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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM
PER: BHAGCHAND, A.M.
This is a bunch of six appeals filed by three different
assessees/societies against the six separate orders all dated 29/12/2015
passed by the ld. CIT(E), Jaipur for not granting the registration U/s 12AA & 80G(5) of the Income Tax Act, 1961 (in short the Act).
Since two common issues are raised in these appeals, therefore,
the same are heard together and for the sake of convenience and brevity, a common order is being passed.
In these appeals, the assessees have raised following grounds:-
Grounds of ITA No. 185/JP/2016 “1. In the facts and circumstances of the case and in law, the ld. CIT(E), Jaipur has erred in rejecting the application for registration U/s 12AA as this is bad in law and liable to be quashed.
The ld. CIT(E), Jaipur is not justified in considering the trust as a cooperative society and rejecting the application for registration based on the same fact.
ITA 185 to 190/JP/2016 3 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
The ld. CIT(E) has erred in making rejecting of application for registration based on incorrect understanding of objectives and activities of the trust as this is bad in law and liable to be quashed.
The aforesaid grounds are mutually exclusive and without prejudice to each other.” In ITA No. 187/JP/2016 and 189/JP/2016, the grounds of appeal are also as above.
Grounds of ITA No. 186/JP/2016 “1. In the facts and circumstances of the case and in law, the ld. CIT(E), Jaipur has erred in rejecting the application for registration U/s 80G as this is bad in law and liable to be quashed.
The aforesaid ground is mutually exclusive and without prejudice to each other.”
In the other appeals i.e. ITA No. 188/JP/2016 and 190/JP/2016, the assessees have taken identical grounds mentioned above.
Briefly stated facts of the case are that these assessees have filed
applications in Form No. 10A seeking registration U/s 12AA of the Act on 26/6/2015. These assessees were asked to produce certain
documents/explanations alongwith original Trust Deed/MOA for verification. In response thereof, the CA/AR, the accountant and Coordinator of the assessee society appeared. The Field Officer/ITO(E),
ITA 185 to 190/JP/2016 4 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
Alwar was also asked to verify the genuineness of the activities of the Trust. After verification of genuineness of activities of the Trust, he
recommended that these applicant societies are not eligible for registration U/s 12AA of the Act. In order to verify the defects pointed
out by the field officer, the applicants were requested vide letter dated
12/11/2015 to produce books of accounts, in response thereof, the AR of the applicants attended and issues were discussed. On examination of activities of these societies, it was noticed that there are basically a cooperative societies where monthly contribution is collected and given
to the member itself as loan against interest. It is also receiving
contribution from parent agency IBTADA and Self Help Groups (SHG).
The ld. CIT(E) also noticed during the proceedings that the Manches are earning income from service charges, FA Bhatta, agriculture income and interest income. He held that these applicants are creating group of few
members under SHG. The benefit through these groups is limited to members of the group and not to be public at large. Thus in this way it works as a mutual benefit society for few members only. He also held
that the charity demands that benefit should flow to the public at large,
while the mutuality is for the persons restricted within the group. It can
be said that charity and mutuality are mutually exclusive and they cannot
ITA 185 to 190/JP/2016 5 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
be stay together. As the activity of the assessee falls under mutuality, it cannot simultaneously claim benefit under charity. Therefore, the ld.
CIT(E) rejected the application for registration U/s 12AA of the Act.
The ld. CIT(E) also held that once the registration U/s 12AA of the Act has been rejected, then the society is not eligible for exemption U/s 80G of the Act. Therefore, he also rejected the applications for seeking
exemption U/s 80G of the Act.
Now the assessee is appeals before us. The AR of the assessee
regarding all the appeals has submitted as under:-
i The appellant trusts are involved in charitable activities by way of relief of the poor and also education. Relief of poor is achieved by providing support to poor women in different SHGs in terms of helping them with get Bank Credit and providing training/education and services to improve their livelihoods.
ii The benefit is not limited to the members of the appellant trusts. On the contrary the beneficiaries are public at large. The concept of Self Help Groups has been explained above. There is no limit of Self Help Groups affiliated to the appellant trusts. Mentioned below are the details of SHGs which are affiliated/registered with the trusts and its Members to whom benefit of the efforts of the appellant trust percolates.
No. of SHGs Appellate Associated/ No. of Members Paper Book Trust Affiliated KMM 164 1,977 PB-I, Pg. :32-35
ITA 185 to 190/JP/2016 6 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
CMM 155 1,863 PB-I, Pg.: 22-24 JMM 151 1,758 PB-II, Pg. : 15-17
iii The Trust always motivates poor women to form SHGs.
iv When these women are empowered, educated and trained vocationally the benefit is passed on to their family including children. Thus, the benefit multiplies and society at large is benefited.
v Ld. CIT(E) failed to appreciate the modern concept of empowering women through formation of Self Help Groups and providing micro-finance and vocational training to the members of Self Help Groups.
vi Ld. CIT(E) has failed to appreciate the saying:
“If you teach (empower) a man, you teach (empower) a man whereas if you teach (empower) a woman, you teach (empower) a family”
The appellants are a mutual benefit society. Mutuality is opposed to the concept of charity.
i The appellants are trusts. None of the members of the trusts get any benefit of the trusts. None of the members of the trusts make contributions to the trusts. The affiliated Self Help Groups are definitely mutual benefit societies. The ld. CIT(E) has committed a grave error in not being able to differentiate between the beneficiaries Self Help Groups and the appellant trusts.
The interest is charged(earned) is above normal banking rate and thus contains element of profit.
i The main thrust of the activities of the appellant trusts is economic empowerment of the women by providing micro-
ITA 185 to 190/JP/2016 7 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
finance to them through SHGs. The appellant trusts through the recognized scheme of NABARD and in association with YES Bank arrange micro-finance to the women of the economically weaker section of the society. No bank provides loans to any of the SHGs unless they have worked for 6 months and demonstrates disciplined functioning of borrowings and repayment through savings. Therefore, the appellant trusts provides initial finance for six months and also hand holds the SHGs for inculcating financial discipline and understanding in the members. During this period interest is charged at the same rate at which banks would provide micro-finance to these SHGs after six months. Thus there is no element of profit. Charging of interest is necessary to teach the SHG members, the concept of borrowings at interest for their economic advancement. Further, the poor women in villages pay high interest of 36% to 60% when they are not members of SHGs.
ii The rejection of the application on the allegation of profit element is baseless. Ld. CIT(E) has not appreciated the facts in correct perspective. The appellant trusts provide various agricultural inputs to the different Self Help Groups on the basis of making collective and centralized buying at a much cheaper rate. Even if a slight markup on the said price makes the said goods available at a much cheaper rate then the members at Self Help Groups buying individually. The markup is to recover the cost incurred by the trusts.
iii Merely because a charitable institution established for the purpose of upliftment of the rural women was making surplus from the current income. It cannot be assumed that these were formed with the object of earning profit and that its activity is commercial in nature. Reliance is placed on the ratio laid down by the Hon’ble Supreme Court in the case of ITA 185 to 190/JP/2016 8 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
Peter’s Educational Society(2016) 287 CTR (SC) 132. In this order, Hon’ble Supreme Court followed its own judgment in the case of Queen’s Educational Society (2015) 275 CTR 449 (SC).
It is submitted that where the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of charitable purpose would be fully satisfied even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution. Hon’ble Karnataka High Court in the case of Gayatri Women Welfare Association (1993) 203 ITR 389 (Kar) held that the trust was a charitable institution and was entitled to exemption under section 11.In this case the institution was established for rehabilitating the economically handicapped women and destitute women by giving them suitable employment, set up a unit ancillary to an industrial undertaking thereby providing employment to several women drawn from the weaker section of the society.
In the case of Bharatha Swamukti Samsthe (2009) 319 ITR (AT) 422 (Bangalore), the assessee trust was recognized as a charitable institution with the objects of poverty alleviation and benefit of socio-economically weaker sections, the issue was whether micro-credit to poor women in socio- economically weaker section of the society would qualify for exemption as covered by the objects. The AO took the view that giving loans to poor women on interest could not be a charitable activity and that it amounted to exploitation of poor women. Commissioner (Appeals) found that the allegation of exorbitant interest was not justified, so that the inference of exploitation cannot stand. The Tribunal found that this activity was recognized as charitable for the past four years in assessee’s case by inferring that giving loan at reasonable interest to poor women, who had otherwise no access for such credit, is to be accepted as a charitable activity, as such activity can uplift the economic status of such women.
ITA 185 to 190/JP/2016 9 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
There was nothing to suggest that they could have obtained a cheaper loan. It is in this view, right to exemption and renewal of recognition under section 80G was held to be justified by the Hon’ble ITAT Bangalore Bench.
It is also brought to the notice of the Hon’ble Bench that following trusts having identical objects and functioning have been granted registration under section 12AA. Details are as under:
Name of the Trust : Sangharsh Mahila Manch Paper Book-II Particulars KMM CMM JMM Trust Deed 40-47 30-37 22-29 12A Registration certificate 48 38 30 80G Registration certificate 49 39 31 Assessment order u/s 143(3) 50-51 40-41 32-33 Name of the Trust : SaveraMahilaManch Paper Book-II Particulars KMM CMM JMM Trust Deed 52-60 42-50 34-42 12A Registration certificate 61 51 43 80G Registration certificate 62 52 44 Assessment order u/s 143(3) 63-64 53-54 45-46
It is also submitted that Ibtada is also granted 12A registration and its assessments are completed allowing section 11 benefit.
In view of the above, ld. CIT(E) may be directed to grant registration under section 12AA to all the appellate trusts. Regarding registration U/s 80G the ld. AR of the assessee has submitted
that in view of the submissions made above and owing to the activities
carried out by the appellant trusts, they are entitled to registration under section 12AA. As a result they are also entitled to registration under ITA 185 to 190/JP/2016 10 Kranti Mahila Manch & Ors two assessees Vs. CIT(E) section 80G. In view of the above, ld. CIT(E) may be directed to grant
registration under section 80G to all the appellate trusts.
At the outset, the CIT DR has vehemently supported the orders of the ld. CIT(E) and prayed to confirm the orders passed by him in all the appeals.
We have heard the rival contentions of both the parties, perused
the material available on the record and also gone through the order of the ld. CIT(E). In this case, the assessee trust filed an application for registration U/s 12AA of the Act. Registration U/s 12AA is being granted
when the competent authority satisfies itself about the objects of the Trust or Institution and genuineness of activities of the same. The aims
and objects of this assessee trust are as under:- VªLV ds mn~ns'; i. lekt esa efgykvksa dk lkekftd ,oa vkfFkZd fiNM+siu dks nwj djus esa lg;ksx iznku djukA efgykvksa ds Lo;a lgk;rk lewgksa ,oa efgyk lHkkvksa ¼dyLVjksa½ dk ii. xBu dj mudh {kerko/kZu djukA iii. Lo;a lgk;rk lewg vk/kkfjr QSMjs'ku ¼eap½ dk vU; {ks= esa fuekZ.k djuk vFkok fuekZ.k djus esa enn djukA iv. efgyk Loa; lgk;rk lewg ds vUrxZr py jgh fofHkUu xfrfof/k;ksa dh ns[kjs[k djuk o muds lqpk: lapkyu esa lg;ksx djukA
ITA 185 to 190/JP/2016 11 Kranti Mahila Manch & Ors two assessees Vs. CIT(E) Lo;a lgk;rk lewgksa ds lqpk: lapkyu gsrq fu;e ,oa fn'kk&funsZ'k v. r; djukA vi. Xkjhc ,oa oafpr oxZ ds fy, f'k{kk] LokLFk;] ty ,oa LoPNrk] vkokl ,oa ewyHkwr lqfo/kka, miyC/k djkus gsrq xfrfof/k;ksa dk lapkyu djukA vii. vkthfodk ,oa Ik;kZoj.k gsrq d`f’k] i'kqikyu] ty ,oa Hkwlaj{k.k] ty xzg.k fudkl] lkekftd okfudh vkfn xfrfof/k;ksa dk lapkyu djukA viii. Lo;a lgk;rk lewgksa dks cSadks ,oa vU; foRrh; laLFkkvksa ls _.k miyC/k djkus esa lgk;ksx djukA ix. ljdkj] cSad] nkunkrk ,oa vU; foRrh; laLFkkvksa ls _.k ,oa vuqnku izkIr dj Lo;a lgk;rk lewgksa dks vFkok muds lnL;ksa dks vuqnku ,oa _.k nsukA _.k izkIr djus ds fy, VªLV }kjk vftZr lEifRr dks _.knkrk ds x. i{k esa fxjoh ;k eksVZxsV djukA xi. Lo;a lgk;rk lewgksa o muds lnL;ksa }kjk rS;kj fd;s x;s mriknksa dh fcØh djuk ,oa fcØh esa lgk;ksx djukA xii. ljdkj ,oa vU; laLFkkvksa dh ;kstukvksa dks dk;Z{ks= esa fØ;kfUor djuk ;k fØ;kUo;u esa lg;ksx djukA xiii ljdkjh ,oa xSj ljdkjh dk;ZØeksa ds dk;ZdrkZvksa dk ekax vuqlkj izf'k{k.k ,oa 'kS{ksf.kd Hkze.k djokukA xiv. Lo;a lgk;rk lewgksa ds lnL;ksa ds lekftd ,oa vkfFkZd fodkl gsrq fofHkUu ;kstukvksa] dk;ZØeksa o laLFkkvksa ds lkFk rkyesy ,oa lk>snkjh LFkkfir djukA xv. VªLV ds mn~ns';ksa dh izkfIr gsrq fofHkUu L=ksrksa ls ¼ljdkjh] xSj ljdkjh] cSad] foRrh; ,oa vU; laLFkk,Wa½ foRrh; vuqnku izkIr djukA xvi. Lkewgksa dh eqf[k;kvksa] lkeqnkf;d lgtdrkZ ,oa efgyk izf'k{kdksa dk {kerko/kZu djukA
ITA 185 to 190/JP/2016 12 Kranti Mahila Manch & Ors two assessees Vs. CIT(E) xvii. Ekfgykvksa ds vkfFkZd fodkl gsrq vkthfodk lao/kZu dh xfrfof/k;ksa dk lapkyu djukA xviii. ,slh lHkh fof/k Lohd`r xfrfof/k;kWa Lo;a ls ;k vU; laLFkkvksa ds lkFk feydj djuk tks bl VªLV ds mn~ns';ksa dh iwfrZ esa lg;ksxh gksA
The ld. AR of the assessee has relied on the various case laws. In the case of Peter’s Educational Society (2016) 287 CTR (SC) 132, wherein
the Hon'ble Supreme Court has held that where an educational institution
carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases
to exist solely for educational purposes and becomes an institution for the purpose of making profit. The ld. AR also relied on the decision of Hon'ble Supreme Court in the case of Queen’s Educational Society (2015)
275 CTR 449 (SC). The ld. AR also relied on the decision of Bangalore 319 ITR (AT) 422 in ITA No. 1121/Bang/2008, wherein the Coordinate
Bench of the Bangalore ITAT has held that object of the assessee was alleviation of poverty by extending micro credits to poor rural women and it was not charging exorbitant interest and there being nothing to suggest that funds were used or misused for personal benefit of the trustees, it was entitled to renewal of recognition U/s 80G(5) of the Act.
the ld AR also relied on the decision of the Jaipur ITAT in the case of ITA 185 to 190/JP/2016 13 Kranti Mahila Manch & Ors two assessees Vs. CIT(E) 632/JP/2015 order dated 08/08/2016, wherein the ITAT has held that no community sought to be benefited by assessee society has sufficiently
been identified by a common quality of a public or impersonal in nature-
membership not restricted to only advocates- no charitable society can
function to help unidentified whole chunk of population- it is necessary to identify limited number of persons, who are also part of the society to which the society shall be serving and such identification should not be based on caste, creed, religion etc. The ld AR of the assessee has also relied on the decision of Ahmadabad ITAT in the case of Friends of WWB
India Vs DIT(E) in ITA No. 2076/Ahd/2014 order dated 14/08/2015. The assessees were asked to submit latest audited accounts. These
applicants have submitted audited accounts for the financial year 2014-
15 and 2015-16. These accounts show that these societies have made
project expenses. There are programme activity expenses also. These
societies have income from projects, interest, agriculture inputs and also contribution by self help groups. Prior to finalization regarding granting
registration U/s 12AA and 80G of the Act, these accounts need a close
scrutiny to arrive at a just conclusion. Therefore by considering the totality of the facts and circumstances of the case, we restore the issues
ITA 185 to 190/JP/2016 14 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
regarding granting of registration U/s 12AA and 80G (5) of the Act to the file of the ld. CIT(E) for reconsideration and decide after considering the latest accounts of these societies and case laws relied upon. Accordingly,
the issues under consideration is restore to the file of the ld. CIT(E).
Now we take appeals of two other assessees being ITA No. 187 &
188/JP/2016 and 189 & 190/JP/2016
In all these appeals, the facts are identical as were in ITA No. 185 &
186/JP/2016, therefore, similar findings are also given in these appeals
also as were in ITA No. 185 & 186/JP/2016. Therefore, all the six appeals
of the three different assessees/ trust/societies are also restore to the file
of the ld. CIT(E). Accordingly, these fours appeals of the assessees are also allowed for statistical purposes only.
In the result, all the appeals of the assessees are allowed for statistical purposes only.
Order pronounced in the open court on 03/03/2017. ¼dqy Hkkjr½ ¼Hkkxpan½ (Kul Bharat) (BHAGCHAND) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 03rd March, 2017 *Ranjan
ITA 185 to 190/JP/2016 15 Kranti Mahila Manch & Ors two assessees Vs. CIT(E)
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellants- (i) Kranti Mahila Manch, Laxmangarh.
(ii) Jagrati Mahila Manch,Thanagazi, Alwar. (iii) Chetna Mahila Manch, Pratapgarh. izR;FkhZ@ The Respondent- The CIT(E), Jaipur. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 185 to 190/JP/2016) 6. vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत