Thangadagi Trust, Karatagi v. CIT, Gulbarga

ITA 853/BANG/2010 | misc
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 85321114 RSA 2010
Bench Bangalore
Appeal Number ITA 853/BANG/2010
Duration Of Justice 6 month(s) 22 day(s)
Appellant Thangadagi Trust, Karatagi
Respondent CIT, Gulbarga
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 21-01-2011
Assessment Year misc
Appeal Filed On 29-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO. 853/BANG/2010 ASSESSMENT YEAR : N.A. THANGADASI TRUST KARATAGI GANGAVATHI TALUK KOPPAL DISTRICT KARNATAKA. : APP ELL ANT VS. THE COMMISSIONER OF INCOME TAX GULBARGA. : RESPONDENT APP EL LA NT BY : SHRI B.S. RAVINDRANATH C.A. RESPONDENT BY : SMT. JACINTA ZIMIK VASHAI ADDL.CIT(DR) O R D E R PER A. MOH AN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGGRIEVED BY THE DENIAL OF RECOGNITION U/S. 80G(5)(VI) OF THE ACT BY THE LD. COMMISSIONER OF INCOME TAX GULBARGA VIDE ORDER NO.F.NO.38/80G/2009 - 10 DATED 31.3.2010. 2. THE ASSESSE E TRUST HAD COME INTO EXISTENCE ON 16.3.2009. THE APPLICATION FOR REGISTRATION U/S. 12A AND FOR GRAND OF RECOGNITION U/S. 80G OF THE ACT WAS FILED BY THE ASSESSEE BEFORE THE CIT(EXEMPTION) BANGALORE ON 5.8.2009. THIS APPLICATION WAS TRANSFERRED TO THE J URISDICTIONAL CIT ITA NO.853/BANG/10 PAGE 2 OF 6 GULBARGA ON 22.9.2009. THE LD. CIT GULBARGA AFTER HEARING THE CASE ON 24.2.2010 A SEPARATE ORDER FOR GRANT OF REGISTRATION U/S. 12A OF THE ACT WAS PASSED ON THE SAME DATE. HOWEVER WITH REGARD TO ISSUE OF RECOGNITION U/S. 80G THE A PPLICANT WAS ASKED TO FURNISH COMPLIANCE U/S. 80G(5)(I) OF THE ACT. THE ASSESSEE S REPRESENTATIVE FILED A REPLY WHICH WAS RECEIVED BY THE REVENUE ON 27.2.2010 WHEREIN THE ACTIVITIES OF THE TRUST WAS STATED. IT WAS OBSERVED BY THE CIT THAT THE TRUST EVEN THOUGH HAD A BROAD SPECTRUM OF PHILANTHROPIC ACTIVITIES HAD NOT COMMENCED ITS ACTIVITIES AS ON THE DATE OF THE APPLICATION FOR GRANT OF APPROVAL U/S. 80G5(IV) OF THE ACT DUE TO WHICH NO ACCOUNTS COULD BE ANNEXED TO FORM 10A OR FORM 10G. THE TRUST WAS HE LD TO BE AT AN INCIPIENT STAGE. AT THE TIME OF HEARING DATED 24.2.2010 THE LD. AR HAD SUBMITTED BEFORE THE LD. CIT THAT THE ASSESSEE HAD STARTED THE ACTIVITIES BY PROVIDING NOTE BOOKS TO SCHOOL CHILDREN BRINGING OUT PUBLICATION SHOWING THE HISTORICAL AN D CULTURAL IMPORTANCE OF LOCAL TEMPLES IN AN EFFORT TO BRING CIVIC AMENITIES AND DEVELOPMENT TO THE REGION. HOWEVER THE ASSESSEE DID NOT FURNISH ANY ACCOUNTS OR ACTIVITY REPORT FOR THE PART PERIOD . LD. CIT THOUGH GRANTED REGISTRATION U/S. 12AA OF THE A CT DENIED APPROVAL U/S. 80G OF THE ACT ON THE GROUND THAT THE ASSESSEE S APPLICATION CAN BE ONLY ENTERTAINED AFTER THE END OF THE ACCOUNTING PERIOD WHEN ACCOUNTS ARE DRAWN AND AUDITED BECAUSE IT IS ONLY AT THE CLOSE OF THE ACCOUNTING PERIOD THE ASSESSEE CAN DETERMINE AND EXAMINE WHETHER THE INCOME OF THE TRUST QUALIFIES FOR CLAIMING EXEMPTION U/S. 11 OF THE ACT. THE LD. CIT WAS OF THE OPINION THAT EVEN IF THERE WERE TO BE NIL INCOME THE QUESTION OF WHETHER THE PRESCRIPTIONS AND PROHIBITIONS INCORPORATE D IN SECTIONS 11 12 AND 13 HAVE BEEN COMPLIED WITH CAN BE DECIDED UPON ITA NO.853/BANG/10 PAGE 3 OF 6 FOR THE YEAR AS A WHOLE AND NOT FOR THE PART PERIOD. LD. CIT FURTHER HELD THAT THE UNDATED CERTIFICATE U/S. 13(1)(C) FURNISHED BY THE TRUSTEES ANNEXED TO FORM 10G DATED 22.7.200 9 TO THE EFFECT THAT THERE HAS BEEN NO VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT CANNOT BESTOW ANY PRESUMPTION IN FAVOUR OF THE APPLICANT FOR THE REMAINING PART OF THE FINANCIAL YEAR AND ALSO THE CLAIM FOR EXEMPTION U/S. 11 HAS TO NECESSARILY BE DECIDED FOR THE YEAR AS A WHOLE AND NOT PART THEREOF. DUE TO THESE FACTORS THE LD. CIT CONSIDERED THE APPLICATION FOR GRANT OF APPROVAL U/S. 80G IN FORM 10G IS PREMATURE SINCE THE CONDITIONS STIPULATED UNDER THE ACT IS NOT SATISFIED. 3. LD. AR SUBMI TTED BEFORE US THAT THE ASSESSEE HAD FILED ITS APPLICATION FOR GRANT OF APPROVAL UNDER SECTION 80G OF THE ACT ON 5.8.2009. AS PER RULE 11AA(6) THE LD. CIT WAS BARRED BY LIMITATION TO PASS AN ORDER U/S. 80G OF THE ACT. THEREFORE IT WAS PRAYED THAT RECO GNITION U/S. 80G OF THE ACT HAD BEEN DEEMED TO BE GRANTED BY THE REVENUE. LD. AR FURTHER SUBMITTED THAT EVEN IF IT IS HELD THAT THE ORDER WAS NOT BARRED BY LIMITATION THE LD. CIT OUGHT TO HAVE GRANTED RECOGNITION U/S. 80G OF THE ACT SINCE THE ASSESSEE HAD COMPLIED WITH ALL THE REQUIREMENTS UNDER THE ACT. 4. LD. DR OPPOSED TO THE SUBMISSION OF THE LD. AR AND SUPPORTED THE ORDER OF THE CIT AND PRAYED THAT THE ORDER OF THE CIT TO BE UPHELD. LD. DR FURTHER SUBMITTED THAT THE APPLICANT WAS AT LIBERTY TO FILE AN APPLICATION FOR GRANT OF RECOGNITION U/S. 80G AFRESH WHEREIN THE CIT CAN EXAMINE THE CURRENT STATUS OF THE APPLICANT AND DECIDE THE ISSUE ON MERITS. ITA NO.853/BANG/10 PAGE 4 OF 6 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. IT APPEARS THAT TH E ASSESSEE HAD NOT FILED ITS APPLICATION FOR GRANT OF REGISTRATION AND RECOGNITION U/S. 12A AND 80G OF THE ACT RESPECTIVELY BEFORE THE JURISDICTIONAL REVENUE AUTHORITY. HOWEVER THE REVENUE HAD ACTED JUDICIOUSLY BY FORWARDING THE APPLICATION FILED BY THE ASSESSEE TO THE JURISDICTIONAL CIT(E). THEREFORE THE DATE OF FILING THE APPLICATION CAN BE CONSTRUED TO BE THE DATE ON WHICH THE JURISDICTIONAL AUTHORITY RECEIVES THE APPLICATION IN THE PRESENT CASE ON 22.9.2009. SINCE THE DATE OF ORDER U/S. 80G5(IV ) OF THE ACT IS 31.3.2010 THE LD.CIT(E) S ACTION IS WELL WITH IN THE PERIOD OF LIMITATION PROVIDED UNDER THE ACT. 6. ON THE ISSUE OF MERITS IT IS RELEVANT TO QUOTE SECTION 80G(5)(I) OF THE ACT WHICH IS REPRODUCED HEREIN BELOW: (I) WHERE THE INSTITUTIO N 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 OR CLAUSE (23AA) OR CLAUSE 23C OF SECTION 10: FROM THE ORDER OF LD.CIT(E) IT APPEARS THAT THE LD. CIT MISTOOK THE P ROVISIONS OF THE ACT TO MEAN THAT ONLY AFTER DERIVING THE INCOME BY THE TRUST AND AFTER EXAMINING WHETHER SUCH INCOME IS APPLIED IN SUCH A MANNER COMPLYING WITH THE PROVISIONS OF SECTION 11 12 CLAUSE (23AA) OR CLAUSE (23C) OF SECTION 10 OF THE ACT BY THE REVENUE RECOGNITION U/S. 80G(5)(IV) CAN BE GRANTED. RECOGNITION U/S 80G OF THE ACT CANNOT BE GRANTED ON THE PRESUMPTION OF COMPLIANCE OF THE ACT EVEN THOUGH THE GENUINE DONORS ARE DEPRIVED OF THE BENEFITS OF THE ACT. ITA NO.853/BANG/10 PAGE 5 OF 6 7. ON A PLAIN READING OF THE SECT ION 80G5(I) OF THE ACT IT IS EVIDENT THAT WHEN SUCH INSTITUTION/TRUST DERIVES ANY INCOME AND SUCH INCOME WOULD NOT BE LIABLE TO INCLUSION IN ITS TOTAL INCOME BY VIRTUE OF ITS RECOGNITION U/S. 12A OF THE ACT THE ASSESSEE IS ENTITLED TO BE GRANTED RECOGNIT ION U/S. 80G OF THE ACT SUBJECT TO THE COMPLIANCE OF THE OTHER PROVISIONS OF THE ACT. FURTHER ACTION POINTS PROVIDED IN FORM NO. 10G ITEM NO. 3 STIPULATES THAT THOUGH NO TIME - LIMIT HAS BEEN PRESCRIBED FOR SUBMITTING THIS APPLICATION THE INSTITUTION/FU ND SHOULD IN THE MUTUAL INTEREST OF BOTH ITSELF AND THE DONORS SUBMIT THE APPLICATION AS SOON AS IT IS FORMED. WHEN IN THE APPLICATION ITSELF IT IS PROVIDED THAT THE TRUST SHOULD FILE THE APPLICATION FOR GRANT OF RECOGNITION AS SOON AS IT IS FORMED THE REVENUE IS BOUND TO EXAMINE THE DOCUMENTS WHICH COULD BE REASONABLY MADE AVAILABLE AT THAT POINT OF TIME AND ARRIVE AT A DECISION FOR GRANTING RECOGNITION U/S. 80G OF THE ACT. IN THE INSTANT CASE IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE HAD COMMENCED I TS ACTIVITIES BY PROVIDING NOTE BOOKS TO SCHOOL CHILDREN AND PUBLICATIONS FOR THE DEVELOPMENT OF THE REGION. IT IS ALSO PERTINENT TO MENTION HERE THAT THE MAIN INGREDIENT TO START AN ACTIVITY IS BY THE FLOW OF FINANCE. IN SUCH INSTITUTIONS THE MAIN SOURC E OF PROCUREMENT OF FUNDS WILL BE BY WAY OF RECEIPT OF DONATIONS. THE RECOGNITION UNDER SECTION 80G OF THE ACT WILL BE ONE OF THE FACTORS TO INDUCE THE DONOR TO DONATE FUND TO SUCH TRUSTS. THE INTENTION OF THE ACT IS TO ENCOURAGE SUCH KIND OF ACTIVITIES BY THE TRUST FOR THE DEVELOPMENT OF T HE SOCIETY AND BUILDING OF THE N ATION. THEREFORE WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT HAS ERRED IN NOT GRANTING RECOGNITION U/S. 80G OF THE ACT. WE HEREBY DIRECT THAT LD. CIT(EXEMPTION) TO GRANT RECOGNI TION U/S. 80G(5)(VI) R.W. RULE 11AA(5) OF THE ACT. ITA NO.853/BANG/10 PAGE 6 OF 6 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 21 ST DAY OF JANUARY 2011 . SD/ - SD/ - ( GEORGE GEORGE K. ) ( A. MOHAN ALANKAMONY ) JUDIC IAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 21 ST JANUARY 2011 . DS/ - COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT B ANGALORE. 1. APP EL LANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BANGALORE. 6. GUARD FILE