH THE LD. CIT HAS NOT SPELT OUT IN HIS ORDER ABOUT THE CONTENTS OF THE REPORT RECEIVED BY HIM FR OM LOWER AUTHORITIES AND AT ONE PLACE THE LD. CIT ACCEPTS THAT THE OBJECTS OF THE ASSESSEE TRUST ARE CHARITABLE IN NATURE BUT IN OTHER PART OF THE ORDER HE HAS HELD THAT EX ISTENCE AND ACTIVITIES OF THE ASSESSEE TRUST ARE NOT CHARITABLE IN NATURE AND VALID REASONS HAVE NOT BEEN GIVEN TO SUBSTANTIATE THE FINDINGS MADE IN THIS REGARD. THEREFOR E IN THE INTEREST OF JUSTICE WE FIND IT JUST AND PROPER TO SET ASIDE THE ORDER OF THE LD. CIT AND RESTORE THE MATTER BANK ON HIS FILE WITH THE DIRECTION TO DECIDE THE APPLICATION AFRESH AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE BY PASSING SPEAKING ORDER SPELLING OUT PROPER BASIS AND REASONING TO ARRIVE AT THE CONCLUSION TO BE DRAWN IN THE FRESH PROCEEDING AND THE ASSESSEE IS EXPECTED TO COOPERATE WITH THE LD. CIT AND PRODUCE ALL RELEVANT MATERIALS AND BOOKS TO SUBSTANTIATE ITS CLAIM OF REGISTRATION. WE HOLD AND DIRECT ACCORDINGLY. I.T.A. NO.1860/MDS/10 5 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ACCEPTED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 18.02.2011. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI DATED THE 18.02.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.