Sanatan Dharam Shiksha Sammittee, Haryana V. CIT (Exemptions), Chandigarh

ITA 363/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6980 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 25-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution; Opportunity of being heard; TDS
• Section: 12A; 12AA

Judgement Text

1 ITA NO. 363/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 363/DEL/2016 SANATAN DHARAM SHIKSHA SAMMITTEE C/O. S.D.SENIOR SECONDARY SCHOOL, NARWANA, DISTT. JIND HARYANA PAN : AAETS6172P (APPELLANT) VS . CIT (EXEMPTIONS) AAYAKAR BHAWAN, SECTOR-17-E CHANDIGARH (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 27.11. 2015 PASSED BY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH BY THE ASSESSEE. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD COMMISSIONER OF INCOME TAX (EXEMPTIONS),CHANDIGARH [ HEREINAFTER REFERRED TO AS CIT(E) ] WAS NOT JUSTIFIED IN REFUSING THE RE GISTRATION OF THE SOCIETY JUST ON HIS SURMISES & CONJECTURE AND WITHOUT CONSIDERIN G ALL THE FACTS ON THE FILE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(E) WAS NOT JUSTIFIED IN REFUSING THE REGISTRATION TO THE APPEL LANT SOCIETY WITHOUT GIVING IT A OPPORTUNITY OF BEING HEARD AS REQUIRED U/S 12AA OF THE INCOME TAX ACT 1961. 3) THAT CIT(A) HAS ERRED IN LAW AND ON FACTS WHILE HO LDING, BASED ON HIS SUSPICIONS, SURMISES AND CONJECTURES , THAT THE RES OLUTION OF THE SOCIETY APPELLANT BY SMT. RANO JAIN, ADV. RESPONDENT BY SH. SANJAY GOYAL, CIT-DR DATE OF HEARING 29.07.2019 DATE OF PRONOUNCEMENT 31.07.2019 2 ITA NO. 363/DEL/2016 PASSED AS ADDENDUM 'THAT SURPLUS FUNDS WILL BE INVE STED AS PER PROVISIONS OF SECTION 11(5) OF THE I.T.ACT ' CONNOTES THAT PRIOR TO THE RESOLUTION THERE WAS NO CHARITABLE ACTIVITY. 4) THE CIT(A) HAS ERRED IN LAW AND FACTS WHILE HOLDIN G THAT RUNNING OF SCHOOLS IS NOT A CHARITABLE ACTIVITY AS FIRST OBJEC T OF THE SOCIETY IS ' DIRECTION, SUPERVISION AND LOOKING AFTER SANATAN DHARMA HIGH S CHOOL'. 5) THAT CIT(E) HAS ERRED IN LAW AND ON FACTS WHILE HO LDING THAT PURCHASE AND SALE OF IMMOVEABLE PROPERTY AS PER THEIR NEEDS BY AN EDUCATIONAL INSTITUTION IS AGAINST CHARITABLE OBJECT. 6) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD CIT (E) HAS ERRED WHILE HOLDING THAT FOR REGISTRATION OF SOCIET Y UNDER INCOME TAX ACT, IT MUST BE REGISTERED UNDER ' HARYANA REGISTRATION AND REGULATION OF SOCIETY ACT, 2012' WHEREAS NO SUCH REGISTRATION IS REQUIRED EITHER UNDER SECTION 12AA OF INCOME TAX ACT,1961 AND/ OR RULES MADE THERE UND ER. 7) THAT CIT(E) HAS ERRED IN LAW AND ON FACTS WHILE HO LDING THAT PROVISIONS OF SECTION 44AB APPLIES TO AN INSTITUTION SEEKING REGI STRATION UNDER SECTION 12A OF THE INCOME TAX ACT. 8) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF LD CIT (E) DATED 27/11/2015 IS VITIATED IN LAW SINCE HE FA ILED TO APPRECIATE THE LEGAL POSITION THAT THE SOURCE IS NOT IMPORTANT BUT THE A PPLICATION OF FUNDS TOWARDS OBJECTS OF THE SOCIETY WHICH ARE 'CHARITABLE IN NAT URE' IS REQUIRED TO BE CONSIDERED IN ORDER TO DECIDE THE GENUINELY OF THE ACTIVITIES OF THE SOCIETY WHEN HE HIMSELF ADMITTED THE FACT THAT THE SOCIETY IS RUNNING SCHOOLS- AN EDUCATIONAL ACTIVITY. 9) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE SOCIETY BEING A PUBLIC CHARITABLE INSTITUTION AND UNDISPUTEDLY IMPA RTING EDUCATION SINCE ITS INCEPTION, THEREFORE IT WAS NOT JUSTIFIABLE ON THE PART OF THE CIT (EXEMPTION) CHANDIGARH TO DENY REGISTRATION. 10) THE APPELLANT SEEKS LEAVE TO ADD, AMEND, DELETE OR ALTER ANY GROUND(S) OF APPEAL PETITION AT THE TIME OF HEARING OF APPEAL, I F DEEMED NECESSARY, IN THE INTEREST OF JUSTICE & EQUITY. 3. SANATAN DHARAM SHIKSHA SAMITI, NARWANA IS A SOC IETY REGISTERED UNDER THE SOCIETYS ACT, 1860 WITH EFFECT FROM 19.11.1974 . THE APPLICANT SOCIETY IS HAVING OBJECT OF DIRECTING, SUPERVISING AND LOOKIN G AFTER SANATAN DHARAM HIGH SCHOOL, TO CONSTRUCT THE BUILDING OF THE SCHOOL, TO PURCHASE MOVABLE AND IMMOVABLE PROPERTY FOR THE SAMITI AND SALE IT TIME TO TIME, TO COLLECT MONEY FOR 3 ITA NO. 363/DEL/2016 THE PROPER CONDUCT OF SAMITI AND TO IMPART AND SUST AIN INDIAN CULTURAL VALUES AMONGST STUDENTS. THIS OBJECT AND AIM ARE SUBMITTE D BEFORE THE TRIBUNAL AS WELL AS BEFORE THE CIT(EXEMPTIONS). NO RETURN OF IN COME WAS FILED SINCE INCEPTION OF THE SOCIETY EXCEPT FOR ASSESSMENT YEAR S 2013-14 AND 2014-15 SHOWING NIL INCOME AND APPARENTLY WITH THE AIM OF S EEKING REFUND ON THE BASIS OF TDS. AN APPLICATION FOR REGISTRATION U/S 12A WAS FILED ON 5 TH MAY, 2015 BY THE APPLICANT SOCIETY. NOTICE WAS ISSUED ON 02.11.2 015 BY THE CIT(EXEMPTIONS). THE SOCIETY FILED REPLY DATED 09.11.2015. THE COMMI SSIONER OF INCOME TAX (EXEMPTIONS) HELD THAT FROM THE PERUSAL OF THE BY-L AWS OF THE SOCIETY, IT CAN BE SEEN THAT THERE ARE GENERAL CLAUSES WHICH DO NOT PO INT OUT TO ANY CHARITABLE ACTIVITY. IN FACT, FROM THE OBJECTIVES THE SOCIETY WILL PURCHASE AND SELL IMMOVABLE PROPERTY AS PER SOCIETYS NEEDS. THE CIT( EXEMPTIONS) FURTHER OBSERVED THAT THE SOCIETY PURCHASED THE PROPERTY OU T OF SURPLUS FUNDS AND EARNED RENTAL INCOME FROM THE SHOPS WHICH HAVE BEEN CONSTRUCTED OUT OF THESE FUNDS. THE CIT(EXEMPTIONS) OBSERVED THAT THE SOCIET Y HAS NO INVESTMENT CLAUSE, AMENDMENT CLAUSE, IRREVOCABILITY CLAUSE, U TILIZATION CLAUSE, OR BENEFICIARY CLAUSE IN THE BY-LAWS OF THE SOCIETY. T HE APPLICANT SOCIETY DID NOT FILE AUDIT REPORT PRESCRIBED IN THE BALANCE SHEET A ND SHOWN RECEIPT OF ABOUT RS. 1 CRORE. THE SOCIETY WAS SUPPOSED TO FILE AUDIT REP ORT IN FORM 3CB AND 3CD AS PER PROVISIONS OF SECTION 44AB OF THE ACT WHICH WAS NOT FILED BY THE APPLICANT SOCIETY. THUS, THE CIT(EXEMPTIONS) REJECTED THE APP LICATION U/S 12A OF THE INCOME TAX ACT, 1961. 4. BEING AGGRIEVED BY THE ORDER, THE APPLICANT SOCI ETY FILED PRESENT APPEAL. 5. THE LD. AR SUBMITTED THAT THE APPLICANT SOCIETY THREE SCHOOLS AND ONE COLLEGE WHICH ARE RUN AT TWO DIFFERENT PLACES/PREMI SES. THE SAMMITTEE IS LOOKING AFTER ITS AFFAIRS FROM THE PREMISES OF S.D. SENIOR SECONDARY SCHOOL, CANAL ROAD, NARWANA. THE SAMMITTEE HAS NO BRANCH. T HE AREA OF OPERATIONS OF THE SAMMITTEE IS ONLY NARWANA (DISTRICT JIND) HARYA NA. THE LD. AR SUBMITTED THAT THE INDIVIDUAL BALANCE SHEETS OF THE SCHOOLS A ND COLLEGE AS ON 31.03.2015 4 ITA NO. 363/DEL/2016 WERE SUBMITTED BEFORE THE CIT (EXEMPTIONS). THE LD. AR SUBMITTED THAT THE APPLICANT SOCIETY IS IN THE FIELD OF EDUCATION WHIC H IS A CHARITABLE PURPOSE ONLY. THE LD. AR FURTHER SUBMITTED THAT ALL THE RELEVANT DOCUMENTS AS ASKED BY THE CIT (EXEMPTIONS) WERE PRODUCED. THEREFORE, THE LD. AR SUBMITTED THAT THE CIT (EXEMPTIONS) SHOULD HAVE GRANTED BENEFIT OF SECTION 12AA OF THE INCOME TAX ACT, 1961. THE LD. AR FURTHER SUBMITTED THAT PROVIS ION OF SECTION 44AB AND AUDIT IN FORM 3CB AND 3CD ARE NOT APPLICABLE TO THE SOCIETY. MERGING OF THE FINANCIAL STATEMENT OF THREE SCHOOLS OF WHICH ONE I S FINANCED BY THE GOVERNMENT IS NOT AGAINST THE LAW AND MAIN OBJECT A ND INTENT OF THE SOCIETY IS CHARITABLE IN NATURE AS DEFINED IN THE PROVISIONS O F THE INCOME TAX ACT, 1961. 6. THE LD. DR SUBMITTED THAT THE APPLICANT SOCIETY DID NOT COMPLETE WITH THE REQUIREMENT OF GRANT OF SECTION 12A APPLICATION . THE LD. DR RELIED UPON FOLLOWING DECISIONS: I) CIT VS. SREE ANJANEYA MEDICAL, 2016, SUPREME COU RT OF INDIA, 74 TAXMANN.COM 243. II) NATIONAL LABOUR FEDERATION CO-OPERATIVE OF INDI A LTD. VS. DIT (EXEMPTION) 2010, ITAT DELHI BENCH F, 130 TTJ 163 (DELHI) III) SOCIETY FOR THE SMALL & MEDIUM EXPORTERS VS. D IT(EXEMPTION), 2010, ITAT DELHI BENCH G, {2011} 11 TAXMANN.COM169(DELH I) IV) CIT VS. BABU RAM EDUCATION SOCIETY, 28, SUPREME COURT OF INDIA, 96 TAXMANN.COM 607 V) WINSOME FOUNDATION VS. CIT-1, CHANDIGARH, 2018, ITAT CHANDIGARH BENCH B, 89 TAXMANN.COM 131 VI) DR. BHIM RAO AMBEDKAR EDUCATIONAL SOCIETY VS. C IT(EXEMPTIONS), 201, HIGH COURT OF ALLAHABAD, 88 TAXMANN.COM 524 VII) DAWN EDUCATIONAL CHARITABLE TRUST VS. CIT, SUP REME COURT OF INDIA, 2016, 73 TAXMANN.COM 61. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL ON THE RECORD. IT IS PERTINENT TO NOTE THAT FROM THE P ERUSAL OF THE BY-LAWS OF THE 5 ITA NO. 363/DEL/2016 SOCIETY, ALL THE CLAUSES ARE GENERAL CLAUSES WHICH DO NOT POINT OUT ANY CHARITABLE ACTIVITY. IN FACT, FROM THE OBJECTIVES T HE SOCIETY WILL PURCHASE AND SELL IMMOVABLE PROPERTY AS PER SOCIETYS NEEDS. THE CIT( EXEMPTIONS) RIGHTLY OBSERVED THAT THE SOCIETY PURCHASED THE PROPERTY OU T OF SURPLUS FUNDS AND EARNED RENTAL INCOME FROM THE SHOPS WHICH HAVE BEEN CONSTRUCTED OUT OF THESE FUNDS. THUS, FROM THESE OBSERVATIONS IT CAN BE SEEN THAT THE SOCIETY IS HAVING COMMERCIAL ACTIVITIES. THE CIT(EXEMPTIONS) OBSERVED THAT THE SOCIETY HAS NO INVESTMENT CLAUSE, AMENDMENT CLAUSE, IRREVOCABILITY CLAUSE, UTILIZATION CLAUSE, OR BENEFICIARY CLAUSE IN THE BY-LAWS OF THE SOCIETY . THE LD. AR COULD NOT POINT OUT THAT THE SOCIETY IS DEALING EXCLUSIVELY IN IMPA RTING EDUCATION WHICH IS CHARITABLE PURPOSE FROM THE BYE-LAWS. IN FACT MAIN OBJECT OF THE SOCIETY IS TO DIRECT, SUPERVISE AND LOOK AFTER SANATAN DHARAM HIG H SCHOOL, AS WELL AS TO CONSTRUCT THE BUILDING OF THE SCHOOL, ALONG WITH PU RCHASE MOVABLE AND IMMOVABLE PROPERTY FOR THE SAMITI AND SALE IT FROM TIME TO TIME. ONE OF THE OBJECT IS TO COLLECT MONEY FOR THE PROPER CONDUCT O F SAMITI AND TO IMPART AND SUSTAIN INDIAN CULTURAL VALUES AMONGST STUDENTS. A LL THESE ARE NOT COMING UNDER THE PURVIEW OF IMPARTING EDUCATION AMONG THE SOCIETY. THE APPLICANT SOCIETY DID NOT FILE AUDIT REPORT PRESCRIBED IN THE BALANCE SHEET AS PER THE REQUIREMENT FOR FILLING APPLICATION U/S 12AA REGIST RATION. THUS, THE APPLICANT SOCIETY ALSO FAILED TO SUBMIT THE PROPER DOCUMENTS BEFORE THE CIT(EXEMPTIONS). THUS, THE CIT(EXEMPTIONS) RIGHTLY REJECTED THE APPL ICATION OF THE APPLICANT SOCIETY U/S 12A OF THE INCOME TAX ACT, 1961. 8. IN RESULT, APPEAL OF THE APPLICANT SOCIETY/APPEL LANT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 31/07/2019 *BINITA* 6 ITA NO. 363/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 15 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16 .07.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 3 1 . 0 7 . 2 0 1 9 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK