Sh. Sita Ram Shiksha Prasar Samiti, Gwalior V. C.I.T., Gwalior

ITA 160/AGR/2013

• Counselvise Citation: 16020314 RSA 2013
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-08-2013
• Assessment Year: misc
• Appeal Filed On: 13-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH KUMAR
• Assessee Lawyers: V BAPNA
• Keywords: Charitable institution; Opportunity of being heard
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 160/AGRA/2013 SRI SITA RAM SHIKSHA PRASAR SAMITI, VS. COMMISSION ER OF 419B, C.P. COLONY, MORAR, GWALIOR. INCOME-TAX, GW ALIOR. (PAN: AAFTS 1231 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. BAPNA, C.A. RESPONDENT BY : SHRI ANIRUDH KUMAR, CIT/DR DATE OF HEARING : 07.08.2013 DATE OF PRONOUNCEMENT OF ORDER : 14.08.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT, GWALIOR DATED 29.04.2013, CHALLENGING THE ORDER REJECTING A PPLICATION U/S. 12AA OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE SOCIETY FILED APPLICATION IN PRESCRIBED FORM SEEKING REGISTRATION U/S. 12AA OF T HE IT ACT. THE REPORT FROM THE ASSESSING OFFICER WAS CALLED FOR. THE LD. CIT ON GO ING THROUGH THE REPORT AND APPLICATION OF THE ASSESSEE SOCIETY OBSERVED THAT T HE SOCIETY FOR THE FINANCIAL YEAR 2009-10 WAS SHOWN TO HAVE RECEIVED THE CORPUS FUND OF RS.14,09,922/-. HOWEVER, NO DETAILS REGARDING THIS CORPUS FUND HAVE BEEN FIL ED. OPPORTUNITY WAS GRANTED TO ITA NO. 160/AGRA/2013 2 THE ASSESSEE TO JUSTIFY THE GENUINENESS OF THE CHAR ITABLE ACTIVITIES BY PRODUCING THE BOOKS OF ACCOUNT AND COMPLETE DETAILS OF LAST THREE YEARS. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNT BEFORE THE LD. CIT. HOWEVER, A CCORDING TO THE IMPUGNED ORDER, NO DETAILS OF CORPUS FUND WERE PRODUCED AS D ESIRED FROM THE SOCIETY. NO DETAILS OF DONATIONS WERE ALSO FILED. THEREFORE, TH E GENUINENESS OF THE ACTIVITIES COULD NOT BE VERIFIED AND ACCORDINGLY APPLICATION F OR REGISTRATION WAS REJECTED. 3. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SECTION 12AA OF THE I T ACT PROVIDES AS UNDER : PROCEDURE FOR REGISTRATION. 12AA. (1) THE COMMISSIONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTITUTION MADE UNDER C LAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12A, SHALL (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TH E TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY A LSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORDE R IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSE D UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. ITA NO. 160/AGRA/2013 3 (1A) ALL APPLICATIONS, PENDING BEFORE THE CHIEF COM MISSIONER ON WHICH NO ORDER HAS BEEN PASSED UNDER CLAUSE (B) OF SUB-SE CTION (1) BEFORE THE 1ST DAY OF JUNE, 1999, SHALL STAND