Corcon Institute of Corrosion v. Assessing Officer C/o CIT (Exemp.), Mumbai
[Citation -2016-LL-0930-242]

Citation 2016-LL-0930-242
Appellant Name Corcon Institute of Corrosion
Respondent Name Assessing Officer C/o CIT (Exemp.), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 30/09/2016
Judgment View Judgment
Keyword Tags memorandum of association • general public utility • grant of registration • additional evidence • business interest
Bot Summary: Respondent C/o CIT, Mumbai Assessee by : Shri Yogesh Thar Revenue by : Shri C.S. Sharma Date of Hearing 19.09.2016 Date of Order 30.09.2016 ORDER PER SAKTIJIT DEY, J.M. Instant appeal by the assessee is directed against the order dated 30th June 2015, passed by the learned Commissioner, Mumbai, rejecting assessee s application for registration under section 12A of the Income Tax Act, 1961. Brief facts are, the assessee is a company incorporated under section 25 of Companies Act, 1956, as per the certificate of incorporation issued by the Registrar of Companies, Maharashtra, 2 Corcon Institute of Corrosion Mumbai, on 31st March 2014. The learned Commissioner, after receiving the application for registration filed by the assessee called for various details and documents and after verifying the information / documents submitted by the assessee, the learned Commissioner referring to certain clauses of the Memorandum of Association of the assessee company was of the view that they are of commercial nature. The learned Authorised Representative assailing the findings of the learned Commissioner, submitted, the assessee is a company incorporated under section 25 of Companies Act, 1956 and as per the license granted under section 25 by the ROC, the company has to apply its profit / income in promoting its objects and is prohibited from payment of any dividend to its members. The learned Authorised Representative submitted the assessee has replied to each of the query raised by the learned Commissioner in relation to the objects of the company by filling an affidavit the learned Commissioner without properly considering the submissions of the assessee had arbitrarily rejected assessee s application for grant of registration by surmising that the activities of the assessee are of commercial nature and for the benefit of the parent companies of the members. Undisputedly, the assessee is a company incorporated under section 25 of Companies Act, 1956, which implies that it is a non profit making company. The learned Commissioner should provide adequate opportunity of hearing to the assessee and decide the issue after considering the submissions made by the assessee as well as the documentary evidences available on record and of course after due consideration of judicial precedents which the assessee may rely upon.


IN INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI ANADI NATH MISHRA, ACCOUNTANT MEMBER ITA no.4406/Mum./2015 (Assessment Year : Not Applicable) Corcon Institute of Corrosion Vasy Centre, Military Road Marol, Andheri (E) . Appellant Mumbai 400 059 PAN AAFCC5627H v/s Assessing Officer . Respondent C/o CIT (Exemp.), Mumbai Assessee by : Shri Yogesh Thar Revenue by : Shri C.S. Sharma Date of Hearing 19.09.2016 Date of Order 30.09.2016 ORDER PER SAKTIJIT DEY, J.M. Instant appeal by assessee is directed against order dated 30th June 2015, passed by learned Commissioner (Exemption), Mumbai, rejecting assessee s application for registration under section 12A of Income Tax Act, 1961 (for short "the Act"). 2. Brief facts are, assessee is company incorporated under section 25 of Companies Act, 1956, as per certificate of incorporation issued by Registrar of Companies, Maharashtra, 2 Corcon Institute of Corrosion Mumbai, on 31st March 2014. assessee claiming itself to be charitable trust applied for registration under section 12A of Act before learned Commissioner (Exemp.), Mumbai, in prescribed manner on 4th December 2014. learned Commissioner (Exemp.), after receiving application for registration filed by assessee called for various details and documents and after verifying information / documents submitted by assessee, learned Commissioner (Exemp.) referring to certain clauses of Memorandum of Association of assessee company was of view that they are of commercial nature. He, therefore, called upon assessee to justify its claim for registration under section 12A, as charitable trust. Further, learned Commissioner (Exemp.) called upon assessee to explain, as activities of company are exclusively related to corrosion why it should not be treated as general public utility trust. In reply to query raised by learned Commissioner (Exemp.), assessee submitted detailed reply stating therein that main as well as ancillary objects of company is to promote awareness relating to corrosion which causes loss of 3% to 4% of country s GDP annually. It was submitted, assessee is totally non profit company and as per objects of company there is no personal benefit to any of members of company and income and property of company is to be applied 3 Corcon Institute of Corrosion solely for promoting objects of company. It was submitted, primary aim of company is to educate people relating to need for controlling corrosion for ensuring human safety preserving assets and environment. Therefore, nature of activities to be carried on by assessee company is in nature of education and preservation of environment, hence, comes within definition of charitable purpose as provided under section 2(15) of Act. learned Commissioner (Exemp.), after considering submissions of assessee, however, was of view that activities proposed to be carried out by company are of commercial nature. He further observed, all directors of company are part of entities which are exclusively dealing in corrosion related service. He observed, claim of company that it will hire experts for giving lectures and conducting workshop to industries and related persons clearly indicates commercial nature of activities. He further observed, objects of company are only mask or device to hide true purpose which is rendering service in relation to target industry. Thus, according to learned Commissioner (Exemp.), company is formed to further business interest of companies in which members have substantial interests. On basis of aforesaid observations, learned Commissioner (Exemp.) passed 4 Corcon Institute of Corrosion impugned order rejecting assessee s application for grant of registration under section 12A. 3. learned Authorised Representative assailing findings of learned Commissioner (Exemp.), submitted, assessee is company incorporated under section 25 of Companies Act, 1956 and as per license granted under section 25 by ROC, company has to apply its profit / income in promoting its objects and is prohibited from payment of any dividend to its members. Further, income and property of company shall be applied for solely promoting objects as set out in Memorandum of Association and no part thereof shall be paid or transferred directly or indirectly by way of dividend / bonus or otherwise by way of profit to its members. license also restricts payment of remuneration or other benefit either in money terms or otherwise to any of its members except payment of out of pocket expenses. learned Authorised Representative referring to Memorandum of Association of company submitted that main object of company is to encourage and promote awareness relating to corrosion and encourage and promote all matters concerning corrosion, corrosion controlling technique and reduction in loss accruing due to corrosion. He submitted, objects incidental or ancillary to main object, inter alia, also includes promoting awareness relating to corrosion and to protect environment 5 Corcon Institute of Corrosion endangered by impact of corrosion. learned Authorised Representative submitted, though, assessee has replied to each of query raised by learned Commissioner (Exemp.) in relation to objects of company by filling affidavit, however, learned Commissioner (Exemp.) without properly considering submissions of assessee had arbitrarily rejected assessee s application for grant of registration by surmising that activities of assessee are of commercial nature and for benefit of parent companies of members. learned Authorised Representative submitted, one of directors of assessee company Shri Samir Degan, is also chairman of NACE International India and Vice President of NACE International which is working in field of preventing corrosion and promoting awareness relating to impact of corrosion on un environment. He submitted, considering loss caused to GDP, due to corrosion, Government of India in Department of Chemicals and Petrochemical (DCPC) decided to establish national mission on corrosion technologies and standards and in this context, several meetings were held under chairmanship of Secretary, DCPC, wherein several other Government and Semi Government officials educationists also participated and Dr. Samir Degan in his capacity as Vice President of NACE International made representation on impact of corrosion on environment and efforts made by NACE on 6 Corcon Institute of Corrosion corrosion control technologies. In this context, he referred to minutes of meeting held under Chairmanship of Secretary, DCPC, on 11th May 2015. He also referred to study undertaken by NACE International as well as various other documents on issue of corrosion and its impacts on environment. However, learned counsel fairly submitted that these documents were not filed before learned Commissioner (Exemp.), hence, sought to produce them as additional evidence application made under rule 29 of Income Tax (Appellate Tribunal) Rules, 1963. He submitted, as these documents sought to be produced by way of additional evidence have crucial bearing on issue relating to nature of activities carried on by assessee they may be admitted as additional evidence. Learned Authorised Representative submitted, in course of proceedings before him, learned Commissioner (Exemp.) had only asked assessee to explain on certain object clauses in memorandum of association and had never expressed any doubt with regard to nature of activity carried on by assessee whether charitable or commercial. He, therefore, submitted, rejection of assessee s application for grant of registration under section 12A of act, should be set aside. 4. Learned Departmental Representative on other hand relied upon observations of the learned Commissioner (Exemp.). 7 Corcon Institute of Corrosion 5. We have considered submissions of parties and perused material available on record. Undisputedly, assessee is company incorporated under section 25 of Companies Act, 1956, which implies that it is non profit making company. Further, license under section 25 of Companies Act issued at time of incorporation by ROC also clearly indicates that assessee has to apply all its income / profit for objects of company and no part of its income / profit will be distributed by way of dividend, remuneration or any other benefits to its members except out of pocket expenses. On reference to Memorandum of Association of Company, we have noted that main object of company is to encourage and promote awareness relating to corrosion and to encourage and promote all material concerning corrosion, corrosion controlling techniques and reduction in losses accruing due to corrosion. main object also makes it clear that company shall not carry out its activities on commercial basis. Objects incidental or ancillary to main objects are also worded in similar manner and mainly supplement main object of promoting awareness relating to corrosion and to protect environment endangered by effects of corrosion. On careful reading of impugned order of learned Commissioner (Exemp.), we have noted that he has accepted fact that main objects of company are relating to corrosion related 8 Corcon Institute of Corrosion activities. He also has accepted that loss due to corrosion to national GDP is 3% to 4%. However, he has treated objects of assessee or activities to be undertaken to be of commercial nature. In our view, observations of learned Commissioner (Exemp.) are general in nature considering fact that he has not established on record that assessee company has been created as fa ade to promote business activities of any other concern / entity. Moreover, before us, assessee has filed certain documents by way of additional evidence to demonstrate that object to encourage and promote prevention of corrosion is in nature of charitable purpose as it is to protect environment. As these documentary evidences, in our view, will have bearing on issue whether activities of assessee is charitable or not, we admit them as additional evidence. However, considering fact that these documentary evidences were not filed before learned Commissioner (Exemp.), when he passed impugned order, we consider it appropriate to restore matter back to file of learned Commissioner (Exemp.) for deciding issue relating to assessee s application for grant of registration under section 12A denovo after considering all material and evidence brought on record including additional evidences filed before us. It is open for assessee to justify its claim by making submissions in its support along 9 Corcon Institute of Corrosion with any other supporting evidence which might be relevant to issue. Further, it is open for assessee to rely upon judicial precedents which, according to assessee, may have impact on deciding issue one way or other. learned Commissioner (Exemp.) should provide adequate opportunity of hearing to assessee and decide issue after considering submissions made by assessee as well as documentary evidences available on record and of course after due consideration of judicial precedents which assessee may rely upon. Grounds raised by assessee are allowed for statistical purposes. 6. In result, appeal stands allowed for statistical purposes. Order pronounced in open Court on 30.09.2016 Sd/- Sd/- ANADI NATH MISHRA SAKTIJIT DEY ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.09.2016 Copy of order forwarded to: (1) Assessee; (2) Revenue; (3) CIT(A); (4) CIT, Mumbai City concerned; (5) DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary (Dy./Asstt. Registrar) ITAT, Mumbai Corcon Institute of Corrosion v. Assessing Officer C/o CIT (Exemp.), Mumbai
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