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THE INCOME TAX APPELLATE TRIBUNAL "F" Bench, Mumbai
ITA No. 1213/Mum/2013 (Assessment Year: 2012-13)
Foundation for Populaton & Development (Appellant) vs. Director of Income Tax-Exemption (Respondent)
Date of Order: 05-02-2016
ORDER
Per Jason P. Boaz, A.M.
This appeal by the assessee is directed against the order of the Director of Income Tax (Exemption) (‘DIT’), Mumbai passed under section 12AA(1)(b)(ii) r.w.s. 12A of the Income Tax Act, 1961 (in short ‘the Act’) dated 24.12.2012.
2. The facts of the case, briefly, are as under: -
2.1 The assessee trust filed an application for registration under section 12A of the Act in Form No. 10A on 22.06.2012 before the DIT (Exemption), Mumbai. As per the details in the impugned order, the assessee has been constituted by Trust Deed dated 07.01.2012 and registered with the Charity Commissioner, Mumbai on 28.03.2012. The learned DIT, vide notice dated 10.09.2012, called for details/documents to be furnished by the assessee trust in connection with examination of its claim for registration. The learned DIT, after examining the details and documents furnished by the assessee, was of the view that the assessee trust had failed to comply with the mandatory requirements prescribed under section 12AA of the Act r.w Rule 17A of the IT Rules, 1962 (in short ‘the Rules). In that view of the matter, the learned DIT rejected the assessee’s application for registration vide the impugned order under section 12AA(1)(b)(ii) r.w.s. 12A of the Act dated 24.12.2012.
3. Aggrieved by the order of the DIT (Exemption), Mumbai dated 24.12.2012 rejecting the assessee’s application for registration under section 12AA of the Act, the assessee trust has preferred this appeal raising the following grounds: -
“1. The Learned Director of Income Tax Exemption is not justified in denying registration of the Foundation for Population & Development. Trust u/s 12A of the Income Tax Act, ignoring the fact that the appellant is registered as a Public charitable Trust with the Charity Commissioner, Mumbai under the Bombay Public Trust Act, 1950 and is engaged in carrying out charitable activity as per the object of the Trust.
2. The Appellant craves leave to make additions, deletion or alteration to the above grounds of appeal.”
4. This case fixed for hearing on a number of occasions. On those dates when the Bench did not function, the case was adjourned by information through the Notice Board. On other occasions none appeared on behalf of the assessee. Today, i.e. 02.02.2016 when the case was called for hearing, none was present on behalf of the assessee, but the learned D.R. was present for Revenue. In the circumstances as laid out above it appears to us that the assessee is not interested in pursuing this appeal seriously and therefore we proceed to dispose off this appeal with the help of the learned D.R. for Revenue and the material on record.
5. We have heard the learned D.R. at length in support of the impugned order of the learned DIT and perused and carefully considered the material on record. The learned DIT has dismissed the assessee’s application for registration under section 12A of the Act holding as under at paras 3 and 4 of the impugned order: -
“3. As per the provisions of section 12AA(1)(b), a trust is to be granted registration, if the Commissioner is satisfied about the objects of the trust and the genuineness of its activities. Both these requirements are cumulative and not alternative. From perusal of the objects clause in the Trust Deed, it is observed that the appellant trust has both charitable and non-charitable/commercial objects. For example, Clause 4(a)(iii) of the Objects Clause reads as under: -
“providing vocational training to the poor and needy.
[1] Aesthetics (basic and advanced)
[2] Codure
[3] Manufacture of jewellery (in two weeks)
[4]
[7] Manufacture of soft toys
[8] “Warli Painting” style “Warli”.
The names of an Indian tribe, for the decoration of various gift items (greeting cards, Wall hangings, etc.) Articles inspired by art “Warli” are fashionable and high demand.
[11] Placement services for the trained”
Further, it is observed that there is n specific clause in the Trust Deed imposing a binding legal obligation on the trustees to apply the income and funds of the trust solely for charitable purposes. Rather, on the contrary, the trustees (under clause 7 of the Trust Deed) are at liberty to decide particular object or objects for which the income or corpus of the trust fund can be applied. In other words, the trustees have absolute discretion to utilize its funds for fulfilling one or more objects in the Trust Deed including the non-charitable ones. It is now well established that a trust both for charitable and non-charitable objects with unfettered discretion to trustees apply whole of its income for non-charitable purposes to the exclusion of charitable objects is not entitled to exemption.
4. In the course of registration proceedings, the appellant trust was asked vide order sheet noting dated 17.10.2012 to explain as to how the aforesaid objects fall within the purview of charitable purpose as defined under section 2(15) of the Act. In its reply, the applicant trust has stated that the objects of the trust are meant to provide medical facility to the poor, education to poor children and women by educating them in English language and providing them computer skills. I have considered the submissions of the applicant trust but the same are not acceptable. The applicant has not furnished any specific explanation with regard to clause 4(a)(iii) of its Trust Deed as reproduced above. The reply given on behalf of the applicant is too general and is silent on the non-charitable/commercial objects contained in the said clause. The applicant has also not drawn attention to any other provision in the Trust Deed enjoining upon the trustees and binding legal obligation to utilize the trust fund etc. wholly and exclusively for charitable purpose. What is of essence is that there is no room for non-charitable/ commercial in nature, the same are not covered within the ambit ‘charitable purpose’ as defined u/s 2(15) of the Act. Thus, in view of mixed charitable/commercial objects coupled with lack of binding legal commitment on part of the trustees in regard to utilization of income, I am unable to satisfy myself about the charitable character of objects of the trust which is a condition precedent for grant of registration. As the applicant trust has failed to comply with the mandatory requirements prescribed u/s 12AA read with Rule 17A, its application for grant of registration is rejected.”
6. After considering the submissions of the learned D.R. and the findings in the impugned order, we find that the assessee trust has not been able to rebut the findings/decision of the learned DIT in respect of the rejection of its application for registration under section 12AA of the Act. In this view of the matter, we do not find any reason to interfere with or deviate from the findings as recorded by the learned DIT (Exemption) and accordingly uphold the action in rejecting the assessee’s application for registration under section 12AA of the Act.
7. In the result, the assessee’s appeal is rejected.
Order pronounced in the open court on 5th February, 2016.
(Sandeep Gosain) (Jason P. Boaz)
Judicial Member Accountant Member
Exemption u/s 12AA denied for having both charitable, non-charitable objects with no legally binding clause to apply income only for charitable objects | 07-02-2016 |
