Income Tax Appellate Tribunal - Jaipur
Shree Jain Samiti, Jaipur vs Cit(Exemptions), Jaipur on 12 November, 2018
vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
Jh fot; iky jkWo] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k
BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 1008/JP/2018
Shree Jain Samiti, cuke The CIT (Exemptions)
Plot No. 2, Behind Maheshwari Bhawan, Vs. Jaipur.
Jhalawar Road,
Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No. AALTS 3417 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal (CA)
jktLo dh vksj ls@ Revenue by: Shri Varinder Mehta (CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 06.11.2018.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 12/11/2018.
vkns'k@ ORDER
PER VIJAY PAL RAO, JM :
This appeal by the assessee is directed against the order dated 15.06.2018 passed by the ld. CIT (Exemptions) under section 12AA(1)(b) read with section 254 of the IT Act. The assessee has raised the following grounds as under :-
" 1. The order passed by ld. CIT (E) on 15.06.2018/27.06.2018 in pursuance to the direction of Hon'ble ITAT order dt. 10.02.2017 is illegal & bad in law as barred by limitation.
1.1. The order passed by ld. CIT (E) on 15.06.2018/27.06.2018 after the conclusion of hearing on 07.11.2017 and without providing any opportunity thereafter to the assessee and without following the direction of Hon'ble ITAT is illegal & bad in law.
2. The learned Commissioner of Income Tax has erred on facts and in law in rejecting the application of assessee for grant of registration u/s 12AA of Income Tax Act, 1961 by holding that the activities of the samiti are not charitable within the meaning 2 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
of section 2(15) of the Act as it is predominantly carrying out business on commercial basis.
3. The assessee craves to amend, alter and modify any of the grounds of appeal.
4. Necessary cost be allowed to the assessee."
2. This is the second round of appeal as the assessee challenged the rejection of registration under section 12A vide order dated 15.09.2016 passed by the ld. CIT (Exemptions) and the Tribunal vide order dated 10th February, 2017 remanded the matter to the record of the ld. CIT (Exemptions) for deciding the same afresh in the light of the decisions referred in the said order. The relevant observations and directions of the Tribunal are in para 5 and 5.1 are as under :-
5. We have heard the rival contentions of both the parties, perused the material available on the record and gone through the orders of the authorities below. The ld. CIT (E) rejected the application on the basis that the only activity which the assessee had carried out was letting out community hall. The claim of the applicant that the funds generated from the community hall used for construction/development work is not relevant after the amendment made U/s 2 (15) W.e.f. 01/04/2009 and subsequent amendment w.e.f. 01/4/2016.
5.1. It is a settled position of law, that at the time of considering application for Registration Under Section 12AA of the Act. The Ld. CIT is required to enquire about the genuineness of the activity of the assessee. We find that Ld. CIT has given a finding that one of the object of the assessee is that to give community hall to the people, for conducting meeting and other ceremony function. This object was only carried out by the assessee. Despite, having 3 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
other objects, the Ld. Counsel submitted that the issue is covered by the decision of the co-ordinate bench rendered in the case of Assistant Commissioner of Income Tax Vs. M/s. Shri Panchyati Dharamshala ITA No. 809/JP/2013. The co-ordinate bench after consider the objective of giving facility of the Dharmshala to the public at the nominal subsidized rate, held that there was no profit motive in that case. That the dominant motive in that case was not earning profit but to do charity, in the form of public service by providing accommodation to the common man at affordable rates. Further, reliance is placed upon the judgment of the Hon. Gujarat High Court rendered in the case of CIT Vs. Paramhans Ashram Trust wherein the hon'ble Court has held as under:
"4.The Similar reference was made by the Revenue for opinion of the Court pertaining to the asst. yrs 1970-71, 1971-72, 1976-77 and 1977- 78 between the same parties. The reference has been answered by this court in case title CIT vs. Paramhans Ashram Trust (1993) 113 CTR (Raj) 433 : (1993) 203 ITR 711 (Raj). Dealing with the same issue, the Division Bench of this court held as under :
