Tca/270/2011 Of Commissioner Of Income Tax v. M/S.arvinth Charitable Trust

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.01.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MR.JUSTICE N.SATHISH KUMAR Tax Case (Appeal) No.270 of 2011 Commissioner of Income TaxSalem... Appellant/Respondent -vs- M/s.Arvinth Charitable Trust,No.17, Rangar Sannathi Street,Namakkal- 637 001. .. Respondent/Appellant Tax Case (Appeal) filed under Section 260-A of the IncomeTax Act, 1961 against the order of the Income-tax AppellateTribunal, Bench 'C', Chennai, dated 22.12.2010, passed inI.T.A.No.267/Mds/2010. Against the Order of the commissioner ofIncome Tax Salem, Order dated 29/01/2010 made in C.No.9755(55)SLM/2009-2010. For Appellant For Respondent :Mr.J.Narayanaswamy,Standing Counsel :Mr.R.Venkatanarayanan for M/s.Subbaraya Aiyar, Padmanabhan & Ramamani JUDGMENT(Delivered by T.S.Sivagnanam, J.) This appeal, by the Revenue filed under Section 260A ofthe Income-tax Act, 1961 (hereinafter referred to as “the Act”),is directed against the order passed by the Income-tax AppellateTribunal, Bench 'C', Chennai (for brevity “the Tribunal”), dated22.12.2010, in I.T.A.No.267/Mds/2010. 2.The above appeal has been admitted, vide order dated20.07.2011, on the following substantial questions of law:-“(i) Whether on the facts and circumstancesof the case, the Income Tax Appellate Tribunal wasright in directing the Commissioner of Income Taxto grant registration to the applicant Trust underSection 12AA of the Income Tax Act on the ground https://hcservices.ecourts.gov.in/hcservices/ that at the stage of consideration of theapplication for registration, the Commissioner ofIncome Tax should examine only the objects asstated in the trust deed and other matters shouldbe examined only at the time of making regularassessment? (ii) Whether on the facts and circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the applicant trust isentitled to registration under Section 12AA of theAct in spite of the several infirmities in theTrust deed and activities of the trust and thehuge margin of profits earned by the trust inrunning the Nursing College that have been broughtout in detail by the Commissioner of Income Tax inhis order?” 3.We have heard Mr.J.Narayanaswamy, learned StandingCounselappearingfortheappellant/Revenue;andMr.R.Venkatanarayanan, learned counsel appearing for therespondent/assessee. 4.The respondent-Trust applied for registration in FormNo.10A, dated 22.07.2009 under Section 12AA of the Act. Theapplication was rejected by the Commissioner of Income Tax,Salem, vide order 29.01.2010. 5.The Commissioner, in the said order, analysed thevarious clauses in the trust deed, the nature of the activities,which they were carrying on, the fee levied on the students inthe nursing college, etc., and came to the conclusion thatneither the activities of the trust are charitable, nor thefunds of the trust are invested for the benefit of the trust.Challenging the same, the assessee filed appeal before theTribunal. The Tribunal, vide the impugned order, allowed theassessee's appeal and set aside the order passed by theCommissioner and directed the Commissioner to grant registrationto the trust and allow the claim of the assessee. Challengingthe correctness of the said order, the Revenue is before us. 5.The Commissioner, in the said order, analysed thevarious clauses in the trust deed, the nature of the activities,which they were carrying on, the fee levied on the students inthe nursing college, etc., and came to the conclusion thatneither the activities of the trust are charitable, nor thefunds of the trust are invested for the benefit of the trust.Challenging the same, the assessee filed appeal before theTribunal. The Tribunal, vide the impugned order, allowed theassessee's appeal and set aside the order passed by theCommissioner and directed the Commissioner to grant registrationto the trust and allow the claim of the assessee. Challengingthe correctness of the said order, the Revenue is before us. 6.We have perused the order passed by the Commissionerdated 29.01.2010, and we find the order to be a well reasonedorder. The Commissioner has examined the objects of the trust,who are all the trustees, the lease deed, the construction putup, checked the tax which they impart, the fee they havecollected from the students and after taken into considerationall the factual aspects, held that the activities of the trustare not charitable and the funds of the trust