Income Tax Appellate Tribunal - Chennai
Community Rural Education Social And ... vs Assessee on 16 July, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI V. DURGA RAO, JUDICIAL MEMBER
I.T.A. No. 1951/Mds/2011
M/s Community Rural
Education Social and
Cultural Enhancement The Income Tax Officer,
Nurture Trust, v. Ward I(1),
430, Wellington Street, Karaikudi.
NGO Colony, Nagamalai,
Madurai - 625 019.
PAN : AAATC 9685 R
(Appellant) (Respondent)
Appellant by : Shri S. Sridhar, Advocate
Respondent by : Shri S. Dasgupta, JCIT
Date of Hearing : 16.07.2013
Date of Pronouncement : 18.07.2013
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
This appeal filed by the assessee, is directed against an order dated 19.1.2009, passed under Section 12AA of Income-tax Act, 1961 (in short 'the Act') by the Commissioner of Income Tax-I, Madurai.
2 I.T.A. No. 1951/Mds/11
2. Learned A.R. has filed an adjournment petition. Since no proper reasons have been shown for seeking the adjournment, it is rejected.
3. Appeal has been filed with a delay of 990 days. A condonation petition has also been filed. Learned A.R., in support of condonation petition, submitted that assessee was pursuing alternative remedies in the interregnum, resulting in the delay. As per learned A.R., as soon as the order of CIT was received, assessee had consulted its Chartered Accountant, who had advised filing of a rectification application. Accordingly, on 13.4.2009, an application for rectification was filed. The said application was disposed of by the Commissioner on 13.1.2011. A copy of the order dated 13.1.2011 was placed on record. Thereafter, assessee filed an application in Form No.56 on 26.5.2011 for availing exemption under Section 10(23C)(vi) & (via) of the Act. Assistant Commissioner of Income Tax (HQ) (Tech), Madurai, vide his letter dated 28.11.2011, informed the assessee that its application for exemption under Section 10(23C)(vi) & (via) was posted for hearing on 20.12.2011. It was only in the last week of November, 2011 that its Chartered Accountants M/s Peri Thiagaraj & Co. advised that an appeal could be filed before this Tribunal against 3 I.T.A. No. 1951/Mds/11 the order dated 19.1.2009 of CIT. Thereafter, without delay, assessee had filed this appeal, and such appeal was taken on record on 5.12.2011. Thus, according to the learned A.R., the delay was not intentional, but caused due to the advice received by the assessee from its Chartered Accountants, who had pursued alternative remedies. Relying on the decision of Third Member in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87), learned A.R. submitted that similar delay was condoned on an appeal filed against refusal for registration under Section 12AA of the Act, where the assessee concerned was pursuing alternative remedies. Reliance was also placed on the decision of Hon'ble jurisdictional High Court in the case of CIT vs. K.S.P. Shanmugavel Nadar & Others (153 ITR 596).
4. Per contra, learned D.R., strongly opposing the condonation petition, submitted that delay of 990 days is too large and explanation given by the assessee could not be accepted. According to him, there was nothing on record to show that assessee was pursuing alternative remedies on the advice of its Chartered Accountants of M/s Peri Thiagaraj & Co. As per the learned D.R., assessee could not properly explain the delay.
4 I.T.A. No. 1951/Mds/11
5. In reply, learned A.R. submitted that assessee was never given a proper opportunity for explaining the merits of its application for registration by the ld. CIT and if the delay was not condoned, irreparable damage would result.
6. We have perused the orders and heard the rival submissions. Insofar as delay in filing the appeal is concerned, as per the assessee, it was pursuing alternative remedies. Assessee had moved for a rectification of the order dated 19.1.2009, through an application filed on 13.4.2009. The said application was disposed only on 13.1.2011. Assessee had also moved for exemption under Section 10(23C)(vi) & (via), vide an application dated 26.5.2011, which was still to be disposed of. Learned A.R. also placed an order dated 18.4.2011 of CIT, on a fresh application for registration under Section 12AA filed by it on 14.2.2011, by which registration had been granted from assessment year 2011-12 onward. Thus, it is not as though assessee was sitting quiet on the order dated 19.1.2009 passed by the CIT. Assessee might have been pursuing remedies, which were ineffective in redressing its grievance. But, an assessee who was pursuing alternative remedies within the framework of law, cannot be considered on par with an assessee who had slept over its 5 I.T.A. No. 1951/Mds/11 rights of appeal. All through the period of 990 days, assessee was pursuing some or other alternatives which could help it enjoy the exemptions available to charitable Trusts under the Act. In our opinion, the reason for delay has been fairly explained by the assessee. Hence, the delay is condoned and appeal admitted for adjudication.
7. Coming to merits of the case, reason why assessee's application has been rejected, is given by the CIT in his order dated 19.1.2009, at paras 4 and 5, which are reproduced as under:-
"4. In the first instance there was no explanation for such long delay in filing the application for registration. In the 'Trust' deed dated 09.05.1997 there were two Trustees: Dr Mrs R. Kalaichelvi and Dr G. Arumugam. They are wife and husband by family relation. Dr Mrs Kalaichelvi is in medical profession whereas Dr Arumugam is a full-time Senior Faculty Member of the Madurai Kamaraj University (hereinafter referred to as 'MKU'). At present he is the Professor and Head of the Department of Computer Science. This 'Trust' Deed was amended in 19.12.2005 whereby in addition to the existing Trustees three others were inducted. The 'Trust' for all practical purposes is mainly run by Dr G Arumugam. The role of other Trustees, not connected with education, appears to be almost negligible. Dr G Arumugam is a Professor of MKU and he is drawing his salary from the MKU which are in turn received as grant from the University Grants Commission (herein after referred to as UGC) an autonomous body under the Central Government.6 I.T.A. No. 1951/Mds/11
5. As per the terms of service conditions of the MKU, and the UGC, a Faculty Member drawing salary from them is not allowed to run any private educational institution. It is not understandable under which circumstances Dr G Arumugam is doing the same. Since he is devoting most of his time in looking after running of these 2 educational institutions he will not be in a position to pay any attention to the students in the university, for which purpose he is mainly employed in such a senior position. Therefore the constitution of the Trust itself is irregular. This Trust after its inception started running two institutes: a Teachers Training Institute and a B.Ed. College of education. Both these institutes were collecting fees from the students and out of 100 students only about 2 were offered free scholarships. The main objectives of these institutes is not charity but to make profit. For both these reasons the application for registration as charitable institution under the Income-tax Act is ill-conceived and totally lacks merit. Therefore I hold that on facts and in the eye of law the applicant 'Trust' does not exist at all."
Assessee might have been created on 9.5.1997 and filed application for registration only on 9.7.2008. However, delay in filing such an application will at best affect assessee's claim for exemption for assessment years prior to the date of such application. This will not be a reason to deny the assessee registration sought, for a subsequent period. The prime reason cited by the CIT for rejecting application is that Dr. G. Arumugam was the main person running the Trust and he was an employee of Madurai Kamaraj University. This, in our opinion, is not factually correct. The original deed of Trust dated 9th May, 1997, which is available on record, clearly shows that 7 I.T.A. No. 1951/Mds/11 the Managing Trustee thereof is Dr. Mrs. R. Kalaichelvi, as mentioned in para 4 of the Trust Deed. Hence, we cannot understand how the CIT came to a conclusion that Dr. G. Arumugam was mainly running the Trust. In any case, one of the Trustees being a Faculty Member of Madurai Kamaraj University, cannot effect an application for registration under Section 12AA of the Act. The Trust by itself does not become irregular for a reason that Dr. G. Arumugam was spending much time in assessee-Trust and not attending his work in the University. The third reason cited by CIT is that institutions, namely, Teachers Training Institute and B.Ed. College were collecting fees from students and had offered free scholarships only for two students. Definition of "charity" under Section 2(15) of the Act does not say that education can be considered as charity only where it is given free of cost. Considering all these aspects, we are of the opinion that CIT had rejected the application for registration under Section 12AA of the Act, based on irrelevant or incorrect presumptions. He ought have made proper analysis of objectives of the assessee-Trust and a proper study of its activities vis-à-vis the requirements spelt out in the Act, before coming to a conclusion that assessee was entitled or not entitled for a registration under Section 12AA of the Act. We are, therefore, of the opinion that the matter 8 I.T.A. No. 1951/Mds/11 requires a re-visit by the CIT. We set aside his order and remit the issue of registration under Section 12AA, based on the application filed by the assessee on 9.7.2008, back to his file for consideration afresh, in accordance with law.
9. In the result, appeal filed by the assessee is allowed for statistical purposes.
Order was pronounced in the Court on Thursday, the 18th of July, 2013, at Chennai.
sd/- sd/-
(V.Durga Rao) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 18th July, 2013.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT-I, Madurai
(4) D.R.
(5) Guard file