Staff Reporter

Move concerns applicability of Section 12 of IT Act to the organisation

BANGALORE: The Karnataka High Court on Tuesday admitted an appeal by the Income Tax (IT) authorities against the Rashtriya Navanirmana Vedike (RNV) founded by former Chief Minister late Ramakrishna Hegde.

The IT Department has moved the court against an order of the Income Tax Tribunal, which had ruled against an order of the Director of Income Tax (DIT-Exemption) in which it was held that the vedike was not fit for grant of registration under Section 12 of the Income Tax Act, thereby permitting it certain exemptions. The tribunal, the IT authorities said, had committed an error by holding that the vedike was entitled to be registered under Section 12 of the IT Act. The tribunal also said that there was no allegation that the funds collected by means of donation (from issue of coupons) were in any way misused or used for purposes other than those mentioned by it in its charter.

The tribunal, however, had agreed with the IT Department's finding that some discrepancy existed for certain periods when it collected funds and printed coupons for membership.

The vedike had contended before both the DIT-Exemption and the tribunal that it was a registered organisation and that it was founded by the late Ramakrishna Hegde who was the president and V.S. Krishna Iyer general secretary. The vedike had decided to admit those paying Rs. 5,000 as life members and those who paid Rs. 500 as ordinary members. It said it was a charitable organisation and that it had conducted seminars, meetings, workshops, symposiums and training programmes.

The IT Department said it had detected certain discrepancies in the accounts of the vedike. Citing an example, it said there was a discrepancy of Rs. 5 lakh in 1999 and this was shown as advance received from Mr. Hegde. However, an amount of Rs. 4.74 lakh was shown as being utilised to purchase a car for Mr. Hegde, which was later transferred in the name of the vedike.

After the DTI passed orders, the vedike had appealed to the tribunal which, on June 28, 2002, set aside the DTI order and allowed the vedike application. The IT authorities then moved the High Court wanting to know whether the vedike was entitled to registration under Section 12 of the IT Act.

A Division Bench comprising Justice R. Gururajan and Justice C.R. Kumaraswamy admitted the appeal and framed "question of law" as sought for by the IT authorities on the applicability of Section 12 to the vedike. The Bench adjourned further hearing on the appeal.