M/s Vestal Institute of Technology Educational Society, Narasapuram v. The ITO Ward-2 Eluru, Eluru

ITA 234/VIZ/2011 | misc
Pronouncement Date: 09-09-2011 | Result: Allowed

Appeal Details

RSA Number 23425314 RSA 2011
Assessee PAN AABTV1337J
Bench Visakhapatnam
Appeal Number ITA 234/VIZ/2011
Duration Of Justice 2 month(s) 12 day(s)
Appellant M/s Vestal Institute of Technology Educational Society, Narasapuram
Respondent The ITO Ward-2 Eluru, Eluru
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 09-09-2011
Assessment Year misc
Appeal Filed On 27-06-2011
Judgment Text
ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 1 OF 8 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.234/VIZAG/2011 ASSESSMENT YEAR: NA VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARASAPUR VS. ITO WARD-2 ELURU (APPELLANT) PAN NO: AABTV 1337 J (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI CA RESPONDENT BY: SHRI TH. LUCAS PETER CIT (DR) DATE OF HEARING: 06/09/2011 DATE OF PRONOUNCEMENT: 09/09/2011 ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9 TH MAY 2011 PASSED BY LEARNED CIT RAJAHMUNDRY. 2. THE ASSESSEE IS ASSAILING THE DECISION OF LE ARNED CIT IN REJECTING THE APPLICATION FILED BY IT SEEKING REGISTRATION U/S 12 AA OF THE ACT BY RAISING FOLLOWING GROUNDS: 1. THE ORDER OF LEARNED COMMISSIONER OF INCOME-TAX IS CONTRARY TO THE FACTS AND ALSO THE LAW APPLICABLE T O THE FACTS OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX IS NOT JU STIFIED IN REJECTING THE APPLICATION FOR REGISTRATION UNDER SE CTION 12AA OF THE ACT. 3. THE LEARNED COMMISSIONER OF INCOME-TAX IS NOT JU STIFIED IN HOLDING THAT THE APPELLANT TRUST COMMITTED VIOLATIO N UNDER ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 2 OF 8 SECTION 13(2)(G) OF THE ACT AND CONSEQUENTLY NOT EL IGIBLE FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT . 4. THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE GRANTED REGISTRATION AT LEAST SUBJECT TO THE COND ITION THAT THE APPELLANT TRUST SHALL GET REGISTERED UNDER SECTION 43(1) OF THE A.P. HINDU CHARITABLE AND ENDOWMENTS ACT 1987. 5. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F APPEAL HEARING. 3. THE FACTS RELATING TO THE ISSUE ARE SET OUT IN BRIEF. THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE ANDHRA PRADESH SOCIETI ES REGISTRATION ACT WITH THE MAIN OBJECTIVE OF IMPARTING AND PROMOTING EDUCA TION BY RUNNING EDUCATIONAL INSTITUTIONS AND TO WORK FOR THE CAUSE OF EDUCATION. IT FILED AN APPLICATION BEFORE LEARNED CIT IN THE PRESCRIBED FO RM SEEKING REGISTRATION UNDER SECTION 12AA OF THE ACT AS A CHARITABLE INSTI TUTION. THE LEARNED CIT REJECTED THE APPLICATION OF THE ASSESSEE ON THE FOL LOWING TWO GROUNDS: (A) THE ASSESSEE SOCIETY IS NOT REGISTERED UNDER S ECTION 43(1) OF A.P. CHARITABLE AND HINDU RELIGIOUS INSTITUTIONS AN D ENDOWMENTS ACT 1987. (B) THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SEC . 13(2)(G) OF THE ACT BY ARRANGING SOME PERSONAL BENEFIT TO THE INTER ESTED PERSONS (TRUSTEES) BY WAY OF PURCHASE OF IMMOVABLE PROPERTY FROM THEM. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. AS STATED EARLIER THE LEARNED CIT HAS REJECTED THE APPLICATION OF THE ASSESSEE ON TWO GROUNDS. IN THE FIRST INSTANCE TH E LEARNED CIT HAS TAKEN THE VIEW THAT THE ASSESSEE SOCIETY SHOULD GET ITSEL F REGISTERED UNDER SECTION 43(1) OF THE A.P. CHARITABLE AND HINDU RELIGIOUS INS TITUTIONS AND ENDOWMENTS ACT 1987 (A.P. ACT 30/87) BEFORE SEEKIN G REGISTRATION UNDER SECTION 12AA OF THE ACT. ACCORDINGLY THE LEARNED C IT HELD THAT THE ASSESSEE-SOCIETY MAY RE-SUBMIT ITS APPLICATION AFTE R REGISTERING WITH THE ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 3 OF 8 AUTHORITIES UNDER THE A.P. ACT 30 OF 1987. IN ARRIV ING AT THIS DECISION THE LEARNED CIT HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL A.P HIGH COURT IN THE CASE OF NEW NOBLE EDUCATIONAL SOCIETY VS. CCIT HYDERABAD (2011) (334 ITR 303)(AP). THE LEARNED CIT ALSO EXT RACTED THE FOLLOWING OBSERVATIONS MADE BY THE HON'BLE HIGH COURT. THE QUESTION WHICH NEXT REQUIRES EXAMINATION IS WHETHER FAILURE TO SO REGISTER WOULD NECESSITATE REJECTION OF PETITIONERS APPLICATION FOR APPROVAL UNDER SECTIO N 10(23- C)(VI) AT THE THRESHOLD OR WHETHER THE CHIEF COMMI SSIONER OUGHT TO HAVE GRANTED APPROVAL SUBJECT ALSO TO THE CONDITION THAT THE PETITIONERS REGISTER THEMSELVES AS A CHARI TABLE INSTITUTION UNDER A.P. ACT 30/87. AS NOTED HEREINAB OVE THE CHIEF COMMISSIONER IS STATUTORILY BOUND UNDER SECT ION 10(23- C)(VI) THE FIRST AND SECOND PROVISOS THERE UNDER A ND RULE 2CA OF THE RULES TO SATISFY HIMSELF THAT THE OBJEC TS OF THE SOCIETY ARE SUCH THAT THE EXISTENCE OF THE EDUCATIO NAL INSTITUTION IS SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROFIT. EVEN IN CASES WHERE A SOCIETY IS REGISTERED AS A CHARITABLE INSTITUTION UNDER A.P. ACT 30/87 T HE CHIEF COMMISSIONER IS NOT ABSOLVED OF HIS STATUTORY DUTY TO VERIFY THE STATUTORILY PRESCRIBED DOCUMENTS AND TO SATISFY HIMSELF THAT THE APPLICANT-SOCIETY IS NOT ONLY A CHARITABLE INSTITUTION BUT ALSO THAT ITS CHARITABLE OBJECTS ARE EXCLUSIVEL Y FOR EDUCATIONAL PURPOSES AND FOR NO OTHER. SINCE THE ST ATUTORY PROVISIONS OF THE INCOME TAX ACT REFERRED TO HEREIN ABOVE PRESCRIBE THIS AS A THRESHOLD EXAMINATION REQUIREME NT SATISFACTION OF WHICH ALONE WOULD REQUIRE THE CHIEF COMMISSIONER TO GRANT APPROVAL IN CASES WHERE THE C HIEF COMMISSIONER IS SATISFIED AFTER EXAMINATION OF THE RECORDS THAT THE APPLICANT EXISTS SOLELY FOR EDUCATIONAL PU RPOSES AND NOT FOR THE PURPOSES OF PROFIT AND THE APPLICATION IS MADE IN THE STIPULATED FORM ACCOMPANIED BY ALL THE DOCUMENT S SPECIFIED UNDER THE ACT AND RULES HE WOULD NOT BE JUSTIFIED IN DENYING APPROVAL MERELY ON THE GROUND THAT THE APPL ICANTS DID NOT REGISTER THEMSELVES AS CHARITABLE INSTITUTI ONS UNDER A.P. ACT 30/87. AS NOTED HEREINABOVE WHETHER OR NO T A CHARITABLE INSTITUTION IS REGISTERED UNDER THE SAID ACT THE PROVISIONS OF A.P. ACT 30 OF 1987 ARE APPLICABLE TO ALL PUBLIC CHARITABLE INSTITUTIONS IN THE STATE OF A.P. FURTHE R WHILE FAILURE TO REGISTER THEMSELVES UNDER A.P. ACT 30 OF 1987 MAY ATTRACT THE PENAL PROVISIONS THEREIN THE SAID ACT DOES NOT PROHIBIT THE PUBLIC CHARITABLE INSTITUTIONS FROM CA RRYING ON THEIR ACTIVITIES EVEN THOUGH THEY ARE NOT REGISTERE D UNDER THE ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 4 OF 8 ACT. CONSEQUENTLY WHILE THE CHIEF COMMISSIONER IS BOUND TO SATISFY HIMSELF THAT THE APPLICANT IS A CHARITABLE INSTITUTION EXISTING SOLELY FOR THE PURPOSES OF EDUCATION HE I S ALSO ENTITLED TO PRESCRIBE REGISTRATION UNDER A.P. ACT 30/87 WITHIN A SPECIFIED PERIOD AS A CONDITION SUBJECT TO WHICH APPROVAL MAY BE GRANTED IN AS MUCH AS REGISTRATION AS A CHA RITABLE INSTITUTION UNDER A.P. ACT 30 OF 1987 WOULD BE ONE OF THE FACTORS TO SHOW THAT THE SOCIETY CONCERNED EXISTS F OR THE CHARITABLE PURPOSE OF CARRYING ON EDUCATIONAL ACTIV ITIES. WE ACCORDINGLY HOLD THAT THE CERTIFICATE SIGNED B Y THE COMMISSIONER OF ENDOWMENTS AS THE APPROPRIATE AUTH ORITY UNDER SECTION 43 OF A.P. ACT NO.30 OF 1987 IS BUT O NE OF THE FACTORS AND NOT CONCLUSIVE PROOF OF AN ASSESSEE U NDER THE INCOME-TAX BEING A CHARITABLE INSTITUTION EXISTING S OLELY FOR THE PURPOSES OF EDUCATION. EVEN IN CASE THE ASSESSE E PRODUCES A CERTIFICATE OF REGISTRATION UNDER SECTIO N 43 OF A.P. ACT NO.30 OF 1987 THE CHIEF COMMISSIONER HAS TO INDEPENDENTLY EXAMINE THE OBJECTS OF THE APPLICANT- SOCIETY THEIR APPLICATION SEEKING APPROVAL UNDER SECTION 10 (23-C)(VI) AND THE PRESCRIBED DOCUMENTS ENCLOSED THERETO AND SATISFY HIMSELF IN THE LIGHT OF THE PROVISIONS OF SECTION 10(23-C)(VI) THE PROVISOS THERETO RULE 2(CA) AND FORM 56D THAT THE EXISTENCE OF THE EDUCATIONAL INSTITUTION IS SOLELY FOR THE PURPOSES OF EDUCATION AND NOT FOR THE PURPOSE OF PR OFIT AND ONLY IF HE IS SO SATISFIED TO GRANT APPROVAL. REG ISTRATION UNDER SECTION 43 OF THE A.P. ACT 30 OF 1987 IS NOT A CONDITION PRECEDENT FOR SEEKING APPROVAL UNDER SECTION 10(23- C)(VI) OF THE ACT. THE CHIEF COMMISSIONER CAN HOWEVER PRESC RIBE REGISTRATION UNDER A.P. ACT 30 OF 1987 AS A CONDITI ON SUBJECT TO WHICH APPROVAL IS GRANTED UNDER SECTION 10(23-C) (VI) OF THE ACT. 5. HOWEVER ON A CAREFUL PERUSAL OF THE ORDER O F HON'BLE A.P. HIGH COURT REFERRED (SUPRA) WE DO NOT FIND ANY SUCH OBSERVATI ON AS UNDER STOOD BY LEARNED CIT I.E. THE HON'BLE HIGH COURT HAS NO WH ERE SAID THAT THE REGISTRATION UNDER THE A.P. ACT 30 OF 1987 IS COMPU LSORY FOR GRANTING REGISTRATION UNDER SECTION 10(23C)(VI) OF THE ACT. INSTEAD THE HON'BLE HIGH COURT HAS HELD IN CLEAR TERMS THAT THE CHIEF COMMIS SIONER HAS TO INDEPENDENTLY EXAMINE THE APPLICATION EVEN IF THE A SSESSEE PRODUCES A ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 5 OF 8 CERTIFICATE OF REGISTRATION UNDER SECTION 43 OF A.P . ACT NO.30 OF 1987. THE FOLLOWING OBSERVATIONS OF HON'BLE HIGH COURT MAKE T HIS POINT VERY CLEAR: EVEN IN CASE THE ASSESSEE PRODUCES A CERTIFICATE O F REGISTRATION UNDER SECTION 43 OF A.P. ACT NO.30 OF 1987 THE CHIEF COMMISSIONER HAS TO INDEPENDENTLY EXAMINE THE OBJECTS OF THE APPELLANTS-SOCIETY THEIR APPLICATIO N SEEKING APPROVAL UNDER SECTION 10(23C)(VI) AND THE PRESCRIB ED DOCUMENTS ENCLOSED THERETO AND SATISFY HIMSELF IN THE LIGHT O THE PROVISIONS OF SECTION 10(23-C)(VI) THE PROVI SOS THERETO RULE 2(CA) AND FORM 56D THAT THE EXISTEN CE OF THE EDUCATIONAL INSTITUTION IS SOLELY FOR THE PURPOSES OF EDUCATION AND NOT FOR THE PURPOSE OF PROFIT AND ONLY IF HE I S SO SATISFIED TO GRANT APPROVAL. THE HON'BLE HIGH COURT HAS FURTHER HELD THAT WHILE THE CHIEF COMMISSIONER IS BOUND TO SATISFY HIMSELF THAT THE APPLICANT IS A CHARITABLE INSTITUTION EXISTING SOLELY FOR THE PURPOSES OF EDUCATION HE C AN ALSO PRESCRIBE REGISTRATION UNDER A.P. ACT 30/87 AS A CONDITION SU BJECT TO WHICH APPROVAL MAY BE GRANTED UNDER SECTION 10(23C)(VI) OF THE ACT I.E. THE REGISTRATION AS A CHARITABLE INSTITUTION UNDER A.P. ACT 30 OF 1987 WOULD BE ONE OF THE FACTORS TO SHOW THAT THE SOCIETY CONCERNED EXISTS F OR THE CHARITABLE PURPOSES OF CARRYING ON EDUCATIONAL ACTIVITIES. 6. DURING THE COURSE OF HEARING THE LEARNED A. R CONTENDED THAT THE DECISION OF HON'BLE A.P. HIGH COURT REFERRED (SUPRA ) HAS BEEN RENDERED IN THE CONTEXT OF SEC. 10(23C(VI) OF THE ACT AND HENCE IT SHALL NOT APPLY TO THE FACTS OF THE INSTANT CASE AS THE ASSESSEE HEREIN I S SEEKING REGISTRATION UNDER SECTION 12AA OF THE ACT. IN SUPPORT OF HIS CO NTENTIONS HE SUBMITTED AS UNDER: (A) SEC. 10(23C) IS AN OUTRIGHT EXEMPTION SECTION I.E. THE INCOMES SPECIFIED UNDER SEC.10 SHALL NOT BE INCLUDED IN THE TOTAL INCOME AT ALL WHERE AS THE REGISTRATION UNDER SECTION 12AA DOES N OT GIVE AUTOMATIC EXEMPTION U/S 11 OF THE ACT. (B) THE REGISTRATION UNDER SECTION 10(23C)(VI) IS GRANTED TO AN EDUCATIONAL INSTITUTION WHERE AS THE EXEMPTION U/S 11 IS GRANTED TO A CHARITABLE OR RELIGIOUS INSTITUTION. ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 6 OF 8 (C) THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SEC TION 11 OF THE ACT IN PURSUANCE OF REGISTRATION GRANTED U/S 12AA SHALL BE EXAMINED BY THE ASSESSING OFFICER. HENCE THE INCOME TAX ACT ITSELF HAS PROVIDED SCOPE FOR MAKING SUFFICIENT SCRUTINY OF THE ACTIVITIES OF A CHARITABLE OR RELIGIOUS TRUST. (D) HENCE THERE IS NO NECESSITY OF MAKING THE REGIS TRATION UNDER A STATE ACT AS A CONDITION FOR GRANTING REGISTRATION UNDER SECTION 12AA OF THE ACT. HOWEVER WE DO NOT FIND MUCH FORCE IN THE SAID CONT ENTION. ANY ASSESSEE CLAIMING EXEMPTION EITHER U/S 10(23C)(VI) OF THE AC T OR U/S 11 OF THE ACT HAS TO FILE THE RETURN OF INCOME. THE ASSESSING OFF ICER IS REQUIRED TO EXAMINE SUCH RETURNS IN ACCORDANCE WITH THE RESPECT IVE PROVISIONS OF THE ACT WHICH ARE APPLICABLE TO EACH OF THEM. SINCE BO TH THE SECTIONS CITED ABOVE PRESCRIBE THE REGISTRATION BY THE COMPETENT A UTHORITY UNDER THE INCOME TAX ACT AS A CONDITION FOR AVAILING THE EXEMP TION UNDER THE RESPECTIVE SECTION THE ASSESSEES ARE REQUIRED TO S EEK REGISTRATION. THE HON'BLE AP HIGH COURT IN THE CASE OF NEW NOBLE EDUC ATIONAL SOCIETY HAS RENDERED ITS DECISION WITH REGARD TO THE REGISTRATI ON UNDER SECTION 10(23C)(VI) OF THE ACT. THE ISSUE BEFORE US IS WITH REGARD TO THE REGISTRATION UNDER SECTION 12AA OF THE ACT. THUS THE ISSUE RELA TES TO THE PROCESSING OF APPLICATIONS FILED BY THE ASSESSEES SEEKING REGISTR ATION UNDER DIFFERENT SECTIONS OF THE INCOME TAX ACT AND SUCH PROCESSING I NVOLVES FOLLOWING OF IDENTICAL METHODOLOGIES WITH MINOR VARIATIONS. HOW EVER THE DISTINGUISHING FEATURES CITED BY THE LEARNED A.R RELATE TO THE ASS ESSMENT TO BE CARRIED OUT IN TERMS OF DIFFERENT SECTIONS OF THE ACT. HENCE IN OUR VIEW THE LEARNED CIT CAN APPLY THE RATIO OF SAID DECISION FOR PROCES SING THE APPLICATION FILED FOR SEEKING REGISTRATION UNDER SECTION 12AA OF THE ACT ALSO. 7. THE FOREGOING DISCUSSIONS SHOW THAT THE LEAR NED CIT WOULD NOT BE JUSTIFIED IN DENYING REGISTRATION ON THE GROUND THA T THE APPLICANT DID NOT REGISTER ITSELF AS CHARITABLE INSTITUTION UNDER A.P . ACT 30/87. ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 7 OF 8 8. WITH REGARD TO THE GROUND OF VIOLATION OF SEC. 13(2)(G) OF THE ACT THE LEARNED A.R SUBMITTED THAT THE LEARNED CIT DID NOT GIVE SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAID ISS UE DISCUSSED BY HIM. HE FURTHER SUBMITTED THAT THE LEARNED CIT COULD NOT HA VE COME TO THE CONCLUSION THAT THERE IS VIOLATION OF PROVISIONS OF SEC. 13(2)(G) OF THE ACT MERELY ON THE BASIS OF CONVEYANCE DEEDS WITHOUT CA USING FURTHER ENQUIRIES. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE SHOULD BE GIVEN SUFFICIENT OPPORTUNITY ON THIS ISSUE. WE FIND FORCE IN THE SU BMISSIONS OF THE ASSESSEE. IN OUR VIEW ALSO THE LEARNED CIT SHOULD HAVE CAUSED FURTHER ENQUIRIES BEFORE COMING TO THE CONCLUSION THAT THERE WAS VIOL ATION OF PROVISIONS OF SEC. 13(2)(G) OF THE ACT. ACCORDINGLY IN OUR VIEW THIS ISSUE ALSO NEEDS EXAMINATION AFRESH. 9. IN VIEW OF THE FOREGOING DISCUSSIONS WE SET ASIDE THE ORDER OF LEARNED CIT AND RESTORE THE SAME TO HIS FILE WITH A DIRECTI ON TO PROCESS THE APPLICATION FILED BY THE APPLICATION FILED BY THE A SSESSEE AFRESH AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE IN ACCORDANCE WITH LAW. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE: 09-09-2011 ITA NO 234 OF 2011 VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOCIETY NARSAPUR PAGE 8 OF 8 COPY TO 1 THE VESTAL INSTITUTE OF TECHNOLOGY EDUCATIONAL SOC IETY ROYAPET NARASAPUR WEST GODAVARI DISTT. 2 THE ITO WARD-2 ELURU 3 4. THE CIT RAJAHMUNDRY THE ADDL. CIT ELURU RANGE ELURU 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM