M/s Geonka Charitable Trust, Amritsar. v. The Commissioner of Income Tax (Exemption),, Chandigarh

ITA 510/ASR/2016 | misc
Pronouncement Date: 08-11-2017 | Result: Dismissed

Appeal Details

RSA Number 51020914 RSA 2016
Assessee PAN MARCH2016T
Bench Amritsar
Appeal Number ITA 510/ASR/2016
Duration Of Justice 1 year(s) 25 day(s)
Appellant M/s Geonka Charitable Trust, Amritsar.
Respondent The Commissioner of Income Tax (Exemption),, Chandigarh
Appeal Type Income Tax Appeal
Pronouncement Date 08-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 08-11-2017
Date Of Final Hearing 19-07-2017
Next Hearing Date 19-07-2017
First Hearing Date 19-07-2017
Assessment Year misc
Appeal Filed On 13-10-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. T.S. KAPOOR ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY JUDICIAL MEMBER I.T.A NO.510 & 511(ASR)/2016 ASSESSMENT YEAR:2016- 17 M/S. GOENKA CHARITABLE TRUST 81 1 ST FLOOR KENNEDY AVENUE AMRITSAR. PAN:AACTG-4474E VS. CIT (EXEMPTION) CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SANJIV MEHRA (LD. CA. ) RESPONDENT BY: SH. RAHUL DHAWAN (LD. D.R) DATE OF HEARING:06.09.2017 DATE OF PRONOUNCEMENT:08.11.2017 ORDER PER N.K.CHOUDHRY: THE INSTANT APPEALS HAVE BEEN FILED BY THE ASSESSEE ON FEELING AGGRIEVED AGAINST THE SEPARATE ORDERS DATED 28.09.2016 PASSED BY THE LD. CIT (EXEMPTION) CHANDIGARH FOR ASST. YEAR:2016- 17. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL IN ITA NO.510(ASR)/2016. 1. THAT THE LEARNED CIT HAS ERRED IN LAW AND ON FA CTS IN REJECTING THE APPLICATION OF APPLICANT ASSESSEE TRUST MADE UNDER SECTION 12A OF THE INCOME TAX ACT 1961 ('THE ACT') FOR REGISTRATION O F THE TRUST. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE CIT HAS PASSED THE ORDER ON PRESUMPTIONS AND SURMISES COMPL ETELY IGNORING THE TRUST DEED AND THE ACTIVITIES UNDERTAKEN SO FAR IN ACCORDANCE WITH THE TRUST DEED BY THE TRUST WHICH ARE GENUINE AND CHARI TABLE IN NATURE AND ARE COVERED UNDER SECTION 2(15) OF THE ACT. ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 2 3. THAT THE ID. CIT HAS ALSO EXCEEDED THE SCOPE AND NATURE OF ENQUIRIES AT THE STAGE OF GRANT OF REGISTRATION AS PRESCRIBED UNDER SECTION 12AA. THE SAID ORDER BE SET ASIDE AND CONSEQUENTLY THE CIT BE DIRECTED TO GRANT REGISTRATION. 4. THAT THE LEARNED CIT HAS ERRED IN LAW AND ON FAC TS IN REJECTING REGISTRATION U/S 12AA ON THE GROUND OF TRUST BEING FOR CORPORATE SOCIAL RESPONSIBILITY ('CSR') ACTIVITIES OF THE SETTLOR BE ING A COMPANY INCORPORATED UNDER THE COMPANIES ACT 2013 WHEN ALL SUCH ACTIVI TIES ARE CHARITABLE IN NATURE AND ARE COVERED UNDER SECTION 2(15) OF THE A CT. FURTHER THE MINISTRY OF CORPORATE AFFAIRS GOI VIDE CIRCULAR NO. 21/2014 DATED 18-6-2014 HAS ALLOWED THE COMPANIES TO CONTRIBUTE TO THE TRUSTS R EGISTERED UNDER INCOME TAX ACT FOR CARRYING OUT CSR ACTIVITIES AS MANDATED UNDER SECTION 135 OF THE COMPANIES ACT 2013. 5. THAT THE ID CIT WAS NOT JUSTIFIED TO REJECT THE APPLICATION FOR REGISTRATION U/S 12A OF THE ACT FOR WHICH PROPER OP PORTUNITY OF BEING HEARD WAS NOT GIVEN AND NO SPECIFIC SHOW CAUSE NOTICE STA TING THE REASONS WAS GIVEN TO THE APPLICANT ASSESSEE TRUST. 6. THAT THE APPELLANT SEEKS LEAVE TO ADD AMEND DE LETE OR ALTER ANY GROUND OR GROUNDS OF APPEAL PETITION AT THE TIME OF HEARING IF DEEMED NECESSARY IN THE INTEREST OF JUSTICE AND EQUITY. THE FOLLOWING GROUNDS OF APPEAL RAISED IN ITA NO.511( ASR)/2016. 1. THAT THE LEARNED CIT HAS ERRED IN NOT GRANTING APPROVAL U/S 80G OF THE INCOME TAX ACT 1961 TO THE APPELLANT TRUST VID E ORDER DATED 28-9- 2016 AS THE REGISTRATION UNDER SECTION 12AA BY THE ID. CIT HAS BEEN REJECTED SIMULTANEOUSLY ON THE SAID DATE. 2. THAT THE ORDER OF CANCELLATION OF REGISTRATION U /S 12AA HAS BEEN CHALLENGED BY THE APPLICANT TRUST BEFORE THE HON'BL E ITAT AND THE APPEAL IS YET TO BE DECIDED. THE APPELLANT PRAYS THAT ON ACCE PTANCE OF THE ASSESSEE'S APPEAL FILED AGAINST ORDER U/S 12AA BY T HE ID. ITAT THE WORTHY CIT BE DIRECTED TO GRANT APPROVAL U/S 80G AS THE TR UST SATISFIES ALL THE CONDITIONS PRESCRIBED FOR GRANT OF APPROVAL. 3. THAT THE APPELLANT SEEKS LEAVE TO ADD AMEND DE LETE OR ALTER ANY GROUND OR GROUNDS OF APPEAL PETITION AT THE TIME OF HEARING IF DEEMED NECESSARY IN THE INTEREST OF JUSTICE AND EQUITY. 3. THE BRIEF FACTS OF ITA NO.510(ASR)/2016 ARE AS UNDER : IN THE INSTANT CASE AN APPLICATION FOR REGISTRATION U/ S 12AA OF THE ACT WAS FILED BEFORE THE LD. CIT(E) ON 29.03.2016 AND IT WAS REVEALED IN THE APPLICATION THAT THE SOCIETY IS AN GOI NG ENTITY THAT HAS BEEN IN OPERATION SINCE 08.03.2016. ON CONSIDERATION OF THE ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 3 APPLICATION THE LD. CIT(E) ACCORDED AN OPPORTUNITY OF PERSONAL HEARING ON DATED 20.09.2016 IN ORDER TO APPRISE THE ACTIVITI ES OF THE APPLICANT TRUST AS TO WHETHER THE SAME WERE ON SYNC WITH THE STAT ED OBJECTS. IN RESPONSE TO WHICH REPLY HAD BEEN RECEIVED FROM THE ASSESSE E AND AFTER CONSIDERING THE REPLY OFFERED BY THE ASSESSEE/APPLICANT A SHOW CAUSE LETTER WAS EMAILED AT SANJIV@PCMEHRAANDCO.COM ON DATED 27.09.2016 VIDE WHICH CERTAIN DOCUMENTS/CLARIFICATIONS HAVE BEEN SO UGHT BY THE LD. CIT(E) AND IN RESPONSE THROUGH MAIL THE APPLICAN T PROVIDED CONFIRMATION FROM LUDHIANA BEVERAGE PRIVATE LIMITED STATING THAT THE DONATION AMOUNTING TO RS.11 00 000/- HAS BEEN MADE OU T OF THE CSR OBLIGATION UNDER THE COMPANIES ACT 2013 AND ON CONSIDE RATION OF VARIOUS ISSUES THE LD. CIT(E) DECLINED TO GRANT REGISTRAT ION U/S 12AA OF THE ACT TO THE ASSESSEE/APPLICANT HEREIN BY OBSERVING AS U NDER: 13. CONSIDERING ALL THE ABOVE IT IS SAFE TO CONCL UDE IN THE PRESENT CASE (I) THAT THE MAIN AIM APPEARS TO BE FORMING A TRUST MER ELY FOR COMPLYING TO CSR REQUIREMENTS (II) THAT THE TRUST HAS BEEN STATE D TO FORMED TO IMPLEMENT THE CSR ACTIVITIES OF THE SETTLER COMPANY (III) THA T THE COMPOSITION OF THE TRUST IS RESTRICTIVE AND TO THAT EXTENT NOT AMENABL E TO PUBLIC CHARITY (IV) THAT NO ACTIVITY IN SYNC WITH THE REQUIREMENTS OF THE CO MPANIES ACT HAS TAKEN PLACE IN THE TRUST SO FAR (V) THAT THE ACTIVITIES S O FAR FURTHER SHOW THAT THE TRUST HAS RELINQUISHED ITS FUNCTION AS THE PRIMARY IMPLEMENTATION AGENCY AND UNDERTAKING ITS OWN PROGRAMMES TO IMPACT TARGET ED BENEFICIARIES BY TRANSFERRING ITS FUNDS TO OTHER SOCIETIES (VI) THAT IT ALSO MILITATES AGAINST THE LEGAL PRINCIPLE THAT SOCIAL ENTERPRISES CANNOT BE A DIRECT RECIPIENT OF MONEY FROM A CORPORATE AS IT IS A PROFIT MAKING COMPANY. ADDITIONALLY IT IS REITERATED TO BE A MERE INSTRUMENT TO CARRY OUT TH E CSR FUNCTIONS OF THE SETTLER COMPANY AND GIVEN ITS RESTRICTIVE COMPOSITI ON IT SURELY DOESNT ENSURE TO THE BENEFIT OF GENERAL PUBLIC NOR DOES IT PARTAKE THE MEANING OF PUBLIC TRUST. THE APPLICANT FOR REGISTRATION U/S 12 A IS HEREBY REJECTED. 4. ON FEELING AGGRIEVED AGAINST THE ORDER PASSED BY THE L D. CIT(E) THE ASSESSEE PREFERRED THE INSTANT APPEAL AND IN SUPPORT OF ITS CASE THE ASSESSEE MADE THE FOLLOWING SUBMISSIONS. 1. THAT THE ID. CIT (EXEMPTIONS) CHANDIGARH HAS REJEC TED THE APPLICATION OF THE APPLICANT MADE UNDER SECTION 12A OF THE INCOME TAX ACT 1961 FOR REGISTRATION AS A CHARITABLE TRUST. T HE APPLICATION DATED 25- 3-2016 IN FORM NO. 10A COMPLETE IN ALL RESPECTS WAS RECEIVED IN THE ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 4 OFFICE OF CIT (EXEMPTIONS) CHANDIGARH ON 28-3-2016 (STATED AS 29-3- 2016 IN THE ORDER). THE TRUST WAS ESTABLISHED ON 8- 3-2016 UNDER THE TRUST DEED WHICH WAS REGISTERED WITH THE SUB-REGIST RAR AMRITSAR ON THIS DATE AND THE APPLICATION SOUGHT REGISTRATION FROM THE FINANCIAL YEAR 2015-16 RELEVANT TO THE ASSESSMENT YEAR 2016-17. AL SO CONSEQUENT TO THE REJECTION OF REGISTRATION UNDER SECTION 12A AP PELLANT'S APPLICATION FOR APPROVAL UNDER 80G HAS ALSO BEEN REJECTED SIMULTANE OUSLY. 2. SINCE THE TRUST WAS NEWLY ESTABLISHED IT COMM ENCED ITS CHARITABLE ACTIVITIES BY CONTRIBUTING TO OTHER REGISTERED AND RECOGNIZED/REPUTED CHARITABLE ORGANIZATIONS AND GOVERNMENT SCHOOLS. TH E APPLICATION FOR REGISTRATION GAVE A DETAILED ACCOUNT OF SUCH CHARIT ABLE CONTRIBUTIONS/EXPENDITURE FOR THE PERIOD FROM 8 MAR CH 2016 TO 23 MARCH 2016 ALONG WITH EVIDENCE THEREOF. SUBSEQUENTLY VID E LETTER 3 AUGUST 2016 THE APPELLANT FILED INTER-ALIA AUDITED ACCOUN TS FOR FINANCIAL YEAR 2005-06 AND THE DETAILS OF APPLICATION FOR THE PERI OD FROM 1-4-2006 TO 31-7-2016. 3. THAT THE WORTHY CIT(EXEMPTIONS) VIDE EMAIL DAT ED 27-9-2016 REQUIRED THE DETAILS OF THE COMPOSITION OF M/S CHAR ITY AID FOUNDATION NEW DELHI TO WHOM THE APPELLANT HAD MADE A MAJOR CH ARITABLE CONTRIBUTION OF RS.10 00 000/- ON 21-3-2016. BEING THE THIRD PARTY TRUST NOT CONNECTED WITH THE APPELLANT OR ITS TRUSTEES IN ANY WAY THE INFORMATION REQUIRED COULD NOT BE SUBMITTED FORTHWI TH. THE WORTHY CIT WITHOUT WAITING FOR THE APPELLANT'S RESPONSE ABRUPT LY PASSED THE ORDER REJECTING REGISTRATION UNDER SECTIONL2AA WAS PASSED BY THE ID. CIT(EXEMPTIONS) ON 28-9-2016. 4. CLEARLY THE TIME AVAILABLE WAS SHORT AND TH E QUERY WAS MADE BY THE ID. CIT(EXEMPTIONS) AT THE LAST MINUTE. EVEN TAKING INTO ACCOUNT THAT THE CASE WAS GETTING TIME BARRED THERE WAS NO SHOW CAU SE NOTICE SERVED ON THE ASSESSEE GIVING REASONS FOR REJECTION OF REGIST RATION TO ENABLE THE ASSESSEE TO RESPOND. HENCE NATURAL JUSTICE WAS DEN IED TO THE APPELLANT. 5. THAT THE APPELLANT HAD HOWEVER MAINTAINED DURING THE REGISTRATION PROCEEDINGS THAT THE DONATION RECEIVED FROM LUDHIAN A BEVERAGES PRIVATE LIMITED AMOUNTING TO RS.11 00 000 DURING THE PREVIO US YEAR ENDED 31-3- 2016 IS OUT OF CSR OBLIGATIONS UNDER THE COMPANIES ACT 2013 AND OUT OF THIS AMOUNT A SUM OF RS.10 LACS HAS BEEN CONTRIB UTED TO THE SAID M/S CHARITY AID FOUNDATION NEW DELHI BEING AN INCOME T AX APPROVED CHARITABLE INSTITUTION WHICH HAS BEEN CARRYING ON P UBLIC CHARITABLE ACTIVITIES INCLUDING CSR ACTIVITIES AS ENLISTED IN SCHEDULE VII OF THE COMPANIES ACT 2013. 6. SUBSEQUENTLY THE APPELLANT HAS PROCURED (1) THE COPY OF TRUST DEED AND (2) THE ORDER UNDER SECTION 80G OF THE INCOME T AX ACT 1961 OF THE SAID M/S CHARITY AID FOUNDATION NEW DELHI. THE TRU ST DEED STATES THE TRUSTEES AND THE OBJECTS OF THE TRUST. THE SAID TRU ST HAS INCORPORATED VARIOUS OBJECTS AS STATED IN CORPORATE SOCIAL RESPO NSIBILITY (CSR) UNDER THE COMPANIES ACT 2013. THE INCOME TAX DEPARTMENT HAS ALSO APPROVED THE TRUST UNDER SECTION 80G OF THE INCOME TAX ACT 1961. ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 5 SINCE THESE DOCUMENTS WERE NOT AVAILABLE WITH THE A PPELLANT AND HENCE COULD NOT BE PRODUCED BEFORE THE WORTHY CIT(EXEMPTI ONS) TO ENABLE HIM TO APPRECIATE THE CASE OF THE APPELLANT. 7. THAT THE TWO DOCUMENTS MENTIONED ABOVE HAVE G REAT EVIDENTIARY VALUE AND GO TO THE ROOT OF THE MATTER. 8. THE COURTS HAVE HELD THAT FROM THE PERUSAL O F PROVISIONS OF SECTION 255 AND THE ITAT RULES THAT THE TRIBUNAL HAS FULL POWERS OF ADMISSION OF ADDITIONAL EVIDENCE AS IT THINKS FIT AND IN THE INTEREST OF JUSTICE IF THE TRIBUNAL FEELS APPROPRIATE IT HAS TO CALL FOR THE E VIDENCE OR EXAMINE THE WITNESS AS IS NECESSARY FOR DECIDING THE APPEAL BEF ORE THEM. IN ADDITION TO THE WRITTEN STATEMENT IT WAS FURTHER SUBMITTED BY THE LD. AR THAT IN VIEW OF THE JUDGMENT PASSED BY TH E HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SC HOOL (2007) 212 CTR 394 (ALL) SUBMITTED THAT SCOPE FOR ENQUIRY BY THE CIT U/S 12A OF THE I.T. ACT IS VERY LIMITED AND THE ENQUIRY R EGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND T HE GENUINENESS OF THE ACTIVITIES. FURTHER THE LD. AR RELIED UPON THE ORDER PASSED BY TH E ITAT LUCKNOW BENCH IN THE CASE OF ST. DON BOSCO EDUCATIONAL SOCI ETY VS. CIT (2004) 90 ITD 477 AND SUBMITTED THAT PROVISIONS O F SEC.12AA OF THE ACT RESTRICT THE POWER OF THE CIT TO EXAMINE AS T O WHETHER ASSESSEE WHO HAS MOVED AN APPLICATION FOR REGISTRATION U/ S 12A OF THE ACT IS ACTUALLY CARRYING ON THE ACTIVITIES WHICH ARE GENU INE OR NOT AND THE SECOND WHETHER THE OBJECT OF THE ASSESSEE SOCIETY/INSTIT UTION IS IN CONSONANCE WITH THE REQUIREMENT OF SEC.11/13 OF THE ACT . NO OTHER ENQUIRY CONTEMPLATED BY THIS SECTION OF THE ACT. THE LD. AR FURTHER RELIED UPON THE JUDGMENT PASSED BY ITAT AMRITSAR BENCH IN THE CASE OF DREAMLAND EDUCATIONAL TRUST VS. CIT (2007) 109-TTJ-ASR (850) AND SUBMITTED THAT FOR GRAN T OF REGISTRATION U/S 12AA OF THE ACT THE ONLY RELEVANT CONSIDERATION I S SATISFACTION OF ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 6 THE CIT(E) REGARDING THE OBJECTS OF THE TRUST AND THE GENUINENESS OF THE ACTIVITIES AND FINALLY SUBMITTED THAT THE OBJECTS OF THE ASSESSEE TRUST ARE LAID DOWN IN THE TRUST DEED DATED 08.03.201 6 AND ARE CHARITABLE IN NATURE WITHIN THE MEANING OF SEC.2(15) OF THE ACT AND TO ACHIEVE THE SAID OBJECTS THE ASSESSEE TRUST HAS SPENT AMOUNTS FROM TIME TO TIME FOR CHARITABLE PURPOSES IN ACCORDANCE WITH T HE OBJECTS OF THE TRUST FOR WHICH THE DETAILS HAVE BEEN FURNISHED A LONG WITH EVIDENCES BEFORE THE WORTHY CIT(E). THE ASSESSEE TRUST HAS ALSO MADE DONATION TO OTHER (UNRELATED) REGISTERED/RECOGNIZED CH ARITABLE INSTITUTIONS HAVING VALID EXEMPTION ON SIMILAR CHARIT ABLE ACTIVITIES AS ENSHRINED IN THE OBJECTS OF THE APPELLANT TRUST. FURTHE R THE TRUST HAS ALSO PROVIDED MONETARY AID TO GOVERNMENT RUN SCHOOLS IN THE SURROUNDING AREAS AND ALL THE AMOUNTS IF FOR GENUINE CHARITABLE ACTIVITIES AND ARE APPEARING IN THE AUDITED INCOME AND EXPENDITURE ACCOUNT AND NO INFIRMITY IN THE ACTIVITIES CARRIED DOWN BY THE ASSESSEE TRUST HAVE BEEN POINTED OUT IN THIS REGARD BY THE WOR THY CIT(E) HOWEVER THE WORTHY CIT HAS EXCEEDED HIS POWERS AVAILAB LE TO HIM U/S 12AA AND HAS STEPPED INTO SHOES OF ASSESSING OFFICER WHOSE SCO PE IS TO DETERMINE THE INCOME OF THE TRUST WHICH IS AN ANNUA L EXERCISE FOR EACH ASSESSMENT YEAR. HENCE THE ORDER PASSED BY THE LD. CIT (E) IS LIABLE TO BE SET ASIDE. 5. ON THE CONTRARY THE LD. DR RELIED UPON THE ORDER P ASSED BY THE LD. CIT(E) AND SUBMITTED THAT THE ORDER UNDER CHALLEN GE IS WELL REASONED AND LOGIC ORDER DOES NOT SUFFER FROM ILLEGALI TY PERVERSITY AND IMPROPRIETY. 6. WE HAVE GONE THROUGH WITH THE FACTS AND CIRCUMSTANCES OF THE CASE AS IT AS RIGHTLY POINTED OUT BY THE CIT(E) IN HIS ORDER THAT PROVISIONS OF SEC.12A OF THE ACT NECESSITATE EXAMINATIO N OF TWO BASIC ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 7 CONDITIONS FOR GRANT OF REGISTRATION AND THE SAME INCLU DE APART FROM THE EXAMINATION OF THE OBJECTS OF THE SOCIETY SATISFACTI ON OF THE COMPETENT AUTHORITY IN RESPECT OF GENUINENESS OF ACTIVITI ES AS WELL PARTICULARLY WHEN THE APPLICANT IS ON GOING ENTITY AND IT WOULD ALSO BE NECESSARY TO EXAMINE THE REAL PURPOSE THAT IS INHERENTLY BUILT CREATION OF CAPTIVE TRUSTS BY COMPANIES IN ORDER TO REDEEM THEIR CSR OBLIGATIONS. IN THE ORDER IT WAS OBSERVED BY THE LD. CIT(E) THAT LUDHIANA BEVERAGE PVT. LTD. IS A COMPANY WHICH IS CLOSELY LINKED T O THE APPLICANT TRUST. APART FROM THE FACT THAT LUDHIANA BEVERAGE PVT . LTD IS THE SETTLER OF THE TRUST IN CONTENTION THE MAJOR CONTRIBUTIONS ARE ALSO WITNESSED TO HAVE BEEN PROVIDED BY THE COMPANY TO THIS TRUST. FURTH ER IT IS EVIDENCED THAT THE MANAGING DIRECTOR OF LUDHIANA BEVE RAGE PVT. LTD SH. KAILASH KUMAR GOENKA IS ALSO AMONG THE TRUSTEES IN ADDITION TO THREE OTHER CLOSE RELATIVES WHO PRESUMABLY ARE ALSO INTR ICATELY LINKED TO THE PRIVATE LIMITED COMPANY MENTIONED ABOVE. THE CONTENTS OF THE TRUST DEED PARTICULARLY POINT 6 REVEALED THAT ANY DONATIONS AND CONTRIBUTIONS RECEIVED FROM LUDHIANA BEVERAGES PVT. LTD. OR FROM ANY OTHER COMPANY IN PURSUANCE OF THEIR CORPORATE SOCIAL RESP ONSIBILITY POLICY SHALL BE SPENT/APPLIED BY THE TRUST AS PER DIRECTIONS OF THE DONOR'. THE ABOVE CLEARLY IS A METHOD TO ATTEMPT REDEEMING THE CSR OBLIGATIONS CAST UPON BY THE COMPANIES ACT. FURTHER FROM THE ABOVE IT IS CLEAR THAT THE OBJECTS NARRATED REGARDING OTHER CHARITABLE ACTIVITIES BEING CL AIMED ARE OSTENSIBLE ADDENDUM TO THE MAIN ACTIVITY WHICH IS PROPOSE D TO CONDUCT CSR IN CASE OF THE SETTLER COMPANY. THE ASSESSEE IN ITS OBLI GATION TO SPEND CSR AMOUNT IN THE LIMITED COMPANY HAS TRIED TO G IVE COVER TO THE ACTIVITIES OF THE ASSESSEE TRUST AS A CHARITABLE ONE. ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 8 THE CORPORATE SOCIAL RESPONSIBILITY HAS BEEN INCORPORATE D THROUGH SECTION 135(1) OF COMPANIES ACT 2013 IN WHICH 2% OF AVERAGE NP FOR THE LAST 3 YEARS OF SOME LARGE COMPANIES HAS TO BE SPENT ON C.S.R. THERE IS NO SPECIFIC TAX EXEMPTIONS AVAIL ABLE ON EXPENSES INCURRED ON C.S.R. HOWEVER THERE ARE SEVERAL A CTIVITIES PART OF SCHEDULE VII OF THE COMPANIES ACT 2013 THAT ENJOY EXEMPTIONS UNDER THE INCOME TAX ACT. THE CONTENTS OF THE SCHEDULE- VII IS REPRODUCED HEREIN BELOW. SCHEDULE VII (SEE SECT ION 135) ACTIVITIES WHICH MAY BE INCLUDED BY COMPANIES IN TH EIR CORPORATE SOCIAL RESPONSIBILITY POLICIES ACTIVITIES RELATING TO: [(I) ERADICATING HUNGER POVERTY AND MALNUTRITION PROMOTING HEALTH CARE INCLUDING PREVENTIVE HEALTH CARE] AND SANITATION [INCLUDING CONTRIBUTION TO THE SWACH BHARAT KOSH SET-UP BY THE CENTRAL GOVERNM ENT FOR THE PROMOTION OF SANITATION] AND MAKING AVAILABLE SAFE DRINKING WATER. (II) PROMOTING EDUCATION INCLUDING SPECIAL EDUCAT ION AND EMPLOYMENT ENHANCING VOCATION SKILLS ESPECIALLY AMONG CHILDREN WOMEN ELDERLY AND THE DIFFERENTLY ABLED AND LIVELIHOOD ENHANCEMENT PR OJECTS. (III) PROMOTING GENDER EQUALITY EMPOWERING WOMEN SETTING UP HOMES AND HOSTELS FOR WOMEN AND ORPHANS; SETTING UP OLD AGE H OMES DAY CARE CENTRES AND SUCH OTHER FACILITIES FOR SENIOR CITIZE NS AND MEASURES FOR REDUCING INEQUALITIES FACED BY SOCIALLY AND ECONOMI CALLY BACKWARD GROUPS. (IV) ENSURING ENVIRONMENTAL SUSTAINABILITY ECOL OGICAL BALANCE PROTECTION OF FLORA AND FAUNA ANIMAL WELFARE AGROFORESTRY C ONSERVATION OF NATURAL RESOURCES AND MAINTAINING QUALITY OF SOIL AIR AND WATER [INCLUDING CONTRIBUTION TO THE CLEAN GANGA FUND SET-UP BY THE CENTRAL GOVERNMENT FOR REJUVENATION OF RIVER GANGA]. (V) PROTECTION OF NATIONAL HERITAGE ART AND CULTUR E INCLUDING RESTORATION OF BUILDINGS AND SITES OF HISTORICAL IMPORTANCE AND WO RKS OF ART; SETTING UP PUBLIC LIBRARIES; PROMOTION AND DEVELOPMENT OF TRAD ITIONAL ART AND HANDICRAFTS; (VI). MEASURES FOR THE BENEFIT OF ARMED FORCES V ETERANS WAR WIDOWS AND THEIR DEPENDENTS; (VII) TRAINING TO PROMOTE RURAL SPORTS NATIONALLY RECOGNIZED SPORTS PARALYMPICS SPORTS AND OLYMPIC SPORTS (VIII) CONTRIBUTION TO THE PRIME MINISTER'S NATIONA L RELIEF FUND OR ANY OTHER FUND SET UP BY THE CENTRAL GOVT. FOR SOCIO ECONOMI C DEVELOPMENT AND RELIEF ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 9 AND WELFARE OF THE SCHEDULE CASTE TRIBES OTHER BA CKWARD CLASSES MINORITIES AND WOMEN; (IX) CONTRIBUTIONS OR FUNDS PROVIDED TO TECHNOLOGY INCUBATORS LOCATED WITHIN ACADEMIC INSTITUTIONS WHICH ARE APPROVED BY THE CEN TRAL GOVT. (X) RURAL DEVELOPMENT PROJECTS] (XI) SLUM AREA DEVELOPMENT. EXPLANATION.- FOR THE PURPOSES OF THIS ITEM THE TE RM SLUM AREA' SHALL MEAN ANY AREA DECLARED AS SUCH BY THE CENTRAL GOVER NMENT OR ANY STATE GOVERNMENT OR ANY OTHER COMPETENT AUTHORITY UNDER A NY LAW FOR THE TIME BEING IN FORCE.] THE FINANCE ACT 2014 PROVIDES THAT ANY EXPENDITURE I NCURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SOCIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT 2013 SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FO R THE PURPOSES OF THE BUSINESS OR PROFESSION AND AS PER PROVISIONS OF CSR THE AMOUNT SPENT UNDER THE HEAD OF CSR WILL NOT BE D EDUCTIBLE AS BUSINESS EXPENDITURE AND IN ORDER TO WORK AROUND THE P ROVISIONS THE LUDHIANA BEVERAGE HAS CREATED A TRUST WHERE THE MANAG ING DIRECTOR IS THE TRUSTEE OF THE APPLICANT TRUST AND AN AMOUNT OF RS. 11 00 000/- HAS BEEN GIVEN AS DONATION TO THE APPLICANT TRUST WHO OUT OF THE SAME FURTHER DONATED RS.10 00 000/- TO ONE ANOTHER CHARIT ABLE INSTITUTION I.E. CHARITIES AID FOUNDATION NEW DELHI WHO HAS ALREADY BEEN REGISTERED U/S 80G AND IN FACT IN DIRECTLY HAS BEEN D ONE WITH THE PURPOSE TO AVAIL THE BENEFIT OF 80G WHICH SEEMS TO BE CLOSE ARRANGEMENT TO CONTROL THE FINANCES OF THE TRUST INDIRE CTLY BY SEEKING EXEMPTION WHICH WOULD NOT HAVE BEEN OTHERWISE DEDUCTI BLE AS EXPENDITURE IS NOW BEING CLAIMED EXEMPT. WE ARE IN AGREEMENT WITH THE OBSERVATION OF THE LD. CIT(A) THAT THE METHOD ADOPTED BY THE APPLICANT WHICH IS CONTROL LED BY SINGLE COMPANY (SETTLER) AND MANAGED THROUGH TRUSTEES WHO ARE SIMULTANEOUSLY PART OF THE COMPANY IN FACT SEEMS TO BE IN-HOUSE ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 10 CAPTIVE TRUST OSTENSIBLY FOR DOING C.S.R. ACTIVITY IN O RDER TO CONTROL THE AMOUNT WHICH IS COMPULSORILY TO BE SPENT. WITH REGARD TO THE CONTENTION OF THE ASSESSEE THE LD. A R THAT THE SCOPE OF ENQUIRY U/S 12A OF THE ACT IS VERY LIMITED FOR HIS SATISFACTION WITH REGARDS TO THE OBJECT OF THE TRUST AN D THE GENUINENESS OF THE ACTIVITIES. WE ARE OF THE CONSIDERED OPINION TH AT CERTAINLY IT IS TRUE THAT THE SCOPE OF ENQUIRY BY THE CIT(E) IS VERY L IMITED TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE SOCIETY OF INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES AND THE JUDGMENTS RELIED UPON BY THE ASSESSEE ARE NOT DISPUTED HOWEVER HE IS FULLY EMPOWERED TO CALL FOR SUCH DOCUMENTS OR INFORMATION FROM THE SOCIETY OR INSTITUT ION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GEN UINENESS OF THE ACTIVITIES OF THE SOCIETY OR INSTITUTION AND MAY ALSO MAKE SUCH ENQUIRY AS HE MAY DEEM NECESSARY IN THIS BEHALF. FURTHER HE IS ALSO EMPOWERED TO PASS ORDER FOR REGISTRATION OF SOCIETY OR I NSTITUTION AND FURTHER IF HE IS NOT SO SATISFIED THEN ALSO EMPOWERED TO PASS AN ORDER REFUSING THE REGISTER THE SOCIETY OR INSTITUTION AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE SOCIETY OR INSTITUTION AND GE NUINENESS OF ITS ACTIVITIES. IN THE INSTANT CASE THERE IS CLAUSE NO.(V) IN THE TRUST DEED WHICH SPECIFYING THAT ANY DONATION RECEIVED SHALL BE SPENT/AP PLIED BY THE TRUST AS PER THE OBJECTS OF THE TRUST DONATION TRUST COR PUS OF THE TRUST SHALL BE APPLIED IN ACCORDANCE WITH SPECIFIC DIRECTIONS FR OM THE DONOR. FURTHER IN CLAUSE (VI) SPECIFIES THAT ANY DONATION OR CON TRIBUTION RECEIVED FROM LUDHIANA BEVERAGE PVT. LTD OR FROM ANY OTHER COMPANY IN PURSUANCE OF THEIR CORPORATE SOCIAL RESPONSIBILITY SHALL BE SPENT/APPL IED BY THE TRUST AS PER DIRECTIONS OF THE DONOR. THESE CLAUSES IN THE TRUST DEED ARE CLEARLY SEEMS TO KEEP THE TRUST BY THE SETTLER ETC. LUDHI ANA BEVERAGE ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 11 PVT. LTD. IN ITS OWN DOMAIN. THE DIRECTIONS SHALL HOWEV ER FALL WITHIN THE PURVIEW OF THE OBJECTS OF THE TRUST. FURTHER FROM THE TRUST DEED IT REFLECTS THAT SETTLER A ND THE TRUSTEES ARE ALMOST FAMILY MEMBERS HAVING NO PARTICIPAT ION OF THE PUBLIC WHICH ALSO NOT SYNC WITH THE CORPORATE SOCIAL RESPO NSIBILITY PROJECT AND IN ADDITION TO THAT EXCEPT GIVING DONATIO N TO THE TUNE OF RS.40 000 AND 30 000/- TO THE GOVT. SCHOOLS OUT OF RS.1 1 00 000/- THE APPLICANT TRUST HAS NOT CARRIED OUT ANY ACTIVITIES T ILL PASSING OF THE IMPUGNED ORDER EVEN OTHERWISE TILL DISPOSAL OF THIS APP EAL. WE ARE IN AGREEMENT WITH THE CIT(E) THAT ACTIVITY SO FAR CLEARLY SHOWS THAT THE TRUST HAS RELINQUISHED ITS FUNCTION AS THE PRIMARY IMPLEMENTATION OF THE AGENCIES AND UNDERTAKING ITS OWN PROGRAMMES TO IMPACT TARGETED BENEFICIARIES BY TRANSFERRING ITS FUN DS TO OTHER SOCIETIES AND IT IS ALSO MILITATES AGAINST THE LEGAL PRINCI PAL THAT THE SOCIAL ENTERPRISES CANNOT BE A DIRECT RECIPIENT OF MONEY FROM A CORPORATE AS IT IS A PROFIT MAKING COMPANY AND IT IS ALSO CLEAR THAT THE COMPOSITION OF THE TRUST IS RESTRICTIVE IN NATURE AND TO THAT EXTENT NOT AMENABLE TO THE PUBLIC CHARITY. FINALLY ON THE AFORESAID OBSERVATION AND CONSIDERATIO N WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A) HAS GONE INTO THE GENUINENESS OF THE ACTIVITIES OF THE SOCIETY AND MADE NECE SSARY ENQUIRIES AND AFTER NONSATISFYING ABOUT THE GENUINENE SS OF THE ACTIVITIES RIGHTLY PASSED AN ORDER REFUSING THE REGISTRA TION TO THE APPLICANT SOCIETY. WE DO NOT FIND ANY INFIRMITY PERVERSITY AND ILLEGAL ITY IN THE ORDER OF THE LD. CIT(E) HENCE THE APPEAL OF THE ASSESSEE STAN DS DISMISSED. IN THE RESULT ITA NO.510(ASR)/2016 STANDS DISMISSED. ITA NO.510 &511 (ASR)/2016 ASST. YEAR: 2016- 17 12 HOWEVER THE APPLICANT/TRUST SHALL BE AT LIBERTY TO APP LY AFRESH AFTER REMOVING THE RESTRICTIVE CLAUSES OF TRUST DEED AS WE LL AS DEFECTS OBSERVED BY THE LD. CIT(E). 7. NOW WE TAKE UP ITA NO.511(ASR)/2016 IN WHICH THE AS SESSEE HAS RAISED THE SEPARATE GROUNDS. SINCE THE ISSUE OF REG ISTRATION U/S 12AA OF THE ACT HAS ALREADY BEEN DECIDED BY US HEREINA BOVE IN ITA NO.510(ASR)/2016 AND THE FINDINGS GIVEN THEREIN SHALL APPLY MUTATIS MUTANDIS TO THIS APPEAL ALSO. ACCORDINGLY IN VIEW OF DECLINING OF REGISTRATION U/S 12AA OF THE ACT THIS APPEAL IS ALSO DI SMISSED. 8. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8.11.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:08.11.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A) (4) THE CIT (5) THE SR DR I.T.A.T. TRUE COPY BY ORDER