M/s. K.V.C.Trust, CHENNAI v. ADIT (E), CHENNAI

ITA 85/CHNY/2011 | misc
Pronouncement Date: 25-03-2011 | Result: Allowed

Appeal Details

RSA Number 8521714 RSA 2011
Assessee PAN AAOPK4279R
Bench Chennai
Appeal Number ITA 85/CHNY/2011
Duration Of Justice 2 month(s) 7 day(s)
Appellant M/s. K.V.C.Trust, CHENNAI
Respondent ADIT (E), CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-03-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 25-03-2011
Assessment Year misc
Appeal Filed On 17-01-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL: B- BENCH: CHENNAI (BEFORE SHRI ABRAHAM P GEORGE AM & SHRI G EORGE MATHAN JM) ITA NOS.84 & 85/MDS/2011 M/S K.V.C. TRUST VS. THE DIT(E) 17 FIRST ST. EAST ABHIRAMAPURAM CHE NNAI MYLAPORE CHENNAI 600004 ( PAN AAOPK4279R) (APPLICANT) (RESPONDENT) APPELLANT BY: SHRI S.SRIDHAR RESPONDENT BY: SHRI P.B.SEKARAN CIT- DR ORDER PER ABRAHAM P.GEORGE ACCOUNTANT MEMBER ASSESSEE THROUGH THESE APPEALS CHALLENGES AN ORDER DATED 28-09-2010 OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) CHENNAI (DIT(E) FOR SHORT) DENYING IT REGISTRATION SOUGHT UNDER SEC. 12AA OF THE INCOME-T AX ACT 1961 (THE ACT FOR SHORT) AND APPROVAL UNDER CLAUSE (V) OF SUB-SEC. (5) TO SE C. 80G OF THE ACT. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED AN APPLICATION FOR REGISTRATION UNDER SEC. 12AA OF THE ACT AND FOR AN APPROVAL UNDE R SEC. 80G OF THE ACT IN FORM NOS.10A AND 10G RESPECTIVELY ON 31-3-2010. LD. DIT (E) SOUGHT CERTAIN CLARIFICATION AND CERTAIN ADDITIONAL INFORMATION. A REPLY WAS FILED B Y ASSESSEE. IT SEEMS THAT LD.DIT(E) WAS NOT HAPPY ABOUT OBJECT CLAUSE 5(XI) OF THE TRUS T DEED OF THE ASSESSEE. ACCORDING TO LD. DIT(E) THIS CLAUSE MENTIONED THAT THE TRUST FUN DS WOULD BE APPLIED FOR RELIGIOUS ITA NOS.84&85MDS/11 2 ACTIVITIES ON MUTUAL CONSENT OF ALL THE TRUSTEES. A S PER LD. DIT(E) EXPLANATION 3 R.W. CLAUSE (II) OF SEC. 80G(5) OF THE ACT WOULD IMPLY T HAT THE PURPOSE FOR WHICH A TRUST SEEKING SEC.80G APPROVAL WAS FORMED SHOULD NOT HAV E ANY RELIGIOUS OBJECT. THOUGH THE ASSESSEE SUBMITTED THAT INCOME UTILISATION FOR ANY RELIGIOUS ACTIVITY WOULD BE RESTRICTED TO 5% OF THE TOTAL INCOME LD. DIT(E) WAS OF THE OPINION THAT RELIANCE TO SUB- SEC. (5B) OF SECTION 80G COULD BE PLACED ONLY IF TH E OBJECTS OF THE TRUST WERE OTHERWISE CHARITABLE. HE THUS CAME TO THE CONCLUSION THAT ASS ESSEES OBJECTS WERE CONNECTED TO RELIGIOUS ACTIVITY AND DENIED IT REGISTRATION SOUG HT FOR UNDER SEC. 12AA AS WELL AS APPROVAL UNDER SEC. 80G OF THE ACT. 3. NOW BEFORE US LD. AR STRONGLY ASSAILING THE ORD ER OF THE DIT(E) CALLED OUR ATTENTION TO THE OBJECT CLAUSE OF THE ASSESSEE TRUS T. ACCORDING TO HIM ITS OBJECTS NUMBERING FROM (I) ONWARDS CLEARLY SHOWED THAT IT W AS PURELY A CHARITABLE TRUST. ON CLAUSE NUMBER 5(XI) WHICH WAS CONSIDERED BY LD. DIT (E) AS A RELIGIOUS OBJECT LD. COUNSEL SUBMITTED THAT THERE WAS A CLEAR RESTRICTI ON THEREIN WHEREBY ANY APPLICATION FOR RELIGIOUS ACTIVITIES WAS LIMITED TO 5% OF THE TOTAL INCOME. THEREFORE ACCORDING TO HIM THE REGISTRATION SOUGHT UNDER SECTION 12AA AND APP ROVAL SOUGHT UNDER SEC.80G OF THE ACT WERE UNJUSTLY DENIED.. 4. PER CONTRA LD. DR SUBMITTED THAT ONCE AN ASSEAS SEE HAD IN ITS OBJECTS ANY RELIGIOUS PURPOSE THEN APPROVAL UNDER SEC. 80G COU LD NOT BE GIVEN. ACCORDING TO HIM SUB-SEC.(5B) OF SEC.80G COULD BE INVOKED ONLY BY AN INSTITUTION WHICH WAS HAVING CHARITABLE OBJECTS BUT HAD USED SOME PART OF ITS IN COME FOR RELIGIOUS PURPOSES. ITA NOS.84&85MDS/11 3 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. LD.DIT(E) HAD DENIED REGISTRATION SOUGHT UNDER SEC. 12AA AS WELL AS APPROVAL UNDER SEC.80G OF THE ACT FOR A REASON THAT ONE OF THE OBJECT CLAUSE OF T HE ASSESSEE AUTHORIZED IT TO SPEND MONEY FOR RELIGIOUS ACTIVITY. ACCORDING TO HIM THE RESTRICTIVE CLAUSE OF 5% APPEARING IN SUB-SEC.(5B) OF SEC. 80G WOULD APPLY ONLY IF ALL TH E OBJECTS WERE OF CHARITABLE NATURE. IT IS THEREFORE NECESSARY FOR US TO LOOK INTO THE OBJE CTS OF THE TRUST. OBJECTS APPEARING IN CLAUSE 5 OF THE TRUST DEED 22-03-2010 RUNS AS UNDER : I) TO PROVIDE FINANCIAL ASSISTANCE TO THE NEEDY AN D POOR TOWARDS: A> EDUCATION B> MEDICAL RELIEF C> RELIEF OF POOR SPORTS AND CULTURE II) TO HONOUR SCHOLARS BY PRESENTING THEM WITH A PU RSE AND/OR CLOTHES AND SUCH OTHER ARTICLES ON OCCASIONS AS THE TRUSTEES MAY CHO OSE FROM TIME TO TIME. III) TO ORGANIZE FEEDING OF POOR SICKLY PERSONS OR TO CONTRIBUTE TOWARDS SUCH POOR FEEDING AS THE TRUSTEES MAY DECIDE FROM TIME TO TIM E. IV) TO CONDUCT TRAINING PROGRAMMES FOR ATHLETES AND OTHER PERSONS AND ASSIST THEM TO COMPETE NATIONAL AND INTERNATIONAL EVENTS. V) TO ESTABLISH TAKEOVER AID AND / OR FINANCIALLY ASSIST HOMES FOR MENTALLY RETARDED DESTITUTE WOMEN AGED PEOPLE ORPHANS ETC. VI) TO ESTABLISH AND CONDUCT ORIENTAL HIGH SCHOOLS COLLEGES AND OTHER VIDYALAYAS AND INSTITUTIONS IMPARTING EDUCATION AND RESEARCH VII) TO PUBLISH AND/OR AID IN THE PUBLICATION OF BO OKS JOURNALS PERIODICALS WHICH PROMOTE THE FULFILLMENT OF THE OBJECTS OF THE TRUST WITHOUT IN ANY WAY EARNING PROFIT THEREON. VIII) TO CELEBRATE OR AID IN THE CELEBRATION OF FES TIVALS IN COMMEMORATION OF GREAT SAINTS ACHARYAS SCHOLARS PHILOSOPHERS BY WAY OF AIDING AND REHEVING THE INDIGENT POOR DESERVING UNEMPLOYED OR INCAPACITATED POOR I N DISTRESS OF ANY CASTE OR CREED IN INDIA X) TO CREATE ENDOWMENTS AND TO DONATE FUNDS TOWARDS SUCH ENDOWMENTS FOR DURDOSES AWARDINQ DRIZES SCHOLARSHIDS FINANCIALS AS SISTANCE TO OUTSTANDING STUDENTS. X) TO ACCEPT ANY GIFTS DONATIONS AND ENDOWMENTS OR PROPERTIES OR MONIES ON SUCH TERMS AND CONDITIONS AS MAY BE IMPOSED BY THE DONOR OR DONORS SO AS NOT TO INCUR ANY LIABILITY ON THE PART OF THE TRUSTEES IN FURTHE RANCE OF ALL OR ANY OTHER OBJECTS OF THE TRUST. ITA NOS.84&85MDS/11 4 XI) TO APPLY ON SUCH RELIGIOUS ACTIVITIES AS THE TR USTEES MAY MUTUALLY AGREE UPON FROM TIME TO TIME. HOWEVER ANY SUCH RELIGIOUS APPL ICATION SHALL NOT EXCEED SUCH PERCENTAGE OF TRUSTS INCOME AS MAY BE PERMITTED BY THE INCOME TAX ACT 1961 FROM TIME TO TIME. XII) TO BUILD UP CORPUS OUT OF THE MONIES DONATED O R USE THE SAID DONATION FOR ANY OF THE OBJECTS OF THE TRUST HEREINABOVE MENTIONED A S THE TRUSTEES MAY DEEM FIT. XIII) TO ADOPT VILLAGES FROM RURAL AREAS EMPOWER P EOPLE AND BRING ABOUT ALL ROUND ECONOMIC AND SOCIAL DEVELOPMENT. XIV) TO DEVELOP LEADERSHIP QUALITIES IN THE YOUTH. XV) TO ASSIST IN FARM PRODUCTIVITY BY THE INTRODUCT ION OF LATEST TECHNOLOGY INCLUDING ORGANIC FARMING DRIP IRRIGATION. 6. THERE CANNOT BE ANY DOUBT REGARDING THE CHARITAB LE NATURE OF THE VARIOUS OBJECTS MENTIONED ABOVE EXCEPT FOR CL. (XI). CLAUSE (XI) D OES AUTHORIZE THE TRUSTEES TO APPLY INCOME OF THE TRUST FOR RELIGIOUS ACTIVITIES AS THE Y MIGHT MUTUALLY AGREE FROM TIME TO TIME. A LIMIT IS SPECIFIED OBVIOUSLY TO COME WITH IN THE AMBIT OF SUB-SEC.(5B) OF SEC.80G OF THE ACT WHICH ALLOWED RELIGIOUS SPENDING NOT EX CEEDING 5% OF THE TOTAL INCOME. THE PROCEDURE FOR SEEKING APPROVAL SPECIFIED IN SUB-CL. (VI) OF SUB-SEC. (5) OF SEC. 80G IS SET OUT IN RULE 11AA. SUB-RULE (4) OF RULE 11AA CLEAR LY STATES THAT ONCE THE COMMISSIONER IS SATISFIED THAT ALL THE CONDITIONS LAID DOWN IN C LAUSE (I) TO (V) OF SUB-SEC.(5) OF SEC. 80G ARE FULFILLED HE SHALL GRANT THE APPROVAL AND IF OTHERWISE HE SHALL REJECT APPLICATION FOR APPROVAL AFTER RECORDING THE REASONS FOR SUCH REJE CTION IN WRITING. SO WHAT IS REQUIRED TO BE SEEN IS WHETHER ASSESSEE TRUST HAD SATISFIED THE CONDITIONS LAID DOWN IN CLAUSES (I) TO (V) OF SUB-SEC.(5) TO SEC. 80G OF THE ACT. OBVIO USLY ASSESSEE HAD SATISFIED ALL OTHER REQUIREMENTS OF RULE 11AA SINCE THERE IS NO WHISPE R IN THIS REGARD IN THE ORDER OF THE DIT(E). THIS CALLS US TO HAVE A LOOK AT CLAUSES (I) TO (V) OF SUB-SEC. (5) OF SEC.80G OF THE ACT WHICH RUNS AS UNDER: ITA NOS.84&85MDS/11 5 [( I )WHERE THE INSTITUTION OR FUND DERIVES ANY INCOME SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTIONS 11 AND 12 3 [* * *] 4 [ 5 [***]] 6 [OR CLAUSE ( 23AA )] 7 [OR CLAUSE ( 23C )] OF SECTION 10 : 8 [ PROVIDED THAT WHERE AN INSTITUTION OR FUND DERIVES ANY INCO ME BEING PROFITS AND GAINS OF BUSINESS THE CONDITION THAT SUCH INCOME W OULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME UNDER THE PROVISIONS OF SECTION 11 SHALL NOT APPLY IN RELATION TO SUCH INCOME IF ( A ) THE INSTITUTION OR FUND MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS; ( B ) THE DONATIONS MADE TO THE INSTITUTION OR FUND ARE NOT USED BY IT DIRECTLY OR INDIRECTLY FOR THE PURPOSES OF SUCH BUSINESS; AND ( C ) THE INSTITUTION OR FUND ISSUES TO A PERSON MAKING THE DONATION A CERTIFICATE TO THE EFFECT THAT IT MAINTAINS SEPARATE BOOKS OF ACCOUNT IN RESPECT OF SUCH BUSINESS AND THAT THE DONATIONS RECEIVED BY IT WILL NOT BE USED DIRECTLY OR INDIRECTLY FOR THE PURPOSES OF SUCH BUSINESS;]] ( II ) THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUN D IS CONSTITUTED DOES NOT OR THE RULES GOVERNING THE INSTITUTION OR FUND DO NOT CONTAIN A NY PROVISION FOR THE TRANSFER OR APPLICATION AT ANY TIME OF THE WHOLE OR ANY PART OF THE INCOME OR ASSETS OF THE INSTITUTION OR FUND FOR ANY PURPOSE OTHER THAN A CH ARITABLE PURPOSE; ( III ) THE INSTITUTION OR FUND IS NOT EXPRESSED TO BE FO R THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE; ( IV ) THE INSTITUTION OR FUND MAINTAINS REGULAR ACCOUNT S OF ITS RECEIPTS AND EXPENDITURE; 9 [* * *] ( V ) THE INSTITUTION OR FUND IS EITHER CONSTITUTED AS A PUBLIC CHARITABLE TRUST OR IS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 (21 OF 1 860) OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF I NDIA OR UNDER SECTION 25 10 OF THE COMPANIES ACT 1956 (1 OF 1956) OR IS A UNIVERSITY ESTABLISHED BY LAW OR IS ANY OTHER EDUCATIONAL INSTITUTION RECOGNISED BY THE GOVERNMEN T OR BY A UNIVERSITY ESTABLISHED BY LAW OR AFFILIATED TO ANY UNIVERSITY ESTABLISHED BY LAW 11 [ 12 [***]] OR IS AN INSTITUTION FINANCED WHOLLY OR IN PART BY THE GOVERNMENT OR A L OCAL AUTHORITY; 13 [ *** ] CLAUSE (II) OF THE ABOVE SUB-SEC. MENTIONS THAT THE INSTRUMENT UNDER WHICH THE INSTITUTION OR FUND IS CONSTITUTED SHALL NOT HAVE A NY PROVISION FOR APPLICATION OF INCOME FOR ANY PURPOSE OTHER THAN A CHARITABLE PURPOSE. I N OUR OPINION THIS PARTICULAR CLAUSE HAS TO BE READ ALONGWITH SUB-SEC.(5B) OF SEC.80G AN D NOT IN ISOLATION. SUB-SEC.(5B) IS REPRODUCED HEREUNDER: ITA NOS.84&85MDS/11 6 (5B) NOTWITHSTANDING ANYTHING CONTAINED IN CL.(II) OF SUB-SEC.(5) AND EXPLANATION 3 AN INSTITUTION OR FUND WHICH INCURS EXPENDITURE DURING ANY PREVIOUS YEAR WHICH IS OF A RELIGIOUS NATURE FOR AN AMOUNT NOR EXCEEDING FIVE PER CENT OF ITS TOTAL INCOME IN THAT PREVIOUS YEAR SHALL BE DEEMED TO BE AN INSTITUTION OR FUND TO WHICH THE PROVISIONS OF THIS SECTION APPLY. 7. A HARMONIOUS CONSTRUCTION IS REQUIRED OF OF SUB- CL. (II) OF SUB-SEC.(5) AND SUB- SEC. (5B) OF THE ACT. HERE THE ASSESSEE HAS NOT MEN TIONED ANY PARTICULAR COMMUNITY OR CASTE AS MENTIONED IN CLAUSE (III) OF SUB-SEC.(5)OF SEC.80G. NONE OF THE PRIOR CLAUSES OF CLAUSE (I) TO (X) OF THE OBJECTS MENTION ANYTHING R EGARDING ANY BENEFIT ACCRUING TO ANY PARTICULAR RELIGIOUS COMMUNITY. IN OUR OPINION A M ERE MENTIONING OF APPLICATION OF A LIMITED PART OF THE INCOME FOR RELIGIOUS ACTIVITY P ER SE WILL NOT RENDER THE TRUST A NON CHARITABLE ONE WHEN THE CLAUSE IS ONE AMONG MANY AND ALL OTHER CLAUSES ARE PURELY CHARITABLE IN NATURE. AS MENTIONED BY US THERE IS NOTHING IN THE TRUST DEED WHICH WOULD SHOW THAT THE TRUST WAS ESTABLISHED FOR THE BENEFIT OF ANY PARTICULAR RELIGIOUS COMMUNITY OR CASTE. WHEN THE ACTIVITIES ARE NOT PERTAINING TO ANY PARTICULAR RELIGION A MERE MENTIONING OF A RELIGIOUS ACTIVITY WITHOUT SPECIFY ING ANY RELIGION WOULD NOT BY ITSELF MAKE THE TRUST A NON CHARITABLE ONE. ESPECIALLY SO SINCE SUB-SECTION (5B) OPENS WITH A NON-OBSTANTE CLAUSE. IF WE LOOK AT EXPLANATION 3 TO SUB-SEC.(5C) OF SEC. 80G OF THE ACT IT CLEARLY SAYS THE CHARITABLE PURPOSE DOES NOT INC LUDE ANY PURPOSE THE WHOLE OR SUBSTANTIALLY THE WHOLE OF WHICH IS OF A RELIGIOUS NATURE. A READING OF THE OBJECT CLAUSE OF THE ASSESSEE TRUST REPRODUCED ABOVE WOULD NOT I N ANY WAY SHOW THAT ITS PURPOSE WAS IN WHOLE OR SUBSTANTIALLY IN WHOLE OF RELIGIOU S NATURE. ASSESSEE HAD BY ITSELF PUT A LIMITATION FOR SPENDING ON RELIGIOUS ACTIVITY IF A T ALL IT WAS SPENT FOR THAT PURPOSE IN FUTURE. IN ANY CASE SUB-RULE (4) OF RULE 11B MENTIO NS THAT THE APPROVAL GIVEN UNDER SEC.80G WOULD BE ONLY FOR SPECIFIC YEARS MENTIONED AND THE APPROVING AUTHORITY HAD THE ITA NOS.84&85MDS/11 7 DISCRETION TO GRANT OR NOT TO GRANT A RENEWAL PERIO DICALLY BASED ON APPLICATIONS WERE PUT UP FOR THIS BY THE ASSESSEE. SIMILARLY IF WE LOOK A T SUB-SEC.(3) OF SEC.12AA OF THE ACT IT GIVES POWER TO THE COMMISSIONER TO WITHDRAW REGISTR ATION GIVEN UNDER SEC.12AA OF THE ACT IF THE ACTIVITIES OF THE INSTITUTION OR TRUST W ERE NOT AS PER ITS OBJECTS. THUS AUTHORITIES WHO ARE VESTED WITH THE POWERS TO GRANT REGISTRATION AND APPROVAL ARE ALSO VESTED WITH THE POWER TO WITHDRAW SUCH REGISTRATION OR NOT TO GRANT EXTENSION OF APPROVAL GIVEN EARLIER. IN THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ASSESSEE WAS ELIGIBLE FOR REGISTRATION UNDER SEC.12AA AS WEL L AS APPROVAL UNDER SEC. 80G OF THE ACT AND THESE WERE UNJUSTLY DENIED WITHOUT TAKING THE TOTALITY OF THE CIRCUMSTANCES AND OBJECTS OF THE ASSESSEE. WE THEREFORE QUASH THE OR DER OF THE DIT(E) AND DIRECT HIM TO GRANT REGISTRATION UNDER SEC. 12AA OF THE ACT AND A PPROVAL SOUGHT BY THE ASSESSEE UNDER SEC. 80G OF THE ACT. 8. IN THE RESULT ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25 -03-2 011. . . SD/- (GEORGE MATHAN) JUDICIAL MEMBER SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER CHENNAI: 25 TH MARCH 2011. CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT 5)THE D.R 6)GUARD FILE. NBR ITA NOS.84&85MDS/11 8