M/s The Rural education Welfare Society, S.B.S. Nagar V. Commissioner of Income Tax (Exemption), Chandigarh

ITA 546/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8730 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Amritsar
• Assessment Year: misc
• Appeal Filed On: 31-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Keywords: Charitable institution; Competent authority
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 12A; 12AA; 10(23C)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: (CIRCUIT BENCH AT JALANDHAR) BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER, AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO.546/ASR/2016 (ASSESSMENT YEAR N/A) RURAL EDUCATIONAL AND WOMEN WELFARE SOCIETY, VPO MUKAND PUR PAN NO.AADAT0585B (ASSESSEE) VS .. CIT (EXEMPTION) CHANDIGARH. (REVENUE) ASSESSEE BY SHRI . Y. K. SUD, CA. REVENUE BY SHRI BHAWANI SHANKAR,DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FILED BY AGAINST THE ACTI ON OF THE LD. CIT(E) IN REJECTING THE ASSESSEES APPLICATION DATED 09.03.20 16, SEEKING REGISTRATION U/S 12A OF THE ACT. 2. THE APPELLANT SOCIETY FILED ITS APPLICATION (APB -4) IN (FORM NO. 10-A) PRESCRIBED UNDER RULE 17A OF THE IT RULES, SEEKING REGISTRATION U/S 12A(A)(I)(IA) OF THE IT ACT, APPENDING THEREWITH, COPIES OF ITS TRUS T DEED, REGISTRATION CERTIFICATE, ACCOUNTS FOR THE LATEST THREE YEARS AND NOTES ON AC TIVITIES. THE LD. CIT(E), WHILE REJECTING THE ASSESSEES APPLICATION, OBSERVING, IN TERALIA, THAT THE ASSESSEE HAD DATE OF HEARING 18.01.2017 DATE OF PRONOUNCEMENT 07 .03.2017 I.T.A NO.546/ASR/2016 2 AMASSED CAPITAL FUNDS TO THE TUNE OF RS.5.59 CRORE AND FIXED ASSETS TO THE EXTENT OF RS.5.85 CRORE; THAT THE FEE RECEIPTS HAD ALSO BEEN CONSISTENTLY OVER RS.02 CRORES; THAT THE EMPHASIS OF THE SOCIETY HAD BEEN MAINLY ON CREATION OF ASSETS, RATHER THAN, ON RE-DEPLOYMENT OF FUNDS TOWARDS EDUCATION; THAT T HE INCOME AND EXPENDITURE STATEMENTS AND BALANCE SHEETS FURTHER INDICATED THA T DURING F.YS. 2013-14 AND 2014-15, THE EMPHASIS OF THE SOCIETY HAD MAINLY BEE N ON ADDING TO THEIR VEHICLES BUSES; THAT THE TRANSPORTATION CHARGES BEING EARNED BY THE SOCIETY WERE APPROXIMATELY 40% OF THE FEE INCOME RECEIVED FROM T HE STUDENTS; THAT SUCH EMPHASIS AND GENERATION, THEREBY, ON ANOTHER SOURCE OF INCOME DID NOT FIT INTO THE DEFINITION OF EDUCATION, AS LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF SOLE TRUSTEE LOK SHIKSHAN; THAT FURTHER, THE S ALARY AND FEE STRUCTURE OF THE