TaxTMI 
TaxTMI 
2019 (11) TMI 996
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....s 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....
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....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: Name Position in YI & No. of shares held Mrs. Sonia Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Rahul Gandhi Director since 22.01.2011 - 1900 shares (36%) Shri Moti Lal Vora Director since 22.01.2011 - 600 shares Shri Oscar Fernandes Director since 22.01.2011 - 600 shares Shri Satyan Gangaram Pitroda (Sam Pitroda) Director since 23.11.2010 - Held 550 shares but transferred it to Shri Oscar Fernandes Shri Suman Dubey Director since 23.01.2010 - Held 550 shares but transferred it to Mrs. Sonia Gandhi. 06 The Chronology of events right from the date of inception of Young Indian u/s. 25 of the Companies Act till the date of application of registration u/s. 12AA ....
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....dvanced by AICC to AJL * Rs. 88,86,68,976 till 31.03.2010 (as claimed) * Rs. 1,35,000 during 01.04.2010 to 16.12.2010 * Total Loan by AICC to AJL is Rs. 90 Crores. AY 2011-12 List of shareholders and directors * Mr. Suman Dubey and Mr. Sam Pitroda - Founder Members with 550 Shares each * Rs. 53,21,290 spent towards objects including Rs. 50 lakhs paid to AICC towards acquisition of loan of Rs. 90 Crores and only Rs. 200 as income from subscription 21.01.2011 EGM of AJL * Approving fresh issue of 9.021 crore shares 22.01.2011 Commencement of directorship of Mrs. Sonia Gandhi * Holds 1900 shares 36% stake in YI 22.01.2011 Commencement of directorship of Mr. Moti Lal Vora Held 600 shares in YI * Chairman and MD of AJL since 22.03.2001 22.01.2011 Commencement of directorship of Mr. Oscar Fernandes Held 600 shares held in YI * Director in AJL since 17.06.2010 14.02.2011 Bank Account of YI opened * After issue of PAN by IT authorities 15.02.2011 Loan from Dotex Merchandise (P) Ltd., Kolkata Loan of Rs. 1 crore was taken from this company to pay AICC Rs. 50 Lakhs for assignment of loan in AJL * Confirmation....
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.... by you during the next two years. 4. Copy of accounts for the period since the inception of the Trust / Society or Last years during which the trust has been in existence. 5. Please insert a clause in the deed /MOA providing that the funds /property of the trust will be used only for the objectives of the Trust/Society. 6. Please insert a provision relating to the dissolution of the Trust/Society providing inter alia that in the event of dissolution of funds/ assets will be transferred only to some other trust having similar objectives. 7. A note on activities carried out since inception/last 1/2/3/4 years with supporting documentary evidence. 8. Please justify your claim for registration u/s. 12AA & 80G. 9. Please explain the change in fact & circumstances of the case since the last rejection order. 10. Please furnish the details of donation including corpus donations received & made giving Name, Address, PAN of donors. 11. Please furnish contact No & E-mail Address of the Applicant & its members. 12. Justify with the bill/vouchers of the income applied for charitable activities along with proof of b....
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....sfied about the genuineness of the activities promised or claimed to be carried on in each Financial Year relevant to the Assessment Year and all the provisions of law acted upon. • The Trust/ Society/ Non Profit Company shall comply with the provision of section 139A(A)(ii) and (Hi) of the Act within one month of the date of this order to obtain a Permanent Account Number and shall communicate the PAN to this office. • The Trust/ Society/ Non Profit Company shall maintain accounts regularly and shall get these audited in accordance with the provisions of section 12A(b) of the Income Tax Act, 1961. Separate accounts in respect of each activity and specified in memorandum shall be maintained. A copy of such account shall be submitted to the Assessing Officer. A public notice of the activities carried on/ to be submitted to the Assessing Officer. A public notice of the activities carried on/ to be carried on and the target group(s) (intended beneficiaries) shall be duly displayed at the Registered/ Designated Office to the organization. • Separate books of accounts in respect of profits and gains of business incidental to, attainment of objects ....
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....that a Section 8 company is prohibited from declaring dividend or distributing or paying any amount to its members. "Investment" presupposes return. However, holding these shares does not envisage any dividend, either present or expected. Therefore, in our view, our continuing to hold shares of The Associated Journals Limited does not militate against Section 11(5) of the Income Tax Act, 1961. However, currently and in the foreseeable future we do not have significant surpluses, which presently makes our registration under Section 12AA virtually academic in nature. After considering all aspects we have decided to surrender our registration u/s 12A read with Section 12AA with immediate effect. The original Registration Certificate issued u/s 12AA bearing no. 2011-12/100 DEL-YR21296 dated 9/5/2011 is surrendered herewith. This is to call upon you to note that the registration stands cancelled with immediate effect. Thank you. Yours faithfully, Motilal Vora Director DIN: 00628348 Encl: Original Registration Certificate bearing no. 2011- 12/100 DEL-YR21296 dated 9/5/2011" FINDING GIVEN IN THE IMPUGNED ORDER OF C....
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....information: • M/s. Young Indian was incorporated with main object of inculcating in the mind of India's youth, commitment to ideal of democratic and secular society for its entire population without any distinction as to religion, caste or creed and to awaken India's youth to participate in activities that promote foregoing objectives. In this context, you are requested to furnish details along with evidence of charitable activities undertaken by M/s. Young Indian to fulfill above object during A.Y. 2011-12 to 2016-17. Please clarify if there is any change in aim and objects of M/s. Young Indian during AY 2011- 12 AY 2016-17. • It is evident from the records that the only substantial activity undertaken by M/s. Young Indian during P.Y. 2010- 11 was to acquire M/s Associated Journals Ltd. by acquiring its 99.99% shares. It is important to mention here that M/s AJL has been engaged in the business of real estate and the source of its income was rental income as well as other business income from construction and development of commercial complexes since FY 2008-09. Please explain whether earning of income from real estate business through M/s AJL is cov....
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....commercial interest income was earned by the assessee and even in the audited accounts filed with the return of income from year to year, it can be seen that no income has been credited to the income & expenditure account of the company. Thus, such an allegation is baseless. • Regarding surrendering of registration certificate issued u/s. 12A, it was submitted that the assessee never admitted that its activities are not in conformity with the terms of registration, rather it was clearly stated that currently and in the foreseeable future, the assessee do not expect significant surplus and therefore, registration u/s. 12AA virtually became academic in nature. It is purely a prerogative of an assessee whether it would like to avail any benefit of exemption provided under law and it is well-settled law that if the assessee does not desire to avail benefit provided in law, then he may chose not to avail the same. Reliance is placed on the judgment of Hon'ble Supreme Court in the case of CIT vs. Mahindra Mills (2000) 243 ITR 56 (SC). Thus, after having surrendered its registration certificate w.e.f. 21.03.2016, it ceases to enjoy the benefit of the provisions of exemption o....
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....a recast of its activities so as to have its main object congruent to the main object of the Company, for a consideration of Rs. 50 lacs. As a part of restructuring exercise of the said Company, the said loan was converted into 9,02,16,898 ordinary shares of Rs. 10 each fully paid. Since said acquisition is treated as application on the objects of the Company (and accordingly, treated in the financial statements of the Company), the same has not been reflected as an investment in shares. Besides, even if the shares were to be treated as an asset ("investment"), having regard to the fact that the net worth of the said company is negative, recognizing the entire cost as "diminution in value" would result in an equivalent charge to the Income & Expenditure Account." 19 After incorporating aforesaid details, the ld. CIT (E) proceeded to analyze the Income & Expenditure Accounts for the assessment years 2012-13 to 2014-15 and from the perusal of the same, he observed that the assessee had not incurred any expenditure on its objects except for creating provision for interest payment for loans of Rs. 1.00 crore taken to acquire AJL, which, according to him, was a Real Estate Company. H....
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....hweshwarNath Road, Lucknow. He also noted that these properties were acquired by AJL either as free hold or on lease from Central/State Government solely for the purpose of publication of newspaper by paying token price and after closure of newspaper business in the year 2008, AJL started the business of construction of buildings for commercial purpose and had let out or sold its existing building on rent or sale consideration. To corroborate this fact, he also took note of disclosure of AJL in the annual report, which for the sake of ready reference is also incorporate hereunder: "3. In respect of construction activity at Lucknow for sale of shops and floors, advances made to contractors and booking money received from intending purchaser in earlier years, are included under Schedule IV " Current Assets Loans and Advances" and Schedule V "Current Liabilities & Provisions" respectively. During the year Company paid Rs. 2,22,17,743/- for buy-back of shops at Lucknow the amount paid has been shown as development expenditure. 4. (a) Freehold land includes 2 plots of Land allotted to the Company in 1983 by Government of Maharashtra at Bandra, Mumbai for Rs. 31,23,0....
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....der the head "Capital Work in Progress". (c) The Title Deed in respect of land allotted in Mumbai, Patna and Panchkula is yet to registered/ executed. 7. Advances/ Security Deposits received from the parties in earlier years relating to construction activity on company's land at Lucknow and Mumbai has been grouped under "Other Liabilities" and "Unsecured Loans" and no provision of interest has been made thereon. 21 Thus, according to ld. CIT (E), AJL had earned substantial income from Real Estate business from AY 2012-13 to 2014-15. He also incorporated the details of such income as disclosed in the return of income of AJL. 22 Further, on perusal of financial details of AJL with reference to the claim of the assessee that the expenditure of Rs. 50 lakhs incurred on acquisition of AJL was in accordance with the objects, the ld. CIT(E) held that the claim of the assessee was factually incorrect and was not tenable for the following reason: • It is evident from the financial records of the assessee company, as summarized above that during assessment year 2011-12 to 2014-15, the assessee had not carried out any activities in accordance with its obje....
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.... for youth commitment for ideals of democratic and secular society for the reason that AJL was engaged solely for earning income from real estate business and never carried out activities and the objects for which it was granted registration. Even the assessee in the notes to account for the year ending 31.03.2011, stated that AJL was in the process of real estate business to manage the assessee company, which was also found to be factually correct. AJL had never changed or re-aligned its business with the objects of the assessee company and for this reason, the expenditure of Rs. 50 lakhs cannot be held to have been incurred for the activities as per objects of the assessee company. 25 He further held that suo moto surrender of registration u/s. 12A in March, 2016, was in the wake of the fact that the investigation was mounted against the assessee by the Investigation Wing in the year 2014 and after having received the enquiry report from the Investigation Wing, the Assessing Officer had started investigation against the assessee by way of issue of summons u/s. 131 and proceedings u/s. 133(6) in the year 2015. Because of this enquiry, the Assessing Officer had issued notice u/s....
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....O and its subsidiary M/s AJL with reference to contention of the assessee and provisions of section 12AA(3), I have reached following conclusions: * Even though assessee was specifically asked to furnish details and evidence of the activities carried out by it during AY 2011-12 to 2016-17 in accordance with its objects, the assessee did not furnish any details or evidence that it had actually carried out any genuine activities in accordance with its objects i.e. the assessee has not even discharged its initial onus. However, scrutiny of the returns of income and annual reports has revealed that the assessee had not carried out any activities in accordance with the objects. * The claim of the assessee that information as contained in the report of the AO was without basis has been examined in detail with reference to disclosure made by the assessee and its subsidiary M/s. AJL in the return of income and annual reports and it has been noticed that the findings of the AO in report were verifiable were based on credible basis as evident from the discussion and findings as recorded in preceding paragraphs 8 to 11 of this order, accordingly, the contention of the assess....
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.... had initially appeared before us on behalf of the assessee, vide letter dated 05.08.2019 had submitted a petition for admission of additional evidences stating that the ld. CIT(E) had given various incorrect and factually misleading statements and has reached to the conclusion without giving any opportunity or making sufficient enquiry. The additional evidences paper book filed separately is running into 386 pages, containing list of 20 documents which are mostly in the nature of launch of Commemorative Edition of National Herald Publication in the year 2017 and 2018, launch of various websites by National Herald and Navjivan newspapers, erstwhile newspapers published by AJL, registration certificates of National Herald newspaper and Sunday Navjivan with Registrar of Newspapers for Indian and various kind of reports of Google showing the outreach of the online news portals operated by AJL. Further, resolution passed by the Board of Directors of AJL to resume the publication of newspapers on 26.09.2016 and letter of AJL to the Registrar of Newspapers of India to resume newspaper business, copy of Form No. 23 submitted before the ROC with amended MOA to show that the amended objects....
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....ogesh Thar gave para-wise submissions of the findings given in the impugned order. One of the contentions raised was that the order passed by the ld. CIT (E) u/s. 12AA (3) is mostly based on the borrowed satisfaction without application of mind. This was pointed out from para 2 of the impugned order wherein an allegation made by the ACIT vide communication dated 16.08.2017 has been made the basis by the ld. CIT (E) and based on that he has reached to the conclusion that prima facie finding of the Assessing Officer was corroborated from the facts on record of the assessee as well as AJL. Thus, the ld. CIT (E) has merely relied upon the information received from the ACIT and JCIT and had not independently and objectively applied his own mind. For instance, relevant observation made by the ld. CIT (E) at page 13 to 15 was highlighted before us. The ld. counsel further submitted that the requirement u/s. 12AA(3) before canceling the registration is that the ld. CIT(E) should be satisfied that the activities of the assessee are not genuine or are not in accordance with the objects. Such satisfaction cannot be a borrowed satisfaction based on the finding of another officer without app....
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....ugh open and transparent electoral process, so as to conform to the ideals of the founding fathers of India, Mahatma Gandhi and Pandit Jawaharlal Nehru and to achieve this through publication and distribution of newspaper, periodicals, magazine or journal, through physical, electronic, digital or any other media, as issued by the Company in accordance with the policy and principles of the Indian National Congress." Further, clause (v) of the MOA mentioned that - (i) The profit, if any, or other income and property of the Company whenever derived shall be applied solely for the promotion of its objects as set forth in this Memorandum. (ii) No portion of the profits, other income or property aforesaid shall be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit to persons who, at any time, are or have been members of the Company or to anyone or more of them or to any persons claiming through anyone or more of them. (iii) No remuneration or other benefit in money or money's worth shall be given by the Company to any of its members, whether officers or members of the Company or not, except payment of out-of-....
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.... labour dues. Not only that, a fire had broken out in its Lucknow premises, which destroyed the printing press. Owing to the said trouble and continuous losses, the publication was temporarily suspended. The publication business was temporarily suspended, is clear from the fact that on 31.03.2008, AJL informed United News of India (UNI) about the temporary suspension of publication business. Even third party newspapers had published that there was temporary suspension of publication business by AJL. Thus, there was no closure of business or business itself had ceased to exist, rather it was only a temporary suspension. He submitted that, in fact, the publication had later on re-commenced, which is evident from the following facts, placed in the paper book of additional evidences: - On 23/01/2014, AJL wrote to the Registrar of Newspapers for India (RNI) informing it of its intent to restart publication of the newspapers. Please see page 267 of the AB - PB I; - On 26/09/2016, a resolution was passed by the Board of Directors of AJL to resume the publications of newspapers. Please see page 266 of the AB - PB I; - On 14/11/2016, AJL launched National Herald W....
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.... temporarily suspended, evidence of the assessee is important. 39 The ld. counsel further submitted that the allegation of the ld. CIT (E) that AJL is Real Estate Company is absolutely incorrect. It was pointed out that in public interest, State Governments, as a policy, had allotted lands/buildings to various entities engaged in the newspaper business to partly use it for running newspaper business and partly to rent it out. The same is done by the Government to ensure independence of the press. The newspaper publishing business, being capital intensive in nature, is primarily a loss making business. In fact, the price at which newspapers are sold is very nominal so that it can reach to masses and generally, the cost of publishing a newspaper is higher than the price at which the same is sold. Therefore, in order to promote press and ensure its freedom, the Government allots lands/buildings to various entities engaged in the newspaper business so that they can recoup their losses from publication business and survive by commercially exploiting the said allotted lands/buildings by renting out the same. The lease deed allotting the said lands/buildings specifically permits the....
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....of Indian Express Newspaper v. UOI (1986 AIR 515) wherein Hon'ble Supreme Court has held that Press is the 4thestate of the country and freedom of speech and expression should, therefore, be given paramount importance and generous support and the government should be more cautious while levying taxes on other matters concerning newspaper industry. Reliance was also placed on another decision of Hon'ble Supreme Court in the case of Bennett Coleman & Co. &Ors. Vs. UOI (1973 AIR 106). Relying on these judgments, it was submitted by the Ld. Counsel that for the said freedom of press, lands were allotted to the companies and permission was granted to partly rent out the same and therefore, AJL cannot be regarded as engaged in the Real Estate business and it is part and parcel of publication business of AJL. 41 The ld. counsel further submitted that AJL had never purchased or sold any property after year 2008 as alleged by the ld. CIT (E). It was submitted that certain land parcels were allotted to AJL by the Government from time to time between the periods 1962 to 2005. In the year 1962, the Government of India allotted land to AJL situated at 5A, Bahadur Shah Zafar Marg, New Delhi f....
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....igital publication. It started renovation and construction of its properties so as to let them out and improve its financial position with the longterm view to first stabilize its financial position and then revive its publication business. Ld. Counsel pointed out that, in the years 2016-17 and 2017-18, the digital and print publication activities of AJL respectively have recommenced and the company is fully committed to continue to conduct its publication activities to their fullest potential. In FY 2016-17, the company had restarted its digital publication business and in the following financial year revived its traditional print newspaper business, thus ending the brief "temporary suspension". Thus, renting of the properties has revived the financially distressed position of AJL and today it is a healthy going concern newspaper and digital publishing business run in the public interest. Thus, said activity cannot be said to be real estate business. 42 Regarding allegation of ld. CIT (E) that AJL had some properties which goes to show that it is a real estate company, for which reference was made by him to the notes on account of AJL as on 31.03.2009, wherein it was stated tha....
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..... Similar view has been taken by Hon'ble Supreme Court in Mrs. Bacha F. Guzdar (supra) and catena of other judgments. Thus, it cannot be held that the assessee company was conducting the duties of AJL. In any case, the AJL is not into the Real Estate business but in publication activities. Therefore, the question of Assessee Company having been engaged in commercial activities does not arise. In fact, by acquiring the shares of AJL, it was never intended to make any gain. The assessee being a section 25 company and even if any alleged gain would have been derived then it would not have been distributed as dividend. Therefore, there could not be any motive to undertake any commercial transaction to derive any benefit or gain. Further, AJL had passed resolution on 21.01.2016 to get the company registered under section 8 of the Companies Act, 2013, the effect of which is that even AJL is prohibited from declaring dividend or distributing any profit amount to the shareholders. 44 As far as allegation of the ld. CIT (E) that the assessee company did not carry out any genuine activities in accordance with its objects, Ld. Counsel submitted that the assessee company acquired 99% sha....
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....d Web. The ld. counsel has also placed several presentations and photographs showing operations of the assessee at page 301 to 386 of the additional evidence paper book. Thus, he submitted that e-medium was the ideal platform to reach today's youths as it was available on all electronic platforms in the form of mobiles, laptops, tabs etc. Apart from that, the ideology of democracy and secularism was also being spread through the newspapers of AJL. In support, he showed us the Commemorative Edition of National Herald. Thus, it was submitted that on the platform of AJL, Young Indian had achieved its objects for spreading the ideology of democratic and secular society. Accordingly, it cannot be held that no genuine activities were carried out by the assessee towards its objects. 45 Without prejudice to the submissions made above, the ld. counsel submitted that the cancellation order of the ld. CIT(E) is bad in law because before issuance of show cause notice, the assessee had suo moto surrendered its registration. He submitted that the assessee had already filed a letter before the DIT (E) surrendering its registration u/s. 12A r.w.s. 12AA and also communicated that unanimous....
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....tigation be the reason for surrender of registration by the assessee. 47 Lastly, Ld. Counsel submitted that the assessee is entitled to surrender the registration u/s. 12AA even though Act does not provide any specific provision prohibiting such surrender. In support, he has relied upon the judgment of Hon'ble Supreme Court in the case of Mahindra Mills (supra) and also following judgments: (i) Cyanamid India Ltd. v. Collector of Central Excise, Baroda (1997) 1997 taxmann.com 1518(CEGAT - New Delhi) (ii) Gothi Plastic Industries vs. Collector of Central Excise, Trichy (1996) 1996 taxmann.com 486 (CEGAT - Chennai) 48 Further, when the assessee had surrendered registration in March, 2016 and for a long period of 17 months, no action was taken, then in absence of any action taken by the department, it should be deemed to have been accepted by the department. The ld. counsel referred to sub-sec. (2) of section 12AA wherein, it has been stated that every order granting or rejecting registration, has to be passed within six months from the end of the months in which the application is filed. In support, he also referred to the following decisions: (i) CIT....
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....vocate, first of all objected for admission of additional evidence filed by the assessee on the ground that, firstly, they are not relevant for deciding the issue in hand; secondly, most of the documents and materials, which have been placed in the additional evidence paper book-1, are post cancellation order of ld. CIT (E) dated 26.10.2017, which are placed in the additional evidences. For instance, documents placed at item No. 2, 5, 10 and 12; therefore, these documents should not be admitted; and lastly, he questioned the genuineness of the evidences. 52 Thereafter, Mr. Srivastava submitted that in order to appreciate entire gamut of facts and background of the case and to have an over view of entire factual matrix and the material available with the Commissioner and the records called by him for its perusal as concluded by the ld. CIT(E) in para 17 of his impugned order, the facts of the case can be divide into four part, namely - i. Facts as existed prior to the incorporation of the Assessee Company. ii. Facts evidenced by events happening from the date of incorporation till the date of filing the application for registration; iii. Facts stated....
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....e Company took a loan of Rs. 1 crore from M/s Dotex Merchandise Pvt. Ltd. ('Dotex') The Assessee Company paid the said Rs. 50 lakhs out of the loan from M/s Dotex to All India Congress Committee (AICC) on 01.03.2011. However, much before the payment of Rs. 50 lakhs to AICC, AJL had already allotted 9,02,16,898 shares in lieu of the loan of Rs. 90 crores (approx.) to the Assessee Company by increasing its share capital from Rs. 1 Crore to Rs. 10 Crores. Certain additional shares of AJL were also purchased by Smt. Sonia Gandhi, Sh. Rahul Gandhi and Smt. Priyanka Gandhi to gain full control of AJL. These transactions as appearing in the bank account of the Assessee Company were noted as suspicious transactions and the Financial Intelligence Unit ('FIU') received a note from the concerned agency to the effect that the loan transaction as also the acquisition of shares were suspicious in nature as these were not in accordance with the stated objects of the Assessee Company. This information was received and passed on to the Investigation Wing of the Department. Thus, the trigger of inquiry into the affairs of the company was the nature of transaction as reported to FIU. ....
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....s or otherwise) which, in its own turn is linked to the ability of the Donors to claim deduction u/s. 80G of the Income Tax Act. The application for registration u/s 12AA is the first step in that direction." h. It has been pointed out by him that the Assessee Company never applied for registration u/s 80G and not a penny of donation was raised from any agency. i. Further, in the note dated 09.05.2011, the Assessee Company did not even whisper about the activity of acquisition of shares of AJL nor made any attempt to place on record a full and true account of the activities of the Assessee Company from the date of its incorporation till the request for grant of registration. Thus, he submitted that this fact further reinforces the contention that there was deliberate attempt to suppress and withhold information about the real motive of the activities of the Assessee Company during the course of proceedings for grant of registration. j. The application for registration was filed with the address of the Assessee Company as Herald House, New Delhi and when asked by the Revenue, the Assessee Company filed no objection certificate from the Chairman of....
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....ts publication activities but was only holding on to certain properties and exploiting these for rental income or construction of shops, etc. The CIT (E) also pointed out that the surrender of registration after the investigation by the Department cannot be used as a tool to prevent the rigors of cancellation of registration. 54 Mr. Srivastava then drew our attention to another fact that while the Income tax and investigation proceedings were going on and parallel proceedings were also undertaken by Land Development office for taking back the possession of land allotted in New Delhi to AJL post cessation of the publication activity. Inspections were carried out on 13.09.2016 and 26.09.2016 that clearly demonstrated that there was no press activity at the given premises. Once it was realized that AJL was in contravention of the terms of lease, it passed a resolution on 26.09.2016 to resume the activity of the publication of newspapers. He further brought on record that a writ petition was filed by AJL before the Hon'ble Delhi High Court against the actions of the Land & Development Officer ('LDO'). The petition was dismissed by the Writ Court and against that an appeal was filed ....
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....d M/s Dotex Merchandise Pvt. Ltd., based out of Kolkata. vi. AJL promptly increased its share capital and allotted 99.99% shares to the appellant company, some of the directors separately acquired a small number of shares to have full control over AJL. vii. These transactions were "questionable" and "speak volumes" as observed by the Hon'ble High Court of Delhi. (Para 20 of the Hon'ble High Court order in W.P. (C.) 12133/2018). 56 The second core argument taken on behalf of the Revenue was that, most of these vital facts were suppressed by the assessee company from DIT (Exemption) while making the application for registration and during the process of said registration. For instance, vide point No. 7 of the information/clarification dated 18.04.2011 (during the process of registration) seeking note on the activities carried out since inception with supporting documentary evidences was admittedly never supplied to by the assessee company. The copy of the said query/clarification sought from the assessee vide letter dated 18.04.2011 has been placed in the Paper Book-1 filed by the Revenue. Thus, it was submitted that there was clear cut suppression of information....
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.... been solely applied for the promotion of the objects. In support, evidences have been filed in form MGT-14 along with amended MoA filed with the additional evidence. He pointed out that no such application is available on the MCA Website, as having been filed by AJL and most importantly, no license has been granted by the Registrar of Companies till date so as to establish that AJL had become a section 8 Company. Thus, it cannot be said that AJL was converted into section 8 Company. Mere amending the MoA of AJL does not lead to any inference that it is a non-profitable company. Till license is granted by ROC u/s. 8 of the Companies Act, 2013, it cannot claim that it is a non-profitable company. MoA can be amended at the sweet will and at any point of time and therefore, mere amendment in MoA will not serve the purpose. Even otherwise also, from the year 2011 when so called MoA was amended, nothing has been done till 2016 to align the functioning of the two companies. It cannot be the contention of the ld. counsel that since the company has adopted the changes in MoA, it has practically all the attributes a section 8 Company, is fallacious because it is always open to a company to ....
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....arge scale diversion of funds and several improper actions on the part of the assessee in direct conflict to the terms of the Deed of Trust and conditions of registration/exemption. Therefore, it was recommended to the competent authority to initiate proceedings for cancellation of the exemption/registration. The matter was decided after due opportunity to the assessee and speaking orders have been passed and obviously these orders will take effect from the assessment year 2010-2011 and it is a misnomer to state that the orders are retrospective or retroactive. The lis which was the subject matter is for the assessment year 2010-2011 and though the orders of cancellation of the exemption/registration was passed on 18.11.2014 and 07.12.2016 they would take effect from the assessment year 2010-2011 during which year the cause of action arose. This being the factual position, the decision in the case of Aura Development Authority is not applicable to the facts of the present case. " 60 In so far as the contention of the assessee that AJL is in the business of publication of newspapers and is not a Real Estate Company, is completely irrelevant in the matter at hand, because AJL is p....
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....gment wherein this issue has been discussed threadbare. He submitted that if the company has been found to evade the obligation under law or indulged in any fraudulent activity under law or for the purpose of taking undue advantage or indulge in any fraudulent activity against the public interest, the doctrine of lifting of corporate veil can be invoked. The Hon'ble Court after examining this issue at length found that for assessing the actual nature of transaction or the modus operandi employed in carrying out a particular transaction, the theory of lifting of the corporate veil is permissible. Here also, in the given facts, this doctrine is squarely applicable and it is open for the Tribunal to see what is the actual nature of transaction in the backdrop of public interest or interest of the Revenue. Thus, the contention of the ld. counsel on this point cannot be sustained. 62 Coming to the issue of surrender of registration certificate, Mr. Srivastava submitted that the surrender of registration was neither genuine nor bona fide. First of all, such an act of surrender of registration is not permissible under the law for the reason that the registration granted was not any ....
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.... REJOINDER BY THE APPELLANT 63 In the rejoinder proceedings, the ld. counsel for the assessee first of all vehemently objected on the reliance placed on the judgments of Delhi High Court in the case of Associate Journals Ltd. (supra) on the ground that the same are subjudice. The ld. DR has relied upon various additional documents/orders, which were neither confronted to the assessee by the ld. CIT (E) nor were available at the time of passing the impugned cancellation order and, therefore, are wholly irrelevant in the present appeal. The ld. DR is trying to make out new case based on some additional evidences and the same ought not to be considered. 64 Now again in the rejoinder stage Assessee Company has filed another set of additional evidences paper book (marked as AE P B-2). These additional evidences contain list of 34 documents. It has been stated to be because of the fact that, department has placed additional papers and submissions, which were not discussed in the order of Ld. CIT (E) and certain allegations, have been made which are not part of cancellation proceedings. 65 As far as placing of heavy reliance on (i) order of the Hon'ble Delhi High Court dated De....
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....e Court on the judgment of Delhi High Court order, he submitted that the said order has to be treated to be non-operational because it indicates that either the order is passed on wrong facts or law has not been applied correctly. In support, he relied upon the judgment of Delhi High Court in the case of CIT vs. Bhushan Steels Pvt. Ltd., 398 ITR 216 wherein the SLP filed against the said judgment was admitted by the Supreme Court and the order was stayed and on this background, the Hon'ble High Court in the case of Sunbeam Auto Pvt. Ltd. (WP(C) 8941/2015 decided not to follow the earlier decision of Bhushan Steel Pvt. Ltd. (supra) on the ground that the same has been stayed by Hon'ble Supreme Court. Similarly, in the judgment of Calcutta High Court in the case of Exide Industries Ltd. vs. UOI(292 ITR 470)wherein it was held that the provisions of section were unconstitutional. However, the said order has been stayed by Hon'ble Supreme Court and in background of such stay order; various courts have held that the decision of Calcutta High Court cannot be followed. In support, he has referred to catena of judgments, for instance, Dhanlakshmi Bank Ltd. v. CIT (2019) 102 taxman 442 (Ker....
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....ation proof is enclosed at page 540 of AE - PB II. (However, since the actual commencement took time, the said approval expired and a new approval of domain name was taken on 03.11.2016). * In the February 24, 2016 Board Meeting, the rough estimates of monthly expenditure for publishing the newspapers was discussed. The extracts from the minutes of the said meeting are enclosed at pg. 541 of AE -PB II. * On July 10, 2016, Zee News writes a report titled "Eight years after it was shut down, Congress re-launch National Herald news paper". Please see at Pg. 542 of AE-PB II. * In August 2016, the Editor-in-chief was appointed. In fact, the news report of Zee News (cited above) clearly cites AJL as informing in its July 10, 2016 news report, inter alia, "we are now close to finalising the editor's name for operations to start..." 69 Ld. Counsel submitted that the first notice of inspection was only on 06.09.2016 and second notice on 26.09.2016, whereas the preparation for starting the press activities happened since the year 2010, thus, it cannot be held that it was purely an afterthought and such an activity was decided to be resumed only after LDO ins....
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....he newspaper is being printed by the company elsewhere. What is relevant for this appeal is the fact that AJL is actually publishing the newspapers. Litigation qua one of its properties cannot affect the entire company as a whole. The CIT's allegation that AJL is a "real estate company" is demolished by the LDO's owns acceptance that the newspaper is being printed somewhere else. (c) The LDO relies on YI's order u/s. 148. The Hon'ble High Court approves that LDO's order based on the Writ petition in case individual shareholders of YI. Ld. DR in this appeal is relying on the said High Court Order. Therefore, by implication, the Id. DR is relying on the order passed u/s. 148. That order is subject matter of appeal to the Hon'ble ITAT. That appeal is presently pending. Any decision in this appeal based on reliance on the Hon'ble high Court order would amount to even pre-judging the outcome of the appeal against the order u/s. 148! Can this be permitted to be done? In Appellant's humble submissions - "NO"." 70 Ld. Counsel submitted that in any case, Hon'ble Delhi High Court order vindicates the assessee's submissions in so far as Allotme....
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..... The Ld. CIT then granted registration based on the documents that are required to be submitted under the law. In such a case, the allegation that the registration is obtained by misrepresentation and suppression of facts is baseless. The ld DR has also laboured on the note on page 7 of the Revenue Paper Book to contend that on May 9, 2011, the Appellant did not disclose the activity of acquiring shareholding in AJL, which it undertook in February 2011. Thus, as per the Id DR, the Appellant supplied wrong information and hence the registration is liable to be cancelled. In this behalf, he submitted as under: * The note on page 7 was submitted pursuant to requirement at S. No. 3 in CIT's letter dated 18.04.2011); * This requirement is for "plan of action for the main charitable activities to be undertaken by you during the next two years"; * Thus, the note focused on the future activities and not on the past activities. The fact that the note is pursuant to the said requirement of item 3 is very evident from the plain reading of requirement at item 3 and the reading of the covering letter dated May 9, 2011. Thus, there was no requirement of disclosing....
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....tions was obtained from the Registrar by playing a fraud and thus could be revoked. This is so because no such reason has been referred to by the Registrar for passing the impugned order; the impugned order has not been passed on the basis that any fraud had been perpetuated on the Registrar. More importantly, particulars of fraud have to be pleaded and established for securing any order accepting such pleas. It is apparent that in this case the Registrar has not proceeded on the basis that it had been defrauded into granting approval/certificate. On the contrary, the Registrar has proceeded on the basis that "there were certain irregularities in approving/certifying the amendments". Undisputedly, the same cannot be construed as a finding of fraud." 74 As regards the reference made by the Revenue to the Deed of Assignment of loan owned by AJL to AICC amounting to Rs. 90.21 crores for a consideration of Rs. 50 lakhs, the ld. counsel submitted that this fact was duly disclosed in the audited accounts of the assessee by way of note and the said note clearly explains the second leg of the transaction, namely, acquisition of shares in lieu of loan. Besides this, there is no ....
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....ecial Counsel that the loan of Rs. 90 crores was transferred by AICC to Young Indian on 16.12.2010, however, the loan was assigned through letter on 28.12.2010, he clarified that Assignment Agreement dated 28.12.2010 was the final duly stamped Assignment Agreement. The original assignment was on ledger paper, the date of journal entry was in fact 18.12.2010 and was inadvertently typed as 16.12.2010, and the same was a clerical error. Besides, the assignment of loan and conversion thereafter into equity shares of AJL followed by conversion of AJL into a non-profit organization are all different steps in the process of enabling the assessee to achieve its objectives of reaching out to the youths of India in pursuance of its charitable objectives through the platform of AJL by reviving AJL's publication activities. In any case, this was not the basis of cancellation by the ld. CIT (E) and therefore, no adverse inference can be drawn from the alleged fact. 77 One of the points raised by the ld. DR was that loan from AICC to AJL was not disclosed in AJL's annual report and it was argued that annual report of AJL for the year 2010 shows unsecured loan of Rs. 89.67 crores as on 31.03.2....
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....veals that in earlier years, AICC had given interest free loans in various transactions from time to time to the assessee company amounting to Rs. 90,21,68,980/-/ Further, it was held there that since the loan was discharged by conversion into equity shares and not by account paying cheque, section 269T of the Act was contravened. 78 Further, he clarified that such loan does appear in the balance sheet of AJL and following details of accounts were shown: Particulars AICC Other Advance/Security Deposits Total As on March 31, 2010 88.86 0.81 89.67 Received during FY 2010-11 1.35 - 1.35 Less: Converted in to Equity (90.21) - (90.21) Total - 0.81 0.81 The reliance placed by the department on the note in schedule-X of the annual account of AJL suggests that the unsecured loan includes the amount taken earlier years for its construction activities has been clearly misread to infer that the entire loan was for construction work. The said inference was not correct. Moreover, none of the departmental authorities have made any efforts to verify the presumption that the AICC loan is not disclosed in the books of AJL. Apart from....
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....orm and therefore, this is evidence created by the assessee. In this regard, he submitted that an extra ordinary meeting of shareholders of AJL was held on 21.01.2016 for which the notice was sent to all the shareholders on 19.12.2015. The meeting was, thereafter, convened and resolution was passed to convert the company into non-profit company. Form MGT-14 was filed with the ROC on 19.02.2016 under "SRN C79224572". Post filing of said form, on 25.02.2016 an email was received from MCA asking for re-submission with certain remarks and in response thereto said form was resubmitted on 10.03.2016 and along with said re-submitted form, the appellant enclosed the letter dated 10.03.2016 explaining why the remarks in the MCA's email have fallacies. Thereafter, nothing has been heard from ROC and there is still stalemate. In any case, once the amended MoA has been approved by the shareholders then the same was binding on all the shareholders, which is binding and effective on the company whether or not license is granted. 82 Further, the ld. counsel submitted that the reliance placed by the department on the judgment of Delhi High Court on the proposition that firstly all the argume....
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....ase of lifting of corporate veil. AJL board as on 31.3.17 has following directors who are NOT in any way connected with YI: Mr. Deepender Singh Hooda Mr. Dipakbhai Ratilal Babaria Besides, AJL has a "Leadership Team" with five members who are in no way connected to YI: Mr. Neelabh Mishra; Mr. Zafar Agha; Mr. Uttam Sengupta; Mr. Piyush Jain; and Ms. Roshni Tondon. Thus, even management of business of AJL is not the domain of YI. Except for ensuring the good amount of work is done for reaching the youth in furtherance of the object, YI has no work to play. Where is the question of piercing the corporate veil in such a case any way? He submitted that the argument as regards lifting of corporate veil borrowed from the Hon'ble Delhi High court's decision by the Ld DR has no relevance to the facts of the present case and it deserves to be rejected. Besides, it was submitted that the basic transaction, which has been questioned here, is the acquisition of shares of AJL, which is allegedly worth Rs. 90 crores, for mere Rs. 50 lakhs. Firstly, the said shares, at the time of acquisition had no worth as AJL was into losses and had eroded net worth. Besides, in vie....
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....r. 85 Without prejudice, it was submitted that most of the information called for through various notices and enquiries, were in any way available with the department as they were either already submitted by the appellant in other proceedings or were publicly available in public domain. Thus, there was no suppression of facts. One of the main reasons of the complaint against the department raised by the assessee before the higher authorities was that the details submitted in response to notices were being leaked to the political opponents, which was in violation of section 138 of the Act. All these enquiries were purely part of political witch-hunt and therefore, the assesseeappellant objected to the said enquiries. 86 Coming to the arguments regarding surrender of registration by the assessee and heavy reliance placed by the ld. DR on the judgment of Hon'ble Supreme Court in the case of Plastibends India Ltd. (supra) for the proposition that the decision of Mahindra Mills Ltd. (supra) is not applicable to the provisions of registration u/s. 12AA, the ld. counsel, referring to the judgment in the case of Plastibends (supra) submitted that the decision of Hon'ble Supreme Court....
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....: - a. In FY 2010-11, i.e. the year in which the shares of AJL were acquired, in the notes to the Annual Accounts, it has been categorically mentioned that the shares of AJL were acquired towards the objects of the Appellant and in fact, it was for said reason that the expenditure incurred in respect thereof was claimed as application towards objects of the Appellant and not shown as an investment. b. Further, even in the income tax return for said year i.e. AY 2011-12, the amount spent towards the said acquisition has been claimed as application of income towards the objects that again shows that the Appellant always considered said acquisition as a part of its objects. 89 As regards the issue, whether AJL is Real Estate Company or not, the ld. DR has submitted that the foundation of CIT(E)'s order is not based on the AJL as a Real Estate Company, which is not correct because in entire order, the ld. CIT(E) has referred at various places that AJL is a Real Estate Company. Now the ld. DR wants to make out some new case and diluting his arguments, which should not be permitted. 90 One of the arguments raised by the ld. DR was that the rental income amounts....
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.... secularism, freedom of speech etc. This is how the objects of young India were achieved through the platform of AJL. Further the assessee has also filed circulation certificate issued by Audit Bureau of Circulations for the period January to June 2018 and July to December 2018 of National Herald on Sunday. 93 Another contention harped upon by the ld. DR was that whether or not AJL has real estate business; the effect is the same, in as much as acquisition of shares of both the companies is contrary to the objects of the assessee company. In this regard, he submitted that, where the acquisitions of shares are in furtherance of its objects then the same could not be regarded as not in accordance to its objects. In this regard, reference is drawn to the decision of the Rajasthan High Court in Indian Medical Trust v. PCIT (414 ITR 296) wherein investment made by the assessee in a TV channel was held to be in accordance with the objects of the assessee since it furthered it objects. The relevant extract is as under: "On a glance of the facts and materials available on record of the case at hand, it is evident that the said TV Channel was acquired by the petitioner Trust for ed....
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....G.C. Srivastava, ld. Special Counsel for the Revenue submitted that no new case has been made out by the department and it is completely misconceived assertion. The order of ld. CIT(E) proceeds on primary satisfaction recorded by him in para 15 & 17 and the entire course of the cancellation order is that activities of the appellant/assessee are neither genuine nor they have been carried out in accordance with its stated objects. He also referred to the judgment in the case of ACIT v. Prakash L. Shah (2008) 115 ITD 167, wherein the Tribunal has clearly stated that the DR can strengthen the view taken by the Assessing Officer from any angle, he likes, but can't bring out an altogether different case de hors the view of the Assessing Officer. The area of arguments of DR is unlimited but within the boundary limit marked by the Assessing Officer. He also distinguished the case of Mahindra & Mahindra (supra) but contended that in those cases Revenue was seeking to negate the findings already recorded by the Assessing Officer and DR argued in that case contrary to the finding of the ld AO. Thus, this case does not support the argument of the assessee. DECISION AND REASONS : 96 We ha....
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....account in the prescribed form as provided in the statute and relevant rules. The Statute provides exemption of income of such Trust or Institution subject to conditions prescribed under the Act and Rules, provided, such Trust or Institution is carrying out activities for charitable purpose and not only that, such activities are carried out strictly in accordance with the objects, for which it was created and also the activities should be genuine. The onus is heavily upon the applicant Trust/Institution to disclose fully and truly all material facts and to clearly state the purpose and the nature of the activities that it is supposed to carry out in terms of the registration granted at the time of seeking registration u/s 12A/12AA. 98 We have already discussed in detail the facts and the chain of events starting from the date of incorporation of the assessee company till the grant of registration. From the facts and material as discussed above, the undisputed facts are reiterated in a succinct manner: * The appellant, Young Indian was incorporated as a company on 23.11.2010, for which it was granted license u/s. 25 of the Companies Act, 1956 on 18.11.2010 * The....
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....India at Rs. 50 lakhs had not been disclosed at any stage in the course of process of registration. * The assessee in his statement for assets and liabilities, filed in Annexure 5B had simply stated that currently, the company has no assets and liability, whereas the fact of the matter was that the assessee has taken loan of Rs. 1 crore from M/s. Dotex Merchandise Pvt. Ltd., Kolkata and out of the said loan, the amount of Rs. 50 lakhs was paid to AICC. * AJL had allotted 9,02,16,898 shares which was more than 99.99% of the holding to Young Indian in lieu of loan of Rs. 90 crores by increasing the share capital. This fact was also not disclosed to the ld. DIT (E) nor was it stated or mentioned that entire holding of AJL went to the assessee company. * The purpose and the object for acquiring entire share holding of AJL was neither brought to the notice of ld. DIT (E) nor explained at the time of registration, which is now being canvassed. * When the ld. DIT(E) specifically asked to give note on activities carried out since inception with supporting documents and to justify the claim of registration, the assessee should have mentioned all ....
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....ronted the assessee that; firstly, only substantial activity undertaken by the appellant company was acquiring 99.99% of shares of AJL and AJL has been engaged in the Real Estate business and their source of income was rental income; secondly, asked the assessee to explain whether such activities of AJL are covered within the aims and objects of Young Indian; and lastly, whether these activities were in conformity with the terms and conditions of the registration granted u/s. 12AA to Young Indian, the assessee nowhere had clarified or sated that the purpose of acquiring AJL and its activities, except for reiterating that as a shareholder, Young Indian does not have any ownership interest, whatsoever, in the properties owned by AJL as it is a separate legal entity. 102 Now, what has been canvassed before us is entirely a new argument that the sole aim and objective of acquiring the entire stake holding in AJL was to carry out charitable activities for its objects, i.e., to spread democratic and secular values to the Youths of India through the medium of newspapers published by AJL. Now, in support of such newline plea, voluminous additional evidences have been filed before us on ....
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..... Indian Express 188 d. Amar Ujala 189 e. Hindustan Times 190 f. Copy of Navjivan Commemorative Edition 191-203 6. Launch of National Herald Website on 14 November 2016 204-205 a. The Indian Express 206-207 b. The Economic Times 208-209 c. Amar Ujala 210-211 d. BW Business World 212-213 7. Launch of Urdu Website on 12 August 2017 215-225 a. Business Standard 226 b. United News of India 227 c. India Today 228 d. Outlook 229 8. Launch of Navjivan Website on 29 August 2017 230-236 a. United News of India 237-238 9. Registration Certificate of National Herald Newspaper with Registrar Office of Newspapers for Indian, Ministry of Information and Broadcasting dated 23 June 2017 and 24 Nov 2017 239-241 10. Registration Certificate of Sunday Navjivan with Registrar Office of Newspapers for Indian, Ministry of Information and Broadcasting dated 20 Feb 2018, 11 Jan 2019 242-244 11. Agreement of AJL with Press Trust of India for Wire News Services dated 15 November 2016 245-249 12. Certificate issued by Audit Bureau....
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....11 along with amended MoA and Form-14 etc., though indicate that AJL may had some kind of intention to start the publication business, but such an intention was never stated or canvassed before the departmental authorities in the course of cancellation proceedings. It is only when the ld. CIT (E) had made certain allegations in the impugned order that the AJL had carried out some activities of Real Estate, the assessee has taken this plea before us to justify that it intended to carry out the activities by acquiring AJL in furtherance of its main objects. Great deal of arguments have been made by the Ld. Counsel that publication business of AJL was a platform to promote the ideals and objects of YI and press being fourth estate of democracy is a powerful medium to inculcate such ideals. First of all, press will be used as medium to promote the objects of YI was never stated earlier at any stage; nor there is one instance that YI has ever used any other newspaper or media to propagate it's so called objects or democratic secular ideals. Is it that only AJL can be such medium and no other press company or it is orchestrated defense in wake of various proceedings initiated against it ....
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....tic commercial real estate business of construction and sale of shops or properties during the relevant period, but there is no denying fact that AJL had large number of properties worth hundreds of crores of rupees across the country and had huge rental income from such properties held from time to time. Though one of the main points harped upon by the ld. CIT (E) is that AJL is Real Estate Company may not be technically correct, but the ld. CIT (E) has not confined his finding merely that AJL is Real Estate Company and by acquiring AJL, the assessee company also acquired Real Estate business. 106 Other pivotal and underpinning reasons for cancelling the registration by the ld. CIT(E) are that the assessee company has not been able to point out any single activity carried out in furtherance of its stated objects, for which it was created during the said period, i.e., from A.Y.s 2011-12 to 2016-17; and the only activity of the assessee was borrowing of Rs. 1 crore from Kolkata based company and making the payment of Rs. 50 lakhs to AICC and applying for allotment of shares against cancellation of loan of Rs. 90 crores assigned by AICC to Young Indian. All these activities defini....
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.... Once, AJL was not in publication of any kind of newspaper in print or digital form during the entire period, then it can be easily deduced that the intention was never to carry out any charitable activity by acquiring AJL. Even after takeover of AJL, no activity has been done by AJL at least for a period of 5 years. One of the main allegation of the ld. CIT (E) and ld. Special counsel was that, it was in wake of certain enquiries conducted by the Income Tax Department and proceedings of eviction initiated by the Land Development Office, steps were taken by the AJL for renewal of newspaper business; and even the so called resuming the newspaper business post September 2016, is much after the assessee had written to the department surrendering its registration. Thus, the entire contention as raised by the ld. counsel that the newspaper business was started later on, which indicates that AJL was acquired only to promote the ideals enshrined in the objects of Young Indian, belies all such intents and in fact the allegations that some printing work had started post inquiries by the Governmental authorities is convincing and probable. 108 Much emphasis has been laid by the ld. cou....
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....ount of Rs. 50 lakhs, to control and have interest in huge immovable assets of AJL throughout the country which were earning huge rental income, which was never the object of YI for which it was granted registration. 110 At the stage of hearing of this appeal, one very important material fact, which has been brought on record by the Revenue before us, are the judgments of Hon'ble Delhi High Court. This judgment of the Hon'ble Jurisdictional High Court clearly clinches the entire issue and supports our findings as given above. In the first judgment dated 21.12.2018 passed by Hon. Single Judge in writ petition filed by the AJL, against notice sent by Land Development Office for eviction of the property known as 'Herald House, 5A, Bahadur Shah Zafar Marg, the Hon'ble High Court had categorically noted that at the time of inspection by LDO, no press activity was being carried out by AJL in the said property and in fact, it was rented out to various commercial establishments. After taking note of the inspection committee report, the Hon'ble court gave a categorical finding that no printing press was functioning and only National Herald weekly newspaper was stated to be published on 2....
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....r deciding the lis in question, particularly, when there is no specific or categorical denial of them even orally before us at the time of hearing. Xxxxxxxxxxxxxxx 48. The first objection of the appellants were to the finding recorded by the learned writ Court in the impugned order passed on 22nd December, 2018 pertaining to there being no press activity in the premises in question, that is, finding in para-17 of the impugned order. The facts that have come on record clearly shows and it is an admitted position if we analyse the show cause notices issued to the appellants on 10th October, 2016 replied to the same on 19th November, 2016, the second show cause notice dated 5th April, 2018, the third show cause notice dated 18th June, 2018 and the fourth show cause notice dated 24th September, 2018 and the series of replies filed by the appellants on 19th November, 2016, 7th April, 2018, 16th July, 2018 and 9th October, 2018 along with the communication made by Sh. Motilal Vora on 26th September, 2018 available at page-406 of the paperbook that between the period from the year 2008 to 2016, the appellant themselves admitted that there was no publication of the newspa....
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....e year 2008 and all the employees were granted VRS. After the communication dated 26th September, 2016 was made by Sh. Motilal Vohra digital publication of the English Versions of the newspaper, National Herald commenced from 4th November, 2016. 51. Digital version of Urdu edition Qaumi Awaz commenced on 12th August, 2017. Digital version of Navjivan, that is, Hindi version commenced on 28th August, 2017 and the print weekly newspaper, National Herald Sunday resumed publication from 24th September, 2017 and it is the case of the appellants that these newspapers were printed in a press at Noida. Finally the printing of Hindi weekly newspaper Navjivan commenced publication on 14th November, 2018 and the necessary license and authorization for the purpose of publication indicated hereinabove was granted by the Registrar of Newspapers for India on 21st November, 2017 available at page-581 is a certificate of registration issued by Sh. K. Ganeshan, Registrar of Newspaper for India giving registration certificate for a newspaper titled "National Herald Sunday". Accordingly it is clear that publication of the newspapers commenced after a gap of eight years as is indicated hereina....
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....reholding pattern of both the companies and the manner in which the transactions have taken place and further in case the lifting of the veil theory is applied, what would be its effect with regard to the issue in question. 58. Indian National Congress sometimes referred to as AICC had advanced a loan of Rs. 90 crores to AJL. The loan was advanced on the condition that the amount shall be utilized by AJL to write off their accumulated debts and to recommence publication of its newspaper. As per the facts recorded by the co-ordinate Bench of this Court in its decision rendered on 10th September, 2018 in W.P.(C) 8482/2018, the books of account of AJL from 1st April, 2010 to 31st March, 2011 showed an outstanding debt of Rs. 88,86,68,976/- and it ultimately became Rs. 90,21,68,980/- as on 15th December, 2010. On 13th August, 2010, an application was made for incorporation of a charitable non-profit company (a company under Section 25 of the Companies Act named Young India). The application was in Form 1A with the competent statutory authority and on 18th November, 2010 Young India was incorporated and on 18.11.2010 license was granted and ultimately on 23rd November,....
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....t a bank account was opened by Young India with Citibank on 14th February, 2011 and the cheque issued by M/s Dotex for Rs. 1 crore was deposited in the Young India Bank account on the said day and on 26th February, 2011 Young India issued a cheque of Rs. 50 lakhs to AICC as consideration for assignment of Rs. 90 crore debt payable by ALJ to AICC. On the same day, i.e., 26th February, 2011, ALJ allotted 9,02,16,899 equity shares to Young India in pursuance to the AGM Meeting decision held on 21st January, 2011 and the ALJ Board Meeting on 26th February, 2011 and thereafter Young India applied for exemption under Section 12-A on 29th March, 2011 and on 9th May, 2011 the Income Tax Authorities granted the exemption with effect from the F.Y. 2010-11. 59. Be that as it may, by the aforesaid transaction that had taken place Young India acquired beneficial interest on AJL's property which on the said date was valued at more than Rs. 400 crores on payment of a sum of Rs. 50 lakhs to AICC. This, according to the respondent, if viewed in the backdrop of the purpose of transfer lease and the modus operandi adopted is nothing but a devise to transfer the property held on lease from th....
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.... transfer of ownership or lease or property as contemplated in clause 13(3) of the lease in question. By referring to the judgment in the case of Monsanto Manufacturers (supra) and the terms and conditions of the lease deed which prohibited transfer in the said case and by comparing it to clause XIII(3) of the lease deed in question, we were told that in the absence of there being any specific prohibition permitting transfer of ownership of shares or change in the Article of Memorandum, the finding recorded with regard to transfer of ownership of the property recorded by the learned writ Court and the competent authority is unsustainable. The principles laid down in judgment of the Supreme Court in M/s K.G. Electronics (supra) and by this Court in DDA v. Human Care Medical Charitable Trust were also relied upon to canvass this contention. 62. On a consideration of the argument as canvassed by Dr. Singhvi, at the first instance, the same looks very attractive and the findings recorded may look to be unsustainable and perverse, however, it is an equally settled principle of law that in public interest and for assessing the actual nature of a transaction or the modus operandi....
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....e judgment of the House of Lords in the case of Salomon v. Salomon, 1897 AC 22 is taken note of and the cardinal principle laid down in the case of Salmon v. Salmon (supra) with regard to the company being a different person altogether from its subscribers is taken note of and it is observed that since after the judgment of Salmon (supra) the Courts have recognized several exceptions to the rule laid down in Salmon (supra) and one of the relevant exception is that when a corporate personality is being blatantly used as a cloak for fraud or improper conduct or where the protection of public interest is of paramount importance or where the company has been formed to evade obligation imposed under the law, the theory which has been described by certain jurists as peeping behind the corporate veil is employed and in para 27 and 29, the Hon'ble Supreme Court goes to determine the doctrine in the following manner: "27. It is thus clear that the doctrine of lifting the veil can be invoked if the public interest so requires or if there is allegation of violation of law by using the device of a corporate entity. In the present case, the corporate entity has been used to conceal the....
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....urt has not to merely see the form of the transaction which is of sale of shares but also the substance which is the private sale of mining rights avoiding legal bar against transfer of sale rights circumventing the mandatory consent of the competent authority. Consent of competent authority is not a formality and transfer without consent is void. The minerals vest in the State and mining lease can be operated strictly within the statutory framework. There is nothing to rebut the allegation that receipt of Rs. 160 crores styled as investment in shares is nothing but sale price of the lease. No precedent has been shown permitting such a private sale of a mining lease for consideration without any corresponding benefit to the public." 65. If we consider the transaction in the present case in the backdrop of the aforesaid principles laid down by the Hon'ble Supreme Court, we have no hesitation in holding that the purpose for which the doctrine of lifting of the veil is applied is nothing but a principle followed to ensure that a corporate character or personality is not misused as a device to conduct something which is improper and not permissible in law, fraudulent ....
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....he principle laid down in Salomon (supra) and in para 28, in the case of Skipper Construction (supra), the law has been crystallized in the following manner: "28. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that Tejwant Singh and members of his family have created several corporate bodies does not prevent this Court from treating all of them as one entity belonging to and controlled by Tejwant Singh and family if it is found that these corporate bodies are merely cloaks behind which lurks Tejwant Singh and/or members of his family and that the device of incorporation was really a ploy adopted for committing illegalities and/or to defraud people." 66. Apart from the aforesaid judgments, there are various other judgments which have been brought to our no....
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.... YI for a meager sum of Rs. 50 lakhs, brings the entire transaction within the ambit of some kind of colourable device because YI had acquired beneficial interest on AJL's properties which have been valued for more that 400 crores on a meager payment of Rs. 50 lakhs to AICC. It has been further observed that modus operandi is nothing but a device to transfer the property held on lease from the Government to AJL to YI, which became almost 100% shareholder of AJL. * Their Lordships have also considered the judgment of Hon'ble Supreme Court in the case of Bacha F. Guzdar (supra) which has been strongly relied by the assessee before us and held that though the principle laid down by the constitutional Bench of Hon'ble Supreme Court cannot be in dispute and it is an accepted principle of law, however, in the public interest and for assessing the actual nature of transaction or modus operandi employed in carrying out a particular transaction, the theory of lifting of the corporate veil is permissible and the court can always apply this doctrine to see as to what is the actual nature of transaction that has taken place, its purpose and then determine the question before it after ....
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....ars, the assessee may have been prompted to surrender its registration u/s. 12AA. 115 There is another angle which ponders us is that, if no activities were carried out by YI towards charitable activity between the period 2011 to 2016, then why so much of clamour that assessee should be recognized as charitable institution qua that period only should have the benefit of registration u/s. 12AA for this period of five years, i.e., from the assessment year 2011-12 to A.Y. 2016-17 and post 21st March 2016, the assessee itself chose to surrender its registration and willingly give up its charity status under the Income Tax Act. If both YI and AJL are non-profitable company, then why such a dispute on cancellation from retrospective date. 116 Before us, the ld. counsel had very strongly objected to refer and rely upon the judgments of Hon'ble Delhi High Court as cited (supra) on the ground that, Hon'ble Supreme Court in SLP No.7345/2019 had stayed the further proceedings pursuant to the High Court order vide order dated 05.04.2019. The relevant directions of the Hon'ble Supreme Court read as under: "There shall be stay of the further proceedings pursuant to High Court's or....
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....on of the order under challenge, a distinction has to be made between quashing of an order and stay of operation of an order Quashing of an order results in the restoration of the position as it stood on the date of the passing of the order which has been quashed. The stay of operation of an order does not, however, lead to such a result. It only means that the order which has been stayed would not be operative from the date of the passing of the stay order and it does not mean that the said order has been wiped out from existence. This means that if an order passed by the Appellate Authority is quashed and the matter is remanded, the result would be that the appeal which had been disposed of by the said order of the Appellate Authority would be restored and it can be said to be pending before the Appellate Authority after the quashing of the order of the Appellate Authority. The same cannot be said with regard to an order staying the operation of the order of the Appellate Authority because in spite of the said order, the order of the Appellate Authority continues to exist in law so long as it exists, it cannot be said that the appeal which has been disposed of by the sai....
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.... Hon'ble High Court, has been stayed and not the order. The ld. counsel has also relied upon the judgment of Delhi High Court in the case of Bhushan Steel (supra) and of Calcutta High Court in the case Exide Industries Ltd. (supra) where the order has been stayed by Hon'ble Supreme Court, and in Subsequent judgment, Hon'ble Delhi High Court has not followed the said order. Such a plea and reference does not come to aid for the reason that in the judgment of Delhi High Court (Bhushan Steel) it has been held that the Sales Tax Subsidy is the Revenue receipt and the Hon'ble Supreme Court had admitted the SLP and the entire order was stayed. Here situation and direction are not similar. Further the judgment of Hon'ble Calcutta High Court in Exide Industries Ltd.(supra), wherein the provisions of section 43B(f) was declared unconstitutional where also SLP was filed before the Hon'ble Supreme Court the entire operation of the order was stayed. In any case, once the jurisdictional High Court has passed the judgment which has not been set aside or reversed by Hon'ble Supreme Court, then for lower courts within its jurisdiction constitutes a binding precedence specifically when the judgm....
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....5. Application dated 15.10.2012 for Registration for establishment Employing Contractor Labour for Construction of Panchkula Building 523-525 16. Registration Certificate dated 31.10.2012 issued by Dy. Labour Commissioner, Ambala in respect of Employing Contractor Labour for Construction of Panchkula Building 526-528 17. Relevant Extract of Approved Building plan for Panchkula Building dated 26.11.2012 529-532 18. Relevant Extract of Approved Building plan for Mumbai Building dated 3.11.2016 533-538 19. Relevant extract of minutes of the Board of Directors of AJL held on February 22, 2013 wherein it was noted that the publication of National Herald would be considered on web-site. 539 20. Invoice of purchase of internet / web domain name "www.nationalherald.com" by AJL on September 12, 2014 540 21. Relevant extract of minutes of the Board of Directors of AJL held on February 24, 2016 wherein it was noted that the rough estimates of monthly expenditure for publishing the news papers 541 22. Relevant extract of minutes of the Board of Directors of AJL held on June 28, 2016 discussing that the newspaper business shall b....
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....em fit to adjudicate on each and every document for the reasons given in the foregoing paragraphs. 121 One of the key contentions raised by the ld. counsel before us is that the ld. CIT(E) does not have the power to cancel the registration from retrospective date and any such cancellation can only be prospective, i.e., from the date of passing of the order and in support of which certain decisions have also been relied upon. From a bare reading of Section 12AA (3) it is seen that, section provides that where a trust or an institution has been granted registration and if subsequently, Pr. CIT or CIT is satisfied that the activities of the trust are not genuine or are not carried out in accordance with the objects of the trust, he may cancel the registration by way of an order in writing. Consequently, if there is violation of any such conditions, then the registration so granted can be cancelled by the CIT. Nowhere, the Statute envisages that the cancellation cannot be retrospective or it has to be necessarily prospective. What it provides that the Commissioner has statutory powers to cancel the registration u/s. 12A/12AA if he finds reason to believe that the activities of th....