TMI Blog2011 (9) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... e charitable and therefore the very foundation on which the registration was granted to the appellant sabha is not removed. - Decided in favor of assessee. - IT APPEAL NO. 1849(MUM.) OF 2011 - - - Dated:- 9-9-2011 - N.V. VASUDEVAN, R.K. PANDA, JJ. G.P. Trivedi for the Appellant. Arvind Sonde for the Respondent. ORDER N.V. Vasudevan, Judicial Member. This is an appeal by Sri Shanmukhananda Fine Arts Sangeetha Sabha Charitable Trust, (hereinafter referred as Appellant Sabha ) against the order dated 2-2-2011 of the Director of Income Tax (Exemption), Mumbai, (DIT) passed under section 12AA(3) of the Income-tax Act, 1961 (the Act). 2. The appellant Sabha is registered as a Society under the Societies Registration Act and also as a Charitable Institution under the Bombay Trusts Act, 1950. The Appellant Sabha was also granted registration under section 12AA of the Act. 3. Under section 11 of the Act Income from property held under trust for charitable or religious purposes, to the extent to which such income is applied to such purposes will not form part of the total income under the Act. In other words such income would not be taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aste or creed and to establish Medical Centres/Hospitals for providing medical services and also to undertake and promote education and research in medical science and allied activities. (f) To provide services in the fields of Community Health, Services, Yoga and Nutrition. (g) To engage in all other lawful and allied activities as may be incidental or conducive to the promotion and furtherance of any or all the objects of the Sabha. (h) To carry on the aforesaid objects either by itself or in association with others. (iii) To affiliate and/or take over/merge/have any arrangement with any other trust/society or institution having similar objects, with or without its assets and on such terms and conditions as may be decided upon by the Sabha. (Clause (iii) added by amendment of the Memorandum of Association with effect from 26-9-2004) 4. The Addl.Director of Income Tax (Exemptions), Range-1, Mumbai (ADIT) by his letter dated 16-11-2009 informed the Director of Income Tax (Exemption), Mumbai that the amendment to the objects clause of the Memorandum by inserting clause 3(iii) has not been intimated nor a fresh application was made for gra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t foresee any possibility to be able to mobilize resources to meet the financial requirements. Therefore, to perpetuate the cause, Society in its Annual General Meeting of the members held on 16th December, 2004 and again in the Extraordinary Meeting of the members held on 12th September, 2004 unanimously approved the proposal to amalgamate the Society with the Appellant Sabha. Similarly, the Appellant Sabha in their Extraordinary General Meeting held on 26th September, 2004 passed the requisite resolution to give effect to the amalgamation of the Society with the Appellant Sabha. A Scheme of amalgamation between the two institutions registered under the provisions of the Bombay Public Trust Act and Society Registration Act can be given effect to on the basis of an application to be made in this behalf to the Charity Commissioner, Greater Mumbai Region, Mumbai under section 50A(2) of The Bombay Public Trusts Act, 1950 and the Charity Commissioner, if he is satisfied, is empowered to pass an order approving the amalgamation. An application for approval of the Amalgamation of the Appellant Sabha with the Society was made. In the application for recognizing the amalgamation it was men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the approval of the Charity Commissioner for the purpose of bringing about amalgamation of the two institutions. It was further pointed out that the Appellant Sabha as well as the Society had common objects and therefore there was no amendment as such that was carried out to the object set out in the Memorandum and Articles of Association. 8. By the impugned order, the DIT held that the objects of the Appellant Sabha and the Society were not one and the same. In this regard, the DIT has summaried the main objects of the Appellant Sabha and the Society as follows: Object of the Sabha The objects of Sabha are secular education in dance, music, drama, cultural and other fine arts, medical relief, health services, yoga scientific research and other charitable objects. Objects of the Society To conduct classes, establish and run schools/colleges, for the study of music, dance and allied arts in general etc. 9. In the opinion of the DIT, the objects of the appellant sabha and the Society were different and therefore the merger of the appellant Sabha with the Society results in change of objects of the Appellant Sabha. Thereafter the DIT r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has observed that a clear distinction must be drawn between the object of a trust and powers conferred upon the trustees as incidental to the carrying out of the object. If the only object of a trust is the construction and maintenance of a swimming bath which is a purpose of general public utility, the fact that the trustees are given the power to supply or sell refreshments to persons who resort to the bath would not make the trust any the less charitable. Further reference was made to the decision of the Hon'ble Supreme Court in the case of CIT v. Federation of Indian Chambers of Commerce Industry [1981] 130 ITR 186/6 Taxman 7 and decision of ITAT Delhi in the case of IILM Foundation Academy v. CIT [2011] 44 SOT 37 for identical proposition as stated above. 12. His next submission was that the conclusion of the DIT that there was change in the objects clause of the Memorandum of the Appellant Sabha is erroneous. In this regard, he pointed out that the objects of the appellant Sabha as well as the Society were identical and the observation of the DIT that they were different is erroneous. It was also submitted that the amendment to the appellant Sabha's memorandum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased on which the registration was granted. 16. In his rejoinder the learned counsel for the Appellant Sabha submitted that the note in Form No.10-A of the Income Tax Rules, 1962 does not specify the consequences in the event of failure to comply with those directions. It was his submission that the consequences of cancellation of registration are serious and a note given in the form specified by the Rules cannot be the foundation to exercise such power. 17. We have considered the rival submissions. The power to cancel registration already granted under section 12AA of the Act is contained in section 12AA (3) of the Act and it reads as follows: (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objects of the appellant Sabha and the Society are similar. 20. There is also substance in the argument on behalf of the appellant sabha that there was in fact no amendment to the objects at all. The amendment to the Appellant Sabha's memorandum of association merely conferred a power to amalgamate with other society or institution having similar objects as that of the appellant Sabha. The DIT has failed to note distinction between power of trust or institution and the objects of the trust or institution as explained in the various judicial decision referred to by the learned counsel for the assessee. The fact that the appellant Sabha has power to amalgamate with other institutions having similar objects cannot by itself lead to a conclusion that its objects have been amended. This power even assuming is an amendment of the objects cannot lead to the conclusion of violation of the conditions mentioned in section 12AA(3) of the Act for cancellation of registration. The amendment should ultimately result in the objects of the trust or institution becoming non charitable. The amendment is a mere power conferred on the Trust or other institution. It has to be shown on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
