Sahara Education Society, Haryana V. CIT(E), Chandigarh

ITA 3969/DEL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3572 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 08-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V RAJ KUMAR S; K S SAMPATH
• Keywords: Charitable institution
• Section: 12A; 12AA

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 3969/DEL/2016 SAHARA EDUCATION SOCIETY, SECTOR - 3, URBAN ESTATE, KURUKSHETRA, HARYANA. PAN AACAS2507H (APPELLANT) VS. CIT (EXEMPTION), CHANDIGARH (RESPONDENT) ASSESSEE BY SH. K.S. SAMPATH & SH. V. RAJ KUMAR, ADVOCATES REVENUE BY ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(E), CHANDIGARH DATED 31.05.2016 ON THE FOLLOWING GROUND : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TAX (EX EMPTIONS) IN REFUSING TO GRANT REGISTRATION U/S. 12AA OF THE INCOME TAX ACT, 1961 IS MOST ARBITRARY, PALPABLY ERRONEOUS AND GROSSLY UNJUST. IT IS PRAYED THAT THIS ACTION MUST BE QUASHED WITH DIRECTIONS TO GRANT THE REGISTRATION A S SOUGHT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY IS REGISTERED UNDER THE REGISTRAR OF SOCIETIES ACT, 1860 VIDE REG ISTRATION NO. 2489/2002-03 DATE OF HEARING 20.08.2018 DATE OF PRONOUNCEMENT 21 .08.2018 ITA NO. 3969/DEL/2016 2 DATED 19.12.2002. LATER ON, THE REGISTRATION OF SO CIETY WAS REVISED ON 31 ST DAY OF OCTOBER, 2013 AND THE AIMS AND OBJECTS OF THE AS SESSEE SOCIETY WERE AMENDED. THE ASSESSEE SOCIETY FILED AN APPLICATION IN FORM NO. 10A SEEKING REGISTRATION U/S. 12AA. THE CBSE ALSO GRANTED PROVI SIONAL AFFILIATION CERTIFICATE BEARING NO. CBSE/AFF/SL-01436-1314/5310 79/2013/530150 DATED 27.02.2013. SHOW CAUSE NOTICE WAS ISSUED TO T HE ASSESSEE ON 06.05.2016 BY THE CIT(EXEMPTION). REPLY WAS ALSO FU RNISHED BY THE ASSESSEE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(E) OBSERVED THAT THE ASSESSEE WAS FILING RETURN IN ITR-5 INSTEAD OF ITR-7 AND LOSSES WERE BEING CARRIED FORWARD AS PER SECTION 72 AND THE SOCIETY S TARTED PROFIT FROM ASSESSMENT YEAR 2014-15 AND 2015-16. THEREAFTER, HE APPLIED REGISTRATION U/S. 12AA. THE LD. CIT(E) HAS OBSERVED AS UNDER : THE ABOVE CLEARLY LEADS ONE TO CONCLUDE THAT AN ENT ITY UNABASHEDLY FOLLOWING COMMERCIAL PRINCIPLES COULD NOT TURN CHAR ITABLE OVERNIGHT. ADMITTEDLY, CHARITABLE PURPOSE AS PER SECTION 2(15) OF I.T. ACT, 1961 INCLUDES EDUCATION BUT THERE IS NO DENYING THAT CHARITABLE PURPOSE HAS TO BE SEEN TO BE REDEEMED IN THE ACTIVITIES OF THE SOCIETY. HAD THE INTENT OF THE SO CIETY BEEN CHARITABLE IT WOULD HAVE SOUGHT REGISTRATION AT THE TIME OF STARTING IT S ACTIVITIES AND NOT WHEN IN THE FINAL ANALYSIS ITS FINANCES HAVE COME OUT OF THE RE D. THE APPLICANT HAS NO COGENT ANSWER TO A SPECIFIC QUERY DIRECTED IN THAT DIRECTI ON. ITS FINANCES ARE ALSO NOT ABOVE BOARD WHEN A PREDOMINANT SOURCE OF EXPENDITUR E NAMELY SALARIES IS EXAMINED. THE APPLICANT'S DISBURSEMENTS OF SALARY AR E NOT COVERED BY TDS PROVISION IT HAS BEEN CLAIMED. THIS IS IN SPITE OF T HE AFFILIATION GRANTED BY THE CBSE WHICH INSISTS ON SALARIES TO BE DISBURSED THRO UGH BANKING CHANNELS. DESPITE ASKING FOR CORROBORATION OF THE SALARIES BE ING THROUGH BANK ACCOUNTS THE SAME HAS NOT BEEN FURNISHED. IN LIGHT OF ALL OF THE ABOVE IT IS DIFFICULT TO ARRIVE AT A CONCLUSION THAT AN ENTITY BEING RUN ON COMMERC IAL PRINCIPLES HITHERTO HAS CHARITABLE PURPOSES IN ITS MIND. THE APPLICATION FOR REGISTRATION UNDER SECTION 12A IS ACCORDINGLY REJECTED. ITA NO. 3969/DEL/2016 3 ACCORDINGLY, THE LD. CIT(A) REJECTED THE APPLICATIO N OF ASSESSEE SOCIETY FOR REGISTRATION U/S. 12AA. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD. AR SUBMITTED THAT THE ASSESSEE SOCIETY I S RUNNING EDUCATIONAL INSTITUTION SINCE ITS INCEPTION AND NO ANY COMMERCI AL ACTIVITY HAS BEEN CARRIED OUT BY THE SOCIETY. NO ANY SURPLUS FUND HAS BEEN DI STRIBUTED AMONGST THE MEMBERS. HE ALSO SUBMITTED THAT FOR GRANTING REGIST RATION, ONLY AIMS AND OBJECTS OF THE SOCIETY ARE TO BE SEEN. THE LD. AR A LSO SUBMITTED A PAPER BOOK CONTAINING 134 PAGES. IT IS SUBMITTED THAT FILING O F RETURN IN THE PRECEDING YEARS EITHER IN ITR-5 OR ITR-7 WOULD NOT HAVE ANY B EARING ON THE CHARITABLE ACTIVITIES OF THE SOCIETY. THE LD. AR SUBMITTED THA T THE MATTER MAY BE SENT BACK TO THE CIT(E) TO EXAMINE THE GENUINENESS OF THE ACT IVITIES CARRIED OUT BY THE ASSESSEE SOCIETY AND ALSO URGED THAT THE REGISTRATI ON MAY BE GRANTED TO THE ASSESSEE SOCIETY W.E.F. THE DATE OF APPLICATION. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE CIT(E) AND SUBMITTED THAT THE ASSESSEE SOCIETY WAS FILING ITR- 5. HE HAS NOT DEDUCTED ANY TDS FROM THE SALARY PAYMENT AND APPLIED REGISTRATIO N ONLY WHEN HE STARTED GENERATING PROFIT. THEREFORE, HE REQUESTED THAT THE ORDER OF THE LD. CIT(E) SHOULD BE AFFIRMED. HE HAS PLACED RELIANCE ON THE F OLLOWING DECISIONS : (I). CIT VS. NATIONAL INSTITUTE OF AERONAUTICAL ENG G. EDUCATIONAL SOCIETY, 181 TAZMAN 205(UTTARANCHAL) ITA NO. 3969/DEL/2016 4 (II). DAWN EDUCATIONAL CHARITABLE TRUST VS. CIT, 73 TAXMANN.COM 61 (SC) (III). RAJAH SIR ANNAMALAI CHETTIAR FOUNDATION VS. DIT, 15 TAXMANN.COM 313 (CHENNAI) (IV). CIT VS. A.R. TRUST, 86 TAXMANN.COM 6 (ALLAHA BAD) 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE OBSERVE THAT THE LD. CIT(E) HAS REJECTED THE REGISTRATION APPLICATION WITHOUT COMPLETE EXAMINATION OF THE ACTIVITIES OF T HE ASSESSEE SOCIETY AS PER SECTION 12AA OF THE ACT. WHILE GOING THROUGH THE AU DIT REPORT SUBMITTED BY THE CHARTERED ACCOUNTANT IN FORM NO. 3CD FOR ASSESS MENT YEARS 2013-14, 2014-15 AND 2015-16, WE FIND THAT THE ASSESSEE-SOCI ETY IS RUNNING COMPUTER TRAINING/EDUCATIONAL AND COACHING INSTITUTES. WE AL SO NOTED FROM THE INCOME AND EXPENDITURE ACCOUNT THAT THE SOCIETY HAS RECEIV ED DISCOUNT IN ALL THE THREE YEARS. THE AR WAS ASKED TO EXPLAIN THE NATURE OF DI SCOUNTS, WHICH HE FAILED TO EXPLAIN. WE ALSO OBSERVE FROM THE FINANCIAL STATEME NT THAT NO MEMBERSHIP FEE HAS BEEN RECEIVED FROM THE ORDINARY MEMBERS AS PER RULES AND REGULATIONS OF THE SOCIETY. THE LD. CIT(E) HAS ALSO ALLEGED THAT T HE SOCIETY IS RUNNING FOR COMMERCIAL PURPOSE WITHOUT EXAMINING THE ACTIVITIES OF THE ASSESSEE SOCIETY AND ITS INCOME & EXPENDITURE WITH RESPECT THERETO. LOOKING TO THE ABOVE FACTS AND CIRCUMSTANCES, WE THINK IT FIT TO SEND THE MATT ER BACK TO THE FILE OF CIT(E) TO EXAMINE THE ACTIVITIES OF THE ASSESSEE DE NOVO A S PER PROVISIONS OF SECTION 12AA R.W.S. 2(15) TO ASCERTAIN WHETHER THE ACTIVITI ES OF THE ASSESSEE SOCIETY ARE WITHIN THE OBJECTS OF THE SOCIETY AND WHETHER T HE ACTIVITIES CARRIED OUT BY THE ASSESSEE ARE CHARITABLE IN NATURE OR NOT. IF TH E ASSESSEES ACTIVITIES ARE FOUND CHARITABLE AND COMMENSURATE TO THE OBJECTS OF THE ASSESSEE SOCIETY THEN ITA NO. 3969/DEL/2016 5 THE ASSESSEE MAY BE GRANTED REGISTRATION W.E.F. THE DATE OF APPLICATION AS PRAYED FOR. ACCORDINGLY, THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST AUGUST, 2018. SD/- SD/- (BHAVNESH SAINI) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 ST AUGUST, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI