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IN THE INCOME TAX APPELLATE TRIBUNAL "I" BENCH, MUMBAI
, ,
BEFORE SHRI SANJAY ARORA, AM AND SHRI VIVEK VARMA, JM
./I.T.A. No. 4312/Mum/2013
( / Assessment Year: 2013-14)
Shree Vagad Visha Oswal DIT (Exemptions),
Social Group (Borivali) 6th Floor, Piramal Chambers,
C/o. M/s. Victor Ply `N' Laminates, / Parel, Mumbai-400 012
Shop No.5/6, Giriraj Bldg., Vs.
S.V.P. Road, Borivali (W),
Mumbai-400 103
. / . /PAN/GIR No.
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Girish Dave &
Ms. Kadambari Dave
/Respondent by : Shri Kishan Vyas
/ : 03.12.2014
Date of Hearing
Date of Order : 05.12.2014
/ O R D E R
Per Sanjay Arora, A. M.:
This is an Appeal by the Assessee contesting the order u/s.12AA(1)(b)(ii) of the
Income Tax Act, 1961, (`the Act' hereinafter) dated 26.04.2013 passed by the Director of
Income Tax (Exemptions), Mumbai (`DIT(E)'), rejecting assessee's application for grant
for registration u/s.12A of the Act.
2. Opening the arguments for and on behalf of the assessee, it was submitted by the
ld. Authorized Representative (AR), the assessee's counsel, that the impugned order
suffers on both, i.e., qua the procedural aspect as well as the merits of the case, and that
he would address both the aspects, in seriatim. As regards procedure, the assessee has not
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ITA No. 4312/Mum/2013 (A.Y. 2013-14)
Shree Vagad Visha Oswal vs. DIT (Exemptions)
been afforded proper opportunity to explain its' case by the ld. DIT(E), by show causing
it in the matter. The assessee, where so, could have either explained as to why and how
its' objects are wholly charitable or could even alter/modify the same so as to satisfy the
ld. DIT(E) in the matter. The assessee had, he would continue, responded to each of the
queries raised by the office of the ld. DIT(E) in the course of the processing of the
assessee's application for registration as a charitable institution, and toward which he
would take us through its' letters dated 06.02.2013, 13.03.2013 and 06.04.2013, and the
annexures accompanying the same, as well as the communications by the office of the ld.
DIT(E) dated 11.01.2013 and 28.03.2013 (forming part of the assessee-appellant's paper-
book). On merits, he would submit that the assessee's primary objects are to carry out
educational and medical activities, with its organization being also geared toward the
same. These represent the primary objects, even as several others have also been included
in the Memorandum of Association. It is customary to, while preparing the memorandum
of association of a society/trust, to include as many objects as possible at the time of its'
incorporation, so that the trust is not constrained to execute any project or activity,
charitable in nature, the range of which is limited only by one's imagination, for want of
the relevant object. The charge of non-charitable and commercial nature of the objects by
the ld. DIT(E), even if regarded as valid, is only with regard to such objects, which are in
any case ancillary and incidental objects, none of which have actually been or intended to
be pursued by the assessee-trust. That by itself should not oust the assessee's case.
The ld. DR would, on the other hand, rely on the impugned order, stating that the
ld. DIT(E) had raised pertinent issues, which have not been met by the assessee or
otherwise shown to be infirm, adverting our attention to his findings and decision.
3. We have heard the parties, and perused the material on record.
We are incomplete agreement with the reasons stated by the ld. DIT(E) in not
accepting the assessee's application, i.e., vide para 7 of his order. Even as observed
during the hearing, existence of even one object which is non-charitable or commercial in
nature, would suffice to oust the assessee's claim for being eligible to be registered as a
charitable trust/institution, and which, i.e., mixed objects, forms the substance or the
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ITA No. 4312/Mum/2013 (A.Y. 2013-14)
Shree Vagad Visha Oswal vs. DIT (Exemptions)
principal reason of the ld. DIT(E) in rejecting the assessee's application. In fact, even the
classification of some objects as `other' or `subsidiary' or `ancillary', etc. would, in our
view, be irrelevant or immaterial for the purpose, an aspect which, where so, may perhaps
have found favour with the ld. DIT(E) inasmuch as he states (at para 7) that there is
nothing to indicate that the applicant has some primary or predominant objects, as stated,
while others are ancillary or incidental. This is as what is relevant is not whether any
activity has actually been undertaken in pursuance thereof, but that it could be; the
applicant-trust having the necessary power or authorization under its memorandum to do
so. The plea with regard to the `customary' manner in which the memorandum is
prepared, is not a legally valid argument and, rather, is, given the position of law, self-
defeating of the assessee's case. The matter is well-settled, and for which one may refer
to the decisions by the apex court, as in the case of CIT vs. Palghat Shadi Mahal Trust
[2002] 254 ITR 212 (SC); Upper Ganges Sugar Mills Ltd. vs. CIT [1997] 227 ITR 578
(SC); and CIT vs. Delhi Stock Exchange Association Ltd. [1997] 225 ITR 235 (SC), even
as observed by the Bench during the course of hearing itself.
Again, on merits, we cannot find fault with the impugned order i.e., in construing
some objects as being liable to be regarded as commercial in nature, or being carried out
in a commercial manner. As an example, we take the first object read out by the ld. AR
during hearing:
"I.(k) To carry on all or any of the activities of makers of and dealers in surgical
instrument and appliances and artificial limbs, dental and optical equipment and
goods anatomical, orthopedic and surgical appliances of all kinds and provides of
all requisites for hospital, patients and invalids."
Clearly, `making' of or `dealing' in surgical instruments, appliances, etc.,
definitely has commercial ramifications. Why, as indicated during hearing, this would
precisely be an object a commercial organization as a manufacturer or dealer of such
instruments or equipment, would adopt and pursue. We are conscious that the assessee
has furnished an explanation about various clauses of the Trust Deed vide its letter dated
13.03.2013, and which clearly states the relevant object/s to be pursued on a non-
commercial/no profit-no loss basis. An explanation, it may be appreciated, cannot
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ITA No. 4312/Mum/2013 (A.Y. 2013-14)
Shree Vagad Visha Oswal vs. DIT (Exemptions)
substitute the generality of the object/s, so that it would have to be amended accordingly
or otherwise restricted by inserting a supervening clause, imposing the said restriction or
otherwise meeting the objection.
So however, we find some merit in the assessee's contention that there is actually
no intent for adopting such a course, and that it be allowed an opportunity to amend its
object/s suitably. This is more so as the assessee has complied with all the notices,
furnishing all the relevant information/details as called for by the office of the ld. DIT(E)
and, more importantly, no show cause notice, stating the precise objection to the
assessee's application, had been issued thereto. As such, while in agreement with and,
consequently, upholding the impugned order on merits, we are inclined to consider it as
procedurally deficient. Procedural law, it is trite, is a hand-maiden of justice.
Under the circumstances, we only consider it fit and proper to restore the matter
back to the file of the ld. DIT(E), to enable the assessee to meet and address his
objections, found valid, on merits. In this regard we may further clarify that the
amendment, if any, to its' objects by the applicant-trust, would have to be carried out by
following the procedure mandated by law in this regard, and for which we may again
refer to the decisions cited supra by the hon'ble apex court. The assessee, even as assured
by the ld. AR, shall extend full cooperation in the said proceedings, failing which the ld.
DIT(E) shall be at liberty to dispose the matter on the basis of the material on record in
accordance with law. We decide accordingly.
4. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on December 03, 2014 at the conclusion of the
hearing.
Sd/- Sd/-
(Vivek Varma) (Sanjay Arora)
/ Judicial Member / Accountant Member
Mumbai; Dated : 05.12.2014
Akhilesh, PS
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ITA No. 4312/Mum/2013 (A.Y. 2013-14)
Shree Vagad Visha Oswal vs. DIT (Exemptions)
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT - concerned
5. , , / DR, ITAT, Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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