M.J. Education Trust, Bangalore v. DIT(Exemptions), Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY ACCOUNTANT MEMBER ITA NO.890/BANG/2009 ASSESSMENT YEAR : N.A. M/S. M.J. EDUCATION TRUST NO.977 RAVICHANDRA HOODI WHITEFIELD ROAD BANGALORE 560 048. : APPELLANT VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) BANGALORE. : RESPONDENT APPELLANT BY : SHRI P. DINESH ADVOCATE RESPONDENT BY : SMT. SWATI S. PATIL CIT(DR) O R D E R PER A. MOHAN ALANKAMONY ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF DIT(EXEMPTIONS) BANGALORE DATED 03.07.2009 REJECTI NG RENEWAL OF RECOGNITION U/S. 80G OF THE INCOME-TAX ACT 1961. 2. THE FOLLOWING EFFECTIVE GROUNDS ARE RAISED IN TH IS APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED DIRECTOR OF INCOME-TAX(E) ERRED IN PASSING THE ORDE R IN THE MANNER HE DID. 2. THE DIRECTOR OF INCOME-TAX(E) OUGHT TO HAVE APPR ECIATED THAT THE APPELLANT INSTITUTION IS A CHARITABLE INST ITUTION THOUGH ITA NO. 890/BANG/09 PAGE 2 OF 6 RUNNING A INSTITUTE AND THAT THE APPELLANT HAD SATI SFIED THE CONDITIONS REQUIRED AND OUGHT TO HAVE RENEWED THE R ECOGNITION U/S. 80G OF THE ACT. 3. THE DIRECTOR OF INCOME-TAX(E) OUGHT TO HAVE APPR ECIATED THAT THE APPELLANT HAD NOT VIOLATED ANY OF THE COND ITIONS LAID DOWN IN SEC.80G(5)(I) TO (V) OF THE ACT AND OUGHT T O HAVE RENEWED THE RECOGNITION AS PRAYED FOR. 4. WITHOUT PREJUDICE THE NON-AVAILABILITY OF VOUCHE RS FOR CERTAIN EXPENDITURE HAVING NOT BEEN PUT TO THE APPE LLANT FOR EXPLANATION NO ADVERSE INFERENCE COULD BE DRAWN MO RE SO TO DENY A VALID CLAIM FOR RENEWAL OF RECOGNITION U/S. 80G OF THE ACT. 5. WITHOUT PREJUDICE THE DIRECTOR OF INCOME-TAX(E) HAVING FOUND NO DEFECT FROM THE BOOKS OF ACCOUNTS OUGHT T O HAVE GRANTED THE RENEWAL OF RECOGNITION U/S. 80G OF THE ACT. 3. THE ASSESSEE TRUST IS ENGAGED IN RUNNING AN EDUC ATIONAL INSTITUTION KNOWN AS SILICON CITY COLLEGE. AN APPLICATION FOR RENEWAL OF RECOGNITION U/S. 80G WAS FILED ON 10.12.2008. IN ORDER TO VER IFY THE ACTIVITIES OF THE TRUST FOR CHARITABLE PURPOSE AND ELIGIBILITY IN TER MS OF SECTION 80G(5) DIT(E) CALLED FOR CERTAIN DETAILS FROM THE ASSESSEE. ON V ERIFICATION OF THE RELEVANT DOCUMENTS BOOKS OF ACCOUNTS AND RECEIPTS/PAYMENT V OUCHERS OF THE COLLEGE AND THE TRUST LD. DIT(E) NOTICED THAT CERT AIN VOUCHERS FOR EXPENDITURE INCURRED WERE MISSING. FOR EXAMPLE EXP ENSES DEBITED UNDER THE HEAD COMPUTERS WAS RS.87 000 IN THE BOOKS OF THE TRUST WHEREAS BILLS WERE PRODUCED ONLY TO THE EXTENT OF RS.45 931 . FURTHER ON ADVERTISEMENT EXPENSES OF RS.2 85 681/- INCURRED BY SILICON CITY COLLEGE NO VOUCHERS WERE PRODUCED BY THE COLLEGE. THE LD. DIT(E) OBSERVED FROM THE ABOVE THAT THE APPLICANT DOES NOT MEET THE CON DITIONS LAID DOWN U/S. 80G(5)(I) TO (IV) OF THE ACT AND BY RELYING ON THE DECISIONS OF KARNATAKA ITA NO. 890/BANG/09 PAGE 3 OF 6 HIGH COURT IN THE CASES REPORTED AT 267 ITR 549 AND 259 ITR 59 REJECTED THE APPLICATION FOR RENEWAL OF RECOGNITION U/S. 80G OF THE ACT. 4. AGGRIEVED THE ASSESSEE TRUST IS IN APPEAL BEFOR E THE TRIBUNAL. THE LD. AR SUBMITTED THAT THE TRUSTS MAIN OBJECTS ARE ONLY RELATED TO EDUCATION I.E. SPREADING AND PROMOTION OF EDUCATIONAL INSTIT UTIONS COLLEGES DEEMED UNIVERSITIES HOSPITALS YOGA PERSONALITY DEVELOPM ENT SPORTS AND EDUCATIONAL ACTIVITY RELIEF TO THE POOR AND DESTIT UTES TO CONDUCT RESEARCH IN THE AREAS OF EDUCATION MEDICINE TECHNOLOGY INCLUD ING BIOTECHNOLOGY ETC. AND ALSO TO PURSUE ANY OTHER OBJECTS OF GENERAL PUB LIC ENLIGHTENMENT/ UTILITY IN A WIDE SENSE. THE TRUST HAD ALSO COMPLIED WITH ALL THE CONDITIONS LAID DOWN IN THE ACT IN ORDER TO ENJOY 80G BENEFITS. LD . AR FURTHER SUBMITTED THAT THE DIT(E)S REJECTION FOR GRATING REGISTRATIO N U/S. 80G OF THE ACT ONLY ON THE GROUND THAT FEW BILLS RELATING TO COMPUTER EXP ENDITURE WERE MISSING AND NO VOUCHERS WERE RECEIVED BY THE TRUST FROM THE COLLEGE FOR PAYMENT OF RS.2 85 000 TOWARDS ADVERTISEMENT CHARGES MET BY TH E COLLEGE WILL NOT AMOUNT TO VIOLATIONS OF SECTION 80G(I) TO (V) OF TH E ACT. IT WAS PRAYED THAT DIT(E) MAY BE DIRECTED TO GRANT EXEMPTION U/S. 80G OF THE ACT FOR THE SMOOTH FUNCTIONING OF THE COLLEGE/TRUST. 5. THE LD. DR SUPPORTED THE ORDER OF THE LD. DIT(E) . LD. DR POINTED OUT THAT THE TRUST HAD INCURRED EXPENDITURE FOR WHICH P ROPER VOUCHERS WERE NOT PRODUCED FOR VERIFICATION AND THEREFORE THERE COULD BE MISAPPLICATION OF FUNDS. SECTION 80G(5)(IV) CLEARLY SPECIFIES THAT T HE INSTITUTION OR FUND SHOULD MAINTAIN REGULAR ACCOUNTS OF ITS RECEIPTS AN D EXPENDITURE. LD.DR CONTENDED THAT THE TRUST HAS VIOLATED THESE PROVISI ONS AND THEREFORE NOT ENTITLED TO RECOGNITION U/S. 80G(5)(VI) OF THE ACT. ITA NO. 890/BANG/09 PAGE 4 OF 6 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS ON RECORD THE PAPERBOOK SUBMITTED BY THE ASSESSEE CONTAINING 1 TO 47 PAGES AND THE RELEVANT CASE LAWS CITED. THE ONLY GRIEVANCE OF THE REVENUE WAS THAT THE ASSESSEE TRUST WAS ABLE TO PRO DUCE VOUCHERS TO THE EXTENT OF RS.45 931 OUT OF THE TOTAL EXPENDITURE OF RS.87 000 BEING AMOUNT SPENT UNDER THE HEAD COMPUTERS AND VOUCHERS WER E ALSO NOT AVAILABLE FOR RS.2 85 681/- BEING THE AMOUNT SPENT ON ADVERTI SEMENT BY SILICON CITY COLLEGE A COLLEGE UNDER THE MANAGEMENT OF THE TRUS T. 7. FOR GRANTING RECOGNITION U/S. 80G(5)(VI) OF THE ACT THE TRUST HAS TO SATISFY THAT IT IS ESTABLISHED IN INDIA FOR A CHAR ITABLE PURPOSE AND THE PROVISIONS OF SECTION 80G(5)(I) TO (VI) ARE TO BE A DDITIONALLY FULFILLED. IF ON ENQUIRY IT IS ESTABLISHED THAT THE ACTIVITIES OF T HE TRUST ARE NOT CONFINED AND LIMITED TO THE OBJECTS OF THE TRUST AND HAS VIOLATE D PROVISIONS OF 80G(5)(I) TO (VI) OF THE ACT THE RENEWAL OF RECOGNITION U/S. 80 G CAN BE DENIED. HOWEVER IN THE CASE ON HAND REVENUE HAS NOT ESTAB LISHED THAT THE TRUST HAS DEVIATED FROM THE OBJECTS OF THE TRUST. ONLY C ERTAIN MINOR IRREGULARITIES OF NON-PRODUCTION OF VOUCHERS FOR FEW EXPENDITURE I NCURRED BY THE TRUST HAVE BEEN POINTED OUT BY THE REVENUE. 8. ON PERUSING THE BALANCE SHEET INCOME & EXPENDIT URE ACCOUNT AND RECEIPTS & PAYMENT ACCOUNT SUBMITTED BY THE ASSESSE E TRUST IT IS EVIDENT THAT THE TRUST HAD NOT GENERATED ANY INCOME. THE T RUST HAD RECEIVED LOANS PREDOMINANTLY FROM ITS TRUSTEES AND TO A SMALLER EX TENT FROM OTHERS. THE OPENING CASH AND BANK BALANCE OF THE TRUST WAS ALSO LOAN RECEIVED BY THE TRUST FROM ITS TRUSTEES DURING THE EARLIER YEAR. F URTHER THERE IS NOTHING ON RECORD TO SHOW ANY MALAFIDE INTENTIONS ON THE PART OF THE TRUSTEES. THE ITA NO. 890/BANG/09 PAGE 5 OF 6 ABSENCE OF FEW VOUCHERS WILL NOT CHANGE THE BASIC C HARACTERISTIC OF THE TRUST OR COULD IT BE INFERRED THAT THE TRUST HAS DEVIATED FROM ITS ACTIVITIES WHICH ARE NOT CHARITABLE IN NATURE. THERE IS NO NECESSIT Y FOR THE TRUSTEES ON ONE HAND TO EXTEND VOLUMINOUS LOANS AND ON THE OTHER TO SIPHON OUT FUNDS TO THIS MEAGER EXTENT. 9. SECTION 80G(5)(IV) DO SPECIFY THAT THE INSTITUT ION OR FUND HAS TO MAINTAIN REGULAR ACCOUNTS OF ITS EXPENDITURE. ACCO RDINGLY THE TRUST HAS MAINTAINED PROPER BOOKS OF ACCOUNTS AND MAINTAINED RECORDS WHICH ARE VERY MUCH EVIDENT FROM THE AUDIT REPORT AND THE CER TIFIED COPY OF THE BALANCE SHEET INCOME & EXPENDITURE ACCOUNT RECEIP T & PAYMENT ACCOUNT ISSUED BY THE CHARTERED ACCOUNTANT OF THE TRUST (PA GES NOS. 21 TO 29 OF THE PAPERBOOK). IT IS ALSO PERTINENT TO NOTE THAT THE TRUST HAD BEEN ENJOYING RECOGNITION U/S. 80G(5)(VI) OF THE ACT SINCE 20.12. 2005 AFTER BEING GRANTED RECOGNITION U/S. 12AA(1)(B)(I) OF THE ACT W.E.F. 14 .1.2005. 10. CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE ASSESSEE TRUST DESERVE TO B E GRANTED RENEWAL OF RECOGNITION UNDER SECTION 80G(5)OF THE ACT. IT IS ORDERED ACCORDINGLY. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF APRIL 2010. SD/- SD/- (GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED THE 30 TH APRIL 2010. DS/- ITA NO. 890/BANG/09 PAGE 6 OF 6 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.