Income Tax Appellate Tribunal - Mumbai
Paras Prerna Trust , Mumbai vs Assessee on 19 April, 2010
1
ITA No.4028/Mum/2010
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI 'C
'C ' BENCH
MUMBAI BENCHES, MUMBAI
BEFORE SHRI R V EASWAR, PRESIDENT & SHRI R K PANDA, AM
ITA No. 4028/Mum/2010
(Asst Year 2010-
2010-11)
Paras Prerna Trust Vs The Dir. Of Income Tax
C/o P M Consultancy Services (Exemption)
102 Osia Friendship Mumbai
51 Gaothan Lane No.4
Off J P Road,
Opp Ram Mandir
Andheri West
Mumbai 58
(Appellant)
Appellant) (Respondent)
PAN NO.AABTP5594K
NO.AABTP5594K
Assessee by Shri Firoze B Andhyarujina
Revenue by Shri S K Sahu/DR
PER R K PANDA, AM
This appeal filed by the assessee is directed against the order dated 19.4.2010 of the Director of Income tax (Exemption) Mumbai refusing registration under sec. 12A of the I T Act.
2 Facts of the case, in brief, are that the assessee trust filed an application in form 10A on 16.11.2009 for registration u/s 12A of the I T Act 1961. The DIT (Exemption), on examination of some of the clauses of the said trust, found that certain objects are of non charitable in nature. He, accordingly, issued show cause to the assessee trust, the relevant extract of which are as under: 2 ITA No.4028/Mum/2010
"On perusal of the trust deed, it is seen that certain objects given in the Trust Deed read as under:
71. To endeavour to evaluate benefits and detrimental effect of the provision to reservation for the backward classes on the basis of caste and social and economic backwardness. 72 To undertake investigation, research and survey and to take action for ultimate total abolition of the reservation policy in a time bound program with cooperation of the beneficiaries.
Further, on perusal of the trust deed, it is seen that object no.73,74,75,76 & 77 are basically for the furtherance of the object no.72 which is already enumerated above. The reservation policy is framed by Hon'ble Parliament and it is a constitution right of certain section of public. The above object of the trust goes against the policy of the Government. Hence you are requested to explain as to how the above activities are charitable in nature.
Clause no.94 contains object regarding starting of coaching classes which is prima facie a non charitable activity as it does not fall under the definition of 'education'.
Also clause no.201 contains object regarding advance/give/grant loan with or without security, whether personal/collateral or by way of personal guarantee of self/spouse/parents/any other persons for acquiring/buying/constructing a apartment/dwelling unit/flat/house/residence at such rate of interest and subject to such terms and conditions as the trustees may in their absolute discretion determine from time to time. This is prima-facie a commercial activity.
Hence, you are requested to explain as to how the objects/activities of the Trust referred above are charitable within the meaning of section 2(15) of the I T Act, 1961. It is also seen that the object clause is voluminous and runs into 19 pages. It is imperative for the trust to clearly outline its objects and activities which it intends to carry out. In the instant case the object clauses are myriad; hence, you are requested to clearly outline the activities the trust intends to carry out."
3 In reply, to the above show cause, it was submitted that a trust to be called as 'charitable trust' should have the following purposes:
i) Relief to poor
ii) Education and medical relief,
iii) Preservation of environment, monuments and objects of artistic or historic interest
iv) Advancement of any other objects of general public utility.3 ITA No.4028/Mum/2010
It was further submitted that if the objects involve carrying of any activity in the nature of trade, commerce or business, it shall not be charitable. 3.1 However, the DIT(Exemption) was not satisfied with the explanation given by the assessee. He noted that object no.71, which states of evaluating detrimental effect of reservation and object no.72 which states to take action for ultimate total abolition of the reservation policy in a time bound programme are clearly against the basic policy formulated by the Parliament. Further, clause no. 76 states to undertake large scale mass campaign for crating awareness regarding backward classes and clause 77 states to endeavour to cause of gradual reduction of at least 1% of reservation and fully abolish the reservation quota at all levels. According to the DIT(Exemption), the objects are blatantly defying the policies of the sovereign states and clause 76 enumerating to undertake large scale campaign is an object which calls for confrontation with Government of India. He rejected the contention of the applicant trust that all the above clauses are not owing against the provisions of constitution of India and in fact the trust intends to uplift the status of economically backward classes. He noted that plain reading of aforesaid clauses clearly lay out the intention of the trust i.e. it is against the reservation of backward classes, which is against the policy of Government of India as adopted by the Parliament. 3.2 The DIT(Exemption) further noted that clause 94 states to work for commencing coaching classes to be run and managed by most popular teachers. This activity is clearly commercial in nature. Relying on the decision of the 4 ITA No.4028/Mum/2010 Hon'ble Supreme Court in the case of Yogiraj Charitable Trust vs CIT reported in 103 ITR 777, he held that even if one of the objects is non-charitable and other objects may be charitable and absolute power is given to the trustees to make expenditure in respect of any of the object, the exemption would be lost. He accordingly, refused to grant registration u/s 12A of the I T Act. 4 Aggrieved with such order of the DIT(Exemption) the assessee is in appeal here before us with the following grounds:
i) On the facts and in the circumstances of the case, the ld DIT(Exemption) has erred in rejecting the Registration of Trust u/s 12A of the I T Act.
ii) On the facts and in the circumstances of the case, the ld DIT(Exemption) has erred n holding that certain objects of the Trust are not charitable and against the policy of the Government.
5 The ld counsel for the assessee submitted that the objections raised by the DIT (Exemption) are without any basis and the objects actually help the backward classes of the society. Referring to Article 46 of the Constitution of India, he submitted that the clause contains promotion of educational and economic interests of the Scheduled Castes and Scheduled Tribes and other weaker sections. It falls only under the directive principles and not coming under the fundamental rights. He submitted that totality of all the clauses should have been appreciated by the DIT(Exemption) instead of highlighting only on one or two clauses.
5.1 Referring to the decision of the Hon'ble Kerala High Court in the case of Medical Accident Prevention Society vs CIT reported in 278 ITR 165, he 5 ITA No.4028/Mum/2010 submitted that while considering the application under 12A, what is required to be established is that the trust or institution is a charitable one having charitable purposes. CIT having rejected petition's application u/s 12A in view of certain clauses in the preamble without giving due weightage to the impact of other clauses, the order was set aside by the Hon'lble High Court and it was directed to the CIT to pass a fresh order in accordance with law.
5.2 Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs Kamla Town Trust reported in 217 ITR 699(SC), he submitted that to find out whether the trust is a charitable one, one has to go by the express words employed in the deed.
5.3 Referring to clause 201 at page 31 of the paper book, he submitted that the clause contains the grant of advance/grant of loan with or without security to spouse/parents or other persons as mentioned therein for acquiring/buying/constructing apartment/dwelling unit/flat/house/residence at the discretion of the Trustee during the natural calamity. He submitted that this aspect was completely ignored by the DIT (Exemption). He submitted that none of the clauses of the trust deed contains any provision which is collusive with the policies adopted by the Government. Therefore, DIT(Exemption) was not justified in rejecting the registration u/s 12A of the I T Act. 5.4 The ld counsel for the assessee, further submitted that the coaching classes are on cooperative basis and there is no profit motive and no element of 6 ITA No.4028/Mum/2010 profit. Therefore, the decision relied upon by the DIT(Exemption) is not applicable to the facts of the present case.
5.5 The ld DR, on the other hand, submitted that the objects of the trust are against the policies of the Government. Referring to clause 76 of the trust deed, he submitted the same is directly in confrontation with the policies of the Government. He submitted that the assessee, in the guise of giving coaching classes is having commercial objects, which are non-charitable and is hit by the proviso to sec. 2(15) of the Act in view of the decision of the Hon'ble Supreme Court in the case of Yogiraj Charitable Trust (supra) relied on by the DIT(Exmp). Therefore, the order of the DIT (Exemption) refusing grant of registration u/s 12A is justified.
6 We have considered the rival submissions made by both the parties, perused the order of the Assessing Officer and DIT(Exemption) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied upon by both the parties. We find, the DIT(Exemption) refused the grant of registration of the trust u/s 12A of the I T Act on the ground that some of the objects are against the policies of the Government i.e. against the reservation of backward classes and further, the assessee trust is having some commercial objects in the nature of conducting coaching classes. According to the ld counsel for the assessee, the clauses of the trust deed relating to reservation of backward classes actually help the backward classes. Further, the coaching classes are run on cooperative basis and there is no profit motive. In our opinion, clause 71 & 72 of the trust deed, which are already reproduced at 7 ITA No.4028/Mum/2010 para 2 of this order contain endeavour to evaluate the benefits and detrimental effect of the provision of reservation for the backward classes on the basis of caste and social and economic backwardness and to undertake investigation, research and survey and to take action for ultimate total abolition of the reservation Policy in a time bound programme with cooperation of the beneficiaries. This, in our opinion, cannot be construed as a direct confrontation with the Government. Ours, being a democratic country, the debates/discussions, seminars, research etc., cannot be shutdown. Therefore, we do not find any merit in the logic given by the DIT (Exemption) that the motive of the trust goes against policies of the Government. Merely because some of the clauses of the trust deed provide for evaluation of the benefits of reservation and to undertake some research and survey for ultimate abolition of the Reservation Policy in a time bound programme with cooperation of the beneficiaries; the same in our opinion cannot be treated as against reservation of backwards and thereby against the policy of the Government or confrontation with the policies of the Government.
7 So far as other object of the DIT (Exemption) that the assessee trust by conducting coaching classes is indulging in commercial activity, we find merit in the submission of the ld counsel for the assessee that the same is on cooperative basis and no profit element is involved. We find clause 94 of the trust deed reads as under:
"To strive and work for commencing coaching classes to be run and managed by the most popular teachers/professor/lecturers of the same Schools/colleges on cooperative basis i.e. the income that may accrue from such classes may be shared equally by the students, teaching faculty and the management."8 ITA No.4028/Mum/2010
From the above, it cannot be said that the trust is having profit motive by carrying on trade, commerce or business. While conducting coaching classes there may be some surplus which is to be shared equally by the students, teaching faculty and the management as per the trust deed. Therefore, this in our opinion cannot be a ground for denying registration u/s 12A of the I T Act. 8 Considering the totality of the facts of the case, we are of the opinion that the ld DIT (Exemption) has not given due weightage to the various clauses of the trust deed in its proper perspective and reused grant of registration u/s 12A of the I T Act. This in our opinion is not justified. We, therefore, direct him to grant registration u/s 12A of the I T Act to the appellant trust. The grounds raised by the assessee are accordingly allowed.
9 In the result, the appeal filed by the assessee is allowed. Order pronounced on the 8th day of April 2011.
Sd/- Sd/-
( R V EASWAR ) ( R K PANDA )
President Accountant Member
Place: Mumbai : Dated: 8th April 2011
Raj*
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ITA No.4028/Mum/2010
Copy forwarded to:
1 Appellant
2 Respondent
3 CIT
4 CIT(A)
5 DR
/TRUE COPY/
BY ORDER
Dy /AR, ITAT, Mumbai
1 Draft dictated on 28 Mar 11 Sr PS
2 Draft placed before Author on 29 Mar 11 Sr PS
3 Draft proposed & Place before the 2nd JM/AM
member
4 Draft discussed/approved by 2nd Member JM/AM
5 Approved draft comes to the Sr PS Sr.PS
6 Kept for pronouncement on Sr PS
7 File sent to the Bench Clerk Sr PS
8 Date on which file goes to the Head Clerk
9 Date on which file goes to the AR
10 Date of despatch Sr PS