St.Mary's English Medium School Society , Guntur V. Commissioner of Income Tax, (Exemptions ), Hyderabad

ITA 2060/Hyd/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7903 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 21-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 12A; 12AA

Judgement Text

आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM (through web-based video conferencing platform) श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./I.T.A.No. 2060/H/2018 (निर्धारण वर्ा/Assessment Year : - NA-) St. Mary’s English Medium School Society Main Road, Ravipadu Village Narasaraopet Mandal Guntur [PAN : AAKTS3349C] Vs. Commissioner of Income Tax (Exemptions) Hyderabad (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant by : Shri GVN Hari, AR प्रत्यधथी की ओर से / Respondent by : Shri MN Murthy Naik, CIT, DR सुिवधई की तधरीख / Date of Hearing : 09.02.2022 घोर्णध की तधरीख/Date of Pronouncement : 25.02.2022 आदेश /O R D E R Per Shri Duvvuru RL Reddy, Judicial Member : This appeal is filed by the assessee against the order of the Commissioner of Income Tax (Exemptions) [CIT(E)], Hyderabad dated 31.07.2018. 2. The only grievance of the assessee is that the Ld.CIT(E) denied registration u/s 12AA of the Income Tax Act, 1961 (in short ‘Act’). Brief 2 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur facts of the case are that the assessee is a society registered under Societies Registration Act and is running educational institutions. An application was filed u/s 12AA of the Act, before the Ld.CIT(E), Hyderabad, having jurisdiction over the assessee. The Ld.CIT(E), Hyderabad passed order u/s 12AA(1)(b)(ii) of the Act on 31.07.2018, rejecting the application for registration u/s 12A/12AA of the Act. 3. On being aggrieved, the assessee preferred an appeal before ITAT, raising the following grounds : 1. The order of the learned Commissioner of Income Tax (Exemptions) is erroneous both on facts and in law. 2. The Learned Commissioner of Income Tax (Exemptions) erred in holding that the appellant is not eligible for registration u/s 12AA of the I.T.Act. 3. The Learned Commissioner of Income Tax (Exemptions) ought to have considered the requirements for granting registration u/s 12AA which the appellant satisfied; 4. The learned Commissioner of Income Tax (Exemptions) ought to have granted the registration u/s 12AA of the I.T.Act without considering the irrelevant facts. 5. Any other ground or grounds that may be urged at the time of hearing. The issue before us is whether, the assessee is eligible for registration u/s 12A / 12AA of the Act. 3 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur 4. The assessee submitted that Form 10A was filed before Ld.CIT(E) for granting registration u/s 12A/12AA of the Act. Without considering any relevant fact for grant of registration u/s 12AA, the Ld.CIT(E) considered irrelevant things and denied the registration u/s 12AA. He further submitted the society was registered under Registrar of Societies in the year 2000. The objectives of the society are (a) To meet the present demand for education through English medium and provide for rural population. Therefore, a good school, college for imparting education through English medium and also to administer the present St. Mary’s English Medium School any to promote into a High School (b) To organize, encourage literary, library and cultural and sports activities He further submitted that the Ld.CIT(E) rejected the registration u/s 12A on the ground that the assessee had claimed exemption u/s 11 of the Act for the A.Y.2015-16 to 2017-18, though the assessee was not granted registration u/s 12AA. He further submitted that the Ld.CIT(E) has not at all considered the objectives of the society at the same time he has not disputed any of the objectives of the society, but simply rejected the 12AA registration on the ground that the assessee has claimed exemption u/s 11 without there being 12AA registration. Therefore, pleaded for registration u/s 12AA of the Act. 4 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur 5. On the other hand, the Ld.DR submitted that the assessee has claimed exemption u/s 11 without having registration u/s 12AA for many years, which explains the ingenuity of the organization, hence, the organization itself is not genuine. The Ld.DR further submitted that the Ld.CIT(E) relied on the judgement reported in (1996) 217 ITR 746 (SC) in the case of Bihari Lal Jaiswal and others v. Commissioner of Income-Tax. By relying on the judgement, the Ld.CIT(E) rightly rejected the claim of the assessee. Therefore, he pleaded that the order passed by Ld.CIT(E) be confirmed. 6. We have heard both the parties, also gone through the objectives of the assessee society and find that there are so many objectives. We find that the main objects are to provide education through English medium school to the rural population and also to encourage literary, library, cultural and sports activities. We are of the view that if the assessee society is genuinely carrying the charitable activity based on the objectives of the society, the registration u/s 12AA must be granted. For that matter, the primary duty of the Ld.CIT(E) is to examine the objectives of the Society and if he is having any doubt about the genuineness of the activity carried on by the assessee society, it is open to the Ld.CIT(E) to depute income tax officials to examine the objectives of the society by conducting enquiries and after receipt of the enquiry report, the Ld.CIT(E) is empowered to exercise his discretion based 5 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur on the material available on record, whether to grant registration u/s 12A/12AA of the Act or not. In the present case on hand, the Ld.CIT(E) simply rejected 12AA registration on the ground that the assessee has claimed exemption u/s 11 without having registration u/s 12AA of the Act during the A.Ys 2015-16 to 2017-18. In our opinion, the Ld.CIT(E) has not at all looked into the objectives of the society and simply rejected registration u/s 12AA based on the wrong claim made by the assessee during the A.Y.2015-16 to 2017-18. Now, it is pertinent to examine the provision for procedure for registration u/s 12AA. Procedure for registration. 12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A, shall— [(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,— (i) the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also 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 55 [as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he— (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner 6 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur 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 under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub- section (1) of section 12A. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration 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 Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are 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 order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. It is clear from the plain reading of section 12A and 12AA of the Act is only registration simpliciter of the entity of a Trust / Society. This has been made a condition precedent for claiming of benefits under the provisions of the Act regarding exemption of income, contribution etc. The stage for consideration of the relevance of the objectives of the Trust and application of it’s funds arising at the time of the assessment, where the benefits are claimed by the assessee in respect of section 11 and 12 of the Act, the question is to nature of such contribution and income can be looked into. At the time of registration of the Trust, going by the binding judgements of the Apex court, what is to be looked into is whether the Trust is genuine one or it is a sham institution only to avail the benefits of exemption in the Act. Upon perusal of the order of the Ld.CIT(E), there is no such finding in the impugned order. The decisions, which were relied on by the Ld.CIT(E) 7 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur has no application in the present case. After considering the provisions of section 12A and 12AA of the Act, we are of the view that the Ld.CIT(E) could have examined only the genuineness of the objectives of the Trust and it’s activities. There was no finding given by the Ld.CIT(E) that the objectives and activities of the Trust are not genuine. Therefore, we hold that the ground raised by Ld.CIT(E) for rejection of registration to the assessee cannot be sustained. In the light of the above findings, the impugned order passed by the Ld.CIT(E) is set aside. The Ld.CIT(E) is directed to grant registration as requested by the assessee in terms of section 12AA of the Act. Accordingly, the grounds raised by the assessee are allowed. 7. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 25 th February, 2022. Sd/- Sd/- (एस बालाकृ ष्णन) (द ु व्वूरु आर.एल रेड्डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सदस्य/ACCOUNTANT MEMBER न्याधयक सदस्य/ JUDICIAL MEMBER Dated : 25 .02.2022 L.Rama, SPS 8 ITA No. 2060/H/2018 St.Mary’s English Medium School Society, Guntur आदेश की प्रतितिति अग्रेतषि/Copy of the order forwarded to:- 1. तिर्धाररिी/ The Assessee – St. Mary’s English Medium School Society, Main Road, Ravipadu Village, Narasaraopet Mandal, Guntur 2. रधजस्व/The Revenue – Commissioner of Income Tax (Exemptions), Hyderabad 3. आयकर आयुक्त ()/ CIT(E), Hyderabad 4. तवभधगीय प्रतितितर्, आयकर अिीिीय अतर्करण, तवशधखधिटणम/DR, ITAT, Visakhapatnam 5.गधर्ाफ़धईि / Guard file आदेशधिुसधर / BY ORDER // True Copy // Sr. Private Secretary ITAT, Visakhapatnam