M/S Manasadhara Trust v. The Chief Commissioner Of Income-Tax

IN THE HIGH COURT OF KARNATAKA, BENGALURU. DATED THIS THE 13[th]DAY OF NOVEMBER 2017. BEFORE THE HON'BLE Dr.JUSTICE VINEET KOTHARI *WRIT PETITION No.27961/2015(TIT) BETWEEN: M/S MANASADHARA TRUSTNO.77/45, 100 FT. ROADSAGAR ROAD, I PARALLEL ROADA-BLOCK, GOPALA GOWDA EXTENSIONSHIMOGA —- 977204, REPRESENTED BY ITSCHAIRMAN-CUM-MANAGING TRUSTEE.DR.K.A.ASHOK PAILAGED ABOUT 69 YBARS(SR. CITIZEN NOR CLAIMED).SON OF LATE SRI KATKBL APPU PAI._ PRTITIONBR (BY MS.JINITA CHATTERJEE, ADV. FOR SRI S PARTHASARATHI) AND: THERE CHIBF COMMISSIONBOF INCOME-TAX.BANGALURU - 2.C.R.BUILDINGQUEEN’S ROAD|BBNGALURU — 560 OO1. |. RESPONDENT (BY SRIL.JEEVAN J NEERALGI, ADV.) THIS W.P. IS KILED UNDER ARTICLES 226 ®& 227 OF THE|CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER OFTHR RESPONDENT DTD.30.03.2015 PASSED UNDER SECTION.10(23G) (VIA) OF THE ACT (ANNEXURE - C). Date of Order 13-11-2017 W.P.No.27961/2015 2/8 THIS W.P. COMING ON FOR PRBLIMINARY HEARING THIS|DAY, THE COURT MADE THE FOLLOWING:- ORDER Ms.Jinita Chatterjee,Adv. for Sri S Parthasarathi for|PetitionerMr.Jeevan J Neeralgi,Adv. for Respondent The petitioner - M/s Manasadhara Trust has filedthis petition before this Court aggrieved by the orderpassed by the respondent — The Chief Commissioner ofIncome-tax, Bangaluru - 2 rejecting the Trust'sapplication for renewal of exemption certificate undersection 10(23C)(via) of the Income Tax Act, 1961 forAssessment Year.2014-15 2. The reasons assigned by the respondent —Chief Commissioner in the impugned order for the saidyear is quoted below for ready reference: | “6. Further, it is observed, as per theterms of the Trust Deed dated 16.8.2006 on|page no.10 vide para no.26 “the funds andéthe income of the Trust shall be solelyutilized for payments to Trust Membersby way of profit, interest, dividend etc”.Thus, it can be construed that, theapplicant is a trust ‘existing for purposes Date of Order 13-11-2017 W.P.No.27961/2015 of profit’ as contemplated by clause(via)of section 10(23C) of I.T.Act and anelement of profiteering exists. 6.1 However, it 1s pertinent to notethat, as on the date of application, the termsoft Trust Deed contains the clause fundsand the income of the Trust shall be§solely utilized for payments to TrustMembers by way of profit, interest,dividend etc’.whereas, in the amended)trust deed dated 23.29.2015 which wassubmitted during the course of hearing theabove said clause was deleted. 6.2 In this connection, further it canbe noted that, as per Trust Deed dated16.8.2006 vide page no.8 and para 12,regarding|Amendments,AlterationsOT|Deletions to the Trust Deed, it reads asunder; “12. Amendments, Alternations orDeletions to the Trust Deed: That the Trustees shall have power toamend, alter or rescind the rules andinterpret their meaning wherever the rulesand by-laws framed do not cover anyprovisions, provided that such change orinterpretation does not conflict with the aims—and objects of the Trust and same shall notbe repugnant to the provisions of Section2(15), 11, 12 13 and 80G of Income Tax.No|Amendment shall be made, without prior|approval of Commissioner of Income Tax. 4/8 6.3 The applicant initially registeredu/s l12AA betore the Commissioner ofIncome Tax and the deed ot amendment isregistered before Sub-Registrar, Shimoga on23.2.2015 without prior approval of theCommissioner of Income Jax.This act of.the applicant shows the mere intention toget the approval u/s 10(23C)(via) andclearly indicates after thought of theapplicant.Hence,theSame1Snotacceptable. 7/7. The applicant is showing surplus,which includes donations received, undercorpus fund in the balance sheet which is|contrary to sec.11(1)(d) — “income in the formof voluntary contributions made with aSpecific direction that they shall form part ofthe corpus of the trust or institution”. 4/8 6.3 The applicant initially registeredu/s l12AA betore the Commissioner ofIncome Tax and the deed ot amendment isregistered before Sub-Registrar, Shimoga on23.2.2015 without prior approval of theCommissioner of Income Jax.This act of.the applicant shows the mere intention toget the approval u/s 10(23C)(via) andclearly indicates after thought of theapplicant.Hence,theSame1Snotacceptable. 7/7. The applicant is showing surplus,which includes donations received, undercorpus fund in the balance sheet which is|contrary to sec.11(1)(d) — “income in the formof voluntary contributions made with aSpecific direction that they shall form part ofthe corpus of the trust or institution”. 8. After verifying the facts of the case1n detailand1nVIEWoT|theabove|discussions, it can be construed that theapplicant trust is not satisfying the conditionenvisaged in.section10(23C) (via)1.€.,“existing solely for philanthropic purposesand not for purposes of profit”. Hence, no|exemption under sec. 10(23C)(via) of theIncome-tax Act 1961 can be granted for theassessment year 2014-15. Accordingly, theassessee’s application for grant of exemptionfor the above said period ishereby rejected od/-|(NUTAN WODEYAR) Chiet Commissioner ot Income-tax, Date of Order 13-11-2017 W.P.No.27961/2015 Bangalore-2,Bangalore’. 3. On the last occasion, after hearing both sides,this Court had passed the following interim order on14.08.2017. The said order is also quoted below forready reference:| ].Thelearned|counselforthepetitioner has argued before the Court that theaccumulation of the profit by the petitioner-Trust, which runs educational institution formentally retarded children, was utilised for thepurpose ofpurchasing a site and construction ofthe building for the school and therefore, thelearned Chief Commissioner could not havedenied the exemption under Section 10(23C)Clause(vi-a) of the Income Tax Act, 1961. 2.She has further submitted that theoffending clause in the Trust Deed that theprofits would be distributed to the memberswas deleted by amendment of the Trust DeedOnI3.2|Y9Q15 and such amendment wasdiscussed by the learned Chief Commissionerherself in the impugned order Annexure-“C™dated~—30.3.2015 3.However, from a perusal of the saidorder it is not clear whether these submissionswere made in writing before the said ChiefCommissioner or not. Mere production of suchcommunicationbeforetheAssistantCommissioner without the same being broughtto|thenoticeoftheconcernedChief| Date of Order 13-11-2017 W.P.No.27961/2015 6/8 Commissioner of the Income-Tax who haspassed the impugned order, such submissionscannot be accepted at its face value. 4.Therefore, the learned counsel forthe petitioner is directed to produce on recordthe copy of the written submissions filed beforethe Chief Commissioner along with the relevantevidence which is now sought to be relied uponby the learned counsel for the petitioner. | 5.At the same time, the learnedcounsel for the Revenue is also directed toproduce before this Court the original recordconsidered by the learned Chief Commissionerof Income Tax at the time of passing of theimpugned order at Annexure-“C” on30.3.2015and also file a brief additional statement ofobjections as to whether the record of the lowerauthorities and evidence produced by thepetitioner-Trust was available with the learnedChief Commissioner at the time of passing ofthe impugned order or not. Put up ajterfour weeks. 4. In pursuance of the same, learned counsel for the respondent — Department has submitted before theCourt that the original record of the Chief Commissionerhas been summoned and no written submissions filed|from the side of the petitioner in this regard, were foundin the record of the Chief Commissioner, while passing the impugned order and only oral submissions wereaddressed on23.03.2015and thereafter, the impugned|order was passed on30.03.2015 Put up ajterfour weeks. 4. In pursuance of the same, learned counsel for the respondent — Department has submitted before theCourt that the original record of the Chief Commissionerhas been summoned and no written submissions filed|from the side of the petitioner in this regard, were foundin the record of the Chief Commissioner, while passing the impugned order and only oral submissions wereaddressed on23.03.2015and thereafter, the impugned|order was passed on30.03.2015 o. This fact is not disputed by the learned counselfor the petitioner that written submissions were not filedbefore the respondent — Chief Commissioner, however,oral submissions were made on that date. 6. Having heard the learned counsels for theparties and in the facts and circumstances of the case,this Court is of the opinion that the petitioner — Trustshould be allowed one more opportunity to file theirwritten submissions before the respondent —- ChiefCommissioner along with the relevant facts andevidence and the respondent — Chief Commissionershould reconsider the entire issue regarding exemptionto the petitioner — Trust for Assessment year 2014-15 inthe light of said facts and evidence placed before her. Date of Order 13-11-2017 W.P.No.27961/2015 7/7. Accordingly, the petition is allowed and setting aside the impugned order -— Annexure “C” dated30.03.2015, the matter is restored back to the ChiefCommissioner of Income Tax, Bangalore — 2 to passfresh orders in accordance with law afiter givingreasonable opportunity of hearing to the petitioner —Trust and afiter examining the relevant evidenceproduced by it. The petitioner — Trust may file freshrepresentations also and appear through authorizedrepresentative in the first instance on|14.12.2017and a period of)three monthsis allowed to the respondentto pass fresh orders in accordance with law. | brn Sd/-. JUDGE