Nashik District Security Guards ... vs Assessee

Nashik District Security Guards Board, 1st Floor, Hotel Zankar, Near Gnjmal Bus Stop, Nashik - 422 001. PAN : AAAJN0532E .... Appellant

Vs.

Commissioner of Income Tax-I, Nashik. .... Respondent

Assessee by : Mr. Abhishek Tilak & Mr. Vinayak Joshi Department by : Mr. A. K. Modi

Date of hearing : 16-01-2015 Date of pronouncement : 20-02-2015

ORDER

PER G. S. PANNU, AM

By way of the present appeal, assessee has challenged the order of the

Commissioner of Income Tax-I, Nashik (in short "the Commissioner") dated

30.09.2010 denying registration to the assessee u/s 12A(1)(a) of the Income

Tax Act, 1961 (in short "the Act").

2. The applicant before us is constituted as per the Maharashtra Private

Security Guards (Regulation of Employments and Welfares) Act, 1981. The

basic object of establishing the assessee Board is to regulate the employment

of Private Security Guards in factories and establishments in the State of

Maharashtra and for making better provisions for the terms and conditions of

their employment and welfare. The objects of the assessee have noted by the

Commissioner in para 2 of his order, as under :-

2 ITA No.1379/PN/2010

"(i) Protect the casual, unorganized Pvt. Guards, from the exploitation by ensuring full and proper payments of wages due to them and provide security of work.

(ii) Ensure that the guards are employed properly.

(iii) Ensure benefits to the guards in the form of Provident fund, gratuity, bonus, compensation for injury, medical benefits, etc.

(iv) Ensure welfare and safety measures such as housing for the guards, providing scholarships to the wards of the guards, providing full fledge Hospitalization facility, maternity benefits and free medical treatment to the guards, etc."

3. The claim of the assessee was that its activities are falling within the

purview of section 2(15) of the Act, which defines 'charitable purpose', as its

activities are towards advancement of an object of general public utility. The

Commissioner has denied the registration to the assessee by way of the

impugned order.

4. As per the Commissioner, the benefit of the scheme is available only

those employees and employers after payment of registration fee as per

clause 17 of the Scheme. It was, therefore, contended by the Commissioner

that the object of the assessee Board is not of general public utility and the

benefit does not extend to those security guards to whom the scheme does

not apply. The Commissioner has also referred to section 3(1) of the

Maharashtra Private Security Guards (Regulation of Employment and Welfare)

Act, 1981 to say that a levy is collected by the Board from the employers and

then distributed to the security guards after deducting statutory dues. It was

noted by the Commissioner that the assessee Board collects from the

registered employers amounts other than wages which is retained as a levy for

incurring administrative expenses, etc.. The Commissioner noted that the levy

so collected is kept with the assessee Board and invested in proper funds. On

this basis, the Commissioner noticed that assessee Board was providing

services to the employers who were engaged in business and therefore it was

hit by the proviso to section 2(15) of the Act, which was introduced w.e.f. 3 ITA No.1379/PN/2010

01.04.2009. It was, therefore, held by the Commissioner that the assessee

was not entitled to registration u/s 12A(1)(a) of the Act.

5. At the time of hearing, the Ld. Representative for the assessee

vehemently pointed out that a similar Board constituted under the Maharashtra

Private Security Guards (Regulation of Employment and Welfare) Act, 1981

for Brihan Mumbai and Thane District was granted registration by the Tribunal

vide order in ITA No.2080/Mum/2008 dated 30.04.2010 on an appeal filed

after rejection of registration by the Commissioner. The Ld. Representative

pointed out that the objection of the Commissioner that the benefit of the

scheme did not extend to all the security guards has been dealt with by the

Mumbai Bench of the Tribunal in the case of Security Guards Board for Brihan

Mumbai and Thane (supra).

6. In this context, we find that the Mumbai Bench of the Tribunal in its

order dated 30.04.2010 (supra) has made the following discussion :-

"7. We have noted that the basic objection of the Id. Director is that the assessee cannot be said to be engaged in object of "general public utility"

as the assessee has provided various welfare measures for registered security guards only. This, according to the Id. Director, amounts to pursuing objects which are for a particular section of society. There is a fallacy in this approach inasmuch as what the Id. Director ought to examine at the stage of granting registration is confined to genuineness of activities and objects of the trust. Once it is not in dispute that the objectives of the applicant trust are for general public utility, the registration cannot be declined on the ground that the manner in which these objects are being pursued may invite disqualification from exemption. As evident from the preamble of the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Act, 1981, under which the applicant Board is set-up, the objects of the Board are clearly of general public utility. The said preamble, inter-alia, provides as follow:-

"An Act for regulating the employment of private Security Guards employed in factories and establishments in the State of Maharashtra and for making better provisions for their terms and conditions of employment and welfare, through the establishment of a Board therefor and for matters connected therewith.

WHEREAS both Houses of the State legislature were not in session; AND WHEREAS, the Governor of Maharashtra was satisfied that circumstances existed which rendered it necessary for him to take 4 ITA No.1379/PN/2010

immediate action to make a law for regulating the employment of Private Security Guards employed in factories and establishment in the State of Maharashtra and for making better provisions for their terms and conditions of employment and welfare, through the establishment of a board therefore, and for matters, connected therewith, and, therefore, promulgated the Maharashtra Private Security Guards (Regulation of Employment and Welfare) Ordinance, 1981 (Mah. Ord. V of 1981) on the 29th June 1981;

AND WHEREAS it is expedient to replace the said Ordinance by an Act of the State Legislature; it is hereby enacted in the Thirty Second Year of the Republic of India as follows-:

8. A plain reading of the above extracts from the legislation would show that objective of setting up the trust is overall welfare of private security guards which has been an unorganised sector. Clearly, the regular employees of commercial and industrial establishments need not be covered by this special legislation because, as employees of respective commercial industrial or other establishment, their legitimate interests are taken care of. Therefore, merely because those security guards are excluded from the scope of benefits by the Board, it cannot be said that the Board is only for a particular section of general public. Ld. Director has been swayed by the considerations which are not really relevant.

9. The assessee Board is a Government run organization and it is not even the case of the Revenue, and rightly so, that activities of the assessee are not genuine. Once activities are genuine and objects are of general public utility as is the situation on the facts of this case, registration cannot be declined. As for the ineligibility of exemption of the assessee due to the points raised by the Id. Director that aspect of the materials to be examined by the Assessing Officer at the time of assessment. As held by a co-ordinate bench in the case of Agarwal Mitra Mandal Trust Vs DIT, 109 (Mum Trib) TTJ 129, an object beneficial to the section of public is an object of general public utility and to serve a charitable purpose, it is not necessary that the object should be to benefit whole of the mankind, or all persons in a country or state. This co-ordinate bench has further held that under section 12AA, the powers of the DIT are limited to make enquiries with a view to satisfy himself about the genuineness of activities and objectives of trust. On both of these counts, on the facts of this case, the assessee does not fail."

7. As per the Tribunal, merely because a category of security guards are

excluded from the scope of the benefit of assessee Board, it cannot be said

that the Board is constituted for a particular section of general public. It was

pointed out that assessee Board is a Government run organization and its

activities cannot be doubted. The Tribunal also referred to the decision of the

Co-ordinate Bench in the case of Agarwal Mitra Mandal Trust (supra) to say

that in case of an organization carrying on object of general public utility, it is

not necessary that the object should be to benefit whole of the mankind or all

persons in a country or state. In our considered opinion, the aforesaid 5 ITA No.1379/PN/2010

decision of the Mumbai Bench of the Tribunal, clearly covers the objection

raised by the Commissioner in the present case.

8. Further, the Commissioner has referred to the first proviso to section

2(15) of the Act which has been inserted by the Finance (No.2) Act, 2009

w.r.e.f. 01.04.2009. In terms of the said proviso where the object is of

advancement of general public utility, it shall not be a charitable purpose if it

involves the carrying on of any activities in the nature of trade, commerce or

business or any activity of rendering any service in relation to any trade,

commerce or business for a cess or fee or any other consideration,

irrespective of the nature of use or application or retention of the income from

such activities. On the basis of the aforesaid proviso to section 2(15) of the

Act, it is sought to be made out by the Commissioner that since the assessee

Board is to collect a levy from the companies/establishments registered with it,

therefore, its activities can no longer be taken as for 'charitable purpose'.

9. We have considered the aforesaid objection and find that the activities

of the assessee Board have not been appreciated by the Commissioner in its

correct perspective. It is abundantly clear as per the provisions of the

Maharashtra Private Security Guards (Regulation of Employment and Welfare)

Act, 1981 that the said legislation is intended to regulate the employment of

private security guards employed in factories and establishments in the State

of Maharashtra for making better provisions in the terms and conditions of

their employment and welfare through the establishment of the Boards. The

applicant Board before us is with regard to the Nashik District in Maharashtra.

The Maharashtra Private Security Guards (Regulation of Employment and

Welfare) Act, 1981 further prescribes that the State Government by means of

a scheme provide for the registration of the employers and security guards.

The said statue also provides for deciding the rate of services, payment, 6 ITA No.1379/PN/2010

overtime payment, leave with wages, gratuity, etc.. The statute also provides

for deciding the time within which should be registered principal employer are

to remit the wages payable to the registered security guards. The statute also

provides for constitution of any fund or funds including, Provident Fund for the

security guards. The statute also provides for the scheme by which the cost of

operating the scheme is to be defrayed. The Government of Maharashtra is

also empowered to provide for constituting the authority who shall be

responsible for the administration of the scheme. The statute also provides for

establishment of Boards, who are under the superintendence and control of

the Government of Maharashtra. In-fact, the statute also provides the manner

in which the property, funds and assets of the Board are to be held and

applied subject to the provisions and for the purposes of the scheme

formulated under the said statute. We are enumerating the aforesaid clauses

of the Maharashtra Private Security Guards (Regulation of Employment and

Welfare) Act, 1981 only to point out that the legislature has enacted the

aforesaid statute not with the purpose of carrying out of any trade, commerce

or business or any activity of rendering any services in relation to any trade,

commerce or business. Ostensibly, the said objectives are for regulating the

employment of private security guards employed in factories and

establishments in the State of Maharashtra and for making better provision for

terms and conditions of their employment and welfare. Clearly, it is a welfare

measure of the Government of Maharashtra and in our view, the activities of

the Board cannot be said to be falling foul of the proviso to section 2(15) of the

Act, as contended by the Commissioner. We are unable to affirm the

aforesaid stand of the Commissioner.

10. At the time of hearing, the Ld. Representative pointed out that similar to

the Maharashtra Private Security Guards (Regulation of Employment and

Welfare) Act, 1981, the State of Maharashtra also enacted the Maharashtra 7 ITA No.1379/PN/2010 Mathadi, Hamal and Other Manual Workers (Regulation of Employment and

Welfare) Act, 1969 under which Amravati Mathadi and Unprotected Labour

Board, Amravati was constituted. The Ld. Representative pointed out that the

two statues enacted by the State of Maharashtra are similar, as one of them

deals with the private security guards employed in factories and establishment

in the State of Maharashtra and other deals with unprotected manual workers

employed in certain employments in the State of Maharashtra. It was pointed

out that both the statues are pari-materia. The Ld. Representative pointed out

that Amravati Mathadi and Unprotected Labour Board, Amravati constituted by

Government of Mahrashtra u/s 6 of the Maharashtra Mathadi, Hamal and

Other Manual Workers (Regulation of Employment and Welfare) Act, 1969

was granted registration by the Commissioner of Income Tax-III, Nagpur u/s

12AA of the Act vide order dated 27.09.2012. It has also been pointed out

that the Akola-Washim-Buldhana District Mathadi and Unprotected Labour

Board constituted u/s 6 of the Maharashtra Mathadi, Hamal and Other Manual

Workers (Regulation of Employment and Welfare) Act, 1969 was also granted

the registration by the Commissioner of Income Tax-I, Nagpur vide order

dated 05.09.2012, copies of which has been placed on record. It was,

therefore, contended that in similar situation the impugned passed by the

Commissioner is unsustainable.

11. In our considered opinion, the objections raised by the Commissioner

are not germane to reject the assessee's plea for registration u/s 12A(1)(a) of

the Act. In view of the aforesaid discussion and having regard to the entirety

of facts and circumstances of the case, we hereby set-aside the impugned

order of the Commissioner and direct him to allow registration to the assessee

u/s 12A(1)(a) of the Act in terms of the application moved by the assessee

before him on 31.03.2010.

8 ITA No.1379/PN/2010

12. In the result, the appeal of the assessee is allowed, as above.

Order pronounced on 20 th February, 2015.

Sd/- Sd/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER

Pune, Dated: 20 th February, 2015.

Sujeet

Copy of the order is forwarded to: - 1) The Assessee; 2) The Department; 3) The CIT-I, Nashik; 4) The DR "B" Bench, I.T.A.T., Pune; 5) Guard File. By Order //True Copy//

Assistant Registrar I.T.A.T., Pune