Income Tax Appellate Tribunal - Mumbai
The Bombay Diamond Merchants ... vs Assessee on 5 November, 2007
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH 'I' : MUMBAI
BEFORE SHRI D.K. AGARWAL, (JM) AND SHRI B. RAMAKOTAIAH ,(AM)
ITA No.343/Mum/2008
The Bombay Diamond Merchants
Association Relief Fund
3, Dhanji Street
Mumbai-400 003. .....(Appellant)
P.A. No.(AAATT 0587 F)
Vs.
Director of Income tax(Exem.)
Piramal Chambers, Parel
Mumbai-400 012. .....(Respondent)
Appellant by : Shri Nitesh Joshi
Respondent by : Mr. Arun C. Bharat
ORDER
Per D.K. AGARWAL (JM).
This appeal preferred by the assessee is directed against the order dated 5.11.2007 passed by the Director of Income tax (Exemption), Mumbai u/s.12AA(1)(b)(i) of the Income tax Act, 1961(the Act).
2. Briefly stated facts of the case are that the assessee Trust constituted under Memorandum of Association dated 12.9.1968 filed 2 ITA No.343/M/08 A.Y. an application for registration u/s.12A(a) of the Act in Form No.10A on 30.5.2007 alongwith petition for condonation of delay. The assessee was asked by the DIT(E) to file original documents like PAN card of the Trust/Trustees, copy of bank accounts, original Trust Deed etc. The assessee was also asked to file copy of the registration granted earlier u/s.12A. However, in the absence of any such material and the reasonableness of the delay in filing application u/s.10A, the DIT(E) granted registration w.e.f. 1.4.2007 as against applied by the assessee from 12.9.1968.
3. Being aggrieved by the order of the DIT(E) the assessee is in appeal before us taking following grounds of appeal :-
The Director of Income tax(Exemptions)-Mumbai erred:-
1. In passing an order u/s.12AA wherein he did not grant the appellant Trust a registration u/s.12A from 12.9.1968 which was the date of formation of the trust and in granting registration only from 1.4.2007.
2. In not appreciating correctly the contents of the application made by appellant trust on 28th May 2007.
3. In not appreciating that the appellant trust was even registered y/s.80G-the last such renewal being granted in March 2007 and that it was regularly being assessed as a trust and was being given the benefit of section 11 and section 12.
4. In not using the powers given to him u/s.12A to condone the delay and to grant a registration only from 1.4.2007.
5. In not appreciating the appellant trust's submission that it was probably registered earlier and in not verifying the records available with him.
6. In not appreciating that there could have been no intention of the appellant trust to not seek a registration."3 ITA No.343/M/08
A.Y.
4. At the time of hearing the ld. Counsel for the assessee submits that the appellant had been granted registration under section 12A of the Act from the date of its formation. Section 12A provides that provisions of sections 11 and 12 shall not apply to income of any trust unless the person in receipt of income has made an application for registration. The income of the appellant has been all through out granted exemption under sections 11 and 12 of the Act. In fact, its assessment orders for Assessment Years 1985-86, 1986-87 and 1989- 90 have been made by the Assessing Officer under section 143(3) of the Act. Unless the appellant had applied for registration u/s.12A of the Act there was no question for granting exemption under section 11 and 12. The fact that it was registered u/s.12A is also shown by the fact that it had been granted registration u/s.80G(5) of the Act where the precondition in 80G(5)(i) is that if the trust derives any income, the income should not be liable to inclusion in total income under sections 11 and 12. Therefore, the Department was also satisfied that the appellant was registered u/s.12A and hence, qualified for exemption under section 11 and 12 in respect of income derived by the appellant trust. He further submits that copy of registration u/s.12A is not available for the time being on account of the persons responsible for handling the affairs of the trust at the relevant point of time have moved out or passed away. He further submits that in any 4 ITA No.343/M/08 A.Y. event, assuming that the Department has no records of the registration having been granted to the appellant u/s.12A the conduct of the Assessing Officer shows that such registration had been granted and there was no reason for the appellant not to have made an application at the relevant point of time. Therefore, assuming without admitting that a fresh registration is required to be granted to the appellant from the date of its formation the delay in filing the application is on account of bonafide reasons and the same may be condoned and the DIT(E) may be directed to allow registration from its formation or in any case w.e.f. 1.4.1973. He also placed on record the copy of certificates issued u/s.80G dated 7.3.2007 and 31.8.1994 by the DIT(E); copy of Assessment orders u/s.143(3) for Assessment Years 1985-86, 1986-87; and 1989-90; letter dated 11.10.2007 with markings of attendance by A.R. on 2.11.2007 appearing at page 1 to 8 of the assessee's paper book. Reliance was also placed in the case of Church of Our Lady of Grace vs. CIT-III, Thane (2009) 34 SOT 315(Mum.) wherein the Tribunal condoned the delay and granted registration to the Trust.
5. On the other hand the ld. DR supports the order of the DIT(E).
6. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no 5 ITA No.343/M/08 A.Y. dispute that the assessee Trust was constituted by a Memorandum of Association dated 12.9.1968 and the Trust was registered under the Bombay Public Trusts Act, 1950 by the Dy. Charity Commissioner on 26.9.1968. It is also not in dispute that for the Assessment Years 1985-86, 1986-87 and 1989-90 the AO under scrutiny assessments made u/s.143(3) of the Act has allowed exemption u/s.11 of the Act vide copy of assessment orders appearing at page-3 to 7 of the assessee's paper book. We further find that the Trust was granted approval u/s.80G from 1.4.94(Assessment Year 1995-96) to 31.3.1997 (Assessment Year 1997-98) vide order dated 31.8.94 passed by DIT(E) Bombay. We further find that the approval u/s.80G was again granted from 1.4.2006 to 31.3.2009 vide certificate dated 7.3.2007 issued by DIT(E) Mumbai. We further find that the assessee vide letter dated 28.5.2007 has explained the reasons for condonation of delay vide para 3 of the impugned order as under :
" We have been filing tax returns regularly as a Religious Trust and we have been claiming the application of section 11 and 12 to our income. We have accordingly been assessed as well since the last several years.
A lot of earlier records of the trust are not available, particularly because some of the trustees who were handling affairs in the earlier years have moved or passed away. As a result we are unable to trace a copy of the registration which would have been granted u/s.12A to the trust when it was formed.
We, therefore, make herewith a fresh application for registration u/s.12A and we request that either a copy of the earlier order be given to us or a registration be given 6 ITA No.343/M/08 A.Y. to the trust with effect from the date of formation. We assure to the(sic) Revenue that there was no intention to not make an application earlier and in case a fresh registration is given then the delay in making the application may kindly be condoned. We reiterate this is only a procedural requirement and that the delay is not intentional and that hence the powers available to your learned self u/s.12A be kindly exercised and the delay be condoned and registration be granted for which the trustees shall be obliged."
We further find that the DIT(E) inspite of the above documentary evidence has refused to condone the delay on the ground that no specific reason has been given by the assessee for late filing of the application u/s.12A of the Act. However, he granted registration u/s.12AA(1)(b)(i) w.e.f. 1.4.2007 by the same order.
7. In the case of Church of Our Lady of Grace (supra), it has been held:
"7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the Trust was constituted on 6.1.1955, which was also registered as a Public Charitable Trust vide certificate dated 20.6.1955 issued by the Dy. Charity Commissioner, Greater Bombay. It is also not in dispute that the objects of the Trust are for religious and charitable purposes. It is also not in dispute that the income of the assessee trust has been assessed at Rs. Nil for assessment year 1995-96 u/s. 144 of the Act, vide order dated 26.11.1996, at Rs. Nil for Assessment Year 1999-2000, vide intimation u/s. 143(1)(a) dated Nil and at Rs. Nil for the assessment year 2001-02 vide order dated 25.2.2004 passed u/s. 143 (3) of the Act. We, further, find that the assessee on the basis of advertisement in the Newspaper namely Times of India, dated May 18, 2007, wherein it was published that " if you have not filed your application for registration within one year of your 7 ITA No.343/M/08 A.Y. creation or establishment and want to avail of exemption for earlier years, you may file such application before 1st day of June, 2007", filed an application on 21.5.2007 followed by another letter dated 12.10.2007 requesting to condone the delay. However, the ld. CIT after examining the matter while rejecting the condonation of delay as "unsatisfactory explanation" granted registration w.e.f. 1.4.2007, i.e. from the first day of financial year in which the application for registration was made. Here it is necessary to take note of the relevant provisions of Sec.12A of the Act which provide that all charitable and religious trusts, which desire to avail of the benefit of tax exemption under sections 11 and 12 of the Act are interalia required to file u/s. 12A an application in the prescribe form for registration of the trust before the CIT by 1st July, 1973 or one year from the date of creation of the trust, whichever is later. Vide CBDT Circular No.115 dated 30.6.1973, the time for filing of such application has been extended until 15.8.1973 or one year from the date of creation of the trust whichever is later. We further note that the amendment of the proviso below clause (a) of sec.12A by the Finance(No.2) Act, 1991 w.e.f. 1.10.1991 enables the commissioner to condone the delay and where the delay is condoned registration has effect from the date of creation of the trust. We further observed that the assessee vide his application dated 12.10.2007 while explaining the reasons for delay that he was under the bonafide belief that since the Trust is registered in the year 1955 his predecessor must have complied with various provisions applicable to the Public Charitable Trust under the Income-tax Act, 1961, has also explained the cause for delay in submitting the application within time. However, the ld. CIT rejected the assessee's application holding "unsatisfactory explanation" for submission of delay. In our view the rejection of the reasons of delay as "unsatisfactory explanation" is not a reasoned order. It was necessary for the Commissioner to administrate as to why the reasons submitted by the assessee were not satisfactory. It is clear from the impugned order that in so far as the entitlement to registration under section 12A is concerned the same has been granted though with prospective effect from April 1, 2007.
8. In Society of Divine Providence vs. Union of India & Another (1999) 235 ITR 339 (M.P) it has been observed (page 342):-
8 ITA No.343/M/08
A.Y. "The expression "before the expiry of the period"
in proviso(i) of clause (a) of section 12A requires sufficiency of reasons which prevented the person from making the application within one year as required and not the reasons for the period beyond the prescribed period of one year. What the authority has to see is whether or not there were sufficient reasons which prevented the person from making the application within the prescribed period and not the total period after which the application was made. The learned Commissioner was, therefore, required to examine whether sufficient reasons existed for not making the application in the prescribed pro forma within the prescribed period of one year and not with reference to the total period that elapsed before making the application. It is, thus, clear that the learned Commissioner has not approached the matter from its correct perspective.
The learned Commissioner has recorded that the reasons furnished were not satisfactory. "Not satisfactory" is a conclusion and cannot be a reason by itself and it was necessary for the learned Commissioner to have given reasons why the explanation for not making the application in time was not satisfactory. It is clear from the impugned order that in so far as the entitlement to registration under section 12A is concerned the same has been granted though with prospective effect from April 1, 1993. The eligibility of the petitioner having thus been concluded, it was necessary that cogent reasons were assigned to indicate why the reasons furnished by the petitioner were not satisfactory."
9. In Surya General Traders vs. CTO (2003) 133 STC 388,389 it has been observed and held that :
" When an appellant has a good case on merits, defeat of his claim on technical plea of limitation would ultimately lead to injustice. State should not stand by a technical plea of limitation of the citizen's case was otherwise meritorious"
10. In Kadur Vidhya Pratishtana v. CIT (2007) 15 SOT 75(Bang.), the Tribunal after considering the various decisions including the decision in Society of Divine Providence (supra), Motilal Padampat Sugar Mills Co. Ltd. V. State of UP(1979) 118 ITR 326 (SC) and Collector, land Acquisition v. Mst. Katiji (1987) 167 ITR 471(SC) has held as under :
9 ITA No.343/M/08
A.Y. "17. The Society receives voluntary contributions from the persons for a charitable cause. The payments are not received by the Society for diverting towards payment of taxes. The spirit with which the payments are made are also to be considered and if there is a bona fide reason for filing the application for registration belatedly then the delay should be condoned so that the purposes for which contributions have been received is achieved. If the Society knowingly ignores the provisions of law then necessarily it has to bear the burden. In the instant case it has not been established as a matter of fact that the trustees or the persons, who are managing the affairs of the Society were aware of filing the application under section 12A. Under such circumstances we feel that the ld. CIT should have condoned the delay.
Accordingly, we feel that it is a fit case where the delay should be condoned and provisions of sections 11 and 12 should not be made applicable in respect of the Society from its inception"
11. Applying the ratio of the above decisions to the facts of the present case we are of the view that since the objects of the Trust and genuineness of its activity that it is for religious and charitable purposes are not in doubt inasmuch as the registration was granted with prospective effect from April 1, 2007 and the reasons for delay for filing of the application were not found to be false or untrue, the delay is condoned and registration is granted to the assessee w.e.f. 1.7.1973. Accordingly, the grounds taken by the assessee are allowed."
In the absence of any contrary material brought on record by the revenue and keeping in view that the objects of the Trust and genuineness of the activity of the Trust are not in doubt in as much as the renewal of approval u/s.80G has been granted w.e.f. 1.4.2006 and the registration has also been granted w.e.f.1.4.2007, we respectfully following the ratio of the above decision hold that there was reasonable cause for delay in filing the application for registration u/s.12A within time and hence we condone the same and grant the 10 ITA No.343/M/08 A.Y. registration w.e.f 1.4.1973 as stated by the ld counsel for the assessee. The grounds taken by the assessee are therefore allowed.
8. In the result assessee's appeal stands allowed. Order pronounced in the open court on 8.3.2010.
Sd/- Sd/-
(B. RAMAKOTAIAH) ( D.K. AGARWAL )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 8.3.2010.
Jv.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
Details Date Initials Designation
1 Draft dictated on 2.3.10 Sr.PS/PS
2 Draft Placed before author 3.3.10 Sr.PS/PS
3 Draft proposed & placed before the JM/AM
Second Member
4 Draft discussed/approved by JM/AM
Second Member
5. Approved Draft comes to the Sr.PS/PS
Sr.PS/PS
6. Kept for pronouncement on 8.3.10 Sr.PS/PS
7. File sent to the Bench Clerk 9.3.10 Sr.PS/PS
8 Date on which the file goes to the
Head clerk
9 Date of Dispatch of order