Income Tax Appellate Tribunal - Delhi
Sardari Lal Oberai Memorial Charitable ... vs Ito on 29 March, 2005
Equivalent citations: [2005]3SOT229(DELHI)
ORDER
A.D. Jain, J.M. The assessee has raised the following grounds :
"1. That the orders passed by the learned CIT is bad in law as the orders have been passed after the expiry of six months from the end of the month in which the application was filed under section 12A. Date of filing application is 29-10-2001.
2. That the appellant was not allowed reasonable opportunity of being heard as per the provision of section 12A.
3. That the learned CIT, Dehradun has erred by not allowing the appellant trust registration under section 12AA of the Income Tax Act when that said Trust fulfils the criteria laid down under section 12A(a) of the Income Tax Act and it was validly created and its objects are charitable in nature.
4. That there is no violation of the conditions as laid under section 12A of the Income Tax Act."
2. The assessee, filed an application for registration under section 12A of the Income Tax Act copies of this application are placed at page 5 of the assessee's paper book. As per this application, the trust was created on 1-2-2001. A certified copy of the instrument under which the trust was created, was filed. A certified copy of the document evidencing the creation of the trust, was also filed. Copies of accounts of the trust, for the latest year, were also filed. Copies of audited accounts are at pages 3 and 4 of the assessee's paper book. As per trust deed (copy at APB pages 7 to 17), the objects of the trust are charitable. These objects, as contained in the trust deed are :
(a) To provide help to deserving persons in the form of stipend, scholarship, cost of books and necessary instruments, food and other necessary expenditure for receiving education and help them in their social uplifts and backwardness and donate money for the marriage of poor persons irrespective of caste, creed or religion.
(b) To provide medical assistance to the poor, in the form of medical aid, cost of medicine, food, clothes, spectacles, etc., in India irrespective of their caste, creed, religion or nationality.
(c) To give donations to hospitals, nursing homes, educational institutions, orphanages, blind institutes, veterinary hospitals, temples, churches, to open dharamshalas, shelter houses for poor and other institutions in India irrespective of caste, creed, religion or nationality.
(d) To spend for the other charitable purposes of general public utility and benefit. All this expenditure shall be incurred in India and the help shall be extended irrespective of caste, creed, religion or nationality.
(e) To undertake any programme for promoting the social and economic welfare of, or the uplift of the poor and backward people irrespective of caste and creed in any rural area/villages.
(f) To develop institutions for the disabled and to provide education, food and clothing to them.
(g) To run and maintain hospitals, schools, etc., irrespective of caste and creed anywhere in India.
(h) To encourage handicraft, music and dance irrespective of caste and creed anywhere in India.
(i) To donate to similar institutions having similar objects.
3. The learned CIT(A) has passed the following impugned order :
"The assessee has applied for registration under section 12A of the Income Tax Act. Perusal of the documents placed of file reveals that the assessee's declared aims are to provide medical assistance to the poor in the form of medical aid, food, clothes, etc., in India, to give donations to the hospitals, nursing, homes, educational institutes, blind institutes, etc. The Trust has been created with the corpus of Rs. 63,000. Perusal of the details filed by the Trust reveals that despite the facts that an amount of Rs. 63,000 was available with it, no charitable activity has been carried out by the Trust. Its intention to act as per the objects of the Trust has not been reflected by any activity. No charitable activity has been carried out although the Trust was formed in January, 2001 and funds were available. Therefore, there appears to be no intention to do so, The object appears to be to collect donations in the name of charity. The judgment of Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT is applicable on the facts of this case. The formation of the Trust is not for carrying out any charitable activity and none has been carried out. I, therefore, reject the application of the assessee."
4. Apropos Ground No. 1, the allegation of the assessee is that the impugned order has been passed after the expiry of 6 months from the end of the month in which the application was filed. The application was filed on 29-10-2001.
5. As per section 12AA(2) of the Act, every order granting or refusing registration under clause (b) of sub-section (1) of section 12AA shall be passed before the expiry of 6 months from the end of the month in which the application was received under clause (a) of section 12A.
Therefore, the aforementioned provision lays down a mandatory period of limitation for deciding an application such as the one under consideration here. As per the section, such limitation is 6 months from the end of the month in which the application was received. In the present case, the application was filed on 29-10-2001. Hence, the limitation available for passing the order was up to 30-4-2002. The order under challenge is dated 24-7-2002. Hence, ipso facto, the order was belated and is barred by limitation.
6. Recently, the Bangalore Bench of the Tribunal, in Karnataka Golf Association v. DIT (Exemption) (2005) 272 ITR (AT) 123, held, inter alia, that wherever an application is made, the authorities must act within the time frame. if they failed to act within the time frame, the application should be treated as having been acted upon in favour of the applicant. In other words, failure on the part of the authority concerned, to pass an order within the statutorily laid down period of limitation, will give rise to a presumption that registration, as applied for by the assessee, has been granted. This is the natural and legal consequence of an action an the part of the department not to have acted within the prescribed time frame. Otherwise, Executives who are supposed to carry out the intentions of the Legislature will only be thriving by their own lapses and latches. If the assessee files a return and the department does not pass an order, the return of income is deemed to have been accepted. In the case before us, the assessee had done what was expected of him under the law, i.e., to seek registration by making an application. The department should have acted vigilantly in refusing to register, if it was so satisfied, within the period of limitation prescribed by the provisions of section 12AA(2) of the Act. Having not done so, it lost the benefit of legally refusing to grant registration. The department, by its latches, cannot be said to have taken the same position by not acting within the time-limit prescribed.
7. In the above-mentioned case, the Tribunal was in seisin of a matter where the Department had not passed any order on the application for registration. On those facts, the Tribunal held that the department could not take undue benefit of its own latches. Hence, registration was deemed to have been granted on the expiry of limitation period prescribed under section 12AA(2) of the Act. The analogy is equally applicable to the facts of the present case also. Once the period of limitation had expired, the subsequent impugned order refusing registration, stands reduced to nothing but a nullity. The expression used in the section is 'shall'. This 'shall' cannot be expressed to mean 'may'. The unequivocal purport of the section is mandatory. There is no escape for the department. Once the limitation period has expired, the department becomes functus officio so far as regards the application under consideration before them. At the very moment of expiry of limitation, the application is deemed to have been accepted, in case no order thereon is passed by him. Hence, on this score, the assessee is successful.
8. We would like to consider the matter on merits also. The learned Counsel for the assessee has argued that the Id. CIT(A) has wrongly relied on the decision of Sole Trustee, Loka Shikshna Trust v. CIT (1975) 101 ITR 234 (SC). The contention is that in that case, the facts were different. We have seen the said judgment. In that case, the trustee carried on a business of printing. The question was whether the income of the trust, which at the relevant time, was publishing newspaper and journals, was exempt from tax under section 11 read with section 2(15) of the Income Tax Act, 1961. Clause 2(c) of the Trust Deed of that assessee provided as an object of the trust, supplying the Kannada speaking public with an organ or organs of educated public opinion and conducting journals in Kannada and other languages, for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public utility. It was held that the object of the trust was not education' within the meaning of section 2(15), but an object of general public utility; that, however, publication of newspapers and journals involved the carrying on of an activity for profit and the income of the trust was, therefore, not exempt from tax. It was also held that ordinarily, profit motive is a normal incident of business activity and if the activity of a trust consists of the carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming, in the absence of some indication to the contrary, that the object of the trust involves the carrying on of an activity for profit.
8.1 Thus, evidently, the facts before us are inconsistent with those before the Hon'ble Supreme Court. The learned CIT(A) has merely remarked that ". . . the judgment of the Hon'ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT is applicable on the facts of this case.." However, it has not been explained, nor is it comprehensible, in view of the foregoing, as to how it is so. The facts being different, as stated, the said judgment is not applicable here. The objects of our present assessee-trust, as detailed hereinbefore, are entirely of a charitable nature. There is no parity thereof whatsoever with the objects of Sole Trustee, Loka Shikshana Trust's case (supra).
9. Further, as per section 12AA(1)(b), an order in writing is to be passed on an application made by the trust for registration as such, after the Commissioner has satisfied himself about the objects of the trust and the genuineness of his activities. The contention of the learned Counsel for the assessee has been that this was the first year of the trust. The learned CIT(A) had only to see the objects of the trust. He went wrong in observing that there appeared to be no intention on the part of the assessee to carry out any charitable activity and that the object of the trust appeared to be to collect donations in the name of charity and that the formation of the trust was not for carrying out any charitable activity and none had in fact been carried out. As per the Id. counsel, the Id. CIT(A) has travelled beyond his jurisdiction. Moreover, according to the Id. counsel, there is no finding that the objects of the assessee are not charitable. Reliance has been placed on the decision of the Delhi Bench of the Tribunal in the case of Ashutosh Dawar Trust v. DIT (2002) 123 Taxman 182 (Mag.). On the other hand, the contention of the Id. DR has been, that section 12AA(1)(a) is very clear. As per this provision, the Commissioner shall call for such documents or information from the trust as he thinks necessary, in order to satisfy himself about the genuineness of the activity of the trust and may also make such enquiry as he may deem necessary in this behalf. As per section 12AA(1)(b), the Commissioner has to satisfy himself about both the objects of the trust and the genuineness of its activities. Therefore, the learned DR contends that in the present case, the learned CIT(A) was correct in passing the impugned order, since no activity was carried out by the assessee.
10. At first glance, the arguments of Id. DR appear to be correct. However, when one goes a little deeper, the position is otherwise. The section takes care of situation where activities have been carried out by a trust, whereas it does not lay down anything negative in cases where no activities have been carried out, like in the case before us. In such a case, to our minds, the sole criterion for grant/non-grant of registration would be for the Commissioner to see the objects of the trust. If the objects of the trust are charitable, just because no activity has been carried out by the trust, this does not entitle the Commissioner to hold that the trust was not entitled to registration, even though its objects were charitable. Pertinently, in the present case, the order of the Commissioner as rightly pointed out by the Id. Counsel for the assessee, makes no mention of the objects of the assessee-trust being not charitable. Moreover, we have delineated these objects hereinabove. A perusal thereof shows that these objects are in the nature of charitable objects. Also, the Id. DR has not denied this factum before us.
10.1 In the above facts, it was not right for the learned Commissioner to just make a conjecture and hold that there was no intention of the assessee trust of carrying out any charitable activity.
10.2 In Ashutosh Dawar Trust's case (supra), the Tribunal held that the provisions of section 12A of the Act are wide enough to cover any type of enquiry which would satisfy the authority concerned about the objects of the trust and the genuineness of its activities and that at the stage of registration, the authority may have before it only the objects which are to be carried out and which are not actually being undertaken by the trust.
11. Evidently, the assessee-trust duly fulfils the criteria laid down under section 12A(a) of the Act. It was validly created and its objects are charitable in nature.
12. In view of the above discussion, we hold that on merits also, the order passed by the Id. Commissioner needs to be cancelled. it is so ordered.
13. Resultantly, the appeal is allowed.