Sri Shwetambar Jain Education Society, Panipat V. CIT(E), Chandgarh

ITA 335/CHANDI/2020

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0730 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 08-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Benefit of exemption
• Section: 11; 12A; 12AA

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “ए एए ए”, च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’, CHANDIGARH BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA No. 335/Chd/2020 (Assessment Year: 2017-18) Shri Shwetamber Jain Education Society, 583 & 583-B, Ansal Sushant City, Panipat. बनाम Commissioner of Income- Tax (Exemptions) Chandigarh. थायी लेखा सं./PAN/TAN NO: AAOAS 9188 E नधा रती क ओर से/Assessee by : Shri Satyam Aneja, Adv. राज व क ओर से/ Revenue by : Shri Sarabjeet Singh, CIT DR स ु नवाई क तार ख/Date of Hearing: 20.06.2022 उदघोषणा क तार ख/Date of Pronouncement: 04.07.2022 आदेश/ORDER Per Vikram Singh Yadav, Accountant Member: This is an appeal filed by the assessee against the order of ld. CIT (Exemptions), Chandigarh dated 15.09.2020 rejecting its application seeking registration under section 12AA of the I T Act, 1961. 2. During the course of hearing, the ld. A/R submitted that the ld. CIT (E) was not justified in rejecting the grant of registration to 2 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. the assessee society as he was only expected to examine whether the objects of the assessee society were charitable in nature and whether the actual activities of the assessee society in pursuance of the stated objects were genuine or not. It was submitted that the ld. CIT (E) has not disputed the objects of the assessee society being charitable in nature and has further issued a detailed questionnaire to verify the activities carried on by the assessee society which have been duly responded by the assessee society and no adverse finding has been recorded by the ld. CI T (E). 3. It was further submitted that the only reason why the ld. CI T (E) has rejected the assessee’s application seeking registration under section 12AA relates to amounts shown by the assessee society as corpus fund in Balance Sheets for the financial years 2016-17, 17-18 and 18-19 respectively. It was submitted that the ld. CIT (E) was of the view that the corpus donations should have been taken as Income in the Income & Expenditure Account and the return of income should have been filed accordingly after paying due taxes. It was submitted that whether the Corpus donations are taxable in the hands of the assessee and whether the assessee society has paid due taxes or not is a subject matter of examination by the AO during the course of assessment proceedings and the 3 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. assessee society has no objection where the same is examined by the AO during the course of assessment proceedings as and when the same is initiated after following due process of law. However, as far as grant of registration of assessee society is concerned, the same cannot be denied merely for the reason that the funds have been shown as corpus fund in the Balance Sheet as against Income in the Income & Expenditure account for the earlier years. It was accordingly submitted that there is no basis for denial of registration u/s 12AA and the assessee society may be granted registration under section 12AA of the I T Act. 4. Per Contra, the ld. CI T D/R submitted that regarding the contention of the ld AR that the ld CI T(E) has not recorded any adverse findings regarding the objects being charitable in nature, it was submitted that a presumption cannot be drawn in this regard and a specific finding is required to be recorded in this regard and in absence of such a finding, the matter may be remanded to the file of the ld CI T(E). 5. Regarding Corpus donation, the ld CIT/DR relied on the findings of the ld. CIT (E) and our reference was drawn to his 4 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. findings which are contained at para 6 and 7 of the impugned order which read as under:- “ 6. After considering the submissions on record, it is observed that the applicant has shown an amount of Rs. 85,74,000/- as Corpus Fund in its Balance Sheet for F.Y. 2016-17. Further, an addition of Rs. 23,93,000/- has been made to corpus fund during the F.Y. 2017-18 and an addition of Rs. 21,52,000/- has been made during F.Y. 2018-19. The society has diverted thee receipts in the name of corpus to the Balance Sheet which, rather, should have been taken as income in the Income & Expenditure account for the previous years. As per the provisions of the Income Tax Act, 1961, corpus donation would be exempt only under Section 11(1)(d) and an assessee can claim benefit u/s 11 only when such assessee is registered u/s 12A or 12AA. This assertion is not only backed by the statute but also by the decision of Hon’ble Supreme Court in the case of CIT vs. U.P. Forest Corporation, 230 ITR 945 (SC)[1998] and decisions of various other Hon’ble high Courts like : (A) New Life in Christ Evangelsit Association vs. CIT reported in 246 ITR 532 (Madras)[2001]; (B) CIT vs. Red Rose School reported in 212 CTR (All.) 394; (C) M. Visvesvaraya Industrial Research & Development Centre vs. ITAT reported in 251 ITR 852 (Mumbai)[2001] (D) CIT vs Otacamund Gymkhana Club reported in 110 ITR 392 (Madras)[1977] and (E) Gouri Shankar Deity vs. Union of India, 145 ITR 67 (MP)[1984]. Before the period of grant of registration, all voluntary contributions (including the ones with specific direction that they shall form part of the corpus) are the income of a charitable, religious or chartable cum religious trust. Therefore, in the present case, the corpus donation shown by the applicant on record during F. Y. 2016-17, 2017-18 & 2018-19 (and for any other previous years) is the income of the applicant and, thus, the trust/society becomes liable to pay tax for all these years. Further, the ITR for A.Y. 2017-18, 2018-19 & 2019-20 corresponding to F.Y. 2016-17, 2017-18 & 2018-19 has been filed by the applicant showing ‘nil’ income during the year and ‘nil’ tax has been paid. However, the applicant should have added the amount shown against corpus fund during the year into its income and then it should have filed the correct ITR and paid taxes. Unless the legitimate tax against the income as discussed above is paid, the application for registration u/s 12AA of the Act cannot be considered. The trust has illegally 5 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. taken the benefit of provisions of the Income Tax Act for getting tax exemption benefits and has tried to subvert the Income Tax Laws. This act of the applicant is unacceptable and the jurisdictional assessing officer will be intimated to take remedial action in the matter. 7. In light of the above discussion, I do not find the applicant trust eligible for getting registration u/s 12AA of the Act and, therefore, the present application for registration u/s 12AA of Income Tax Act, 1961 is hereby rejected.” 6. We have heard the rival contentions and purused the material available on record. Firstly, as far as voluntary contributions including corpus donations received by the assessee society and treatment thereof for tax purposes, prior to grant of registration is concerned, though the ld CIT(E) has expressed his reservation regarding treatment thereof by the assessee society by not disclosing the same as its income and paying taxes thereon, at the same time, he has himself stated that the jurisdictional Assessing officer will be intimated to take remedial action in the matter which supports the contentions advanced by the ld AR that the same is a subject matter of examination by the Assessing officer at the time of assessment proceedings and cannot form the basis for denial of registration. Therefore, we agree that the said apprehension and reservation so expressed by the ld CIT(E) regarding treatment of donations for tax purposes where the remedy thereof admittedly and undisputedly lies with the Assessing officer at the assessment stage cannot act as the basis for denial of registration u/s 12AA 6 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. where the conditions for grant of such registration otherwise stand duly fulfilled. 7. Now, coming to the other contention of the ld AR that no adverse finding has been recorded by the ld CIT(E) regarding the objects of the assessee society being charitable in nature where as the ld CI T D/R has contended that a presumption cannot be drawn in this regard and a specific finding is required to be recorded in this regard. On perusal of the provisions of section 12AA, we find that it talks about the ld CIT(E) satisfying himself about the objects of the assessee society and genuineness of its activities and thereafter, where he is satisfied, he shall pass an order in writing registrating the society and where he is not satisfied, he is again required to pass an order in writing refusing to grant the registration. We therefore find that the recording of satisfaction in either case has to be manifested by way of written order and the ld CIT(E) therefore has to pass an order specifying as to why he is satisfied or not satisfied in a particular case. Therefore, we agree with the contention of the ld CI T D/R that the ld CIT(E) has to record a specific finding as to his satisfaction regarding the objects of the assessee society being charitable in nature and genuineness of its activities carried out in pursuance of its stated objects. 7 ITA No.335/Chd/2020 Shri Shwetamber Jain Education Society. Therefore, for this limited purpose, the matter is set-aside to the file of the ld CIT(E) to examine and pass a speaking order after providing reasonable opportunity to the assessee. 8. In the result, the appeal of the assessee society is allowed for statistical purposes. O r d e r p r o n o u n c e d o n 0 4 . 0 7 . 2 0 2 2 . S d / - S d / - ( DIVA SINGH ) (VIKRAM SINGH YADAV) याय क सद य/Judicial Member लेखा सद य/Accountant Member Dated: 04.07.2022 *Das* आदेश क % त&ल'प अ*े'षत/ Copy of the order forwarded to : 1. अपीलाथ+/ The Appellant 2. %,यथ+/ The Respondent 3. आयकर आय ु -त/ CIT 4. आयकर आय ु -त (अपील)/ The CIT(A) 5. 'वभागीय % त न0ध, आयकर अपील य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar