Young Indian Vs CIT (Exemption) (ITAT Delhi)
ITAT Delhi has dismissed Congress leader Rahul Gandhi’s plea to make Young Indian a charitable trust. Rejecting the application, the ITAT Delhi said that it is a commercial organization. With the rejection of the application, the income tax case of 100 crore rupees against him will open again.
Here, in this case, as we have gathered from the material facts on record and discussed in detail, the assessee at the time of seeking registration itself has concealed the material facts and not disclosed the entire events of transactions which had undergone from the date of inception of assessee company till the grant of registration and one of the conditions on which the registration has been granted stood violated from the day one and therefore, under these circumstances, the ld. CIT(E) was fully justified in law and on facts in cancelling the registration from the date of granting of registration itself, i.e., from the assessment year 2011-12. Secondly, here in this case it has been found that even after grant of registration u/s. 12AA, no genuine activities have been carried out by the assessee either in furtherance of its objects or otherwise, which can be held to be for charitable purpose because one of the so called purpose of acquiring AJL was not carried out at all. Otherwise, also, we have already discussed and given our categorical findings that till the grant of registration and surrender made by the assessee, no worthwhile activities were carried out by AJL. In fact, what it turns out to be is that, the assessee has acquired AJL, a company that owns property worth hundreds of crores from which the AJL had been enjoying only rental income. Clearly, AJL, which had been earning rental income, cannot be held that its activities were aligned with the objects of the assessee company or through AJL; it was carrying out activities in pursuance of its objects qua that period. Hence, in that sense, the assessee’s activities cannot be held to be genuine. Thus, the cancellation of registration u/s 12AA by the Ld. CIT (E) from A.Y. 2011-12 is upheld.
FULL TEXT OF THE ITAT JUDGEMENT
01 The aforesaid appeal has been filed by Young Indian [ in short ‘YI’] , appellant-assessee against impugned order dated 26.10.2017, passed by the ld. CIT(Exemption), New Delhi, cancelling the registration u/s. 12AA(3) of the Income-tax Act, 1961[ In short “ The Act’] , granted earlier to the assessee u/s. 12A r.w.s. 12AA, vide certificate dated 09.05.2011 w.e.f. assessment year 2011-12.
02 In the grounds of appeal, the appellant assessee has raised following grounds:
“1. On the facts and circumstances of the case and in law, the CIT (E) erred in withdrawing the registration granted u/s. 12A retrospectively from A.Y. 2011-12 on the alleged grounds that the activities carried on by the Appellant are not genuine and are not in accordance with the objects of the assessee.
2. On the facts and circumstances of the case and in law, the CIT (E) erred in not appreciating that the Assessee had suo moto surrendered its registration u/s. 12A in March 2016 and that once the registration u/s. 12A is surrendered in March 2016, nothing survives to be cancelled subsequently.
3. The Appellant craves leave to add, to amend, to alter and/or to delete all or any of the above grounds of appeal.”
03 Before us, during the course of marathon hearing, four volumes of paper books on behalf of the appellant-assessee have been filed, along with two separate sets of paper books of additional evidences, one filed during the course of arguments and other during the course of rejoinder submissions. On behalf of the department, two sets of paper books have been filed along with a statement giving dates and evident of various stages. Besides this, various documents and judgments were also filed from both the sides. All the submissions and relevant documents that are germane to the issue involved shall be discussed hereinafter.
Brief facts and background of the case:
04 The appellant, Young Indian was incorporated as a company on 23.11.2010 u/s. 25 of the Companies Act, 1956. It applied for registration u/s. 12A r/w section 12AA on 31.03.2010. It was granted registration by then DIT (Exemption), New Delhi vide order/certificate dated 09.05.2011 w.e.f. assessment year 2011-12. As a prelude, certain vital events precursor to grant of registration u/s. 12AA and antecedent to application for registration us 12AA need to be elaborated which are germane to the issue involved.
05 Assessee had filed an application for incorporation of a company u/s. 25 of the Companies Act, 1956 on 14.10.2010. Memorandum of Association was subscribed by two Directors, namely, Mr. Suman Dubey, having 550 equity shares, and Mr. Satyan Gangaram Pitroda (Sam Pitroda) with 550 equity shares. License u/s. 25 of the Companies Act, 1956 was granted to YI on 23.11.2010. Later on, both the Directors transferred their shares to Mr. Oscar Fernandes and Mrs. Sonia Gandhi; and Mr. Sam Pitroda and Suman Dubey were appointed as Directors of a company, M/s Associated Journals Limited (herein referred to as ‘AJL’) on 21.12.2010. On 13.12.2010, Mr. Rahul Gandhi was appointed as Director of YI, who acquired 1900 shares resulting in 36% stake in YI; and later on, Mrs. Sonia Gandhi became the director on 22.01.2011 having 36% of stakes with 1900 shares. Another relevant fact to this chain of events is that various loans were advanced by All India Congress Committee [ In short ‘The AICC”] to AJL from time to time and as on 31.03.2010, there was outstanding of Rs. 88,86,68,976/- . Further loan of Rs. 1,35,000/- was received during the period 01.04.2010 to 16.12.2010. On 16.12.2010, AICC, who had given loan to AJL over the period of around Rs. 90 crores, transferred the entire loan of Rs. 90 crores due from AJL in favour of YI for a consideration of Rs. 50 lakhs. Thus, AICC assigned loan of Rs. 90 crores outstanding as payable in books of AJL to YI at Rs. 50 lakhs. Since YI did not had funds to pay consideration of Rs. 50 lakhs, it took loan of Rs. 1,00,00,000/- (one crore) from M/s. Dotex Merchandise Pvt. Ltd., Kolkata. Out of said loan, Rs. 50 lakhs were paid to AICC on 01.03.2011. However, before the payment of Rs. 50 lakhs to AICC, AJL had allotted 9,02,16,898 shares (almost 99.99% of the holding) to YI in lieu of loan of Rs. 90 crores by increasing the share capital from Rs. 1 crore to Rs. 10 crores. Thus, almost entire shareholding of AJL went to YI. Certain additional shares of AJL were also purchased by Mrs. Sonia Gandhi, Mr. Rahul Gandhi and Mrs. Priyanka Gandhi to gain full control of AJL. At the time of making an application for registration u/s. 12AA, the assessee company disclosed the list of shareholders and directors of Young Indian during the assessment year 2011-12 as under:
