Income Tax Appellate Tribunal - Chennai
St.Johns Rajakumar Education And ... vs Assessee on 29 September, 2010
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH 'B'
CHENNAI
Before Shri Abraham P. George, Accountant Member and
Shri George Mathan, Judicial Member
.....
I.T.A. No. 1891/Mds/2010
Assessment Year :--
M/s. St. Johns Rajakumar Education The Director of Income-tax
And Research Trust, v. (Exemptions),
'Arcadia'. 4th Floor, Chennai.
Kamaraj Avenue, First Street,
Kasthuriba Nagar, Adyar,
Chennai-60020.
(PAN: AAJTS3068B)
(Appellant) (Respondent)
Appellant by : Smt. Pushya Sitaraman,
Sr. Counsel along with Ms.
Sree Vidya & Ms. G. Vardini,
Advocates
Respondent by : Shri P.B. Sekaran, CIT-DR
ORDER
PER GEORGE MATHAN, JUDICIAL MEMBER :
This is an appeal filed by the assessee against the order of the learned Director of Income-tax (Exemptions), Chennai in DIT(E) No.2(1360)/09-10 dated 29-09-2010.
2
I.T.A. No.1891/Mds/2010
2. Mrs. Pushya Sitraraman, Sr. Counsel along with Ms. Sree Vidya and Ms. G. Vardini, Advocates represented on behalf of the assessee and Shri P.B.Sekaran, learned CIT-DR represented on behalf of the Revenue.
3. It was submitted by the learned authorised representative that the assessee is a trust which was created by a trust deed dated 04-02-2010. It had filed an application for registration under section 12AA of the Income Tax Act, 1961 in the requisite Form No. 10A on 29-03-2010. The learned DIT had called for clarifications vide letter dated 17-08-2010 and the clarifications were also submitted by the assessee. It was the submission that the learned DIT after considering the submissions had held that though the objects of the assessee trust were purely charitable, still the activities of the trust had not yet started and consequently he refused to grant the assessee registration u/s 12AA on the ground that the satisfaction of the genuineness of the activities for fulfilling the objects could not be examined. It was the submission that the learned DIT had fairly held that the trust was free to apply again when it starts its activities significantly. It was the submission that though the learned DIT had granted the assessee the liberty to apply fresh for registration still as per the provisions of section 12A(1)(a) the assessee was duty-bound to make the application before the expiry of the period of one year from the date of creation of the trust as the trust was created in February,2010 and the first year ending was 31-03-2010 3 I.T.A. No.1891/Mds/2010 and if the assessee made the application subsequent to 31-03-2010, then it would not have the benefit of the provisions of sections 11 and 12 for the period ending 31-03-2010. It was the further submission that as per the provisions of section 12A(2) if an application has been made on or after the first day of June, 2007, the provisions of sections 11 and 12 would apply in relation to the income of the trust from the assessment year immediately following the financial year in which the application was made. It was submission that it was also brought to the attention of the learned DIT vide a letter dated 27-08-2010 that the trust proposed to purchase property for the construction of a school before December, 2010 and commence construction of the same by January, 2011. It was also the submission that it was also brought to the attention of the learned DIT that the registration u/s. 12AA would assist the trust in getting 50% exemption from the stamp duty for the purpose of registration on the purchase of the land. It was the further submission that it was also brought to the attention of the learned DIT that the managing trustee was a well-experienced academician with rich experience in the field of education and he was working as the Dean of St.Johns Residential School, Sriperumbudur. It was the submission that it was also brought to the attention of the learned DIT that the substantial contribution was being made out of the own sources of the trustees and also by obtaining from financial institutions and that the HDFC Bank had given concurrence for the term loan for the purchase and construction of the school. It was the submission that 4 I.T.A. No.1891/Mds/2010 obviously within one month of the formation of the trust an educational institution cannot be brought into existence. The verification of the documents, the purchase of the land, etc. were time-consuming. It was the submission that the fact that the Bank had also granted provisional sanction for the term loan itself showed that the activities of the trust were as per the provisions of the trust deed and the learned DIT himself had held that the objects of the trust were purely charitable. The activities done by the assessee for attaining the said purely charitable activities should have been looked into instead of looking for a running school. It was the submission that the assessee may be granted the registration under section 12AA of the Act.
4. In reply, the learned DR submitted that the assessee was unable to prove its charitable activities and consequently the learned DIT was right in denying the assessee the registration under section 12AA. The learned DR vehemently supported the order of the learned DIT.
5. We have considered the rival submissions. We have also perused the order of the learned DIT as also the questionnaire issued by the learned DIT and the replies given by the assessee. At the outset we may mention here that in the order of the learned DIT the learned DIT has specifically recorded that the assessee has filed an application in Form No. 10A for registration u/s 12AA and 5 I.T.A. No.1891/Mds/2010 Form No.10G for approval u/s 80G of the Act. We may mention here that the assessee has filed only one appeal against the order refusing to grant the registration under section 12AA. Consequently, we are adjudicating only upon the decision of the learned DIT in refusing to grant registration u/s. 12AA. A perusal of the order of the learned DIT in page 2 shows that the learned DIT has recognized that under the provisions of section 12AA the CIT/DIT is to be satisfied both on the objects and genuineness of the activities simultaneously under clause (b) of section 12AA. He then proceeds to hold that the objects of the assessee trust may be purely charitable but the activities have not yet started. The learned DIT has consequently denied the registration u/s 12AA on the ground that the assessee trust has not started any significant activity. This leads us to the presumption that the learned DIT is of the view that the objects of the assessee trust are purely charitable. Further a perusal of the order of the learned DIT at page 1 para 4 shows that the learned DIT was aware of the fact that the assessee trust is looking out for a suitable land to establish a school. A perusal of the reply given by the assessee along with the enclosures dated 27- 08-2010 shows that it was brought to the attention of the learned DIT that the intention is to run a school and that the trustee is a competent person to run such a school and the time frame for the activities had also been laid down and provisional sanction for the term loan had also be obtained from the Banks for starting the school. A perusal of the trust deed also clearly shows that the 6 I.T.A. No.1891/Mds/2010 objects of the trust are to start, open, found, establish, assist and maintain schools, colleges, boarding schools and other educational institutions for imparting knowledge. The activities which have been done by the trustees in the form of looking for the land, identifying the land, sending the papers for legal verification, obtaining the provisional sanction for the purchase of the land are all for the purpose of attaining the object being running an educational institution. In these circumstances it cannot be said that the assessee has done no activity which can be examined as has been mentioned by the learned DIT. In fact, the activities that have been done are actually the activities for attaining the objects specified in the trust deed. The learned DIT, as we have mentioned earlier, has not raised any objection against the objects of the trust. In fact it is otherwise. In these circumstances, we are of the view that the assessee trust is entitled to the registration u/s 12AA insofar as its objects are purely charitable and the activities conducted by it clearly show that they are for the purpose of attaining the objects of the trust and the genuineness of the same have not been shown to be otherwise. We may make a mention here that the fact that the assessee has brought out the reason for making its application that it would get the benefit of 50% exemption from the stamp duty itself shows the bona fides of the assessee trust. In any case as per the provisions of section 12AA(3) the liberty is available to the learned DIT to withdraw the exemption if it is found that the assessee trust is not doing genuine charitable activity. In the circumstances, the 7 I.T.A. No.1891/Mds/2010 learned DIT is directed to grant the assessee the registration u/s. 12AA of the Act as claimed by the assessee. In the circumstances, the appeal of the assessee is allowed.
7. The order was pronounced in the court on 03-01-2011.
Sd/- Sd/-
(Abraham P. George) (George Mathan)
Accountant Member Judicial Member
Chennai,
Dated the 03rd January, 2011.
H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file