M/s Global Educational Society, Ludhiana V. CIT-I, Ludhiana

ITA 646/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64037 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-10-2012
• Assessment Year: misc
• Appeal Filed On: 07-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Charitable institution
• Section: 12A; 12AA; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 646/CHD/2011 (UNDER SECTION 12AA(1)(B)(II)) GLOBAL EDUCATIONAL SOCIETY, VS. THE C.I.T-I, 34, 2 ND FLOOR, CITY PLAZA, LUDHIANA. CHAURI SARAK , LUDHIANA. PAN: AAAAG7590A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SMT.JYOTI KUMARI, DR DATE OF HEARING : 29.10.2012 DATE OF PRONOUNCEMENT : 27.11.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX-I, LUDHIANA DATED 28.04. 2011 AGAINST THE ORDER PASSED U/S 12AA(1)(B)(II) OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT). 2. THE LEARNED A.R. FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE GROUNDS OF APPEAL NOS.1 AND 2 ARE EFFECTIVE GROUNDS OF APPEAL AND OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE NARRAT IVE IN NATURE. WE PROCEED TO DISPOSE OFF THE GROUNDS OF APPEAL NOS.1 AND 2, WHICH READ AS UNDER: 1. THAT THE LD. CIT-I, LUDHIANA HAS ERRED IN REFUSING REGISTRATION TO THE APPELLANT TRUST NAMELY M/S GLOBAL EDUCATIONAL SOCIETY U/S 12AA (1)(B)(II) OF THE INCOME TAX ACT, 1961 IN RESPONSE TO APPLICATION U/S 12A FILED BY THE APPELLANT IN FORM NO.10A. 2 2. THAT THE REGISTRATION OF THE APPELLANT SOCIETY H AS BEEN REFUSED AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE BY NOT CONSIDERING OUR SUBMISSIONS PROPERLY. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS T HE NON-GRANT OF REGISTRATION TO THE ASSESSEE TRUST UNDER SECTION 12 AA OF THE ACT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY FILED AN APPLICATION UNDER SECTION 12A OF THE ACT IN FORM NO .10A ON 29.10.2010 FOR REGISTRATION OF THE TRUST UNDER SECTION 12AA OF THE ACT. THE COPY OF THE APPLICATION MOVED BY THE ASSESSEE IS PLACED AT PAGES 1 AND 2 OF THE PAPER BOOK. THE ASSESSEE CLAIMED THAT IT WAS ESTA BLISHED ON 1.10.2009 AND WAS TO RUN SEPARATE POLY-TECHNICAL COLLEGE AT V ILLAGE & P.O. KUBE NEAR NELLO BRIDGE, LUDHIANA. CERTIFICATE OF REGIS TRATION OF SOCIETY ALONGWITH THE REPORT IN FORM NO.10B AND COPY OF MEM ORANDUM AND ARTICLE OF ASSOCIATION ARE PLACED AT PAGES 2 TO 14 OF THE PAPER BOOK. THE COMMISSIONER OF INCOME TAX, LUDHIANA ISSUED SHO W CAUSE NOTICE TO THE ASSESSEE. THE COMMISSIONER OF INCOME TAX NOTED THAT BESIDES THE OBJECTS OF EDUCATION SOME OF THE OBJECTS WERE DISTR IBUTIVE AND WERE NOT RELATED TO THE OBJECTS OF EDUCATION. THE LIST OF O BJECTS TO BE UNDERTAKEN BY THE ASSESSEE TRUST ARE ENLISTED AT PAGE 2 AND PA RT OF PAGE 3 OF COMMISSIONER OF INCOME TAX. THE COMMISSIONER OF IN COME TAX WAS OF THE VIEW THAT EXCEPT THE OBJECT NO.