INDIAN VIROLOGICAL SOCIETY,NEW DELHI V. CIT (EXEMPTION), NEW DELHI

ITA 1708/DEL/2023

AI Insights

The Indian Virological Society appealed against the decision of the Commissioner of Income Tax (Exemption), which denied them registration under section 12AB of the Income Tax Act for the Assessment Year 2022-23. The primary contention was that the society's activities, although generating revenue, were charitable in nature and should qualify for tax exemption. The society argued that their activities, including publishing a scientific journal and organizing conferences, were for the public benefit and not for profit. The CIT(E) had rejected their application based on the commercial nature of some activities and the receipt of substantial amounts in lieu of services provided. The Tribunal found that the CIT(E) had not adequately considered the materials and evidence provided by the society and remitted the matter back for a fresh decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31054 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2022-2023
• Other Referred Cases: M/s Civil Services Institute vs. CIT (Exemption), Lucknow
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SIDHU
• Assessee Lawyers: VED JAIN; AMAN GARG; ICAR; SCIENCE; ENGINEERING; UTILIZATION CERTIFICATE
• Keywords: Charitable institution; Cancellation of registration
• Section: 12AA; 12A; 13; 80G

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘C’: NEW DELHI) BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No:- 1708/Del/2023 (Assessment Year- 2022-23) Indian Virological Society, New Delhi, F-3, Block, NASC Complex, Pusa Campus, New Delhi. Vs. CIT(Exemption), Delhi. PAN No: AAAAI3782N APPELLANT RESPONDENT Assessee by : Shri Ved Jain, Adv. & Shri Aman Garg, CA Revenue by : Shri Dayainder Singh Sidhu, CIT(DR) Date of Hearing : 30.12.2024 Date of Pronouncement : 28.03.2025 ORDER PER SUDHIR PAREEK, JM This appeal is preferred by the Assessee against the order dated 31.03.2023 passed by the Commissioner of Income Tax (Exemption), Delhi, [hereinafter referred to as ‘Ld. CIT(E)’], for the Assessment Year (‘AY’) 2022-23. 1.1 The assessee has raised the following grounds of appeal: ITA No.-1708/Del/2023 Virological Society Page 2 of 13 “ 1. On the facts and circumstances of the case the order passed by the Commissioner of Income Tax (Exemptions) [CIT(E)], denying assessee the registration under section 12AB of the Act, is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case Id. CIT(E) has erred both on facts and in law in rejecting the application for registration under section 12AB of the Act, despite the objects of the assessee being charitable in nature and the activities of the assessee being genuine. 3. On the facts and circumstances of the case, the action of the CIT(E) in denying the registration under section 12AA is bad in law as the same has been concluded only on the basis of nature of receipts by the assessee and not the charitable activities being carried out by it. 4. On the facts and circumstances of the case Id. CIT(E) has erred both on facts and in law in rejecting the application for registration under section 12AB of the Act, arbitrarily rejecting the explanation and evidences brought on record by the assessee. 5. The appellant craves leave to add, amend or alter any of the grounds of appeal.” 2. Heard rival submissions and carefully perused the material available on record. 3. The Ld. AR, while reiterating the grounds of appeal, submitted that denial of registration u/s 12AB of the Act by the Ld. CIT(E) is quite erroneous, in the eye of law despite the objects of the assessee being charitable in nature being genuine activity. It is also submitted that the Ld. CIT(E) denied on simply on the basis of nature of receipts by the assessee and absence of charitable activities. ITA No.-1708/Del/2023 Virological Society Page 3 of 13 4. The Ld. DR has relied upon the order passed by the authority below. 5. The Ld. AR further contended that the assessee society is a member of International Union of Microbiological Society (IUMS), established in December, 1984 at Haryana Agricultural Society, Hisar, and it is unique scientific body that provides platform for those associated with characterization and management of viruses affecting animal, human, fish, insect, plant and other living organisms and the society also organizes national and international conferences, trainings, seminars, workshop etc. and also quarterly publishes an internationally reputed scientific journal named “ Virus Disease” . 6. The Ld. AR emphatically contended that during covid pandemic certain articles namely - a comprehensive review of covid-19 vaccines: development, effectiveness, adverse effects, distribution and challenges were published in its journal and in respect of publication of journal “Virus Disease”, society received grant from Indian Council of Agricultural Research (ICAR), Science and ITA No.-1708/Del/2023 Virological Society Page 4 of 13 Engineering Research Borar, a statutory body under Department of science & Technology, Government of India. 7. It is also submitted that the assessee / appellant submitted the following documents before the Ld. CIT(E) along with application.  self -certified copy of instrument creating the trust or establishing the institution (Memorandum of Association)  Self-certified copy of registration with Registrar of Society  Copy of existing order granting provisional registration u/s 12A and 80G of the Act  Copy of financial statement of for FY 2018-19 to FY 2020-21.  Copy of note of activities and projections of Indian Virological Society along with Annual report for FY 18-19 to 20-21  Copy of rent agreement of the place at which activities of Indian Virological Society are carried out  Copy of justification note on the claim of registration u/s 12A/ BOG of the Income Tax Act  Copy of computation of Income and audited financial statement for AY 2020-21  Copy of computation of Income and audited financial statement for AY 2021-22  Copy of computation of Income for AY 2022-23 and audit report in form 108 as required u/s 12A(b) of the Act  Copy of notarized undertaking of objects and activities of the society by shri Yashpal Singh Malik  Copy of declaration by Yashpal Singh Malik u/s 131(1)(c) of the Income Tax Act  Copy of notarized undertaking by Yashpal Singh Malik  Copy of Provisional Financial statements as on 30.09.2022  Copy of sanction letter of grants to assessee by ICAR and Science & Engineering and Utilization certificate  Copy of publishing agreement with Springer Nature India Private Limited  Copies of identity proof of Yashpal Singh Malik (Secretary General) and Basavaraj (Treasure of the Society) and ITRs filed by them  Copy of detail of vehicle owned by the assessee  Copy of note and documentary evidences submitted to substantiate that charitable activities are being carried out by assessee  Copy of ledgers of IVS for the period 01.04.2019 to 31.03.2020 ITA No.-1708/Del/2023 Virological Society Page 5 of 13  Copy of ledgers of IVS for the period 01.04.2020 to 30.09.2022 8. The Ld. CIT(E) observed while deciding application submitted by the assessee / appellant that the activities carried out by the applicant are not charitable. relevant portion of the impugned order are as under: “ 5. The assessee has provided a copy of agreement with Springer Nature India Private Limited. As per the terms of the agreement the publisher (Springer Nature India Private Limited) shall be responsible for publishing the journal including the entire cost of manufacturing, distribution maintaining inventory, pricing, promotion, advertising and collection of subscription payments. So, as per terms of the agreements, the assessee has no role in deciding the cost of journal. The publisher is solely responsible for the same. Further, there is an arrangement between the assessing and Springer Nature India Private Limited that the assessee will be paid an annual royalty of 25% of the net revenue from the journal sales for each calendar year. The assessee is also liable to pay the publisher towards partial production and distribution cost of the member copies. The agreement so entered by the assessee with publisher and pricing of the journal indicates that this is a pure commercial venture and there is no element of Charity in publishing of the journal. Therefore, it is clear that the activity of publishing of journal for which substantial royalty is received and there is no role of the assessee in determining the price that is very steep, is not charitable but is a commercial arrangement. 6. The applicant has organized an event named Virocon 2020 and substantial amounts were received towards sponsorship and registration charges as detailed in para 4 above. The applicant has also charged a hefty amount as registration fee from students. It is beyond apprehension as to why such amounts are being charged from students when the activity is claimed as the one for benefit of public at large. 7. The applicant has also submitted the details of major activities. However, no bills. vouchers, etc. have been filed to substantiate the activities undertaken. The assessee has also stated that the society is carrying academic activities only and not charitable. 8. The applicant has also contended that it gives away seven different awards. On perusal of the instructions to the awards furnished by the ITA No.-1708/Del/2023 Virological Society Page 6 of 13 applicant it is observed that only members-of-the-applicant society. can apply for these awards. Therefore, scholars who are not member of the applicant society can not be nominated for these awards and the same are not open to general public. 9. The applicant is in receipts of substantial amounts in lieu of services provided by it andthus activities carried out by the applicant are not charitable. The applicant has also not beenable to substantiate the activities undertaken by it with bills, vouchers, list of beneficiaries etc. Therefore, the conditions for grant of registration in the case are not satisfied and hence the present application filed in Form 10AB for grant of registration u/s 12A(1)(ac)(iii) is rejected” 9. In the course of hearing the Ld. AR draws our attention towards circular no. 21/2016, dated 27th May, 2016 issued by Central Board of Direct Taxes (CBDT), regarding cancellation of registration u/s 12AA of the Act, in which certain directions given as under: “ 4. In view of the aforesaid position, it is clarified that it shall not be mandatory to cancel the registration already granted u/s 12AA to a charitable institution merely on the ground that the cut-off specified in the proviso to section 2(15) of the Act is exceeded in a particular year without there being any change in the nature of activities of the institution. If in any particular year, the specified cut-off is exceeded, the tax exemption would be denied to the institution in that year and cancellation of registration would not be mandatory unless such cancellation becomes necessary on the ground(s) prescribed under the Act. 5. With the introduction of Chapter XII-EB in the Act vide Finance Act, 2016, prescribing special provisions relating to tax on accreted income of certain trusts and institutions, cancellation of registration granted u/s 12AA may lead to a charitable institution getting hit by sub-section (3) of section 115TD and becoming liable to tax on accreted income. The cancellation of registration without justifiable reasons may, therefore, cause additional hardship to an assessee institution due to attraction of tax-liability on accreted income. The field authorities are, therefore, advised not to cancel the registration of a charitable institution granted u/s 12AA just because the proviso to ITA No.-1708/Del/2023 Virological Society Page 7 of 13 section 2(15) comes into play. The process for cancellation of registration is to be initiated strictly in accordance with section 12AA(3) and 12AA(4) after carefully examining the applicability of these provisions.” 10. Mere perusal of the impugned order, it exhibits that the Ld. CIT(E) decline to accept the application of assessee by stating that the agreement between spring nature and assessee is of commercial nature without having element of charity in publishing of the journal, and also that assessee has charged registration fee from students for virocon 2020 and same should not be charged if the object of the society is general public utility. In this regard, the Ld. AR submitted that it is only required to be seen for determination of the fact of being charitable society is that even in the event of earning profits or surplus, such profits or surplus remain with the society itself and again ploughed back into the coffers of the society for furtherance of its charitable objects. As long as the profits or surplus are not distributed to the private individuals of the assessee society either directly or indirectly in any manner whatsoever for malafide purposes, there is no harm in any charitable society earning profits / surplus. ITA No.-1708/Del/2023 Virological Society Page 8 of 13 11. In order to strengthen his argument, the Ld. AR relied upon the conditions of society as stated in its memorandum of association, which is reproduced below for easy reference: ITA No.-1708/Del/2023 Virological Society Page 9 of 13 12. It is submitted by the Ld. AR that mere perusal of above extract of MOA it is crystal clear that surplus are not distributed to the private individuals of the assessee society either directly or indirectly in any manner whatsoever for malafide purposes and they are ploughed back into the coffers of the society for furtherance of its charitable objects. It is also submitted that a charitable society is that even in the event of earning profits or surplus, such profits or surplus remains with the society itself and again ploughed back into the coffers of the society for furtherance of its charitable objects and hence profits are not distributed to the public individuals of the assessee society. There is no harm in any charitable society earning profits and in this regard the Ld. AR relied upon the order of the Co- ordinate Bench of ITAT, in the case of M/s Civil Services Institute vs. CIT (Exemption), Lucknow, 2023(9) TMI 836, dated 15, 2023. It is also submitted that the Ld. CIT(E ) has not pointed out single incident where the surplus made by the assessee or any fee collected by it is utilized for any purpose other than the object of society. 13. The Ld. CIT(E) observed in impugned order that the applicant is in receipts of substantial amount in lieu of services provided by it ITA No.-1708/Del/2023 Virological Society Page 10 of 13 and thus assessee has not been able to substantiate the activities undertaken by it with bills, vouchers, list of beneficiaries etc. so, the conditions for grant of registration in the case are not satisfied. In this regard, the Ld. AR submitted that it is not true that he could not submitted the relevant bills/ vouchers and list of beneficiaries, and during the proceedings, he furnished entire tally data from 01.04.2019 to 30.09.2022, which is already placed on page no. 145 of Paper Book, and for the satisfaction of the Ld. CIT(E), also submitted a copy of publishing agreement with Springer Nature India Pvt. Ltd., copy of identity proof of Yashpal Singh Malik and Basavaraj, who are Secretary General and Treasure of the Society, ITR filed by them also copy of detail of vehicle owned by the assessee, copy of note and documentary evidences submitted substantiate that charitable activities are being carried out by the assessee, but the Ld. CIT(E) did not considered the same and rejected the application. 14. The Ld. AR also expressed his grievance that in the entire proceedings, the Ld. CIT(E) never asked or required to furnish any bills or vouchers, but the assessee provided complete tally data and the ledgers before the CIT(E). So far as the question regarding ITA No.-1708/Del/2023 Virological Society Page 11 of 13 observation of the Ld. CIT(E) that the scholars were not members of society cannot be nominated for awards given by the society, it is submitted that it is well settled by now that an object beneficial to a section of the public is an object of general public utility to serve a charitable purpose and it is not necessary that the object should be to benefit the whole of mankind and all persons. 15. From bare perusal of the record and submissions advanced on behalf of the assessee, we are of the view that during the proceedings Ld. CIT(E) neither considered nor discussed material / documents submitted by the assessee/ appellant and rejected the prayer of the assessee whereas it was required by law that before passing any order the Ld. CIT(E ) should properly considered all the material / evidence placed on record. On the basis of the facts mentioned herein before and upon hearing rival contentions, without discussing on merits of the case, we deem it proper to remit the matter back to the Ld. CIT(E) with the direction to decided afresh in accordance with law after with affording meaningful and effective opportunity to the assessee/ appellant. The assessee / appellant shall co-operate in the proceeding for expeditious disposal before Ld. CIT(E) with providing ITA No.-1708/Del/2023 Virological Society Page 12 of 13 all material / document / evidence in support of his claim without seeking unnecessary adjournments 16. Consequently, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 28/03/2025 Sd/- Sd/- (S RIFAUR RAHMAN) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 28/03/2025. Pooja/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA No.-1708/Del/2023 Virological Society Page 13 of 13 1. Date of dictaƟon of Tribunal order 06.03.2025, 26.3.25 2. Date on which the typed draŌ Tribunal Order is placed before the DictaƟng Member 6.03.2025, 26.03.25 3. Date on which the typed draŌ Tribunal order is placed before the other Member 4. Date on which the approved draŌ Tribunal order comes to the Sr. PS/PS 5. Date on which the fair Tribunal order is placed before the DictaƟng Member for pronouncement 6. Date on which the signed order comes back to the Sr.PS/PS 7. Date on which the final Tribunal order is uploaded by the Sr.PS/PS on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal order 9 Date of killing off the disposed of files on the judisis Portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes to the Assistant Registrar for endorsement of the order 12. Date of Despatch of the order "