Nav Jeewan Medical Institute, Kolkata v. DIT, Exemption, Kolkata, Kolkata

ITA 2116/KOL/2010 | misc
Pronouncement Date: 23-09-2011 | Result: Allowed

Appeal Details

RSA Number 211623514 RSA 2010
Assessee PAN AAATN2102N
Bench Kolkata
Appeal Number ITA 2116/KOL/2010
Duration Of Justice 9 month(s) 29 day(s)
Appellant Nav Jeewan Medical Institute, Kolkata
Respondent DIT, Exemption, Kolkata, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 23-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 23-09-2011
Assessment Year misc
Appeal Filed On 24-11-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( ) . . ) [BEFORE HONBLE SRI S.V. MEHROTRA A.M. & HONBLE SRI MAHAVIR SINGH J.M.] ! ! ! ! / I.T.A NO. 2116/KOL/2010 NAV JEEWAN MEDICAL INSTITUTE -VS.- DIRECTOR OF INCOME TAX (EXEMPTION) KOLKATA (PAN : AAATN 2102 N) KOLKATA ( '# /APPELLANT ) ( $%'# / RESPONDENT ) FOR THE APPELLANT : SHRI S. BANDYOPADHYAY A.R. FOR THE RESPONDENT : SHRI B.R. PUROKAYASTHA D.R. & / ORDER PER SHRI S.V. MEHROTRA ACCOUNTANT MEMBER/ . . :- THE ASSESSEE HAS FILED THIS APPEAL AGAINST ORDER O F LD. DIRECTOR OF INCOME TAX (EXEMPTION) KOLKATA DATED 03.08.2010 ON THE FOLLOW ING GROUNDS :-. (A) THE DIRECTOR OF INCOME TAX (EXEMPTION) (DIT(E)) ERRED ON THE FACTS OF THE CASE AND IN LAW IN REJECTING THE APPLICATION FOR RENEWAL OF EXEMPTION UNDER SECTION 80G (5) (VI) OF THE INCOME-TAX ACT(ACT). ONLY REASON GIVEN BY TH E DIT (E) IN REJECTING THE RENEWAL APPLICATION IS THAT APPELLANT IS REGISTERED UNDER S ECTION 12A OF THE ACT AND HAS NOT COMPLIED WITH CONDITIONS PRESCRIBED IN SECTION 11/1 3 OF THE ACT. (B) DIT (E) FAILED TO APPRECIATE THAT IN THE VERY F IRST ASSESSMENT OF APPELLANT (FOR THE ASSESSMENT YEAR 1986-1987) THE ASSESSING OFFICER ( AO) HAD RECORDED AS UNDER: IT WAS STATED THAT REGISTRATION UNDER SECTION 12A THOUGH NOT NECESSARY IN THIS CASE THE SOCIETY OBTAINED THE SAID CERTIFI CATE AS A MEASURE OF ABUNDANT CAUTION AND PRECAUTIONARY MEASURE. (C) DIT (F) FAILED TO APPRECIATE THAT THE INCOME-TA X ASSESSMENTS OF THE APPELLANT FROM THE ASSESSMENT YEAR 1986-1987 TO 2009-2010 HAVE BEE N COMPLETED AND IN EACH ASSESSMENT THE EXEMPTION CLAIMED UNDER SECTION 10 (22A) / 10 (23C)(IIIAE) OF THE ACT WAS ALLOWED THE APPELLANT HAS NEVER CLAIMED ANY EXE MPTION UNDER SECTION 11 OF THE ACT IN ANY YEAR. (D) DIT (E) FAILED TO APPRECIATE THAT PROVISIONS OF SECTIONS 11(1) / 11 (1)(A)/ 11(5)/ 13(3) OF THE ACT AS MENTIONED IN HER ORDER ARE NOT AT ALL APPLICABLE TO THE APPELLANTS CASE. (E) DIT (E) FAILED TO APPRECIATE THAT THE APPELLANT HAS COMPLIED WITH ALL THE PRESCRIBED