Income Tax Appellate Tribunal - Hyderabad
International Bhaktivedanta ... vs Assessee on 27 September, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'A', HYDERABAD
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER and
SHRI SAKTIJIT DEY, JUDICIAL MEMBER
I.T.A. No. 895/Hyd/2012 - A.Y. : NA
I.T.A. No. 896/Hyd/2012 - A.Y. : NA
M/s. International vs. The Director of Income-tax
Bhaktivedanta Institute, (Exemptions),
Hyderabad Hyderabad
PAN: AAATI8315E
Appellant Respondent
Appellant by: Sri A.V. Raghuram
Respondent by: Smt. Nivedita Biswas
Date of hearing: 27.09.2012
Date of pronouncement: 27.09.2012
ORDER
PER CHANDRA POOJARI, AM:
These two appeals by the assessee are directed against the order of the Director of Income-tax (Exemptions) [DIT(E)], Hyderabad dated 29.3.2012 wherein the DIT(E) refused to grant registration u/s. 12AA and approval u/s. 80G(5)(vi) of the Income-tax Act, 1961.
2. In this case registration u/s. 12AA and approval u/s. 80G(5)(vi) of the Income-tax Act, 1961 was refused on the reason that the assessee has not carried on any tangible charitable activities. Further, the assessee's main object is to conduct research in different fields and the area of operation is worldwide. Moreover, the assessee did not maintain books of account.
3. We have heard both the parties and perused the material available on record. In our opinion, at the time of registration u/s. 12AA, the DIT(E) has to satisfy himself about the genuineness of the activities of the trust and has to see whether it falls under the purview of provisions of section 2(15) of the Act. For this purpose he can cause necessary enquiry. Before us the learned AR submitted that the trust is 2 I.T.A. Nos. 895 & 896/Hyd/2012 M/s. International Bhaktivedanta Institute ============================== satisfying all the ingredients for the purpose of granting registration and for this purpose he relied on the following judgements:
a) Fifth Generation Education Society v. CIT, 185 ITR 634 (All)
b) M.K. Nambyar SAARC Law Charitable Trust v. Union of India & Ors., 269 ITR 556 (Del)
c) Medical Accident Prevention Society v. CIT, 278 ITR 165 (Ker.)
d) Kasyapa Veda Research Foundation v. CIT, 131 ITD 370 (Cochin)
4. We have carefully considered the relevant facts, arguments advanced and the case laws cited. We direct the DIT(E) to consider the application for registration/s. 12AA in the light of above decisions. The assessee is also seeking registration under section 80G(5) of the Act. Section 80G(5) is extracted hereunder:-
"(5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-
section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :--
[(i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA)] [or clause (23C)] of section 10 :
Provided that where an institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if--
(a) the institution or fund maintains separate books of account in respect of such business;
(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and
(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;
(ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the 3 I.T.A. Nos. 895 & 896/Hyd/2012 M/s. International Bhaktivedanta Institute ============================== transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
(iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
(iv) the institution or fund maintains regular accounts of its receipts and expenditure; (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority;
[(vi) in relation to donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules 15 made in this behalf and
(vii) where any institution or fund had been approved under clause (vi) for the previous year beginning on the 1st day of April, 2007 and ending on the 31st day of March, 2008, such institution or fund shall, for the purposes of this section and notwithstanding anything contained in the 7 proviso to clause (15) of section 2, be deemed to have been,--
(a) established for charitable purposes for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009; and
(b) approved under the said clause (vi) for the previous year beginning on the 1st day of April, 2008 and ending on the 31st day of March, 2009.
As per sub-clause (vi) of sub-section (5) of section 80G, for recognition, the trust is required to be approved by the Commissioner in accordance with the Rules made in this behalf. The Rules are Rule 11AA prescribed in this regard. As per Rule 11AA, the assessee is required to make an application in Form No.10G. The application shall be accompanied by the following documents:-
4 I.T.A. Nos. 895 & 896/Hyd/2012M/s. International Bhaktivedanta Institute ============================== (1) Copy of Registration granted under section 12A or copy of Notification issued under section 10(23) or 10(23C) of the Act;
(2) Notes on activities of institution since its inception or during the last 3 years whichever is less.
(3) Copies of accounts of the institution since its inception or during the last 3 years whichever is less.
5. The Commissioner is empowered to call for such further documents or information or calls such enquiries in order to satisfy himself about the genuineness of the activities of the institution. If the Commissioner is satisfied that the condition laid down in clauses (i) to
(v) of sub-section (5) of section 80G are fulfilled, he shall record such satisfaction and grant approval. If he is not so satisfied, he shall reject the application after recording the reasons. Thus as per the provision of section 80G(5) read with Rule 11AA for granting registration, the Commissioner needs to be satisfied that the condition laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled. In the present case there is no dispute that the application for approval has been filed in Form No.10G along with the documents required to be accompanied thereto. Sub- clause (i) of sub-section (5) of section 80G requires that where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 of the Act. The assessee is registered under section 12AA of the Act. Thus sub-clause (i) is satisfied.
6. As per sub-clause (ii) of sub-section (5) of section 80G, the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of its income or assets for any purpose other than a charitable purpose. Admittedly there is no clause or rule governing the institution which contains any provision for the transfer or application of its income or assets for any purpose other than a charitable purpose. The only object of the assessee trust is for carrying out such object of 5 I.T.A. Nos. 895 & 896/Hyd/2012 M/s. International Bhaktivedanta Institute ============================== charitable nature within the definition of "Charitable purpose" as specified in section 2(15) of the Act. The condition prescribed in sub- clause (iv) of section (5) of section 80G is that the institution or fund maintains regular accounts of its expenditure is also complied with. The condition in sub-clause (v) of sub-section (5) of section 80G is that the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1960.
7. From the above it is clear that all the conditions laid down in Rule 11AA i.e. condition laid down in sub-clauses (i) to (v) of sub- section (5) of section 80G are fulfilled.
8. In respect of registration under section 80G, the scope of enquiry will be confined to finding out if the institution satisfies prescribed condition stated in sub- clauses (i) to (v) of section 80G. It does not extend to actual assessment of institution. The phrase used in sub- clause (i) of sub-section (5) of section 80G is that "where the institution or fund derives any income, such income would not be liable to inclusion in its total income". Thus what is to be seen is whether any income would not be liable to inclusion in its total income and not whether because of certain defaults prescribed in section 11 or 13, the trust is not actually held eligible for exemption under sections 11 & 12 of the Act. Once the condition laid down in Rule 11AA as also in sub- clauses (i) to (v) of sub- section (5) of section 80G are complied with, the trust is, eligible for registration under section 80G(5)(vi) of the Act.
9. In this case, the approval under section 80G of the Act was denied by the DIT (E) only on the reason that the object clause contains the clause that the activities of the trust and its objects will not be confined to India. To grant approval under section 80G of the Act, the DIT (E) can examine whether or not the conditions set out in section 80G(5) (i) to (v) are satisfied. If the assessee has satisfied the above conditions, there is no reason to deny the approval under section 80G of the Act by the DIT (E).
6 I.T.A. Nos. 895 & 896/Hyd/2012M/s. International Bhaktivedanta Institute ==============================
10. In the circumstances, we direct the DIT (E) to consider the amendment and decide the issue in accordance with law.
11. The reason for denial of registration u/s. 12AA and approval u/s. 80G(5)(vi) by DIT(E) is not justified. We, therefore, remit the entire issue back to the file of the DIT(E) who shall reconsider the assessee's application for registration u/s. 12AA and approval u/s. 80G(5)(vi) of the Act and decide the issue afresh.
12. In the result, appeals of the assessee are allowed for statistical purposes.
Order pronounced in the open court on 27th September, 2012.
Sd/- Sd/-
(SAKTIJIT DEY) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, dated 27th September, 2012
tprao
Copy forwarded to:
1. M/s. International Bhaktivedanta Institute, 90, Shaktinagar, Ramakrishnapuram, Secunderabad-500 056.
2. The Director of Income-tax (Exemptions), Hyderabad.
3. The ADIT(E), Hyderabad.
4. The DR - A Bench, ITAT, Hyderabad