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TMI Blog2013 (11) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... so, registration u/s. 12AA was not granted. Genuineness of the activities carried on by the assessee as charitable is doubtful - Brought on record by the DIT(E) that the assessee not at all maintained books of account, bills and vouchers in their original form. All original documents have been kept by LVPEI. Funds are received by the LVPEI from foreign organisation and thereafter funds are parted with by LVPEI to the present assessee which shows that the assessee has been used as a tool in the hands of LVPEI – Assessee is not an independent organization functioning independently – Accordingly, registration denied u/s 12AA of the Income tax act – Decided against the Assessee. - IT Appeal No. 1625 (Hyd.) of 2012 - - - Dated:- 28-3-2013 - CHANDRA POOJARI AND SMT. ASHA VIJAYARAGHAVAN, JJ. For the Appellant : M. Chandramouleswara Rao. For the Respondent : R. Laxman. ORDER:- PER : Chandra Poojari This appeal by the assessee is directed against the order of the Director of Income-tax (Exemptions), Hyderabad dated 30.08.2012. 2. The grievance of the assessee herein is for non-granting of registration u/s. 12AA of the Income-tax Act, 1961. 3. The learned AR su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is incorporated under the Companies Act, 1956 as an Independent Company. Allowing the usage of the premises by LVPEI does not take away the independence of the company and the Director of Income Tax (Exemptions) simply made the allegations without bringing any instance on record to prove that the usage of the premises has taken away its independence. Therefore, the assessee submits that it is a complete independent Institution and it is carrying its activities independently with the funds received from the donors. 6. The AR submitted that Operation Eyesight Universal, Canada is a Global International Organization which is sponsoring programmes in various Countries in the World particularly in the field of Eye Care and in the prevention of blindness etc. The assessee company has obtained the right to use the name for the purpose of incorporation in India and accordingly obtained incorporation certificate as a complete independent company. Operation Eyesight Universal except allowing the assessee company to use its name, has not even subscribed to the Memorandum of Association and Articles of Association of the company. The assessee company has been carrying on its charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out 6 months ago. It has been incorporated in the month of July, 2011 and made application for Registration u/s. 12A in the month of February, 2012. Since, the Institution in the first 6 months of its existence could get only joint programme as its activity, the entire funding came from "operation eyesight Universal Canada-LVP" Joint programme. In future, some more programmes may come from others also and there is no restriction placed on the number of sponsored programmes on the institution. The independence of the organization is not going to be effected by the funding of the programmes. The independent nature of the organization and the charitable nature of the activities have not been affected by such funding. The Director of Income Tax, (Exemptions), Hyderabad has not brought any material on record to prove that the assessee company is not an independent charitable institution. The assessee institution has total freedom to take up any other programmes also sponsored by the outsiders if they are in consonance with the objectives of the institution. 10. The AR submitted that as per the provisions of Sec.12AA of the IT Act, 1961, for grant of sec.12A registration, the Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee institution has only 6 months age at that time of making application and as per Circular No.108 refereed herein above it is not required to submit its accounts along with the application. All the information called for by the Director of Income Tax (Exemptions) have been submitted and all the explanations .called for have been provided. The AR submitted that its objectives for which it is formed are all charitable in nature and covered by the provisions of Sec.2(15) of the IT Act. There is no dispute about this issue and the Director of Income Tax (Exemptions) also has not denied this fact. 14. Further, the AR submitted that during the period i.e., from the date of incorporation to the date of making the application in Form No. 10A, the assessee company has undertaken activities. It has filed before the DIT(E) the details of the activities undertaken, evidences such as photographs of the programmes of medical camps, eye camps conducted by it along with the detailed list of beneficiaries and proved beyond doubt that the activities are all genuinely conducted which are completely in consonance with the charitable objectives for which it was formed. The Ld. Director of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and CBDT Circular No.108 Dated 20/03/1973 and also contrary to the above referred decision of the Tribunal. 16. The AR relied on the judgement of Hon'ble Delhi High Court in the case of DIT v. Foundation of Ophthalmic Optometry Research Education Centre (2012) 254 CTR (Del.) 133 where in the High Court has considered a question - "whether the Income Tax Appellate Tribunal was right in holding that while examining the application u/s.12AA(l)(b) r.w.s. 12A of the IT Act, 1961 the concerned Commissioner/ Director is not required to examine the question whether the Trust has actually commenced and has, in fact, carried on Charitable Activities?" 17. The learned AR submitted that the Hon'ble Delhi High Court has dismissed the Revenue Appeal and followed the interpretation given to Sec. 12AA by the Hon'ble Karnataka High Court in the case of DIT (Exemptions) v. Meenakshi Amma Endowment Trust [2011] 50 DTR 243 and in that case the Hon'ble Karnataka High Court has ordered that in granting Sec. 12A Registration the concerned authorities have to consider the objects of the trust and need not enquire into the activities of the trust at the stage of Registration. 18. The AR subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son concerned should have made an application for registration in the prescribed form and the prescribed manner to the authorities named in that section before the first day of July, 1973 or before the expiry of the period of one year shall be date of creation of the trust or establishment of the institution. The second condition provides for the keeping of the accounts in a particular manner and further, that such account should be audited. The language of the section does not show that in order to be able to get registration u/s. 12A, there is necessity of first establishing as to how the concerned institution or, as the case may be, the society would be able to claim the exemptions under sections 11 or 12. There is nothing in language to suggest that an institution of a religious nature is precluded from getting registration u/s. 12A. The question of exemptions under sections 11 and 12 or as the case may be u/s. 80G would come only when the said exemptions are claimed by the society at the time when it is assessed to tax". 20. The AR submitted that the allegations made by the Director of Income Tax (Exemptions), Hyderabad, that it is an extension of a foreign organizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay to the licensor a lee of $1.00 per year plus any applicable taxes and duties (the licence fee). The ownership of the brand lies with the licensor. It is relevant to mention here that the foreign institution has made a substantial contribution to the trust or institution during the year and to whom the assessee-institution has under obligation to make payment of $1.00 per year as licence fee to the foreign organization based at Canada as per the licence agreement. This is a clear violation of provisions of section 13 whereby section 11 not to apply in this case. 24. The DR submitted that section 13(1)(c) provides that where a part of the income of a charitable or religious trust or institution enures or is used or applied, directly or indirectly. for the benefit of those persons specified in section 13(3). such a trust or institution shall forfeit the exclusion under section 11. Even if only small portion of the income enures or is used or applied for the benefit of a person mentioned in section 13(3), the entire income of the trust is denied the exclusion, except in the case provided in section 13(4) CIT v. V. Jamnalal Bajaj Sewa Trust [1988] 171 ITR 568 (Bom.). 25. The DR s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vity by the DIT(E) would not arise. The nature of enquiry would depend on the facts of each case. Hence, the contention of the AR that the scope of DIT(E) is limited to ascertaining only whether the objects are charitable or not cannot be accepted. 28. The next question for our consideration is whether on the facts and in law registration u/s. 12AA of the Act can be refused to the assessee. For the purpose of sections 11 and 12 the words "charitable purpose" have been defined in section 2(15) of the Act which reads as follows: . "Charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 13 whereby section 11 not to apply in this case. 31. Section 13(1)(c) provides that where a part of the income of a charitable or religious trust or institution enures or is used or applied, directly or indirectly. for the benefit of those persons specified in section 13(3). such a trust or institution shall forfeit the exclusion under section 11. Even if only small portion of the income enures or is used or applied for the benefit of a person mentioned in section 13(3), the entire income of the trust is denied the exclusion, except in the case provided in section 13(4). 32. It is also to be noted that the assessee institution admitted that the original vouchers of various expenses are with LVPEI and only photo copies are available with the assessee-institution. Under these circumstances, it was held that the assessee-institution cannot be accepted as an independent charitable organization having existence of its own. 33. Considering the cumulative effect of all the above, the genuineness of the activities carried on by the assessee as charitable is doubtful. Further it is also brought on record by the DIT(E) that the assessee not at all maintained books o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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