TMI Blog2014 (7) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... n be held that its activities are not genuine or are not in accordance with the objects for which registration was granted – order of DIT(E) is set aside and the registration granted to the assessee cannot be cancelled u/s 12AA(3) on the ground stated by the learned DIT(E) in the order – Decided in favour of Assessee. - ITA No. 1782/Mum./2014 - - - Dated:- 16-7-2014 - Shri D. Karunakara Rao And Shri Amit Shukla,JJ. For the Petitioner : Mr. Vijay Mehta For the Respondent : Mr. A. C. Tejpal ORDER Per Amit Shukla, J. M. The present appeal has been preferred by the assessee, challenging the impugned order dated 28th February 2014, passed by the learned Director of Income Tax (Exemption) [for short the learned DIT(E) ], Mumbai, cancelling the registration under section 12AA(3) of the Income Tax Act, 1961, on the following grounds:- 1. The ld. DIT(E) has erred in law and on facts in passing the impugned order which is illegal and bad in law and without following the principles of natural justice. 2. The ld. DIT(E) has erred in law and on facts in cancelling the registration granted u/s 12A, by holding that activities of the Trust are not as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c and research papers, and other literatures for dissemination of the scientific knowledge about cancer. IV. To help the cause of scientific study and research by giving freeships, scholarships, fellowship and grant endowments for study and research in the field of cancer. V. To start, conduct and maintain curriculum or extra curriculum study and research etc. either alone or in co-operation with other institution/s or bodies on the subjects relating to dreaded disease of cancer as the Board of Trustees may decide in their absolute discretion. VI. To start, conduct, maintain manage and establish cancer hospital, diagnostic centre, cancer hostel, cancer hospice and any other centre/s or facilities for the treatment / convalescences or cancer patients at such places, as may be decided by the Board of Trustees in their absolute discretion. VII. To establish cancer screening and detection services and counseling centres. VIII. To carry periodical survey of cancer and its causes in the country independently or in association with government / private institution. IX. To provide financial assistance for travel to those who go to attend seminars, conferences, lectures, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to education, etc. This trust has got nothing in common with Cancer Aid research Foundation except for the fact that Prof. A.A. Kazi in whole name PAAK Foundation has been established is also a trustee with Cancer Aid Research Foundation have been used for the benefit of another trust of Trustee which is not in accordance with the objects of Cancer Aid Research Foundation Trust. Cancer Aid Research Foundation had sought to establish a hospital in Ratnagiri for which about 9.5 acres of land was taken. However, it is gathered from the website of Cancer Aid Research Foundation that the said land has been treated as commercial land and put on sale. This is again not in accordance with the objects of your Trust. 4. The assessee trust, in response to the show cause notice, submitted that insofar as the first observation on the purchase of BMW 325i car worth ₹ 32.20 lakhs is concerned, similar observation was made by the Assessing Officer in the assessment order for the assessment year 2009-10 also, wherein he had observed that the car has been purchased in the name of one of the trustee namely, Mr. Abdul Qadir Kazi, whereas the payment was made by the trust f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the second objection, it was submitted that PAAK Foundation was also a charitable trust, the aim and object of which were to impart and promote education and giving scholarships to the students in various streams of education. One of the objects of the assessee trust was also on similar lines to extend financial help for any educational institution welfare project or any other project for the benefit of the people as deemed fit by the Board of Trustees. The assessee trust has distributed the scholarships to the meritorious and needy students through the PAAK Foundation. The money was not given to the said foundation but was directly given to the institutions for sponsoring the students which were identified by the PAAK Foundation. Insofar as one of the trustees Prof. A.A. Kazi, being common to both the trusts, it was submitted that out of the 14 trustees of the assessee trust, only one trustee had a common link. Besides this, Prof. Kazi, was a learned Scholar and a big name in the social work and both the trust were dedicated to social work and upliftment and welfare of the weaker of the society. No benefit has been given to the other turst, because of Prof. A.A. Kazi an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee cannot transfer, assign, sell, the said land or part thereof in any manner without the previous consent in writing of the Chief Executive Officer. The assessee, on the website, has put up an advertisement of sale of the said, wherein it was termed as commercial land and by doing so, the assessee was misusing the benefit it had received from the MIDC on a concessional rate. Thus, the object of acquiring the land and selling the same instead of using it for the purpose of the trust, is not in accordance with the objects of the trust and it is purely commercial in nature; ii) The assessee has used the trust money for buying a very expensive luxury car (BMW 325i) in the name of the trustee and the assessee trust could not produce any evidence during the course of the assessment proceedings for the assessment year 2009-10 to show that the said car was used only for the purpose of the trust. The selling of the car in the next year has no meaning because the car has been used by the trust by using trust funds which is in violation of the provisions of section 13. The trust has not been able to justify the purpose of buying a luxury car and how does it serve the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -21 of the paper book. Since the assessee had to face financial problems and did not find any financial support from the donors, therefore, further construction of the hospital could not go ahead. In order to recover the funds which have been blocked on the land and the construction of the hospital, the assessee had put up an advertisement in the newspaper for selling the property for the purpose of hospital only. He drew our attention to the advertisement given in the Times of India as appeared on 19th September 2011, wherein the advertisement was for sale of land as Ratnagiri Hospital. The proposal for the potential buyers was mainly for those who were interested in hospital project. In the website also, the advertisement placed was mainly for the sale of land, wherein it has been clearly mentioned that the plot is partly developed and constructed as a hospital building. This plot can also be used for any commercial purpose. The advertisements were meant only to recover the substantial amount which has already been invested in the construction of hospital and not for any commercial venture. In fact, by selling the said plot along with the constructed property, the assessee would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous educational institutions on behalf of the students. No money was given to PAAK Foundation for distribution of scholarships. Thus, no adverse inference can be drawn on these facts. In support of his contention, he also drew our attention to the details of cheques issued to various institutions on behalf of the students for the educational help given in the financial year 2011-12 and 2012-13. These details were pointed out from the paper book given at Pages-12 to 17. On the allegation of the learned DIT(E) that one of the trustees i.e., Prof. A.A. Kazi, is common, is common in both the trusts, therefore, benefit has been to other trust, he submitted that this cannot be a ground for rejection / cancellation of registration under section 12AA(3), as no direct or indirect benefit has been given to PAAK Foundation or to the trustee Prof. A.A. Kazi. In any case and without prejudice, if the payment made to various educational institutions for scholarships of students routed through PAAK Foundation is treated as payment given to PAAK Foundation, then at best it is a violation of provisions of section 13, which can lead to denial of exemption for that previous year, but certainly could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he has strongly relied upon the decision of the M.P. High Court in Deoradha Madhava Lalji Genda Trust, [1980] 125 ITR 53.1, and the decision of the Hon'ble Supreme Court in CIT v/s Indian Sugar Mills Association, [1974] 97 ITR 486 (SC). The Hon'ble Supreme Court in Indian Sugar Mills Association (supra), held that the private gain was inconsistent with the object of the general public utility and, therefore, it cannot be held to be charitable. In this case also, the purchase of BMW car in the name of the trustee goes to show that the trustee was benefited by the funds which clearly violate the principle of charity under the Act. Regarding advertisement of sale of land at Ratnagiri, he submitted that the very fact that it was advertised as commercial land which was allotted to the assessee for the purpose of constructing the hospital, goes to show the intention of the assessee which was to sell the same for commercial reasons and not for the purpose of running the hospital. Thus, over all reasons and objections which has been highlighted by the learned DIT(E), if taken into consideration, then it can be very well held that the assessee s registration has rightly been can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not and whether the activities are being carried out in accordance with the objects. Within these parameters, we now have to examine the impugned order by which the assessee s registration has been cancelled. 17. As stated in the forgoing paragraphs, the registration has been cancelled mainly on four counts. The first ground is that on the website of the assessee trust the hospital plot at Ratnagiri has been termed as commercial land which has been put up for sale and, therefore, the trust is into commercial sale and purchase of the land. The facts which have been culled out from the material available on record is that the assessee was allotted a plot of land by the MIDC in Ratnagiri, for the purpose of hospital for which the assessee had given ₹ 75,64,674, as lease premium to the MIDC. On the said plot of land, the assessee started constructing the hospital for the purpose of cancer patients which was in accordance with its objects. Right from the financial year 2007-08 to 2012-13, the assessee has invested huge amount, the details of which have already been incorporated in the earlier part of the order. However, the assessee could not construct the entire hospital o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer has invoked the provisions of section 13 to deny the exemption to the assessee trust. The matter had travelled up to the stage of first appellate proceedings, wherein the learned Commissioner (Appeals) has reversed the findings and the conclusion of the Assessing Officer by holding that the car was used for the purpose of the trust only and after recording detail reasons, he decided the issue in favour of the assessee trust by holding that there is no violation of section 13. It has also been brought on record that the said car was sold in the next year. Such an objection of the learned DIT(E) in the present case, cannot be the subject matter of cancellation of registration under section 12AA(3), firstly, it is still a dabatable matter which is subjudice, whether there is any violation of section 13 or any misuse of trust fund; secondly, even if the car has been purchased in the name of the trustee, then at the most, it needs to be examined within the scope of section 13, and if at all there is any violation, then the income of the previous year in which such a violation took place, gets excluded from the exemption provided under section 11 i.e., surplus income becomes taxab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udying, the details of such scholarship for the financial year 2011-12 and 2012-13, has already been referred by the learned counsel from the paper book Page-12 to 17. Thus, neither the funds have been given to the PAAK Foundation nor there is any violation of provisions of section 13. Extending the financial help and scholarship is one of the objects of the trust for which the assessee has utilized its funds and, therefore, it is basically application of income for attainment of its objects only. Simply because the scholarships have been routed through PAAK Foundation to the students identified by the PAAK Foundation, it cannot be held that either the assessee s activities are not genuine or there is any violation of objects of the trust. Lastly, the learned DIT(E) has also noted that the assessee has given temporary advance of ₹ 20.50 lakhs to PAAK Foundation, which has been returned back within a month. It has been explained that the said amount was given for the purpose of distribution of scholarship, however, later on, it was decided that the scholarship should be given directly to the educational institution and should not be routed through PAAK Foundation and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