CONDITIONS FOR EXEMPTION UNDER SECTION 10 (22A) (EA RLIER) AND UNDER SECTION ITA NO. 2116/KOL./2010 2 10(23C)(IIIAE) (AFTER AMENDMENT) OF THE ACT. THERE WAS NO VIOLATION OF ANY OF THE CONDITIONS PRESCRIBED UNDER THE SAID SECTIONS. (F) DIT (E) FAILED TO APPRECIATE THAT HER PREDECESS ORS IN OFFICE HAVE EXAMINED THE CASE SEVERAL TIMES AND HAVE REPEATEDLY ISSUED CERTIFICAT E OF EXEMPTION UNDER SECTION 80G(5)(VI) OF THE ACT VALID FROM 26.7.1984 TILL ASS ESSMENT YEAR 2010-2011. (G) ON PROPER APPRECIATION OF THE FACTS OF THE CASE AND IN CORRECT CONSTRUCTION OF THE LAW. DIRECTOR OF INCOME-TAX (EXEMPTION) SHOULD HAVE RENEWED THE CERTIFICATE UNDER SECTION 80G(5)(VI) OF THE ACT. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAD FI LED AN APPLICATION ON 03.02.2010 IN FORM NO. 10G SEEKING RENEWAL OF EXEMPTION UNDER SECTION 80G(5)(VI) OF THE INCOME TAX ACT 1961. LD. DIT(EXEMPTION) NOTED THAT RENEWAL OF EXEMPTION UNDER SECTION 80G WAS NOT RECOMMENDED BY LOWER AUTHORITIES ON FOLLOWING TWO GROUNDS :- (I) THERE WAS SHORT APPLICATION OF INCOME; (II) INVESTMENTS OF FUND HAD BEEN DONE IN PRIVATE E QUITY SHARES AND MUTUAL FUNDS. ACCORDINGLY LD. DIT(EXEMPTION) GAVE AN OPPORTUNITY TO ASSESSEE OF BEING HEARD FOR WITHDRAWING THE EXEMPTION. IN COURSE OF ITS SUBMISS ION THE ASSESSEE INTER ALIA SUBMITTED THAT THE SOCIETY WAS ESTABLISHED MAINLY FOR IMPARTING ME DICAL FACILITIES I.E. SOLELY FOR PHILANTHROPIC PURPOSES AND NOT FOR THE PURPOSES OF PROFIT. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE FULFILS ALL THE GROUNDS UNDER SECTION 10(23C)(IIIAE). IT WAS FU RTHER CONTENDED THAT APPLICABILITY OF THE PROVISIONS OF SECTION 11(1)(A) AND 11(5) OR SECTION 13 WERE OF NO CONSEQUENCE SINCE THE INCOME IN ANY CASE WAS EXEMPT UNDER SECTION 10(23 C)(IIIAE). LD. DIT(EXEMPTION) NOTED THAT SOCIETY WAS REGISTERED UNDER SECTION 12A OF THE ACT ON 19.09.1985 AND THEREFORE ALL THE PROVISIONS OF SECTIONS 11 TO 13 WERE APPLICABLE TO THE SOCIETY AND IT COULD NOT ESCAPE THE MANDATORY PROVISIONS IN THIS REGARD. AFTER EXAMININ G THE PATTERN OF INVESTMENTS LD. DIT(EXEMPTION) OBSERVED THAT RIGHT FROM THE BEGINNI NG THE ASSESSEE WAS CONSISTENTLY VIOLATING SECTION 11(1)(A) AS WELL AS SECTION 11(5). FOR THIS PURPOSE HE HAS GIVEN A CHART IN HIS ORDER IN WHICH PERCENTAGE OF INCOME APPLIED TO CHARITABLE PU RPOSES HAS BEEN COMPUTED. FROM THIS HE CONCLUDED THAT THE MAIN OBJECT OF THE SOCIETY WAS T O GROW UP THE BUSINESS WHERE ONE OF THE TRUSTEES WAS INTERESTED. HE FURTHER POINTED OUT THE SUGAR MILL OF WHICH THE SHARES WERE PURCHASED YEAR AFTER YEAR BELONGED TO ONE OF THE T RUSTEES AND HENCE THERE WAS VIOLATION OF ITA NO. 2116/KOL./2010 3 SECTION 13(3). HE ACCORDINGLY WITHDREW THE EXEMPT ION GIVEN UNDER SECTION 80G FOR VIOLATING THE PROVISION OF SECTIONS 11(1)(A) 11(5) AND 13(3) . 