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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri Kirit S. Sanghavi Department by: Shri Abhishek Meshram सुनवाई क" तार"ख / Date of Hearing: 25.04.2016 घोषणा क" तार"ख /Date of Pronouncement:10.08.2015 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 21.06.2013 passed by the Director of Income Tax (Exemptions), Mumbai [hereinafter referred to as the “DIT(E)”] relevant to the A.Y. 2014-15 wherein the DIT(E) rejected the application moved by the appellant u/s.12AA(1)(b)(ii) r.w.s. 12A of the Income Tax Act, 1961 ( in short “the Act”).
ITA No.5437/M/13 A.Y. 2014-15
The assessee has raised the following issues:
“1. The Director of Income Tax (Exemption) erred in holding that the applicant trust has mixed charitable and non-charitable / commercial objects viz., establishment of nursing homes, family planning centers etc. thereby rejecting application of the trust for registration u/s.12A of I.T. Act.
2. The Director of Income Tax (Exemption) erred in holding that there is no binding legal obligation on the trustees on applying income / funds of the applicant trust solely for charitable purposes.
The Director of Income Tax (Exemption) erred in holding that setting up nursing homes or family planning centers for needy members of society or providing mediclaim insurance will not fall in the head of medical relief so as to constitute charitable purpose and giving assistant to needy for residential accommodation etc., is housing finance activity which will not be covered under the charitable head of relief of poor because the needy may not necessarily be poor.
4. The Director of Income Tax (Exemption) erred in holding that the trust was partly for non-charitable / commercial objects.
5. The Director of Income Tax (Exemption) erred in holding that: a. Giving prizes to students of Shree Vile Parle Ghoghari Visha Shreemali Jain Samaj who excelled in education as well as Dharmik exams conducted in Mumbai and b. To given prizes to the residents of Vile Parle belonging to Shree Vile Parle Ghoghari Visha Shreemali Jain Samaj for ‘Tapscharya’ according to Jain religion, are for the benefit of a particular religious community or cast.
6. The Director of Income Tax (Exemption) erred in holding that the benefit of a particular religious A.Y. 2014-15 community or cast is in breach of section 13(1)(b) of the I.T.Act.
7. The Director of Income Tax (Exemption) erred in holding that a trust cannot be for charitable and religious purpose and therefore not entitled for exemption u/s.11 and that the applicant has been 3. The brief facts of the case are that the appellant filed an application for registration u/s.12A of the Act in the prescribed Form No.10A on 21.12.2012. The trust has been constituted by a Trust Deed dated 23.05.2012. It was registered with the Charity Commissioner, Mumbai on 23.11.2012. After the submission of an application, DIT(E) issued the notice to the appellant and find the object of the trust as mixed charitable and non-charitable / commercial and religious objects therefore, the said application has been rejected. Thereafter the appellant has filed the present appeal before us.
We have heard the arguments advanced by the learned representative of the parties and perused the record. The learned representative has argued that the authority considered the object 1(b), 1(i), 3(a), 3(b), 3(e), 3(i) and 3(j) as commercial, therefore, the authority has rejected the present application. It is argued that the above said objects leads to the establishment of nursing home, family planning centres, provision of mediclaim insurance at subsidised rates, giving business advances to the needy for enabling them to be self reliable / employed, giving assistance to the needy towards their maintenance for wedding or providing residential A.Y. 2014-15 accommodation, adoption of villages for development of rural areas, provision of accommodation and lodging and boarding facilities etc. which nowhere denotes the trade, commerce and business activities therefore the authority has rejected the application wrongly and illegally. It is also argued that the clause 9 of the object speaks about the absolute discretion to apply it’s income on any object which is not wrong because clause 9 gives discretion to the trustee only to suggest any of the object of the trust and no income is require to be expended beyond the object of the trust, therefore the assessing authority, has wrongly declined the exemption.
The other ground which has been taken by the assessing authority to reject the application is that the object as mentioned in the clause 13(1)b of the Act speaks about the benefit of any particular religious community or caste which does not come within the definition of trade, business and commerce, therefore, the assessing authority has wrongly declined the application. He also place reliance on the law settled in [2015] 54 taxmann.com 143 (Pune-Trib.) in the ITAT Pune Bench in case of Kul Foundation Vs. Commercial of Income Tax – 1, Pune.
However, on the other hand the learned representative of the department has relied upon the finding of DIT(E) on record. The trust deed on the file speaks about the object of the trust. The specific provision which have been considered by the authority is liable to be scribed before discussion. A.Y. 2014-15 “1(b). To establish, to maintain or assist public health centres, nursing homes, family planning centres and / or a hospitals with a view 1(i). To provide mediclaim insurance at subsidized rates either in part or full.
3(a). To set up or give grant to Orphanages, old age home.
3(b). To give assistance to widows, orphans, aged, disabled, needy or handicapped for their educational and business advances for enabling them to be self reliable / employed.
3(e). To adopt villages for the development of the rural areas of the country.
3(i). To give prizes to the students of the Shri Vile Parle Ghoghari Visha Shrimali Jain Samaj, who have excelled in education as well as dharmik exams conducted in Mumbai.
3(j). To give prizes to the residents of Vile Parle in Mumbai and who belongs to Shri Vile Parle Ghoghari Visha Srimali Jain Samaj, for Tapascharya done according to Jain Religion and as approved by Board of Trustees.”
On appraisal of the above mentioned objects we found nowhere commercial in nature. So far as the clause 9 of the Act is concerned it speaks about the discretion of the trustees only to select any object of the trust. The trustees have no discretion to apply the income outside the object A.Y. 2014-15 which is not within the scope of trust. No doubt this clause speaks about the discretion to use their discretion in connection with the object of the trust. The other ground which has been considered for the rejection has been mentioned in clause 13(1)(b) of the Act which speaks as under:
“(3)(i). To give prizes to the student of Shri Vile Parle Visha Shrimali Jain Samaj, who have excelled in education as well as dharmik exams conducted in Mumbai.
3(j). To give prizes to the residents of Vile Parle in Mumbai and who belong to Shri Vile Parle Ghoghari Visha Srimali Jain Samaj, for Tapascharya done according to Jain religion and as approved by Board of Trustees.”
The said object has yet to be achieved and since the object has yet to be achieved the purpose of the trust has not been fulfilled. In support of these contentions the representative of the assessee has placed reliance on the finding held in [2015] 54 taxmann.com 143 (Pune-Trib.) in the ITAT Pune Bench in case of Kul Foundation Vs. Commercial of Income Tax – 1, Pune on similar facts. The para 16 of the said order has been discussed as under:-
At the time of grant of registration, the powers of the CIT enshrined under section 12AA of the Act, provided that the CIT is to look into the objects of the Trust and the genuineness of its activities. Merely because, one of the objects of the Trust was for the benefit of upliftment of the Jain community as against the pre-dominant object of providing education by the Trust or the Institution, the issue arises A.Y. 2014-15 whether the grant of registration under section 12AA of the Act could be denied to the assessee. We find no merit in the order of CIT in observing that the said benefit being provided to the Jain community would attract the provisions of section 13(1)(b) of the Act and the assessee therein would not be entitled to the claim of deduction under sections 11 and 12 of the Act and consequently, there was no merit in allowing the registration under section 12A of the Act. The allowability of the deduction under sections 11 and 12 of the Act is to be looked into by the Assessing Officer while completing the assessment in the hands of the assessee at the relevant time. Whether the said deduction under sections 11 and 12 of the Act is allowable or not to the Trust or the Institution by way of non-fulfillment of the conditions laid down in section 13(1)(b) of the Act is to be considered by the Assessing Officer while completing assessment in the hand of the assessing Trust or Institution. But the said violation by the Trust or Institution on account of provisions of section 13(1)(b) of the Act, if any, are not to be considered by the CIT while granting registration under section 12A of the Act.
It is to be seen whether in view of the above said objects the application moved by the trust is liable to be rejected or not. This controversy can be looked into at the time of assessment. It is liable to be considered whether the assessee is entitled for the exemption u/s.12A of the Act or not. In brief the allowability of the deduction u/s.11 and 12 of the Act is to be looked into by the Assessing Officer while completing the assessment in the hand of the assessee at the relevant time. The said A.Y. 2014-15 violation of the trust if any on account of provision u/s.13(1)(b) of the Act are not required to be considered by the authority while granting registration u/s.12A of the Act. In view of the said circumstances we are of the view that the rejection of the application of the assessee is wrong and against the law and facts, therefore, the order passed by the authority in question is ordered to be set aside. We direct the concerned authority to re-examine the matter afresh and to decide the same in view of the observation made above by giving an opportunity of being heard to the assessee in accordance with law.
In the result the appeal filed by the assessee is hereby allowed.
Order pronounced in the open court on 10th August, 2016. (D.KARUNAKARA RAO) (AMARJIT SINGH) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 10th August, 2016 MP MP MP MP