Income Tax Appellate Tribunal - Pune
World Institute Of Sustainable ... vs Department Of Income Tax on 26 June, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "B", PUNE
BEFORE: SHRI R.K. PANDA, ACCOUNTANT MEMBER
AND
SHRI VIKAS AWASTHY, JUDICIAL MEMBER
ITA Nos. 04 & 05/PN/2014
Assessment Years : 2004-05 & 2005-06
Dy. Commissioner of Income Tax, World Institute of Sustainable
Circle - 7, Pune Energy,
"Surya Suman", 49 Hindustan
Vs.
Estates, Road No. 2, Kalyani
Nagar, Pune-411006
(Appellant) (Respondent)
PAN No. AAATW0727A
Assessee By: Shri Nikhil Pathak
Revenue By: Shri B.C. Malakar
Date of hearing : 11-06-2015
Date of pronouncement : 26-06-2015
ORDER
PER VIKAS AWASTHY, JM:-
The appeals have been filed by the Revenue impugning the order of Commissioner of Income Tax (Appeals)-III, Pune dated 18-10-2013 common for the assessment years 2004-05 and 2005-06. In both the appeals, the Revenue has challenged the findings of Commissioner of Income Tax (Appeals) in holding the assessee as charitable institute and eligible for exemption u/s. 11 of the Income Tax Act, 1961 (hereinafter referred to as "the Act").
2. The brief facts of the case as emanating from records are: The assessee is a Trust registered under the Societies Registration Act, 1860. The assessee is also registered under the Bombay Public Trust Act, 1950. The assessee has been formed with the primary object of 2 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 providing training in Sustainable Energy and Conservation of Energy. The main objects as listed in Memorandum of Association of the assessee are:
• To conduct short-term and long-term academic and other training programmes in furtherance of the futuristic human resource needs of the emerging sustainable energy, sustainable development and energy conservation sectors.
• To be a premier outreach centre for communications, information and knowledge transfer in the fields of sustainable energy, sustainable development and energy conservation.
• To function as an apex policy think tank, policy advocacy centre and consultancy provider in the field of sustainable energy and energy conservation.
• To take up technical and other research in selected and specialized areas of vital importance for augmenting and accelerating sustainable development in a holistic manner, for a transition to a cleaner and greener world.
• To establish, maintain and operate libraries, laboratories and prototype training centres and hold seminars and training programmes in concordance and furtherance to these objectives.
3. The assessee was granted registration u/s. 12A on 05-03-2004. The assessee was also granted approval for benefit of section 80G of the Act on 13-10-2005. Thereafter, the registration of the society u/s. 12A was withdrawn by the Department on 30-03-2011. The assessee filed appeal against the said order. The Tribunal in ITA No. 930/PN/2011 set aside the order of Commissioner of Income Tax cancelling registration and restored the registration of the assessee u/s. 12A vide order dated 28-02-2013. Now, in the impugned assessment years the Assessing Officer has held that the assessee is not eligible for exemption u/s. 11 of the Act. The Assessing Officer refused to grant exemption to the assessee primarily on four grounds:
i. The assessee has not carried out any charitable activities;3
ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 ii. The operations of the assessee extend to foreign countries (Abroad);
iii. The trustees are the Directors of major windmill manufacturing companies, from which the assessee has purchased windmills; and iv. The salary paid to Shri G.M. Pillai, Director General of assessee is excessive.
Aggrieved by the assessment orders for the respective assessment years, the assessee preferred appeals before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) accepted the appeals of the assessee and held that the assessee is eligible for benefit of section 11 of the Act. Against the order of Commissioner of Income Tax (Appeals), the Revenue has filed appeals for both assessment years 2004-05 and 2005-06 before the Tribunal.
4. Shri B.C. Malakar appearing on behalf of the Revenue vehemently supporting the assessment order submitted, that the assessee in Clause 3 of the Memorandum of Association has categorically mentioned that the scope of work of assessee extends to Abroad. The ld. DR further submitted that the assessee is not carrying out any educational activities. The assessee is neither recognized nor registered with any Board or University. The assessee has not been able to show any charitable activity carried out during the period under appeals. The ld. DR prayed for setting aside the impugned order.
