GURU NANAK EDUCATIONAL BOARD, JALANDHAR V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH

ITA 188/ASR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9318 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 06-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEVENDER SING H LD
• Assessee Lawyers: SURINDER MAHAJAN LD; VIKAS H BHAGAT LD
• Section: 12AA; 6; 12; 10; 2

Judgement Text

IN THE INCOME TAX APPELLAT E TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.S.SAINI, ACCOUNTANT MEM BER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NO.188(ASR)/2018 ASSESSMENT YEAR: GURU NANAK EDUCATIONAL BOARD, VPO DHESIAN SANG, TEH PHILAUR, DISTT. JALANDHAR [PAN:AABAG 2668J] VS. THE CIT (EXEMPTIONS), CHANDIGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SURINDER MA HAJAN (LD. CA) AND SH. VIKAS H BHAGAT (LD. ADV.) RESPONDENT BY: DR. DEVENDER SINGH (LD. CIT-DR) DATE OF HEARING: 21.05.2019 DATE OF PRONOUNCEMENT: 21.06.2019 ORDER PER N.K.CHOUDHRY, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE/APPELLAN T AGAINST THE ORDER DATED 26.02.2018 IMPUGNED HEREIN, PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH U/S 12AA(1)(B)(II I) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT) , WHER EBY THE APPLICATION OF THE ASSESSEE HAS BEEN REJECTED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPLICATION FIL ED ON 17-08-2017 BY THE APPELLANT SOCIETY WAS TAKEN INTO CONSIDERATION BY THE CIT(E) WHILE FIXING THE DATE OF HEARING ON 23/10/2017 AND THE APPLICANT SOCIETY WAS REQUESTED TO FI LE THE DETAILS/CLARIFICATIONS AS MENTIONED IN PARA NO. 5 OF T HE IMPUGNED ITA NO.188/ASR/2018 GURU NANAK EDUCATIONAL BOARD V S. CIT(E) 2 ORDER ON OR BEFORE 07/11/2017 AGAINST WHICH THE APPL ICANT SOCIETY FILED REPLY AND DOCUMENTS. WHILE CONSIDERING THE REPLY OF THE APPELLANT SOCIETY, THE APPLICATION FOR REGISTRATION WAS REJECTED BY THE LD. CIT(E) BY OBSERVING AS UNDER: 6. SHRI KULDEEP BHAGAT, C.A. & AUTHORISED REPR ESENTATIVE OF THE APPLICANT ATTENDED ON THE FIXED DATE AND FILED REPL Y IN RESPONSE TO THE QUESTIONNAIRE ISSUED. THE COUNSEL SUBMITTED THA T THE SOCIETY RUNS FOUR EDUCATIONAL INSTITUTES (THREE SCHOOLS & O NE COLLEGE) UNDER ITS AEGIS. THE COUNSEL VIDE REPLY DATED 07.11.2017 HAS ALSO SUBMITTED THAT INCOME TAX RETURN OF THE SOCIETY HAS NOT BEEN FILED TILL DATE, SINCE THE CREATION OF THE SOCIETY BUT LA TER VIDE LETTER DATED 17.02.2018 THE APPLICANT SOCIETY SUPPLIED COPIES OF ITRS FOR A.Y. 2016-17 AND A.Y. 2017-18 FILED ON 17 TH FEBRUARY, 2018. IT IS CLEAR FROM THE DOCUMENTS ON RECORD AND FROM THE REPLY SUB MITTED BY THE APPLICANT THAT NO ITR HAD BEEN FILED EARLIER AND TH E SAME WAS FILED AFTER A SPECIFIC QUERY IN THIS REGARD WAS RAISED VI DE QUESTIONNAIRE DATED 16.02.2018. THE APPLICANT HAS CLAIMED ITS INCOME EXEMPT U/S 11/12 OF THE ACT IN THE RECENTLY FILED RE TURNS OF INCOME. FILING OF RETURNS ON 17.02.2018 DURING THE COURSE OF PROCEEDINGS AND CLAIMING EXEMPTION UNDER SECTION 11/12 OF THE ACT BELIES LOGIC IN THE ABSENCE OF REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961. THE APPLICANT IN RESPONSE TO A SPECIFIC QUERY RAISED FOR NOT FILING ITS RETURN ARGUED THAT THE RETURNS WERE NOT FILED EARLIER BECAUSE OF THE OPINION THAT THE INCOM E OF THE SOCIETY WAS EXEMPT U/S 10(23C)(VI) OF THE ACT. THE APPLICANT'S CASE DOESN'T FALL UNDER THE QUOTED SECTION IN ABSENCE OF ANY APPROVAL UNDER SECTION 10(23C)(VI) OF THE ACT EITHER. NOTWITHSTANDING THE SAME, THE RECEIPTS OF THE SOCIE TY ARE IN EXCESS OF RS. ONE CRORE NEGATING THE ELIGIBILITY FOR CLAIM ING EXEMPTIONS U/S 10(23C)(IIIAD) OF THE ACT AS PRESCRIBED BY RULE 2BC OF THE INCOME TAX RULE, 1962. EVEN IN THAT CASE, FOR CLAIMING EXE MPTIONS U/S 10(23C)(IIIAD) OF THE ACT, FILING OF RETURN IS COMP ULSORY. IT SEEMS FROM THE TEXT QUOTED BY THE APPLICANT SOCIETY (THOUGH NOT CLAIMED BY THE APPLICANT IN AS MANY WORDS) IN ITS REPLY AND THE COPY OF RECEIPTS & PAYMENTS ACCOUNT THAT IT INTENDS TO SAY THAT THE APPLICANT SOCIETY WAS COVERED U/S 10(23C)(IIIAB) OF THE INCOME TAX ACT, SINCE THE INCOME HAS BEEN CLAIMED TO BE RECEIV ED THROUGH GRANTS IN AID AND DID NOT FILE RETURN OF INCOME EAR LIER. FOR CLAIMING EXEMPTIONS U/S 10 (23C)(IIIAB) OF THE ACT FILING OF RETURN IS COMPULSORY AS PER THE AMENDMENT IN SECTION 139(4C)( E) OF THE ACT APPLICABLE FROM 01.04.1016. IT IS NOT CONVINCING TH AT THE APPLICANT HAS CHOSEN TO FILE ITS RETURN CLAIMING EXEMPTIONS U /S 11/12 OF THE ACT WITHOUT HAVING ANY REGISTRATION U/S 12 AA OF TH E ACT AND NOT UNDER SECTION 10(23C)(IIIAB) OF THE INCOME TAX ACT WHEN IT CLAIMS ITS INCOME TO BE COVERED BY SECTION 10 OF THE INCOME TA X ACT AS THE ITA NO.188/ASR/2018 GURU NANAK EDUCATIONAL BOARD V S. CIT(E) 3 RATIONALE FOR NOT FILING RETURNS IN THE PAST. IN AN Y CASE THE APPLICANT NOT FILING RETURNS U/S 10(23C)(IIIAB) DESPITE THE S AME BEING MANDATORY W.E.F. 01.04.2016 IS A SERIOUS INFRACTION THAT IMPINGES UPON ITS PRESENT CLAIMS AND GENUINENESS OF ITS ACTI VITIES. 7. THE TERMS OF MOA OF THE BYE LAWS ALONGWITH OTHER DOCUMENTS HAVE BEEN PERUSED WHEREIN DISSOLUTION CLA USE OF THE APPLICANT SOCIETY APPEARS TO BE RESTRICTIVE IN NATU RE. THE DISSOLUTION CLAUSE AS IN PARA EIGHT OF THE MOA READS THAT UPON WINDING UP OR DISSOLUTION OF THE BOARD, THE ENTIRE PROPERTY BELON GING TO THE BOARD SHALL BE AUTOMATICALLY TRANSFERRED TO GURUDWARA BAB A DHESIAN SANG. THE TRANSFER OF THE PROPERTY IN THE EVENT OF DISSOLUTION IS NOT OPEN TO ANY OTHER SOCIETY HAVING SIMILAR AIMS AND O BJECTS OR TO THE SOCIETY REGISTERED U/S 12 AA OF THE INCOME TAX ACT. 8. IT HAS ALSO BEEN REVEALED THAT THE SOCIETY HAS BEEN CREATED ON 16 TH JANUARY, 1970 AND HAS APPLIED FOR GRANT OF REGISTR ATION U/S 12AA OF THE ACT FOR THE FIRST TIME AFTER A LAPSE OF FORTY-SEVEN YEARS. THE INTENT OF THE APPLICANT SOCIETY TO HAVE APPLIED FOR GRANT OF REGISTRATION UNDER THIS SECTION AFTER SUCH A LONG G AP WHEN IT CLAIMED TO BE COVERED UNDER SECTION 10 EARLIER IS NOT CONVI NCING. THE REPLY OF THE APPLICANT SOCIETY VIDE LETTER DATED 17.02.2018 STATING THAT IT HAS APPLIED FOR GRANT OF REGISTRATION BECAUSE OF AMENDM ENT MADE BY THE LEGISLATURE FOR CLAIMING EXEMPTION U/S 10 DOES NOT APPEAR TO HOLD GROUNDS. IF THE APPLICANT IS SANGUINE ABOUT ITS CLA IMS W.R.T. COVERAGE BY THE PROVISIONS OF SECTION 10 IN THE PAS T IT WAS IMPERATIVE THAT IT FILED RETURNS U/ S 10(23C)(IIIAB ) ONCE IT WAS MADE MANDATORY. FAILURE TO DO SO TANTAMOUNT TO COCKING A SNOOK AT THE STATUTORY REQUIREMENTS WITH GREATER IMPORT IN CASE THAT ARE ACCORDED EXEMPTION FROM TAXES ON THE GROUNDS THAT T HEY ARE FORMED INTO LEGAL OBLIGATIONS DEALING WITH PUBLIC MONEY AN D CLAIMING TO ENURE TO THE BENEFIT OF GENERAL PUBLIC. 9. IT IS ALSO THE CASE AS TO HOW THE CHARACTER OF INC OME THAT HAS BEEN CLAIMED TO BE COVERED UNDER SECTION 10 SUDDENL Y CHANGES CHARACTER SO AS TO MAKE IT AMENABLE TO FALL INTO TH E CATEGORIES OF (A) INCOME FROM PROPERTY HELD BY THE TRUST WHOLLY FOR C HARITABLE PURPOSES (B) INCOME FROM VOLUNTARY DONATIONS AND (C ) INCOME FROM VOLUNTARY DONATIONS GIVEN WITH SPECIFIC DIRECTIONS THAT IT WOULD FROM PART OF CORPUS. IN LIGHT OF THE ABOVE, THE APPLICAN T'S INABILITY IN RATIONALIZING THE BELATED APPLICATION, ITS NON-FILI NG OF RETURNS EVEN AFTER BEING MADE MANDATORY, AND, IN THE LAST, FILIN G RETURNS AND CLAIMING EXEMPTION U/S. 11/12 (IN THE ABSENCE OF A 12AA REGISTRATION) ALL GO ON TO SEVERELY IMPINGE ON THE GENUINENESS OF ITS CLAIMED ACTIVITIES. THOUGH THE APPLICANT DURING THE COURSE OF PROCEEDINGS FILED EVIDENCE OF A RESOLUTION AMENDING CERTAIN REPUGNANT CLAUSES BEEN FILED WITH THE REGISTRAR OF SOCIETIES THE SAME CAN'T BE HELD TO BE LEGALLY TENABLE TILL THE S AME GETS REGISTERED. IN ANY CASE THE SAME DOES NOT EVEN HINT AT THE SOURCES OF FUNDS AND THE INVESTMENT THEREOF THAT COULD MAKE ITS FINA NCES OF THE PAST ITA NO.188/ASR/2018 GURU NANAK EDUCATIONAL BOARD V S. CIT(E) 4 AMENABLE TO SCRUTINY. THE APPLICATION FOR GRANT OF REGISTRATION U/S 12AA IS ACCORDINGLY REJECTED. 3. THE FIRST OBJECTION FOR REJECTION BY THE LD. CIT(E) IS THAT THE ASSESSEE SOCIETY HAS NOT FILED ITS RETURN OF INCOME TILL DATE I.E. 07/11/2017, SINCE THE CREATION OF THE SOCIETY, BUT VIDE LETTER DATED 17/02/2018 THE APPLICANT SOCIETY SUPPLIED COPIES OF ITRS FOR A.Y 2016-17 & A.Y. 2017-18 FILED ON 17 TH FEB., 2018. IT IS CLEAR FROM THE DOCUMENTS ON RECORD AND FROM THE REPLY SUBMITTED BY THE APPLICANT THAT NO ITR HAS BEEN FILED EARLIER AND THE SAME WAS FILED AFTER SPECIFIC ENQUIRY IN THIS REGARD WAS RAISED VIDE QUESTIONNAIRE DATED 16/02/2018. AS IT APP EARS FROM THE ORDER THAT THE APPELLANT SOCIETY IN RESPONSE TO THE SPECIFIC QUERY QUA NON FILING OF THE RETURN HAD SUBMITTED TH AT THE RETURNS WERE NOT FILED EARLIER BECAUSE OF THE IMPRESSION THAT THE INCOME OF THE SOCIETY WAS EXEMPT U/S 10(23C) (VI) OF THE ACT. HO WEVER, IT WAS OBSERVED BY THE LD. CIT(E) THAT NON-FILING OF THE RETURN U/S 10(23C)(IIIAB), DESPITE THE SAME BEING MANDATORY W .E.F, 01/04/2016 IS A SERIOUS INFRACTION THAT IMPINGES UPON IT S PRESENT CLAIMS AND GENUINENESS OF ITS ACTIVITY. WE HAVE REALIZED THAT THE ASSESSEE WAS UNDER MIS- CONCEPTION FOR NOT FILING OF RETURN BEING COVERED UNDE R THE EXEMPTION U/S 10(23C)(VI) OF THE ACT AS CLAIMED BY THE ASSESSEE SOCIETY, HOWEVER IT IS A FACT THAT THE ASSESSEE ON DATED 1 7 TH FEB. 2018 FILED THE INCOME TAX RETURN FOR A.Y. 2016-17 AN D A.Y.2017-18, THEREFORE, THIS OBJECTION OF THE LD. CIT (E) DOES NOT COME IN THE WAY OF THE CASE OF THE ASSESSEE SOCIETY. 3.1 THE SECOND OBJECTION HAS BEEN RAISED BY THE CIT(E) WITH REGARD TO THE DISSOLUTION CLAUSE OF THE APPLICANT SOCIETY WHICH ITA NO.188/ASR/2018 GURU NANAK EDUCATIONAL BOARD V S. CIT(E) 5 ACCORDING TO HIM APPEARS TO BE RESTRICTIVE IN NATURE. TH E DISSOLUTION CLAUSE AS IN PARA-8 OF THE MOA READS THAT UPO N DISSOLUTION OF THE BOARD, THE ENTIRE PROPERTY BELONGI NG TO THE BOARD SHALL BE AUTOMATICALLY TRANSFERRED TO GURDAWARA BABA DHESIAN SANG. THE TRANSFER OF THE PROPERTY IN THE EV ENT OF DISSOLUTION IS NOT UPON TO ANY OTHER SOCIETY HAVING SIMI LAR AIMS AND OBJECTS OR TO THE SOCIETY REGISTERED U/S 12AA OF THE ACT. OUR ATTENTION WAS DRAWN BY THE LD. C.A SH. SURINDE R MAHAJAN TO THE AMENDED MEMORANDUM OF ASSOCIATION DATED 27/11/2017 AS APPROVED BY THE REGISTRAR OF SOCIETIES, PUNJAB WHEREIN THE PARA-8 OF THE AMENDED MUU, THE ASSESSEE SOCIE TY HAS AMENDED THE DISSOLUTION CLAUSE WHICH WAS EARLIER RESTR ICTED TO GURUDWARA BABA DHESIAN SANG. NOW ACCORDING TO THE AMENDED CLAUSE, THE RESTRICTION HAS BEEN UPLIFTED SO THIS GROUND ALSO DOES NOT INTERFERE THE ASSESSEES CASE. 3.2 THIRD GROUND OF REJECTION IS THAT THE APPELLANT SOCI ETY HAS BEEN CREATED ON 16.01.1970 AND APPLIED FOR REGISTRATI ON U/S 12AA OF THE ACT FOR THE FIRST TIME AFTER A GAP OF 47 YEARS. THE INTENT OF APPLICANT SOCIETY FOR NOT APPLYING EARLIER FOR GRANT OF REGISTRATION UNDER THIS SECTION IS NOT CONVINCING. IN THE ACT THERE IS NO RESTRICTION THAT THE SOCIETY CANNOT APPLY AFTER A L ONG PERIOD MAY BE AFTER ONE YEAR OF ITS CREATION OF THE SOCIETY HE NCE THIS OBJECTION ALSO DOES NOT CAME INTO PLAY FOR REJECTION OF THE GRANT OF REGISTRATION U/S 12AA OF THE ACT. 3.3 THE LD. CIT(E) DID NOT RAISE ANY DOUBT ABOUT THE GENUINENESS OF THE AIMS AND OBJECTS OF THE SOCIETY AND IT IS A FACT THAT THE APPLICANT SOCIETY IS A RUNNING AN EDUCATI ONAL INSTITUTION IN THE NAME AND STYLE OF GURUNANK KHALSA GIRL ITA NO.188/ASR/2018 GURU NANAK EDUCATIONAL BOARD V S. CIT(E) 6 COLLEGE, BABA DHESIAN, JALANDHAR, IN PURSUANCE TO ITS AIMS AND OBJECTS AS ENUMERATED IN THE MEMORANDUM OF ASSOCIATION, THEREFORE IN OUR CONSIDERED OPINION, THE ASSESSEE SOCIETY IS ENTITLED TO GET THE REGISTRATION AS APPLIED, HENCE, WE DIRECT THE CIT(E) TO GRANT THE REGISTRATION TO THE APPELLANT S OCIETY. NO DOUBT, THE LD. CIT(E) SHALL BE AT LIBERTY TO MAKE RE ASONABLE CONDITIONS IF ANY FOR GRANTING THE REGISTRATION AND SHA LL ALSO BE AT LIBERTY TO CANCEL THE REGISTRATION IN THE EVENT OF ANY DEFAULT AND/OR NON FOLLOWING THE RELEVANT PROVISIONS OF LAW A S APPLICABLE TO THE APPLICANT SOCIETY IN FUTURE. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.06.2019. SD/- SD/- (N.S.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 21.06.2019 /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) GURU NANAK EDUCATIONAL BOARD, JALANDHAR. (2) THE CIT(EXEMPTIONS), CHANDIGARH. (3) THE SR DR, I.T.A.T., AMRITSAR TRUE COPY BY ORDER