Dr. Puran Chand Dharmarth Trust, Gurgaon v. CIT, Faridabad

ITA 2949/DEL/2010 | misc
Pronouncement Date: 27-08-2010 | Result: Allowed

Appeal Details

RSA Number 294920114 RSA 2010
Assessee PAN AAATD7474R
Bench Delhi
Appeal Number ITA 2949/DEL/2010
Duration Of Justice 2 month(s) 13 day(s)
Appellant Dr. Puran Chand Dharmarth Trust, Gurgaon
Respondent CIT, Faridabad
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted F
Tribunal Order Date 27-08-2010
Date Of Final Hearing 18-08-2010
Next Hearing Date 18-08-2010
Assessment Year misc
Appeal Filed On 14-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI K. G. BANSAL ACCOUNTANT MEMBER ITA. NO.2949/D/2010 ASSESSMENT YEAR : M/S DR. PURAN CHAND DHARMARTH VS. COMMISSIONER OF I NCOME-TAX TRUST KONARK HOUSE OPP. I.G.S FARIDABAD OFFICE COURT ROAD GURGAON PAN NO.AAATD 7474 R (APPELLANT) (RESPONDENT) APPELLANT BY : DR. RAKESH GUPTA ADVOCATE RESPONDENT BY : SMT. BANITA DEVI NAOREM SR. DR ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE ASSESSEE TRUST ARISES FROM THE O RDER OF THE COMMISSIONER OF INCOME-TAX FARIDABAD PASSED ON 18 .05.2010 U/S 12AA(3) OF THE INCOME-TAX ACT 1961. THE ASSESSEE HAS TAKEN UP FOUR GROUNDS IN THE APPEAL TO THE EFFECT THAT THE L EARNED CIT(A) ERRED IN PASSING ORDER U/S 12AA(3) THEREBY CANCELING THE REGISTRATION GRANTED TO THE ASSESSEE EARLIER. IT IS FURTHER MEN TIONED THAT THE GROUNDS ON WHICH REGISTRATION HAS BEEN CANCELLED AR E NOT RECOGNIZED U/S 12AA(3). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE TRUS T WAS GRANTED REGISTRATION U/S 12AA(1)(B)(I) BY THE COMMISSIONER OF INCOME-TAX ROHTAK ON 13.04.2004. IT APPEARS THAT THE ASSESSEE HAD ALSO BEEN GRANTED APPROVAL U/S 10(23C)(VI) AND IT SOUGHT SIMI LAR APPROVAL FOR 2 ASSESSMENT YEARS 2008-09 TO 2010-2011. THE LEARNED CHIEF COMMISSIONER OF INCOME-TAX DID NOT ALLOW THE APPROV AL AS AFORESAID ON THE GROUND THAT IT HAD ADVANCED A HUGE LOAN OF R S.1 54 50 000/- TO ANOTHER TRUST IN CONTRAVENTION OF THE PROVISION CON TAINED IN SECTION 11(5). TAKING A CUE FROM THIS ORDER HE ISSUED A N OTICE TO THE ASSESSEE TO SHOW CAUSE AS TO WHY REGISTRATION GRANT ED TO IT U/S 12AA SHOULD NOT BE CANCELLED FROM ASSESSMENT YEAR 2005-0 6. AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE THE RE GISTRATION ALLOWED EARLIER WAS CANCELLED. IN THIS CONNECTION IT HAS BEEN MENTIONED THAT THE ASSESSEE ADVANCED LOAN OF RS.1 54 50 000/- TO H ARE KRISHNA DHARMARTH TRUST OUT OF ITS REGULAR RECEIPTS WHICH WERE IN THE NATURE OF INCOME. SUCH RECEIPTS DID NOT CONSTITUTE THE CO RPUS OF THE TRUST U/S 11(1)(D). ADVANCEMENT OF SUCH LOAN IS NOT PRESCRIB ED MODE OF INVESTMENT U/S 11(5) READ WITH SECTION 13(1)(D)(I). THEREFORE IT VIOLATED THE PROVISION CONTAINED IN SECTION 11(5) A ND SECTION 2(15) AS THE ADVANCEMENT OF LOAN IS NOT A CHARITABLE PURPOSE . IT IS FURTHER MENTIONED THAT IN SUCH CIRCUMSTANCES THE REGISTRAT ION CANNOT BE ALLOWED TO BE CONTINUED. ACCORDINGLY THE REGISTRA TION WAS CANCELLED FROM ASSESSMENT YEAR 2005-06 AS THE FIRST INSTANCE OF SUCH ADVANCEMENT OF LOAN OCCURRED IN PREVIOUS YEAR 2004- 05. AGGRIEVED BY THIS ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 3. THE CASE OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US IS THAT THE REGISTRATION ALREADY GRANTED CAN BE CANCEL LED ONLY WHEN PRE- CONDITIONS MENTIONED IN SECTION 12AA(3) HAVE BEEN S ATISFIED. THESE CONDITIONS ARE THAT THE COMMISSIONER IS SATISFIED T HAT (I)THE ACTIVITIES OF THE TRUST ARE NOT GENUINE OR (II) THE ACTIVITIE S ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. IT IS SUBMITTED THAT 3 THE LEARNED CIT HAS NOWHERE MADE OUT A CASE THAT TH E ACTIVITIES OF THE TRUST ARE NOT GENUINE OR THAT THE ACTIVITIES AR E NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS. THEREFORE IT HAS BEEN ARGUED THAT THE ORDER MAY BE SET ASIDE SO THAT REGISTRATION ALREADY GRANTED REMAINS ENFORCE. IN THIS CONNECTION HE RELIED ON THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (E XEMPTIONS VS. ACME EDUCATIONAL SOCIETY IN I.T.A. NO.888/10 DATED 28.07.2010 A COPY OF WHICH HAS BEEN PLACED BEFORE US. IN THIS C ASE IT HAS BEEN HELD IN THAT CASE THAT THE INTEREST FREE LOAN OF RS .90 50 000/- GIVEN BY THE ASSESSEE SOCIETY TO NAV BHARTI EDUCATIONAL SOCI ETY DOES NOT VIOLATE THE PROVISIONS CONTAINED IN SECTION 13(1)(D ) READ WITH SECTION 11 (5) AS BOTH THE SOCIETIES HAD SIMILAR OBJECTS AN D WERE REGISTERED BY THE COMMISSIONER OF INCOME-TAX. THE FACT THAT T HE LOAN WAS INTEREST FREE AND HAD BEEN SUBSEQUENTLY RETURNED IS ALSO SIGNIFICANT. 4. IN REPLY THE LEARNED SR. DR RELIED ON THE ORDER OF THE LEARNED CIT(A). IN PARTICULAR IT HAS BEEN SUBMITTED THAT INVESTMENT OF FUNDS WITH HARE KRISHNA DHARMARTH TRUST IS CLEARLY IN VIO LATION OF THE PRESCRIBED MODE OF INVESTMENT REFERRED TO IN SECTIO N 11(5). THEREFORE SUCH ADVANCEMENT OF LOAN UTILIZING THE I NCOME OF THE ASSESSEE IS NOT A CHARITABLE PURPOSE. THEREFORE BOTH THE CONDITIONS MENTIONED IN SECTION 12AA(3) STAND SATISFIED IN THI S CASE. ACCORDINGLY IT HAS BEEN ARGUED THAT THE ORDER OF T HE LEARNED CIT MAY BE UPHELD. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUB MISSIONS MADE BEFORE US. SECTION 12AA(3) PROVIDES FOR CANCE LLATION OF REGISTRATION WHICH HAS ALREADY BEEN GRANTED U/S 12A A(1) OR 12A PROVIDED THAT THE COMMISSIONER IS SATISFIED THAT (I) THE ACTIVITIES OF 4 SUCH TRUST ARE NOT GENUINE; OR (II) THE ACTIVITIES ARE NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. IN EITHE R OF THE CIRCUMSTANCES THE COMMISSIONER OF INCOME-TAX HAS B EEN EMPOWERED TO PASS AN ORDER IN WRITING CANCELING THE REGISTRATION. OF COURSE SUCH AN ORDER CAN BE PASSED ONLY AFTER GIVIN G A REASONABLE OPPORTUNITY OF BEING HEARD TO THE TRUST. ON PERUSA L OF THE ORDER OF THE LEARNED CIT IT IS SEEN THAT HE HAS NOWHERE GIVEN A FINDING IN REGARD TO GENUINENESS OF THE ACTIVITIES OR THE ACTIVITIES NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST. THE O NLY GROUND MENTIONED IS THAT THE FUNDS OF THE TRUST HAVE BEEN INVESTED WITH HARE KRISHNA DHARMARTH TRUST WHICH IS NOT A CHARITABLE PURPOSE. SUCH INVESTMENT IS IN VIOLATION OF SECTION 11(5) AND SEC TION 13(1)(D)(I). WE HAVE CONSIDERED THIS MATTER ALSO. SECTION 11(5) PR ESCRIBES THE FORMS OR MODES OF INVESTMENT OF THE MONEY REFERRED TO IN SECTION 11(2)(B). THUS THE MONEY WHICH HAS TO BE DEPOSITED IN THE S PECIFIED MODE IS THE MONEY ACCUMULATED OR SET APART. SECTION 13(1)( D)(I) DEALS WITH THE SITUATION IN WHICH THE PROVISION CONTAINED U/S 11 SHALL NOT APPLY NAMELY THAT ANY FUNDS OF THE TRUST ARE INVESTED OR DEPOSITED AFTER 28.02.1984 OTHERWISE THEN IN ANY ONE OR MORE OF THE FORMS OR MODES SPECIFIED IN SECTION 11(5). THE EFFECT OF THIS SEC TION IS THAT IF THE FUNDS OF THE TRUST ARE INVESTED IN ANY MODE OR FORM OTHER THAN PRESCRIBED IN SECTION 11(5) DEDUCTION TO THE ASSESSEE U/S 11 WIL L NOT BE ADMISSIBLE. HOWEVER IT CANNOT BE INFERRED FROM TH ESE PROVISIONS THAT THE ACTIVITIES ARE NOT GENUINE OR THAT THE ACTIVITI ES ARE NOT CARRIED OUT IN ACCORDANCE WITH OBJECTS OF THE TRUST BEING THE ONLY GROUNDS ON WHICH REGISTRATION ALREADY GRANTED CAN BE CANCELLED . THEREFORE WHILE THE QUESTION OF GRANT OF DEDUCTION U/S 11 CAN BE CO NSIDERED BY THE 5 ASSESSING OFFICER FROM YEAR TO YEAR DEPENDING UPON THE MODE OF INVESTMENT OF ANY FUNDS OF THE TRUST THE INVESTMEN T OF ANY FUNDS OTHERWISE THAN IN MODE PRESCRIBED U/S 11(5) CANNOT BE A GOOD GROUND FOR CANCELLATION OF THE REGISTRATION. ACCOR DINGLY IT IS HELD THAT THE LEARNED CIT ERRED IN CANCELING THE REGISTRATION ALREADY GRANTED TO THE ASSESSEE. LEARNED COUNSEL ALSO REFERRED TO THE DECISION IN THE CASE OF ACME EDUCATIONAL SOCIETY (SUPRA). WE ARE N OT GOING INTO THIS CASE FOR THE REASON THAT OBJECTS OF THE ASSESS EE TRUST AND HARE KRISHNA DHARMARTH TRUST HAVE NOT BEEN PLACED BEFORE US. 4. IN RESULT THE APPEAL IS ALLOWED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 27.08.20 10. SD/- SD/- ( C.L. SETHI ) ( K.G. BANSA L ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.27.08.2010. NS COPY FORWARDED TO:- 1. M/S DR. PURAN CHAND DHARMARTH TRUST KONARK HOUS E OPP. I.G.S OFFICE COURT ROAD GURGAON. 2. THE CIT 3. THE CIT (A) NEW DELHI. 4. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY BY ORDER (ITAT NEW DELHI).