Matru Vandana Trust, Mumbai vs Assessee

ी डी. म मोहन, उपा य एवं ी संजय अरोड़ा, लेखा के सम ।

BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM

आयकर अपील सं./I.T.A. No. 9003/Mum/2010

Matru Vandana Trust DIT(E), 472, Mohan Niwas, Mumbai 3rd Floor, Block No.1/2B, बनाम/ Opp. Maheshwari Udyan, Vs. Matunga (Cr.), Mumbai-400 019

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. (अपीलाथ" /Appellant) : (#$यथ" / Respondent)

अपीलाथ" क% ओर से / Appellant by : Shri Dharmesh Shah

#$यथ" क% ओर से/Respondent by : Shri S. J. Singh

ु वाई क% तार+ख / सन : 04.02.2015 Date of Hearing घोषणा क% तार+ख / : 20.02.2015 Date of Pronouncement

आदे श / O R D E R Per Sanjay Arora, A. M.:

This is an Appeal by the Assessee directed against the Order by the Director of Income Tax (Exemption), Mumbai ('DIT(E)' for short) dated 25.10.2010, u/s. 12AA(1)(b)(ii) r/w s.12A of the Income Tax Act, 1961 ('the Act' hereinafter).

The issue

2. The only issue arising in the instant appeal is the validity or otherwise in law of the rejection of the assessee's application for registration u/s.12AA of the Act. The appellant-trust, formed on 05.10.2009, moved the said application with the competent 2 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

authority under the Act on 19.04.2010 in the prescribed form, furnishing the details as called for from time to time. The basis of the denial of the assessee's claim by the ld. DIT(E) is that no activity had been carried out by the appellant-trust subsequent to its creation, even up to the time its' application was disposed of by it. The ld. DIT(E), as the competent authority, is required by law, i.e., section 12AA(1)(b), to be satisfied about:

a) the objects of the trust; and b) the genuineness of its activities.

A positive satisfaction with regard to the genuineness of the activities could not be arrived at in the absence of conduct of the activities. Hence, a lack of the said satisfaction or, rather, the material that could enable the same, would result in a corresponding denial of the assessee's application for registration as a charitable trust or institution. This sums up the Revenue's case. Before us, arguments for and against this proposition were assumed by the parties, i.e., on this aspect of the matter only. The issue arising, as we discern, is a pure question of law, i.e., the power of the competent authority to deny registration solely on the ground that the assessee had not commenced its' activities.

Discussion

3. We have heard the parties, and perused the material on record. 3.1 We shall begin by reproducing the relevant part of the provision of section 12AA, which delineates the procedure to be adopted for according or otherwise registration as a charitable entity under the Act:

'Procedure for registration.

12AA. (1) The Principal Commissioner or 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;

3 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

(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 :

Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.'

3.2 Without doubt, the competent authority is, as per the scheme or procedure of registration, as contemplated u/s.12AA, required to satisfy himself about the objects of the trust and the genuineness of its' activities. For the purpose, he has the power to call for such documents or information from the applicant as he thinks necessary. How, however, we wonder the absence of any activity, by itself lead to the satisfaction qua the genuineness of the applicant's activities. Put differently, how could under such circumstances any dissatisfaction be expressed qua the genuineness of the activities?

There could after all be no presumption that either no activities would ever be carried out, or would be carried out in a manner which is not in accordance or consistent with its objects. At best, one could issue a disclaimer stating that he is under the circumstances or on the basis of the material on record unable to express any positive satisfaction with regard to the genuineness of the activities. Certainly, activity, if present, would be enquired into, i.e., as regards its genuineness. Equally, the ld. DIT(E) could also enquire into the circumstances responsible for the non-commencement of the activities by the trust or the entity seeking registration. The whole premise of the provision, as we understand from its holistic reading, is a state of satisfaction by the competent authority with regard to the nature of the objects, i.e., qua their being charitable, legitimate, etc., and a genuine and bona fide intent to pursue those objects. The decision rejecting the assessee's application could after all only be based on an absence of such satisfaction or, rather, existence of a positive non-satisfaction, i.e., dis-satisfaction, with either the appellant's objects or its' activities. A satisfaction with regard to the genuineness of the activities presupposes their existence. The law, however, does not either postulate a waiting period for the assessee to apply for registration, i.e., after its formation, or for it to carry out the activities for a certain length of time before it could seek registration, 4 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

making, implicitly, their being carried on a precondition there-for. In fact, in the myriad situations that arise in general or public life, it is difficult to stipulate such a time frame, which would vary with circumstances as also the nature and type of activity to be carried out; the project size; access to material and financial resources, etc. How could, after all, activity be carried out without adequate funding or resources at its command? And marshaling which may take time. Again, such a line of enquiry may lead to a further question as to the period of time for which the activities are on before a satisfaction qua their genuineness could be expressed. These are in fact all matters of fact, as are the various parameters, being inferences of fact, on the basis of which a decision qua the genuineness or otherwise of the activities would arise in a particular case. There could, for example, be circumstances or material on record to suggest that the trust, though purportedly for charitable purposes, and set up for long, is so for an ulterior purpose. Or, take a case where it has no plausible reason for not commencing any activity despite lapse of considerable time, so that the fact of non-commencement could be a supportive, along with the other corroborative facts and circumstances, enabling a finding of non- satisfaction qua the genuineness of the activities of the trust.

3.3 The provision of law, thus, read meaningfully and contextually, leads to an existence of dissatisfaction as regards the genuineness of its activities as a qualifying condition for denial of registration on that ground. This is further supported by the legal position that if at any time subsequently the entity is found to be pursuing activities which are not genuine or not in accordance with its objects, the registration granted could be cancelled u/s.12AA(3). This view is in fact supported by a series of decisions relied upon before us by the ld. AR, as under, so that the issue is no longer res integra:

1) DIT(E) vs. Pannalalbhai Foundation [2013] 35 taxmann.com 104 (Guj);

2) DIT vs. Foundation of Ophthalmic & Optometry Research Education Centre [2012] 254 CTR 133 (Del);

3) DIT(E) vs. Meenakshi Amma Endowment Trust [2011] 50 DTR 243 (Kar);

4) CIT vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust [2014] 362 ITR 194 (Guj);

5 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

5) Fifth Generation Education Society vs. CIT [1990] 185 ITR 634 (All);

6) Universal Welfare and Education Foundation vs. DIT(E) (in ITA No. 7730/Mum/2012 dated 06.08.2014);

7) Biomedical Foundation of India vs. DIT(E) (in ITA No. 4420/Mum/2011 dated 10.10.2012); and

8) M. L. Meyyappan vs. DIT (in ITA No. 2073 & 2074/Mds/2010 dated 19.10.2011)

As would be apparent from their reading, the courts have consistently held that the competent authority is entitled, and is rather obliged, to take into account all the circumstances to arrive at a view with regard to the genuineness or otherwise of the assessee's activities, so that though a relevant factor, could not by itself be decisive of the matter. The decision in the case of Aman Shiv Mandir Trust (Regd.) vs. CIT [2008] 296 ITR 415 (P&H), relied upon by the Revenue before us, is rendered on the facts of the case, even as was found by the hon'ble Delhi high court in Foundation of Ophthalmic & Optometry Research Education Centre (supra). The application for registration u/s.12A was made by the trust in an almost defensive manner. In the facts of that case, the activities were being carried on for more than three years prior to the application, and it was only after the discrepancies in the form of non-deduction of tax at source surfaced that it applied for registration. Substantial amounts had in fact been collected and kept in the bank in the form of fixed deposits without any corresponding charitable activity. In the present case, as explained during hearing by the ld. AR, the assessee was in fact in the process of acquiring land, i.e., for the construction of an old age home, in the name of one of it's trustees. The same being under process at the relevant time, was explained to the ld. DIT(E), and for which reference was made by him to para 3 of the impugned order. The efforts have since borne fruit, he would inform us, with the appellant acquiring land on a 99 year lease basis. The initiation of the process for acquiring the land by the trustee/s, though in their own name/s, in-as-much as a change of user of agricultural land could only be applied for subsequently and by an individual, would itself be under the circumstances regarded as 'commencement' of its activities by the applicant-trust. We have already indicated that there could be number of reasons or circumstances leading to 6 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

non-commencement of activities by an otherwise genuine trust, so that what is of prime relevance is the nature of the objects as well as an intent to pursue the same, may be in future. The other decisions cited by the ld. DIT(E) in support of his decision per the impugned order, viz. CIT vs. Agricultural Produce and Market Committee [2007] 291 ITR 419 (Bom); Sanjeevamma Hanumanthe Gowda Charitable Trust vs. DIT(E) [2006] 285 ITR 327 (Kar); and CIT vs. Red Rose School [2007] 163 Taxman 19 (All), have been pursued, to find them as inapplicable in the facts of the case. In fact, all of them turn on the facts and circumstances of their respective cases, and the only ratio that we discern is that the Revenue authorities are required to apply their mind to the matter; examining the activities being carried out, and drawing reasonable inferences there-from. The same cannot be therefore taken as supportive of the Revenue's case.

Decision

4. No dissatisfaction with regard to the objects of the trust, which represents the other limb or aspect on which the ld. DIT(E)) is required to satisfy himself, has been expressed by him, nor any such reservation stands brought out before us during hearing. Under the circumstances, we, in view of the foregoing, are of the clear view that the denial of registration by the ld. DIT(E) is not sustainable both in law and in the facts and circumstances of the case. We, accordingly, set aside the impugned order, and direct acceptance of the assessee's application. We decide accordingly.

5. In the result, the assessee's appeal is allowed.

प1रणामतः 3नधा51रती क% अपील वीकृत क% जाती है ।

Order pronounced in the open court on February 20, 2015

Sd/- Sd/-

(D. Manmohan) (Sanjay Arora) उपा य / Vice President लेखा सद य / Accountant Member मुंबई Mumbai; 9दनांक Dated : 20.02.2015 व.3न.स./Roshani, Sr. PS 7 ITA No. 9003/Mum/2010 Matru Vandana Trust vs.DIT(E)

आदे श क !त#ल$प अ%े$षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant 2. #$यथ" / The Respondent 3. आयकर आयु:त(अपील) / The CIT(A) 4. आयकर आयु:त / CIT - concerned

5. =वभागीय #3त3न@ध, आयकर अपील+य अ@धकरण, मुंबई / DR, ITAT, Mumbai

6. गाड5 फाईल / Guard File आदे शानस ु ार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai