ZILA PARYAWARN SUDHAR SAMITI, JHUNJHUNU V. CIT(EXEMPTION), JAIPUR

ITA 3/JPR/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7093 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Appeal Filed On: 19-01-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution; Condonation of delay; Cancellation of registration; TDS; FORM 26AS
• Section: 133(6); 12A; 194C; 12AA; 207; 192; 13; 22

Judgement Text

1 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 03/JP/2021 fu/kZkj.k o"kZ@Assessment Year :/ Under Section 12AA of I.T. Act, 1961 Zila Paryawarn Sudhar Samiti Ward No. 37, in front of Govt. Primary Mahal School, Jhunjhunu cuke Vs. The CIT(Exemption) Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAATJ 5362 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Rajeev Sogani, CA jktLo dh vksj ls@Revenue by: Shri Sanjay Dhariwal. CIT lquokbZ dh rkjh[k@Date of Hearing : 09/02/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 11 /03/2022 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee trust which is arising from the order of the ld. Commissioner of Income Tax (Exemption), Jaipur [hereinafter referred to as ld. CIT(E)] whereby the ld. CIT(E) held that the applicant society cannot be held as charitable within the meaning of Section 2(15) of the I.T. Act, 1961. Based on the observation, he felt that the assessee trust is not fit for registration and registration granted u/s 12AA of the Act earlier is rejected. 2 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur 2. At the outset of the hearing, the Bench observed that there is delay of 53 days in filing the appeal by the assessee for which the assessee filed an application dated 15-10-2021 praying therein for condonation of delay on the ground of prevailing situation of Covid-19 Pandemic. 3. The ld. DR during the course of hearing objected to the assessee's application for condonation of delay merely on the general reason of Covid-19. 3.1 We have heard both the parties and perused the materials available on record. We find that there is national wide Covid 19 Pandemic situation which is beyond the control of the human being. It is observed that the assessee is prevented by sufficient cause in not filing the appeal in time. The assessee also relied on the extension of limitation granted by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020. 3.2 In respect of condonation of delay, the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji, 167 ITR 471 observed as under:- ‘’The Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression " sufficient cause " in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice--that being the life-purpose of the existence of the institution of courts. A justifiably liberal approach has to be adopted on principle. "Every day's delay must be explained" does not imply a pedantic approach. The doctrine must be applied in a rational, common sense and pragmatic manner. 3 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur The doctrine of equality before law demands that all litigants, including the State as a litigant, are accorded the same treatment and the law is administered in an evenhanded manner. There is no warrant for according a step-motherly treatment when the State is the applicant praying for condonation of delay. "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay." In this view of the matter, the application of the assessee for condonation of delay in filing the appeal is allowed. 4. The assessee has raised following grounds of appeal. ‘’1. In the facts and circumstances of the case and in law the ld. CIT(Exemptions), Jaipur has erred in withdrawing the registration u/s 12AA of the I.T. Act, 1961. The action of the ld. CIT(Exemptions) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by granting registration u/s 12AA of the I.T. Act, 1961. 2. In the facts and circumstances of the case and in law the ld. CIT(Exemptions), Jaipur has erred in denying the registration u/s 12AA of the I.T. Act, 1961 without being dissatisfied that the objects of the assessee society are charitable. The provisions of Section 2(15) were invoked for denying the registration u/s 12AA. The action of the ld. LD. CIT(Exemptions) is illegal, unjustified, arbitrary and against the facts of the case. Appropriate relief may please be granted. 5. The hearing of the appeal was concluded through video conference by both the parties in view of the prevailing situation of Covid-19 Pandemic. 6. Brief facts of the case are that the assessee is a society registered under Rajasthan Societies Registration Act. The assessee society vide order dated 20-03- 2001 was granted registration u/s 12AA of the Act. The assessee society assists the Govt. of India as well as Govt. of Rajasthan in implementation of various welfare 4 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur projects / schemes. The assessee society creates awareness amongst the people and work on the ground level for implementing the welfare schemes. It is noted that on 13-09-2019, the assessee society under a bonafide belief filed an application u/s 12A(1)(ab) of the Act in Form No. 10A, as the section has been amended and therefore, to comply with the amended provision w.e.f. 01-04-2018. The application dated 13-09-2019 was filed to place on record the amendment made on 04-05-2013 in the objects of the society. 7. On realizing the fact that there was no need of making an application u/s 12A(1)(ab) which came subsequently but the amendment was made in 2013. Therefore, the assessee society filed a letter dated 06-03-2020 seeking permission to withdraw application made by the assessee society. 8.1 Even though the assessee society has withdrawn its application, ld. CIT(E) went on to examine the facts of the case and ultimately rejected the registration u/s 12AA of the Act vide order dated 20-09-2020 wherein he has observed that :- (a) The applicant society is already in receipt of 12AA certificate dated 20-03- 2001. Later on, the applicant society modified its objects on 04-05-2013. (b) Hence, the contention of the ld.AR in withdrawal application is not acceptable as per facts of the case. (c) The provision of Section 12AA stipulates the following conditions for registration u/s 12AA of the I.T. Act. (i) The object of the Trust should be for charitable purpose. (ii) The activities of the Trust should be genuine. 5 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur (d) Section 2(15) defines charitable purposes which makes it clear that the assessee is engaged in charitable activities under General Public Utility (GPU) then it has to comply with the provisos mentioned in Section 2(15) of the Act. The proviso to Section 2(15) was inserted to keep a check on the entities who have other objects of GPU and who use object of GPU as a mask or a device to hide the true purpose which is trade, commerce or business or the rendering of any service in relation to trade, commerce or business. 8.2 The above proviso to Section 2(15) is amended by the Finance Act, 2015 w.e.f. 01-04-2016. In this amendment, two conditions have been inserted for the case of GPU who are engaged in the activity in the nature of trade commerce and business. These are:- (a) Such activities are undertaken in the course of actual carrying out of such advancement of any other object of GPU. (b) The aggregate receipts from such activity or activities during the previous year do not exceed 20% of the total receipt of the trust or institution undertaking such activity or activities of that previous year. 8.3 While carrying out the above amendments, the explanatory note read as under:- ‘’Explanatory note to Finance Act, 2015’’ – In so far as the advancement of any other object of GPU is concerned, there is a need to ensure appropriate balance being drawn between the object of preventing business activity in the garb of charity and the same time protecting the activities undertaken by the genuine organization as part of actual carrying out of the primary purpose of the trust or institution.’’ 8.4 In nutshell, the meaning of the above proviso is that while deciding the case where business activities are visible, the predominant object test is to be applied and also the business activities should be in the course of actual carrying out of such GPU activities i.e. such business activities should only be incidental to the 6 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur charitable object and hence should not be the pre-dominant or primary activity by itself. 8.5 On examination of the I&E accounts for F.Y. 2016-17, 2017-18 and 2018-19 wherein the assessee society has primarily carried out activities under the category of General Public Utility (GPU) only and is in receipt of contractual payments from various payers which forms integral and substantial part of income in I/E Accounts of the applicant society for different FYs. 8.6 Accordingly, information u/s 133(6) of the I.T. Act was sought from various deductors/ payers. The deductors furnished bill/ vouchers, MOU/Contract Agreement which are placed on records. In most of the cases, tenders were invited and thereafter agreements/MOUs were made and work orders were executed. The MOUs agreements specifically states about the work to be performed by the assessee society for which payments at a certain rate to be made by the deductors. It is an evident that the payers had made payments due to work performed by the assessee society as per conditions laid down in MOUs/ Agreements. Further, the Payers have also deducted TDS on such payments under section 194C of the I.T. Act which reveals that the payments are contractual payments after completion of work as desired by the payers. Since the work performed/ done by the assessee society is at the instance of conditions of MOU/Agreements only and not out of the 7 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur society, the activities cannot be termed as charitable activities. Moreover, some of the payments are made as commission payments on account of life insurance and TDS u/s 194D has been deducted. Also, the assessee society is in receipt of commission in lieu of services rendered by it on which TDS u/s 194H has been deducted by ICICI Bank Ltd. The impugned contractual / insurance and commission receipts are integral part of the Income & Expenditure accounts for F.Y. 2016-17, 2017-18 & 2018-19. 8.7 The ld. CIT(E) then pointed out that on examination of I/E Accounts Form No. 26AS and MOUs/ Agreements, it is quite clear that:- 1. The applicant society has carried out activities as per the conditions laid down in the agreements/MOUs/ work orders. 2. Against the work performed certain payments (having nature of contractual payments etc.) from F.Y. 2016-17 to F.Y. 2018-19 have been paid by various payers. 3. On impugned payments, TDS u/s 194C/194D/194H of the Income Tax Act have been deducted by the payers entities. 4. As such, the applicant is receiving contractual receipts/insurance commission/ commission payments. Hence, impugned receipts/ considerations shown in the I&E Account for FY 2016-17 to FY 2018- 19 are nothing but income in lieu of service rendered which definitely is of the nature of business/commercial receipts. It is pertinent to state that the income from such commercial activities is forming 98.13% for F.Y. 2016-17 & 97.72% for F.Y. 2017-18 & 97.67% for F.Y. 2018-19 which is more than 20% i.e. which is in contravention to the provisions laid down 8 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur in Ist proviso to Section 2(15). Hence, the assessee fails condition (b) of the proviso. Further, such commercial activities are not the incidental but are pre- dominant activity of the assessee. Hence, the assessee also fails condition (a) of the proviso. Therefore, as per the proviso, such activity in the nature of advancement of an object of GPU shall not qualify as charitable activity. 8.8 The ld. CIT(E) has relied on the decision of Hon'ble Kerala High Court who has disapproved of such charity in its decision in the case of CIT vs Annadan Trust [2018] 258 Taxman 54 (Ker.) where it is held as follows:- ‘’The sub-contract of the assessee cannot considered to be a charitable activity especially since the supply of food is with the funds of the State Government, received by the assessee as contract amounts. The activity of the assessee confined to such sub-contracts cannot be deemed to be a charitable activity and hence the Trust is not entitled to Registration u/s 12AA... The assessee, as rightly found is engaged in a business and there can be no registration as a charitable institution.’’ 8.9 Similar issue came up before ITAT, Jaipur Bench in the case of M/s. Eternal Foundation vs CIT (Exemptions), Jaipur in ITA No. 1504 & 1505/JP/2018 wherein the ITAT, Jaipur Bench has observed as under:- ‘’Thus the ld. CIT (Exemptions) has followed the decision of Hon'ble Kerala High Court in the case of CIT vs Annadan Trust (supra) which in our view is squarely applicable in the facts of the present case where the assessee is engaged in the activities which are sponsored by the Pharmaceutical Companies (MNCs) in their regular business activity. Accordingly, in view of the above facts, we do not find any error or illegality in the impugned order of the CIT (Exemptions)’’ 9 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur Tribunal has clearly held that the activities which have been performed by the applicant society wherein the payments have been received at the instance of fulfillment of the conditions as laid down in MOUs & Agreements are business activities only and cannot be stated as charitable activity. Based on the above discussion, it is clear that the activities of the assessee society are not charitable in nature as it is predominantly carrying out activities/ performing work at the instance of the conditions of MOUs/ Agreements only and not out of the volition of the society and since such activities cater solely to the profit-motive of assessee society, hence society is observed to be involved in the activities of the nature of business/ commerce. Hence, the assessee society cannot be held as charitable within the meaning of Section 2(15) of the I.T. Act, 1961. Based on above, the ld. CIT(E) satisfied that the assessee trust is not fit for registration and therefore, registration u/s 12AA is rejected. 8.10 The sum and substance of the above facts and finding of the ld. CIT(E) is that the assessee trust is doing the activities of the nature of business/ commerce. The relevant finding of the ld. CIT(E) as appearing at para 09 of his order is mentioned hereunder:- ‘’09. Based on above discussion, it is clear that the activities of the applicant society are not charitable in nature as it is predominantly carrying out activities / performing work at the instance of the condition of MOU/Agreements only and not out of the volition of the society and since such activities cater solely to the profit-motive of applicant society, hence 10 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur society is observed to be involved in the activities of the nature of business/ commerce. Hence, the applicant society cannot be held as charitable within the meaning of Section 2(15) of the Income Tax Act, 1961. Based on above, I am satisfied that the applicant trust is not fit for registration and, therefore, registration u/s 12AA is rejected.’’ Thus, it is clear from the above observations of ld. CIT(E) that he has cancelled the registration of the assessee only on a finding that the assessee society is involved in the activities of the nature of business / commerce within the meaning of Section 2(15) only. 9. The ld.AR of the assessee submitted a paper book and written submission wherein assessee's contentions are as under:- ‘’1.Proviso to section 2(15) not applicable 1. Ld. CIT(E) without appreciating the facts in entirety and without looking into the contents of Income & Expenditure A/c and Form 26AS for F.Y. 2016-17 to F.Y. 18-19 (pages 6 to 32 of CIT(E) order) held that the assessee society was carrying out charitable activities under the limb of General Public Utility (GPU). 1.2 On further observing that for most of the work, which the assessee society was doing, tenders were invited, MOU/Agreements were entered into, assessee society was performing works as specifically stated in the MOU/Agreements and TDS u/s 194C was deducted, ld. CIT(E) opined that the assessee society was carrying out activities of commercial nature i.e. activities in the nature of trade, commerce and business for consideration and with profit motive. 1.3 Income in Income and Expenditure Account from such commercial activities was calculated and it was observed that from F.Y. 2016-17 to F.Y. 2018-19 aggregate receipts from such activities exceeded 20% and, hence, as per the proviso to section 2(15) the activity of the assessee society were treated to be not for charitable purpose. 1.4 It is submitted that perusal of Income and Expenditure Account and Form 26AS for F.Y. 2016-17 to F.Y. 18-19 (pages 6 to 32 of CIT(E) order) reveals that the assessee society received amounts from Government, Government Companies, Government Agencies etc 11 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur for carrying out activities for implementation of various welfare scheme of Government like: i. Jan Aushadi Medical Store, ii. Sathin Training Programme, iii. Anganwadi Worker Training Centre, iv. Balika Ashray Grah, v. Mahila Salah & Surakha Kendra, vi. Child Line 1098, vii. Rajiv Gandhi Shishu Palan Grah, viii. National Urban Livelihood Mission, ix. Navjeewan Yojana, x. Mukhya Mantri Nishulk Dava Yojna, xi etc. 1.5 All the above mentioned activities do not fall under the limb of General Public Utility but falls under the following limbs: Scheme Name as per Income and Expenditure Account Department Activity Limb of section 2(15) 26AS reference Mukhya Mantri Nishulk Dava Yojana, Jhunjhunu District Rural Health Society Block Chirawa and Surajgarh Distribution of most commonly used drugs free of cost to all patients visiting Government Hospitals. Medical and Relief of the Poor Deductor 1 - page 13, Deductor 1 - page 19, Deductor 1 and 2 – page 26 District Medicare Relief Society, Jhunjhunu Deductor 10 - page 16, Deductor 8 - page 21, Deductor 5 – page 27 Senior Medical Officer CHC Singhana Deductor 12 - page 17, Deductor 12 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur 11 - page 22, Medical Relief Society Khetri Deductor 10 - page 22 Deductor 7 – page 28 One Stop Sakhi Centre, Ajmer Project Director District Women Development Agency, Ajmer Intends to support women from violence in private and public spaces, within the family, community and at the workplace. Any other object of general public utility Deductor 2 - page 13, Deductor 2, 3 and 5 - page 19 and 20, Aanganwari Worker Mobile Training ICTRTM Churu and Rajgarh Child Development Project Office Conducting training to combat child hunger and malnutrition Medical, Education and Relief of the Poor Deductor 3, 4, 5 and 6 - page 13 and 14, Deductor 4 - page 20 Aanganwari Worker Training Centre Churu Dy. Director ICDS & Project Director D.W.D.A., Churu Conducting training to combat child hunger and malnutrition Medical, Education and Relief of the Poor Deductor 7 - page 14, Deductor 6 - page 20, Rajasthan Forest Biodivercity Project Deputy Conservator of Forests, Jhunjhunu Conserving biodiversity by undertaking afforestation Preservation of Environment Deductor 8 - page 15, Deductor 3 – page 26 GPF Jhunjhunu Deputy Director- State Insuarance & Provident Fund Department, Jhunjhunu Proper functioning of General Provident Fund Any other object of general public utility Deductor 9 - page 16, Deductor 7 - page 21, Deductor 4 – page 27 Mahila Suraksha Salah Kendra Jhunjhunu and Ajmer Programme Officer Women Empowerment (DWDA) Ensuring safety and security of the aggrieved women Any other object of general public utility Deductor 11 - page 16, 13 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur Mahila Adhikarita Churu and Amrita Haat Mahila Adhikarita Churu Zila Mahila Vikas Abhikaran Jhunjhunu Running Beti Bacho Beti Padhao, etc programmes Education Deductor 13 - page 17, Deductor 13 – page 23 ICICI Commission ICICI Bank Limited Encouraging Micro Finance initiative by developing Self Help Groups and providing financial services to the unreached and unserved poor household. Relief of poor Deductor 15 - page 18, Deductor 15 - page 25, Tourist Department Jhunjhunu Tourist Reception Centre Jhunjhunu Promoting Tourism and preserving monuments Preservation of Monuments and places Deductor 12 - page 22, Deductor 8 – page 29 Insurance Life Insurance Ensuring insurance of Poor Relief of Poor Deductor 9 – page 22 Deductor 6 – page 28 HDFC Bank Limited Encouraging Micro Finance initiative by developing Self Help Groups and providing financial services to the unreached and unserved poor household. Relief of poor Deductor 10 – page 31 1.6 If receipts as per Form 26AS are bifurcated on the basis of above limbs then