B.C Sharma Memorial Society For Education & Social Welfare, V. Commissioner of Income Tax (Exemption), Lucknow

ITA 588/LKW/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1194 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 04-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12AA; 10B; 11

Judgement Text

I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.588/LKW/2016 ASSESSMENT YEAR:N.A. B.C. SHARMA MEMORIAL SOCIETY FOR EDUCATION & SOCIAL WELFARE, GANGA VIHAR, GAUJAJALI, BAREILLY ROAD, HALDWANI, DISTT. NAINITAL. PAN:AAAAB 6966 H VS. CIT (EXEMPTIONS), LUCKNOW. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT (EXEMPTIONS) PASSED U/S 12AA OF THE ACT. 2. AT THE OUTSET, LEARNED A. R. SUBMITTED THAT ASSE SSEE IS RUNNING A SCHOOL AND HAD BEEN CLAIMING EXEMPTION U/S 10(23C)( III) AND NOW THE ASSESSEE HAD APPLIED FOR REGISTRATION U/S 12AA WHIC H THE CIT (EXEMPTIONS) HAS REFUSED RELYING ON THE PROVISIONS OF SECTION 13 (1)(C) OF THE ACT. LEARNED A. R. SUBMITTED THAT AT THE TIME OF REGISTRATION U/ S 12AA THE ONLY ASPECT WHICH CIT (EXEMPTIONS) IS EXPECTED TO EXAMINE IS OB JECT OF THE ASSESSEE AND GENUINENESS OF THE ACTIVITIES OF THE ASSESSEE F OR ACHIEVING OF THESE APPELLANT BY SHRI H. P. SINGH, ADVOCATE RESPONDENT BY SMT. ALKA SINGH, D.R. DATE OF HEARING 13 / 12 /201 7 DATE OF PRONOUNCEMENT 08 / 01 /201 8 I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 2 OBJECTS. IT WAS SUBMITTED THAT OBJECTS OF THE SOCI ETY ARE CHARITABLE IN NATURE AND A COPY OF THE OBJECTS WAS PLACED IN PAPER BOOK PAGES 4 TO 10. HE SUBMITTED THAT VIDE PARA 8 OF HIS ORDER, CIT (EXEM PTIONS) HAS HELD THAT MERE RECITAL OF OBJECTS OR ACTIVITIES WITHOUT COGEN T OR CORROBORATIVE EVIDENCE IS NOT SUFFICIENT BY THEMSELVES TO ENABLE A REGISTE RING AUTHORITY TO GRANT REGISTRATION. IN THIS RESPECT, LEARNED A. R. SUBMI TTED THAT ASSESSEE HAD FILED COPIES OF BALANCE SHEET AND INCOME AND EXPEND ITURE FOR THE FINANCIAL YEAR 201-13 TO 2014-15, COPY OF WHICH WAS PLACED AT PAGES 14 TO 27 OF THE PAPER BOOK AND HAD ALSO SUBMITTED COPIES OF INCOME TAX RETURN FOR THE ABOVE SAID YEAR WHICH ITSELF PROVES THAT THE ASSESS EE WAS RUNNING A SCHOOL WHICH WAS IN CONSONANCE WITH THE OBJECTS OF THE SOC IETY. LEARNED A. R. IN THIS RESPECT RELIED ON A JUDGMENT OF HON'BLE ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL AS REPORTED IN 212 CTR 394 FOR THE PROPOSITION THAT AT THE TIME OF GRANTING REGISTRATI ON THE CIT (EXEMPTIONS) IS EMPOWERED TO EXAMINE THE OBJECTS OF THE SOCIETY AND THE GENUINENESS OF ITS ACTIVITIES. REGARDING OTHER OBJECTION RAISED BY CI T (EXEMPTIONS) IN RESPECT OF AUDIT REPORT IN FORM 10B, LEARNED A. R. SUBMITTE D THAT FORM 10B HAS TO BE SUBMITTED AT THE TIME OF FILING OF RETURN AND AT THE TIME OF CLAIMING THE EXEMPTION U/S 11 & 12 OF THE ACT AND IT IS NOT REQU IRED TO BE FILED AT THE TIME OF REGISTRATION. THEREFORE, IT WAS PRAYED THA T CIT (EXEMPTIONS) BE DIRECTED TO GRANT REGISTRATION TO THE SOCIETY. 3. LEARNED D. R., ON THE OTHER HAND, RELIED ON THE ORDER OF CIT (EXEMPTIONS). 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IS AN ADMITTED FACT THAT THE OBJECTS OF THE SOCIETY, AS MENTIONED IN THE BYE-LAWS PLACED AT PAG E NO. 4 OF THE PAPER BOOK, ARE CHARITABLE IN NATURE. THE CIT (EXEMPTION S) HAS ALSO NOT DOUBTED THE CHARITABLE NATURE OF THE OBJECTS AND HE HAS REJ ECTED THE APPLICATION BY I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 3 HOLDING THAT THERE WAS NO COGENT OR CORROBORATIVE E VIDENCE TO PROVE THE GENUINENESS OF ACTIVITIES WHEREAS THE FACT REMAINS THAT THE ASSESSEE HAD FILED COPIES OF BALANCE SHEET AND INCOME AND EXPEND ITURE ACCOUNT FOR THE FINANCIAL YEAR 2012-13 TO 2014-15 AND HAD ALSO FILE D COPIES OF INCOME TAX RETURN WHICH CLEARLY ESTABLISH THAT ASSESSEE WAS RU NNING A SCHOOL. THEREFORE, THIS FINDING OF CIT (EXEMPTIONS) THAT GE NUINENESS OF THE ACTIVITIES COULD NOT BE VERIFIED IS NOT BASED UPON THE FACTS. AS REGARDS THE OBJECTION OF CIT (EXEMPTIONS) THAT FORM-10B WAS NOT SUBMITTED , WE FIND THAT THERE IS NO REQUIREMENT UNDER THE LAW TO FILE FORM-10B AT TH E TIME OF REGISTRATION. IT NEEDS TO BE FILED ALONG WITH RETURN OF INCOME AND T HEREFORE, THIS OBJECTION OF CIT (EXEMPTIONS) IS NOT RELEVANT. 4.1 AT THE TIME OF GRANTING REGISTRATION U/S 12AA, THE CIT (EXEMPTIONS) IS EMPOWERED TO EXAMINE THE OBJECTIONS OF THE ASSESSEE AND ALSO THE GENUINENESS OF THE ACTIVITIES OF SOCIETY WITH RESPE CT TO ACHIEVEMENT OF THOSE OBJECTS. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. RED ROSE SCHOOL [2007] 212 CTR (ALL) 293 HAS EXHAUSTIVELY EX AMINED THE PROVISIONS OF SECTION 12AA OF THE ACT AND HAS HELD THAT CIT (E XEMPTIONS) HAS TO SATISFY HIMSELF ABOUT THE GENUINENESS OF THE ACTIVITIES OF THE TRUST AND ALSO THE OBJECTS OF THE TRUST OR INSTITUTION. THE HON'BLE C OURT HAS FURTHER HELD THAT CIT (EXEMPTIONS) IS EMPOWERED TO MAKE INQUIRIES, AS HE THINKS FIT, TO VERIFY AS TO WHETHER THE ACTIVITIES ARE GENUINE OR NOT BUT ON MERE PRESUMPTION AND SURMISES THAT INCOME DERIVED BY THE TRUST OR IN STITUTION WILL BE MISUSED OR THAT THERE IS SOME APPREHENSION THAT THE SAME WO ULD NOT BE USED IN A PROPER MANNER, CANNOT BE MADE A BASIS FOR REJECTION OF REGISTRATION. HON'BLE COURT HAS FURTHER HELD THAT THE GENUINENESS OF THE ACTIVITIES OF TRUST OR INSTITUTION HAS TO BE SEEN KEEPING IN MIND THE O BJECTS THEREOF WHICH NECESSARILY MEANS THAT THE CIT (EXEMPTIONS) SHALL S ATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CONSONA NCE WITH THE OBJECTS OF THE I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 4 TRUST OR INSTITUTION. THE RELEVANT FINDINGS OF HON 'BLE COURT ARE REPRODUCED BELOW: 21. SECTION 12AA, WHICH LAYS DOWN THE PROCEDURE FO R REGISTRATION, DOES NOT SPEAK ANYWHERE THAT THE CIT, WHILE CONSIDERING THE APPLICATION FOR REGISTRATION, SHALL ALSO SEE THAT THE INCOME DERIVED BY THE TRUST OR THE INSTITUTION IS EITHER NOT BEING SPENT FOR CHARITABLE PURPOSE OR SUCH INSTITUT ION IS EARNING PROFIT. THE LANGUAGE USED IN THE SECTION ONLY REQUI RES THAT ACTIVITIES OF THE TRUST OR THE INSTITUTION MUST BE GENUINE, WHICH ACCORDINGLY WOULD MEAN, THEY ARE IN CONSONANCE WITH THE OBJECTS OF THE TRUST/ INSTITUTION, AND ARE NOT MERE CAMOUFLAGE BUT ARE REAL, PURE AND SINCERE, NOR AGAINST THE PRO POSED OBJECTS. THE PROFIT EARNING OR MISUSE OF THE INCOME DERIVED BY CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITI ES, MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME BUT CANNOT BE TAKEN TO BE A SYNONYM TO T HE GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE I NSTITUTION. THIS IS MORE EVIDENT IF WE SEE THE PROVISIONS OF SE CTION 11, WHICH, WHILE EXEMPTING THE INCOME GIVEN IN ITS VARI OUS SUB- CLAUSES FROM BEING INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, FOR EX AMPLE, IN SUB- CLAUSE (I) SAYS 'INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSES IN IN DIA; AND WHERE ANY SUCH INCOME IS ACCUMULATED OR SET APART F OR APPLICATION TO SUCH PURPOSES IN INDIA, TO THE EXTEN T TO WHICH THE INCOME SO ACCUMULATED OR SET APART IS NOT IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SUCH PROPERTY. 22. THE AFORESAID PROVISION THUS, CLARIFIES THAT AL L THAT INCOME, WHICH IS DERIVED FROM THE PROPERTY HELD UNDER THE T RUST WHOLLY FOR CHARITABLE PURPOSES OR RELIGIOUS PURPOSES, SHAL L STAND EXEMPTED TO THE EXTENT TO WHICH SUCH INCOME IS APPL IED TO SUCH PURPOSES IN INDIA BUT IF THE INCOME IS ACCUMULATED OR SET APART FOR APPLICATION TO SUCH PURPOSES IN INDIA, THE SAME SHALL NOT BE IN EXCESS OF FIFTEEN PER CENT OF THE INCOME FROM SU CH PROPERTY. 23. SUB-SECTION (2) OF SECTION 11 STATES ABOUT A SI TUATION WHERE EIGHTY-FIVE PER CENT OF THE INCOME REFERRED TO IN C LAUSE (A) OR CLAUSE (B) OF SUB-SECTION (I) READ WITH THE EXPLANA TION TO THAT I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 5 SUB-SECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAV E BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN IND IA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITH ER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOSES IN INDIA, AND SAYS THAT IN SUCH A SITUATION, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PR EVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOME, PROVIDED THE C ONDITIONS GIVEN IN SUB-CLAUSES (A) AND (B) ARE COMPLIED WITH. THIS ALSO MEANS THAT EVEN THAT INCOME, WHICH COULD NOT BE EXEMPTED UNDER SUB-CLAUSE (A) OR (B) OF SUB-SECTION (I), CAN STILL BE EXEMPTED, IF THE CONDITIONS ATTACHED TO SU B-SECTION (2) IN ITS SUB-CLAUSES (A) AND (B) ARE COMPLIED WITH. 24. SUB-SECTION (3) AGAIN SAYS THAT IF ANY INCOME R EFERRED TO IN SUB-SECTION (2) IS APPLIED TO PURPOSES OTHER THAN C HARITABLE OR RELIGIOUS PURPOSES AS AFORESAID OR CEASES TO BE ACC UMULATED OR SET APART FOR APPLICATION THERETO, OR CEASES TO REM AIN INVESTED OR DEPOSITED IN ANY OF THE FORMS OR MODES SPECIFIED IN SUB- SECTION (5), OR IS NOT UTILISED FOR THE PURPOSE FOR WHICH IT IS SO ACCUMULATED OR SET APART DURING THE PERIOD REFERRED TO IN CLAUSE (A) OF THAT SUB-SECTION OR IN THE YEAR IMMEDIATELY FOLLOWING THE EXPIRY THEREOF, OR IS CREDITED OR PAID TO ANY TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INS TITUTION OR TRUST OR INSTITUTION REGISTERED UNDER SECTION 12AA OR TO ANY FUND OR INSTITUTION OR TRUST OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTIT UTION REFERRED TO IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) OR SUB-CLAU SE (VI) OR SUB-CLAUSE (VIA) OF CLAUSE (230 OF SECTION 10, SHAL L BE DEEMED TO BE THE INCOME OF SUCH PERSON OF THE PREVIOUS YEA R IN WHICH IT IS SO APPLIED OR CEASES TO BE ACCUMULATED OR SET APART OR CEASES TO REMAIN SO INVESTED OR DEPOSITED OR CREDITED OR P AID OR, AS THE CASE MAY BE, OF THE PREVIOUS YEAR IMMEDIATELY FOLLO WING THE EXPIRY OF THE PERIOD AFORESAID. 25. SECTION 12 ALSO ONLY SAYS THAT ANY VOLUNTARY CO NTRIBUTIONS RECEIVED BY A TRUST CREATED WHOLLY FOR CHARITABLE O R RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED WHOLLY FO R SUCH PURPOSES, SHALL FOR THE PURPOSES OF SECTION 11 BE D EEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLL Y FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF THAT SECTION AND SECTION 13 SHALL APPLY ACCORDINGLY. I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 6 THE PROVISION THUS, EMPHASIZES UPON THE INCOME OF T HE TRUST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR AN INSTITUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES AN D SO IS THE CASE IN SUB-SECTION (2) OF THE AFORESAID SECTION. T HE PROVISIONS OF SECTION 13 EXCLUDES THE APPLICABILITY OF SECTION 11 IN CERTAIN CASES. 26. A CUMULATIVE READING OF THE AFORESAID PROVISION S LEAVES NO MANNER OF DOUBT THAT EXEMPTION UNDER THE AFORESAID PROVISIONS CAN BE CLAIMED WITH RESPECT TO THE INCOME DERIVED B Y THE TRUST OR THE INSTITUTION, WHICH IS BEING RUN FOR A CHARIT ABLE PURPOSE AND, THEREFORE, WHILE CONSIDERING THE REGISTRATION UNDER SECTION 12AA, THE SCOPE OF ENQUIRY OF THE CIT, WOULD BE LIM ITED TO THE AFORESAID EXTENT. 27. SINCE IN THE ABSENCE OF SUCH REGISTRATION, THE TRUST OR THE INSTITUTION WOULD NOT BE ENTITLED TO CLAIM ANY EXEM PTION OF THE INCOME DERIVED, THOUGH IT IS BEING RUN FOR CHARITAB LE PURPOSES, THE REGISTRATION HAS TO BE CONSIDERED IN THE LIGHT OF THE SPECIFIC PROVISIONS AFORESAID AND IN THE MANNER THAT IT FURT HERS THE OBJECT OF THE SCHEME OF REGISTRATION AND, OF COURSE , EXEMPTION OF THE ENTIRE INCOME OR THE PART OF THE INCOME, AS THE CASE MAY BE, OF A CHARITABLE TRUST OR INSTITUTION HAS TO BE CONSIDERED DURING ASSESSMENT PROCEEDINGS. 28. IT IS SIGNIFICANT TO MENTION THAT REGISTRATION UNDER SECTION 12AA, DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE PREVIOUS YEA R FOR THE PURPOSE OF DETERMINATION OF TAX LIABILITY BUT IT ON LY ENTITLES THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE C OULD NOT BE CLAIMED IN THE ABSENCE OF REGISTRATION. THE ENQU IRY BY THE CIT SHALL REMAIN RESTRICTED TO THE EXAMINATION, AS TO WHETHER THE ASSESSEE, WHO HAS MOVED THE APPLICATION FOR REG ISTRATION UNDER SECTION 12A, IS ACTUALLY IN THE ACTIVITIES WH ICH ARE GENUINE. GENUINENESS OF THE ACTIVITIES OF THE TRUST OR THE INSTITUTION HAS TO BE SEEN, KEEPING IN MIND THE OBJ ECTS THEREOF, WHICH NECESSARILY MEANS THAT THE CIT SHALL SATISFY HIMSELF ABOUT THE FACT THAT THE ACTIVITIES ARE GENUINE AND IN CON SONANCE WITH THE OBJECTS OF THE TRUST OR THE INSTITUTION. IN OTH ER WORDS, IF ESTABLISHING AND RUNNING A SCHOOL IS THE OBJECT OF THE SOCIETY, AS GIVEN IN ITS BYE-LAWS, IT HAS TO BE SATISFIED THAT THE SOCIETY HAS ESTABLISHED THE SCHOOL, WHERE EDUCATION IS BEING IM PARTED AS PER RULES AND THE FACTUM OF ESTABLISHMENT AND RUNNI NG SCHOOL IS I.T.A. NO.588/LKW/2016 ASSESSMENT YEAR:N.A. 7 A GENUINE ACTIVITY. THE ENQUIRY REGARDING GENUINENE SS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. 4.2 IN THE PRESENT CASE, UNDOUBTEDLY THE OBJECTS OF THE ASSESSEE ARE CHARITABLE IN NATURE AND THE ASSESSEE IS RUNNING A SCHOOL FOR ACHIEVEMENT OF ITS OBJECTS AS GIVEN IN THE BYE-LAWS. THEREFORE, T HE REGISTRATION CANNOT BE DENIED BY HOLDING THAT THE ACTIVITIES OF THE ASSESS EE WERE NOT GENUINE. IN VIEW OF THE ABOVE, CIT (EXEMPTIONS) IS DIRECTED TO GRANT REGISTRATION TO THE ASSESSEE U/S 12AA OF THE ACT. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:08/01/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR