Poor Home Society, Calicut v. CIT, Calicut

ITA 304/COCH/2009 | misc
Pronouncement Date: 20-07-2011

Appeal Details

RSA Number 30421914 RSA 2009
Bench Cochin
Appeal Number ITA 304/COCH/2009
Duration Of Justice 2 year(s) 1 month(s) 26 day(s)
Appellant Poor Home Society, Calicut
Respondent CIT, Calicut
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2011
Appeal Filed By Assessee
Bench Allotted DB
Tribunal Order Date 20-07-2011
Assessment Year misc
Appeal Filed On 25-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO. 304 /COCH/200 9 THE POOR HOME SOCIETY WEST HILL CALICUT.5. PA NO.AAATT 2715R VS. THE COMMISSIONER OF INCOME-TAX CALICUT. (APPELLANT) ( RESPONDENT ) APPELLANT BY SHRI ARJUN NEDUNGADI FCA RESPONDENT BY MS. VIJAYAPRABHA JR.D.R. O R D E R PER N.VIJAYAKUMARAN J.M: THIS APPEAL BY THE ASSESSEE SOCIETY IS DIRECTED AG AINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX CALICUT DATED 01-05-2009 DENYING 80G BENEFIT. THE CONTEN TION OF THE ASSESSEE WOULD BE THAT THE ASSESSEE SOCIETY IS ENGAGED IN RELIEF TO THE POOR AND WHICH WAS ACCORDED WITH 80G BENEFIT FOR OVER 37 YEARS BEFORE THIS IMPUGNED ORDER WAS PASSED. 2. THE RENEWAL OF EXEMPTION WAS NOT GRANTED BY THE LD. COMMISSIONER FOR THE REASON THAT THE PURPOSE IN PAR A.3 (E) (F) & (G) OF MEMORANDUM OF ASSOCIATION REFLECTS MIX ED PURPOSE. HENCE ACCORDING TO THE LD. CIT THIS 80G BENEFIT ITA NO. 304/COCH/2009 2 HAS TO BE STALLED FROM THE DATE OF THE IMPUGNED ORD ER DATED 01-05-2009. THE LD. COUNSEL FOR THE ASSESSEE WOUL D SUBMIT THAT MEMORANDUM GRANTING SUCH PURPOSE UNDER CLAUSE 3(E) (F) & (G) ARE NOT THE PURPOSES FOR WHICH THE ASSESS EE SOCIETY WAS FORMED. THESE ARE SOME POWERS OF THE ASSESSEE TO ACHIEVE THE OBJECTS MENTIONED IN PARA.2 OF THE MEMORANDUM. UNDER NO STRETCH OF IMAGINATION SUCH P OWER INCLUDED IN THE MEMORANDUM CANNOT BE CONSTRUED AS ASSESSEE SOCIETY IS HAVING THE MIXED PURPOSE. AT THE COST OF REPETITION THE LD. COUNSEL SUBMITTED THAT ONLY PURPOSE FOR WHICH THE SOCIETY HAS BEEN ESTABLISHED IS TO ASYLUM TO THE DESTITUTE I.E. RELIEF TO THE POOR. THIS IS THE ON LY ACTIVITY CARRIED OUT BY THE ASSESSEE SINCE ITS INCEPTION IN 1938. EVEN OTHERWISE CBDT CIRCULARNO.11/2008 DATED 19-12- 2008 EXPLAINS THAT THE NEWLY INSERTED PROVISO TO SECTION 2(15) WILL NOT APPLY IN RESPECT OF THE FIRST THREE LIMBS OF SE CTION 2(15) I.E. RELIEF TO THE POOR EDUCATION OR MEDICAL RELIE F. CONSEQUENTLY WHERE THE PURPOSE OF A TRUST OR INSTIT UTION IS FOR RELIEF OF THE POOR IT WILL CONSTITUTE CHARITA BLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES CARRYING ON OF COM MERCIAL ACTIVITIES. THE CONDITION LAID DOWN IN 80G(5)(I) I S NOT APPLICABLE NOR VIOLATED AS THE ASSESSEE HAS NEVER U NDERTAKEN ANY SUCH ACTIVITY OR BUSINESS. SO ALSO SUB CLAUSE (II) OF 80G(5) IS NOT VIOLATED AS RULE IX AVAILABLE IN ASSE SSEES ITA NO. 304/COCH/2009 3 PAPER BOOK PAGE NO.6) AND RULE X (PAGE 7 OF THE PAP ER BOOK) OF RULES AND REGULATIONS PROVIDE FOR NO TRANS FER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF THE ASSESSEE FOR ANY PURPOSE OT HER THAN A CHARITABLE PURPOSE. THIS CLEARLY PROHIBITS SIPHO NING OF THE INCOME OR ASSETS OF THE ASSESSEE SOCIETY FOR ANY PU RPOSE OTHER THAN A CHARITABLE PURPOSE. IN OTHER WORDS T HE ASSESSEE SOCIETY CAN USE IT FOR ONLY GIVING ASYLUM TO THE DESTITUTE AND NOT EVEN FOR ANY OTHER CHARITABLE PUR POSE. SO ALSO 80G(5)(III) IS NOT VIOLATED AS THE ASSESSEES HOME IS OPEN TO ANY BODY IRRESPECTIVE OF CASTE CREED OR RE LIGION. 80G(5)(IV) IS NOT VIOLATED AS THE ASSESSEE MAINTAIN S REGULAR BOOKS. THE SOCIETY IS ALSO REGISTERED UNDER THE S OCIETIES REGISTRATION ACT. THE LD. COUNSEL FOR THE ASSESSE E WOULD SUBMIT THAT THE ASSESSEE SOCIETY WAS FIRST GRANTED 80G EXEMPTION IN 1971 AND FOR OVER 37 YEARS AND THEREAF TER WITHOUT ANY DENIAL THE DEPARTMENT HAS GRANTED BENEF IT U/S.80G AND SUCH RENEWAL BEING GRANTED IN 2005 FOR THE PERIOD UPTO 31-3-2008. THERE IS NO CHANGE IN THE CIRCUMSTANCES OVER THE PERIOD OF 37 YEARS AND THE O RDER OF THE LD. COMMISSIONER OF INCOME-TAX IN DISTURBING TH E SOCIETY FOR THE FIRST TIME IS WITHOUT ANY VALID REASON AND ALLEGATION OF CHANGE IN CIRCUMSTANCES. ITA NO. 304/COCH/2009 4 3. ON THE OTHER HAND THE LD. JR.D.R. WOULD SUBMIT THAT THE OBJECT OF THE SOCIETY HAS MIXED OBJECTS MIXED PURPOSE. SECTION 80G(5)(II) CLEARLY VIOLATED EITHER THE INCO ME OR ASSET HAS BEEN UTILIZED FOR OTHER THAN CHARITABLE PURPOSE THEREBY ASSESSEE HAS MIXED PURPOSE. PARA. 3(E) (F) & (G) CLEARLY SHOW MIXED PURPOSE AS OBSERVED BY THE LD. COMMISSIO NER OF INCOME-TAX. THE MEMORANDUM INSTRUMENT CONTAINS CL EAR BUSINESS ACTIVITY. THEREFORE THE ORDER OF THE LD . CIT(APPEALS) DESERVES TO BE UPHELD AND THE APPEAL O F THE ASSESSEE IS THEREFORE LIABLE TO BE DISMISSED. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE OBJECT OF THE TRUST AND THE INSTRUMENT SHOULD BE CHARITABLE. THERE IS NO QUARREL ON THIS. A DISTINCTION IS ALSO THERE UNDER THE SETTL ED LAW WITH REGARD TO THE MAIN OBJECTS AND INCIDENTAL OBJECTS. TO DECIDE WHETHER THE TRUST IS A CHARITABLE OR NOT HAS TO BE DECIDED VIS--VIS THE MAIN OBJECTS AND NOT THE INCI DENTAL OBJECTS. AFTER ALL THE MAIN OBJECTS ARE DOMINANT OBJECTS FOR WHICH THE TRUST HAS BEEN FORMED AND THE FUNCTIO N OF THE INCIDENTAL OBJECT IS TO ONLY SUPPLEMENT THE MAIN OB JECT. WHERE THE MAIN OBJECTS THEMSELVES ARE DISTRIBUTIVE IT IS ESSENTIAL THAT EACH OF THE MAIN OBJECTS IS CHARITAB LE IN NATURE. ONLY OTHERWISE THE EXEMPTION CAN BE JUST IFIABLY ITA NO. 304/COCH/2009 5 DENIED. THIS IS RIGHTFULLY SO BECAUSE THE TRUSTE ES HAVE THE OPTION TO APPLY THE INCOME AND THE FUNDS OF THE TRU ST FOR NON CHARITABLE PURPOSES ALSO. HERE IN THIS CASE AS EXPLAINED BY THE LD. COUNSEL THAT THERE IS NO VIOLATION OF 80 G(5) SUB CLAUSES AS THE ASSESSEE SOCIETY NEVER UNDERTAKEN AN Y SUCH ACTIVITY OF BUSINESS. THE NEXT CONTENTION WOULD B E THAT THE CLEAR RESTRICTION PROVIDED IN THE RULES AND REGULAT IONS. RULE IX AND X PROVIDE FOR NO TRANSFER OR APPLICATIO N AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSE TS OF THE ASSESSEE SOCIETY FOR ANY PURPOSE OTHER THAN A CHARI TABLE PURPOSE. THUS IT IS A CLEAR CHECK PLANTED FOR TH E USE OF THE FUNDS. HENCE DENYING FURTHER WHERE THE MAIN OBJE CTS THEMSELVES ARE DISTRIBUTIVE IT IS ESSENTIAL THAT E ACH OF THE MAIN OBJECTS IS CHARITABLE IN NATURE. ONLY OTHERWI SE THE EXEMPTION CAN BE JUSTIFIABLY DENIED. THE REASON B EING THE TRUSTEES HAVE THE OPTION TO APPLY THE INCOMES AND T HE FUNDS OF THE TRUST FOR NON CHARITABLE PURPOSES ALSO. TH IS HAS BEEN TAKEN CARE IN THE RULE IX AND X WHEREIN A CLEAR RES TRICTION FOR MIS-USE OF THE FUNDS OF THE TRUST. THE DECISI ON OF THE SUPREME COURT IN THE CASE OF DHARMOPOSHAMAN VS. CIT(1978) 114 ITR 463(SC) AND THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DIT VS. BHARAT DIAMOND BOURSE (2003) 126 TAXMAN 365(SC) WILL HOLD GOOD FOR DECIDING THIS ISSUE ALSO. IN THE RECENT DECIS ION OF THE ITA NO. 304/COCH/2009 6 INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH IN THE C ASE OF IILM FOUNDATION VS. CIT (2011) 44 SOT 37(DEL) WHEREIN THE ISSUE WAS REGISTRATION U/S.12A OF THE I.T.ACT. TH AT DECISION ALSO SUPPORTS THE CASE OF THE ASSESSEE. WHEN THE POWERS OF THE TRUSTEES ARE RESTRICTED AND CONTINUOUSLY THE AS SESSEE SOCIETY FOR THE PAST 37 YEARS ENJOYING THE BENEFIT OF 80G(5) EXEMPTION AND WITHOUT POINTING OUT ANY CHANGE IN T HE CIRCUMSTANCES NOR A CHANGE IN THE POSITION OF LAW THE DENIAL OF 80G BENEFIT FROM 1-4-2008 IS NOT JUSTIFIED IS OU R VIEW. THE EXPLANATIONS OF THE ASSESSEE ARE QUITE SUFFICIE NT TO PROVE THAT THE ASSESSEE IS DOING THE CHARITABLE PUR POSE BY RUNNING A HOME TO THE DESTITUTE. UNDER THE CIRCU MSTANCES WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF I NCOME- TAX DATED 01-05-2009 AND ALLOW THE CLAIM OF THE ASS ESSEE. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM DATED THE 20 TH JULY 2011. PM. COPY FORWARDED TO: 1. THE POOR HOME SOCIETY WEST HILL CALICUT.5. 2. THE COMMISSIONER OF INCOME-TAX CALICUT. 3. D.R.