Income Tax Appellate Tribunal - Amritsar
M/S Care And Share Welfare Society , ... vs Commissioner Of Income Tax, ... on 27 June, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.694(Asr)/2017
Assessment Year:2017-18
Care & Share Welfare Society Vs. The CIT, (Exemption)
C/o International Marketing Chandigarh
Corporation, Guru Nanak Dev
Bhawan, Near Bharat Nagar
Chowk, Ludhiana
PAN:AACAC6608D
(Appellant) (Respondent)
Appellant by: Sh Sunil Kumar Mukhi (Ld. Adv.)
Respondent by: Sh. Sandeep Chauhan(Ld. DR)
Date of hearing: 31.05.2018
Date of pronouncement: 27.06.2018
ORDER
PER N.K.CHOUDHRY, JM:
The instant appeal has been preferred by the Assessee/Appellant, on feeling aggrieved against the order dated 29.09.2017, impugned herein, passed by the Ld. CIT, (Exemptions), Chandigarh, u/s 12AA(1)(b)(ii) of the I.T. Act, 1961 (hereinafter called as 'the Act').
2. The assessee has raised the following grounds of appeal.
"1(A) That the Ld. CIT(E) is not justified in not granting registration u/s 12AA of the Income Tax Act, 1961 which is illegal, without jurisdiction, arbitrary and thus bad in law and so needs to be quashed and accordingly registration u/s 12AA of Income Tax Act, 1961 needs to be allowed.2 ITA No.694/Asr/2017 (A.Y:2017-18)
Care & Share Welfare Society, Ludhiana vs. CIT(E) (B) That the learned CIT(Exemptions) has rejected the objects of the society by not considering them as Charitable without giving sufficient opportunity of hearing to appellant society."
3 The brief facts of the case are that an application for registration u/s 12AA of the Act was filed before the Ld. CIT(E) on 7th March, 2017 which came up for consideration on 2nd August, 2017 and the assessee society was requested to file the details /clarifications as enumerated in para no.5 of the order, on dated 16.08.2017 which was replied by the assessee society vide letter dated 16.08.2017. Although the reply along with documents of this assessee society was considered by the Ld. CIT(E), however, the registration was declined mainly on the ground that no charitable activity has been conducted by the appellant society since its inception except purchasing land worth of Rs.1,04,48,900/- for its future plan for constructing the Hospital. Secondly, it was observed by the ld. CIT(E) that the loan of Rs.1.06 Crores taken by the applicant society from the relative of the society inextricably linked loan givers and office bearers of the society and even no details whether the loan is interest bearing or free of interest has been provided by the assessee society, therefore in absence of the same it might be construed as an arrangement designed to pay the loan giver from receipts that would be claimed as charitable and would be public money. Further, it was also observed that in Clause no. 9 of the object clause, there is no mention at all qua acquisition of any land for a Hospital and more over from the other clauses (point no. 1 to 5 & 7) it reveals that the predominant object of 3 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) the assessee society is in the field of the education and there is no mention of opening a Hospital in the object clause. Finally, it was observed by the Ld. CIT(E) that the whole business of creating a society transferring a huge sum of Rs.1.06 crores from related commercial concern, purchase of land with the involvement of the family members without carrying out any charitable activity as per object clause of the MOA and for purpose i.e., not contended or allowed by the objects clause of the MOU, do not enthuse confidence in respect of the applicant viz. a viz. its claims about being charitable and neither the objects nor the genuineness of its activity get corroborated in the instant case.
Our attention was drawn by the Ld. AR to the amended aims and objects of the society which reflects from clause no.(1) reproduced herein below for the sake of convenience and brevity.
"To open an educational/medical and researches Institutions/Hospitals for the health and welfare of mankind."
We also perused the certified copy of minutes of meeting held on 06.11.2017 at society office of the assessee where the proper amendment in MOA has already been made and vide application dated 17.01.2018 forwarded to the Assistant Registrar of the Society cum District Manager, District Industry Center, Ludhiana for appropriate in-corporation. From the amended MOA aims and objects of society, clause No.9 reflects 4 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) " to acquire land and building for the construction and maintains of Hospitals, Medical Institutions, Schools, Colleges, Hostels and maintains of offices and centers of the society. From the amended aims and objects of the society it is clear that the objection of the Ld. CIT(E) to the effect that there is no mention at all in respect of acquisition of any land for a hospital, has already been meted out by the assessee society. Therefore, the said ground for rejection of application does not survive.
3.1 Second main ground with regard to the inextricable link between the loan giver and offer bearer of the society, we realized that there is no embargo under the Act that such persons cannot be related to each other by blood or otherwise. Our view even fortified by the judgment passed by the Delhi High Court in the case of Viswamohan Gupta vs. Registrar of Society, in Writ Petition No.6965/2011 dated 2nd May, 2012.
3.2 The third reason for rejection of registration by the CIT(E) was that no charitable activity has been conducted by the applicant society since its inception except purchasing land. We have given our thoughtful consideration to this reason of rejection. In the instant case the society has been formed only 19.08.2016 and thereafter application for registration was filed on 7th March, 2017 and the order was passed on 29th Sep. 2017 which goes to show that society came in existence recently only which clearly spell out that the assessee society is at a nascent stage and we cannot expect the society to start its operation in 5 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) high pedestal at the beginning itself. The assessee society has already purchased the land and is in the process of constructing hospital for which site plan has already been prepared and placed before the Ld. CIE(E) as well as before us for perusal which further strengthen the contention of the assessee that the purchase of land for construction of Hospital and starting process for construction of Hospital is certainly in pursuance to the aims and objections of the society.
The Co-ordinate Bench at Amritsar, in the case of Sant Ishwar Shiksha Samiti, Jammu and Sant Ishwar Foundation ( ITA No.670(Asr)/2015 & ITA No.671(Asr)/2015, decided on 30- 08-2017 ) , while dealing with the similar and identical issue, where the society was an nascent stage, analyzed the position of law as well as issue in hand. Relevant part of the said decision is reproduced herein below.
"6. We have gone through with the facts and circumstances of the case and also rival submissions of the parties, relevant dates are very much material in the instant case. The trust was established and registered only on 12th March, 2015 and thereafter, application for registration u/s 12A was filed on 29.04.2015 and main objects of the trust are establishment of educational institution and/or maintenance of educational institution ,meditation and prayer halls, granting of scholarship and financial assistance to needy for educational purposes and establishment of hospitals and nursing homes etc. which are covered under the dimension of Sec.2(15) of the I.T. Act.
Further we feel it appropriate to reproduce herein the contents of Sec.12AA of the Act.
Section 12AA 6 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) (1) The Chief Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall--
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he -
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
(2) Every order granting or refusing registration under clause
(b) of sub-section which the application was received under clause (a) of section 12A.] From the contents of the Sec.12AA, it encompass that the Ld. CIT(E) in order to satisfy himself about the genuineness of the activities of the trust or institution can call for such documents or information from the trust or institution as he thinks necessary and also empowered to make such enquiry as he may deem fit necessary in this behalf.
Second Clause deals with that after satisfying himself about the object of the trust or institution and the genuineness of the activities, he shall pass order in writing either to register or refusing to register the trust or institutions.
Let us to consider judicial verdicts on the issues in hand :
Delhi High Court in the case of DIT Vs. Foundation of Opthalmic & Optometry Research Education Center, in ITA 7 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) No.1687/2010 , decided on dated 16.08.2012 dealt with the same situation and observed as under:
"That the concern CIT is not required to examine the question whether the Trust has actually commenced and has, in fact, carried on charitable activities ?"
Gujrat High Court in the case of CIT -1, vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust (2014 271 CTR 0595 was pleased to held that " While considering the application u/s 12AA, the Commissioner has to satisfy himself about the objectives of the trust and genuineness of its activities and for such purposes, he has the power to call for such documents or information from the trust as he think are necessary. However, this does not mean that if the activities of the trust have not commenced the Commissioner has authority to reject its application for registration on the ground that the Trust has failed to convince him about the genuineness of the activities. That is what unfortunately the Commissioner did in the preset case ".
Further, Allahabad High Court in the case of Hardayal Charitable & Educational Trust Vs. Commissioner of Income Tax-II, Agra decided on 15 March, 2013 observed that:
" The preponderance of the judicial opinion of High Courts as well as ITAT is that at the time of registration u/s 12AA of the Act, the CIT is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of enabling educational institution, is in the process of establishing such institution and receives donations, the registration u/s 12AA cannot be refused, on the ground that the Trust has not yet commenced the charitable or religious activity" .
Further, Co-ordination Bench of ITAT, Amritsar in the case of Ek Umeed Welfare Society, Fazika Vs. Assessee in ITA No.615(Asr)/2013 "Directed to grant registration to the society where the registration was denied by the CIT on ground of negligible activity till the date of registration".8 ITA No.694/Asr/2017 (A.Y:2017-18)
Care & Share Welfare Society, Ludhiana vs. CIT(E) Let us to consider reasons for rejection of Application for grant of registration u/s 12 AA of the Act:
First reason for denial of registration by the Ld. CIT was that that the assessee trust has not carried out any activity.
Second reason that the assessee trust has initially decided to construct school & meditation hall at Asar Doda but later purchased land for school at Niabhat, Nagrota Third reason that the activities of assessee trust are controlled by one family .
The reasons given by the Ld. CIT(E ) does not sound good because , one side reasoned that no activity has been carried out by the Assesse Trust , on the other hand has doubted the intents of the objects and further observation that initially the Assessee wanted to construct school & meditation hall at Asar Doda but later purchased land for school at Niabhat, Nagrota , in our view , the trust that time was un-doubtly at nascent stage and has not carried out any activity except to make efforts for procuring land for school , however later on purchased the land for school at Niabhat, Nagrota , which clearly shows the intention of the trust as the main object of the trust is to establish schools etc. and to provide education, therefore, one can expect from the trust to do activity of the charity immediately and in that situation the authority cannot come to the conclusion that the intent contained in the objects of the trust do not find corroboration in the shape of any positive action taken towards either education or any of the other objects enunciated in the trust deed , as observed by the ld. CIT (E ) .
Third reason that the activities of assessee trust are controlled by one family is only an apprehension of the Ld. CIT (E ) , which according to our mind can not base rejection of the registration because the Revenue Authority is at liberty to withdraw and/or to cancel the Registration an any time on the specified reasons enumerated in the Act.
Further from the documents filed before us, it reflects that the assessee trust has already purchased the land which is 9 kanals 19 marlas situated at Village Balian, Teshil Udhampur, and further also got approved sanctioned plan for construction of school from the concerned Executive Engineer of the area , no objection for construction from the concerned Panchayat and construction of School is at advance stage and also executed Memorandum of 9 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) Understanding with the Bhartiya Shiksha Samiti, which is involved in the field of imparting formal education having established a number of Primary and Secondary level Schools in different part of Jammu & Kashmir as submitted .
Further from the cutting of newspapers, it reflects that inauguration for construction and laying stone for establishment of the School has already been done and as per computation of Income of Asst. Year: 2016-17 it reflects that the assessee trust has received Rs.1,80,52,900/- as voluntarily contribution and during the Financial Year the assessee trust has incurred the expenditure of Rs.13089100 and Rs.379000 for the purchase of the land and its construction for School purposes, and further income and expenditure for the period ended 31st March, 2016 shows that the assessee trust has contributed Rs.11,000/- to the P.M. relief fund and Rs. 9,472/- for cleaning moment at Katra and Rs.5,640/- for the environment awareness and Rs.8,548/- for medical care at FDR.
On perusal of records and judgments, it is clear that at the time of registration u/s 12AA of the Act, the Ld. CIT(E) is required to see the objects of the trust or institutions and genuineness of its activities, however, if we come to the instant case, then it is not disputed that the trust was formed and registered only on 12th March, 2015 thereafter, application for registration u/s 12AA was filed on 15.05.2015 and the impugned order was passed on 30th Nov. 2015 and till the disposal of the application the assessee has only received single donation and tried to procure the land for establishment of the School and further because the assessee trust was at nascent stage, therefore, could not carry any activity and according to aforesaid judgments it is clear that statute does not prescribe a waiting period for a newly registered trust to qualify itself for registration under Section 12AA of the act and wait till the activity commence. From the conjoint reading of the aforesaid judgments, it can be safely concluded that even otherwise if no activity was carried out by a trust or institution, still registration can be granted by the CIT(E) and even otherwise it is not the case of the Revenue that at the time of consideration of application of the Assessee , the assessee has carried out many activities and their genuineness were in doubt but in the instant case grievance of the CIT(E) is only that there was no activity carried out by the assessee.
Although form the documents submitted before us positively reflects that the Assessee trust has carried out many activities in furtherance of objects of the trust, however because the same 10 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) activities have not been carried out and documents were also not submitted before the LD. CIT (E ) till the date of adjudication of Application , hence we are not taking into consideration the said documents and facts , however in overall consideration of the judicial interpretation , peculiar facts and circumstances and situation, in our considered opinion the Ld. CIT(A) was under
obligation to consider the objects of the trust which are available in the trust deed itself. Even otherwise, the concerned Revenue Authority was empowered to withdraw the registration already granted or cancel the said registration if he came across that factually trust has not conducted any charitable activities.
Although, in the open Court we had shown our inclination to remand the case with direction to the assessee to approach the Ld. CIT(E) with the documents as submitted before this forum because the documents were not available before the CIT(E), however, considering the principles laid down by the various Courts as it is not in controversy that till the adjudication of application u/s 12AA of the Act, the trust was at nascent stage and all the activities which are reflecting from the documents submitted herein are of the later stage, however, in our considered opinion at the time of disposal of application, the Ld. CIT(E) in order to satisfy himself about the genuineness of the activities of the trust or institution can call for such documents or information from the trust or institution as he thinks necessary and also empowered to make such enquiry as he may deem fit necessary in this behalf , secondly that after satisfying himself about the object of the trust or institution and the genuineness of the activities, he shall pass order in writing either register or refusing to register the trust or institutions. In the instant case no activity was carried out therefore question of genuineness did not arise.
Hence, we direct the Ld. CIT(E) to grant the registration u/s 12A of the Act to the assessee and it is clarified in case, the assessee does not qualify/satisfy the objects of the trust and/or not involved in genuine activities , then the concerned authority shall be at liberty to withdraw or to cancel the registration u/s 12A of the Act.
Hence, in the aforesaid observations, the appeal filed by the assessee is allowed."
In view of the aforesaid observation and conclusion drawn by the Co-ordinate Bench, we are of the considered opinion that 11 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) where the assessee society is a nascent stage then it cannot be expected that the society must do some charitable work for grant of registration u/s 12AA of the Act.
3.3 In para No.6 of the impugned order, it reflects that additional queries have been raised by the Ld. CIT(E) vide show cause letter dated 25.09.2017 which are reproduced herein below.
(i) How does the object of constructing a hospital qualify for any of the limbs of charitable purpose u/s 2(15) of the 'Act' ?
(ii) How can the Hospital running be taken as medical relief ?
Why can't the same be construed as an enterprise for commercial gains?
(iii) Please provide the detail in support of the claim that the land purchased is for constructing a Hospital.
(iv) Please provide the evidence in support of loans from IMC to the tune of 1.06 crore.
(v) What are the relations between the members of the Governing Body?
In reply to the show cause letter dated 25.09.2017, the assessee society had replied vide reply dated 27.09.2017 which are also reproduced herein below.
Reply 1: The object of the constructing hospital is one of the objects and qualify u/s 2(15) of Income lax Act 1961. The construction of hospital will be for charitable purposes and for needy deprived public at large.
Reply 2: The hospital running will be charitable and will be a medical relief for the needy and the public which cannot a f f o r d the costly medical facility in present days. The hospital will be charitable and not for commercial gains.
Reply 3: The land has been purchased for the hospital. The ciaim we can show only after construction. It is a welfare activity in the 12 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) society and which shows our genuineness that a business entity of one of the Governing Body Members has provided Rs 1.06 crores as loan for purchase of land.
Reply 4: The certified copy of loan of Rs 1.06 crores from IMC is enclosed.
From the reply No.1 it reflects that construction of Hospital will be for charitable purposes and for needy and deprived public at large. Further from reply No.2 it reflects that the Hospital running will be charitable and will be a medical relief for the needy and the public which cannot afford the costly medical facility in present day . The hospital will be charitable and not for commercial gains. However from the amended aims and objects and rules and regulations of the society it does not reflect that the hospital will be charitable and not for commercial gains. On specific query raised by the Bench, which was acceded by the Ld. AR on behalf of the Assessee/Applicant Society that the assessee society shall get incorporate the condition that the Hospital will be charitable only and not for commercial gains, in the aims and object/ MOU of society. We endorse the assent of the Ld. A.R. On the aforesaid reasoning, we are inclined to set aside the order passed by the Ld. CIT(E) and feel it appropriate to remand the case in hand to the file of the ld. CIT(E) for deciding afresh while taking into consideration the facts, circumstances and documents inter-alia, the amended MOA whereby the aims and objects have already been amended and further incorporation of condition in the aims and objects of society to 13 ITA No.694/Asr/2017 (A.Y:2017-18) Care & Share Welfare Society, Ludhiana vs. CIT(E) the effect that the Hospital will be charitable only and not for commercial gains.
The Ld. CIT(E) shall also be at liberty to re-examine the case of the assessee society independently without being influenced by the observations made in this order except directed.
6. In the result, the appeal filed by the assessee society is allowed for statistical purposes.
Order pronounced in the open Court on 27.06.2018.
Sd/- Sd/-
(SANJAY ARORA) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated:27.06.2018
/PK/ Ps.
Copy of the order forwarded to:
(1) M/s Care and Share Welfare Society, Ludhiana (2) The CIT(Exemptions), Chandigarh (3 The SR DR, I.T.A.T., Amritsar True copy By order