MESERS BORDER PEOPLE EDUCATION SOCIETY , FEROZPUR V. COMMISSIONER OF INCOME TAX (EXEMPTIONS), CHANDIGARH

ITA 469/ASR/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 6411 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2019
• Assessment Year: 2016-2017
• Appeal Filed On: 19-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P.N.ARORA LD.
• Keywords: Charitable institution; Opportunity of being heard; Question of law; Capital expenditure; Set aside
• Section: 12; 10; 11; 12AA; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. N.K.CHOUDHRY, JUDICIAL MEMBER AND DR. A.L.SAINI, ACCOUNTANT MEMBER ITA NO.469/ASR/2018 ASSESSMENT YEAR: NIL BORDER PEOPLE EDUCATIONAL SOCIETY, FEROZEPUR CITY, VS. CIT(EXEMPTIONS) CHANDIGARH. [PAN:AAABB 0422F] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (LD. ADV.) RESPONDENT BY: SMT. PRABJOT KAUR (L D. CIT-DR) DATE OF HEARING: 29.11 .2019 DATE OF PRONOUNCEMENT: 16.01.2020 ORDER PER N.K.CHOUDHRY, JM: THIS APPEAL HAS BEEN PREFERRED BY THE APPELLANT SOC IETY AGAINST THE IMPUGNED ORDER DATED 31.07.2018 PASSED BY THE LD. CIT(EXEMPTIONS), CHANDIGARH, U/S 12AA (1)(B)(II) OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS THE ACT), WHEREBY THE A PPELLANT'S APPLICATION FILED U/S 12AA OF THE ACT WAS REJECTED. 2. THE LD. CIT(E) REJECTED THE APPLICATION MAINLY ON THE REASON THAT THE APPELLANT SOCIETY HAS BEEN CLAIMING EXEM PTION U/S 10(23C)(IIIAD) OF THE I.T. ACT. THE LD. CIT(E) O BSERVED THAT ACTUALLY AS PER THE SCHEME OF THE ACT, THE CONVERSE IS TRUE. FOR CASES CLAIMING AUTOMATIC EXEMPTION U/S 10(23C)(IIIAD) APP ROVAL U/S 10(23C)(VI) IS TO BE SOUGHT ON RECEIPTS CROSSING TH E THRESHOLD OF RS.1 CRORE. THE APPLICANT HAD ALL THE REASONS TO APPLY F OR EXEMPTION ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 2 UNDER THE PROVISION OF SECTION 10(23C)(VI) FOLLOWIN G THE STATUTORY PROVISIONS. THIS ISSUE NEEDS TO BE SEEN IN LIGHT OF THE FACT THAT NUMEROUS YEARS IN THE PAST THE SOCIETY HAS BEEN FIL ING RETURNS AND CLAIMING EXEMPTION U/S 10(23C)(IIIAD) . THE LD. CIT(E) FURTHER OBSERVED THAT JUDICIAL PRECEDENTS HAVE ALLOWED PURSUANCE OF ALTERNATIVE CLAIMS EITHER FOR 12AA OR 10(23C) BUT AT THE SAME TIME HAVE NOT ALLOWED SHIFTING FROM ONE PROVISION TO THE OTHER WHEN THE APPLICANT HAS CONSISTENTLY AVAILED BENEFITS FOR A N UMBER OF YEARS UNDER SECTION 10(23C)(IIIAD). NATURAL PROGRESSION ENTAILS AND ENTITLES THE EDUCATIONAL SOCIETIES TO GO FOR 10(23C )(VI) IN SUCH CASES . IT IS ALSO RELEVANT IN THE PARTICULAR CASE THAT T HE CHARACTER AND OBJECTS OF THE APPLICANT HAVE NOT CHANGED TO WA RRANT A CHANGE IN THE CODE OF EXEMPTION THAT HAS A COMPLETELY DIFF ERENT SET OF CONDITIONS. THIS CONTENTION OF THE APPLICANT IS CER TAINLY NOT ACCEPTABLE . THE LD. CIT(E) ALSO OBSERVED THAT THE FINANCIAL STATEMENTS SUBMITTED BY THE APPLICANT DURING THE COURSE OF PRO CEEDINGS DON'T REFLECT THE TRUE PICTURE AND THUS GENUINENESS OF AC TIVITIES IS SQUARELY IMPUGNED. AS PER THE SUBMISSIONS BY THE APPLICANT, IT IS SEEN THAT ACCUMULATION IS SHOWN BY THE APPLICANT IN EVERY YEA R FROM AY 2014- 15 ONWARDS WHICH ALSO TANTAMOUNT TO NOT SHOWING THE CORRECT PICTURE IF WE GO BY THE NEW CLAIMS THAT THERE WERE ALWAYS DEFICITS IN THE PREVIOUS YEARS. 3. HAVING HEARD THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE OBSERVE THAT THE CO-ORDINATE BENCH IN TH E CASE OF CIT (E), CHANDIGARH VS. KHATU JI PARA MEDICAL TECHN OLOGY EDUCATIONAL & RESEARCH SOCIETY (ITA NO. 593/ASR/ 2016 DECIDED ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 3 31.08. 2017) DEALT WITH IDENTICAL ISSUE AND ANALYZED THE SIMILAR OBSERVATION OF THE LD. CIT(E) FOR DECLINING THE REGIS TRATION U/S 12AA OF THE ACT AND DIRECTED THE LD. CIT(E) TO GRANT THE REGISTRATION TO THE THEN SOCIETY . THE ORDER PASSED BY THE CO- ORDINATE BENCH IN THE AFORESAID CASE WAS CHALLENGED BEFOR E THE HONBLE PUNJAB & HARYANA HIGH COURT AND HON'BLE COURT VIDE ITS JUDGMENT DATED 8 TH APRIL, 2019 IN APPEAL NO.141/2018 [2019]106 TAXMANN.COM 344 (P&H), UPHELD THE FINDING O F THE TRIBUNAL. FOR THE SAKE OF BREVITY AND READY REFERENCE THE RELEVANT PART OF THE ORDER IS REPRODUCED HEREIN BELOW . 2. A FEW FACTS NECESSARY FOR ADJUDICATION OF THE I NSTANT APPEAL AS NARRATED THEREIN MAY BE NOTICED. THE ASSE SSEE IS AN EDUCATIONAL SOCIETY REGISTERED ON 19.9.2003 UNDE R THE SOCIETIES REGISTRATION ACT, 1860 AND SINCE 2003 HAS BEEN RUNNING EDUCATIONAL INSTITUTES FOR EDUCATION. IT FI LED AN APPLICATION DATED 15.3.2016 IN FORM 10A FOR REGISTR ATION UNDER SECTION 12AA OF THE ACT. THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) [FOR BREVITY 'THE CIT(E)'] VIDE OR DER DATED 30.9.2016 (ANNEXURE A-L) REJECTED THE SAID APPLICAT ION BY OBSERVING AS UNDER: 8 XX XX XX (Z) SELF CONFESSEDLY THE SOLE OBJECT OF THE SOCIETY HAS BEEN PROJECTED AS PROVIDING EDUCATION. IN THAT CONT EXT THE APPLICANT HAD ALL REASONS TO APPLY FOR EXEMPTIO N UNDER THE PROVISION OF SECTION 10(23C) (VI) RATHER THAN 12AA. THIS ISSUE GETS CORROBORATED WHEN FOR THE PAS T NUMEROUS YEARS THE SOCIETY HAS BEEN FILLING RETURNS AND CLAIMING EXEMPTION U/S 10(23C)(IIIAD). IN ANSWE R TO A SPECIFIC QUERY SEEKING THE RATIONALE FOR APPLI CATION U/S 12AA IT HAS BEEN STATED THAT SINCE THE RECEIPTS ARE BELOW 1 CRORE THE SOCIETY IS CLAIMING EXEMPTION U/S 10(23C)(IIIAD). THIS FOLLOWING THE STATUTORY PROVISIONS WOULD HAVE NECESSITATED AN APPLICATION U/S 10(23C)(VI) AS PER THE SCHEME OF THE I.T. ACT, 1961. IS IT THE CASE THAT THE MOMENT RECEIPTS EXCEE DED RS.1 CRORE THE INSTITUTION HAS CEASED TO BE EXISTIN G 'SOLELY FOR EDUCATIONAL PURPOSES' AND 'NOT FOR PROF ITS'. ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 4 (II) ALTHOUGH THE JUDICIAL PRECEDENTS HAVE ALLOWED ALTERNATIVE CLAIMS EITHER FOR 12AA OR 10(23C) BUT A T THE SAME TIME HAVE NOT ALLOWED SHIFTING FROM ONE PROVISION TO THE OTHER WHEN THE APPLICANT HAS CONSISTENTLY AVAILED BENEFITS FOR A NUMBER OF YEARS UNDER SECTION 10(23C) (IIIAD). NATURAL PROGRESSION ENTAILS AND ENTITLES THE EDUCATIONAL SOCIETIES TO G O FOR 10(23C)(VI) IN SUCH CASES. THERE ARE NO FRESH CIRCUMSTANCES PROJECTED THAT WOULD WARRANT EXAMINATION OF THE ELIGIBILITY OF THE INSTITUTION U NDER A DIFFERENT CODE WITH DIFFERENT CONDITIONALITIES. 9. NOTWITHSTANDING THE SAME, THE CLAIM FOR REGISTRATION U/S 12AA WAS EXAMINED. THE AUDITED ACCOUNTS REVEALS THAT OVER THE PERIOD OF TIME THE EMPHASIS OF THE SOCIETY IS MAINLY ON CREATION OF AS SETS RATHER THAN ON REDEPLOYMENT OF FUNDS TOWARDS EDUCATION. THE INCOME & EXPENDITURE STATEMENTS AND BALANCE SHEETS FURTHER INDICATE THAT DURING THE F.Y S. 2014-15 AND 2015-16 THE EMPHASIS OF THE SOCIETY HAS BEEN MAINLY ON ADDING TO THEIR CAR, MOTORCYCLE, SCOOTER.' 3. FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ORDER DATED 31.8.2017 (ANNEXURE A-2) ALLOWED THE APPEAL AND DIRECTED THE CIT(E) TO GRANT REGISTRATION UNDER SEC TION 12AA OF THE ACT TO THE ASSESSEE. HENCE, THE PRESENT APPEAL. 4. WE HAVE HEARD LEARNED COUNSEL FOR THE APPELLANT AND DO NOT FIND ANY MERIT IN THE APPEAL. 5. THE TRIBUNAL HAS NOTICED THAT THE CIT(E) WAS NOT CORRECT TO THE EXTENT THAT THE ASSESSEE WOULD HAVE APPLIED UNDER SECTION 10(23C) OF THE ACT INSTEAD OF SECTION 12AA OF THE ACT BECAUSE THE APEX COURT AS WELL AS JURISDICTIONA L HIGH COURT HAD CLEARLY HELD THAT WHERE THE ASSESSEE WAS RUNNING HOSPITAL OR SCHOOL AND IF BOTH THE OPTIONS WERE AVA ILABLE BEFORE IT, I.E., EITHER TO APPLY FOR EXEMPTION UNDER SECTI ON 10(23C) OF THE ACT OR CLAIM EXEMPTION UNDER SECTION 12AA OF TH E ACT, IT WAS NOT JUSTIFIED TO DECLINE EXEMPTION UNDER SECTIO N 12AA THAT IT SHOULD HAVE CLAIMED EXEMPTION UNDER SECTION 10(2 3C) OF THE ACT. FOR GRANTING EXEMPTION UNDER SECTION 12AA OF T HE ACT, THE CIT(E) HAD TO SATISFIED HIMSELF ABOUT THE OBJECTS A ND THE GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE AND O NCE THE CIT(E) HAVING ACCEPTED THAT THE MAIN AIM OF THE SOC IETY WAS RUNNING OF COLLEGE AND EDUCATIONAL INSTITUTIONS AND MADE NO ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 5 ADVERSE OBSERVATION REGARDING GENUINENESS OF THE OB JECTS OR THE ACTIVITIES CARRIED ON BY THE SOCIETY, THEN THE REGISTRATION UNDER SECTION 12AA OF THE ACT COULD NOT HAVE BEEN D ENIED HOLDING THAT IT WAS ENTITLED TO EXEMPTION UNDER ANY OTHER PROVISION. WITH REGARD TO THE FINDING OF THE CIT(E) THAT THE EMPHASIZE OF THE SOCIETY WAS MAINLY CREATION OF ASS ETS RATHER THEN REDEPLOYMENT OF FUNDS TOWARDS EDUCATION, THE T RIBUNAL HAD NOTICED THAT DURING