5. On the other hand Shri Nikhil Pathak appearing on behalf of the assessee submitted that the objects of the assessee are partly educational and partly for advancement of objects of general public utility. The assessee is creating awareness and educating people 4 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 towards environment protection and conservation of energy. 'Charitable purpose' as defined u/s. 2(15) includes preservation of environment. The ld. AR submitted that the assessee was registered under the Societies Registration Act, 1860 on 18-12-2003 and under the Bombay Public Trust Act, 1950 on 23-04-2004. The assessee was granted registration u/s. 12A of the Act on 05-03-2004 and the benefit of section 80G w.e.f. 13-10-2005. The assessee has conducted training programmes in furtherance of the futuristic human resource needs of sustainable energy, sustainable development and energy conservation. The assessee is involved in research for a transition to a cleaner and greener world. To achieve its objects the assessee has purchased four Wind Turbine Generators by investing its entire corpus and borrowings from the banks. The assessee is publishing a Bi-monthly newsletter "Green Energy", which is the only holistic publication on Sustainable Energy in India. The said publication is distributed free of cost. The assessee is organizing seminars and short duration training programmes for creating awareness in Sustainable Energy and Conservation of Energy. The ld. AR further contended that the Governing Council of the assessee appointed Shri G.M. Pillai, I.A.S. (Retd.) as the Director General. He had wide exposure and experience in the field of Energy Development and Conservation. He has represented India at United Nations Development Plan. The ld. AR vehemently supported the orders of Commissioner of Income Tax (Appeals) and prayed for dismissing the appeals of the Revenue. In support of his submissions the ld. AR placed reliance on the decision rendered in the case of Dr. D.Y. Patil Pratisthan Vs. DCIT reported as 154 TTJ 320 (Pune).
6. We have heard the submissions made by the representatives of both the sides and have perused the orders of the authorities below. The 5 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 Revenue in its appeals for assessment years 2004-05 and 2005-06 have impugned the orders of First Appellate Authority in holding the assessee eligible for claiming exemption u/s. 11 of the Act. The Assessing Officer has denied exemption to the assessee primarily on four grounds:
i. The assessee has not carried out any charitable activities since its inception;
ii. The activities of the assessee extend to foreign countries (Abroad);
iii. The trustees of the assessee are Directors of windmill manufacturing companies from which the assessee has purchased windmills. Thus, the trustees are substantially interested in the said companies and serving the cause of the said companies; and iv. The salaries/perquisites of Shri G.M. Pillai, Director General of assessee trust are highly excessive.
7. The ld. Commissioner of Income Tax (Appeals) in a detailed and well reasoned order has dealt with all these issues in an exhaustive manner. The Assessing Officer in the first instance has raised question over the charitable activities being carried out by the assessee. Earlier, the Commissioner of Income Tax had invoked the provisions of section 12AA(3) and had cancelled registration granted to the assessee. The Commissioner of Income Tax cancelled the registration on the ground that the activities of the trust are not genuine and that they are not in accordance with the objects of the trust and provisions of section 13(1)(c) of the Act. The assessee challenged the order of Commissioner of Income Tax before the Tribunal in ITA No. 930/PN/2011. The Tribunal after appreciating the documents on record, vide order dated 28-02-2013 set aside the order of Commissioner of Income Tax and restored the registration of the trust. Now, again raising question over the charitable activities of the assessee, is not tenable. The Commissioner of Income 6 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 Tax (Appeals) while rejecting the first ground for denying exemption u/s. 11 held as under:
"4.3.6. In the face of such irrefutable evidences that the Assessing Officer had before him but chose to ignore, I therefore, find myself unable to be persuaded by the Assessing Officer's objection that no charitable activities have been carried out. The word 'charity' is undoubtedly of the widest import. A charitable organization encompasses a company formed under section 25 of the Companies Act or a society formed under Society Registration Act, 1860 or any Stale Act for Registration of Societies. A charitable trust should have public character in the sense that its activities, while not reaching out to humanity as a whole, are available to a cross section of the public. At the same time, charity need not be confined to the poor. The philanthropic purpose of serving the poor is better served, when its facilities are made available or put to use for earning income from well to do patients. What is barred is private profit as held by the Supreme Court in P.C. Raja Ratnam Institution vs MCD 181 ITR 354. There are also a catena of decisions in which varied objects of general public utility and not merely education or medical relief, per se, have been held to be of "charitable nature", which are enumerated as under;
(i) monitoring agricultural produce [CIT vs Agricultural Produce and Marketing Committee 291 ITR 419 Bombay]
(ii) legal awareness [CIT vs Andhra Chamber of Commerce 55 ITR 722 SC]
(iii) promotion of diamond bourse [DIT vs Bharat Diamaond Bourse 259 ITR 280 SC]
(iv) yoga training [CIT vs Rajneesh Foundation 200 ITR 553 Bombay]
(v) educating public in safety [DIT(Exemptions) vs National Safety Council 305 ITR 257 Bombay] 4.3.7. Therefore, in my humble opinion, though the Assessing Officer has acknowledged that the appellant has carried out activities related to the consultancy, public awareness and research in the field of renewable energy, his view that such activities were not of general public utility, is not a correct view. In arriving in this conclusion, I am supported by the decision of the Pune Bench of the ITAT in ITA No. 930/PN/2011, wherein the various activities carried out by the appellate in the field of education training, public awareness, policy advocacy and research in the cause of sustainable development and environmental protection have been discussed and in the absence of the any specific negative finding by the Commissioner of Income Tax-IV, Pune, it has been held that his action in 7 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 cancelling the registration granted to the appellant trust u/s 12A(a) by invoking the provision of sec. 12AA(3) of the IT Act was not justified. In the ultimate, the ITAT has restored the registration of the trust that was originally granted on 05.03.2004."
8. The second ground for rejecting the exemption by the Assessing Officer is, the activities of the assessee extend beyond Indian geographical boundaries. The Revenue has not been able to show that the assessee has carried out any of its activities abroad. One of the essential conditions for claiming benefit of exemption u/s. 11 is that the activities have to be carried out by the trust in India. In case the charitable activities of the assessee are beyond India territory, the assessee will not be eligible for the benefit of section 11. The Commissioner of Income Tax (Appeals) in his orders has observed that there is no material on record to show that the activities of the assessee extend outside India. The findings of the Commissioner of Income Tax (Appeals) on this issue are as under:
"4.3.10. Therefore, this objection of the Assessing Officer that the situs of the trust shows that the essential condition regarding application of income within India only, is not fulfilled, is seen to be based on only presuppositions and surmises without any reference to any concrete facts. There is no material that has been brought on record by him to show that the appellant was carrying out any activity outside India or that the corpus of the appellant was located outside India. This view is also contrary to the legal view that so long as the income derived from property has been applied for charitable or religious purposes in India, a charitable origination is not prohibited from incurring expenditure outside India."
9. The third ground for denying exemption u/s. 11 to the assessee by Assessing Officer is, the trustees are the Directors of the companies from which the assessee has purchased windmills. Thus, the trustees of the assessee trust have substantial interest in the companies manufacturing 8 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 windmills. The Commissioner of Income Tax (Appeals) discarded these findings of the Assessing Officer with following observations:
"4.3.16. In the present case, it is not denied that substantial donations have been received from the companies namely the windmills manufacturers M/s Suzlon Energy Ltd. and M/s Enercon India Ltd., both towards the corpus fund as well as by way of other donations during the impugned F.Y. It is also not denied that the directors of these companies are members of the appellant society. However, having established that these persons are persons covered under sec, 13(3), the Assessing Officer had necessarily to establish that any part of the income or the property of the institution has been used or applied directly or indirectly for the benefit of such person. The specific mode of infringement of the conditionalities ate prescribed u/s 13(2) so as to make the general provision of sec. 13(1)(c) more specific. In the present case, the Assessing Officer mentioned that the windmills costing Rs.17,40,00,390/- have been purchased from companies in which the trustees are substantially interested but he has not brought any clinching or corroborative evidences on record to show that the income of the society has boon used or applied for the benefit of persons covered u/s 13(3). The Assessing Officer, as the Courts have held, has to bring on record the adequate materials which can establish that the payments made are excessive or undue to give benefit to the person covered u/s 13(3). The Assessing Officer has failed to do so in this proceeding and therefore, his finding in respect of payments made to the companies in which the trustees are substantially interested cannot be upheld in the facts of the case and the law. If the contentions of the Assessing Officer are carefully considered in an unbiased manner, it is not difficult to see that the Assessing Officer has drawn his contentions or arguments mostly on assumptions that Suzlon and Enercon being life members of the trust must have derived undue benefit from the income of the trust. However, when the question of denying the benefit or exemption u/s. 11 to the trust arises, the decision cannot be taken on such assumptions or possibilities. Hard facts and evidences have to be brought on record by the Assessing Officer before invoking sec. 13(1)(c) for denying the benefit of sec. 11. More so when courts are of the opinion that the onus to invoke the exception contained in section 13(1)(c) is on revenue. For the discussions made above and in the law which demands the Assessing Officer to discharge the onus of application of sec. 13(1)(c) for denying the benefit of sec. 11, it has to be held that in the face of the fact that no evidences have been brought on record by the Assessing Officer to hold the payment to Suzlon and Enercon as undue or excessive, the finding that there is some infringement of sec. 13(1)(c) is erroneous. The 9 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 Assessing Officer has failed to bring on record adequate materials which can support his findings."
10. The last and fourth ground for refusing to grant exemption u/s. 11 by Assessing Officer is, excessive remuneration/perquisites paid to Shri G.M. Pillai, Director General of the assessee. Undisputedly, Shri G.M. Pillai is an employee of the assessee trust and not its trustee. Therefore, the provisions of section 13(2)(c) are not attracted. The Commissioner of Income Tax (Appeals) after ascertaining the facts has observed as under:
"4.3.18. I have considered the submissions made and find myself unable to accept the conclusion drawn by the Assessing Officer on this aspect of the matter. In the first place, the Director General is a professional who has been hired by the appellant to manage the affairs of the trust. He is an employee of the trust and not a trustee. His previous credentials are impeccable, since it is seen from the record that he has not only administrative experience of nearly 30 years in the government but has also worked in the area of sustainable energy and development. The objection of the Assessing Officer therefore that, the salary paid to him in his excess of the normal salary paid lo office bearers of other charitable institutions in not factually and legally sustainable. The Assessing Officer has also drawn an inference that the level of salary paid to the Director General shows that the appellant is a professionally managed institute and his therefore not of charitable nature. This inference is also seen to have no basis. There is no bar under the law that charitable trust or institutions should not be efficiently or professionally managed. So long as the institution is not engaged in making private profit or its income has not been diverted for the benefit of interested persons, there is no reason to deny an assessee the benefit of sec. 11, so long as the other statutory provisions are satisfied. Therefore, the Assessing Officer's contentions that the salary and remuneration paid to. the Director General is more than what should have been paid is held to have no basis and cannot be sustained."
11. We concur with the findings of the Commissioner of Income Tax (Appeals). The Revenue has not been able to controvert the well reasoned observations of the Commissioner of Income Tax (Appeals) in rejecting the findings of Assessing Officer. Thus, we find no merit in the 10 ITA Nos. 04 & 05/PN/2014, A.Ys. 2004-05 & 2005-06 appeal of the Revenue. The impugned order is confirmed and the appeals of the Revenue are dismissed.
Order pronounced on Friday, the 26th day of June, 2015 at Pune Sd/- Sd/-
(R.K. PANDA) (VIKAS AWASTHY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Pune, Dated: 26th June, 2015
RK/PS
Copy to
1 Assessee
2 Department
3 The CIT(A)-III, Pune
4 The CIT-IV, Pune
5 The DR, ITAT, "B" Bench, Pune.
6 Guard file.
//True Copy//
By Order
Private Secretary,
Income Tax Appellate Tribunal,
Pune