(A) I.E. TO PROM OTE DENTAL EDUCATION, ALL OTHER OBJECTS FALL IN THE CATEGORY OF ANY OTHER OBJECTS OF PUBLIC UTILITY. THE ASSESSEE THOUGH DENIED TO HAVE INDULG ED IN ANY OTHER ACTIVITIES OF PUBLIC UTILITY BUT THE SAME WAS NOT A CCEPTED BY THE COMMISSIONER OF INCOME TAX AND FURTHER IT WAS HELD BY THE COMMISSIONER OF INCOME TAX THAT THE EDUCATION FOR T HE PURPOSE OF SECTION 2(15) OF THE ACT WAS TO BE UNDERSTOOD AS IM PARTING OF EDUCATION BY NORMAL SCHOOL AND NOT BY RUNNING PROFITABLE ENGI NEERING AND MEDICAL COLLEGE ETC., AND INDULGING IN SALE OF EDUCATION. THE COMMISSIONER OF 3 INCOME TAX ALSO NOTED THE ASSESSEE TRUST TO HAVE KE PT THE DISSOLUTION CLAUSE OPEN ENDED. THE COMMISSIONER OF INCOME TAX REFUSED TO GRANT REGISTRATION TO THE ASSESSEE TRUST UNDER SECTION 12 AA(1)(B)(II) OF THE ACT. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX. THE LEARNED A.R. FOR THE ASSESSEE MAKI NG REFERENCE TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION PLACED AT PA GES 9 TO 14 OF THE PAPER BOOK POINTED OUT THAT THE ASSESSEE TRUST WAS CONSTITUTED FOR ESTABLISHING THE COLLEGE OF DENTAL EDUCATION AND HA D PURCHASED THE LAND AND BUILDING FOR THE PURPOSE AS IS APPARENT FROM TH E AUDITED ACCOUNTS FILED BY THE ASSESSEE WHEREIN THE BUILDING UNDER CO NSIDERATION HAD BEEN REFLECTED. IT WAS STRESSED BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE SAID REGISTRATION WAS APPLIED FOR THE FIRST TIME. OUR ATTENTION WAS DRAWN TO THE LIST OF OBJECTS OF THE ASSESSEE FIRM WHEREIN IT WAS MENTIONED THAT THE ASSESSEE WAS ENGAGED IN IMPARTING EDUCATION. T HE OBJECT BEING CHARITABLE, THE ASSESSEE WAS ENTITLED TO BE REGISTE RED WAS THE CLAIM. THE LEARNED A.R. FOR THE ASSESSEE REFERRED TO PAGES 12 AND 14 OF THE PAPER BOOK I.E. TO THE RECOGNITION GRANTED TO THE SAID CO LLEGE AND THE AFFILIATION AND ALSO REFERRED TO THE FEES CHARGED A T PAGE 9 OF THE PAPER BOOK NO.2. FURTHER RELIANCE WAS PLACED AT VARIOUS CASE LAWS, WHICH SHALL BE REFERRED TO BY US IN THE PARAS BELOW. 6. THE LEARNED D.R. FOR THE REVENUE PLACING RELIANC E ON THE ORDER OF THE COMMISSIONER OF INCOME TAX WITH SPECIAL REFEREN CE TO PARA 6 ADMITTED THAT THE MAIN OBJECT OF THE ASSESSEE TRUST WAS EDUCATION BUT THERE WERE SOME OTHER OBJECTS WHICH WERE NOT ANCILL ARY TO THE MAIN OBJECT, BUT WERE SEPARATE OBJECTS. IT WAS STRESSED BY THE LEARNED D.R. FOR THE REVENUE THAT THE ASSESSEE TRUST WAS A PRIVA TE ENTERPRISE, WHICH WAS CARRYING ON VARIOUS OBJECTS AND FURTHER DISSOLU TION CLAUSE WAS NOT PROPERLY MADE. 4 7. IN REJOINDER THE LEARNED A.R. FOR THE ASSESSEE P OINTED OUT THAT THE DISSOLUTION CLAUSE HAS BEEN AMENDED AND COPY OF THE SAME WAS FURNISHED ON RECORD. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN ORDER TO AVAIL EXEMPTION UNDER SECTIONS 11 AND 12 O F THE ACT, THE ASSESSEE TRUST IS REQUIRED TO APPLY AND GET ITSELF REGISTERED AS A TRUST UNDER THE PROVISIONS OF SECTION 12A OF THE ACT. FU RTHER IT IS PROVIDED UNDER THE SAID SECTION THAT THE COMMISSIONER OF INC OME TAX IN EXERCISE OF ITS POWER SHALL LOOK INTO THE OBJECTS OF THE TRU ST WHETHER THE SAME ARE GENUINE AND ALSO TO ENQUIRE INTO THE GENUINENESS OF ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST. IN CASE THE COMMISSIONER OF INCOME TAX IS SO SATISFIED THAT AIMS AND OBJECTS OF THE TRUST ARE IN LINE WITH THE PROVISIONS OF SECTION 2(15) OF THE ACT, THE REGISTRATION UNDER SECTION 12AA OF THE ACT WOULD BE GRANTED TO THE ASSESSEE, IN ORDER TO E NTAIL IT TO AVAIL DEDUCTION UNDER SECTIONS 11 AND 12 OF THE ACT. 9. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIB UNAL IN SURYA EDUCATIONAL & CHARITABLE TRUST VS. CIT-II, CHANDIGA RH IN ITA NO.223/CHD/2009 ORDER DATED 30.11.2009, WHEREIN I N AN APPEAL FILED AGAINST THE ORDER PASSED UNDER SECTION 12AA OF THE ACT, THE TRIBUNAL HELD THAT WHERE THE OBJECT OF THE TRUST WAS TO ESTA BLISH EDUCATION INSTITUTION, WHICH HAS BEEN ACCEPTED BY THE COMMISS IONER OF INCOME TAX AND ONLY THE GENUINENESS OF THE ACTIVITIES HAVE TO BE LOOKED INTO IN ORDER TO VERIFY THE CLAIM OF REGISTRATION UNDER SECTION 1 2AA OF THE ACT. WHERE THE ASSESSEE IS CARRYING ON THE ACTIVITIES IN LINE WITH ITS OBJECTS, THE GENUINENESS OF THE SOCIETY COULD NOT BE QUESTIONED. WE FIND THAT WHILE GRANTING THE REGISTRATION UNDER SECTION 12AA OF THE ACT, THE SCOPE OF COMMISSIONER OF INCOME TAX IS LIMITED AND ALLOWANCE UNDER SECTION 11/12 OF THE ACT IS TO BE LOOKED INTO BY THE ASSESS ING OFFICER DURING THE 5 COURSE OF ASSESSMENT PROCEEDINGS. THE TRIBUNAL FUR THER HELD THAT SECONDLY AT THE LEVEL OF GRANTING REGISTRATION BY T HE COMMISSIONER OF INCOME TAX, THE ABSENCE OR PRESENCE OF THE SURPLUS IS NOT RELEVANT. THE ORDER OF THE TRIBUNAL HAS FURTHER BEEN APPROVED BY THE HON'BLE HIGH COURT VIDE ORDER DATED 5.10.2011 IN ITA NO.701 OF 2 010 IN THE CIT-II, CHANDIGARH VS. M/S SURYA EDUCATIONAL & CHARITABLE TRUST, CHANDIGARH. 10. FURTHER THE HON'BLE PUNJAB & HARYANA HIGH COURT IN BUNCH OF MATTERS WITH LEAD ORDER IN CIT, BHATINDA VS. BABA D EEP SINGH EDUCATIONAL SOCIETY, BHATINDA IN ITA NO.881 OF 2010 DATE OF DECISION 13.10.2011 ADDRESSED SIMILAR ISSUE OF GRANT OF REGI STRATION UNDER SECTION 12AA OF THE ACT WHICH WAS DENIED TO THE ASSESSEE DU E TO THE ENQUIRIES MADE BY THE COMMISSIONER OF INCOME TAX BEFORE GRANT ING OF REGISTRATION UNDER SECTION 12AA OF THE ACT. THE HON'BLE HIGH CO URT IN CIT, BHATINDA VS. BABA DEEP SINGH EDUCATIONAL SOCIETY, B HATINDA (SUPRA) REFERRED TO THE RATIO LAID DOWN IN CIT-II, CHANDIGA RH VS. M/S SURYA EDUCATIONAL & CHARITABLE TRUST, CHANDIGARH (SUPRA) AND OBSERVED AS UNDER: THE POWER OF THE CIT REGARDING THE SCOPE OF SECTION 12AA OF THE ACT HAS BEEN CONSIDERED BY THIS COURT IN THE ORDER DATED 5.10.20 11 PASSED IN ITA NO.701 OF 2010 (COMMISSIONER OF INCOME TAX-LL, CHANDIGARH VS. M/S SURYA EDUCATIONAL & CHARITABLE TRUST) AND IT HASBEEN HELD THAT SECTION 12AA OF THE ACT, R EQUIRES SATISFACTION IN RESPECT OF THE GENUINENESS OF THE ACTIVITIES OF THE TRUST, WHI CH INCLUDES THE ACTIVITIES WHICH THE TRUST WAS UNDERTAKING AT PRESENT AND ALSO WHICH IT MAY CO NTEMPLATE TO UNDERTAKE. THE INSERTION OF SUB SECTION 3 TO SECTION 12AA OF THE A CT REGARDING THE POWERS OF THE COMMISSIONER TO CANCEL THE REGISTRATION IF THE ACTI VITIES OF THE TRUST ARE NOT CARRIED OUT IN ACCORDANCE WITH SUCH OBJECTS WAS ALSO NOTICED. THE ALLAHABAD HIGH COURT IN COMMISSIONER OF INCOME TAX VS. RED ROSE SCHOOL 2007 (163) TAXMAN 19 HAS HELD THAT THE JURISDICTION OF THE COMMISSIONER AT THE STAGE OF PROCESSING APPLICATION UNDER SECTION 12AA OF THE ACT IS LIMITED REGARDING WHETHER THE ACTIVITIES ARE GENUINE AND IN CONSONANC E WITH THE OBJECTS OF THE TRUST OR INSTITUTION AND WHERE EDUCATION IS BEING IMPARTED A S PER THE RULES AND THE FACTUM OF THE ESTABLISHMENT AND RUNNING OF SCHOOLS IS NOT DISPUTE D THE SAME WAS A GENUINE ACTIVITY AND THE ENQUIRY REGARDING GENUINENESS OF THE ACTIVITIES CANNOT BE STRETCHED BEYOND THIS. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, IT WOULD BE CLEAR THAT RESPONDENT-SOCIETY WHICH WAS ADMITTEDLY RUNNING A POLYTECHNIC COLLEGE AND THE ACTIVITIES WERE INTERWOVEN FOR FURTHERING THE PROJECTS AND ACTIVITIES PERTAINI NG TO EDUCATION, THE TRIBUNAL RIGHTLY DIRECTED THAT REGISTRATION SHOULD BE GRANTED TO THE RESPONDENT-SOCIETY WITH THE RIDER THAT 6 THE SAME COULD ALWAYS BE CANCELLED IF IT CAME TO TH E NOTICE OF THE CIT THAT THE SOCIETY WAS NOT CARRYING ON THE ACTIVITIES AS PER ITS OBJECTS. THE COMMISSIONER WHILE PROCESSING THE APPLICATION UNDER SECTION 12AA OF THE ACT WAS NOT T O ACT AS AN ASSESSING AUTHORITY AND THUS, THE TRIBUNAL HAS RIGHTLY ALLOWED THE APPEAL F ILED BY THE SOCIETY IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 11. APPLYING THE ABOVE SAID RATIO TO THE FACTS OF T HE PRESENT CASE WE FIND THAT THE ASSESSEE TRUST WAS REGISTERED ON 1.10 .2009 AND THE CERTIFICATE OF REGISTRATION OF SOCIETIES IS PLACED AT PAGE 2 OF THE PAPER BOOK. THE COPY OF MEMORANDUM AND ARTICLE OF ASSOCI ATION AND RULES AND REGULATIONS OF THE SOCIETY ARE PLACED AT PAGES 24 TO 29 OF THE PAPER BOOK. AS PER CLAUSE 4(A) THE FIRST OBJECT OF THE A SSESSEE SOCIETY IS TO PROMOTE DENTAL EDUCATION AND AS PER CLAUSE 4(B) THE ASSESSEE IS TO ESTABLISH AND TO PROMOTE ESTABLISHMENT OF OR TO REN DER AID TO SCHOOL, COLLEGE, EDUCATIONAL INSTITUTIONS, ETC. I.E. CLAUSE S 4(C) TO 4(R) ARE ANCILLARY TO THE MAIN OBJECTS OF THE ASSESSEE TRUS T. THE SAME IS EVIDENT FROM THE PERUSAL OF THE BALANCE SHEET PLACED AT PAG E 7 OF THE PAPER BOOK FOR THE YEAR ENDING 31.3.2010 WHERE THE ASSESSEE HA D SHOWN INVESTMENT IN LAND AND BUILDING OUT OF THE FUNDS RAISED BY IT. THE ASSESSEE APPLIED FOR REGISTRATION UNDER SECTION 12A OF THE ACT IN TH E FIRST YEAR OF ITS FORMATION. ADMITTEDLY, THE ASSESSEE IS CARRYING ON THE OBJECTS OF PROVIDING EDUCATION WHICH IS RECOGNIZED AS CHARITAB LE PURPOSE UNDER SECTION 2(15) OF THE ACT. THE ASSESSEE CLAIMS THAT IT IS CARRYING ON OBJECT OF EDUCATION BY WAY OF ESTABLISHING DENTAL C OLLEGE. IN VIEW OF THE ABOVE SAID FACTS WE FIND NO MERIT IN THE ORDER OF T HE COMMISSIONER OF INCOME TAX IN REJECTING THE REGISTRATION UNDER SECT ION 12AA OF THE ACT OBSERVING THAT EXCEPT FOR OBJECT NO.(I), ALL OTHER OBJECTS FALL UNDER ANY OTHER OBJECT OF PUBLIC UTILITY. IN VIEW OF THE RA TIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT, BHATIND A VS. BABA DEEP SINGH EDUCATIONAL SOCIETY, BHATINDA (SUPRA), THE PO WER OF THE COMMISSIONER OF INCOME TAX WHILE GRANTING REGISTRAT ION IS TO LOOK INTO 7 THE OBJECT OF THE SOCIETY AND COME TO A SATISFACTIO N IN RESPECT OF THE GENUINENESS OF THE ACTIVITIES OF THE TRUST. IN THE FACTS OF THE PRESENT CASE WHERE ADMITTEDLY THE ASSESSEE IS RUNNING DENTAL COL LEGE AND ACTIVITIES WERE BY WAY OF CONSTRUCTING THE BUILDING FOR ESTABL ISHING THE DENTAL COLLEGE TO PROVIDE EDUCATION AND CONSEQUENTLY THE A SSESSEE IS ENTITLED TO THE GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT. IN VIEW THEREOF, WE HOLD THAT WHERE THE OBJECTS OF THE TRUST WERE GE NUINE I.E. OF PROVIDING EDUCATION AND THE ACTIVITIES UNDERTAKEN BY IT WERE ALSO GENUINE AS IT HAD STARTED CONSTRUCTING THE BUILDING IN WHICH SUCH DEN TAL COLLEGE HAS TO BE ESTABLISHED, THE CLAIM OF THE ASSESSEE FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT FOR CARRYING ON THE OBJECTS OF RUNNING THE EDUCATIONAL INSTITUTE IS THUS ALLOWED. FURTHER OBJ ECTION OF DISSOLUTION CLAUSE HAS ALSO BEEN MET WITH BY THE ASSESSEE. THE COMMISSIONER OF INCOME TAX SHALL THUS PASS CONSEQUENTIAL ORDER OF R EGISTRATION UNDER SECTION 12AA OF THE ACT TO THE ASSESSEE SOCIETY. T HE PLEA OF THE REVENUE THAT IT WAS ENGAGED IN OTHER OBJECTS BEING DISTRIBUTIVE AND NOT CHARITABLE IS PREMATURE AS NO SUCH OBJECTS CARRIED ON BY THE ASSESSEE, HAD BEEN BROUGHT TO OUR NOTICE. THE GROUNDS OF APP EAL RAISED BY THE ASSESSEE ARE ALLOWED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH DAY OF NOVEMBER, 2012. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH NOVEMBER, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 8