B B Educational Society, Karnal V. CIT, Karnal

ITA 4994/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2830 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-06-2017
• Assessment Year: misc
• Appeal Filed On: 12-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Assessee Lawyers: AASHISH GOYAL
• Keywords: Gift; Charitable institution
• Section: 12A; 12AA; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4994/DEL./2014 B.B. EDUCATIONAL SOCIETY, VS. CIT, 17, SECTOR 14, URBAN ESTATE, KARNAL. KARNAL. (PAN : AAATB7163K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE AND SHRI AASHISH GOYAL REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 28.02.2018 DATE OF ORDER : 16.03.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, B.B. EDUCATIONAL SOCIETY (HEREINAFT ER REFERRED TO AS THE ASSESSEE SOCIETY) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 12.08.2014 PASSE D BY LD. COMMISSIONER OF INCOME-TAX, KARNAL ON THE GROUNDS I NTER ALIA THAT:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (C IT) IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. ITA NO.4994/DEL./2014 2 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN R EJECTING THE APPLICATION FOR GRANT OF REGISTRATION UNDER SEC TION 12AA OF THE INCOME TAX ACT, 1961. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN R EJECTING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UN DER SECTION 12AA DESPITE THE SAME BEING COMPLETE AND IN COMPLIA NCE TO THE PROVISIONS OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN H OLDING THAT THE SOCIETY IS NOT RUNNING FOR CHARITABLE PURP OSE, IGNORING THE FACT THAT THE EDUCATION PER SE IS A CH ARITABLE ACTIVITY. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN R EJECTING THE REGISTRATION UNDER SECTION 12AA OF THE ACT BY I NVOKING THE PROVISIONS OF RIGHT TO EDUCATION ACT DESPITE TH E FACT THAT THERE IS NO SUCH CONDITION FOR REGISTRATION UNDER S ECTION 12AA OF THE INCOME TAX ACT. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN H OLDING THE ACTIVITIES CONDUCTED BY THE ASSESSEE AS NOT BEI NG GENUINE, DESPITE THE ASSESSEE BRINGING ALL THE MATE RIAL AND EVIDENCE ON RECORD TO PROVE THE SAME. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE APPLICATION MOVED BY THE ASSESSEE SOCIETY FOR REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) HAS BEEN REJECTED BY LD. CIT ON THE GROUNDS INTER ALIA THAT THE ASSESSEE SOCIETY IS CON TROLLED BY ONE FAMILY FOR PROFIT PURPOSE AND ORDINARY PUBLIC IS RE STRICTED FROM MEMBERSHIP; THAT GOVERNING BODY OF THE ASSESSEE SOC IETY HAS GOT ITA NO.4994/DEL./2014 3 EXTREME POWER AS IT OWNS ALL THE ASSETS AND HAS POW ER TO PURCHASE OF PROPERTY, INVEST FUNDS AND APPOINTMENT OF ANY EMPLOYEE/MEMBER; THAT AS PER MEMORANDUM OF ARTICLES , AIMS AND OBJECT TO PROVIDE CREATURE COMFORTS OF CLOTHING, CE REALS AND MONETARY SIDES AND TO CARRY ON FRAMING AND DEVELOPI NG WASTE LAND ETC. ARE NON-COMPREHENSIVE; THAT THE ASSESSEE SOCIE TY HAS NOT CARRIED OUT ANY SOCIAL ACTIVITIES TO PROMOTE THE AI MS AND OBJECTS ENSHRINED IN THE MEMORANDUM OF ARTICLES; THAT THE A SSESSEE SOCIETY IS EARNING SUFFICIENT PROFIT WHICH SHOWS THAT THIS IS NOT RUNNING FOR CHARITABLE PURPOSES. 3. FEELING AGGRIEVED, THE ASSESSEE SOCIETY HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. TO PROCEED FURTHER, WE WOULD LIKE TO PURSUE THE AIMS AND OBJECTS OF THE ASSESSEE SOCIETY SEEKING REGISTRATIO N U/S 12AA OF THE ACT, WHICH ARE AS UNDER :- A) TO IMPART PRIMARY, HIGH SCHOOL, SENIOR SECONDARY EDUCATION TO THE MASSES & STUDENTS AT LARGE WITHOUT ANY DISTINCTION OF CASTE, COLOR & CREED. ITA NO.4994/DEL./2014 4 B) TO FIND AND DEVELOP THE AVENUES OF VOLUNTARY SERVICES FOR THE BENEFITS OF PUBLIC AT LARGE WITHOU T ANY CONSIDERATION OF CASTE, COLOR & CREED OR RELIGION. C) TO DRAW OUT THE AVAILABLE UNDER USED TIME, ENERGY AND OTHER RESOURCES OF THE PEOPLE AND DIRECT THEM INTO VARIOUS FIELDS OF SOCIAL ECONOMICAL ACTIVITIES, D) TO PROMOTE THE SOCIAL WELL-BEING OF THE COMMUNITY END TO MITIGATE THE PRIVATIONS AND HARDSHIP OF ITS LESS FAVORED SECTION BY SERVING PATIENTS IN THE HOSPITALS BY SERVING ADVICE OF MEDICAL AUTHORITIES, BY SUPPLYING OF MEDICINES, FOOD ETC. E) TO PROVIDE CREATURE COMFORTS OF CLOTHING, CEREAL S AND MONETARY SIDES. F) TO PROVIDE FEES, BOOKS, SCHOLARSHIPS TO NEEDY STUDENTS ON MEANS CUM MERIT BASIS. G) SERVING LEPERS AND HANDICAPS, AND OLD AGE PROVIDING THEM WORK, FOOD AND MEDICINES TO ASSIST THEM AND ADVISING PREVENTIVE MEASURES FOR ERADICATIONS OF THEIR CURSED DISEASE, ENTHUSING THEM, TO ADOPT MEANS FOR THEIR PHYSICALS, MENTAL MORAL AND SPIRITUAL UPLIFT BY CREATING CONGENIAL ATMOSPHERE AND SURROUNDINGS. H) TO CONSTRUCT, MAINTAIN, ALTER, IMPROVE AND DEVELOP ANY BUILDING OR WORKS NECESSARY OR CONVENIENT FOR THE PURPOSE AND OBJECT OF THIS SOCIETY. I) TO ISSUE APPEALS AND APPLICATIONS FOR MONEY AND FUNDS IN FURTHERANCE OF THE SAID OBJECT AND TO RECEIVE DONATION IN CASH OR KIND MOVABLE OR IMMOVABLE OR FREE HOLD OR LEASE HOLD PROPERTIES, TO ACCEPT GIFTS, DONATION, SUBSCRIPTION IN CASH OR KIND AND SECURITIES AND ANY PROPERTY EITHER MOVABLE OR IMMOVABLE. ITA NO.4994/DEL./2014 5 J) TO INVEST AND DEAL WITH THE FUNDS OR MONEY OF TH E SOCIETY. K) TO CONSTRUCT, MAINTAIN, IMPROVE AND DEVELOP BARAT GARH. L) TO CARRYON FARMING, DEVELOPING WASTE LAND, NURSERY ETC. FOR CHARITABLE PURPOSES. M) TO CARRY ON ALL SUCH TYPE OF CHARITABLE ACTIVIT IES AS ARE DECIDED BY THE EXECUTIVE COMMITTEE FROM TIME TO TIME. N) TO CARRY OUT ANY TYPE OF PUBLICITY WORK TO PROMOTE AWARENESS M THE PUBLIC ABOUT FAMILY PLANNING. 6. BARE PERUSAL OF THE AIMS AND OBJECTS OF THE ASSE SSEE SOCIETY, REPRODUCED ABOVE, SHOWS THAT THE BASIC OBJECT OF TH E ASSESSEE SOCIETY IS TO IMPART PRIMARY, HIGH SCHOOL AND SENIO R SECONDARY SCHOOL EDUCATION TO THE STUDENTS WITHOUT ANY DISCRI MINATION OF CAST, COLOUR AND CREED AND TO SERVE PATIENTS IN THE HOSPI TAL BY SUPPLYING OF MEDICINES AND FOOD ETC., PROVIDING FEES, BOOKS, SCHOLARSHIP TO NEEDY STUDENTS ON MEANS-CUM-MERIT BASIS ETC. AND TO CARRY OUT ALL SUCH CHARITABLE ACTIVITIES DECIDED BY THE ASSESSEE SOCIETY FROM TIME TO TIME. 7. SO FAR AS FIRST GROUND FOR REFUSAL OF REGISTRATI ON U/S 12AA OF THE ACT BY THE LD. CIT THAT THE ASSESSEE SOCIETY IS CONTROLLED BY ONE FAMILY IS CONCERNED, WE ARE OF THE CONSIDERED VIEW THAT CHARITABLE ITA NO.4994/DEL./2014 6 NATURE OF ANY SOCIETY CANNOT BE DETERMINED ON THIS SOLE FACT ONLY RATHER ALL THE AIMS AND OBJECTS ARE REQUIRED TO BE EXAMINED IN ENTIRETY. RATHER IN CASE CHARITABLE SOCIETY IS RUN BY A SINGLE UNIT MAY BE MEMBER OF ONE FAMILY, THEY CAN CARRY OUT THE CHARITABLE ACTIVITIES MORE EFFECTIVELY TO AVOID ANY TYPE OF UN NECESSARY HINDRANCES. 8. COORDINATE BENCH OF THE TRIBUNAL IN CASE OF MAA SARASWATI EDUCATION SOCIETY VS. CIT 2016 (12) TMI 1076 IT AT DELHI WHILE DEALING WITH THE IDENTICAL ISSUE HELD THAT A SOCIETY CONTROLLED BY CLOSE FAMILY MEMBERS CANNOT BE DEBARRED FROM REG ISTRATION AS SOCIETY IS A SEPARATE ENTITY FROM ITS MEMBERS HAVIN G BEEN GOVERNED BY THE SOCIETIES REGISTRATION ACT, 1960. SO, WHEN WE READ THE TRUST DEED PARTICULARLY AIMS AND OBJECTS OF THE ASSESSEE SOCIETY IN ENTIRETY, IT LEADS TO THE CONCLUSION THAT THE ASSES SEE SOCIETY HAS BEEN SET UP FOR CARRYING OUT THE CHARITABLE ACTIVIT IES UNDER THE ACT. 9. SO FAR AS SECOND GROUND FOR REFUSAL OF REGISTRAT ION FOR LD. CIT THAT AIMS AND OBJECTS AS PER MEMORANDUM OF ARTICLES ARE NON- COMPREHENSIVE IS CONCERNED, AGAIN WE ARE OF THE CON SIDERED OPINION THAT THE LD. CIT HAS PICKED UP TWO CLAUSES OF MEMORANDUM OF ARTICLES E.G. :- (I) TO PROVIDE CREATURE COMFORTS OF CLOTHING, CEREA LS AND MONETARY SIDES; ITA NO.4994/DEL./2014 7 (II) TO CARRY ON FRAMING AND DEVELOPING WASTE LAND ETC. BUT HAS NOT EXAMINED THE SAME IN CONJUNCTION WITH O THER AIMS AND OBJECTS OF THE ASSESSEE SOCIETY. SO, FOR THE SAKE OF REPETITION, IT IS HELD THAT APPROVAL OR REFUSAL OF REGISTRATION IS NO T BASED UPON ONE OR TWO AIMS AND OBJECTS OF THE SOCIETY RATHER THE M EMORANDUM OF ARTICLES HAS TO BE EXAMINED IN ENTIRETY WHICH CATEG ORICALLY LEADS TO THE CONCLUSION THAT THE BASIC AIMS AND OBJECTS OF T HE SOCIETY ARE BEING CARRIED OUT BY IMPARTING EDUCATION TO THE PUB LIC AT LARGE EVEN BY PROVIDING FREE BOOKS, SCHOLARSHIP TO THE NEEDY S TUDENTS ETC.. ONE OF THE AIMS AND OBJECTS IS ALSO TO SERVE THE PA TIENTS IN HOSPITALS BY SUPPLYING MEDICINES, FOOD, ETC. WITHOUT ANY DISC RIMINATION OF CASTE, COLOUR OR CREED. 10. SO FAR AS THE NEXT GROUND TAKEN BY THE LD. CIT FOR REFUSAL OF REGISTRATION U/S 12A THAT FROM SURPLUS AMOUNT, IT I S PROVED THAT THE ASSESSEE SOCIETY APPEARS TO HAVE PROFIT MOTIVE, AND IS CHARGING HEFTY FEES FROM THE STUDENTS IS CONCERNED. NO DOUB T THE LD. CIT IN PARA 5.2 OF THE IMPUGNED ORDER HAS GIVEN YEAR-WISE DETAIL OF PERCENTAGE OF SURPLUS OF TOTAL INCOME OF THE ASSESS EE SOCIETY WHICH IS WITHIN THE RANGE OF 15 16% OF THE TOTAL INCOME . AT THE SAME TIME, WE ARE OF THE CONSIDERED VIEW THAT IN CASE HE FTY FEES IS BEING CHARGED BY THE ASSESSEE SOCIETY AND AT THE SAME TIM E, IT IS PROVIDING FREE EDUCATION TO THE NEEDY STUDENTS AND FREE MEDICAL AID ITA NO.4994/DEL./2014 8 TO THE NEEDY PATIENTS, IT CANNOT CHANGE ITS NATURE FROM CHARITABLE SOCIETY TO PROFIT MAKING SOCIETY. WHEN THE SURPLUS FUNDS ARE FURTHER BEING UTILIZED TO CARRY OUT THE AIMS AND OB JECTS OF THE SOCIETY, A SOCIETY CANNOT BE DENIED REGISTRATION U/ S 12AA OF THE ACT. 11. HONBLE SUPREME COURT IN CASE OF QUEENS EDUCATIONAL SOCIETY VS. CIT (2015) 372 ITR 699 (SC) HELD THAT MERELY CHARGING FEE BY THE SCHOOL CANNOT BE A GROUND FOR D ENIAL OF REGISTRATION U/S 12A OF THE ACT PARTICULARLY WHEN S URPLUS FUNDS ARE USED FOR EDUCATION PURPOSE AND EDUCATION INSTITUTIO NS EXIST SOLELY FOR EDUCATION PURPOSE AND NOT FOR PURPOSE OF PROFIT . THERE ARE NO CATEGORIC FINDINGS DELIVERED BY THE LD. CIT THAT TH E ASSESSEE SOCIETY IS SOLELY FORMED AS A PROFIT MAKING ENTITY. MOREOV ER, WHEN THE PRIMARY AIMS AND OBJECTS OF THE ASSESSEE SOCIETY IS EDUCATION WHICH IS A CHARITABLE PURPOSE, PROVISO TO SECTION 2(15) D OES NOT APPLY AS PER CBDT CIRCULAR NO.11 OF 2008. 12. MOREOVER, SECTION 12AA PROVIDES FOR PROCEDURE F OR REGISTRATION AS TO HOW THE LD. CIT WILL PROVIDE THE REGISTRATION AFTER GETTING SATISFIED ABOUT THE AIMS AND OBJECTS OF THE SOCIETY AND NOT TO SIT ON THE MATTER LIKE THE AO AS ALL THESE FACTS ARE TO BE TAKEN CARE OF BY THE AO AT THE TIME OF ASSESSMENT. SO, M ERELY EARNING PROFIT OUT OF WHICH ONLY 15 16% ARE LYING SURPLUS WITH THE ITA NO.4994/DEL./2014 9 ASSESSEE SOCIETY CANNOT BE A GROUND FOR REFUSAL OF REGISTRATION IN THIS CASE. 13. MOREOVER, WHEN LD. CIT HAS NOT DISPUTED THE FAC T THAT AIMS AND OBJECTS OF THE ASSESSEE SOCIETY ARE CHARITABLE HE CANNOT DISPUTE THE GENUINENESS OF THE ACTIVITIES OF THE TRUST ON T HE BASIS OF SURMISES ONLY. 14. HONBLE PUNJAB & HARYANA HIGH COURT IN JUDGMENT CITED AS CIT-II, CHANDIGARH VS. SURYA EDUCATIONAL & CHARITAB LE TRUST (2013) 355 ITR 280 (P&H) WHILE DEALING WITH SECTION 12AA OF THE ACT HELD AS UNDER :- SECTION 12AA OF THE INCOME-TAX ACT, 1961 - CHARITA BLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE - WHETH ER OBJECT OF SECTION 12AA IS TO EXAMINE GENUINENESS OF OBJECTS OF TRUST BUT NOT APPLICATION OF INCOME OF T RUST FOR CHARITABLE OR RELIGIOUS PURPOSES; STAGE FOR APPLICA TION OF INCOME IS ARRIVED WHEN SUCH TRUST OR INSTITUTION FILES ITS RETURN - HELD, YES - WHETHER QUANTUM OF ACTIVIT IES UNDERTAKEN BY TRUST AFTER ITS CREATION CAN BE BASIS FOR EXAMINING REGISTRATION APPLICATION UNDER SECTION 12 AA - HELD, NO [IN FAVOUR OF ASSESSEE] 15. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, T HE LD. CIT HAS GONE ONE STEP FURTHER IN EXAMINING THE INCOME O F THE ASSESSEE SOCIETY WHEREAS IT IS TO BE EXAMINED AT THE TIME OF ITS ASSESSMENT. SO FAR AS QUESTION OF CHARITABLE AIMS AND OBJECTS A ND GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE SOCIETY IS CONCER NED, THE LD. CIT HAS NOT BROUGHT ON RECORD ANY COGENT MATERIAL RATHE R BASED HIS ITA NO.4994/DEL./2014 10 FINDINGS ON THE BASIS OF SURMISES. SO, WE ARE OF T HE CONSIDERED VIEW THAT LD. CIT HAS ERRED IN WITHHOLDING THE REGI STRATION U/S 12AA OF THE ACT APPLIED FOR BY THE ASSESSEE SOCIETY . CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE SOCI ETY IS ALLOWED DIRECTING THE LD. CIT TO PROVIDE REGISTRATION U/S 1 2AA TO THE ASSESSEE SOCIETY. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF MARCH, 2018. SD/- SD/- (B.P. JAIN) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 16 TH DAY OF MARCH, 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT, KARNAL. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.