" In order to appreciate the arguments of learned counsel for the Revenue, it has to be seen as to whether the trust is a private trust or a public charitable trust. Normally, in a private trust, the beneficial interest is vested in one or more individuals whereas a public or charitable trust, on the other hand, has objects by which the public at large is benefited. The beneficiaries are capable of being ascertained in the private trust while the charitable purpose has been defined to include relief of the poor, education, medical relief and advancement of any other object of general public utility not involving the carrying on of any activity for profit. According to the main objects, the maintenance of the existing Dharmashalas, help of Agarwals and other widows and children, feeding of medicamts and construction of new Dharmashalas and school, and help of the destitute cannot be said to be restricted in respect of a particular individual or groups of them. The use of the words object of general public utility can be interpreted to cover such trust where the intention is to give the benefit to sizeable numbers of the public in contrast to an individual or group of individuals. The expenses in constructing new Dharamashalas were considered as advancement of the charitable object of the trust which was held entitled to exemption under s. 11 of the said Act in the case of Satya Vijay Patel Hindu Dharamshala Trust vs. CIT (1972) 86 ITR 683 (Guj) and this court in Ragunath Das Parihar Dharmshala Vs. CIT (1986) 158 ITR 432 (Raj), has held that the sole purpose of the trust was to run a Dharamshala which is an object of general public 4 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
utility and so when this was the sole object, the income derived therefrom in the shape o the rent from the Dharamshala is exempt under s.11 r/w s. 2(15) of the Act. Similarly, the other objects of help of Agarwal's, widows and children, feeding of mendicants and help of destitutes are of general public utility and the Tribunal has rightly come to the conclusion that the assessee is a public charitable and religious trust and its income in entitled to exemption under s. 11 of the IT Act, 1961''.
5. We also subscribe to the view o the Division Bench (supra) and answer the reference accordingly against the Revenue."
Further, the Ld. Counsel has furnished a comparative statement of tariff of marriage hall at Page 33 of paper book to support the contention that the assessee is provide the facility of the community hall at the subsidized rate which become within the reach of the common men. There is not dispute with regard to the fact that the activity of community hall is essentially of nature of public utility. The assessee is having other objects, which are charitable in nature is not disputed by the Ld. CIT. Under these facts we are unable to affirm the view of the ld. CIT, therefore, the impugned order is set aside and the application seeking registration under section 12AA of the Act is restored to ld. CIT for decision afresh in the light of judgement of Hon'ble Jurisdictional High Court. This ground raised in the appeal is allowed for statistical purpose."
Thus the Tribunal has specifically considered the fact that the activity of community hall is essentially of nature of public utility and consequently the ld. CIT (Exemptions) was directed to decide the matter afresh in the light of decision of Hon'ble Jurisdictional High Court. The ld. A/R of the assessee has submitted that while passing the impugned order, the ld. CIT (Exemptions) has not given effect to the directions given by this Tribunal vide order dated 10th February, 2017 and, therefore, the impugned order is nothing but repetition of the earlier order dated 15.09.2016. He has referred to the various paragraphs of the impugned order as 5 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
well as earlier order and submitted that except the objects of the assessee were reproduced under para 11 of the impugned order, there is no other change or variation in both the orders despite the specific directions of the Tribunal. The ld. A/R has further contended that the impugned order is otherwise bad in law as it is barred by limitation and passed after more than one year from the date of order of the Tribunal dated 10th February, 2017. Thus the impugned order is invalid and liable to be quashed being barred by limitation as well as being not in conformity with the directions of this Tribunal. In support of his contention, he has relied upon the order of this Tribunal dated 28th September, 2018 in case of Gettwell Health & Education Samiti, Sikar vs. CIT (Exemptions) in ITA No. 245/JP/2016.
3. On the other hand, the ld. D/R has submitted that the ld. CIT (A) has considered all the relevant facts and specifically pointed out that the assessee has not carried out any activity except construction of community hall and leasing out/hiring of the same to earn the income. Therefore, the activity carried out by the assessee is nothing but commercial activity with the motive to earn the profit. There is no other charitable activity conducted by the assessee though there are as many as 16 objects of the assessee as per the object clause of the Memorandum of the Society. Thus the ld. D/R has contended that once the activity of the assessee is carried out with the motive to earn the income from hiring of the community hall, then the proviso to section 2(15) of the Act is applicable in the case of the assessee and consequently the assessee cannot be treated as charitable institution. He has supported the impugned order of the ld. CIT (Exemptions).
4. We have considered the rival submissions as well as the relevant material on record. As we have already reproduced the relevant part of the order of the 6 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
Tribunal whereby the matter was set aside to the record of the ld. CIT (Exemptions) with the specific direction to decide the issue afresh in the light of the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Paramhans Ashram Trust, 315 ITR 220 (Raj.). We find that the ld. CIT (Exemptions) has repeated its finding while rejecting the application of the assessee without even considering or discussing the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs. Paramhans Ashram Trust (supra). Further, the Tribunal has also observed in the order dated 10th February, 2017 that the assessee has carried out only one activity of community hall which is essentially of nature of public utility and the other objects are though charitable in nature and were not disputed by the ld. CIT (Exemptions). Therefore, the matter was set aside for taking a fresh decision on the part of the ld. CIT (Exemptions) and hence the fresh order was to be passed as per law including the period of limitation provided for passing the order under section 12AA of the Act. At the outset, we note that an identical issue was considered by this Tribunal in the case of Gettwell Health & Education Samiti vs. CIT (Exemptions) (supra) in para 10 & 11 as under :-
"10. Before parting with, we also take up the objection raised by the ld. A/R regarding the validity of the impugned order being barred by limitation. There is no dispute that the Tribunal vide order dated 22nd July, 2011 set aside the matter to the record of the ld. CIT (E) for deciding the same after granting an opportunity to the assessee. The ld. CIT (E) was to decide the matter by taking a decision and, therefore, it was not a case of giving only an effect to the order of the Tribunal. Hence, once the ld. CIT (E) has to pass a decision in the set aside proceedings, then the limitation for passing the order/decision 7 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
cannot be more than the limitation provided for deciding the application for registration under section 12AA of the Act. There is no dispute that as per the provisions of section 12AA(2) limitation for granting or refusing the registration is prescribed as before expiry of six months from the end of the month in which the application was received. This issue was initially considered by the Hon'ble Allahabad High Court in the case of Society for the Promotion of Education Adventure Sport & Conservation of Environment vs. CIT, 171 Taxman 113 which was challenged before the Hon'ble Supreme Court by the department and the Hon'ble Supreme Court in 382 ITR 6 has held in para 3 to 6 as under :-
"3. The short issue is with regard to the deemed registration of an application under Section 12AA of the Income Tax Act. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision.
4. The learned Additional Solicitor General appearing for the appellants, has raised an apprehension that in the case of the respondent, since the date of application was of 24.02.2003, at the worst, the same would operate only after six months from the date of the application.
5. We see no basis for such an apprehension since that is the only logical sense in which the Judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application under Section 12AA of the Income Tax Act in the case of the respondent shall take effect from 24.08.2003.
6. Subject to the above clarification and leaving all other questions of law open, the appeal is disposed of with no order as to costs."
Thus the judgment of Hon'ble Allahabad High Court has been upheld by the Hon'ble Supreme Court. The Hon'ble Jurisdictional High Court in the case of CIT vs. Sahitya Sadawart Samiti (supra) has held in para 6 & 7 as under :-
8ITA No. 1008/JP/2018
Shree Jain Samiti, Kota.