SOCIETY WAS NOT IN SYNC WITH THE INSTRUCTIONS ISSUE D BY THE CBSE WHILE PROVIDING AFFILIATION TO AN ENTITY; THAT THE SALARY STRUCTURE WAS PITIABLE LOW AND IN THE ABSENCE OF A SUITABLE SALARY STRUCTURE, IT WAS SAFE TO CONC LUDE THAT THE SOCIETY COULD NOT MAINTAIN THE QUALITY OF EDUCATION; THAT, AS SUCH, T HE ACTIVITIES OF THE SOCIETY DID NOT REFLECT ADHERENCE TO THE STATED CHARITABLE INTENT; AND THAT THE SOCIETY WAS HELD TO BE FALTERING ON STATUTORY REQUIREMENTS OF FILING OF RE TURN OF INCOME DESPITE SUBSTANTIAL RECEIPTS IN EXCESS OF RS.2 CRORE EVERY YEAR. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT THE ORDER UNDER APPEAL IS ILLEGAL AND INVALID, AS THE LD. CIT(E) WHO IS THE P RESCRIBED AUTHORITY UNDER THE ACT, DID NOT GIVE ANY HEARING TO THE ASSESSEE SOCIETY AN D ILLEGALLY DELEGATED IS FUNCTIONS I.T.A NO.546/ASR/2016 3 U/S 12AA OF THE ACT TO THE DCIT(E), WHO ILLEGALLY C ONDUCTED THE PROCEEDINGS, BUT IT WAS THE LD. CIT(E) WHO PASSED THE ORDER REJECTIN G THE ASSESSEES APPLICATION; THAT HOWEVER, THIS OBJECTION WAS NOT BEING PRESSED; THAT ON MERITS, INSTEAD OF EXAMINATION THE OBJECTS OF THE SOCIETY AND THE GENU INENESS OF ITS ACTIVITIES, WHICH IS THE REQUIREMENT OF SECTION 12A OF THE ACT, IT WA S THE APPLICATION OF THE INCOME OF THE SOCIETY, WHICH WAS CONSIDERED FOR REJECTING THE APPLICATION; THAT IT HAS BEEN OBSERVED THAT THE SOCIETY HAD BEEN CLAIMED EXEMPTIO N U/S 10(23C) OF THE ACT, BUT SINCE 2007, IT HAS AMASSED A CAPITAL FUND OF RS.5.5 9 CRORE AND ASSETS TO THE EXTENT OF RS.5.85 CRORE; THAT THIS OBJECTION IS ENTIRELY U NCALLED FOR, SINCE THE ASSETS OF THE SOCIETY, I.E., LAND AND BUILDING, ETC., HAVE BEEN C REATED OUT OF DONATIONS RECEIVED FOR THE SETTING UP OF THE SCHOOL OF THE SOCIETY, I. E., SADHU SINGH DAV RURAL PUBLIC SCHOOL, MUKAND PUR; THAT IT HAS BEEN FURTHER OBJECT ED THAT THE TOTAL RECEIPTS OF THE SOCIETY ARE OF RS.2 CRORE, CHARGED BY WAY OF FEES; THAT THIS OBJECTION IS NOT RELEVANT, SINCE THE FEES RECEIVED FROM THE STUDENTS HAVE BEEN SPENT ON THE WORKING OF THE SCHOOL, WHICH APPLICATION OF INCOME CAN BE E XAMINED ONLY AT THE TIME OF ASSESSMENT, RATHER THAN AT THE JUNCTURE CONSIDERING GRANT OF REGISTRATION; THAT THE FINDING THAT THE EMPHASIS OF THE SOCIETY WAS ON CRE ATION OF ASSETS AND NOT ON RE- DEPLOYMENT OF THE FUNDS FOR EDUCATION, IS AN IMAGIN ARY FINDING; THAT THE TWENTY THREE BALANCE SHEETS FILED ALONGWITH THE APPLICATIO N, IT IS AMPLY CLEAR THAT EVERY SINGLE RUPEE SPENT BY THE SOCIETY HAS BEEN SPENT FO R THE PURPOSES OF THE SCHOOL ONLY AND THE ASSETS ACQUIRED WHICH ALSO MEANT FOR AN EST ABLISHMENT OF THE SCHOOL; THAT I.T.A NO.546/ASR/2016 4 MOREOVER, TO REITERATE, HERE ALSO, THE FINDING IS Q UA THE APPLICATION OF THE INCOME OF THE SOCIETY, WHICH IS BEYOND THE REQUIREMENT FOR GR ANT OF REGISTRATION; THAT APROPOS THE OBSERVATION REGARDING THE PURCHASE OF BUSES, TH E SAME ARE MEANT FOR THE EXCLUSIVE USED OF FERRYING THE STUDENTS FROM AND TO VARIOUS VILLAGES WHICH ARE AS FAR AS TWENTY K.M. AWAY FROM THE SCHOOL; THAT FURTH ER, THE FINDING THAT THE SALARY STRUCTURE LOW AND IT DOES NOT FOLLOW THE CBSE INSTR UCTIONS, IS, AGAIN, AN IMAGINARY FINDING, SINCE IT IS THE CBSE ITSELF, WHICH HAS GRA NTED AFFILIATION (APB 36-39) TO THE SCHOOL, WITHOUT RAISING ANY SUCH OBJECTION, THO UGH IT IS ONLY THE CBSE, WHICH IS THE COMPETENT AUTHORITY TO RAISE ANY OBJECTION, IF THERE BE ANY NON-COMPLIANCE OF THEIR INSTRUCTIONS; THAT THE ASSESSEE SOCIETY HA S BEEN ESTABLISHED FOR ITS VARIOUS AVOWED CHARITABLE OBJECTS AND FOR EDUCATING SCHOOL CHILDREN; THAT THE SOCIETY HAS NO OTHER ACTIVITY BEYOND ITS OBJECTS, NOR HAS ANY S UCH OTHER ACTIVITY BEEN PROVED TO HAVE BEEN CARRIED OUT BY THE SOCIETY; AND THAT HENC E, THE ORDER UNDER APPEAL BE REVERSED AND REGISTRATION BE DIRECTED TO BE GRANTED TO THE ASSESSEE SOCIETY, ON ALLOWING THE APPEAL. 4. PER CONTRA, THE LD. DR HAS SOUGHT TO PLACE STRON G RELIANCE ON THE IMPUGNED ORDER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS IN THE LIGHT OF THE MATERIAL ON RECORD. UNDER THE PROVISIONS OF SECTION 12AA OF THE ACT, TH E COMPETENT AUTHORITY IS REQUIRED TO EXAMINE THE OBJECTS AND GENUINENESS OF ACTIVITIES OF THE INSTITUTION APPLYING FOR REGISTRATION. IN THE PRESENT CASE, AS APPEARED ITS MEMORANDUM OF I.T.A NO.546/ASR/2016 5 ASSOCIATION (APB 1-2), THE ASSESSEE SOCIETY HAS , A MONGST ITS AIMS AND OBJECTS, THE OBJECT TO PROMOTE THE QUALITY AND SCOPE OF EDUCATI ON IN RURAL AREA AND MANAGED THE AFFAIRS OF SADHU SINGH RURAL PUBLIC SCH OOL, MUKAND PUR. 6. WHILE REFUSING REGISTRATION TO THE ASSESSEE SOCI ETY, THE OBJECTION RAISED BY THE LD. CIT(E) IS THAT THE APPLICANT HAS AMASSED CA PITAL FUNDS TO THE TUNE OF RS.5.59 CRORE AND FIXED ASSETS TO THE EXTENT OF RS.5.85 CRO RE. THIS OBSERVATION, IT IS SEEN, IMPINGES ON NEITHER THE OBJECTS OF THE APPLICANT, N OR THE GENUINENESS OF ITS ACTIVITIES. IT HAS BEEN SUBMITTED BEFORE US THAT TH E ASSETS OF THE APPLICANT, I.E., ITS LAND AND BUILDING, ETC., HAVE BEEN CREATED OUT OF D ONATIONS RECEIVED FOR THE SETTING UP OF THE SCHOOL OF THE SOCIETY. AS PER OBJECT (APB - 1), AS SET OUT IN THE MEMORANDUM OF ASSOCIATION OF THE APPLICANT SOCIETY, THE APPLICANT IS TO PROMOTE THE QUALITY AND SCOPE OF EDUCATION IN RURAL AREA AN D MANAGED THE AFFAIRS OF SADHU SINGH RURAL PUBLIC SCHOOL, MUKAND PUR. IN IT S REPLY (APB 23-29) (DATED 12.08.2016) TO THE QUESTIONNAIRE (APB 21-22) (DATED 04.08.2016) THE APPLICANT STATED THAT THE DETAILS OF DONATIONS RECEIVED WERE BEING ANNEXED. THE CONTENTION THAT THE EARNED GOT CREATED FROM SUCH DONATIONS HAS RECEIVED FOR THE SETTING UP OF THE SCHOOL, HAS NOT BEEN REBUTTED BASED ON ANYTHING TO THE CONTRARY ON RECORD. AND BE THAT AS IT MAY, THE FACT REMAINS THAT THE OBSERV ATION IN THIS REGARD IN THE IMPUGNED ORDER FAILS TO CARRY OUT THE STATUTORY MAN DATE OF SATISFACTION REGARDING THE OBJECTS AND GENUINENESS OF ACTIVITIES OF THE AP PLICANT. IT, THEREFORE, IS SUPERFLUOUS AND NOT DETRIMENTAL TO THE APPLICANTS CLAIM FOR REGISTRATION. I.T.A NO.546/ASR/2016 6 7. SO FAR AS REGARDS, THE OBSERVATION THAT THE FEE RECEIPTS OF THE APPLICANT HAVE CONSISTENTLY BEEN IN EXCESS OF RS.2 CRORE, AGAIN, T HIS OBJECTION DOES NOT PERTAIN EITHER TO THE OBJECTS OR TO THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT. THE CONTENTION THAT THE FEES RECEIVED HAVE BEEN SPENT O N THE RUNNING OF THE SCHOOL HAS NOT BEEN CONTROVERTED WITH ANY MATERIAL ON RECORD. MOREOVER, TO REITERATE, EXAMINATION OF APPLICATION OF INCOME CAN BE UNDERTA KEN ONLY AT THE TIME ASSESSMENT. 8. LIKEWISE, THE OBJECTION REGARDING THE EMPHASIS O F THE APPLICANT ALLEGEDLY BEING ON CREATION OF ASSETS, RATHER THAN, ON DEPLOY MENT OF FUNDS FOR EDUCATION, DOES NOT RENDER THE CLAIM FOR REGISTRATION UNTENABLE, IN AS MUCH AS, EVEN IF THIS OBSERVATION IS TAKEN, FOR THE SAKE OF ARGUMENT TO B E, CORRECT, DESPITE THERE BEING NO BASIS FOR IT SPELT OUT IN THE ORDER, NOTHING HAS BE EN BROUGHT ON RECORD THAT THE ASSETS OF THE APPLICANT ARE MEANT FOR ANY PURPOSES OTHER T HAN ITS AVOWED AIMS AND OBJECTS, WHICH INCLUDE MANAGING THE AFFAIRS OF THE SCHOOL. T OO IT HAS NOT BEEN REFUTED THAT AS SEEN FROM THE THREE BALANCE SHEETS FILED BY THE APPLICANT, THE ENTIRE EXPENDITURE INCURRED BY IT, HAS BEEN FOR THE PURPOSES OF THE SC HOOL ONLY. THEN, THE ASSETS OF THE APPLICANT HAVE ALSO NOT BEEN SHOWN TO BE EXISTING, MUCH LESS UTILIZED, FOR ANY PURPOSES OTHER THAN THAT OF THE SCHOOL. FURTHER, ON CE AGAIN, AS TO HOW THE QUESTION OF APPLICATION OF INCOME IS GERMANE TO THE GRANT OF REGISTRATION, IS NOT EVINCIBLE FROM THE ORDER. I.T.A NO.546/ASR/2016 7 9. CONCERNING THE FINDING THAT EMPHASIS OF THE SOCI ETY HAS MAINLY BEEN ON ADDING BUSES, IT HAS NOT EVEN BEEN ALLEGED THAT ANY OF THE BUSINESS ADDED HAS NOT BEEN USED FOR FERRYING STUDENTS AND THAT THEY HAVE BEEN USED FOR ANY OTHER PURPOSES. OBVIOUSLY, A RURAL SCHOOL HAVING STUDENTS FROM VILLAGES WOULD REQUIRE BUSES, FERRYING THEM. 10. COMING TO THE RECORD THAT THE SALARY STRUCTURE IS LOW AND THAT INSTRUCTIONS OF THE CBSE HAVE BEEN FLOUTED, EVIDENTLY, GRIEVANCE AG AINST SUCH INFRACTION, IF ANY, WOULD LIE WITH THE CBSE AND NOT WITH THE INCOME TAX DEPARTMENT. ON THE CONTRARY, IT IS SEEN THAT THE AFFILIATION GRANTED T O THE SCHOOL OF THE CBSE HITHERTO CONTINUES IN HINDER. MEANING THEREBY, THAT CBSE ITS ELF NURSES NO SUCH GROUSE, AND IF THAT BE SO, AS TO HOW THE AUTHORITY BELOW IS AGG RIEVED INCOMPREHENSIBLE. THEN, YET AGAIN, THE OBJECTS AND GENUINENESS OF ACTIVITIE S OF THE APPLICANT REMAIN UNCHALLENGED, EVEN IN SPITE OF THIS OBSERVATION. 11. THE PROPOSITION THAT AT THE TIME OF CONSIDERING THE GRANT OF REGISTRATION, ONLY THE OBJECTS AND THE GENUINENESS OF THE ACTIVITIES O F THE APPLICANT ARE TO BE GOT SATISFIED ABOUT, BESIDES CONSTITUTION THE BARE PROV ISIONS OF SECTION 12AA OF THE ACT, HAS ALSO BEEN UPHELD, INTER ALIA, IN THE FOLLO WING DECISIONS, AS RIGHTLY RELIED ON BY THE ASSESSEE, TO CONTENTS THAT APPLICATION OF IN COME IS NOT TO BE CONSIDERED ON THIS STAGE: I) CIT VS. SURAYA AND BAHARA EDUCATION AL AND CHARITABLE TRUST, 355 ITR 280 (P & H). II) CIT VS. VIJAY VARGIYA VANI CH ARITABLE TRUST, 369 ITR 360 (RAJ). III) CIT VS. IILM FOUNDATION ASSOCIATION, 389 ITR 148 (P & H). IV) I.T.A NO.546/ASR/2016 8 SHREE ANJANEYA MEDICAL TRUST VS. CIT, 382 ITR 399 (KER). V) VIKAS LOW SEWA SAMITI VS. CIT, 147 ITD 294 (AGRA). VI) SHRI GYAN GANGA VOCATIONAL AND EDUCATIONAL SOCIETY VS. CIT, 143 ITD 297 (DEL). 12. NO CONVERSE DECISION HAS BEEN BROUGHT TO OUR NO TICE. 13. IN VIEW OF THE ABOVE, FINDING MERIT IN THE GRIE VANCE RAISED BY THE APPELLANT/APPLICANT SOCIETY, THE SAME IS ACCEPTED. THE ORDER UNDER APPEAL IS REVERSED. THE LD. CIT(E) IS DIRECTED TO GRANT REGIS TRATION TO THE APPLICANT SOCIETY FORTHWITH, W.E.F. THE DATE OF THE APPLICATION. 14. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2017. SD/- SD/- (T. S. KAPOOR) (A.D. JAIN) ACCOUTANT MEMBER JUDICIAL MEMBER DATED 07/03/2017 *AKV* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT BY ORDER AR/SR.P.S./P.S. I.T.A NO.546/ASR/2016 9