ARRYA EDUCATIONAL SOCIETY,PALAMPUR V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH, CHANDIGARH

ITA 1647/CHANDI/2025

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The case involves M/s Arrya Educational Society, which appealed against the rejection of their registration application under section 12A(1)(ac)(iii) of the Income Tax Act by the Commissioner of Income Tax (Exemptions), Chandigarh. The primary issue was the payment of life insurance premiums for the trustees, which the CIT(E) viewed as a violation of section 13(3) of the Act, leading to an undue benefit to the members. The Tribunal, after reviewing the submissions and documents provided by the assessee, concluded that the rejection was not justified based solely on this violation, especially since no other violations were noted and the assessee had commenced activities as evidenced by the documents submitted.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 846477 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Chandigarh
• Assessment Year: 2025-2026
• Appeal Filed On: 05-12-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANAV BANSAL LD
• Assessee Lawyers: ASHWANI KUMAR; ADITYA KUMAR
• Keywords: Benefit of exemption
• Section: 11; 12

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, CHANDIGARH PHYSICAL HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No.1647/CHANDI/2025 M/s Arrya Educational Society Differpatt, Bindraban, Palampur, District Kangra, Palampur, Himachal Pradesh – 176061 बनाम/ Vs. CIT (Exemptions) 5th Floor, C.R. Building, Himalaya Marg, Sector-17 E, Chandigarh - 160017 ˕ायीलेखासं./जीआइआरसं./PAN/GIR No. AAAAA-7762-L (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) अपीलाथŎकीओरसे/Appellant by : Sh. Ashwani Kumar (CA) & Sh. Aditya Kumar (CA) – Ld. ARs ŮȑथŎकीओरसे/Respondent by : Sh. Manav Bansal (CIT) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 18-02-2026 घोषणाकीतारीख /Date of Pronouncement : 24-03-2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aggrieved by rejection of registration application u/s 12A(1)(ac)(iii) vide an order passed on 16-10-2025 by learned Commissioner of Income Tax (Exemptions), Chandigarh [CIT(E)], the assessee is in further appeal before us. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. 2. The assessee applied for registration u/s 12(1)(ac)(iii) on 23-04- 2025. To examine the genuineness of trust activities, the assessee Printed from counselvise.com 2 was show-caused on 28-05-2025 wherein the assessee was required to file various explanations and documents. As per Trust deed, the assessee, inter-alia, strived to promote and provide educational facilities by establishing public educational institutions and establish vocational institutions etc. The assessee furnished various documents to lay claim on the impugned registration. Upon perusal, it was observed by Ld. CIT(E) that the assessee was paying premium for life insurance policy on behalf of Trustees viz. Shri Sudhanshu Verma, Smt. Neeraj Parashar and Smt. Ritu Gupta. Shri Sudhanshu Sharma acted as Secretary of the society. The Ld. CIT(E) thus formed an opinion that this transaction was in contradiction to conditions of Sec.13 since Secretary was one of the specified persons as listed u/s 13(3) of the Act. The payment of life insurance premium on behalf of and for the benefit of its secretary was in blatant violation of Sec.13 of the Act. The assessee allegedly gave undue benefit to its members. Accordingly, the requisite registration as sought by the assessee was denied against which the assessee is in further appeal before us. 3. From enumerated factual matrix, it clearly emerges that the rejection action stem only from the allegation that the assessee has violated the conditions of Sec.13 by giving undue advantage to its members. We find that the provisions of Sec. 13(1)(c)(ii) exclude such income from the purview of exemption u/s 11 or 12 which has been used or applied directly or indirectly for the benefit of any person referred to in sub-section 13(3). In other words, such payment would be excluded from exemption benefit and brought to taxation. However, Printed from counselvise.com 3 the said violation could not result into denial of registration to the genuine trust. Any such violation could be taken care of by Ld. AO while making an assessment on the assessee. The stated reason i.e., payment of LIC premium on behalf of trustees, alone could not jeopardize the registration claim of the assessee. Pertinently, no other violation has been observed by Ld. CIT(A). Upon perusal of assessee’s reply to Ld. CIT(E), it could be seen that the assessee has furnished sufficient document to establish commencement of activities. The assessee also furnished its audited financial statements for AYs 2022-23 to 2024-25 along with cash book and ledger, bank statements, Income Tax Returns, copies of intimation u/s 143(1) for AYs 2022-23 to 2024-25. No other violations have been pointed out in any of these documents. Accordingly, we are of the considered opinion that the refusal of impugned registration to the assessee was not justified. Therefore, the registering authority is directed to grant the impugned registration to the assessee. We order so. 4. The appeal stand allowed. Order pronounced on 24th March, 2026. -Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER AS Dated: 24-03-2026 Printed from counselvise.com 4 आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "