Ita/687/2009 Of Sri Narayana Guru Prasaditha Sangha v. The Commissioner Of Income Tax

1| () IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 14 DAY OF JULY, 20195 PRESKBNT THE HON'BLE MR. JUSTICE VINEET SARAN ANTI THE HON’BLE MR. JUSTICE ARAVIND KUMAR ITA NO.687 / 20 BETWEEN: SRI NARAYANA GURUPRASADITHA SANGHA,SHUNTILPADAVU,NIDDODI VILLAGE,|KARKALA TALUK-5/7/4 22REP. BY [TS PRESIDENT|oRI N. CHANDAYA,AGKD ABOUT 65 YBARS9/O SRI. BASAPPA MAJARI. _ APPBRLLANT (BY SMT. JINEETHA CHATRJEE FORSRI. S. PARTHASARATHI, ADVOCATE) AND: THR COMMISSIONER OFINCOME TAX,C.R.BUILDING, ROOM NO.1CENTRAL REVENUE BUILDING, ATTAVARA, MANGALORE-575 OO1. ...RESPONDENT (BY SRI E.I. SANMATHI AND SRI.K.V. ARAVIND,ADVOCATES) 2 THIS APPEAL IS FILED UNDER SECTION J6O0A OFINCOME TAX ACT, 1961 PRAYING TO FORMULATE THESUBSTANTIAL QUESTIONS OF LAW STATED THEREINAND ALLOW THE APPEAL AND SEI ASIDE THE ORDER.ISSUEDBY|THBKITATBANGALORE INNO. 4/BNG/2009, DATED 29.05.2009. | ITA | THIS APPEAL IS COMING ON FOR HEARING THIS.DAY,ARAVINDKUMARJ,DBLIVEREDTHERKOLLOWING: JUDGMENT Assessee has filed this appeal challenging thecorrectness and legality of the order passed by|Income Tax Appellate Tribunal, Bangalore Bench ‘B’,Bangalore dated 29.05.2009 in ITA No.4/Bang/2009whereunder appeal filed by the assessee questioning|the order of Commissioner for Income Tax, Mangalorewho had rejected the assessee’s application filed|under Section 80G of the Income Tax Act, 1961 (for|short “‘Act’) came to be affirmed. 2 |Appellant(hereinafterreferredTOas|‘assessee) is a society registered under the Karnatakasocieties Registration Act, 1960. It was granted| registration under Section 12A and also approval|under Section 80G(5)(vi) of the Act with effect from|17.02.2004 to 31.03.2005. Thereafter, continuation|of the approval granted under Section 80G(5)(v1) of|the Act was granted with effect from 01.04.2005 to 31.03.2008. On an application made for continuanceof approval on 06.03.2008, it was proposed to be|rejected by the respondent and as such, notice came|to be issued which was duly replied by the assessee.Thereafter, application for continuance of recognitioncame to be rejected by the respondent. Assessee|unsuccesstully challenged the same before Tribunal|and as such, present appeal has been presented to this Court. 3.|We have heard the arguments of Smt.|Jineetha Chatterjee, learned Advocate appearing on behalf of Sri S Parthasarathy for appellant — assesseeand Sri E.I.Sanmathi, learned Advocate appearing for|Respondent — Revenue. 4 4It is the contention of Smt Jineetha|Chatterjee , learned Advocate appearing for the >appellant - assessee that respondent was not justifiedin rejecting the application for continuance olfrecognition granted to appellant under Section|80G(95)(vi) of the Act without examining as to whetheraims and objects of the assessee — society had been|fulfilled and charitable object with which it was|formed has been achieved or not and as such, she.contendsthat.orderoT|theCommissioner1Serroneous.Shewould|alsocontendthat|Commissioner as well as ‘Tribunal erred in noconsidering the fact that assessee — Trust had not|carried on any activity which was hit by proviso to section 2(15) of the Act and reply given to the|respondent indicated that donations which had been.received by the assessee had been utilised for the|purpose envisaged under the objects of the Trust and ©1tsfulfillment.Non-consideration|ot saidvital 5 evidence available on record by the respondent has|resulted in miscarriage in the administration of justice. Hence, she prays for answering the|substantial questions of law formulated in the appealmemorandum in favour of the assessee and against|the revenue. 5 evidence available on record by the respondent has|resulted in miscarriage in the administration of justice. Hence, she prays for answering the|substantial questions of law formulated in the appealmemorandum in favour of the assessee and against|the revenue. 5 |Per contra, Sri E.Il.Sanmathi, learnedAdvocate appearing for the revenue would support|the orders passed by the authorities and contends|that assessee — Trust having obtained registration|under Section 12A of the Act on 17.02.2004, had not.carried out the object for which Trust was establishedeven aiter lapse of four years and as such, rejection otrenewal is just and proper and as such, he prays for|dismissing the appeal by answering the substantial|questions of law in favour of the revenue. 