are not investedfor any charitable purpose. If the Tribunal was of the viewthat the order passed by the Commissioner needs to be reversed,then the Tribunal requires to give a factual finding as to howthe Commissioner erred in appreciating the materials placed before him and how the Commissioner erred while recording hissatisfaction in terms of Section 12AA(1)(a) of the Act.Further, we find that the Tribunal made a remark that running ofa nursing college itself is charitable. We do not agree withthe said finding because, the Commissioner while rejecting theapplication found that the trust collects a sum of Rs.2,72,000/-as fees from the candidates, who are admitted to the nursingcourse. Therefore, the burden is heavily on the assessee toprove that the objects of the trust are bona fide and there isbona fide charitable activity being done. 7.Thelearnedcounselappearingfortherespondent/assessee referred to the definition of “charitablepurpose” as defined under Section 2(15) of the Act. It is thesubmission that the definition is an inclusive definition andeducation is one of the aspects mentioned therein and therefore,the activities of the trust are deemed to be charitable innature. It is true that the definition of “charitable purpose”as defined under Section 2(15) is an inclusive definition toqualify for a registration under Section 12AA of the Act. TheCommissioner should be satisfied about the genuineness of theactivities of the trust or the institution, and is entitled tomake such an enquiry, as he deems necessary in this behalf. Inthe opinion of the Commissioner, the assessee did not satisfythe requirements. 8.One more aspect which is to be noted is that the provisoto Section 2(15) of the Act provides that advancement of anyother object of general public utility shall not be a charitablepurpose, if it involves the carrying on of any activity in thenature of trade, commerce or business, or any activity ofrendering any service in relation to any trade, commerce orbusiness, 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. Therefore, in our consideredview, the Tribunal failed to properly examine the contentionsadvanced by the Revenue and by a non-speaking order, allowed theappeal filed by the assessee. Therefore, we are of theconsidered view that the matter requires to be re-considered bythe Tribunal. 9.The learned counsel for the respondent/assessee reliedupon Circular No.14/2015, dated 17.08.2015 whereby, the Boardissued “'clarification on certain issues relating to grant ofapproval and claim of exemption under Section 10(23C)(VI) of theAct”. In our view, if this clarification comes to the aid ofthe assessee, it is well open to the assessee to place the samefor consideration before the Tribunal for de nova consideration. 10.For the above reasons, the appeal filed by the Revenueis allowed, the impugned order passed by the Tribunal is setaside, and the matter is remanded to the Tribunal to decide thesame afresh, after taking into consideration all the facts and circumstances of the case. It is well open to the assessee toplace all materials before the Tribunal to decide their claimfor registration under Section 12AA of the Act. 11.Mr.J.Narayanaswamy, learned Standing Counsel pointedout that the circular will have no application to the facts ofthe case because, the same is pertaining to Section 10(23C) andthe present proceedings is relating to claim for registrationunder Section 12AA. 12.Thelearnedcounselappearingfortherespondent/assessee pointed out that the Commissioner whilerejecting the registration under Section 12AA, had followed thedecision in the case of CIT vs. M/s.Queens Educational Society,(2009) 319 ITR 160. This decision has been reversed by theHon'ble Supreme Court in Queen's Educational Society vs.Commissioner of Income Tax, (2015) 372 ITR 0699 (SC). 13.In the preceding paragraphs, we have recorded oursatisfaction as to how the Tribunal failed to record itssatisfaction with regard to the factual aspect dealt with by theCommissioner. Therefore, first the assessee should convince theTribunal on facts that their activities, obligation of theincome etc., qualify for a charitable purpose. No costs. Sd/-Assistant Registrar //True Copy// Sub Assistant Registrar abr To 1.The Income-tax Appellate Tribunal, Bench 'C', Chennai. 2.The Commissioner of Income-tax, No.3, Gandhi Road, Salem-7. +1cc to Mr.Subbaraya Aiyar Padmanabhan, Advocate, S.R.No.7967 +1cc to Mr.J.Narayanaswamy, Advocate, S.R.No. 8335 CP(CO)GN(13/03/2019)