Abdul Kalam Azad Islamic Awakening Center, New Delhi v. DIT(E), New Delhi

ITA 386/DEL/2012 | misc
Pronouncement Date: 30-03-2012 | Result: Allowed

Appeal Details

RSA Number 38620114 RSA 2012
Assessee PAN AAATA2513N
Bench Delhi
Appeal Number ITA 386/DEL/2012
Duration Of Justice 2 month(s) 4 day(s)
Appellant Abdul Kalam Azad Islamic Awakening Center, New Delhi
Respondent DIT(E), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 30-03-2012
Date Of Final Hearing 28-03-2012
Next Hearing Date 28-03-2012
Assessment Year misc
Appeal Filed On 25-01-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI T.S. KAPOOR ITA NO. 386/DEL/2012 U/S 12AA OF THE I.T. ACT 1961 ABUL KALAM AZAD ISLAMIC VS. DIRECTOR OF INCOME-T AX(E) AWAKENING CENTER NEW DELHI. 4 JOGA BAI JAMIA NAGAR NEW DELHI. PAN/GIR NO. AAATA2513N (APPELLANT) ( RESPONDENT ) APPELLANT BY: SH. R.S. SINGHVI RESPONDENT BY : MRS. ANUSHA KHURANA SR. DR O R D E R PER R.P. TOLANI J.M : THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF DIRE CTOR OF INCOME-TAX (E) PASSED U/S 12AA(3) R.W.S. 12 OF THE I.T. ACT 1 961 CANCELLING REGISTRATION GRANTED U/S 12A. 2. FOLLOWING GROUNDS ARE RAISED: 1(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND UNDER THE LAW CANCELLATION OF REGISTRATION U/S 12AA VIDE ORDER U/S 12AA(3) IS NOT JUSTIFIED. (II) THAT AIM AND OBJECTS OF THE SOCIETY ARE OF CHA RITABLE NATURE AND THEIR BEING NO VIOLATION OF PROVISIONS O F SEC. 2(15) OF THE INCOME TAX ACT 1961 THE ORDER PASSED BY DIT(E) IS NOT SUSTAINABLE UNDER THE LAW. (III) THAT THE OBSERVATION AND FINDING OF THE DIT(E ) ARE WITHOUT PROPER APPRECIATION OF FACTS AND WHOLE BASI S OF ORDER U/S 12AA(3) IS ILLEGAL ARBITRARY AND MISCONC EIVED. ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 2 3. BRIEF FACTS ARE: ASSESSEE SOCIETY WAS GRANTED RE GISTRATION U/S 12A VIDE DIT(E)S ORDER DATED 23-5-2001 AND BENEFIT OF EXEMP TION U/S 80G TILL 31-3- 2011. IT IS NOT DISPUTED THAT THE AIMS AND OBJECTS OF THE SOCIETY REMAINED THE SAME AND THERE IS NO CHANGE THEREIN. THE SOCIETY WA S FORMED MAINLY TO PROMOTE THE CAUSE OF EDUCATION IN GENERAL AND CAUSE OF THE EDUCATION OF THE INDIAN MUSLIM AND OTHER MINORITIES AND BACKWARD SEC TIONS OF THE COUNTRY. DURING THE COURSE OF ASSESSMENT FOR A.Y. 2005-06 A O FOUND THAT ASSESSEE HAD PURCHASED A COMMERCIAL PROPERTY AT BANGALORE FO R RS. 7 34 62 970/-. THE PURCHASE AMOUNT WAS CLAIMED BY THE SOCIETY TO B E APPLICATION OF SOCIETYS INCOME IN THE ASSESSMENT. AO HOWEVER DI D NOT AGREE WITH THE ASSESSEE AND HELD THAT THIS AMOUNT WAS APPLIED FOR NOT CHARITABLE PURPOSE AND DID NOT AMOUNT TO APPLICATION OF INCOME OF SOCI ETY AND MADE THE ADDITION. 3.1. ON THE BASIS OF THE ASSESSMENT ORDER DIT(E) I SSUED A SHOW CAUSE NOTICE AS TO WHY SOCIETYS REGISTRATION 12A ALSO SH OULD NOT BE WITHDRAWN AS THE ASSESSEE HAD APPLIED ITS INCOME FOR NON-CHARITA BLE PURPOSES. 3.2. IN REPLY ASSESSEE INTER ALIA PLEADED: (I) THE BYLAWS OF THE SOCIETY PERMITTED THE ACTIVITY OF PURCHASING ANY IMMOVABLE PROPERTY AND INVESTMENT OF SURPLUS FUND. (II) THE MANAGEMENT OF THE TRUST WAS ELIGIBLE TO INVEST IN ANY IMMOVABLE PROPERTY INCLUDING A COMMERCIAL PROPERTY WHICH COULD BE LET OUT ON RENT; THE RENT WOULD BE RECURRING INC OME AND THE INVESTMENT AND RECURRING INCOME WERE FOR PROMOTION OF THE OBJECTS OF THE TRUST. (III) THE MANAGEMENT WAS ELIGIBLE TO LET OUT THE PROPERTY ON RENT AND RENTAL INCOME RECEIVED HAS BEEN OFFERED TO TAX. ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 3 3.3. DIT(E) HOWEVER DID NOT AGREE WITH THE SAME A ND OBSERVED THAT: (I) THE EARNING OF RENTAL INCOME WAS NOT OBJECT OF THE SOCIETY. THE PROPERTY PURCHASED WAS SHOPPING ARCADE CUM-OFFICE C OMPLEX WHICH INDICATED THE INTENTION OF INDULGING IN COMME RCIAL ACTIVITIES. (II) THE COMMERCIAL PROPERTY HAS NOT AT ALL BEEN USED FO R ANY OF ITS OBJECTIVES I.E. SPREADING EDUCATION AS CLAIMED TO BE THE OBJECT OF THE ASSESSEE SOCIETY. (III) THE PURCHASE OF COMMERCIAL PROPERTY WAS NOT INCIDEN TAL TO ATTAINMENT OF ANY OBJECTIVE. THE PROPERTY BEING COM MERCIAL WITHOUT ANY USE FOR ITS AIMS AND OBJECTIVES THE IN VESTMENT WAS FOR NON-CHARITABLE PURPOSES. 3.4. ON THESE OBSERVATIONS DIT(E) WITHDREW THE REGISTRA TION U/S 12A. 7. IN THE INSTANT CASE THE SOCIETY IS EARNING FR OM TWO DIFFERENT HEADS I.E. RENTAL INCOME FROM PROPERTY A ND FROM SALE OF SHOP. THE PURCHASE OF COMMERCIAL PROPERTY BY THE SOCIETY IS NOT INCIDENTAL TO THE ATTAINMENT OF ITS AIMS AND OB JECTS BUT A WELL THOUGHT OUT ACTION TO EARN RENT AT HIGHER RATE PROPERTY BEING COMMERCIAL AND TO OBTAIN HIGHER APPRECIATION OF VALUE OF THE PROPERTY IN THE NEAR FUTURE. THE CONTENTION OF THE SOCIETY THAT SURPLUS FUNDS OF THE SOCIETY WERE INVESTED IN ACCORDANCE WITH SECTION 11(5) OF THE ACT IS NOT ACCEPTABLE AS THE IMMOVABLE PROPERTY WAS COMMERCIAL AND NOT A PROPERT Y PURCHASED FOR ESTABLISHMENT OF SCHOOL/ COLLEGE OR A NY OTHER EDUCATIONAL INSTITUTE WHICH IS ONE OF THE MAIN AIM S OF THE SOCIETY FOR WHICH IT WAS CREATED. 8. KEEPING IN VIEW THE ABOVE FACTS AND NATURE OF IN COME IT IS CLEAR THAT THE INTENTION OF THE ASSESSEE SOCIETY BEHIND INVESTMENT IN COMMERCIAL PROPERTY IS TO EARN RENTAL INCOME WHICH IS NOT AN ACTIVITY OF CHARITABLE PURPOSE SP ECIFICALLY AFTER THE AMENDMENT IN PROVISO TO SECTION 2(15) FRO M AY 2009- 10 ONWARDS. TO SUM UP THOUGH THE AIM OF THE TRUST IS TO IMPART EDUCATION ONE OF THE ACTIVITIES SO FAR IS CENTERED AROUND GENERATING SURPLUS BUYING PROPERTIES AND RENTING OU T THE SAME TO DIFFERENT PARTIES. THE PROPERTIES PURCHASED NAM ELY UB ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 4 PLAZA BANGALORE AND SIGMA SOFTECH PARK RAMAGONDAN AHALLI VILLAGE BANGALORE ARE OUT RIGHTLY COMMERCIAL PROPE RTIES LOCATED IN A SHOPPING ARCADE CUM-OFFICE COMPLEX AN D ARE NOT SUCH PROPERTIES WHERE EDUCATION IS GENERALLY IMPART ED. THIS WOULD INDICATE THAT THE ASSESSEE HAS NO INTENTION TO UTILIZE THE PROPERTIES PURCHASED FOR USING THE SAME FOR IMPARTI NG EDUCATION. INVESTMENT PROPERTIES TO EARN RENTAL INC OME AND IN SHOPS SO THAT INCOME CAN BE EARNED BY SELLING THOSE SUBSEQUENT CAN BY NO STRETCH OF IMAGINATION BE CONSTRUED AS AP PLICATION OF FUNDS/ MONEY FOR CHARITABLE PURPOSES BY THE SOCIETY . MOREOVER THE SUCH INVESTMENT CANNOT BE TREATED AS INCIDENTAL TO ATTAINMENT OF ITS AIMS AND OBJECTS AS PER MOA. 9. IN VIEW OF AMENDED PROVISIONS OF SECTION 2(15) O F THE INCOME TAX ACT 1961 THE ACTIVITY OF THE SOCIETY R ELATING TO INVESTMENT IN PURCHASE OF COMMERCIAL PROPERTY DOES NOT FALL WITHIN THE MEANING OF CHARITABLE ACTIVITY AS THE I NVESTMENT IN COMMERCIAL PROPERTY AND EARNING RENTAL INCOME AS WE LL AS INCOME FROM SALE OF SHOP OUT OF THE PROPERTY PURCHA SED ARE HIT BY THE PROVISIONS OF THE AMENDED PROVISIONS OF SECT ION 2(15) KEEPING IN VIEW THE ABOVE FACTS AND THAT THE ASSES SEE IS CARRYING OUT ACTIVITIES WHICH ARE NOT CHARITABLE AS PER PROVISIONS OF SECTION 2(15) OF THE ACT THE SOCIETY IS HELD TO BE NOT QUALIFYING FOR REGISTRATION U/S 12A. ACCORDINGLY R EGISTRATION GRANTED U/S 12A TO THE ASSESSEE SOCIETY IS CANCELLE D FROM AY 2009-1- ONWARDS. 4. AGGRIEVED ASSESSEE IS BEFORE US. 5. LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY ARG UES THAT: (I) THE DIT(E) GOT CARRIED AWAY BY THE ASSESSMENT ORDER FOR AY 2005-06 IN WHICH THE INVESTMENT IN THIS PROPERTY WA S HELD TO BE NOT THE APPLICATION OF INCOME OF SOCIETY. (II) IN CASES A PART OF APPLICATION OF INCOME IS HELD NOT TO BE THE APPLICATION OF SOCIETYS INCOME IN TERMS OF SEC. 11 & 12 IT CAN ENTAIL AT THE MOST IN ADDITION TO INCOME IT CANNOT BE A BASIS FOR WITHDRAWING THE REGISTRATION U/S 12A ALREADY GRANTE D TO ASSESSEE. ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 5 (III) THE BYLAWS OF THE TRUST ENABLED THE MANAGEMENT TO I NVEST THE SURPLUS FUNDS IN A MANNER TO ENSURE SAFETY OF INVES TMENT AND ITS BEING VIABLE INVESTMENT. 6. LD. DR ON THE OTHER HAND RELIED ON DIT(E)S ORDE R. 7. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. RELEVANT PROVISIONS O F SECTION 11 READ AS UNDER: INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE . 11(2) WHERE EIGHTY FIVE PER CENT OF THE INCOME REFE RRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) R EAD WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED OR IS NOT DEEMED TO HAVE BEEN APPLIED TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEA R BUT IS ACCUMULATED OR SET APART EITHER IN WHOLE OR IN PAR T FOR APPLICATION TO SUCH PURPOSES IN INDIA SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN T HE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIP T OF THE INCOME PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH NAMELY:- (A) SUCH PERSON SPECIFIES BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART WHICH SHALL IN NO CASE EXCEED TEN YEARS; (B) THE MONEY SO ACCUMULATED OR SET APART IS INVESTED OR DEPOSITED IN THE FORMS OR MODES SPECIFIED IN SUB-SECTION (5). (5) THE FORMS AND MODES OF INVESTING OR DEPOSITING THE MONEY REFERRED TO IN CLAUSE (B) OF SUB-SECTION (2) SHALL BE THE FOLLOWING NAMELY:- ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 6 (X) INVESTMENT IN IMMOVABLE PROPERTY. 7.1. PLAIN READING OF PROVISIONS OF SEC. 11 (2)(B) LAY DOWN THAT 85% OF THE INCOME IS TO BE APPLIED TO CHARITABLE PURPOSES OR S ET APART AND THE MONEYS ACCUMULATED OR SET APART CAN BE INVESTED OR DEPOSIT ED IN THE FORMS OR MODES SPECIFIED IN SUB-SEC.(5). 7.2. CLAUSE (X) OF SUB SEC. (5) TO SEC. 11 PRESCRIB ES ONE OF THE MODES OF INVESTMENT AS INVESTMENT IN IMMOVABLE PROPERTY. T HUS THE SURPLUS INCOME CAN BE APPLIED TO INVESTMENT IN IMMOVABLE P ROPERTY. THE CHARITABLE PURPOSES WILL INCLUDE THE EDUCATIONAL ACTIVITIES AN D ACQUIRING THE INCOME YIELDING ASSETS TO PROMOTE THE EDUCATIONAL OBJECTS OF THE SOCIETY. CONSEQUENTLY COMBINED READING OF THESE PROVISIONS MAKE IT CLEAR THAT THE ASSESSEE CAN SET APART OR INVEST ITS INCOME IN AN IMMOVABLE PROPERTY. THE WORD IMMOVABLE PROPERTY BY NATURAL READING WILL INCLUDE ANY TYPE OF LAND RESIDENTIAL OR COMMERCIAL PROPERTY OR ANY OT HER FORM OF PROPERTY WHICH CAN BE TERMED AS IMMOVABLE PROPERTY AS DEFINE D IN THE TRANSFER OF PROPERTY ACT. THUS THE SOCIETY/ MANAGEMENT IS ALLO WED TO INVEST ITS SURPLUS IN IMMOVABLE PROPERTY INCLUDING COMMERCIAL PROPERT Y. THUS THERE CANNOT BE A BAR ON MANAGEMENT OF SOCIETY TO INVEST ITS SUR PLUS FUNDS IN ACQUISITION OF A COMMERCIAL PROPERTY AS THE LAW DOES NOT MANDAT E ANY EXTRA BAR. 7.3. COMING TO THE OTHER ASPECT THAT BECAUSE THE A SSESSEE IS NOT CARRYING OUT ANY EDUCATIONAL ACTIVITY IN THIS COMMERCIAL PRO PERTY THEREFORE THE INVESTMENT BECOMES FOR NON-CHARITABLE PURPOSES AND THE ASSESSEE HAS ENDEAVORED TO ENTER INTO BUSINESS OPERATIONS. IN OU R VIEW THE ASSESSEES CHARITABLE OBJECTS INCLUDE SPREADING EDUCATION AND OPENING OF SCHOOLS; INVESTMENT EVEN IN COMMERCIAL PROPERTY ASSETS REMAI NS CHARITABLE PURPOSES SO LONG AS THE INCOME GENERATED BY IT IS APPLIED T O CHARITABLE OBJECTS. IT HAS ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 7 NOT BEEN DEMONSTRATED THAT THE ASSESSEE APPLIED RE NT RECEIVED FROM THESE PROPERTIES TO ANY NON-CHARITABLE PURPOSES. BESIDES IT HAS NOT BEEN DEMONSTRATED THAT THE ASSESSEES INTENTION WAS TO E NTER IN BUSINESS OF PURCHASE AND SALE OF COMMERCIAL PROPERTY INASMUCH A S WE ARE IN YEAR 2012 THE PROPERTY WAS PURCHASED IN FY 2004-05 AND THE TRUST STILL RETAINS THIS PROPERTY. IN THESE CIRCUMSTANCES WE ARE UNABLE TO HOLD THAT THE ASSESSEES INVESTMENT CAN BE HELD NON-CHARITABLE IN NATURE. 7.4. COMING TO THE ASPECT OF ADDITION IN WITHDRAWAL OF REGISTRATION BECAUSE OF ASSESSMENT FOR AY 2005-06. IN OUR VIEW THAT IS A SEPARATE SUBJECT AS IN THE CASE OF ANY TRUST AO HAS A DISCRETION TO EXAMIN E THE NATURE OF APPLICATION OF INCOME IN AND IN AND PARTICULAR FACTS TO HOLD IT AS NON-APPLICATION BUT EVERY DISALLOWANCE WILL NOT AUTOMATICALLY LEAD TO W ITHDRAWAL OF REGISTRATION ALREADY GRANTED U/S 12A. 7.5. IN VIEW OF THE FOREGOINGS WE HOLD THAT ASSESS EES REGISTRATION U/S 12A SHOULD NOT HAVE BEEN CANCELLED THE SAME IS RESTORE D. ORDER OF DIT(E) IS REVERSED. 8. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30-03-2012. SD/- SD/- ( T.S. KAPOOR) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-03-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 386/DEL/12 ABUL KALAM AZAD ISLAMIC 8