I.t.a v. According To Them, Anticipating Expenditure With

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR &THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE FRIDAY, THE 7TH DAY OF FEBRUARY 2014/18TH MAGHA, 1935 ITA.No. 115 of 2011 -------------------------- [AGAINST THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, DATED 29/04/2011 IN I.T.A. NO.137/COCH/2009] .......... APPELLANT: ------------------- TELLICHERRY MINORITY WELFARE TRUST, 19/600, MARIYAMMA ROAD, PILAKOOL, THALASSERY, REPRESENTED BY ITS CHAIRMAN, K.C.SALEEM. BY ADVS.SRI.K.I.MAYANKUTTY MATHER, SMT.RUKHIYABI MOHD. KUNHI. RESPONDENT:--------------------- THE COMMISSIONER OF INCOME TAX, SAHANA BUILDING, MELE CHOVVA, KANNUR. BY SRI.P.K.R.MENON, SR.COUNSEL, G.O.I.(TAXES), SRI.JOSE JOSEPH, S.C. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 07-02-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Prv. I.T.A. NO.115/2011: APPENDIX PETITIONER'S ANNEXURES: ANNEXURE. A: TRUE COPY OF THE TRUST DEED DTD. 30/05/2003. ANNEXURE. B: TRUE COPY OF THE APPLICATION FOR REGISTRATION FILED BY THE APPELLANT DTD. 21/07/2008.BY THE APPELLANT DTD. 21/07/2008. ANNEXURE. C: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX, KANNUR DTD. 15/01/2009.INCOME TAX, KANNUR DTD. 15/01/2009. ANNEXURE. D: TRUE COPY OF THE APPEAL MEMORANDUM FILED BEFORE THE INCOME TAX APPELLATE TRIBUNAL DTD. 02/03/2009.THE INCOME TAX APPELLATE TRIBUNAL DTD. 02/03/2009. ANNEXURE. E: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2004 DTD. NIL.WITH 31/03/2004 DTD. NIL. ANNEXURE E.1: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2005 DTD. NIL.WITH 31/03/2005 DTD. NIL. ANNEXURE E.2: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2006 DTD. NIL.WITH 31/03/2006 DTD. NIL. ANNEXURE E.3: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2007 DTD. NIL.WITH 31/03/2007 DTD. NIL. ANNEXURE E.4: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2008 DTD. NIL.WITH 31/03/2008 DTD. NIL. ANNEXURE E.5: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2009 DTD. NIL.WITH 31/03/2009 DTD. NIL. ANNEXURE E.6: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2010 DTD. NIL.WITH 31/03/2010 DTD. NIL. ANNEXURE E.7: TRUE COPY OF BALANCE SHEET FOR THE YEAR ENDING WITH 31/03/2011 DTD. NIL.WITH 31/03/2011 DTD. NIL. ANNEXURE F: TRUE COPY OF THE EXTRACT OF THE BALANCE SHEET SUMMARY DTD. NIL.SUMMARY DTD. NIL. ANNEXURE G: TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DTD. 29/04/2011.TRIBUNAL DTD. 29/04/2011. RESPONDENT'S ANNEXURES: NIL. //TRUE COPY// P.A. TO JUDGE. MANJULA CHELLUR,C.J. & A.M.SHAFFIQUE, J. = = = = = = = = = = = = = = = = I.T.A. No.115 of 2011 = = = = = = = = = = = = = = = = = = = = = Dated this the 7 th day of February, 2014 JUDGMENT Manjula Chellur,CJ Appellant was the unsuccessful trust who failed in gettingregistration certificate under Section 12A of the Income Tax Act(hereinafter referred to as the Act). An application came to befiled on 21.07.2008 for registration under Section 12A of theIncome Tax Act which came to be rejected on 15.01.2009.According to the appellant, the said order was unsustainable;therefore, he preferred an appeal before the Appellate Tribunal.Aggrieved by the order of Tribunal, the appellant is before us. 2. The main contention of the appellant is, the authoritieswhile considering or processing the application for registrationunder Section 12A of the Act are not entitled to examine the saidapplication with reference to Section 13(1)(b) of the Income TaxAct. Therefore, the reasoning for the orders of Commissioner as 2. The main contention of the appellant is, the authoritieswhile considering or processing the application for registrationunder Section 12A of the Act are not entitled to examine the saidapplication with reference to Section 13(1)(b) of the Income TaxAct. Therefore, the reasoning for the orders of Commissioner as well as Tribunal is unsustainable. He also relies upon thefollowing three decisions of various High Courts to substantiatehis arguments. Fifth Generation Education Society v.Commissioner of Income-tax (1990)185 ITR 634 (All);Commissioner of Income Tax v. Jodhpur CharteredAccountants Society (2002)258 ITR 548(Raj) and un reportedjudgment of High Court of Punjab and Haryana at Chandigarhdated 5.10.2011 in ITA Nos.701 of 2010 and 189 of 2011.Placing reliance on these decisions, appellant/assessee contends,Commissioner was not required to examine the application ofincome while processing the application for registration underSection 12A of the Act. Therefore, the order of Commissioner aswell as Tribunal clearly indicates how they analysed theapplication of assessee for registration under Section 12A whichhas led to the present erroneous order under challenge. 3. According to them, anticipating expenditure with reference to a particular minority community, by referring tocertain clauses in the trust, there was no justification to prejudgethe issue. Even before computation of tax was undertaken bythe authorities, the intention of the trust in question cannot be I.T.A. No.115 of 2011 anticipated. It cannot be held that the intention is to help onlyone religious minority, therefore, hit under Section 13(1)(b) ofthe Income-Tax Act. 4. As against this, learned Standing Counsel submittingarguments for the Department contends that the clauses and thewords used in the entire document of trust, especially, the nameof the trust, restriction of beneficiaries at clause 9 of the trustdeed clearly indicates that the intention of the trust is only toextend benefits to a particular religious minority, therefore,there was justification in rejecting the application of theassessee. 5. He further contends, issuance of registration underSection 12A is mandatory, if anyone intends to seek exemptionunder Section 11 of the Act. Then Section 13 refers toconditions which have to be looked into while grantingexemption of tax under Section 11 of the Act. Therefore, unlessthe activities undertaken by applicant indicate that the activitiesare meant for general public without reference to any particularreligious group, no registration certificate could be issued. Asthe very rejection of application is with reference to Clauses in the document, appeal deserves to be dismissed. 6. We have gone through the order of Tribunal in detail. While referring to application of Section 11 of the Act underwhat circumstances it extends to, they did refer to Section 13(1)(b) in order to appreciate the justification of the applicantseeking registration under Section 12A. This is only withreference to whom the benefit was proposed to be extended.This is not with reference to computation of tax payable givingsuch exemption while computing the income. Therefore, therewas no examination of income being undertaken by theauthorities while analyzing the facts. Therefore, the argument ofthe learned counsel for the appellant that except consideringthe application under Section 12A registration, the authoritieswere not required to examine the income never occurred in thepresent case, therefore, the said argument falls to ground. 7. Then coming to the next argument, whether there is anyindication that the benefits arising out of charitable servicerendered by the trust in question were intended only to aparticular religious minority, both the authorities have gonethrough the clauses of trust in detail. I.T.A. No.115 of 2011 7. Then coming to the next argument, whether there is anyindication that the benefits arising out of charitable servicerendered by the trust in question were intended only to aparticular religious minority, both the authorities have gonethrough the clauses of trust in detail. I.T.A. No.115 of 2011 8. We have also gone through different clauses of trustand also nomenclature. In unmistakable words the heading ofthe document of the trust says 'Tellicherry Minority WelfareTrust'. Though it is declared as a public charitable andminorities trust, clause 9 indicates, the beneficiaries arefinancially poor minorities and other backward classes inTellicherry Municipality and its suburbs. 9. If the object of the trust was to help all backward classesas contended by appellant, we fail to understand why financiallypoor minority were included. If their intention were to extendthe benefit to all poor minorities as indicated in the orders of theTribunal, the minorities have to be with reference to minoritiesas declared by the Central Government. Though it refers tominorities, the trust does not further clarify whether it isreligious minority, linguistic minority or cultural minority. 10. We are unable to understand what exactly is the objectand aim of the trust in mentioning minorities and backwardclasses of Tellicherry Municipality and its suburbs. In order tounderstand what exactly is the intention, the entire document onperusal does not indicate that it is with reference to any particular minority of religion, language or culture. Even now nomaterial is brought on record which minority groups inTellicherry Municipality represent religion, language or culture.In the absence of such details by referring to minorities living inTellicherry Municipality and its suburbs, the real intention ofusing the word 'minorities' in the trust deed, according to theauthorities, with reference to a particular religious minorityseems to be justified. 11. If the intention were to be otherwise, at least some ofthe clauses of the trust had to refer to such details. If it is acharitable and religious trust, especially in the case of charity,having regard to several restrictions under Section 13 (1) of theAct (especially 13(1)(b)) if benefit is restricted to a particularreligion or class, exemption benefit will not be attracted. Nodoubt, once registration under Section 12A is secured, there isno automatic exemption of income and such exemption will beextended only with reference to factual situation. In order to getexemption, they must comply with the conditions enumeratedand the authorities must also verify whether the activitiesundertaken by the applicant is really meant for public at large or they are restricted to a particular group with reference toreligion or caste. Unless this exercise is done, it would not beproper for the authorities to blindly grant registration underSection 12A to every other applicant. As long as 12Aregistration is in existence, the assessee can claim the benefit.Without 12A registration, even if the assesee were to spendmoney on charitable activities, they are not entitled for thebenefit. Therefore, registration under Section 12A is like anentry document to secure exemption. Hence, registration is arelevant process which has to be carefully exercised by theauthority concerned. It is always Commissioner who process theapplications for registration under Section 12A and it is notentrusted to any other officer below the rank of a Commissionerof Income Tax. 12. The observation of the authorities below with referenceto the contents of the trust deed in question persuaded them toopine that the meaning and import of the word ‘apply’, havingregard to the denominational character of the trust on theholistic approach to conclude that the intention was not toextend the benefit to all minorities, but to a particular religious I.T.A. No.115 of 2011 minority. 13. It is always open to the applicant/assessee to approachthe authorities concerned after modifying the clauses in the trustclearly indicating that the charitable benefits are meant for allsections across the society and not a particular group.With these observations the appeal is disposed of. MANJULA CHELLUR,CHIEF JUSTICE A.M.SHAFFIQUE, JUDGE. sj 10/02