Is Wound Up. After Taking Note Of Various Decisions Of The High Courts, Theappeal Filed By The Assessee Was Allowed v. The Neotia University

OD-27 IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income tax)ORIGINAL SIDE IA No.GA 2 of 2018 (Old No.GA 433 of 2018) In ITAT 28 of 2018 COMMISSIONER OF INCOME TAX (EXEMPTION), KOLKATAVs.THE NEOTIA UNIVERSITY BEFORE: The Hon'ble JUSTICE T. S. SIVAGNANAM AND The Hon’ble JUSTICE HIRANMAY BHATTACHARYYADate : 13[th] December, 2021. Appearance:Mr. P.K. Bhowmik, Adv.…for the appellant. Mr. S. Kejriwal, Adv. Mr. G. S. Gupta, Adv.…for the respondent. The Court : This appeal by the revenue filed under Section 260A ofthe Income Tax Act (the ‘Act’ in brevity) is directed against the order dated23[rd] August, 2017 passed by the Income Tax Appellate Tribunal, C-Bench,Kolkata (the ‘Tribunal’) in ITA No.32 and 33/Kol/2017. The revenue has raised the following substantial questions of law forconsideration: i)Whether on the facts and circumstances of the case, even ondissolution or winding up by not having any restriction onapplication of assets for charitable purpose, the object pursued bythe assessee cannot be said to be a charitable in nature ? ii)Whether on the facts and circumstances of the case, the learnedTribunal is justified in law in holding distribution of income/fund at the discretion of State Government in the event of dissolution ispermissible though forbidden under other section 115TD of theIncome Tax Act ? iii)Whether on the facts and circumstances of the case, the learnedTribunal is justified in law in holding that even though there is norequirement of dissolution clause, registration under section 12AAof the Act can be granted even when the dissolution is against theprovision of the Income Tax Act ? We have heard Mr. P. K. Bhowmik, learned Standing Counselappearing for the appellant/revenue and Mr. S. Kejriwal, learned Counselappearing for the respondent/assessee. The respondent is an university which came into existence by a lawenacted by the West Bengal Assembly under the Neotia University Act, 2014published in the Government Gazette dated 4[th] February, 2015. Therespondent university filed an application in Form No.10A for registrationunder Section 12A of the Act and for approval under Section 80G of the Act.The appellant by order dated 31[st] October, 2016 rejected the application onthe ground that the dissolution clause is in contravention to Section115TD(1)(c) of the Act. The respondent being aggrieved by such order filedappeal before the Tribunal. The Tribunal at the first instance noted the legalposition as to what is the procedure to be followed by the appellant when anapplication is made for grant of registration under Section 12A of the Act.Secondly, the Tribunal took note of the fact that in terms of Section 45 of theAct, appropriate procedure has been contemplated in the case when the trust is wound up. After taking note of various decisions of the High Courts, theappeal filed by the assessee was allowed. is wound up. After taking note of various decisions of the High Courts, theappeal filed by the assessee was allowed. Aggrieved by the same, the revenue is before us by way of this appeal.We find that the appellant being the Commissioner of Income Tax(Exemption) Kolkata has committed gross error in rejecting the applicationand, consequently, cancelling the approval granted under Section 80G of theAct. The order dated 31[st] October, 2016 passed by the CIT(E) is an outcome ofwrong understanding of the legal decision apart from missing out ofimportant issues with regard to the facts. The Commissioner has glossed overthe provisions of the Neotia University Act, 2014 more particularly Section 45therein. That apart, the fundamental legal principle which is to be borne inmind when an application is made for registration under Section 12A of theAct is that the Commissioner is not expected to examine the application ofthe trust. All that is required to be seen is whether the activities of the trustare genuine. In the instant case, the respondent trust having been created byan Act of the West Bengal Assembly, there can be no doubt as regards thegenuinity of the trust. Thus, we find that the order passed by theCommissioner suffers from utter perversity. We also take note of thedecisions rendered by this Court in the case of CIT(Exemption) Vs. WestBengal Municipal Development Fund Trust in ITAT 29 of 2018 dated30.11.2021. In the said case also the Commissioner had rejected theapplication on the ground that the dissolution clause is defective. The saidcontention was rejected and the appeal filed by the revenue was dismissed.The operative portion of the judgement reads as follows : “The short question involved in the instant case is whether theCommissioner of Income Tax (Exemption), Kolkata, CIT (E) was right in refusingthe registration to the respondent/trust under Section 12AA of the Act solely onthe ground of the absence of dissolution clause in the Deed of Trust dated25.02.2008. The tribunal took into consideration that facts of the case andfound there is absolutely no ground for refusing the registration to therespondent/assessee. The Tribunal appreciated clause no.8.9 of the Deed ofTrust dated 25.02.2008 which provided that in the event of winding up fo therespondent/trust any property remains after the satisfaction of all its debtsand liabilities, the surplus fund, asset and other properties of the trust shall betransferred to another trust having similar object or shall vest in the StateGovernment. The Tribunal on interpretation of the said clause held that clause8.9 provides for the contingency of the dissolution and there are twoalternatives and the first of it, namely, that the property shall be transferred tothe another trust having similar object will have preference over the secondalternative wherein ti has been provided that the property shall vest in theState Government. The Tribunal rightly referred to the decision of the Hon’bleSupreme Court in Queen’s Educational Society – vs- CIT [(2012) 372 ITR 699(SC)]. The learned Counsel for the respondent/assessee submitted that therespondent/trust has been formed by the Government for the purpose ofcreating a corpus for providing facilities to the public who are in the WestBengal Municipal area. Further, reliance has been placed on the decision ofHigh Court of Rajasthan in Commissioner of Income Tax[Exemptions], Jaipur –vs- Sri Narsinghji Ka Mandir [2020] 119 Taxmann.com 476 wherein ti was heldthat the absence of dissolution clause or condition as rightly contended by theassessee therein is uncertain in future events and that cannot be a ground torefuse registration under section 12AA of the Act. We find that the Tribunalwas right in allowing the assessee’s appeal and directed the appellant togrant registration under section 12AA of the Act. We are informed by thelearned Counsel for the respondent/assessee that after the order passed bythe Tribunal the registration has been granted in favour of the respondent/assessee vide an order dated 26[th] September, 2017 and theregistration continues to remain valid as on date. In the above, the appeal is dismissed and the substantial question oflaw is answered against the Revenue”. In the light of the above, we find that there is no error in the orderpassed by the Tribunal. Accordingly, the appeal fails and the same is dismissed. Substantialquestions of law are answered against the revenue. The connected application also stands dismissed. (T. S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)