THE FINANCIAL YEAR 2014-15 VALUE OF CAR, MOTORCYCLE AND SCOOTER WERE RS. 2.17 LAKHS AND IN 2015- 16, IT WERE RS. 2.30 LAKHS AND THE SOCIETY SURPLUS AMOUNT WAS @ 5.52% ONLY, WHICH CANNOT BE TERMED AS HIGHER AND CERTAINLY TO RUN INSTITUTE, THE VEHICLES WERE REQUIRED. FURTH ER, THE APPREHENSION AND ASSUMPTION OF THE CIT(E) THAT THE SOCIETY MUST BE CHARGING SOME FUNDS, WAS BASED ON THE ASSUM PTION AND SURMISES AND HAD NO LOGICAL REASONING. ACCORDIN GLY, THE TRIBUNAL HAS RIGHTLY DIRECTED THE CIT(E) TO GRANT R EGISTRATION UNDER SECTION 12AA OF THE ACT TO THE ASSESSEE. THE FINDINGS RECORDED BY THE TRIBUNAL READ THUS: '6. WE HAVE GONE THROUGH THE FACTS AND CIRCUMSTANCE S OF THE CASE AND RIVAL SUBMISSIONS OF THE PARTIES AS WELL AS DOCUMENTS AVAILABLE ON RECORD AND ORDER PASSED BY THE LD. CIT(E). IN THE INSTANT CASE, OBJ ECT OF THE ASSESSEE IS NOT IN DOUBT. THE OBSERVATION OF THE ASSESSEE CIT(E) IS NOT CORRECT TO THE EXTENT THAT THE ASSESSEE WOULD HAVE APPLIED U/S 10(23C) OF THE ACT INSTEAD OF SEC.L2AA OF THE ACT BECAUSE THE APEX COURT AS WELL AS JURISDICTIONAL HIGH COURT CLEARLY HELD THAT WHERE THE ASSESSEE TRUST RUNNING HOSPITAL OR SCHOOL AND IF BOTH THE OPTIONS AVAILABLE BEFORE IT I.E., EITHER TO APPLY FOR EXEMPTION U/S 10(23C) OR CLAIM EXEMPTION U/S 12AA OF THE ACT THEREFORE IT IS NOT JUSTIFIED TO DECLINE EXEMPTION U/S 12AA ON THE GROUND THAT IT SHOULD HAVE CLAIMED EXEMPTION U/S 10(23C) . IT IS SETTLED LAW THAT FOR THE PURPOSE OF GRANTING REGISTRATION U/S 12AA, SCOPE OF POWERS OF THE LD. CIT(E) IS LIMITED TO BE BEING SATISFIED ABOUT THE O BJECTS AND THE GENUINENESS OF THE ACTIVITIES OF THE ASSESS EE AND ONCE THE CIT(E) HAVING ACCEPTED THAT THE MAIN AIM OF THE SOCIETY IS RUNNING OF COLLEGE AND EDUCATIONAL INSTITUTIONS AND MADE NO ADVERSE OBSERVATION REGARDING GENUINENESS OF THE OBJECTS OR THE ACTIVITIES CARRIED ON BY THE SOCIETY THEN REGISTRATION U/S 12AA COULD NOT BE DENIED ON THE GROUND THAT IT WAS ENTITLED EXEMPTION UNDER ANY OTH ER PROVISION. FURTHER IN THE CASE OF CIT V. BOSOTTO BROTHERS LIMITED [1940 ] 8 ITR 41 (MAD ). HON'BLE ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 6 MADRAS HIGH COURT HELD THAT IF A CASE APPEARS TO BE GOVERNED BY EITHER OF TWO PROVISIONS, IT IS CLEARLY THE RIGHT OF THE ASSESSEE TO CLAIM THAT HE SHOULD BE TA XED UNDER THAT ONE WHICH LEAVES HIM WITH A LIGHTER BURDEN. MEANING THEREBY, IF, EXEMPTION IS AVAILABLE TO THE ASSESSEE IN TWO OR MORE SECTIONS THEN THE CHOIC E IS FOR THE ASSESSEE UNDER WHICH SECTION EXEMPTION HAS TO BE CLAIMED. WITH REGARD TO THE ANOTHER OBJECTION OF LD. CIT(E), OUR ATTENTION WAS DRAWN BY THE LD. AR TO TH E AUDITED BALANCE SHEET, WHERE IT IS CLEARLY SHOWN TH AT DURING THE F.Y. 2015-16 VALUE OF CAR, MOTORCYCLE AN D SCOTER WERE 2.17 LAKH AND IN 2015-16 IT WERE 2.30 LAKH AND THE SOCIETY SURPLUS AMOUNT WAS @ 5.52 % ONLY. WE ARE IN AGREEMENT WITH THE ASSESSEE THAT TH E SURPLUS @ 5.52 % CANNOT BE TERMED AS HIGHER AND CERTAINLY TO RUN AN INSTITUTE, THE VEHICLES ARE REQ UIRED, THEREFORE, THE OBSERVATION OF THE CIT(E) IS NOT COR RECT TO THE EXTENT THAT THE EMPHASIZED OF THE SOCIETY HAS B EEN MAINLY TO ADD CAR, MOTORCYCLE AND SCOOTER. IN FACT TOTAL RECEIPTS HAD BEEN SHOWN AT RS. 182,76,252/- DURING THE F.Y. 2015-16, HOWEVER, THE VALUE OF THE CAR, MOTORCYCLES AND SCOOTER WERE 2.30 LAKH ONLY, THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT OBSERVATION OF THE CIT(E) WAS NOT CORRECT. ANOTHER OBSERVATION OF THE CIT(E) WAS THAT THE SOCI ETY IS MAINLY EMPHASIZING FOR CREATION OF FIXED ASSETS RATHER THAN REDEPLOYMENT FUNDS TOWARDS EDUCATION. THE LD. AR DRAWN OUR ATTENTION REGARDING THE RECEIP TS, THE AVERAGE ANNUAL FEE FOR THE F.Y. 2015-16 CHARGED BY THE ASSESSEE WAS AT RS. 16,525 PER STUDENT FOR I IT, B.COM STUDENTS AND RS. 4,559 PER STUDENT FOR B.CA COURSES. AVERAGE ANNUAL FEE FOR THE F.Y. 2015-16 WA S RS. 34,157 PER STUDENT ONLY AND THE FEE BEING CHARG ED IS QUITE REASONABLE AND IS LESS THAN THE FEES PRESCRIBED BY THE CONTROLLING GOVT. BODIES. THE LD. AR ALSO DREW OUR ATTENTION THAT THE ASSESSEE'S INSTITU TES HAVE ALSO BEEN APPROVED/AFFILIATED BY/WITH GOVT. AUTHORITIES ON FULFILLMENT OF THE NORMS AND CONDITI ONS AND ADHERENCE THERETO. ON THE AFORESAID CONSIDERATION, WE ARE OF THE CONSIDERED OPINION, TH AT THE APPREHENSION AND ASSUMPTION OF THE CIT(E) THAT SOCIETY MUST BE CHARGING SOME FUNDS, JUST BASED ON THE ASSUMPTION AND SURMISES AND HAVE NO LOGICAL REASONING. FURTHER OBSERVATION WITH REGARD TO SALAR Y STRUCTURE AND QUALITY OF EDUCATION, WE ARE OF THE V IEW THAT LOWER SALARY CANNOT BE MADE BEST TO CONCLUDE THAT QUALITY OF EDUCATION HAS BEEN COMPRISED AND NO T IN SYNC WITH THE INSTRUCTION ISSUED BY MAHARAJA RAN JIT ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 7 SINGH STATE TECHNICAL UNIVERSITY, BATHINDA, WHILE PROVIDING AFFILIATION TO AN ENTITY. ON THE AFORESAI D OBSERVATION AND CONCLUSION, WE ARE OF THE CONSIDERE D VIEW THAT THE ASSESSEE IS ENTITLED TO GET REGISTRAT ION U/S 12AA OF THE ACT AND HENCE, WE DIRECT THE LD. CIT(E) TO GRANT REGISTRATION TO THE ASSESSEE SOCIET Y. 6. NO ILLEGALITY OR PERVERSITY COULD BE POINTED OUT BY THE LEARNED COUNSEL FOR THE REVENUE IN THE AFORE SAID FINDINGS RECORDED BY THE TRIBUNAL WHICH MAY WARRANT INTERFERENCE BY THIS COURT. NO SUBSTANTIAL QUESTION OF LAW ARISES IN THE APPEAL. CONSEQUENTLY, FINDING NO MERIT IN THE APPEAL, THE SAME IS HEREBY DISMISSED. NEEDLE SS TO SAY, IT SHALL BE OPEN FOR THE REVENUE TO INITIATE A CTION UNDER SUB-SECTION (3) TO SECTION 12AA OF THE ACT FO R WITHDRAWAL/CANCELLATION OF THE REGISTRATION GRANTED HEREINABOVE, IN CASE IT COMES TO THE NOTICE OF THE REVENUE THAT THE ACTIVITIES UNDERTAKEN BY THE ASSES SEE ARE NOT GENUINE OR ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE OBJECTS OF THE TRUST OR INSTITU TION OR ARE NOT CHARITABLE IN NATURE IN TERMS OF THE PROVIS IONS OF THE ACT. ' 3.1 THE HONBLE HIGH COURT HAS UPHELD THE FINDING OF THE TRIBUNAL TO THE EFFECT THAT THE LD. CIT(E) WAS NOT JU STIFIED TO DECLINE THE EXEMPTION U/S 12AA ON THE GROUND THAT THE APPLICANT SHOULD HAVE CLAIMED EXEMPTION U/S 10(23C). THE ISSUE AS RAISED BY THE LD. CIT(E) IN THE INSTANT CASE IS EXACTLY SIMILAR AND IDENTICAL WHICH STANDS DECIDED BY THE TRIBUNAL AND AFFI RMED BY THE HON'BLE HIGH COURT THEREFORE RESPECTFULLY FOLLOWIN G THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT, WE ARE UNA BLE TO SUSTAIN THE MAIN GROUND OF REJECTION OF THE APPLICATION U/S 12AA OF THE ACT, TO THE EFFECT ' NATURAL PROGRESSION ENTAILS AND ENTITLES THE EDUCATIONAL SOCIETIES TO GO FOR 10(23C)(VI) IN SUCH CASES. HENCE THE GROUND OF REJECTION UNDER CONSIDERATION IS LIABLE TO BE SET ASIDE. 4 COMING TO THE 2 ND GROUND OF REJECTION, THE LD. COMMISSIONER HAS HELD THAT IN REGARDS TO THE CLAIM OF SURPLUS OF ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 8 RS. 42.53 LAKHS (CLAIMED AS EXEMPT BY THE APPLICANT IN THE COMPUTATION OF INCOME FOR AY 2017-18) PERTAINING TO FY 2016-17 IN THE ABSENCE OF EITHER 10(23C) APPROVAL OR 12AA REGI STRATION, THE APPLICANT HAS REPLIED THAT ' THE SURPLUS OF RS.42.53 LAKHS IS ONLY FROM REVENUE OPERATIONS BUT THIS HAS NOT DESCRIBED THE FULL PICTURE OF OUR INSTITUTIONS BECAUSE WE HAVE ALSO SP ENT RS. 48.91 LAKHS ON CAPITAL EXPENDITURE SO IN FACT THERE IS NO SURPLUS THEIR DEFICIT OFRS.6.38 LAKHS (42.53-48.91) ... THIS CONTENTION OF THE APPLICATIONS IS NOT ACCEPTABLE. I F WE GO BY THE NEW CLAIMS OF THE APPLICANT THAT THERE IS IN FACT NO SU RPLUS, THEN IT IS CLEAR THAT THE FINANCIAL STATEMENTS SUBMITTED BY THE APPL ICANT DURING THE COURSE OF PROCEEDINGS DON'T REFLECT THE TRUE PICTUR E AND THUS GENUINENESS OF ACTIVITIES IS SQUARELY IMPUGNED. AS PER THE SUBMISSIONS BY THE APPLICANT, IT IS SEEN THAT ACCUM ULATION IS SHOWN BY THE APPLICANT IN EVERY YEAR FROM AY 2014-15 ONWA RDS WHICH ALSO TANTAMOUNT TO NOT SHOWING THE CORRECT PICTURE IF WE GO BY THE NEW CLAIMS THAT THERE WERE ALWAYS DEFICITS IN THE PREVI OUS YEARS. 4.1 THE PROCEDURE FOR REGISTRATION IS PRESCRIBED UNDER SECTION 12AA, WHICH READS AS UNDER: 'PROCEDURE FOR REGISTRATION.' 12AA. (1) THE [PRINCIPAL COMMISSIONER] OR COMMISSI ONER, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRU ST OR INSTITUTION MADE UNDER CLAUSE (A)[OR CLAUSE (AA) OF SUB-SECTION (1)] OF SECTION 12A, SHALL-- (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TH E TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO S ATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THIS BEHALF; AND ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 9 (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE-- (I) SHALL PASS AN ORDER IN WRITING REGISTERING THE TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORD ER 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 OP PORTUNITY OF BEING HEARD. 4.2 THE JURISDICTIONAL HIGH COURT IN THE CASE OF THE COMMISSIONER OF INCOME TAX-I ...VS SRI GURU GORAKH NATH CHARITABLE (ITA NO.336 OF 2013 (O&M) DECIDED ON 5 MAY, 2015 ) HAS HELD AS UNDER:- UNDER SECTION 12A, THE PROVISIONS OF SECTIONS 11 & 12 SHALL NOT APPLY IN RELATION TO THE INCOME OF A NY TRUST OR INSTITUTION UNLESS VARIOUS CONDITIONS ARE FULFILLED. THE PROVISIONS OF SECTION 12AA, THUS, AL SO GIVE THE POWER UNDER SUB-SECTION(3) TO CANCEL THE REGIST RATION OF THE ACTIVITIES OF THE TRUST IF IT IS NOT CARRIED OUT IN ACCORDANCE WITH THE OBJECTS BUT THE COMMISSIONER HA S TO KEEP IN MIND THAT IT IS NOT TO ACT AS AN ASSESSI NG AUTHORITY WHILE DECIDING THE APPLICATION UNDER SECT ION 12AA AND THE ENQUIRY REGARDING THE GENUINENESS OF T HE ACTIVITIES OF IMPARTING EDUCATION WITH A CHARITABLE PURPOSE IS TO BE KEPT IN MIND. THE OBJECTS OF THE T RUST, THUS, HAVE TO BE TAKEN INTO CONSIDERATION. SECTION 2(15) DEFINES CHARITABLE PURPOSE AND THE SAME INCLUDES RE LIEF IN EDUCATION AND ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. 4.3 THE JURISDICTIONAL HIGH COURT IN COMMISSIONER OF INCOME TAX VS. SURYA EDUCATIONAL & CHARITABLE TRUST [2013] 35 5 ITR 280, HAS HELD THAT THE PRINCIPLES LAID DOWN FOR EXCLUD ING INCOME ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 10 UNDER SECTION 10(23C) ARE NOT APPLICABLE, WHILE CONSIDE RING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA. FURTH ER THE GENUINENESS OF THE OBJECTS OF THE TRUST ARE TO BE TAKEN INTO CONSIDERATION. RELEVANT OBSERVATIONS READ AS UNDER: 'ON THE OTHER HAND, SECTION 10(23C) OF THE ACT ARE THE PROVISIONS OF THE ACT IN SUBSTITUTION OF THE EA RLIER PROVISIONS OF SECTION 10(22) OF THE ACT AS TO WHICH INCOME SHALL NOT BE INCLUDED IN COMPUTING THE TOTAL INCOME OF ANY PERSON. THEREFORE, THE PROVISIONS OF SECTIONS 11, 12 OR SECTION 10(23C) OF THE ACT, DEAL WITH THE INCOME OF A TRUST OR OF THE INSTITUTION AND THE CIRCUMSTANCES AS TO WHEN SUCH INCOME IS TO BE EXCLU DED FOR COMPUTING THE TOTAL INCOME, BUT THE BASIS OF SU CH BENEFIT IS THE REGISTRATION UNDER SECTION 12AA OF T HE ACT. UNLESS A TRUST OR INSTITUTION IS REGISTERED UNDER S ECTION 12AA OF THE ACT, SUCH TRUST OR INSTITUTION SHALL NO T BE ENTITLED TO EXCLUDE FROM ITS TOTAL INCOME, DEDUCTIO NS OR CONTRIBUTIONS OR FROM OTHER SOURCES. THEREFORE, THE PRINCIPLES LAID DOWN FOR EXCLUDING THE INCOME FROM CONSIDERATION UNDER SECTION 10(22) NOW 10(23)(C) OR SECTIONS 11 AND 12 ARE NOT APPLICABLE WHILE CONSIDE RING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. THE APPLICATION FOR REGISTRATION IS REQUIR ED TO BE MADE WITHIN ONE YEAR OF THE CREATION OF THE TRUST. SECTION 12AA OF THE ACT, REQUIRES SATISFACTION IN R ESPECT OF THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, WHICH INCLUDES THE ACTIVITIES WHICH THE TRUST IS UNDERTAK ING AT PRESENT AND ALSO WHICH IT MAY CONTEMPLATE TO UNDERTAKE. THE INSERTION OF SUB-SECTION (3) TO SECT ION 12AA OF THE ACT, CLARIFIES THE SAID FACT, WHEN IT EMPOWERS THE COMMISSIONER TO CANCEL THE REGISTRATIO N IF THE ACTIVITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH SUCH OBJECTS. THEREFORE, THE OBJECT OF SECTION 12AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. 4.4 FROM THE PERUSAL OF THE PROVISIONS FOR GRANT OF REG ISTRATION AS ENUMERATED IN SECTION 12AA OF THE ACT, IT TRANSPIRES THAT THE ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 11 COMMISSIONER HAS TO SATISFY HIMSELF OF THE OBJECTS OF THE T RUST OR INSTITUTION AS THE CASE MAY BE AND THE GENUINENESS OF THE ACTIVITIES AND AFTER GIVING AN OPPORTUNITY OF BEING H EARD TO THE TRUST OR THE INSTITUTION, A REFUSAL CAN BE MADE TO REGI STER THE TRUST OR THE INSTITUTION. THUS, THE SECTION GIVES POWER T O THE COMMISSIONER TO LOOK INTO THE GENUINENESS OF THE ACTIVIT IES OF THE TRUST AND TO SATISFY HIMSELF ABOUT ITS ACTIVITIES. JU RISDICTIONAL HIGH COURT IN THE ABOVE REFERRED CASES, HAS REITERATED THAT THE PRINCIPLES LAID DOWN FOR EXCLUDING THE INCOME FROM CONSID ERATION UNDER SECTION 10(23) OR SECTIONS 11 OR 12 ARE NOT APPL ICABLE WHILE CONSIDERING THE APPLICATION FOR REGISTRATION UNDE R SECTION 12AA OF THE ACT AND THE OBJECT OF SECTION 12AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NOT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THESE ASPECTS HAVE NOT BEEN TAKEN INTO CONSIDERATION BY THE LD . COMMISSIONER. IT IS A FACT THE LD. COMMISSIONER DID NOT RAISE ANY DOUBT QUA OBJECTS OF THE APPELLANT SOCIETY, CONSEQUE NTLY THE INSTANT GROUND OF REJECTION IS ALSO UN-SUSTAINABLE AND L IABLE TO BE SET ASIDE. 5. IN CUMULATIVE EFFECT, WE ARE INCLINED TO SET ASIDE T HE ORDER PASSED BY THE LD. CIT(E) AND REMAND BACK THIS CASE TO ITS FILE FOR DECISION AFRESH WHILE CONSIDERING THE ANALYZATIONS MADE A BOVE BY US AND PARAMETERS SET OUT U/S 12AA OF THE ACT, WITHI N THREE MONTH OF THIS ORDER, SUFFICE TO SAY, WHILE AFFORDING PR OPER AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE APPELLA NT SOCIETY . ITA N0.469/ASR/ 2018 BORDER PEOPLE EDUCATIONAL SOCIETY VS. CIT(E) 12 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16/0 1/2020. SD/- SD/- (DR. A.L.SAINI) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16/01/2020. /PK/ PS. COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THEN CIT(E) 5. SR DR, I.T.A.T. AMRITSAR 6. GUARD FILE TRUE COPY BY ORDER