Income Tax Appellate Tribunal - Kolkata
Harsh Vardhan Charity Trust, Kolkata vs Cit, (Exemptions), Kolkata, Kolkata on 30 August, 2017
आयकर अपील य अधीकरण, यायपीठ - "B" कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH "B" KOLKATA Before Shri Aby.T Varkey, Judicial Member and Shri Waseem Ahmed, Accountant Member ITA No.285/Kol/2016 Assessment Year :2006-07 Krishna Charity Trust V/s. Commission of Income 90/31, Diamond Harbour Tax (Exemptions), Road, Kolkata-38 Kolkata [P AN No. AAATK 7682 E] अपीलाथ /Appellant .. यथ /Respondent ITA No.286/Kol/2016 Assessment Year: 2006-07 Akling Charity Trust V/s. Commission of Income 12/1, Alipore Park Road, Tax (Exemptions), Kolkata-27 Kolkata [P AN No. AAATK 4430 C] अपीलाथ /Appellant .. यथ /Respondent ITA No.287/Kol/2016 Assessment Year:2006-07 Lakshmi Trust V/s. Commission of Income 90/31, Diamond Harbour Tax (Exemptions), Road, Kolkata-38 Kolkata [P AN No. AAATL 2461 L] अपीलाथ /Appellant .. यथ /Respondent ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 2 ITA No.288/Kol/2016 Assessment Year: 2006-07 Kishore Kanti Khandelwal V/s. Commission of Income Charity Trust, 90/31, Tax (Exemptions), Diamond Harbour Road, Kolkata Kolkata-38 [P AN No. AAATK 7533 J] अपीलाथ /Appellant .. यथ /Respondent ITA No. 289/Kol/2016 Assessment Year: 2006-07 Harsh Vardhan Charity V/s. Commission of Income Trust, 90/31, Diamond Tax (Exemptions), Harbour Road, Kolkata-38 Kolkata [P AN No. AAATH 1762 N] अपीलाथ /Appellant .. यथ /Respondent ITA No.1156/Kol/2016 Assessment Year: 2006-07 Udaipur Charity Trust V/s. Commission of Income 12/1, Alipore Park Road, Tax (Exemptions), Kolkata-27 Kolkata [P AN No. AAATU 1009 P] अपीलाथ /Appellant .. यथ /Respondent ITA No.1157/Kol/2016 Assessment Year:2006-07 Ashoke Kumar Memorial V/s. Commission of Income Trust, 90/31, Diamond Tax (Exemptions), Harbour Road, Kolkata- Kolkata 38 [P AN No. AAAT A 4466 A] अपीलाथ /Appellant .. यथ /Respondent ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 3 ITA No. 1158/Kol/2016 Assessment Year: 2006-07 Nawal Kishore Kejriwal V/s. Commission of Income Charity Trust, 90/31, Tax (Exemptions), Diamond Harbour Road, Kolkata Kolkata-38 [P AN No. AAATN 5888 R] अपीलाथ /Appellant .. यथ /Respondent ITA No.1159/Kol/2016 Assessment Year:2006-07 National Agricultural & V/s. Commission of Income Scientific Research Tax (Exemptions), Foundation, 90/31, Kolkata Diamond Harbour Road, Kolkata-38 [P AN No. AAAAN 0751 G] अपीलाथ /Appellant .. यथ /Respondent ITA No.1160/Kol/2016 Assessment Year: 2006-07 Alwar Charity Trust V/s. Commission of Income 90/31, Diamond Harbour Tax (Exemptions), Road, Kolkata-38 Kolkata [P AN No. AAAT A 4429 K] अपीलाथ /Appellant .. यथ /Respondent आवेदक क ओर से/By Assessee Shri J.P. Khaitan, Sr. Advocate & Shri Pratyush Jhunjhunwala, Advocate राज व क ओर से/By Revenue Shri G. Hangshing CIT-DR सन ु वाई क तार ख/Date of Hearing 02-08-2017 घोषणा क तार ख/Date of Pronouncement 30-08-2017 ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 4 आदे श /O R D E R PER BENCH:-
These are ten appeals by different assessee(s) are directed against the different orders of Commissioner of Income Tax (Exemptions)-Kolkata u/s 12AA(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide dated 15.12.2015 & 30.03.2016 respectively for assessment year 2006-07 onwards.
Shri J.P. Khaitan, Ld. Senior Advocate & Pratyush Jhunjhunwala, Ld Advocate appeared on behalf of assessee and Shri G. Hangshing Ld. Departmental Representative represented on behalf of Revenue.
2. All these appeals are heard together and are being disposed off by way of common order for the sake of convenience. Except figures all the grounds of appeals are common, therefore, we are taking the facts of the case for A.Y 2006-07 in ITA No. 285/Kol/2016 as a lead case for the sake of convenience and to pass a consolidated order for all the appeals.
3. Assessee has raised following grounds of appeals :-
"1. For that the CIT erred in cancelling the assessee's registration under Section 12A and that too with retrospective effect from April 1, 2005.
2. For that the CIT erred in holding that -
i) no charitable activity / real charitable activity was done;
ii) activities of the assessee were not genuine;
iii) assessee had not performed as per objectives for which it was created;
iv) assessee was rotating donations from group trusts to show application of income, and his purported findings in that behalf are arbitrary, unreasonable and perverse.
3. For that further and in any event and without prejudice to the aforesaid, the CIT had no power and/or jurisdiction to cancel the registration with retrospective effect from April 1, 2005.
4. For that the order appealed against is otherwise erroneous on facts and/or in law.
The assessee craves leave to add to, alter, amend and/or modify the grounds taken herein."
ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 5
4. Only effective issue raised by assessee in all the grounds of appeal is that Ld. CIT (Ex) erred in cancelling the registration certificate of the assessee u/s 12AA(3) of the Act.
5. Before coming to the specific issue of the case, a brief note on the factual history of the case goes as under. The assessee in the present case is a trust and having a registration u/s 12A of the Act with effect from 24.01.1979.
6. A survey operation was carried out at the office premises of the assessee during the financial year 2005-06. During the survey, it was observed by AO that there are 10 trusts having their offices at the same premises. It was also revealed that all these 10 trusts belonged to one group and the list of the trusts stand as under:-
i) Akling Charity Trust
ii) Kishore Kanti Khandelwala Charity Trust
iii)Krishna Charity Trust
iv)Harsh Vardhan Charity Trust
v) Lakshmis Trust
vi) Nawal Kishore Kejriwal Charitable Trust
vii) National Agricultural & Scientific Research Foundation
viii) Ashoke Kumar Memorial Trust
ix) Alwar Charity Trust
x) Udaipur Charity Trust During the course of assessment proceedings for the year under consideration Assessing Officer observed that assessee is deriving mainly its income from source of investment such as interest, dividend from mutual fund etc. The impugned income of the assessee was applied by way of donations to a certain institutions which are part of group and having registration u/s 12A of the Act.
During the course of assessment proceedings, Assessing Officer observed that all the 10 trusts have transferred corpus donation to one another in order to claim the benefit of exemption Section 11 of the Act. As such, no charitable ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 6 activity was carried out by the group of trusts. Only small amount of money was given as donation to the outside trust just to show the genuineness of the activities so that the benefit of Section 11 of the Act could be claimed. In view of the above, AO in his assessment order u/s. 143(3) of the Act has denied the benefit of exemption u/s 11 of the Act.
7. Against the assessment order these trusts carried the matter before Ld. CIT (Ex) who has also confirmed the order of AO. Thereafter the matter was travelled to the Hon'ble ITAT Kolkata Benches which also confirmed the order of Authorities Below in ITA No. 385/Kol/2014 vide order dated 16.9.2016. On the basis of above finding the Ld. CIT(Ex) issued show-cause notice to the assessee u/s. 12AA(3) vide dated 30.10.2014 and proposed the cancellation of registration granted u/s. 12A of the Act. The copy of the show-cause notice is reproduced as under:-
"Information is received that during the financial year 2005-06 your organization was involved in circuitous transactions by rotating the same donation through inter trust donation. Money donated by the assessee trust again came back to it in the grab of donations from other trusts registered us/s 12AA of the IT Act, 1961.
Therefore, the activity of your organization was neither genuine nor in accordance to the stated objective of your organization. In view of the above facts and discrepancy, the Director of Income Tax (Exemption), Kolkata proposes to cancel the registration u/s 12AA granted to your organization. Should be revoked. You are requested to appear before the Director of Income Tax (Exemption), Kolkata through Authorised Representative on 13.11.2014 at 3.00 PM for hearing and submit your reply along with supporting documents."
In compliance thereto the assessee made submission which is complied as under:-
i) The Assessing Officer in his assessment order for the A.Y 2006-07 has denied the benefit of exemption u/s.11 of the Act. But no action was taken for the cancellation of registration certificate u/s. 12A of the Act.
ii) The time limit available u/s 263 of the Act against the order of AO has already been expired.
ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 7
iii) The allegation of Ld. CIT(Ex) that the amount donated by the assessee has come back to it has no leg to stand.
iv) Indeed the corpus donation was given by the assessee to another trust but it was given out of its current year's income. The donation received by the trust as corpus donation was retained by it and it was not forwarded to other trust. Therefore the theory of Ld. CIT(Ex) that all the group of 10 trusts are engaged in circular donation has no base.
v) In none of the case, AO has held that the activities of the trusts are ingenuine. Only benefit u/s. 11 of the Act was denied on the ground that the donation received was subsequently given to another trust.
vi) After AY 06-07 the assessee has been filing its return of income claiming exemption benefit u/s. 11 of the Act for all the AYs beginning from 2007-08 to 2015-16 respectively. All the returns filed by assessee after AY 06-07 were accepted by the Revenue up to AY 2014-15. However, Ld. CIT(Ex) disregarded the contention of assessee and cancelled the registration certificate u/s. 12AA(3) of the Act by observing as under:-
"Based on the findings of Assessing Officer, Commissioner of Income Tax (Appeals), Hon'ble ITAT, Kolkata and considering the submission of the assessee. it is concluded-
a) Rotational transactions as depicted in para (3) of this order, assessee was rotating donations from various group trusts just to show application of income.
b) Assessee was not doing any charitable activity. Even if he has done, it is nominal only.
c) Assessee has not performed as per the objectives of the trust for which purpose it was created.
d) Activities of the trust were found to be in-genuine.
e) No real charitable activities are done by assessee trusts, involved in rotation transactions.
f) It is also noted that there is time limit for cancellation of registration for in-genuine activities. Therefore the Department has every right to wait till the appeal of the assessee is decided by the Hon'ble ITAT.
g) The Assessing Officer did not deny the full benefit u/s. 11 as he is not authorized by the Act to do so, as long as, the registration u/s. 12A is not cancelled.
h) The cancellation takes effect from the year in which such in-genuine activity takes place. Till such cancellation the Assessing Officer is ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 8 bound to give benefit u/s. 11. However, once registration u/s. 12AA is cancelled, then the assessment of all the following years has to be revisited.
11. Hence, registration granted u/s. 12A to Krishna Charity Tru9st is cancelled u/s. 12AA(3) of Income Tax w.e.f. 01.04.2005, i.e. FINANCIAL YEAR 2005-06 (Assessment Year 2006-07) i.e. the year in which activities of the trust were found to be in-genuine and not at par with objectives of the trust."
Being aggrieved by this order of Ld. CIT(Ex), assessee came in second appeal before us.
8. Ld. AR for the assessee before us submitted as under:-
1) The Assessing Officer, Ld. CIT(Ex) and Hon'ble ITAT for the A.Y 2006-07 have denied the benefit of exemption11 of the Act only on the ground that no charitable activity was carried out by assessee-trust. But none of the authority has disputed the objects of the trust as well as activities of the assessee-trust.
2) It is undisputed fact that the donation was made by the assessee to another trust and another trust further made donation to another trust and so on. All these facts were duly reported under the income tax returns and there was no camouflage in the activities of the trust. As such everything was duly reported. The assessee was under the impression that donation made to other trusts as corpus will amount to charitable activity and misunderstanding of the law cannot amount to in- genuine activities of the assessee-trust.
3) There is no material available with the Ld. CIT(Ex) suggesting that the money donated by the trust has come back to it in any manner.
4) The benefit of exemption was denied to assessee for the A.Y 2006-
07 and in rest of the years, it enjoyed the benefit of exemption u/s 11 of the Act which was duly extended to it. Thus, it is clear that out of several years only in one year the benefit of exemption was not extended to the assessee. Therefore on the basis of one year the registration u/s. 12A of the Act cannot be cancelled. Even if it is presumed that the assessee ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 9 has done something wrong in a year then it cannot be inferred that the trust is in-genuine.
5) Ld. CIT(Ex) has cancelled the registration certificate with effect from 01.04.2005 i.e. financial year 2005-06 corresponding to AY 2006-07. In this regard Ld. AR submitted that Ld. CIT(Ex) has no power to cancel the registration certificate w.e.f 01.04.2005 Ld. AR in support of assessee's claim relied on Circular No.1/2011 [F.No. 142/1/2011- SO(TPL)] dated 06.04.11. The relevant extract of the circular reads as under:-
"7. Cancellation of registration obtained under section 12A 7.1 Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard.
7.2 The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of section 12A as it is not specifically mentioned in section 12AA. 7.3 Therefore, section 12AA has been amended to provide that the Commissioner can also cancel the registration obtained under section 12A as it stood before amendment by Finance (No.2) Act,1996.
7.4 Applicability- This amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011-12 and subsequent assessment years."
Thus, Ld. AR submitted the power was given to the Commissioner for the cancellation with effect from 01.06.2010 and referred on the order of ITAT Delhi Bench in the case of Delhi & District Cricket Association vs. Director of Income-tax (Exemptions) in ITA No. 3095/Del/2012 dated 13.01.2015 reported (2015) 58 taxmann.com 292 (Delhi- Trib.). However, in ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 10 the instant case, Ld. CIT(Ex) canceled the registration certificate with effect from 01.04.2005 which is ultra vires.
6. The money of the donation is available within the books of account for a charitable purpose and it has never been taken out of the stream of charitable activities. Ld. AR has also filed the activities undertaken by the assessee during the last several years which are depicted below:-
Name of the Donee & their Mode of payment Amount address Accounting year 2011-12 Swami Dayananda RTGS 2,00,000 Satbhishekam Celebration Committee (under the auspices of Sruti Seva Trust) Sivanand Math, Kali, Munger, Demand Draft 5,000/-
Bihar
2,05,000
Accounting year 2012-13
Indian Institute of Cereberal Cheque 75,000
Palsy -35/1, Taratalla Road,
Kolkata-88
75,000
Accounting year 2013-14
Aditya Bagla Son of MR. Cash 42,350
Vinod Bagla, Kailashpuri,
Hanuman Nagar, Kanker
Bagh, Patna-20 Bihar
The Bharat Sevashram Cheque 10,000/-
Sangha, 211, Rash Behari
Avenue, Kolkaata-19
52,359
Accounting year 2014-15
Sruti Seva Trust, P.O. Cheque 15,50,000
Anaikatti, Coimbatore-641108
Bihar School of Yoga, Ganga Cheque 25,000/-
Darshan, Munger, Bihar-
811201
15,75,000
The necessary receipts & other supporting evidences are enclosed on pages 47 to 59 of the paper book.
ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 11 Ld. AR also submitted that the donation received by the assessee was allowed to be accumulated @ 15% in the AY 2006-07 which implies that the activities of the trusts were duly accepted by the Authorities Below in the assessment proceedings. The Hon'ble ITAT in assessee's own case in ITA No. 385/Kol/2014 vide order dated 16.9.2016 has also given their view for considering the amount of donation received by it which was accumulated to the extent @ 15% as per the provision of Section 11(1)(a) of the Act. Thus, the orders of AO and Ld. CIT(Ex) for the AY 2006-07 got merged with the order of ITAT. Thus, in such case, Ld. CIT(Ex) passed order u/s. 12AA(3) of the Act loses his jurisdiction.
On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
9. We have heard the rival contentions of both the parties and perused and carefully considered the material on record including the judicial pronouncements cited and placed reliance upon. In the instant case before Ld. CIT(Ex) cancelled the registration certificate granted by it u/s. 12A of the Act on the ground that assessee is not engaged in any real charitable activities. There is no dispute with regard to the facts of the case. Therefore, we are not inclined to repeat the same for the sake of brevity. After considering the totality of facts we observe certain points as detailed under:-
a) Indeed there were 10 trusts registered under section 12AA of the Act and all of them were operating from one place. There were common trusty in all the trusts. There was donation of corpus fund from one trust to another trust in the form of corpus. It is also undisputed fact that all the corpus donations were given from one trust to another trust out of current year's income. In none of the case corpus donation received by assessee was given to another trust in the form of corpus donation.
There is no provision under the Act which prohibits to forward corpus donation out of the current year's income. Thus corpus donation will amount to application of income. In this regard, we find there was an ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 12 amendment which was brought by the Finance Bill, 2017 [Bill No 12 of 2017]. Section 11 of the Act which reads as under:-
"1... ...
2. ....
8. Amendment of section 11.- In section 11 of the Income-tax Act, in sub-section (1), the Explanation below clause (d) shall be numbered as Explanation 1 thereof and after Explanation 1 as so numbered, the following Explanation shall be inserted with effect from the 1std day of April, 2018, namely:-
'Explanation 2. - Any amount credited or paid, out of income referred to in clause (a) or clause (b) read with Explanation 1, to any other trust or institution registered under section 12AA, being contribution with a specific direction that they shall form part of the corpus of the trust or institution, shall not be treated as application of income for charitable or religious purposes.' From the amendment, we find that income authorities were conscious about the application of income out of corpus fund which shall not be treated as obligation but the same is applicable from 01.04.2018.Thus, it is clear prior to 01.04.2018 the money donated as corpus will amount the application of income.
b) In this connection, we also find support & guidance from the judgment of Hon'ble Gujarat High Court in the case of CIT vs. Sarladevi Sarabhai Trust - No.2 reported in 172 ITR 698 (Guj), wherein it was held as under:-
"When a donor-trust which is itself a charitable and religious trust donates its income to another trust, provisions of section. 11(1 )(a) can be said to have been met out by such donor-trust and the donor-trust can be said to have applied its income for religious and charitable purposes, notwithstanding the fact that donation is subjected to any conditions that donee-trust will treat the donation as to its corpus and can only utilise the accrued income from the donated corpus for religious and charitable purposes, and that the question whether gifted income is to be utilised by donee-trust fully for its religious and charitable purposes or whether donee-trust has to keep intact the corpus of the donation and has to utilise only the income therefrom for its religious and charitable purposes would not make the slightest difference, so far as entitlement of the donor-trust for exemption under section 11(1) goes."
c) Ld. CIT(Ex) has cancelled the registration certificate with effect from 01.04.2005 though he was delegated the power for cancellation of registration certificate with effect from Assessment Year 20011-12 as discussed above. ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 13 Thus, in our considered view, Ld. CIT(Ex) has exceeded his jurisdiction by cancelling registration certificate from earlier date i.e. 01.04.2005.
d) Ld. CIT(A)(Ex) has alleged that the activities of assessee is not in accordance to the object of the trust for which it was created. But we find that Ld. CIT(Ex) has not brought any iota of evidence suggesting that assessee's activities are not as per the object of the trust.
e) Ld. CIT(Ex) found activities of the trust in-genuine only on the basis of assessment order passed u/s 143(3) for the A.Y. 2006-07 but on perusal of assessment order we find that there is no whisper about the in-genuine activities of assessee-trust. The allegation of Ld. CIT(Ex) that the amount of donation paid by assessee has come back to it in cash, in this regard we find that there is no material available on record suggesting that such money has come back to assessee in cash form.
Without prejudice to the above even assuming that the assessee has not carried out any charitable activity then the assessee will not be eligible for exemptions u/s 11 of the Act. Under such circumstances, the registration certificate issued u/s 12A of the Act cannot be cancelled as long as the objects of the trust are within the provisions of law. The ld. CIT (Ex) has not brought anything on record suggesting that objects/ byelaws of the trust are contrary to the provisions of law. While holding so, we find support & guidance from the judgment of Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Apeejay Education Society reported in 59 taxmann.com 102 wherein it was held as under:-
"Under Section 12AA of the Act, the Commissioner, at the relevant time in the year 1999 had called for all documents and information from the respondent-assessee to satisfy himself about the genuineness of the activities of the institution and after making enquires had passed the order registering the said institution and giving it the benefit under Section 12A of the Act, which made the institution eligible for exemption from the provisions of Sections 11 and 12 of the Act. Under Section 12AA(3) of the Act, the Commissioner was to be satisfied about the activities of the said institution and if they were not genuine and the same were not being carried out in accordance with the objects of the institution he could pass the order cancelling the registration. It cannot be disputed that the respondent-assessee is engaged in carrying out its objects and the genuineness of the same has never been doubted. The allegation is regarding the alleged supply of the installation of the software and ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 14 whether the same was done by M/s. WSL or not. Merely because Sh. Sanjay D. Sonawani had given a statement, the Commissioner as such is not justified in cancelling the registration granted on 13.05.1999 w.e.f. the assessment year 2004-
05. The assessee had placed various materials before the Tribunal to show that software modules purchased were installed between 2004 to 2011 and the assessee had incurred as much as 91.71% of the receipts for the assessment year 2004-05.
Accordingly, keeping in view the peculiar facts and circumstances as noticed above, High Court are of the opinion that the Commissioner of Income Tax was not justified in passing the impugned order for withdrawing the exemption as admittedly, the respondent-assessee is carrying out educational activities by running a large number of educational institutions all over the country and, therefore, the questions of law sought to be raised do not arise."
9.1 The facts of the above case are similar to the instant case before us. In the instant case the assessee is a charitable trust duly constituted under the Deed of Trust and no flaw in its objects has been brought to our notice.
Similarly, we also rely in the judgment of Hon'ble High Court of Karnataka in the case of CIT Vs. Islamic Academy of Education reported in 59 taxmann.com 102 wherein it was held as under:-
"If trustees were misappropriating funds and were maintaining false accounts, it was open to authorities to deny benefit under Section 11 of the Income Tax Act, but that could not be ground for cancelation of registration itself."
Applying the above ratio laid down by the Hon'ble High Court of Karnataka in the case of Islamic Academy of Education (Supra), it can be concluded that in the given facts & circumstances the benefit of exemptions can be denied.
9.2 The provisions of section 12A of the Act prescribe conditions for registration of trust and make obligatory for the trust or the institution to seek registration under section 12AA of the Act, if such trust or institution intends to have the benefit of the provisions of section 11 and 12 of the Act. These provisions thus make it clear that if the trust or the institution is not registered under section 12AA of the Act, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 of the Act. Thus, in a case where registration is refused, the trust or the ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 15 institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. The Income-tax Act through section 12A has made it obligatory for charitable trusts and institutions to get themselves registered with the income-tax authorities failing which the benefit of exemption of income-tax would be denied. The requirement of registration being procedural is prescribed under section 12AA of the Act which reads as under:-
"Procedure for registration.
12AA. (1) The [***] [Principal Commissioner of] 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;"
From the above provisions, it is clear that the ld CIT(Exemption) before granting the registration certificate shall conduct necessary enquiries as he thinks fit in order to satisfy himself about the genuineness of activities of the trust. Once the ld CIT(Exemption) is satisfied with the genuineness of the activities then he will grant the registration certificate. In the instant case before us, we find that the activities of the trust have not been doubted except the corpus donation given by the assessee to other trusts. Thus in our view at the most the exemption u/s 11 of the Act will be denied to such donation. Thus, in such circumstances the registration u/s 12A of the Act cannot be cancelled. In this regard, we rely in the principles laid down by the Hon'ble Allahabad High Court in the case of CIT Vs. Red Rose School (2007) 212 CTR 394 (All). The relevant extract of the judgment is extracted below:-
ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 16 "A reading of provisions of sub-cls. (a) and (b) of s. 12AA makes it clear that the CIT has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. On being satisfied about the genuineness of the activities of the trust or the institution and also about its objects, the CIT would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 12AA, which lays down the procedure for registration, does not speak anywhere that the CIT, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere, nor against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities, may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. It is significant to mention that registration under s. 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the CIT shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under s. 12A, is actually in the activities which are genuine. Genuineness of the activities of the ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 17 trust or the institution has to be seen, keeping in mind the objects thereof, which necessarily means that the CIT shall satisfy himself about the fact that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the society, as given in its bye-laws, it has to be satisfied that the society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this. Sufficient safeguards having been given in ss. 11, 12 and 13 for assessing the income which has not been applied to the purpose of the trust or the institution, the intention of the law maker and the scope and purport of the provision is apparent while considering the question of registration."
In view of above precedent, we find that the activities/ objects of the trust have not been doubted and on the basis of same activities/ objects registrations u/s 12AA was awarded to the assessee. Simply the assessee has given corpus donation to a trust cannot be the basis for the denial of the registration certificates as discussed above.
9.3 It is also important to note that the activities of the assessee have not been doubted in all other years as discussed above. As such the activities of the trust were duly accepted by the Revenue as evidenced from the details submitted by the AR in the preceding paragraph and placed on record. The ld.
DR has not brought anything on record contrary to the finding of ld. AR. Thus the amount of donation given by the assessee trust to the other trust is very much charitable activities. In this connection the CBDT has issued instruction No. 1132 date 05.01.1978 wherein it was clarified that the payment of a sum by one Charitable Trust to another for utilization by the donee-trust towards its charitable objects is proper application of income for a charitable purpose. In view of above, we have no hesitation in reversing the order of ld. CIT(Ex) and accordingly the appeal of the assessee is allowed.
10. In the result, assessee's appeal is allowed. ITA No.285-289 & 1156-1160/Kol/2016 A.Y. 2006-07 Page 18 Coming to ITA No.286-289/Kol/2016 & ITA No.1156-1160/Kol/2016 for A.Y 06-07.
11. Since the facts are exactly identical, both parties are agreed whatever view taken in the appeal of assessee in ITA No.285/Kol/2016 may be taken in these appeals of assessee also, we hold accordingly.
12. In the result, appeals of assessee are allowed.
13. In combine result, all the appeals of assessee stand allowed.
Order pronounced in the open court 30/08/2017
Sd/- Sd/-
(Aby. T. Varkey) (Waseem Ahmed)
(Judicial Member) (Accountant Member)
Kolkata,
*Dkp
&दनांकः- 30/08/2017 कोलकाता ।
आदे श क
त ल प अ े षत / Copy of Order Forwarded to:-
1. आवेदक/Assessee-Krishna Charity Trust/Lkshmi Trust/Kishore Kanti Khandelwal Charity Trust/Harsh Vardhan Charity Trust/Ashoke Kumar Memorial Trust/ Nawal Kishore Kejriwal Charity Trust/National Agricultural & Scientific Research Foundation/Alwar Charity Trust 90/31, Diamond Hrarbour Road, Kolkata-38,/Akling Charity Trust/Udaipur Charity Trust/12/1 Alipore Part Road,Kolkata-27
2. राज व/Revenue-CIT (Ex), Kolkata
3. संब1ं धत आयकर आय2 ु त / Concerned CIT Kolkata
4. आयकर आय2 ु त- अपील / CIT (A) Kolkata
5. 5वभागीय 8त8न1ध, आयकर अपील य अ1धकरण, कोलकाता / DR, ITAT, Kolkata
6. गाड; फाइल / Guard file.
By order/आदे श से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील य अ1धकरण, कोलकाता ।