CORCON INSITUTE OF CORROSION,MUMBAI vs. CIT (E), MUMBAI

Instant appeal by the assessee is directed against the order dated 30th June 2015, passed by the learned Commissioner (Exemption), Mumbai, rejecting assessee’s application for registration under section 12A of the Income Tax Act, 1961 (for short "the Act").

2 Corcon Institute of Corrosion Mumbai, on 31st March 2014. The assessee claiming itself to be a charitable trust applied for registration under section 12A of the Act before the learned Commissioner (Exemp.), Mumbai, in the prescribed manner on 4th December 2014. The learned Commissioner (Exemp.), after receiving the application for registration filed by the assessee called for various details and documents and after verifying the information / documents submitted by the assessee, the learned Commissioner (Exemp.) referring to certain clauses of the Memorandum of Association of the assessee company was of the view that they are of commercial nature. He, therefore, called upon the assessee to justify its claim for registration under section 12A, as a charitable trust. Further, the learned Commissioner (Exemp.) called upon the assessee to explain, as the activities of the company are exclusively related to corrosion why it should not be treated as general public utility trust. In reply to the query raised by the learned Commissioner (Exemp.), the assessee submitted a detailed reply stating therein that the main as well as ancillary objects of the company is to promote awareness relating to corrosion which causes loss of 3% to 4% of the country’s GDP annually. It was submitted, the assessee is a totally non–profit company and as per the objects of the company there is no personal benefit to any of the members of the company and the income and property of the company is to be applied

3 Corcon Institute of Corrosion solely for promoting objects of the company. It was submitted, primary aim of the company is to educate people relating to need for controlling corrosion for ensuring human safety preserving assets and environment. Therefore, the nature of activities to be carried on by the assessee company is in the nature of education and preservation of environment, hence, comes within the definition of “charitable purpose” as provided under section 2(15) of the Act. The learned Commissioner (Exemp.), after considering the submissions of the assessee, however, was of the view that the activities proposed to be carried out by the company are of commercial nature. He further observed, all the directors of the company are part of entities which are exclusively dealing in corrosion related service. He observed, the claim of the company that it will hire experts for giving lectures and conducting workshop to industries and related persons clearly indicates the commercial nature of the activities. He further observed, the objects of the company are only a mask or a device to hide the true purpose which is rendering service in relation to the target industry. Thus, according to the learned Commissioner (Exemp.), the company is formed to further the business interest of the companies in which the members have substantial interests. On the basis of the aforesaid observations, the learned Commissioner (Exemp.) passed

4 Corcon Institute of Corrosion the impugned order rejecting assessee’s application for grant of registration under section 12A.

5 Corcon Institute of Corrosion endangered by the impact of corrosion. The learned Authorised Representative submitted, though, the assessee has replied to each of the query raised by the learned Commissioner (Exemp.) in relation to the objects of the company by filling an affidavit, however, the learned Commissioner (Exemp.) without properly considering the submissions of the assessee had arbitrarily rejected assessee’s application for grant of registration by surmising that the activities of the assessee are of commercial nature and for the benefit of the parent companies of the members. The learned Authorised Representative submitted, one of the directors of the assessee company Shri Samir Degan, is also the chairman of NACE International India and Vice President of NACE International which is working in the field of preventing corrosion and promoting awareness relating to the impact of corrosion on un– environment. He submitted, considering the loss caused to GDP, due to corrosion, the Government of India in Department of Chemicals and Petrochemical (DCPC) decided to establish national mission on corrosion technologies and standards and in this context, several meetings were held under the chairmanship of Secretary, DCPC, wherein several other Government and Semi–Government officials educationists also participated and Dr. Samir Degan in his capacity as Vice President of NACE International made a representation on the impact of corrosion on environment and the efforts made by NACE on 6 Corcon Institute of Corrosion corrosion control technologies. In this context, he referred to the minutes of meeting held under the Chairmanship of Secretary, DCPC, on 11th May 2015. He also referred to study undertaken by NACE International as well as various other documents on the issue of corrosion and its impacts on environment. However, learned counsel fairly submitted that these documents were not filed before the learned Commissioner (Exemp.), hence, sought to produce them as additional evidence application made under rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. He submitted, as these documents sought to be produced by way of additional evidence have a crucial bearing on the issue relating to the nature of activities carried on by the assessee they may be admitted as additional evidence. Learned Authorised Representative submitted, in course of proceedings before him, the learned Commissioner (Exemp.) had only asked the assessee to explain on certain object clauses in the memorandum of association and had never expressed any doubt with regard to the nature of activity carried on by the assessee whether charitable or commercial. He, therefore, submitted, the rejection of assessee’s application for grant of registration under section 12A of the act, should be set aside.

7 Corcon Institute of Corrosion

8 Corcon Institute of Corrosion activities. He also has accepted that loss due to corrosion to the national GDP is 3% to 4%. However, he has treated the objects of the assessee or the activities to be undertaken to be of commercial nature. In our view, the observations of the learned Commissioner (Exemp.) are general in nature considering the fact that he has not established on record that the assessee company has been created as a façade to promote the business activities of any other concern / entity. Moreover, before us, the assessee has filed certain documents by way of additional evidence to demonstrate that the object to encourage and promote prevention of corrosion is in the nature of charitable purpose as it is to protect the environment. As these documentary evidences, in our view, will have a bearing on the issue whether activities of the assessee is charitable or not, we admit them as additional evidence. However, considering the fact that these documentary evidences were not filed before the learned Commissioner (Exemp.), when he passed the impugned order, we consider it appropriate to restore the matter back to the file of the learned Commissioner (Exemp.) for deciding the issue relating to assessee’s application for grant of registration under section 12A denovo after considering all material and evidence brought on record including the additional evidences filed before us. It is open for the assessee to justify its claim by making submissions in its support along

9 Corcon Institute of Corrosion with any other supporting evidence which might be relevant to the issue. Further, it is open for the assessee to rely upon the judicial precedents which, according to the assessee, may have impact on deciding the issue one way or the other. The learned Commissioner (Exemp.) should provide adequate opportunity of hearing to the assessee and decide the issue after considering the submissions made by the assessee as well as the documentary evidences available on record and of–course after due consideration of judicial precedents which the assessee may rely upon. Grounds raised by the assessee are allowed for statistical purposes.