DLF Qutab Enclave Complex Educational Charitable Trust, New Delhi v. DIT (E), New Delhi

ITA 839/DEL/2010 | misc
Pronouncement Date: 08-07-2011 | Result: Allowed

Appeal Details

RSA Number 83920114 RSA 2010
Assessee PAN AAATD0852D
Bench Delhi
Appeal Number ITA 839/DEL/2010
Duration Of Justice 1 year(s) 4 month(s) 11 day(s)
Appellant DLF Qutab Enclave Complex Educational Charitable Trust, New Delhi
Respondent DIT (E), New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 08-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 08-07-2011
Date Of Final Hearing 22-06-2011
Next Hearing Date 22-06-2011
Assessment Year misc
Appeal Filed On 26-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 839(DEL)/2010 & ITA NO. 247 (DEL)/2009 DLF QUTAB ENCLAVE COMPLEX DIRECTO R OF INCOME-TAX EDUCATIONAL CHARITABLE TRUST VS. (EXEM PTIONS) AAYAKAR BHAWAN DLF CENTRE 9 TH FLOOR DISTT. CENTR E LAXMI NAGAR SANSAD MARG NEW DELHI. DE LHI-110092. PAN-AAATD0852D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRADEEP DINODIA ADVOC ATE RESPONDENT BY : M S. Y. KAKKAR SR. DR ORDER PER K.G. BANSAL : AM REGISTRATION U/S 12AA(A) THE ASSESSEE WAS GRANTED REGISTRATION U/S 12A O N 27.12.1988. IT APPEARS THAT THE LD. DIT(E) DELHI PASSED AN ORDER UNDER SECTION 80G(5) ON 30.06.2001 IN WHICH THE APPROVAL UNDER THE SA ID PROVISION WAS NOT EXTENDED IN THE CASE OF THE ASSESSEE ON THE GROU ND THAT IT IS ENGAGED IN THE BUSINESS OF CONSTRUCTING AND LETTING OUT PROPERTI ES FOR EARNING RENTAL INCOME AND THEREFORE IT WAS NOT CARRYING OUT AN Y CHARITABLE PURPOSE. IN VIEW THEREOF A NOTICE WAS ISSUED U/S 12AA(3) ON 26.11.2008 ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 2 REQUESTING THE ASSESSEE TO EXPLAIN AS TO WHY THE REGISTRATION EARLIER GRANTED ON 27.12.1988 MAY NOT BE CANCELLED. AFTE R HEARING THE ASSESSEE THE REGISTRATION WAS CANCELLED ON THE GROUNDS THA T (I) THE ASSESSEE IS REALLY INVOLVED IN BUSINESS ACTIVITIES IN WHICH HUGE SURPLUS IS REALIZED FROM YEAR TO YEAR THE DETAILS OF WHICH HAVE BE EN FURNISHED ON PAGE NO. 9 IN PARAGRAPH NO. 4.4; AND (II) IT HAS NOT CARRIE D OUT ANY CHARITABLE ACTIVITY NOR THERE IS ANY INTENTION TO CARRY OUT CHARITAB LE ACTIVITY AS THE SURPLUS REALIZED FROM RENTING BUILDINGS TO EDUCATIONAL IN STITUTIONS WAS NOT APPLIED FOR ANY EDUCATIONAL PURPOSE. THE ASSESSEE HAS C HALLENGED THIS ORDER BY TAKING FOLLOWING GROUNDS:- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND CONTRARY TO THE PROVISIONS OF LAW AND AGAINST THE PAST HISTORY OF THE CASE THE LD. DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS ERRED IN HOLDING THAT THE APPELLANT IS ENGAGED IN THE BUSI NESS OF COMMERCIAL ACTIVITIES AND NOT IN CHARITABLE ACTIVITIES THERE BY HAS ERRED IN CANCELLING THE REGISTRATION U/S 12A OF THE INCOME -TAX ACT 1961 WITH EFFECT FROM ASSESSMENT YEAR 2005-06. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND CONTRARY TO THE PROVISIONS OF LAW AND AGAINST THE PAST HIS TORY OF THE CASE THE LD. DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS ERR ED IN HOLDING THAT THE TRUSTS ACTIVITIES DO NOT FALL WITHIN THE PURV IEW OF SECTION 2(15) OF THE INCOME-TAX ACT 1961. 1.3 THAT THE LD. DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS GROSSLY ERRED IN HOLDING THAT LETTING OUT OF SCHOOL BUILDINGS TO EDUCATIONAL INSTITUTIONS AT HIGHLY CONCESSIONAL RENT DOES NO T CONSTITUTE A ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 3 CHARITABLE ACTIVITY WHICH IS AGAINST THE SETTLED PROPOSITIONS IN ASSESSEES OWN CASE. 1.4 THAT THE CANCELLATION OF REGISTRATION U/S 12A OF THE INCOME-TAX ACT BASED ON REJECTION OF APPLICATION U/S 80G OF THE INCOME-TAX ACT IS BAD IN LAW. 1.5 THAT THE ORDER PASSED BY DIRECTOR OF INCOME-TAX (EXEMPTIONS) IS BASED ON ERRONEOUS INTERPRETATION OF LAW AND UNW ARRANTED INFERENCES OF FACTS AND IS PRAYED TO BE DECLARED NULL AND VOID. 2. THE ONLY SUBMISSION TAKEN UP BY THE LD. COUNS EL BEFORE US IS THAT THE MACHINERY PROVIDED FOR CANCELLATION OF REGISTRA TION UNDER SUB-SECTION (3) OF SECTION 12AA AS IT EXISTED ON THE DATE OF P ASSING THE IMPUGNED ORDER DID NOT PROVIDE FOR CANCELLATION OF REGISTRATION GRANTED UNDER SEC. 12A ALTHOUGH IT PROVIDED FOR CANCELLATION OF REGISTRA TION GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1) OF THIS SECTION. IN OTHE R WORDS THE ARGUMENT IS THAT THE ORDER IS BEYOND THE COMPETENCE OF THE DIREC TOR OF INCOME-TAX (E). FOR THIS PURPOSE RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCO ME-TAX (EXEMPTIONS) VS. MOOL CHAND KHAIRATI RAM TRUST IN ITA NO. 54/2011 DATED 04.04.2011 A COPY OF WHICH HAS BEEN PLACED BEFORE US. THE QUES TION BEFORE THE HONBLE COURT WAS-WHETHER THE ITAT WAS RIGHT IN HOLDIN G THAT THE REGISTRATION GRANTED U/S 12A ON 4.12.1974 TO THE ASSESSEE COU LD BE CANCELLED/WITHDRAWN BY THE AUTHORITIES U/S 12AA( 3) OF THE ACT? THE ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 4 HONBLE COURT CONSIDERED THE PROVISIONS CONTAINED IN SECTIONS 12A AND 12AA AND CAME TO THE CONCLUSION THAT THE POWER T O CANCEL THE REGISTRATION ONCE GRANTED WAS ONLY CONFINED TO TH E REGISTRATION GRANTED UNDER CLAUSE (B) OF SUB-SECTION (1) OF SECTION 1 2AA TILL 1 ST JUNE 2010. OF COURSE NOW WITH EFFECT FROM 1 ST JUNE 2010 THE POWER VESTS WITH THE COMMISSIONER EVEN TO CANCEL THE REGISTRATION GRA NTED UNDER ANY OF THE CLAUSES OF SUB-SECTION (1) OF SECTION 12A. IN TH AT VIEW OF THE INTERPRETATION THE HONBLE COURT WAS OF THE CONS IDERED VIEW THAT THERE WAS NO POWER VESTED WITH THE COMMISSIONER TO CANCEL OR WITHDRAW THE REGISTRATION GRANTED TO THE ASSESSEE UNDER SECT ION 12A(A) IN THE YEAR 1974. 2.1 IN REPLY THE LD. DR SUBMITTED THAT THE DIRE CTOR OF INCOME-TAX (E) HAS INHERENT POWER TO CANCEL/WITHDRAW REGISTRATIO N EARLIER GRANTED U/S 12A(A). 2.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE HONBLE DELHI HIGH COURT WHICH IS THE JURISDICTIONAL HIGH COURT IN THIS CASE HAS SPECIFICALLY HELD THAT POWER TO CANCEL REGISTRATION GRANTED U/S 12A(A) IS VESTED IN THE COMMISSIONER/ DIRECTOR WITH EFFECT FROM 1 ST JUNE 2010 ONLY. THIS POWER IS GRANTED BY AMEND MENT IN THE ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 5 PROVISION MADE BY FINANCE ACT 2010 WITH EFFECT FR OM 01.06.2010. GRANT OF THIS POWER SHOWS THAT SUCH POWER WAS NOT E ARLIER VESTED IN THE DIRECTOR OF INCOME-TAX (E) AS INHERENT POWER. N ONETHELESS SUCH AN ARGUMENT WAS NOT TAKEN BEFORE THE HONBLE HIGH COURT BUT IT BECOMES CLEAR FROM THE FACTS THAT SUCH POWER WAS VEST ED SPECIFICALLY IN HIM WITH EFFECT FROM 01.06.2010. THEREFORE WE ARE OF T HE VIEW THAT THE LD. DIT(EXEMPTIONS) WAS NOT COMPETENT TO PASS THE ORDE R OF CANCELLATION OF REGISTRATION ON 31.12.2009 I.E. BEFORE 1 ST JUNE 2010. APPROVAL UNDER SECTION 80G(5) 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE APPLIED ON 30.06.3008 IN FORM NO. 10G FOR GRANT OF APPROVAL UNDER SECT ION 80G. THE ASSESSEE WAS REQUESTED TO FURNISH DOCUMENTS AND EXPLANATI ON AS MENTIONED ON PAGE NO. 1 OF THE IMPUGNED ORDER FOR THE PURPOSE OF GRANT OF THE APPROVAL. IN THE COURSE OF HEARING THE LD. DIT(E) NOTED TH AT IN FINANCIAL YEAR 2004- 05 TO FINANCIAL YEAR 2007-08 THE MAIN SOURCE OF INCOME WAS RENT RECEIVED FROM DLF LTD. SUMMER FIELD SCHOOL DLF ESTATE DEVELOPERS LTD. AND SRI RAM SCHOOL. THE TOTAL RENT RECEIVED IN FINANCIAL YEAR 2007- 08 AMOUNTED TO RS. 2 50 55 428/- OUT OF WHICH REN T OF RS. 95.00 LAKH WAS RECEIVED FROM SUMMER FIELD SCHOOL AND RS. 74.00 LAKH WAS RECEIVED ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 6 FROM SRI RAM SCHOOL. IT WAS FURTHER NOTED THAT IN FINANCIAL YEARS 2005-06 TO 2008-09 THE DONATION MADE BY THE ASSESSEE WERE MEAGER AMOUNT OF RS. 6.00 LAKH RS. 6.00 LAKH RS. 4.00 LAKH AND RS. 3.00 LAKH. THE TRUST FUND INCREASED FROM ABOUT RS. 1 054 LAKH IN FINANCIAL YEAR 2003-04 TO ABOUT RS. 2 375/- LAKH IN FINANCIAL YEAR 2007-08. ON THE BASIS OF THIS DATA HE CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENG AGED IN COMMERCIAL ACTIVITIES OF LETTING OUT PROPERTIES FOR EARNIN G HUGE RENTAL INCOME. THE SMALL DONATIONS GIVEN IN VARIOUS YEARS WERE IN CIDENTAL TO CARRYING OUT THE COMMERCIAL ACTIVITIES. THEREFORE IT WAS HEL D THAT THE ASSESSEE HAS NOT BEEN CARRYING OUT ANY CHARITABLE ACTIVITY. THERE FORE APPROVAL UNDER SECTION 80G(5) WAS DENIED. 3.1 AGGRIEVED BY THIS ORDER THE ASSESSEE HAS FILE D APPEAL BEFORE US IN WHICH TWO SUBSTANTIVE GROUNDS HAVE BEEN TAKEN WHI CH READ AS UNDER:- 1.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN ACCORDANCE WITH THE PROVISIONS OF LAW THE LEARNED DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS ERRED IN REJECTING THE REQUEST FOR EXEMPTION U/S 80G95) OF THE INCOME-TAX ACT 1961. 1.2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN ACCORDANCE WITH THE PROVISIONS OF LAW THE LEARNED DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS ERRED IN HOLDING THE TRUST ACTIVITIES IS ONLY ACCUMULATING ASSETS AND NOT CARRYING ON ANY CHARITABLE ACTIVITY ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 7 OR UTILIZING THOSE ASSETS FOR ANY CHARITABLE ACTI VITY AND ITS INCOME IS NOT EXEMPT U/S 11 AND 12. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN ACCORDANCE WITH THE PROVISIONS OF LAW THE LEARNED DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS ERRED IN HOLDING THA T THE RENT ON SCHOOL BUILDING HAS BEEN CHARGED ON MARKET RATE A ND NOT APPEAR TO BE ANY CONCESSION. 3.2 BEFORE US THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF B BENCH OF DELHI TRIBUNAL IN ITS O WN CASE IN ITA NO. 1386(DEL)/1998 FOR ASSESSMENT YEAR 1994-95 DATE D 28.7.2006 A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK NO. III ON PAGE NOS. 33 TO40. THE SUBMISSION OF THE REVENUE BEFORE THE TRIBUNA L WAS THAT LETTING OUT OF BUILDING BY THE ASSESSEE TO ANOTHER SOCIETY CANNO T BE COVERED WITHIN THE MEANING OF EDUCATIONAL OR CHARITABLE ACTIVITY. TH E FAILURE OF THE DEPARTMENT TO TAKE ACTION IN EARLIER YEARS WILL NOT ENTITLE THE ASSESSEE TO UNDUE BENEFIT OF SECTION 11. ON THE OTHER HAND THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE WERE THAT THE AO HAS TRE ATED THE ASSESSEE AS A TRUST. REGISTRATION HAS BEEN GRANTED TO THE TRU ST. THEREFORE THE BENEFIT CANNOT BE DENIED TO THE ASSESSEE ON RULE OF CONS ISTENCY. IT WAS FURTHER SUBMITTED THAT CONSTRUCTION OF BUILDING IS ESSENT IAL FOR IMPARTING EDUCATION AND THEREFORE LETTING OUT OF SCHOOL BUILDING WAS AN EDUCATIONAL ACTIVITY. THE TRIBUNAL ACCEPTED THE SUBMISSIONS OF THE A SSESSEE AND HELD IN ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 8 PARAGRAPH NO. 13 THAT THE ASSESSEE-TRUST WAS JU STIFIED IN LETTING OUT SCHOOL BUILDING TO OTHER EDUCATIONAL TRUST AND THEREFO RE IT CAN BE SAID THAT LEASING ACTIVITY AS WELL AS INCOME EARNED THROU GH SUCH ACTIVITY WAS IN FURTHERANCE OF THE OBJECTS AND IDEALS OF THE TRU ST. IT WAS FURTHER HELD THAT THE LEASING ACTIVITY WAS ALSO AIMED AT PROVID ING ASSISTANCE IN IMPARTING EDUCATION WHICH IS INDISPUTABLY A CHARITABLE OBJE CT. THUS THE APPEAL OF THE REVENUE WAS DISMISSED. THIS DECISION WAS FOL LOWED IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002-03 IN ORDER DATE D 10.07.2009 PLACED IN THE PAPER BOOK ON PAGE NOS. 41 TO 48. THUS THE A RGUMENT OF THE LD. COUNSEL IS THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF SECTION 11. FURTHER THE ASSESSEE HAD BEEN GRANTED REGISTRATION UNDER SECTI ON 12A(A). THEREFORE APPROVAL U/S 80G CANNOT BE DENIED. 3.3 IN REPLY THE LD. DR RELIED ON PARAGRAPH NO S. 3 AND 4 OF THE IMPUGNED ORDER THE SUMMARY OF WHICH HAS ALREADY BE EN FURNISHED BY US. 3.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE HAVE ALREADY UPHELD THE CONTENTION OF THE ASSESSEE THAT REGISTRATION GRANTED TO IT ON 27.12.1988 COULD NOT HAVE BEEN WITHDRAWN BY THE DIT(EXEMPTIONS) ON 31.12.2009 AS SUCH POWER WAS VESTED IN HIM ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 9 WITH EFFECT FROM 01.06.2010 ONLY. IN ANY CASE THE ORDER OF CANCELLATION OF REGISTRATION WAS MADE AFTER PASSING THE IMPUGNED ORDER ON 25.11.2008. THEREFORE THE QUESTION OF REGISTRATION COULD NOT HAVE BEEN A GROUND FOR REFUSAL OF THE APPROVAL. IN SO FAR AS EXEMPTION U/S 11 IS CONCERNED THE FINDING GIVEN BY THE TRIBUNAL IN EARLIER YEARS IS THAT THE ASSESSEE IS ENTITLED TO BENEFIT OF SUB-SECTIONS (1) AND (2) OF SECTION 11. THESE ORDERS ARE IN THE NATURE OF BINDING PRECEDENCE. ALTHOUGH THE LD. D R VEHEMENTLY ARGUED THAT RENTING OF BUILDING TO SCHOOL IS NOT AN EDUC ATIONAL OR CHARITABLE PURPOSE AS UNDERSTOOD U/S 2(15) WE ARE OF THE VIEW T HAT THE ONLY RECOURSE OPEN TO THE REVENUE IS TO CHALLENGE THE FINDINGS GIVE N BY THE TRIBUNAL IN ASSESSMENT YEARS 1994-95 AND 2002-03. IN SO FAR AS THIS DIVISION BENCH IS CONCERNED IT IS BOUND TO FOLLOW THOSE ORDERS. THEREFORE IT IS HELD THAT THE ACTIVITIES OF THE ASSESSEE ARE CHARITABLE IN NATU RE AND IT IS ENTITLED TO APPROVAL U/S 80G. 4. IN THE RESULT BOTH THE APPEALS ARE ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 8 JULY 2011. SD/- SD/- (RAJPAL YADAV) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 08.07.2011. SP SATIA ITA NO. 839(DEL)/2010& ITA NO. 247(DEL)/2009 10 COPY OF THE ORDER FORWARDED TO:- DLF QUTAB ENCLAVE COMPLEX EDUCATIONAL CHARITABLE TR UST NEW DELHI. DIT (EXEMPTIONS) DELHI. CIT AO THE DR ITAT NEW DELHI. ASSISTANT REGISTRAR.