IT : Where assessee in preceding year of making registration application had mainly organized Shree Maharaja Agrasen Jyanti meant for Agarwal community only, objects of assessee were meant for benefit of a particular community and, therefore, it was not eligible for registration
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[2013] 40 taxmann.com 170 (Agra - Trib.)
IN THE ITAT AGRA BENCH
Shri Agrawal Sabha
v.
Commissioner of Income-tax-I*
Bhavnesh Saini, JUDICIAL MEMBER
AND PRAMOD KUMAR, ACCOUNTANT MEMBER
AND PRAMOD KUMAR, ACCOUNTANT MEMBER
IT Appeal No. 317 (Agra) OF 2013
OCTOBER 31, 2013
Section 2(15), read with sections 11 and 12AA, of the Income-tax Act, 1961 - Charitable purpose [Objects of general public utility] - Assessee-society was registered way back in January, 1991 - Most of objects of assessee were meant for benefit of Agarwal community only - There were certain other objects like establishment of hospital, dharamashala, library, etc. - It applied for grant of registration under section 12AA in January, 2013 - It submitted that it had already established dharamashala at Mathura and one more dharamashala was also in process, therefore, running of dharamashala was meant for general public - In preceding year of making registration application, assessee had mainly organized Shree Maharaja Agrasen Jayanti meant for Agarwal community only - Rest of objects had not been carried out by assessee since its inception in year 1991 - Whether in peculiar facts of case it was evident that objects of assessee were meant for benefit of a particular community only, i.e., Aggarwal community - Held, yes - Whether merely because dharamashala was created by assessee in religious place at Mathura, it could not be said that dharamashala was meant for charitable or religious purpose - Held, yes - Whether, therefore, assessee was not eligible for registration under section 12AA - Held, yes [Paras 5 and 6] [In favour of revenue]
FACTS
| ■ | The assessee-society was registered way back in January, 1991. Most of the objects of the assessee were meant for the benefit of Agarwal community only. There were certain other objects like establishment of hospital, dharamashala, library, etc. It applied for grant of registration under section 12AA in January, 2013. | |
| ■ | The Commissioner noticed that during the financial year 2011-12 the assessee earned income of Rs. 17.96 lakhs and incurred expenditure of Rs. 20.74 lakhs in organizing Shree Maharaja Agrasen Jayanti, etc. The other expenses shown by the assessee were for donation, website expenses, stationery, bad debts, bank charges, miscellaneous expenses, etc. No expenses on other objects, i.e., on establishing hospitals, dharamashalas, libraries, schools, programs for women and young men or to help widows, etc. had been incurred by the assessee. No documentary evidence in support of activities of general public utility was furnished by it. He, therefore, held that no charitable activities for general public utility had been carried out by the assessee. All its activities and expenses were related to a particular community, i.e., Aggarwal community. He, therefore, rejected the application for registraiton. | |
| ■ | On appeal to Tribunal: |
HELD
| ■ | Section 12AA provides procedure for grant of registration and the Commissioner shall have to satisfy himself about the objects of the trust or institution and the genuineness of its activities before granting or refusing to grant registration. Thus the objects of the assessee and genuineness of its activities shall have to be considered in the light of the material produced on record. Since section 11 provides for exemptions to the trust or institution registered under the Act, it is primarily the purpose of section 11 that will dominate or prevail over other considerations. Section 11 provides for this exemption only if the property held is for charitable or religious purpose. It is only when such a purpose is shown that registration under section 12AA can be granted. The definition of 'charitable purpose' as indicated in section 2(15) includes relief of the poor, education, medical relief and preservation of monuments or places or objects of artistical or historic interest and the advancement of any other object of general public utility. | |
| ■ | The documents filed on record suggest that the assessee was registered way back in January, 1991. It is not in dispute that most of the objects are meant for the benefit of Agarwal community only. There are certain other objects like establishment of hospital, dharamashala, library, etc., but the assessee since its inception has not carried out any such activities meant for the general public. Since nothing has been provided by the assessee for relief of the poor, education or medical relief, the last provision in the definition of 'charitable purpose' will be considered, i.e., 'advancement of any other object of general public utility'. The Commissioner has specifically noted that during the financial year 2011-12 the assessee has earned income of Rs. 17.96 lakhs and incurred expenditure of Rs. 20.74 lakhs in organizing Shree Maharaja Agrasen Jayanti meant for Agarwal community only. The assessee did not contradict this finding of fact recorded by the Commissioner. It is, therefore, clear that in the preceding year of making registration application, the assessee has mainly organized Shree Maharaja Agrasen Jayanti meant for Agarwal community only. It could not be treated having any charitable purpose for advancement of any other objects of general public utility. Thus substantially the objects of the assessee are meant for the benefit of particular community only and rest of the objects have not been carried out by it since its inception in the year 1991. The assessee applied for registration in January, 2013 despite it was in existence since January, 1991. As such, the assessee has no intention to carry out any activity for general public and its objects are merely on paper. Therefore, it could be inferred that even though the assessee has taken certain other objects in its memorandum of association, but the same have never been acted upon or brought into existence to take care of general public. The Commissioner specifically noted that in order to enquire into the genuineness of the claim of assessee in registration application, the spot enquiry was got conducted through the Assessing Officer and he has submitted that neither the work done by the society comes under the purview of charitable activities nor the same could be verified, as no evidence in this regard was made available. As such, the assessee failed to prove that its objects were charitable in nature or it carried out genuine activities in order to achieve its objects. [Para 5] | |
| ■ | The assessee submitted that it has already established a dharamashala at Mathura and one more dharamashala is also in process, on which huge amount has been spent. Therefore, running of dharamashala is meant for general public. [Para 6] | |
| ■ | Merely because dharamashala is created in religious place at Mathura, it could not be said that the dharamashala was meant for charitable or religious purpose. There should be something more to suggest its nexus with the religious or charitable purpose. The assessee at the stage of spot inspection by the Assessing Officer and the enquiry before the Commissioner has not furnished any evidence in support of its alleged activities for general public utility. Therefore, the contention of the assessee could not be accepted to grant registration for running or creating dharamashala by it. [Para 6.1] | |
| ■ | In view of the aforesaid, the appeal of the assessee was liable to be dismissed. [Para 7] |
CASE REVIEW
Shri Dhakad Samaj Dharamshala Bhawan Trust v. CIT [2008] 302 ITR 321 (MP) (para 6.1) followed.
Agarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 106 ITD 531 (Delhi) (para 7), Shri Krishna Education & Welfare Trust v. CIT [2009] 27 SOT 331 (Delhi) (para 7); Bhagwan Mahavir Purusharth Prerna Nidhi Nyas v. CIT [2012] 144 TTJ 379/23 taxmann.com 311 (JP) and CIT v. Paramhans Ashram Trust [1993] 203 ITR 711 (Raj.) (para 7) distinguished.
CASES REFERRED TO
Shri Dhakad Samaj Dharamshala Bhawan Trust v. CIT [2008] 302 ITR 321 (MP) (para 6), Agarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 106 ITD 531 (Delhi) (para 7), Shri Krishna Education & Welfare Trust v. CIT [2009] 27 SOT 331 (Delhi) (para 7), Bhagwan Mahavir Purusharth Prerna Nidhi Nyas v. CIT [2012]144 TTJ 379/23 taxmann.com 311 (JP) and CIT v. Paramhans Ashram Trust [1993] 203 ITR 711 (Raj.) (para 7).
M.M. Agarwal for the Appellant. Anirudh Kumar for the Respondent.
ORDER
Bhavnesh Saini, Judicial Member - This appeal by the assessee is directed against the order of ld. CIT-I, Agra dated 15.07.2013, rejecting the application for registration u/s. 12AA of the IT Act.
2. Briefly, the facts of the case are that the assessee society filed application for grant of registration u/s. 12AA of the IT Act. The ld. CIT in order to enquire into the genuineness of the claim of the assessee society called for a report from the Assessing Officer and on the spot enquiry was also got conducted through the AO in which the AO has submitted that "neither works done by the society come under the purview of charitable activities nor same could be verified as no evidences in this regard made available". The ld. CIT in order to examine the genuineness of the activities of the society required the assessee to produce relevant documents/records of the assessee society. The ld. CIT quoted three of the objects of the society in the impugned order and found that dominant objects of the assessee are for the benefit of Agarwal Community only. It was also noticed that during the financial year 2011-12, the assessee society earned income of Rs.17,96,148/- and incurred expenditure of Rs.20,74,763/- in organizing "Shree Maharaja Agrasen Jayanti etc.", the activities meant for Agrawal community. The other expenses shown by the assessee society were for donation, website expenses, stationery, bad debts, bank charges, misc. expenses, salary expenses and scooter expense. It was, therefore, evident that the assessee society has incurred expenses mainly on organizing Shree Maharaja Agrasen Jayanti etc. and other expenses incurred by it are not related to any charitable activity. No expenses on other objects have been made or incurred on establishing hospitals, Dharmshalas, libraries, schools, programs for women and young men or to help widows. No documentary evidence in support of activities of general public utility was furnished by the assessee society. The ld. CIT, therefore, found that no charitable activities for general public utility have been carried out by the assessee society. All its activities and expenses are related to a particular community. No material has been brought on record to substantiate that the assessee is engaged in charitable activities of general public utility so as to make him eligible for registration u/s. 12AA of the IT Act. Application for registration was accordingly rejected.
3. The assessee is in appeal, challenging the order of the ld. CIT in rejecting the registration application u/s. 12AA of the IT Act. The assessee claimed that the impugned order has been passed without giving proper opportunity and that the ld. CIT has not appreciated that institution was already running Dharamashala known as Maharaja Agrasen Atithi Bhawan since very long and was also in process of establishing another Dharamashala known as 'Agra Vatica' and such facilities were not restricted to any caste, community or creed.
4. We have heard the ld. representatives of both the parties, perused the finding in the impugned order and considered the material available on record.
5. Section 12AA of the IT Act provides procedure for grant of registration and the ld. CIT shall have to satisfy himself about the objects of the trust or institution and the genuineness of its activities before granting or refusing to grant registration under the above provisions. Thus, the objects of the assessee and genuineness of its activities shall have to be considered in the light of the material produced on record. Section 11 of the IT Act provides for exemption to the trust or institution registered under the Act, which is primary purpose of section 11 that will dominate or prevail over other considerations. Section 11 provides for this exemption only if the property held is for charitable or religious purpose. It is only when such a purpose is shown, the registration u/s. 12AA can be granted. Section 2(15) of the IT Act provides definition of 'charitable purpose includes relief of the poor, education, medical relief and preservation of monuments or places or objects of artistical or historic interest and advancement of any other object of general public utility. The documents filed on record suggest that the assessee society was registered way back in January, 1991. It is not in dispute that most of the objects of the assessee society are meant for the benefit of Agarwal community only. There are certain other objects like establishment of hospital, Dharamashala, library etc., but the assessee since its inception have not carried out any such activities meant for the general public. Since in the case of the assessee society, nothing has been provided for providing relief to the poor, education or medical relief. Therefore, the last provision provided in section 2(15) of the IT Act in the definition of "charitable purpose" will be considered, i.e., "advancement of any other objects of general public utility". The ld. CIT has specifically noted in the impugned order that during the financial year 2011-12, the assessee has earned income of Rs.17.96 lacs and incurred expenditure of Rs.20.74 lacs in organizing Shree Maharaja Agrasen Jayanti meant for Agarwal community only. The ld. counsel for the assessee during the course of arguments did not contradict this finding of fact recorded by the ld. CIT in the impugned order. It is, therefore, clear that in the preceding year of making registration application, the assessee has mainly organized Shree Maharaja Agrasen Jayanti meant for Agarwal community only. Therefore, it could not be treated having any charitable purpose for advancement of any other objects of general public utility. The ld. counsel for the assessee has not been able to satisfy as to how the general public would have been benefited by organizing Maharaja Agrasen Jayanti out of the total income of the assessee society. The other expenditure noted above are also not explained as to under which category of those miscellaneous expenses noted in the impugned order, would have benefited the cause of general public. Thus, substantially, the objects of the assessee are meant for particular community only and rest of the objects have not been carried out by the assessee since its inception in the year 1991. The assessee applied for registration in January, 2013 despite it was in existence since January, 1991. As such, the assessee has no intention to carry out any activity for general public and its objects are merely on paper. Therefore, it could be inferred that even though the assessee has taken certain other objects in its memorandum of association, but the same have never been acted upon or brought into existence to take care of general public. The ld. CIT was, therefore, justified in holding that none of the expenses incurred by the assessee are related to any charitable activity. The ld. CIT is also justified in holding that none of the expenses have been incurred towards achieving the objects of the assessee society. It is also admitted fact that no documentary evidences were furnished either before the ld. CIT or before us in respect of the activities of general public utility. The ld. CIT also specifically noted in the impugned order that in order to enquire into the genuineness of the claim of assessee in registration application, on the spot enquiry was got conducted through AO and the AO has submitted that neither the work done by the society come under the purview of charitable activities nor the same could be verified as no evidence in this regard was made available. During the course of arguments, the ld. counsel for the assessee admitted that the assessee did not file any evidence or material before the ld. CIT to contradict the report submitted by the AO against interest of assessee at the enquiry stage of registration application. Thus, on the spot enquiry conducted through the Assessing Officer was also not rebutted by the assessee through any evidence or material on record and as such, the assessee failed to prove that its objects were charitable in nature or the assessee carried out genuine activities in order to achieve its objects.
6. The ld. counsel for the assessee pointed out from the paper book the balance sheet and income & expenditure account and submitted that the assessee has already established Dharamashala and one more Dharamashala is also in process, on which huge amount has been spent. Therefore, running of Dharamashala is meant for general public. The ld. counsel for the assessee, however, admitted that no list of occupants in any Dharamashala was furnished before the ld. CIT and no such details have been furnished in the paper book. Therefore, it is difficult to believe whether running of Dharamashala by the assessee society was meant for general public. Hon'ble M.P. High Court in the case of Shri Dhakad Samaj Dharamshala Bhawan Trust v. CIT [2008] 302 ITR 321 in para 7 & 9 held as under :
"7. While it is true that the CIT in declining the registration has taken into account certain extraneous consideration such as Dhakad caste also exists in Rajasthan, Maharashtra and Uttar Pradesh and includes certain other castes which are not recognised as other backward classes which has been explained by the learned counsel for the appellant that merely because the members of the Samaj spread to far-flung areas for making a living, it cannot be said that they have become inhabitants of outside State and have ceased to the members of Dhakad community. However, we find from the order passed by the Tribunal that the trust has been created only to provide Dharamshala for the stay of pilgrims who, as admitted by the learned counsel for the appellant need not necessarily be from Dhakad community. It has further observed that merely because Dharamshala has been constructed in a religious place namely, Ujjain, it cannot be said that it is for charitable or religious purposes.
8. In our considered view, since s. 11 of the Act provides for exemptions to the trust registered under the Act, it is primarily the purpose of s. 11 that will dominate or prevail over other consideration. Sec. 11 provides for this exemption only if the property held is for charitable or religious purposes. It is only when such a purpose is shown that registration can be granted. It is in this context that in the case of trust for charitable purposes or charitable institution created or established after the commencement of the Act, the income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste, shall be excluded. Reference to the religious community or caste will have to be read ejusdem generis with the purposes for which the exemption is to be granted under s. 11 which is charitable or religious purpose. Thus, even though the bar contained in cl. (b) of sub-s. (1) of sec. 13 may not be attracted in view of the Expln. 2 providing that in case of scheduled castes, backward classes, scheduled tribes or women and children, it will not be deemed to be created or established for the benefit of a religious community or caste, within the meaning of cl. (b) of sub-sec. (1) of s. 13, the said provision cannot be construed de hors the purpose contained in s. 11. It is only when it is proved that the property is consecrated for charitable or religious purposes that the trust may become entitled to registration subject to fulfilment of other conditions.
9. In the application of the appellant, before the CIT, the purpose shown was to provide Dharamshala for persons from the Samaj and outsiders. It is not disputed that though the provision has been made for charging a token amount from the persons belonging to Dhakad Samaj, the charges for stay in the case of persons not belonging to the Samaj are many times the charges for the persons belonging to the Samaj. Merely because the accommodation created is in a religious place, it cannot be said that providing Dharamshala is for religious purposes. There should be something more to suggest its nexus with the religious or charitable purpose. It may not be with an intention to make money, but at the same time it does not fulfill the requirement of s. 11. Under these circumstances, we find that the registration declined by the CIT and affirmed by the Tribunal , does not suffer from any infirmity, patent or latent. Thus, we answer the question against the appellant and in favour of the respondent and this appeal is dismissed."
6.1 Since Hon'ble Allahabad High Court and M.P. High Court are the jurisdictional High Courts of Agra Bench of Tribunal, therefore, we are bound to follow the decision of Hon'ble M.P. High Court as quoted above. Merely because Dharamshala is created in religious place at Mathura, it could not be said that the Dharamshala was meant for charitable or religious purpose. There should be something more to suggest its nexus with the religious or charitable purpose. As noted above, the assessee at the stage of spot inspection by the AO and the enquiry before the ld. CIT has not furnished any evidence in support of its alleged activities for general public utility. Therefore, the contention of the ld. counsel for the assessee could not be accepted to grant registration for running or creating Dharamshala by the assessee society.
7. The ld. counsel for the assessee relied upon the decision of ITAT, Delhi Bench in the case of Agarwal Mitra Mandal Trust v. DIT (Exemption) [2007] 106 ITD 531 in which the objects and genuineness of the activities of the assessee trust being charitable was not doubted. Therefore, it was held that the powers of DIT (Exemption) u/s. 12AA are limited to make enquiries with a view only to satisfy himself about the genuineness of the activities and objects of the trust. Application u/s. 13 falls within exclusive domain of the AO and registration cannot be refused on the ground of violation of provisions of section 13(1)(b). On the similar proposition, he has relied upon the decision of ITAT Delhi Bench in the case of Shri Krishna Education & Welfare Trust v. CIT [2009] 27 SOT 331 and order of ITAT Jaipur Bench in the case of Bhagwan Mahavir Purusharth Prerna Nidhi Nyas v. CIT [2012]144 TTJ 379/23 taxmann.com 311. He has also relied upon the judgment of Hon'ble Rajasthan High Court in the case of CIT v. Paramhans Ashram Trust [1993] 203 ITR 711 in which the main objects were for maintenance of Dharamshalas, help of Agarwal and other widows and children, feeding of mendicants and construction of new Dharamshalas and schools. All the above decisions would not support the case of the assessee because of the specific finding of fact recorded by the ld. CIT in the impugned order. Considering the above discussion, we do not find any justification to interfere with the order of the ld. CIT at this stage. The appeal of the assessee has no merit and is liable to be dismissed. However, the assessee would be at liberty to move fresh application for registration before the ld. CIT if it is able to satisfy him that the objects of the assessee society were charitable or religious in nature and its activities were genuine. With these observations, the appeal of the assessee is dismissed.
8. In the result, the appeal of the assessee is dismissed.
S.K.Regards
Prarthana Jalan
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