6 6. This Court, vide order dated 21.10.2009| has admitted the appeal to consider the following|substantial question of law: “(a)WhethertheTribunalWaS justified in alleging that, mereconstruction of a building for thePUT POSCOT carryingOUTOT activities for the advancement otany objects of general publicutility like providing venue forpublic meeting to promote unityotbrotherhood|wouldnotconstitute charitable activity todeny continuance of approvalunder Section 8OG(95)(vi) of theAct?justified in alleging that, mereconstruction of a building for thePUT POSCOT carryingOUTOT activities for the advancement otany objects of general publicutility like providing venue forpublic meeting to promote unityotbrotherhood|wouldnotconstitute charitable activity todeny continuance of approvalunder Section 8OG(95)(vi) of theAct? (b)WhenAppellanthaserantedregistration under Section 12A)and also approval under Section|SOG(9)(vi) oT theActand|continuance for such approval in|preceding years under similarcirclimstancesthen,whetherTribunalWaS justified1n ding upholthe denialotcontinuance.OT|approvalsubsequentlyunder.Sectionregistration under Section 12A)and also approval under Section|SOG(9)(vi) oT theActand|continuance for such approval in|preceding years under similarcirclimstancesthen,whetherTribunalWaS justified1n ding upholthe denialotcontinuance.OT|approvalsubsequentlyunder.Section subsequently80G(5)(vi) of the Act?80G(5)(vi) of the Act? (c)Whetherconstruction|oT abuilding to enable carrying outAppellant’s objects can be held as"inadequatefor.grant|oT continuance of approval undersection 80G(5)(vi) of the Act whensuch continuance was requiredbuilding to enable carrying outAppellant’s objects can be held as"inadequatefor.grant|oT continuance of approval undersection 80G(5)(vi) of the Act whensuch continuance was required T| for.carryingOUTOT activityconcerning advancement of objectotgeneralpublicutilityasprovided under Section 2(195)? (d)Whether the proviso to Section2(15) of the Act would apply tojustify the denial of continuanceotapprovalunder.Section80G(5)(vi) of the Act when theconstructionot buildingforcarrying out of the object of thesociety was under progress?”2(15) of the Act would apply tojustify the denial of continuanceotapprovalunder.Section80G(5)(vi) of the Act when theconstructionot buildingforcarrying out of the object of thesociety was under progress?” TSHavingheardthelearnedAdvocatesappearing for parties and on perusal of the records, itwould emerge that assessee -Trust was granted|registration under Section 12A of the Act and also|approval under Section 8O0G(95)(vi1) of the Act 17.02.2004 upto 31.03.2005. Same was continuedwith effect from 01.04.2005 and upto 31.03.2008 by|order dated 04.10.2005 (Annexure-E) and thereafter|assessee sought for continuance of the approval|eranted under Section 8O0G(95)(vi) of the Act bsubmittingallapplicationOT)06.03.2008.Respondent issued a show cause notice to the| 8 assessee proposing to reject the application. Same|was resisted to by the assessee by filing detailed|objection, copy of which has been made available by|the learned Advocate appearing for the assessee|during the course of arguments. Subsequently, the|Commissionervideorder.dated2YA28S8.11.(Annexure-G)rejectedthe|applicationforcontinuation of the recognition. 8 assessee proposing to reject the application. Same|was resisted to by the assessee by filing detailed|objection, copy of which has been made available by|the learned Advocate appearing for the assessee|during the course of arguments. Subsequently, the|Commissionervideorder.dated2YA28S8.11.(Annexure-G)rejectedthe|applicationforcontinuation of the recognition. 3.|Perusalot thesaid|order.dated"28.11.2008 which is at Annexure-G would indicatethat there is neither consideration of objections filed|by the assessee for rejecting the application ofassessee nor the respondent has examined as to|whether the conditions laid down in clause (vi) of|sub-section (5) of Section 80G of the Act is either|fulfilled or not fulfilled, for rejecting the application|for renewal. Assessee had carried said order otrejection in appeal before the Tribunal by filing an|appeal and even the appellate Tribunal after| considering the grounds urged by the assessee has|held that rejection order is justifiable. Perusal of theorder ot Tribunal dated 29.05.2009 would also'indicate that there are no reasons forthcoming as to|why order of rejection is sustained, except making a_passing reference to the fact that construction of the|building by the assessee would by itself not|constitute granting of relief for the poor or it would besufficient to hold such activity would amount'charitable purpose. It is not in dispute thatregistration|eranted to the respondent-assessee|under Section 12A of the Act is in force or vogue as on date and the Commissioner while examining the|application for approval of an institution or fund.under Section 80G of the Act is required to comply|with Rule 11AA of Income Tax Rules, 1962, which.reads as under:| “Requirements for approval of an_institution or fund under Section|S80O0 LILA. (1) The application for approvalof any institution or fund under clause (vi) of sub-section (5) of Section 80G|shall be in Form No.10G and shall be!made in triplicate. (2)Theapplication|shallbe.accompanied by the _ followindocuments, namely;-accompanied by the _ followindocuments, namely;- &1'CopyOT|registrationeranted under Section 12A|OT|COPYot notificationissuedunder.Section10(23) or 10(23C);eranted under Section 12A|OT|COPYot notificationissuedunder.Section10(23) or 10(23C); &11'NotesOT]activitiesot institution or fund since itsinception or during the lastthree years, whichever is/less;institution or fund since itsinception or during the lastthree years, whichever is/less;&111'Copies of accounts of theinstitutions or fund since|its inception or during the|last three years, whichever|is less.institutions or fund since|its inception or during the|last three years, whichever|is less. &G'The Commissioner may call for|suchfurther|documentsOT|intormation from the institution|or fund or cause such inquiriesto be made as he may deem|necessary in order to_ satisfyhimself about the genuineness ofthe activities of such institution|or fund. suchfurther|documentsOT|intormation from the institution|or fund or cause such inquiriesto be made as he may deem|necessary in order to_ satisfyhimself about the genuineness ofthe activities of such institution|or fund. (4)WheretheCommissioner.1S satistied that all the conditionslaid down in clauses (i) to (v) ofsub-section (5) of section 80G arefulfilled by the institution orfund,heshallrecordsuchsatistied that all the conditionslaid down in clauses (i) to (v) ofsub-section (5) of section 80G arefulfilled by the institution orfund,heshallrecordsuch satisfaction in writing and grantapproval to the institution orfund specifying the assessment.year or years for which theapproval is valid. (4)WheretheCommissioner.1S satistied that all the conditionslaid down in clauses (i) to (v) ofsub-section (5) of section 80G arefulfilled by the institution orfund,heshallrecordsuchsatistied that all the conditionslaid down in clauses (i) to (v) ofsub-section (5) of section 80G arefulfilled by the institution orfund,heshallrecordsuch satisfaction in writing and grantapproval to the institution orfund specifying the assessment.year or years for which theapproval is valid. (9)WheretheCommissioner 1S satistied that one or more of theconditions laid down in clauses (1)to (v) of sub-section (5) of Section80G are not fulfilled, he shallrejectthe applicationforapproval,after|recordingthereasons for such rejection inwriting:satistied that one or more of theconditions laid down in clauses (1)to (v) of sub-section (5) of Section80G are not fulfilled, he shallrejectthe applicationforapproval,after|recordingthereasons for such rejection inwriting: ProvidedthatThoorderoT rejection of an application shallbe passed without giving theinstitutionOT|fundan|opportunity of being heard.rejection of an application shallbe passed without giving theinstitutionOT|fundan|opportunity of being heard. (6)The time limit within which the|CommissionershallPassallorder either granting the approvalor rejecting the application shall|not exceed six months from the|date on which such applicationwas made:CommissionershallPassallorder either granting the approvalor rejecting the application shall|not exceed six months from the|date on which such applicationwas made: Provided|that in computing the|period of six months, any time|taken by the applicant in notcomplying with the directions of the Commissioner under sub-rule(3) shall be excluded. * 12 OQ Perusal of the above Rule would indicate|that an applicant is required to indicate in the.application about activities of the institution or fund.collected since its inception or during the last three|years whichever is less including furnishing of|Registration Certificate obtained under Section 12A|and copies of its accounts since inception or last|three years, whichever is less and in the event of|Commissioner not being satisfied with the details|furnished by the applicant, he is empowered under|sub-rule (3) of Rule 1IAA of the Rules to call for|further documents or intormation from the institutionor fund or cause such enquiry as he deems necessaryin order to satisfy himself the activities of the|institution or fund is genuine. After calling for suchinformation|OTdetailsOTparticulars,1T theCommissioner is satisfied that all the conditions laid|down under clauses (i) to (v) to sub-section (5) of|section 80G are fulfilled, he would issue approval as otherwise, he would reject the application for|approval by recording reasons for such rejection and|communicate the same to the applicant. 10.|At the cost of repetition, it requires to be|noticed that order of rejection of renewal of|recognition dated 28.11.2008 — Annexure-G is berelitof reasons. On the ground of order of rejection being|not a speaking order which has been affirmed by theTribunal in a perfunctory manner, we are of the|considered view that both the orders cannot be!sustained and are liable to be set aside. In view otthe fact that objections came to be filed by the|assessee — applicant to the rejection proposed by|respondent indicating that it had taken steps to fulfillthe objects of the Trust by not only constructing|‘Samudaya Bhavana’ but also medical treatment saidto have been given by its ‘Mumbai Samithi’ apart|from distribution of books to the needy, are all|aspects which was required to be examined bDy 10.|At the cost of repetition, it requires to be|noticed that order of rejection of renewal of|recognition dated 28.11.2008 — Annexure-G is berelitof reasons. On the ground of order of rejection being|not a speaking order which has been affirmed by theTribunal in a perfunctory manner, we are of the|considered view that both the orders cannot be!sustained and are liable to be set aside. In view otthe fact that objections came to be filed by the|assessee — applicant to the rejection proposed by|respondent indicating that it had taken steps to fulfillthe objects of the Trust by not only constructing|‘Samudaya Bhavana’ but also medical treatment saidto have been given by its ‘Mumbai Samithi’ apart|from distribution of books to the needy, are all|aspects which was required to be examined bDy respondent and said exercise having not been|undertaken, we are of the considered view that.matter requires to be remitted to the respondent for.being adjudicated afresh. Hence, by setting aside|order dated 28.11.2008 passed by the respondent|and order dated 29.05.2009 passed by the Tribunal,matter is being remitted to the respondent for|adjudication airesh. It is needless to state that|respondent would be at liberty to examine the|application afresh on merits and in accordance with.law. 11. In that view of the matter, substantial|questions of law as obtained in the facts and_circumstances of the case are required to be|answered in favour of the appellant — assessee. Hence, we proceed to pass the following order: (1)Appeal1Sherebyallowedby| answering substantial questions of 15 law in favour of the assessee —applicant (on facts). (2)Matter is remitted back to the’CommissioneroT IncomeTax, Mangalore for being adjudicatedafresh and he would be at liberty toPass|ordersOT)merits|and1nNaccordance with law without being influenced by the observations made in the earlier order which came to be affirmed by the Tribunal. (3)Costs made easy. Sd/-. JUDGE Sd/-. JUDGE