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS A CASE OF RENEWAL OF EXEMPTION UNDER SECTION 80G AND NOT THE CASE OF WITHDRAWAL UNDER SE CTION 80G FOR WHICH LD. DIT(EXEMPTION) HAD TO INITIATE SEPARATE PROCEEDINGS. HE SUBMITTED THAT ASSESSEE SUBMITTED APPLICATION FOR RENEWAL OF EXEMPTION AND THEREFORE THERE COULD NO T BE ANY QUESTION OF WITHDRAWAL OF EXEMPTION WHICH IF SO REQUIRED HAD TO BE INITIAT ED AT THE INSTANCE OF THE DEPARTMENT AND COULD NOT BE ON THE BASIS OF APPLICATION MADE FOR RENEWAL BEFORE THE LD. DIT(EXEMPTION). LD. COUNSEL HOWEVER SUBMITTED THAT IN ANY VIEW OF TH E MATTER THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTION 10(23C)(IIIAE) OF THE ACT. LD. COUNSEL FURTHER SUBMITTED THAT SINCE THE ASSESSEE WAS REGISTERED UNDER SECTION 12A LD. DIT( EXEMPTION) CONSIDERED THE APPLICABILITY OF PROVISIONS OF SECTION 11(1)(A) 11(5) AND 13(3) BUT REGISTRATION UNDER SECTION 12A WAS ONLY SUPERFLUOUS AS ASSESSEE WAS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(IIIAE) OF THE ACT. LD. COUNSEL SUBMITTED THAT IT IS NOT A CASE OF WITHDRAW AL OF REGISTRATION BUT OF RENEWAL OF REGISTRATION ONLY. HE SUBMITTED THAT AFTER THE AMEN DMENT TO SECTION 80G(5)(VI) THE RENEWAL COULD NOT BE DENIED. HE RELIED ON VARIOUS CASE LAWS IN SUPPORT OF HIS SUBMISSIONS. 4. ON THE OTHER HAND LD. D.R. SUBMITTED THAT THERE IS NO AUTHORITY WHICH HOLDS THAT IF EXEMPTION UNDER SECTION 10(23C)(IIIAE) IS APPLICABL E THEN AUTOMATICALLY REGISTRATION UNDER SECTION 80G COULD BE GRANTED. HE SUBMITTED THAT IN VIEW OF VIOLATIONS MADE BY ASSESSEE THE ASSESSEE WAS NOT ENTITLED FOR BENEFIT OF EXEMPTION UNDER SECTION 80G OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORDS OF THE APPEAL. PRIOR TO AMENDMENT BY FINANCE ACT NO. 2/2009 SECTION 80G (5)(VI) READ AS UNDER :- IN RELATION TO DONATIONS MADE AFTER THE 31ST DAY O F MARCH 1992 THE INSTITUTION OR FUND IS FOR THE TIME BEING APPROVED BY THE COMMISSIONER IN ACCORDANCE WITH THE RULES MADE IN THIS BEHALF. PROVIDED THAT ANY APPROVAL SHALL HAVE EFFECT FOR SU CH ASSESSMENT YEAR OR YEARS NOT EXCEEDING FIVE ASSESSMENT YEARS AS MAY BE SPEC IFIED IN THE APPROVAL. 5.1. VIDE FINANCE ACT NO.2/2009 PROVISO WAS OMITTE D WITH EFFECT FROM 01.10.2009. THE IMPORT OF THE OMISSION OF THIS PROVISO HAS BEEN CONSIDERED BY C.B.D.T. IN ITS CIRCULAR NO.7/2010 DATED 27:10.2010 VIDE PARA 5 WHICH READS AS UNDER :- ITA NO. 2116/KOL./2010 4 5. AS REGARDS APPROVALS GRANTED UPTO 1.102009 UNR SECTION 80G BY THE COMMISSIONERS OF INCOME TAX/ DIRECTORS OF INCOME TA X PROVISO TO SECTION 80G(5)(VI) CLARIFIED THAT ANY APPROVAL SHAL L HAVE EFFECT FOR SUCH ASSESSMENT YEAR OR YEARS NOT EXCEEDING FIVE ASSESSM ENT YEARS AS NAY BE SPECIFIED IN THE APPROVAL. THE ABOVE PROVISO WAS DE LETED BY THE FINANCE (NO. 2) ACT 2009. THE INTENT BEHIND THE DELETION OF ABOVE PROVISO AS EXPLAINED IN THE EXPLANATORY MEMORANDUM TO FINANCE (NO.2) BILL 2009 WAS AS UNDER: FURTHER AS PER CLAUSE (VI) OF SUB-SECTION (5) OF S ECTION 80G OF THE INCOME-TAX ACT 1961 THE INSTITUTIONS OR FUNDS TO WHICH THE DONATIONS ARE MADE HAVE TO BE APPROVED BY THE COMMISSIONER OF INCOME-TAX IN ACCORDANCE WITH THE RULES PRESCRIBED IN RULE I1AA O F THE INCOME-TAX RULE 1962. THE PROVISO TO THIS CLAUSE PROVIDES THA T ANY APPROVAL GRANTED UNDER THIS CLAUSE SHALL HAVE EFFECT FOR SUC H ASSESSMENT YEAR OR YEARS NOT EXCEEDING FIVE ASSESSMENT YEARS AS MAY BE SPECIFIED IN THE APPROVAL. DUE TO THIS LIMITATION IMPOSED ON THE VALIDITY OF S UCH APPROVALS THE APPROVED INSTITUTIONS OR FUNDS HAVE TO BEAR THE HAR DSHIP OF GETTING THEIR APPROVALS RENEWED FROM TIME TO TIME. THIS IS UNDULY BURDENSOME FOR THE BONA FIDE INSTITUTIONS OR FUNDS AND ALSO LEADS TO W ASTAGE OF TIME AND RESOURCES OF THE TAX ADMINISTRATION IN RENEWING SUC H APPROVALS IN A ROUTINE MANNER. THEREFORE IT IS PROPOSED TO OMIT THE PROVISO TO CL AUSE (VI) OF SUB-SECTION (5) OF SECTION 80G TO PROVIDE THAT THE APPROVAL ONC E GRANTED SHALL CONTINUE TO BE VALID IN PERPETUITY. FURTHER THE CO MMISSIONER WILL ALSO HAVE THE POWER OF WITHDRAW THE APPROVAL IF THE COMM ISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH INSTITUTION OR FUND ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN. ACCORDANCE WITH THE OBJECTS O F THE INSTITUTION OR FUND. THIS AMENDMENT WILL TAKE EFFECT FROM 1ST DAY OF OCTOBER 2009. ACCORDINGLY EXISTING APPROVALS EXPIRING ON OR AFTE R 1ST OCTOBER 2009 SHALL BE DEEMED TO HAVE BEEN EXTENDED IN PERPETUITY UNLESS SPECIFICALLY WITHDRAWN. IT APPEARS THAT SOME DOUBTS STILL PREVAIL ABOUT THE PERIOD OF VALIDITY OF APPROVAL UNDER SECTION 80G SUBSEQUENT TO 1.10.2009 ESPECIALLY IN VIEW OF THE FACT THAT NO CORRESPONDING CHANGE HAS B EEN MADE IN RULE IIA(4). TO REMOVE ANY DOUBTS IN THIS REGARD IT IS REITERATED THAT ANY APPROVAL UNDER SECTION 80G(5) ON OR AFTER 1.10.2009 WOULD BE A ONE TIME APPROVAL WHICH WOULD BE VALID TILL IT IS WITHD RAWN. 6. SECTION 80G(5)(I) READS AS UNDER :- WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER TH E PROVISIONS OF SECTIONS 11 & 12 OF SECTION 10. ITA NO. 2116/KOL./2010 5 PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCOME BEING PROFITS AND GAINS OF BUSINESS THE CONDITION THAT S UCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE P ROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCOME IF (A) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS (B) THE DONATIONS MADE TO THE INSTITUTION OR FUND ARE N OT USED BY IT DIRECTLY OR INDIRECTLY FOR THE PURPOSES OF SUCH BU SINESS AND (C) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKING T HE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARAT E BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS REC EIVED BY IT WILL NOT BE USED DIRECTLY OR INDIRECTLY FOR THE PURPOSES O F SUCH BUSINESS. 6.1. THUS IF ASSESSEE INTER ALIA IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10(23C)(IIIAE) THEN IT FULFILLS ONE OF THE CONDITIONS CONTEMPLATED UNDE R SECTION 80G(5) AND THEREFORE MERE VIOLATION OF CERTAIN CONDITIONS LAID DOWN UNDER SEC TION 11 IN TERMS OF EXPLANATION 2 TO SECTION 80G(5) WOULD NOT DISENTITLE THE ASSESSEE FROM GETTI NG RENEWAL OF REGISTRATION UNDER SECTION 80G. WE FIND THAT LD. DIT(EXEMPTION) HAS ONLY CONSI DERED THE ISSUE REGARDING WITHDRAWAL OF REGISTRATION WITH REFERENCE TO SECTION 11 BUT HAS N OT CONSIDERED THE EFFECT OF EXEMPTION GRANTED UNDER SECTION 10(23C)(IIIAE). CONSIDERING THE TOTAL ITY OF THE FACTS IN OUR OPINION IF THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10(23C)(III AE) RENEWAL OF REGISTRATION COULD NOT BE DENIED ESPECIALLY WHEN THE PROVISO TO SECTION 80G( 5)(VI) HAS BEEN OMITTED WITH EFFECT FROM 01.02.2009 AS PER WHICH THE APPROVAL UNDER SECTION 80G COULD BE ONLY FOR A PERIOD OF FIVE YEARS. IN VIEW OF ABOVE WE RESTORE THE ISSUE BACK TO THE FILE OF LD. DIT(EXEMPTION) TO EXAMINE WHETHER THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDE R SECTION 10(23C)(IIIAE) AND IF HE FINDS THAT ASSESSEE FULFILS THE CONDITIONS LAID DOWN UNDER SEC TION 10(23C)(IIIAE) THEN RENEWAL OF REGISTRATION COULD NOT BE DENIED. 7. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23/ 09/2011. SD/- SD/- [ MAHAVIR SINGH / ] [S.V. MEHROTRA/ ( . . )] JUDICIAL MEMBER/ ACCOUNTANT MEMBER/ DATED : 23/ 09/ 2011 ITA NO. 2116/KOL./2010 6 COPY OF THE ORDER FORWARDED TO: 1. NAV JEEWAN MEDICAL INSTITUTE 9/1 R.N. MUKHERJEE R OAD KOLKATA-1. 2 DIT (EXEMPTION) 10B MIDDLETON ROW 6 TH FLOOR KOLKATA-71. 3. ADIT- KOLKATA 4 . DR KOLKATA BENCHES KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T. KOLKATA LAHA SR. P.S.