Sri Vyasa Madhwa Samshodhana Pratisthana, Bangalore v. DIT(Exemptions), Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI SHAILENDRA KUMAR YADAV JUDICIAL MEMBE R AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.690/BANG/2009 ASSESSMENT YEAR : 2010-11 SRI VYASA MADHWA SAMSHODHANA PRATHISTHANA # 89/24 III MAIN MOUNT JOY ROAD HANUMANTHANAGAR BANGALORE 560 019. : APPELLANT VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) BANGALORE 560 001. : RESPONDENT APPELLANT BY : SHRI MANOJ D. PUKALE ADVOCATE RESPONDENT BY : SMT. PREETHI GARG CIT(DR) O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL IN ITA 690/B/09 IS FILED BY THE ASSESSE E ON 7.7.2009 AGGRIEVED AGAINST THE ORDER OF DIT(E)/BLR/80G/17/AA ATS7974H/ITO(E)- 3/VOL.2008-09 DATED 27.4.2009. 2. THE ASSESSEE HAS RAISED SEVEN EXTENSIVE GROUNDS HOWEVER THE CRUX OF THE ISSUE CENTRES ON: ITA NO.690/BANG/09 PAGE 2 OF 7 LD. DIT(E) HAS ERRED IN REJECTING THE APPLICATION SUBMITTED IN FORM NO.10G SEEKING APPROVAL FOR RECOGNITION U/S. 80G OF THE ACT. 3. THE APPLICANT IS A TRUST FORMED AND REGISTERED ON 8.11.1996. THE OBJECTS OF THE TRUST AS PER THE TRUST DEED ARE TO P UBLISH FINANCE OR ORGANIZE PUBLICATION OF BOOKS PERIODICALS BULLETINS ETC. IN ORDER TO SPREAD PRESERVE AND PROPAGATE INDIAN PHILOSOPHY AND CULTURE AND TO ENGAGE IN ANY OTHER ACTIVITY OF GENERAL PUBLIC UTILITY. 4. THE APPLICANT TRUST FILED ITS APPLICATION IN FOR M10G ON 30.10.08 REQUESTING FOR APPROVAL FOR RECOGNITION UNDER 80G O F THE ACT. DIT(E) VIDE HIS ORDER UNDER SECTION 80G(5)(VI) OF THE ACT 1961 DATED 27.4.2009 REJECTED THE APPLICATION. DIT(E) MADE THE FOLLOWIN G OBSERVATIONS IN HIS ORDER: ON VERIFICATION IT IS FOUND THAT THE APPLICANT TRU ST IS ENGAGED IN PUBLISHING AND SALE OF THE BOOK CALLED THE PRATHIST HANA. THE PUBLICATION OF BOOKS ARE MADE WITH REFERENCE TO THE OLD MANUSCRIPTS. THE ACCOUNTS FURNISHED BY THE APPLICA NT TRUST ALSO REVEAL THAT THE MAJOR ACTIVITY OF THE TRUST IS PUBL ISHING AND SALE OF THE BOOKS. THE APPLICANT IN ITS ANNEXURE SUBMITTED ALONG WITH ITS APPLICATION HAS CONFIRMED THAT THE MAIN OBJECT OF T HE TRUST IS PUBLICATION OF BOOKS. THE RELEVANT PORTION OF ITS SUBMISSION IS REPRODUCED FOR EASY REFERENCE: I. THE MAIN OBJECTS OF THE PRATHISTHANA IS TO SPREAD PRESERVE AND PROPAGATE INDIAN PHILOSOPHY AND CULTUR E THROUGH PUBLICATION OF BOOKS OR THROUGH ANY OTHER M EDIUM AS INDICATED ON PAGE 3 OF THE TRUST DEED. V. WE WOULD LIKE TO EXPLAIN HERE THAT THE PUBLICATION OF BOOKS ARE MADE WITH REFERENCE TO OLD MANUSCRIPTS WHICH HA VE NOT BEEN PUBLISHED EARLIER OR MADE LONG BACK WITH A RE NOT AVAILABLE TO SCHOLARS AND STUDENTS NOW. THE PRICE OF PUBLICATION IS DONE ON COST PRICE AND OUT OF THE PUBLISHED COPIES WE DISTRIBUTE FREE TO THE EMINENT SCHOLARS W HICH ARE ABOUT 100 NOS. AND TO THE STUDENTS IT IS GIVEN 50% LESS AND ITA NO.690/BANG/09 PAGE 3 OF 7 IN SOME CASES FOR POOR STUDENTS FREE WHICH IS ABOU T 200 NOS. ON THE RELEASING DAY THE BOOKS ARE GIVEN AT A CONCESSIONAL RATE OF 25% LESS TO ENCOURAGE COMMON PUBLIC TO PURCHASE AND MAKE USE OF THE BOOKS. FROM THE ABOVE SUBMISSION IT IS CLEAR THAT THE AP PLICANT TRUST IS ENGAGED IN THE ACTIVITY OF PUBLISHING AND SALE OF BOOKS AND IS IN LINE WITH THE OBJECT OF THE TRUST AS AT C LAUSE 3(A) TO SPREAD PRESERVE AND PROPAGATE INDIAN PHILOSOPHY AN D CULTURE THROUGH PUBLICATION OF BOOKS OR THROUGH ANY OTHER MEDIUM. THIS OBJECT AND ACTIVITY OF THE TRUST FALLS WITHIN THE LIMB GENERAL PUBLIC UTILITY AS PER THE DEFINITION O F CHARITABLE PURPOSE U/S. 2(15) AND IN VIEW OF THE INSERTION TO PROVISO TO SECTION 2(15) OF THE I.T. ACT 1961 IT IS NON-CHARI TABLE AND COMMERCIAL IN NATURE. THE APPLICANT TRUST HAS ALSO NOT ADDUCED ANY EXPLANATION WITH REGARD TO THE COMMERCIAL AND N ON-CHARITABLE OBJECT. PERUSAL OF THE ACCOUNTS SUBMITTED BY THE APPLICAN T REVEALS THAT THE BOOKS ARE NOT SOLD ON COST PRICE AS CONTEN DED BY IT. FOR EXAMPLE FOR THE YEAR ENDING 31.03.2007 THE INCOME RECEIVED BY WAY OF PUBLICATION IS RS.15 77 544/- WHEREAS THE A MOUNT EXPENDED TOWARDS PUBLICATION IS ONLY RS.6 60 204/-. IT MORE OR LESS FOR THE OTHER YEARS ALSO. MOREOVER THE AMEND ED PROVISO TO S 2(15) OF THE INCOME TAX ACT 1961 DOES NOT SAY ANYTH ING ABOUT NON-PROFIT ORGANIZATION IT ONLY STATES THAT IF THE OBJECT OF THE TRUST IS IN THE NATURE OF BUSINESS TRADE OR COMMERCE OR ANY SERVICES TOWARDS BUSINESS TRADE OR COMMERCE AND IF A FEE IS CHARGED FOR THAT THEN IMMATERIAL OF ITS APPLICATION OR USE THE SAID ACTIVITY IS NON-CHARITABLE IN NATURE. THE ACTIVITY OF THE TRUS T IS TOWARDS GENERAL PUBLIC UTILITY THE BOOKS PUBLISHED BY IT A RE SOLD FOR A FEE AND THUS THE ACTIVITY OF THE SOCIETY IS NOT CHARITA BLE IN NATURE IRRESPECTIVE OF ITS APPLICATION OR USE OF SAID INCO ME/FEE UNDER S 2(15) R.W. PROVISO THERETO OF THE INCOME TAX ACT 1961. IF THE ACTIVITIES CARRIED OUT BY THE APPLICANT ARE NOT CHARITABLE PURPOSE THEN IN TERMS OF SECTION 80G(5) THE APPLICANT BECOMES INELIGIBLE FOR CONSIDERATION UNDER THE SAID SECTION. ADDITIONALLY IN TERMS OF CONDITIONALITY U/S. 80G(5 )(I) ALSO THE APPLICANT IS INELIGIBLE. HENCE IN VIEW OF THE ABO VE FACTS AND THE STATUTORY LEGAL POSITION THE APPLICATION FOR RENEW AL OF RECOGNITION U/S. 80G HAS TO BE REJECTED. ITA NO.690/BANG/09 PAGE 4 OF 7 5. LD. AR VEHEMENTLY ARGUED THAT THE TRUST HAD ONLY CARRIED OUT ITS OBJECTS AND NOT ANY COMMERCIAL ACTIVITY. THE PRICE OF THE BOOKS WERE KEPT AT PAR OR WITH A THIN MARGIN TO RECOVER COST. MANY BOOKS WERE ALSO DISTRIBUTED FREE OF COST TO EMINENT SCHOLARS AND ST UDENTS AND AT TIMES CONCESSION OF 50% WAS OFFERED. FURTHER IN ORDER T O ENCOURAGE COMMON PUBLIC PURCHASE A DISCOUNT OF 25% WAS OFFERED ON T HE BOOK RELEASING DAY. ALL THE BOOKS PUBLISHED WERE FOR SPREADING PRESERV ING AND PROPAGATING INDIAN PHILOSOPHY AND CULTURE. THESE BOOKS WERE P UBLISHED AFTER A GREAT DEAL OF RESEARCH BY EMINENT SCHOLARS HEADED BY THE MANAGING TRUSTEE SHRI V. PRABHANJANACHARYA WHO HAS BEEN AWARDED BY T HE PRESIDENT OF INDIA. ALL THE EMINENT SCHOLARS WHO HAD BEEN INSTRU MENTAL IN THESE PUBLICATIONS HAVE BEEN RENDERING YEOMAN SERVICES TO THE SOCIETY FOR DECADES AND ARE AT THE FAG END OF THEIR LIFE AND TH EREFORE TO ASSIST THEM IN THEIR MEDICAL AND OTHER EXPENSES FINANCIAL ASSISTA NCE WAS PROVIDED IN THE NAME OF PURASKARA EITHER BY ONE TIME PAYMENT IN L UMP SUM OR WITH MONTHLY PAYMENTS. 6. LD. DR STRONGLY OPPOSED TO THE PRAYER OF LD. AR AND VOICED THAT THE ASSESSEE TRUST HAD BEEN INVOLVED IN ACTIVITIES IN T HE NATURE OF TRADE COMMERCE ETC. AND THEREBY HIT BY THE PROVISO TO S ECTION 2(15). HE FURTHER SUPPORTED THE FINDINGS OF DIT(E) WITH CONVICTION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND MINUTELY PERUSED THE MATERIALS AND RECORDS INCLUDING THE PAPERBOOK CONTA INING 1 TO 52 PAGES SUBMITTED BY THE LD. AR. ON EXAMINING THE INCOME A ND EXPENDITURE STATEMENT FOR THE YEAR ENDED 31.3.2007 WE OBSERVED THAT THE TRUST HAD ITA NO.690/BANG/09 PAGE 5 OF 7 SOLD BOOKS AND GENERATED REVENUE TO THE EXTENT OF R S.15 77 544. THE COST FOR THE PUBLICATION OF THESE BOOKS COULD BE EXTRACT ED FROM THE INCOME AND EXPENDITURE STATEMENT AS FOLLOWS: SL. NO. DETAILS AMOUNT 1. PUBLICATION EXPENDITURE 6 60 204 2. PURASKARA 2 20 120 3. TELEPHONE CHARGES 23 108 4. STATIONERY 98 755 5. TRANSPORT & CONVEYANCE 49 245 6. BOOKS & PERIODICALS 56 835 7. POSTAGE AND TELEGRAM 36 645 8. FUNCTIONS 29 520 9. SALARIES 96 850 10. ELECTRICITY CHARGES 18 254 11. MAINTENANCE OF COMPUTER 3 802 12. RENT 9 000 -------------- TOTAL 13 02 338 -------------- THUS THE SURPLUS EARNED BY THE TRUST FROM ITS ACTIV ITIES OF PUBLISHING BOOKS AMOUNTS TO RS.2 75 206 (15 77 544 13 02 338) WHIC H WORKS OUT TO 17.5% OF TURNOVER. THESE FACTS SHOW THAT THE TRUST HAS G ENERATED A WHOPPING PROFIT FROM ITS ACTIVITIES IN THE COMMERCIAL SENSE. IN FACT THE PROFIT WORKED OUT ABOVE IS ALSO NOT CORRECT BECAUSE THE EFFECT OF CLOSING STOCK IS NOT TAKEN INTO ACCOUNT IN THE BALANCE SHEET AND IN THE INCOME & EXPENDITURE STATEMENT FURNISHED BY THE ASSESSEE. FROM THE STOC K STATEMENT SUBMITTED ITA NO.690/BANG/09 PAGE 6 OF 7 BY THE ASSESSEE (PAPERBOOK PAGE NO.52) THE CLOSIN G STOCK AS ON 31.3.2007 IS WORKED OUT HEREBELOW: SL. NO. BOOK NAME COPIES PRINTED COPIES SOLD BALANCE STOCK % OF UNSOLD STOCK 1. MAHABHARATADABELAKU 1000 550 450 45 2. GEETHAMADHU 1000 600 400 40 3. GEETHAMAHATHME 1000 300 700 70 4. EKADASIVRATHA 1000 400 600 60 5. SAMPRADAYAPADHATHI 1000 900 100 10 6. BHAGWATGEETHA 1000 600 400 40 7. EKADASIVRATHA 1000 350 650 65 8. STHOTHRAMALIKA 1000 950 50 5 9. SUMADHWA VIJAYA 1000 625 375 37.5 10. MADHWA FOR YOUTHS- WORKSHOP 1000 600 400 40 11. STHOTRAMALIKA 1000 220 780 78 IF THESE STOCKS ARE ALSO CONSIDERED FOR THE PURPOSE OF COMPUTING INCOME THE PROFIT WILL SHOOT UP PHENOMENALLY. CONSIDERING ALL THESE ABOVE FACTS AND ALSO BASED ON THE DETAILED FINDINGS OF LD. DIT(E) WE ARE LEFT W ITH NO OTHER OPTION OTHER THAN AFFIRM THE ORDER OF LD. DIT(E). IT IS ORDERED ACCORDINGLY . 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL 2010. SD/- SD/- (SHAILENDRA KUMAR YADAV) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMB ER BANGALORE DATED THE 30 TH APRIL 2010. DS/- ITA NO.690/BANG/09 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE.