M/s Paramount Public School Educational Society, Rohtak V. CIT, Rohtak

ITA 5712/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97603 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 02-03-2015
• Assessment Year: misc
• Appeal Filed On: 23-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SMT. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO . 5712 /DEL/201 3 ASSESSMENT YEAR: N.A. PARAMOUNT PUBLIC SCHOOL VS. COMMISSIONER OF INCOME TAX, EDUCATION SOCIETY, 698/10, ROHTAK. SOHRA KOTHI, ROHTAK. (PAN: AABAP1789K ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NAVIN GUPTA, ADV. RESPONDENT BY : SMT. NANDITA KANCHAN, CIT(DR) DATE OF HEARING: 27.10.2015 DATE OF PRONOUNCEMENT: 28.10.2015 ORDER PER INTURI RAMA RAO, A.M. : THE APPEAL FILED BY THE ASSESSEE SOCIETY IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX, ROHTAK, DATED 26 TH SEPTEMBER, 2013, DENYING THE EXEMPTION UNDER SECTION 12AA OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) . THE ASSESSEE SOCIETY RAISED THE FOLLOWING GROUNDS OF APPEA L: I. THAT THE ORDER OF LD. CIT IS AGAINST LAW AND FACTS. II. THAT THE LD. CIT ERRED IN REJECTING THE APPLICATION OF THE ASSESSEE FOR REGISTRATION U/S 12AA ALTHOUGH SOCIETY FULFILS ALL THE CONDITIONS FOR REGISTRATION AND ALL THE OBJECTS AND ACTIVITIES OF THE SOCI ETY ARE ELIGIBLE FOR GRANT OF REGISTRATION U/S 12AA OF THE ACT. III. THAT THE APPELLANT CRAVES LEAVE TO ADD OR ALTER ANY GROUND OF APPEAL. 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE APPELLANT SOCIETY WAS REGISTERED ON 17 TH MARCH, 1995 VIDE CERTIFICATE NO. 8 3 OF 1995 UNDER THE SOCIETIES REGISTRATION ACT WITH THE REGISTRAR OF FIRMS & SOCIETIES, SHIMLA, HIMACHAL PRADESH. THE APPELLANT SOCIETY FILED AN APPLICATION FOR REGISTRATION UNDER THE PROVISIONS OF SECTION 12A A OF THE INCOME - TAX ACT, 1956 (FOR SHORT THE A CT ) IN FORM NO. 10A WITH THE COMMISSIONER OF INCOME TAX, ROHTAK, WITH ALL THE REQUIRED DOCUMENTS. THE COMMISSIONER OF INCOME TAX VIDE ORDER DATED 26 TH SEPTEMBER, 2013, REJECTED THE REGISTRATION UNDER SECTION 12A A OF THE ACT PRIMARILY ON THE GROUND THAT TH E JURISDICTION OF THE CASE DOES NOT VEST WITH HIM AND THE PROVISO TO SECTION 2(15) OF THE ACT IS APPLICABLE AND THE ASSESSEE SOCIETY FAILED TO FURNISH FULL DETAILS OF THE CORPUS FUND OF RS. 15,25,000/ - . BEING AGGRIEVED THE APPELLANT IS BEFORE US WITH THE P RESENT APPEAL. 3. LD. COUNSEL FOR THE APPELLANT SOCIETY VEHEMENTLY ARGUED THAT THE COMMISSION OF INCOME TAX HAD GONE BEYOND HIS JURISDICTION BY CALLING THE DETAILS OF CORPUS DONATIONS AND REJECTING THE APPLICATION FOR REGISTRATION UNDER SECTION 12A A OF T HE ACT. HE FURTHER SUBMITTED THAT THE COMMISSIONER OF INCOME TAX WHILE EXAMINING THE APPLICATION FOR REGISTRATION UNDER SECTION 12A A OF THE ACT, INQUIRY SHOULD BE CONFINED ONLY TO THE AIMS AND OBJECTIVES OF THE INSTITUTIONS AND FOR THIS PURPOSE HE RELIED O N THE FOLLOWING DECISIONS: I. FIFTH GENERATION EDUCATION SOCIETY VS. CIT, 185 ITR 634 (ALL.) II. MORMUGAO PORT TRUST VS. CIT, 109 ITD 303 (PANAJI); III. MALLI RAM CHARITABLE TRUST VS. CIT, 260 ITR (AT) 118 (AMR.); IV. ST. DON BOSCO EDUCATIONAL SOCIETY VS. CIT, 90 ITD 477 (LUCK.); AND V. AGGARWAL MITRA MANDAL TRUST VS. DIT, 106 ITD 531 (DEL.) 3 4. ON THE OTHER HAND, THE LEARNED CIT(DR) VEHEMENTLY ARGUED THAT THE APPELLANT SOCIETY HAD NOT COMPLIED WITH THE DIRECTION OF CIT TO FURNISH THE DETAILS OF DONORS OF CORPUS FUNDS AND THEREFORE, THE CIT HAD NO OPPORTUNITY FOR EXAMINING THE GENUINENESS OF THE ACTIVITIES OF THE APPELLANT SOCIETY. THEREFORE, S HE PRAYED THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE CIT FOR FRESH EXAMINATION OF THIS ISSUE. 5. WE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT APPEAL, WE ARE REQUIRED TO ADJUDICATE WHETHER THE COMMISSIONER OF INCOME TAX, ROHTAK WAS JUSTIFIED IN REJECTING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT OR NOT. THE COMMISSIONER OF INCOME TAX HAD REJECTED THE APPLICATION PRIMARILY ON TWO GROUNDS. THE FIRST GROUND RELATES TO THE JURISDICTION OF THE CASE , ACCORDING TO LD. CIT, JURISDICTION OF THE CASE DID NOT LIE W ITH HIM. FIRST OF ALL , WE SHALL DEAL WITH THE FIRST OBJECTION RAISED BY THE CIT. IN OUR CONSIDERED OPINION, IT IS UNDISPUTED FACT THAT THE APPELLANT SOCIETY FILED THE RETURNS OF INCOME WITH THE INCOME TAX OFFICER ( EXEMPTION ), ROHTAK . WE ALSO FIND FROM THE PAPER BOOK THAT THE DEPUTY COMMISSIONER OF INCOME TAX, ROHTAK, CIRCLE ROHTAK, HAD ISSUED SCRUTINY NOTICE UNDER SECTION 143(2) OF THE ACT DATED 22 ND SEPTEMBER, 2014 FOR THE ASSESSMENT YEAR 2013 - 14. THEREFORE, IT IS THE COMMISSIONER OF THE INCOME TAX, ROH TAK, WHO HAD VALID JURISDICTION FOR THE APPELLANT SOCIETY. THE JURISDICTION OF COMMISSIONER OF INCOME TAX IS ALWAYS DETERMINED WITH REFERENCE TO THE SIT US OF THE ASSESSING OFFICER. IN THE CIRCUMSTANCES, THE FIRST OBJECTION RAISED BY THE CIT IS REJECTED AND IT IS 4 WORTHWHILE TO MENTION HERE THAT THE LEARNED CIT(DR) FAIRLY CONCEDED BEFORE US THAT THIS OBJECTION DOES NOT HOLD WATER. 6 . NOW, COMING TO THE SECOND OBJECTION RAISED BY THE CIT THAT THE PROVISO TO SECTION 2(15) IS APPLICABLE TO THE APPELLANT SOCIET Y AND THE APPELLANT SOCIETY HAD FAILED TO COMPLY WITH THE DIRECTION OF THE COMMISSIONER OF INCOME TAX TO FILE THE DETAILS OF THE DONORS OF THE CORPUS FUNDS. THE SCOPE OF THE POWER OF COMMISSIONER OF INCOME TAX WHILE GRANTING THE REGISTRATION UNDER SECTION 12A OF THE ACT WAS EXAMINED BY THE HON BLE ALLAHABAD HIGH COURT IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT, 185 ITR 634, WHEREIN IT IS HELD THAT AT THE STAGE OF GRANT OF REGISTRATION UNDER SECTION 12A OF THE ACT , THE COMMISSIONER MAY EXAMINE, WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENT OF SECTION 12A , WHETHER THE FORM HAS BEEN PROPERLY FILLED UP OR NOT AND THE OBJECTS OF THE SOCIETY ARE CHARITABLE OR NOT . THE RELEVANT PARA OF AFORESAID CASE IS REPRODUCED BELOW: 2. A READING OF THE SECTION SHOWS THAT THE REGISTRATION UNDER SECTION 12A IS A PRECONDITION FOR AVAILING THE BENEFIT UNDER SECTIONS 11 AND 12 OF THE ACT. SECTION 11 PROVIDES FOR EXEMPTION OF INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSES. SECTION 12 IS I N THE NATURE OF AN EXPLANATION TO SECTION 11. BEFORE A PERSON CAN CLAIM THE BENEFITS OF SECTION 11 OR SECTION 12, AS THE CASE MAY BE, HE MUST OBTAIN REGISTRATION UNDER SECTION 12A. THE APPLICATION FOR REGISTRATION UNDER SECTION 12A HAS TO BE MADE IN FORM N O. 10A PRESCRIBED BY RULE 17A BEFORE EXPIRY OF ONE YEAR FROM THE DATE OF THE CREATION OF THE TRUST OR THE ESTABLISHMENT OF THE INSTITUTION, WHICHEVER IS LATER. IT HAS TO BE MADE BY THE PERSON IN RECEIPT OF THE INCOME OF THE TRUST. 3. IT IS EVIDENT THAT AT THIS STAGE, THE COMMISSIONER IS NOT TO EXAMINE THE APPLICATION OF INCOME. ALL THAT HE MAY EXAMINE IS WHETHER THE APPLICATION IS MADE IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 12A READ WITH RULE 17A AND WHETHER FORM 10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE WHETHER THE OBJECTS OF THE TRUST ARE CHARITABLE OR NOT AT THIS STAGE, IT IS NOT PROPER TO EXAMINE THE APPLICATION OF INCOME. 5 4. THE ORDER IMPUGNED DOES NOT SAY THAT THE OBJECTS OF THE SOCIETY ARE NOT CHARITABLE IN NATURE; IT MERELY SAYS THAT T HEY ARE GENERAL IN NATURE. JUST BECAUSE THEY ARE GENERAL, THEY DO NOT CEASE TO BE CHARITABLE. THE COMMISSIONER HAS ALSO OBSERVED THAT NO ACTIVITY HAS BEEN CARRIED OUT BY THE SOCIETY. IT IS ALSO NOT THE REQUIREMENT OF SECTION 12A NOR SECTION 80G HAS ANY REL EVANCE AT THIS STAGE. THE IMPUGNED ORDER CANNOT, THEREFORE, BE SUSTAINED AND IS QUASHED. SIMILARLY, THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURYA EDUCATION AND CHARITABLE TRUST, (2013) 355 ITR 280 (P&H) HELD THAT THE OBJECTS OF THE PROVISION S OF SECTION 12AA OF THE ACT IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE INSTITUTIONS , BUT NOT THE APPLICATION OF INCOME OF THE TRUST FOR CHARITABLE. THE STAGE FOR APPLICATION OF INCOME IS YET TO ARRIVE WHEN S UCH TRUST/INSTITUTION FILES THE RETURN. THE RELEVANT PARA OF THIS CASE IS REPRODUCED AS UNDER: ..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 A S TO WHEN SUCH INCOME IS TO BE EXCLUDED FOR COMPUTING THE TOTAL INCOME, BUT THE BASIS OF SUCH BENEFIT IS THE REGISTRATION UNDER SECTION 12AA OF THE ACT. UNLESS A TRUST OR INSTITUTION IS REGISTERED UNDER SECTION 12AA OF THE ACT, SUCH TRUST OR INSTITUTION SH ALL NOT BE ENTITLED TO EXCLUDE FROM ITS TOTAL INCOME, DEDUCTIONS 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 APPLIC ABLE WHILE CONSIDERING THE APPLICATION FOR REGISTRATION UNDER SECTION 12AA OF THE ACT. THE APPLICATION FOR REGISTRATION IS REQUIRED TO BE MADE WITHIN ONE YEAR OF THE CREATION OF THE TRUST. SECTION 12AA OF THE ACT, REQUIRES SATISFACTION IN RESPECT OF THE GE NUINENESS OF THE ACTIVITIES OF THE TRUST, WHICH INCLUDES THE ACTIVITIES WHICH THE TRUST IS UNDERTAKING AT PRESENT AND ALSO WHICH IT MAY CONTEMPLATE TO UNDERTAKE. THE INSERTION OF SUB - SECTION (3) TO SECTION 12AA OF THE ACT, CLARIFIES THE SAID FACT, WHEN IT EMPOWERS THE COMMISSIONER TO CANCEL THE REGISTRATION IF THE ACTIVITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH SUCH OBJECTS. 11. THEREFORE, THE OBJECT OF SECTION 12AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT N OT THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE STAGE FOR APPLICATION OF INCOME IS YET TO ARRIVE I.E. WHEN SUCH TRUST OR INSTITUTION FILES ITS RETURN. THEREFORE, WE 6 FIND THAT THE JUDGMENTS REFERRED TO BY THE LEARNED COUNSEL FOR THE APP ELLANT ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE ARISING OUT OF THE QUESTION OF REGISTRATION OF THE TRUST AND NOT OF ASSESSMENT. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST VS. DIRECTOR OF INCO ME TAX (EXEMPTION), (2006) 285 ITR 327 (KARN.) HELD THAT THE REGISTRATION OF INSTITUTION RELATES TO THE OBJECTS SO THAT THE ACTIVITIES BE CHARITABLE, WHICH SHOULD BE CONSIDERED AS GENUINE TRUST. IF THE AC TIVITIES OF THE INSTITUTION ARE TAXABLE FOR ANY REASON THE MATTER TO BE CONSIDERED AT THE TIME OF ASSESSMENT. THE SOURCE OF INCOME CANNOT BE QUESTIONED AT THE TIME OF GRANTING THE REGISTRATION UNDER SECTION 12A A OF THE ACT. 7 . THE RATIO THAT CAN BE CULLED OUT FROM THE ABOVE DECISION S IS THAT THE COMMIS SIONER IS ONLY ENTITLED TO EXAMINE WHETHER THE OBJECTS OF THE INSTITUTIONS ARE CHARITABLE OR NOT. ONCE THE OBJECTS OF THE INSTITUTIONS ARE FOUND TO BE CHARITABLE, THE COMMISSIONER HAS NO OPTION , BUT TO GRANT REGISTRATION. IN THE PRESENT CASE THE COMMISSION ER HAS NOT FOUND THAT ANY OBJECTS OF THE TRUST ARE NOT CHARITABLE IN NATURE. THE OBJECTIONS RAISED BY THE CIT THAT THE APPELLANT HAD FAILED TO COMPLY WITH THE DIRECTION OF THE COMMISSIONER OF INCOME, ROHTAK TO FILE THE DETAILS OF DONORS OF CORPUS FUNDS AND THE INSTITUTION WAS COLLECTING THE FEES FROM THE STUDENTS ARE NOT RELEVANT CONSIDERATION S AT THE TIME OF GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THESE ARE THE ISSUES TO BE EXAMINED DURING THE ASSESSMENT PROCEEDINGS AFTER GRANT OF THE REGISTRAT ION UNDER SECTION 12A A OF THE ACT. THEREFORE, WE DIRECT THE COMMISSIONER OF INCOME TAX, 7 ROHTAK, TO GRANT REGISTRATION TO THE APPELLANT SOCIETY WITH IN A PERIOD OF 30 DAYS FROM THE DATE OF RECEIPT OF THIS ORDER. ACCORDINGLY, THE GROUND S OF APPEAL FILED BY TH E APPELLANT SOCIETY ARE ALLOWED IN FULL. 8 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 2 8 T H OCTOBER , 2015. S D / - S D / - ( SUCHITRA KAMBLE ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 T H OCTOBER , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI