State Forum Of Bankers Club(Kerala), ... vs Assessee

1 ITA No. /Coch/2010

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN

Before Shri N.R.S. Ganesan (JM) and Shri Chandra Poojari (AM)

I.T.A No. 473/Coch/2014

State Forum of Bankers Club (Kerala) vs the ITO(Tech) 1-A, Lotus Apartment O/o the commissioner of Durbar Hall Road, Kochi 682 011 Income-tax-1, Kochi PAN : AANTS7644B (Appellant) (Respondent)

Appellant by : Shri V Sathyanarayanan Respondent by : Shri M Anil Kumar, CIT

Date of hearing : 23-12-2014 Date of pronouncement : 09-01-2015

ORDER

Per N.R.S. Ganesan (JM)

This appeal of the assessee is directed against the order of the

Administrative Commissioner rejecting the claim of the assessee for

registration u/s 12AA of the Act.

2. Shri V Sathyanarayanan, the ld.representative for the assessee

submitted that the assessee trust is a state forum of bankers club. The

object of the trust was to bring all the bankers clubs under one roof for a

common purpose. Referring to the object of the trust, the ld.representative 2 ITA No. /Coch/2010

submitted that the assessee is organizing lectures and seminars for the

benefit of bank employees. According to the ld.representative, the

assessee trust is inviting senior officials from the Reserve Bank of India,

viz. the Governor, the Deputy Governor to address the bankers in the

state. By listening to the speeches delivered by the governor and the

Deputy Governor of RBI, the efficiency and capability of the bankers would

increase so as to render better service to the general public. On query

from the bench, the ld.representative for the assessee clarified that general

public does not mean the entire population of the state. A section of the

public can be considered to be general public. According to the

ld.representative, employees of the bank is a section of the public,

therefore, the benefit given to the bank employees by the trust can be

considered to be of public utility service. Referring to the order of the

Commissioner of Income-tax, the ld.representative submitted that the

Commissioner of Income-tax has misunderstood the object of the trust and

observed that the assessee trust was established for providing recreation

to its members clubs. According to the ld.representative, it is not a

recreation club, but is established for the purpose of sharing common

thoughts with regard to efficiency in the banking business. Referring to the

observation made by the Commissioner of Income-tax that no activity was

carried out by the assessee, the ld.representative for the assessee

submitted that it is not necessary for the assessee to start any activity 3 ITA No. /Coch/2010

since the application was made immediately after its establishment.

According to the ld.representative, the activity can be carried out only after

some time once the trust is established. Referring to the decision of the

Kerala High Court in the case of Medical Accident Prevention Society vs

CIT (2005) 278 ITR 165 (Ker), the ld.representative submitted that it is not

necessary for the assessee trust to start its activity. At the time of grant of

registration what is required to be considered is the genuineness of the

object of the trust. The Commissioner of Income-tax cannot travel beyond

that. According to the ld.representative, if the application for registration

was made subsequent to the establishment of the trust, then the

Commissioner may look into the activity of the trust. In this case, the

application was made immediately on establishment of the trust, therefore,

the question of looking into the activity of the trust does not arise. In fact,

according to the ld.representative, the activity was started and that the

assessee has conducted several programmes in which the Deputy

Governor of Reserve Bank of India has participated, the Governor of

Kerala has also participated in the function. Therefore, it is not correct to

say that the assessee has not started any activity.

3. On a query from the bench that by organising lectures and seminars

to the employees of the bank, the efficiency and capability of the

employees to earn profit to the banking company may increase, how it is 4 ITA No. /Coch/2010

going to help the general public, the ld.representative clarified that by

increasing the capability and efficiency of the bank employees, they will

serve the society in a better manner which ultimately benefit the general

public. Therefore, according to the ld.representative, the activity of the

assessee is general public utility. Referring to First Proviso to section

2(15) of the Act, the ld.representative submitted that the assessee is not

rendering any services to the trade or commerce. The assessee brings all

the members of the banker clubs together and organizes seminars so that

the general public may be benefited. According to the ld.representative,

the benefit derived by the individual bank employee is sufficient for grant of

registration u/s 12AA since the employees of the bank themselves form

part of a section of the society. The ld.representative further clarified that

the object of the trust does not benefit the common man on the street.

According to the ld.representative, the moment the benefit of the trust was

extended to the section of the public, viz. the employees of the bank in the

state, the assessee is entitled for registration u/s 12AA of the Act. The

ld.representative placed reliance on various case laws including the

judgment of the Supreme Court in the case of CIT vs Andhra Chamber of

Commerce 55 ITR 722 (SC) and cit VS Gujarat Maritime Board (2007) 295

ITR 561 (SC); judgment of the Kerala High Court in Commissioner of

Agricultural Income-tax vs Rubber Board 226 ITR 722 (Ker); Delhi High 5 ITA No. /Coch/2010

Court in the case of All India Management Association vs DGIT (E) 2013-

TIOL-935-HC-DEL-IT.

4. On the contrary, Shri M Anil Kumar, the ld.DR submitted that the

assessee is functioning like a apex bankers club. There are several

bankers club in the State of Kerala. The assessee is bringing all the

bankers club in the state under one umbrella by establishing an apex body

in the state. Referring to the object of the trust, copy of the trust deed filed

by the assessee, the ld.DR submitted that the assessee is organizing

lectures and seminars to benefit the banking employees. By educating the

bankers or its employees, the general public may not get any benefit. At

the best, according to the ld.DR it may increase the capability of the

employees to earn more profit for the banking companies. According to

the ld.DR, the trust was created to benefit the members clubs and not any

individual members. Referring to the impugned order of Commissioner of

Income-tax, the ld.DR submitted that the intention of the assessee trust is

to collect corporate social responsibility fund from various banks. The

ld.DR placed his reliance on the decision of this bench of this Tribunal on

in Dhathri Ayurveda Foundation ITA No.93/Coch/2013 order dated 26-07-

2013. According to the ld.DR, the CIT(A) has rightly rejected the

application for registration u/s 12AA of the Act.

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ITA No. /Coch/2010

5. We have considered the rival submissions on either side and also

perused the material available on record. We have carefully gone through

the object of the trust as per the trust deed. The object of the trust is as

follows:

"3. The object for which the Trust is established are as

follows:

a) To bring together all Bankers Clubs in Kerala under one umbrella for their common goal.

b) To arrange for lectures, seminars and talks on topics of contemporary relevance for the benefit of bank employees fraternity.

c) To unite member clubs in bonds of friendship, good fellowship and mutual understanding and activate dormant clubs.

d) To represent and bring to the attention of the state / district authorities, financial and other organizations, banking matters and problems of common nature faced by members of bankers clubs.

e) To provide required assistance, encouragement, support, etc. to member clubs to enlarge their knowledge / technical skills, talents and expertise, etc. in various other fields.

f) To undertake various charitable activities for relief of the poor, education and medical relief and the advancement of any other object of general public utility which are not in the nature of trade, commerce or business.

g) To do all such things as may be incidental or conducive to the attainment of the aforesaid objects."

7 ITA No. /Coch/2010

From the above objects of the trust it appears that the main object of the

assessee trust is to bring together all bankers club of the state under one

umbrella. The assessee is organizing lecturers and seminars for the

benefit of the employees of the bankers. The question arises for

consideration is by organizing lecturers and seminars to the employees of

the bank, who will benefit? Whether the banking company or the public at

large? This Tribunal is of the considered opinion that by organizing

lectures and seminars the bankers may benefit; the capability of the

employees of the bank may substantially increase and also the profitability

of the bank may also increase. Consequently, the general public may also

get some benefit from the banking sector. The question, therefore, arises

for consideration is whether services rendered by the assessee trust in

organizing lectures, seminars, etc. to the employees of the bank by

bringing together all bankers club under one umbrella in the State of

Kerala would amount to services rendered to a trade, commerce or

business? This Tribunal is of the considered opinion that by providing

such kind of opportunity to the employees of the bank to listening to

seminars and lecturers organized by the trust, the assessee is really

rendering service to the banking business.

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ITA No. /Coch/2010

6. The next question that would arise for consideration is when the

assessee is rendering services to the banking business by conducting

lectures and seminars, whether the assessee is entitled for recognition u/s

2(15) of the Act? We have carefully gone through the provisions of section

2(15) of the Act which reads as below:

"2(15) charitable purpose includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity 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 activity: Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is twenty five lakh rupees or less in the previous year;"

The First Proviso to section 2(15) was incorporated by Finance Act, 2008

with effect from 01-04-2009. By virtue of First Proviso to section 2(15),

rendering any service in relation to trade commerce or business for a fees 9 ITA No. /Coch/2010

cess or other consideration irrespective of its use or application cannot be

considered to be a charitable purpose. By way of another amendment, viz.

Second Provision to section 2(15), the application of first proviso is

restricted in respect of the trust or institution, whose aggregate value of the

receipt is less than Rs.25 lakh rupees. In the case on our hand, it is not

the case of the assessee that the aggregate value of the receipt is less

than Rs.25 lakh rupees. Therefore, this Tribunal is of the considered

opinion that the First Proviso to section 2(15) would come into operation.

In view of the First Proviso to section 2(15), this Tribunal is of the

considered opinion that rendering of any service to the banking business

cannot be considered to be a charitable activity or purpose. In this case,

as found by this Tribunal, the assessee is rendering services to the

banking business by organizing lectures and seminars. There may be an

incidental benefit to the customers of the bank, but it does not mean that

the assessee is doing charitable activity. This Tribunal is of the considered

opinion that the assessee is not rendering any charitable activity other than

rendering service to banking business by organizing lectures and

seminars.

7. The judgments relied upon by the assessee was rendered prior to

introduction of Provisos to section 2(15) of the Act. Therefore, this 10 ITA No. /Coch/2010

Tribunal is of the considered opinion that the judgment relied upon by the

ld.counsel for the assessee may not be applicable to the facts of the case.

8. The next contention of the assessee is that it is not necessary for the

assessee to start any activity for registration u/s 12AA of the Act. The

ld.representative placed reliance on the judgment of the jurisdictional High

Court in Medical Accident Prevention Society (supra). We have carefully

gone through the judgment rendered by the ld.Single Judge of the Kerala

High Court on a writ petition wherein the order of the Commissioner

rejecting registration was challenged. However, this Tribunal finds that a

Division Bench in the Kerala High Court in Self Employers Service Society

vs CIT (2001) 247 ITR 18 (Ker) has considered this issue and found that

the assessee can apply for registration only after commencing its activity. In view of the judgment of the Division Bench of the Kerala High Court in

the case of Self Employers Service Society (supra), the judgment of the

ld.Single Judge in the case of Medical Accident Prevention Society (supra)

may not be relevant to the facts of this case.

9. In view of the above, this Tribunal do not find any infirmity in the

order of the lower authority. Accordingly, the same is confirmed.

10. In the result, the appeal of the assessee is dismissed. 11

ITA No. /Coch/2010

Order pronounced in the open court on this 09th January, 2015.

Sd/- sd/- (Chandra Poojari) (N.R.S. Ganesan) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cochin, Dt : 09th January, 2015 pk/- copy to:

1. State Forum of Bankewrs Club (Kerala), 1-A, Lotus Apartment, Durbar Hall Road, Kochi-11

2. The ITO (Tech), Office of the CIT, Kochi

3. The DR (True copy) By order

Asstt. Registrar, Income-tax Appellate Tribunal, Cochin Bench