TRANSFERRED ON T HAT DAY TO THE COMMISSIONER AND THE COMMISSIONER MAY PROCEED WITH SUCH APPLICATIONS UNDER THAT SUB-SECTION FROM THE STAGE AT WHICH THEY WERE ON THAT DAY. (2) EVERY ORDER GRANTING OR REFUSING REGISTRATION U NDER CLAUSE (B) OF SUB-SECTION (1) SHALL BE PASSED BEFORE THE EXPIRY O F SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE APPLICATION WAS RECEI VED UNDER CLAUSE (A) OR CLAUSE (AA) OF SUB-SECTION (1) OF SECTION 12 A. (3) WHERE A TRUST OR AN INSTITUTION HAS BEEN GRANT ED REGISTRATION UNDER CLAUSE (B) OF SUB-SECTION (1) OR HAS OBTAINED REGIS TRATION AT ANY TIME UNDER SECTION 12A [AS IT STOOD BEFORE ITS AMENDMENT BY THE FINANCE (NO. 2) ACT, 1996 (33 OF 1996) AND SUBSEQUENTLY THE COMM ISSIONER IS SATISFIED THAT THE ACTIVITIES OF SUCH TRUST OR INSTITUTION AR E NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITUTION, AS THE CASE MAY BE, HE SHALL PASS AN O RDER IN WRITING CANCELLING THE REGISTRATION OF SUCH TRUST OR INSTIT UTION: PROVIDED THAT NO ORDER UNDER THIS SUB-SECTION SHALL BE PASSE D UNLESS SUCH TRUST OR INSTITUTION HAS BEEN GIVEN A REASONAB LE OPPORTUNITY OF BEING HEARD. 3.1. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF HA RDAYAL CHARITABLE AND EDUCATION TRUST VS. CIT-II, AGRA IN INCOME-TAX APPE AL NO. 107 OF 2012 VIDE JUDGMENT DATED 15.03.2013 HELD AS UNDER : THE PREPONDERANCE OF THE JUDICIAL OPINION OF ALL TH E HIGH COURT INCLUDING THIS COURT IS THAT AT THE TIME OF R EGISTRATION UNDER SECTION 12AA OF THE INCOME TAX ACT, WHICH IS NECESS ARY FOR CLAIMING EXEMPTION UNDER SECTION 11 & 12 OF THE ACT, THE COM MISSIONER OF INCOME TAX IS NOT REQUIRED TO LOOK INTO THE ACTIVIT IES, WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS IN ITIATION. WHERE A TRUST, SET UP TO ACHIEVE ITS OBJECTS OF ESTABLISHING EDUCA TIONAL INSTITUTION, IS IN THE PROCESS OF ESTABLISHING SUCH INSTITUTIONS, A ND RECEIVES DONATIONS, THE REGISTRATION UNDER SECTION 12AA CANN OT BE REFUSED, ON THE GROUND THAT THE TRUST HAS NOT YET COMMENCED THE CHARITABLE OR ITA NO. 160/AGRA/2013 4 RELIGIOUS ACTIVITY. ANY ENQUIRY OF THE NATURE WOULD AMOUNT TO PUTTING THE CART BEFORE THE HORSE. AT THIS STAGE ONLY THE G ENUINENESS OF THE OBJECTS HAS TO BE TASTED AND NOT THE ACTIVITIES, WH ICH HAVE NOT COMMENCED. THE ENQUIRY OF THE COMMISSIONER OF INCOM E TAX AT SUCH PRELIMINARY STAGE SHOULD BE RESTRICTED TO GENUINENE SS OF THE OBJECTS AND NOT THE ACTIVITIES UNLESS SUCH ACTIVITIES HAVE COMMENCED. THE TRUST OR SOCIETY CANNOT CLAIM EXEMPTION, UNLESS IT IS REGISTERED UNDER SECTION 12AA OF THE ACT AND THUS AT THAT SUCH INITI AL STAGE THE TEST OF THE GENUINENESS OF THE ACTIVITY CANNOT BE A GROUND ON WHICH THE REGISTRATION MAY BE REFUSED. IT IS NOT DENIED THAT FOR SUBSEQUENT YEAR THE APPE LLANT HAS BEEN GRANTED EXEMPTION UNDER SECTION 12AA AND HAS ALSO B EEN APPROVED UNDER SECTION 80G OF THE ACT, SUBJECT TO CERTAIN CO NDITIONS. IF THE COMMISSIONER OF INCOME TAX WAS SATISFIED WITH THE G ENUINENESS OF THE OBJECTS OF THE TRUST FOR THE SUBSEQUENT ASSESSMENT YEAR, THE REFUSAL OF THE REGISTRATION FOR THE PREVIOUS ASSESSMENT YEAR 2 011-12 WAS NOT JUSTIFIED. THE QUESTION OF EXEMPTION OF THE APPLICATION OF IN COME RECEIVED BY WAY OF DONATION, IS A SEPARATE ISSUE AND WHICH M AY BE REQUIRED TO BE CONSIDERED, WHEN THE RETURN IS FILED BY THE TRUS T AND IS EXAMINED BY THE INCOME TAX OFFICER. THE QUESTION AS TO WHETH ER THE DONATIONS BY THE SOCIETIES WAS THE EXPENDITURE OF THE TRUST F OR CHARITABLE AND RELIGIOUS PURPOSES WILL BE EXAMINED AT THE TIME OF EXAMINING THE RETURN. IN THE RESULT THE INCOME TAX APPEAL IS ALLOWED. AL L THE THREE SUBSTANTIAL QUESTIONS OF LAW FORMULATED AS ABOVE AR E DECIDED IN FAVOUR OF THE ASSESSEE, AND AGAINST THE REVENUE WIT H A CLARIFICATION THAT THE REGISTRATION UNDER SECTION 12AA AND APPROV AL UNDER SECTION 80G WOULD NOT BY ITSELF ENTITLE THE TRUST FOR EXEMP TION OF THE INCOME OF ITS DONORS OR OF THE TRUST FOR THE ASSESSMENT YE AR 2011-12. FOR CLAIMING SUCH EXEMPTION THE RETURNS OF THE DONOR AN D THE TRUST WILL BE EXAMINED, FOR ORDERS TO BE MADE IN ACCORDANCE WITH LAW. 3.2 HONBLE M.P. HIGH COURT IN THE CASE OF CIT VS. D.P.R. CHARITABLE TRUST, 61 DTR (MP) 410 HELD AS UNDER:- ITA NO. 160/AGRA/2013 5 WHILE CONSIDERING APPLICATION UNDER S. 12A, CIT IS NOT REQUIRED TO EXAMINE WHETHER THE INCOME DERIVED BY T HE TRUST IS BEING SPENT FOR CHARITABLE PURPOSES OR THE TRUST IS EARNI NG PROFIT WHILE GRANTING REGISTRATION; ASSESSEE TRUST ESTABLISHED F OR EDUCATIONAL PURPOSES WAS THEREFORE ENTITLED TO REGISTRATION. 4. FROM THE RELEVANT PROVISIONS OF LAW AND THE ABOV E DECISIONS, IT IS CLEAR THAT AT THE TIME OF GRANT OF REGISTRATION U/S. 12AA, THE LD. CIT HAS TO SATISFY HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND T HE GENUINENESS OF THE ACTIVITIES. IN THE CASE OF HARDAYAL CHARITABLE AND EDUCATION TRUST (SUPRA), IT WAS ALSO HELD THAT THE CIT IS NOT REQUIRED TO LOOK INTO THE ACTIVITIES WHERE SUCH ACTIVITIES HAVE NOT OR ARE IN THE PROCESS OF ITS INITIATION. AT THIS STAGE ONLY THE GENUINENESS OF THE OBJECTS HAVE TO BE EXAMINED AND NOT THE ACTIVITIES, WHICH H AVE NOT COMMENCED. THE QUESTION OF EXEMPTION OF APPLICATION OF INCOME RECE IVED BY WAY OF DONATIONS WOULD BE EXAMINED AT THE TIME OF EXAMINATION OF THE RETURN. THE ASSESSEE HAS FILED THE REQUIRED DOCUMENTS IN THE APPEAL PAPERS TO SHOW THAT THE ASSESSEE IS REGISTERED WITH THE REGISTRAR OF SOCIETIES AND ITS OBJECTS ARE EDUCATIONAL IN NATURE. THE LD. CIT DID NOT DISPUTE THIS FACT IN THE IMPUGNED ORDER. TH E LD. CIT CONSIDERED THE ISSUE OF CORPUS FUND AND DONATIONS FOR THE PURPOSE OF REJECT ING THE APPLICATION FOR REGISTRATION, WHICH ARE WHOLLY IRRELEVANT TO THE EN QUIRY AT THE STAGE OF REGISTRATION. MOREOVER, WITH REGARD TO THE ISSUE OF CORPUS FUNDS AND THE OBSERVATION OF THE LD. CIT THAT NO DETAILS HAVE BEEN FILED, THE LD. COUNSE L FOR THE ASSESSEE REFERRED TO PB- 4, WHICH IS REPLY FILED BEFORE THE LD. CIT ON 25.04 .2013 IN WHICH THE ASSESSEE ITA NO. 160/AGRA/2013 6 EXPLAINED THAT NO CASH CORPUS HAVE BEEN COLLECTED F ROM THE PUBLIC OR MEMBERS OF THE SOCIETY OR ANY PERSON. A SUM EQUIVALENT TO 15% OF THE GROSS RECEIPTS HAVE BEEN TRANSFERRED FROM INCOME AND EXPENDITURE ACCOUNT EVE RY YEAR AND CREDITED IN THE BALANCE SHEET UNDER THE HEAD CORPUS FUND. THE LD. CIT/DR ON GOING THROUGH THE REPLY OF ASSESSEE AND THE DETAILS, SUBMITTED THAT T HE CONTENTION OF THE ASSESSEE IS CORRECT THAT 15% OF THE GROSS RECEIPTS HAVE BEEN TR ANSFERRED UNDER THE HEAD CORPUS FUND. THEREFORE, THE OBJECTION OF THE LD. CIT IN TH IS REGARD IS SET ASIDE. THE ANOTHER ISSUE LEFT FOR CONSIDERATION IS THAT NO DETAILS OF DONATIONS OF RS.2,30,150/- HAVE BEEN FILED. THOUGH THE DETAILS OF THE SAME HAVE BEE N FILED AT PAGE 76 AND 77 OF THE PAPER BOOK AND THE LD. CIT/DR OBJECTED TO THE SAME BEING IN VIOLATION OF RULE 46A OF THE IT RULES, BUT THE SAME ISSUE NOT BEING RELEV ANT FOR ENQUIRY U/S. 12AA OF THE ACT, CANNOT BE CONSIDERED ADVERSE AGAINST THE ASSES SEE. THERE IS NO OTHER OBJECTION RAISED BY THE LD. CIT FOR CANCELLATION OF THE REGIS TRATION. CONSIDERING THE ABOVE DISCUSSION AND THE FACT THAT THE ASSESSEE EXISTS FO R EDUCATIONAL PURPOSE AND THAT THE ASSESSEE SOCIETY IS REGISTERED WITH THE NATIONAL C OUNCIL FOR TEACHER EDUCATION FOR B.ED. COURSE AS WELL AS WITH INDIAN NURSING COUNCIL FOR NURSING COLLEGE, WOULD THEREFORE, PROVE THAT THE ASSESSEE WAS ENGAGED IN E DUCATIONAL ACTIVITIES PRIOR TO FILING OF APPLICATION. SAME IS ALSO SUBSTANTIATED B Y THE AUDITED BALANCE SHEET TO SHOW THAT IN THE PRECEDING ASSESSMENT YEAR THE ASSE SSEE HAS RECEIPTS FROM EDUCATIONAL INSTITUTION AND AMOUNT HAS ALSO BEEN SP ENT FOR EDUCATIONAL PURPOSE. THE LD. COUNSEL ALSO FILED DETAILS OF STUDENTS AND FEES PER YEAR CHARGED FROM ITA NO. 160/AGRA/2013 7 STUDENTS WOULD ALSO SUPPORT THE CASE OF ASSESSEE TH AT THE ASSESSEE IS ENTITLED FOR REGISTRATION U/S. 12AA OF THE IT ACT. WE ACCORDINGL Y SET ASIDE THE IMPUGNED ORDER AND DIRECT THE LD. CIT, GWALIOR TO GRANT REGISTRATI ON TO THE ASSESSEE U/S. 12AA OF THE IT ACT IN ACCORDANCE WITH LAW AS PRAYED FOR IN THE APPLICATION FOR REGISTRATION. THE REGISTRATION BE GRANTED TO THE ASSESSEE WITHIN ONE MONTH FROM THE DATE OF THIS ORDER. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY