TMI Blog2017 (11) TMI 1667X X X X Extracts X X X X X X X X Extracts X X X X ..... t be disallowed for the purpose of exemption u/s 11 Taking into consideration the fact that the matter which is pending before the High Court, the observations made by the tribunal are just and proper. 12AA registration could not have been given on the basis which is stayed by the High Court. In that view of the matter, the issue is answered in favour of the assessee and against the department. - D.B. Income Tax Appeal No. 387/2011, D.B. Income Tax Appeal No. 110/2012 And D.B. Cross Objection Civil No. 27/2015 - - - Dated:- 22-11-2017 - Mr. K.S. Jhaveri And Mr. Deepak Maheshwari JJ. For the Appellant(s) : Mr. Daksh Pareek for Mr. Sameer Jain For the Respondent(s) : Mr. Lokesh Tailor for Mr. Mahendra Gargieya JUDGMENT 1. In all these appeals common question of law and facts are involved hence they are decided by this common judgment. 2. By way of these appeals, the appellant has assailed the judgment and order of the tribunal whereby tribunal has dismissed the appeal of the department and confirmed the order of CIT(A). In the cross objection, no substantial question of law is framed. 3. This court while admitting the appeals framed following substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from such property; (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty five per cent of the income from such property;] (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952 , for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii) for charitable or religious purposes, created before the 1st day of April, 1952 , to the extent to which such income is applied to such purposes outside India: Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income; (d) income in the form of voluntary contributions made with a specific direction that they shall form p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e. to reach the people of every community with god s love. 2. ₹ 27773165/- Expenses incurred on Schools, Orphanages churches, which again as per objectives of the society. Our object is to help poor, downtrodden, widows, orphans, school etc. Details already submitted during hearing. Our nature is purpose of religious, education social activities. Now once again we are submitting head wise detail of expenses to prove justification regarding expenses as per objectives of the society. 3. ₹ 4376747/-, The object of society is running orphanages, hospitals, churches schools, hence we are helping Emmanuel School Society. Emmanuel School Society was in great Financial crisis due to heavy Tax demand of ₹ 4276747/-(Not Penalty). As our object of the society to help the school we paid ₹ 4376747/- towards tax demand of Emmanuel School Society. 4. ₹ 9502/- Expenses on maintenance of Raipura church as per objectives of the society. 5. ₹ 903309/- The society is running orphanages, schools churches etc when guest come from India abroad we provide them food, accommodation, travel, entertainment expenses hotel charges etc. Ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been claiming benefit of exemption u/s 11 12 of the Act. However, the department never denied benefit, the way it did this year and assessment were completed right from A.Y. 1982-83 to 2006-07. Even some of the years were assessed under scrutiny e.g. A.Y. 2004- 05, was assessed vide order u/s 143(3) dated 22.12.2006 (PB 61-64). Same expenditure have been incurred in A.Y. 2004- 05 and yet the ld. AO recorded a categorical finding in para 3 of the order that expenditure were incurred for achieving the objective of the trust and are fully vouched. Thus, there appears no valid reason or fresh material as to why the ld. AO has taken departure from this settled history of the case from last several years . The appellant referred to decision in cases of Kehar Singh [195 ITR 769 (Raj)] and Mangalchand Bhanwarlal co. [144 ITD 359 (JP)] to assert, Although the doctrine of res-judicata normally do not apply to Income tax proceedings. However, it does apply where there is no change in the facts upon which a decision in the past has already been arrived at . Based on the assessment order, in my opinion, crux of decision of the assessing officer is that various expenses du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is obvious enough that the claim of the assessing officer that the appellant catered to Christians only is not correct. It is also significant that expenditure on schools and Children homes is the single largest item of expenditure his year. Further, in the case of Shri Digamber jain mandir, Chaksu [(2009) 29 DTR 65 (Raj)], the Hon ble Rajasthan High Court held that The language of Sec. 12A does not indicate, not even remotely, that an institution of religious nature cannot get itself registered u/s 12A. In other words, the institutions of religious nature as well as for charitable purpose can claim registration u/s 12A. In light of above, in my considered opinion, decision of the assessing officer that expenditure of ₹ 2,02,21,283/- was not incurred on charitable purposes, is based on a narrow and an incorrect view of section 11 of the IT Act, 1961. It is narrow because section 11 recognizes both charitable and religious purposes, a view confirmed by higher appellate authorities: no distinction is made between charitable and religious purposes in section 11 of the IT Act, 1961. Further, this view of the assessing officer, based on his assumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12A of the IT Act, 1961. In this backdrop and as there is no change in facts and circumstances over earlier years, in my view, decision of the assessing officer to deny benefits of section 11 and 12A of the IT Act, 1961 is not tenable; consequently the addition of ₹ 2,02,21,283/- is not confirmed. Grounds 1 to 3 of the appeal are accepted. 7.2 Further, the tribunal observed as under:- 2.4 We have heard both the parties. The Revenue for the assessment year 2004-05 has treated the income of the assessee exempt u/s 11 of the Act. Page 15 of the paper book filed by the ld. AR showed the copy of Registration Certificate u/s 12A of the Act. It is nowhere mentioned in the Registration Certificate that the society is being registered as charitable society. If one goes through the nature of the expenses and explanation given before the AO, it is clear that the expenses at serial no. 1 and the expenses given at serial no. 8 can only be related to religious activities. Other expenses are not for religious purposes and have been incurred for Schools, orphanages etc. The Hon ble Jurisdictional High Court in the case of CIT Vs. Digamber jain Mandir, Chaksu (supra) has held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ali Kanpur Ors, AIR 1970 SC 450 applied; CIT vs Social Service Centre (2001), 169 CTR (APP) 130 (2001), 250 ITR 39 (AP), Addl. CIT vs A.A. Bibijiwala Trust (1975) 100 ITR 516 (Guj.) and CIT vs Barkate Saifiyah Society (1995), 213 ITR 492 (Guj.) relied on; Calicut Islamic Cultural Society (ITA No. 729/Coch/2006 and 641/Coch/206 date 31st July, 2008) impliedly approved. 8. Regarding other appeal (110/2012), counsel for the appellant contended that registration was cancelled in view of the fact that the registration was not granted by the competent authority. 8.1 Further tribunal while considering the matter observed as under:- 19. Initially, the Bench thought that the matter is covered by the order of the tribunal in the case of the assessee for assessment year 2007-08 but it was noticed that there are some aspects which were not considered and these are: (i) Cancellation of registration of society by the Registrar of Society. Copy of order is to be obtained. (ii) Whether Section 13(1) and proviso to Section 2(15) will have impact for requiring the cancellation. Copy of order of Registrar of Society and copy of written petition filed before the Hon ble H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position, the ld. CIT(A) was justified in deleting the addition because the assessee was a religious and charitable society and the expenses have been incurred for the purpose for which society was established-The Society of Presentation Sisters vs. ITO (2009) 125 TTJ (Coch) (TM) 909: (2009) 30 DTR (Coch) (Tribunal) (TM) 1 followed. Conclusion: Assessee being a religious and charitable society, the expenses incurred by it relating to both religious as well as charitable activities were for the purpose for which the society was established and, therefore, the expenses incurred for religious purposes could not be disallowed for the purpose of exemption u/s 11. 23. It is true that the present appeal was not heard along with the appeal against order of ITO u/s 143(3) for assessment year 2007-08 though matters considered by Ld. CIT should have been brought to our knowledge. In respect of satisfaction of the Ld. CIT in passing order u/s 12AA(3), it is clear that there was a report from the AO. Satisfaction requires to apply the mind and came to the conclusion that prima facie the action is needed. Hence requirement of satisfaction stands complied. 24. The assessee is sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anceling the registration requires consideration has prima facia the Registrar has no authority to do the same in view of the ratio of the supreme court decision in the case of Indian National Congress (I) Vs. institute of Social Welfare and others (2002) 5 SSC 685. The Hon ble Jurisdictional High Court stayed the operation of the order of the Single Judge. It will be useful to reproduce the relevant extract of the decision of the Hon ble Jurisdictional High court:- It is nowhere mentioned in the registration certificate that the society is being registered as charitable society. If one goes through the nature of the expenses and explanation given before the AO, it is clear that the expenses at serial no.1 and the expenses given at serial No.8 can only be related to religious activities. Other expenses are not for religious purposes and have been incurred for schools, orphanges, etc. The main heading for Section 11 is income from property held for charitable or religious purposes . Section 11(1)(b) says that income derived from property held under trust wholly for charitable or religious purposes is to be allowed exemption in case such income is applied to such purposes in I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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