"6. Mr. Mahendra Gargieya counsel for the respondent has relied upon the decision of Supreme Court in CIT v. Society for the Promotion of Education [2016] 67 taxmann.com 264/238 Taxman 330/382 ITR 6 (SC) wherein speaking for the bench Supreme Court has observed as under:--
"The short issue is with regard to the deemed registration of an application Under Section 12AA of the Income Tax Act. The High Court has taken the view that once an application is made under the said provision and in case the same is not responded to within six months, it would be taken that the application is registered under the provision.
The learned Additional Solicitor General appearing for the Appellants, has raised an apprehension that in the case of the Respondent, since the date of application was of 24.02.2003, at the worst, the same would operate only after six months from the date of the application.
We see no basis for such an apprehension since that is the only logical sense in which the judgment could be understood. Therefore, in order to disabuse any apprehension, we make it clear that the registration of the application Under Section 12AA of the Income Tax Act in the case of the Respondent shall take effect from 24.08.2003.
Subject to the above clarification and leaving all other questions of law open, the appeal is disposed of with no order as to costs."
7. The view taken by the tribunal is very clear that the registration will take effect from the date of application. In our considered opinion, in view of the observation made by the Tribunal, the registration will be granted from 30.5.2002. The issue is answered in favour of the assessee.
Though all these decisions are in respect of the order passed by the ld. CIT (E) on the application filed for the registration under section 12AA, however, once the limitation prescribed under section 12AA is expired and the consequential default on the part of the ld. CIT (E) in deciding the application would result deemed grant of registration is settled by various courts including the Hon'ble Supreme Court then the order to be passed by the ld. CIT (E) even in set aside proceedings is governed by the limitation prescribed under section 12AA(2) of the Act. It is pertinent to note that in the set aside proceedings no authority can get 9 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
more time than the time limit prescribed for the original order passed by the said authority when decision is required to be taken in the set aside proceedings. The Lucknow Bench of the Tribunal in the case of Harshit Foundation vs. CIT (supra) while considering an identical issue has held in para 2 to 6 as under :-
"2. When this called out for hearing, Shri Abhinav Mehrotra, learned counsel for the assessee raised a preliminary legal issue. He pointed out that we are at present in second round of proceedings before this Tribunal, and that, in the first round of proceedings, matter was remitted to the file of the learned Commissioner for fresh adjudication on merits. It is also pointed out that even though the Tribunal had passed the order, so remitting the matter to the file of the CIT on 12.12.2008, learned CIT passed the order only on 28.10.2011. This inordinate delay, according to the learned counsel, is contrary to the scheme of things visualized under the law. Our attention was then pointed out to Special Bench decision in case of Bhagwad Swarup Shri Shri Devraha Baba Memorial Shri Hari Parmarth Dham Trust v. CIT [2008] 111 ITD 175/[2007] 17 SOT 281, which is, in principle, approved by Hon'ble Jurisdictional High Court in the case of Society for the Promotion of Education Adventure Sport & Conservation of Environment v. CIT [2008] 171 Taxman 113 (All.). It was thus contended that when a decision is not taken on the request for registration u/s.12AA within a period of six months, the registration is deemed to have been granted. By the same logic, according to the learned counsel, when learned Commissioner does not decide the matter one way or the other within six months even after the matter is restored to him, the registration should be deemed to have been granted. In the present case, learned Commissioner has taken almost three years to dispose of the remanded matter. For this short reason alone, we are urged to grant the registration u/s. 12AA.
3. Learned Departmental Representative does not dispute the factual elements embedded in the above contentions but submits that it will be unrealistic to proceed on this basis due to heavy work load on the Commissioner, and it will seriously affect legitimate interests of revenue. We are thus urged to deal with the matter on merits.
4. In our considered view, plea of the assessee deserves to be accepted in the light of Hon'ble jurisdictional High Court's judgment in the case of Society for the Promotion of Education Adventure Sport & Conservation of Environment (supra), wherein their Lordships have, inter alia, observed as follows:--
"The apex Court has also applied doctrine of purposive interpretation in fiscal statutes that would be evident from its decision in CIT v. Anjum M.H.Ghaswala & Ors. [2001] 171 10 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
CTR (SC) 1 : JT 2001 (9) SC 61. Considering the pros and cons of the two views, we are of the opinion that by far the better interpretation would be to hold that the effect of non- consideration of the application for registration within the time fixed by section 12AA(2) would be a deemed grant of registration. We do not find any good reason to make the assessee suffer because the IT Department is not able to keep its officers under check and control, so as to take timely decisions in such simple matters such as consideration of applications for registration even within the large six month period provided by s. 12AA(2) of the Act.
We accordingly direct the respondents, subject to any order which may be passed under s. 12AA(3), to treat the petitioner society as an institution duly approved and registered under s. 12AA and to recomputed its income by applying the provision of s.11 of the Act. Accordingly, a formal certificate of approval will be issued forthwith to the petitioner by the respondent No.2."
5. Applying the principle so laid down, where Commissioner does not pass any orders even after six months from receipt of Tribunal's order remitting the matter to him. The registration will be deemed to have been granted. Of course, this is subject to exercise of Commissioner's power u/s.12AA(3) in appropriate cases, but the registration will be deemed to have been granted.
6. For the reasons set out above, we uphold the preliminary objection raised by the assessee and direct the Commissioner to issue approval of registration forthwith. In this view of the matter, we see no need to deal with other legal and factual issues raised by the assessee." Thus the Tribunal in the said case has applied the same logic of deemed registration as the matter is not decided within the period of limitation in the set aside proceedings. Even otherwise, no authority can take a liberty for an indefinite period for taking a decision and more so when the authority exercising its power as a quasi judicial authority. Accordingly, when the impugned order was passed after more than four years from the end of the month in which the Tribunal set aside the matter to the record of the ld. CIT (E), then the same is illegal and void abinitio being barred by limitation.
11. Accordingly, by considering the matter on merits as well as on the validity being barred by limitation, we hold that the impugned 11 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.
order is not sustainable and the assessee is eligible for grant of registration. Since the order is passed beyond the limitation period, therefore, it is a deemed registration. Accordingly the registration stands granted under section 12AA of the Act. We direct the ld. CIT (E) to pass an appropriate order granting registration forthwith." Undisputedly, the impugned order was passed by the ld. CIT (Exemptions) beyond the period of 6 months from the receipt of the order of the Tribunal dated 10.02.2017 and, therefore, following the earlier order of this Tribunal as well as various other decisions as referred in the said order, we hold that the impugned order is not sustainable and the assessee is eligible for grant of registration. The impugned order is passed beyond the limitation period, therefore, deemed registration stands granted under section 12AA to the assessee. We accordingly direct the ld. CIT (Exemptions) to pass an appropriate order granting Registration forthwith.
5. In the result, appeal of the assessee is allowed.
Order is pronounced in the open court on 12/11/2018.
Sd/- Sd/-
(foØe flag ;kno) (fot; iky jkWo ½
(VIKRAM SINGH YADAV ) (VIJAY PAL RAO)
ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member
Jaipur
Dated:- 12/11/2018.
Das/
12
ITA No. 1008/JP/2018
Shree Jain Samiti, Kota.
vkns'k dh izfrfyfi vxzfs "kr@Copy of the order forwarded to:
1. The Appellant- Shree Jain Samiti, Kota.
2. The Respondent - The CIT (Exemptions), Jaipur.
3. The CIT(A).
4. The CIT,
5. The DR, ITAT, Jaipur
6. Guard File (ITA No. 1008/JP/2018) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar 13 ITA No. 1008/JP/2018 Shree Jain Samiti, Kota.