Chokhraj Tulsyan Saraswati Vidhya Mandir Inter College, Maharajganj V. Commissioner of Income Tax (Exemption), Lucknow

ITA 691/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1123 (ITAT-LUCKNOW)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 02-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 12AA; 12; 11

Judgement Text

I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.691/LKW/2017 ASSESSMENT YEAR:N.A. CHOKHRAJ TULASYAN SARSWATI VIDYA MANDIR INTER COLLEGE, SISWA KHURD, SISWA BAZAR, MAHARAJGANJ. PAN:AABTC 5119 P 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 A NON PROFIT ASSOCIATION REGISTERED UNDER THE SOCIETIES REGISTRA TION ACT, 1860 FOR CARRYING OUT CHARITABLE ACTIVITIES. THE ASSESSEE HAD APPLIE D FOR REGISTRATION U/S 12AA WHICH THE CIT (EXEMPTIONS) HAS REFUSED. LEARNED A. R. SUBMITTED THAT AT THE TIME OF REGISTRATION U/S 12AA THE ONLY ASPECT W HICH CIT (EXEMPTIONS) IS EXPECTED TO EXAMINE IS OBJECT OF THE ASSESSEE AND G ENUINENESS OF THE ACTIVITIES OF THE ASSESSEE FOR ACHIEVING OF THESE O BJECTS. IT WAS SUBMITTED APPELLANT BY SHRI ADITYA AGARWAL, C.A. RESPONDENT BY SHRI J. S. MINHAS, CIT, D.R. DATE OF HEARING 19/02/2018 DATE OF PRONOUNCEMENT 22 / 02 /201 8 I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 2 THAT OBJECTS OF THE SOCIETY ARE CHARITABLE IN NATUR E AND A COPY OF THE OBJECTS WAS PLACED IN PAPER BOOK PAGES 62 TO 72. HE SUBMIT TED THAT VIDE PARA 8 OF HIS ORDER, CIT (EXEMPTIONS) HAS HELD THAT MERE RECI TAL OF OBJECTS OR ACTIVITIES WITHOUT COGENT OR CORROBORATIVE EVIDENCE IS NOT SUF FICIENT BY THEMSELVES TO ENABLE A REGISTERING AUTHORITY TO GRANT REGISTRATIO N. IN THIS RESPECT, LEARNED A. R. SUBMITTED THAT ASSESSEE HAD FILED COPIES OF A UDITED FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR 2013-14 TO 2015-1 6, COPY OF WHICH WAS PLACED AT PAGES 50 TO 61 OF THE PAPER BOOK AND HAD ALSO SUBMITTED COPIES OF INCOME TAX RETURN FOR THE FINANCIAL YEAR 2014-15 AND 2015-15, COPY OF WHICH IS AVAILABLE AT PAGES 35 AND 36 OF THE PAPER BOOK, WHICH ITSELF PROVES THAT THE ASSESSEE WAS RUNNING A COLLEGE WHICH WAS I N CONSONANCE WITH THE OBJECTS OF THE SOCIETY. LEARNED A. R. IN THIS RESP ECT RELIED ON A JUDGMENT OF HON'BLE ALLAHABAD 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 REGISTRATION THE CIT (EXEMPTIONS) IS EMPOWERED TO E XAMINE THE OBJECTS OF THE SOCIETY AND THE GENUINENESS OF ITS ACTIVITIES. THEREFORE, IT WAS PRAYED THAT CIT (EXEMPTIONS) BE DIRECTED TO GRANT REGISTRA TION 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 ES 62 TO 72 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 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 AUDITED FINANCIAL STATEMENTS FOR T HE FINANCIAL YEAR 2013-14 TO I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 3 2015-16 AND HAD ALSO FILED COPIES OF INCOME TAX RET URN WHICH CLEARLY ESTABLISH THAT ASSESSEE WAS RUNNING A COLLEGE. THE REFORE, THIS FINDING OF CIT (EXEMPTIONS) THAT GENUINENESS OF THE ACTIVITIES COU LD NOT BE VERIFIED IS NOT BASED UPON THE FACTS. 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) 394 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 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 I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 4 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 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. I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 5 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. 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. I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 6 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 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 COLLEGE FOR ACHIEVEMENT I.T.A. NO.691/LKW/2017 ASSESSMENT YEAR:N.A. 7 OF ITS OBJECTS AS GIVEN IN THE BYE-LAWS. THEREFORE , THE 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 22/02/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:22/02/2018 *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