it can be seen that only 17.76% of the total receipts are for any other object of general public utility: 14 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur Limb Total from Form 26AS % of Total Receipts Any other object of general public utility 31,30,137 17.76% Education 32,30,800 18.33% Medical and Relief of the Poor 11,06,140 6.27% Medical, Education and Relief of the Poor 79,02,995 44.83% Preservation of Environment 3,47,000 1.97% Preservation of Monuments and places 97,175 0.55% Relief of Poor 18,14,814 10.29% Grand Total 1,76,29,061 100.00% 1.7 However, it is pertinent to note that all the activities including the activities which fall under the limb of general public utility are inseparably linked and purely connected to the welfare measures adopted by the Government. The assessee society worked as an extended arm of the Government. Funds were made available by the Government which were similar to grants or donations. These funds were applied by assessee society for charitable activities. Hence, the activities carried out were not in the nature of trade, commerce and business. 1.8 Ld. CIT(E) has failed to appreciate the changing landscape of the way the charitable activities are being carried out. Big charitable foundations like The Bill & Melinda Gates Foundation, Azim Premji Foundation, etc are carrying out charitable activities by roping in, at ground level, the local NGOs. This combination of large trusts and local NGOs result into the most efficient and effective manner of achieving the desired results of charitable activities. Government of India and various State Government also function in similar combination with local NGOs as in the case of assessee society. Hence, ld. CIT(E) should not have viewed the case of assessee company adversely when it has approval of Government itself. 1.9 It is submitted that after introduction of mandatory Corporate Social Responsibility spending under the Companies Act, 2013 similar pattern is adopted by Corporate Entities also for their charitable spending. This collaborative approach is also recognized by Companies Act, 2013 where spending through other specialized NGOs is encouraged. Similar MOU/Agreements are entered into and amount is handed over to local NGOs for applying the same for charity in accordance with the terms of MOU/Agreement. 15 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur 1.10 It is submitted that it is not the case of ld. CIT(E) that the receipt of amounts from the parties mentioned in Income & Expenditure A/c or Form 26AS were utilized elsewhere and not for the purpose of advancement of object of general public utility as per MOU/Agreements i.e. for the welfare schemes. 1.11 Ld. CIT(E), prejudiced his mind, without looking at the actual activities carried out, because the payer deducted TDS. It is submitted that the fact of deduction of TDS would not alter the nature of activities carried out by the assessee society. 1.12 Therefore, proviso to section 2(15) do not operate in the case of assessee society. Whatever activities were undertaken were charitable and not trade, commerce or business. Reliance is placed on the decision of Hon’ble High Court of Allahabad in the case of CIT vs Shri Bajaji Samaj Vikas Samiti [2018] 91 taxmann.com 26 (All.). “..27. Merely because the State had itself not been able to cook and supply cooked food by way of mid-day-meals at it's schools and further because it out-sourced that part of the work, against consideration, it cannot be said that it transformed the activity into one in the nature of trade, commerce or business etc. Execution of a contract between two parties, in these facts cannot be decisive whether the activity itself was one purely in the nature of trade, commerce or business. What was more important is to examine whether assessee had engaged in an activity that was inseparably linked to and performed in continuation of the charitable scheme of the government. 28. The fact that some money had been paid by the State to the assessee was only a necessary expense at the hands of the State. Looking at the nature of expenses met by the assessee one cannot escape the conclusion that similar expenses would have been incurred by the State, had it performed that work itself or though it's own agencies. 29. Thus, at the hands of the assessee, the payments received were utilized to defray the expenses met to perform the task of cooking and supplying the meals as directed by the State government. It is also not the case of the revenue that the assessee was in any manner free to utilize either the materials supplied to it or food cooked by it, as per it's own wish/discretion. The assessee appears to have acted merely as an agent of the State. 30. Therefore, on the basis of findings recorded by the Tribunal and the material examined by the Commissioner it would be wrong to conclude that because there existed a contract between the assessee & the 16 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur government therefore the assessee was not pursuing a "charitable purpose". On the other hand the activity performed by the assessee clearly appears to be inseparably linked to the 'charitable purpose' of providing mid-day meals at village schools. Also, admittedly, the total receipts of the assessee were below the limit of Rs. 10,00,000/- as stipulated under the second proviso to Section 2(15) of the Act. 31. In that view of the matter, the Tribunal has rightly concluded that the restriction created by the first proviso to Section 2(15) of the Act did not operate against the assessee and therefore the activity of the assessee, even though it may have involved an activity in the nature of trade, commerce or business, etc., it would fall within the ambit of general public utility and therefore be a charitable purpose under Section 2(15) of the Act...” 1.13 Ld. CIT(E) has misplaced his reliance on judgments of Hon’ble Kerala High Court in the case of CIT vs Annadan Trust [2018] 96 taxmann.com 207 (Kerala) which is distinguishable as under: In the said case Naandi Foundation and not the Government outsourced the work of Preparation of Food for Mid-Day meals to Annadan Trust. Meaning thereby Annadan Trust was not the NGO which was selected by the Government whereas in the case of the assessee society it is the NGO which has been selected by the Government itself for acting as its agent/ extended arm. Further, the work of Annadan Trust was restricted to preparation of meal whereas the assessee society from start to end is responsible for implementation of the scheme. Also there was a specific finding in Annadan Trust case that the trust was not carrying out activities in accordance with its objects which is not the case with the assessee society. 1.14 Without prejudice to above it is submitted that if two Non-Jurisdictional High Courts have contrary views, on in favour of assessee is to be followed. Reliance is place on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC). 1.15 Ld. CIT(E) has also misplaced his reliance on judgments of Hon’ble ITAT Jaipur Bench in the case of Eternal Foundation vs CIT- ITA NO. 1504 & 1505/JP/2018 which is again distinguishable as under: In the said case the assessee was carrying out an activity on the instance of MNCs and not Government which was ultimately benefitting MNCs and not public at large. 17 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur Whereas the assessee society was carrying out activities on the instance of Government which were undertaken for the benefit of public at large. 2. Proviso to section 2(15) cannot be a basis for rejection of approval 2.1 Section 12AA(3) is the only section in the code of trusts which empowers ld. CIT(E) to cancel/withdraw the already granted registrations of the trusts/ societies on fulfilment of the following conditions and CIT(E) cannot go beyond the said conditions: i. The activities of such trust or institution are not genuine or ii. are not being carried out in accordance with the objects of the trust or institution, 2.2 In the case of the assessee society no such allegation has been made by ld. CIT(E). It is also not the case of ld. CIT(E) that the modification in the objects, carried out in the year 2013, led to assessee society being engaged in non-charitable activities. Hence, the withdrawal of registration is illegal. 2.3 Proviso to section 2(15) was invoked to withdraw registration which is not a ground specified in the Act for withdrawal/ cancellation. Reliance is placed on the following decisions: (i) Hon’ble Gujarat High Court in the case of CIT vs Gujarat Maritime Board [2021] 123 taxmann.com 35 (Gujarat) (ii) Hon’ble ITAT Jaipur Bench in the case of Rajasthan Housing Board vs CIT [2012] 21 taxmann.com 77 (Jp.) (iii) Hon’ble ITAT Cochin Bench in the case of Mahatma Gandhi Charitable Society vs CIT [2013] 142 ITD 565 (Cochin) (iv) Hon’ble ITAT Chennai Bench in the case of Madras Motor Sports Club vs DIT [2013] 90 DTR 197 (Chennai) (v) Hon’ble ITAT Ahmedabad Bench in the case of Gujarat Cricket Association vs DIT [2012] 19 ITR 520 (Ahd.) 2.4 Attention is drawn towards provisions of section 13(8) inserted by Finance Act, 2012 w.r.e.f. 1 st April, 2009 which makes it clear that existing registration cannot be withdrawn on account of applicability of proviso to section 2(15). 3. Action of ld. CIT(E) is without jurisdiction and contrary to principles of natural justice 3.1 The order of ld. CIT(E) is without jurisdiction. The proceedings were initiated on the basis of application filed by the assessee society. This application was withdrawn by the assessee society. Not allowing withdrawal of such application is not within the powers of ld. CIT(E). No law confers such authority 18 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur to ld. CIT(E). This application is not like appeal before CIT(A) or ITAT which cannot be withdrawn. Even fresh application for registration are routinely allowed to be withdrawn by the Department. Thus, there was no foundation for the proceedings to continue or sustain. 3.2 It is further submitted that the Show Cause Notice issued by the ld. CIT(E) was for rejection and not for withdrawal of existing registration (CIT(E) page 2 and 3). The application having been withdrawn and, therefore, the issue of rejection did not arise as ld. CIT(E) had no Locus Standi. 3.3 No Show Cause Notice was given by ld. CIT(E) for withdrawal of existing registration. Without giving specific Show Cause Notice for withdrawal the assessee society was never afforded opportunity as specifically required u/s 12AA(3) and 12AA(4). In view of the above, the rejection of registration u/s 12AA is illegal, unwarranted, without jurisdiction, against the specific provision of law and contrary to the principles of natural justice. Therefore, relief may please be granted by restoring the registration u/s 12AA.’’ 10. The ld. DR contended that the assessee filed an application and later on suo moto withdrawal was filed when ld. CIT (E) went on examination of activities done by the assessee. He further submitted the plea that the changes done in 2013 were not taken before ld. CIT (E). The law does not permit to withdrawn an application made it has to be decided. Earlier when registration was granted, there were 05 objects and now it has 13 objects. The withdrawal was filed much later and looking to the power of ld. CIT(E), if the assessee does not fulfill condition then the registration may be cancelled at any time. He relied para 6 & 7 of order of ld. CIT(E) and stated that the assessee is not doing charitable activities. Further, he relied on the decision of Hon'ble Kerala High Court and also submitted a copy of 19 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur the decision in the case of Mahatma Gandhi Charitable Society vs CIT, 107 Taxmann.com 309 and relied upon para 9 of the order which is reproduced as under:-` ‘’9. The appellant-trust obviously was engaged in executing contracts as awarded by the Indian Railways for cleaning train coaches and railway stations. The contention of the assessee was also that considering the work of cleaning, for which the contract was awarded, it should be assumed that the employment would only be of persons from the marginalised sections of society. The Tribunal considered the question elaborately. The specific objects as available in the MoA of the Trust was extracted by the Tribunal. The reliance placed by the assessee was also on sub-clause (17) which reads as "giving employment at least for one member in a family, which is needy and deserving". The Tribunal first considered the question as to whether taking a contract from the Indian Railways and carrying out the contract work by employing poor people as claimed by the assessee would amount to a charitable purpose or not. The Tribunal, according to us, correctly found that execution of a contract as awarded by the Indian Railways for the purpose of cleaning train coaches and railway stations is a purely commercial and business activity. The Tribunal also noticed that when there is employment given in pursuance of a contract work, there are many labour friendly legislations which had to be complied with by the employer. Mere employment of people from the weaker sections of Society would not absolve the contractor from the labour legislations and such work is one carried out with a clear intention at making profit. The assessee having bid in a competitive tender had been awarded the work for a consideration agreed upon between the parties and carrying on of such work cannot be categorised as a charitable work merely because the poor or persons from marginsalised sections are given employment. The execution of the work awarded by the Railways, is not a public utility service carried on by the assessee and the mere fact that the poor are employed in such execution of contract awarded, would not make it a charitable purpose.’’ 11. Looking to the receipts being contractual in nature and working placed by ld. CIT(E) in his order, he has argued to uphold the view of ld. CIT(E). 12. In the rejoinder, the ld.AR submitted that the legal ground can be raised at any stage and thus the same is raised before the Bench. 13. The amendment made in 2013 in constitution of the Society whereas the Law has been changed in 2018 and thereafter there are no change and the 20 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur application made under a wrong interpretation of law, applied when came to the notice, withdrawal application was filed. The ld.AR further argued that there is no apparent provision in law for withdrawal of application. The ld. CIT(E) has no power to cancel the registration when after the amendment there is no change in the constitution and assessee continues to be a registered trust from the year to year it was granted since then. Therefore, action of the ld. CIT(E) passing an order u/s 12A(1)(ab) merely on a ground that the assessee is engaged in the business activities and thus the action of the ld. CIT(E) is bad in law as well as on facts. Even if the ld. CIT(E) wants to cancel the registration, he can invoke provision of Section 12AA(3)/ 12AA(4) of the Act and thus the order passed cancelling registration only on contravention of Section 2(15) of the Act is bad in law as well as on facts. 14. We have heard the rival contentions at length and appreciate the presentation of facts by both the parties. There is no dispute that the assessee is a registered society under Rajasthan Societies Registration Act. The assessee changed its object in 2013 and thereafter continued to enjoy the benefit of Section 12AA of the Act. Suddenly due to change in law on account of misconception, application was filed u/s 12A(1)(ab) of the Act which was ultimately withdrawn by the assessee. There is no dispute that after the amendment in law, there are no changes and the 21 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur assessee continues to assist the Govt. of India as well as Govt. of Rajasthan in implementation of various welfare projects/ schemes and also enjoys the benefit of registration u/s 12AA of the Act. The assessee society creates awareness amongst people and work on the ground level implementation of schemes. Thus, there is no profit motive on the activities carried out by the assessee society. The amended objects are charitable in nature and were all approved since 2013 by the action of the Department. The changes were inserted in the deed after approval under the Societies Act. The amended objects are within the scope of charitable purpose and the fundamental character of the society was not altered or changed in any manner. There was no provision in the Act to obtain any prior permission for any amendment of the object of the society nor is there any specific provision requiring the assessee to intimate the Department about the amendment in the object of the society at relevant point of time. It is important to note that Finance Act 2017 has brought an amendment in Section 12A, effective from A.Y. 2018-19 by inserting a new sub-clause (ab) in sub-section(1) of Section 12A requiring the trust/ institution to file an application to ld. CIT(E) within 30 days of the adoption /modification of the object which do not conform the condition of registration. It is thus very clear and not disputed by ld. DR also that this amended provision was not in force when the amendment in the object carried out in 2013. This legislative development also 22 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur vindicates the appellant’s stand that there was no statutory requirement at the relevant time to intimate the amendment/ modification in the object of the institution claiming exemption u/s 11 of the Act.Since then there is no change in the facts and circumstances of the case, the fundamental facts accepted by the Department in past has to prevail as per principles of law laid down by the Hon'ble Supreme Court in Radhasoami Satsang vs CIT 193 ITR 321 (SC). 15. Therefore, we agree with the argument made by the assessee that the Registration u/s 12AA of the Act, once granted, remains valid until it is cancelled by the Commissioner, by due process of law laid down u/s 12AA(3)/12AA(4) of the Act. It cannot cease to be operative unless order u/s 12AA(3)/12AA(4) of the Act is passed by the ld. CIT(E) in accordance with the law for cancellation of registration and that too on an application made by assessee for intimation of amendment in the object which was subsequently withdrawn. Thus, the order passed u/s 12A(1)(ab) is bad in law as well as on facts merely on a ground that the assessee is doing activities of the nature of business/commerce. 16. This view is also cleared by the CBDT vide Circular No. 21/2016 dated 27-05-2016, inter alia clarifying as under:- ‘’4. In view of the aforesaid position, it is clarified that it shall not be mandatory to cancel the registration already u/s 12AA to a charitable institution merely on the ground that 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 23 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur 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 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 reason 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 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’’’ [Emphasis supplied] 17. Looking to ld.AR’s submission on merits explaining each activities specifying that they are within the definition of Section 2(15) as tabulated in para 1(1.6) of the assessee and the comparison of the receipts alongwith the limb of Section 2(15), the GPU percentage is also less than 20%, the same is reproduced in assessee's submission hereinabove and thus even on merits the views of ld. CIT(E) is incorrect on facts . 18. The decision that the ld. DR as pointed out in relation to the execution of commercial contract of Railways whereas in the case before us the same is implementation of various relief schemes and therefore, the same is differentiated. 19. In view of the above finding, it is apparent and clear that the order passed by the ld. CIT(E) dated 20-03-2001 cancelling the registration of the Society u/s 24 ITA No. 03/JP/2021 M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu, vs CIT (Exemptions), Jaipur 12A(1)(ab) merely on a finding that the assessee is involved in the activities of the nature of business / commerce within the meaning of Section 2(15) of the Act is bad in law as well as on facts and therefore, the registration canceled is required to be continued and thus the appeal of the assessee is allowed as indicated hereinabove. 20. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11 /03/2022 ` Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 11 /03/2022 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- M/s. Zila Paryawarn Sudhar Samiti, Jhunjhunu 2. izR;FkhZ@ The Respondent- ld. CIT(E) . 3. vk;dj vk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File (ITA No. 03/JP/2021) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar