The South India Club, New Delhi V. CIT(E), New Delhi

ITA 8338/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 8255 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: misc
• Appeal Filed On: 21-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMA KRISHNA BANDE PALI
• Keywords: Charitable institution; Non compliance; Set aside
• Section: 12AA; 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G, NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.8338/DEL/2019 (ASSESSMENT YEAR-NIL) THE SOUTH INDIA CLUB, MANDIR MARG, (NEAR HINDU MAHA SABHA), NEW DELHI-110 001. PAN:AAAJT 2351B VS. CIT(EXEMPTIONS), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAMA KRISHNA BANDE PALI, ADV. & SH. RAGHAV RAJEEV MENON, ADV. RESPONDENT BY SH. H.K. CHOUDHARY, CIT-DR DATE OF HEARING 10.08.2020 DATE OF PRONOUNCEMENT 13.08.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE ASSESSEE SOCIETY AG AINST ORDER DATED 30.09.2019 PASSED BY THE LEARNED COMMIS SIONER OF INCOME TAX (EXEMPTIONS), NEW DELHI {CIT(E)} REJECTI NG THE 2 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) ASSESSEES APPLICATION FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE SOCIETY WAS FORMALLY REGISTERED IN THE YEAR 1941 AS A SOCIETY UNDER THE SOCIETY REGISTRATION ACT, 1860. IT WAS ALL OTTED A LAND MEASURING 0.75 ACRES AT READING ROAD, NEW DELHI ON PERPETUAL LEASE BY THE THEN GOVERNMENT IN THE YEAR 1934. A P ART OF THE SAID LAND WAS SUB-LEASED BY THE ASSESSEE SOCIETY TO DELHI TAMIL EDUCATION ASSOCIATION (DTEA) FORMERLY CALLED (MADRA SI EDUCATION ASSOCIATION) IN 1945 FOR RUNNING A SCHOOL. 2.1 THE OBJECTS OF THE ASSESSEE SOCIETY AS PER THE MEMORANDUM OF OBJECTIVES INTER ALIA INCLUDE: I) TO PIONEER, CULTIVATE AND ENCOURAGE ACTIVITIES IN EDUCATIONAL, SOCIAL, CULTURAL AND RECREATIONAL FIEL DS II) TO CULTIVATE LITERARY AND ARTISTIC TALENT S III) TO PROVIDE A COMMON MEETING PLACE WITH A REA DING ROOM AND ATTACHED LIBRARY, AND IV) TO PROMOTE FINE ARTS 2.2 IN JULY, 2010, SHRIRAM GROUP BASED AT CHENNAI DECIDED TO TAKE OVER THE MANAGEMENT/RUNNING OF THE SOCIETY IN 3 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) ORDER TO FULFILL THE OBJECTS OF THE SOCIETY AND INT RODUCED FUNDS FOR THE PURPOSE OF THE SAME. THE SOCIETY WANTED TO CONST RUCT BUILDING/S FOR THE FURTHERANCE OF ITS OBJECTS AFTER DEMOLITION OF THE OLD DILAPIDATED BUILDING ON THE SITE. THE SOCIE TY ALREADY HELD A LICENSE IN THE FORM OF NO OBJECTION CERTIFICATE ( NOC) FROM THE LAND AND DEVELOPMENT OFFICE BUT THERE WERE NO BUILD ING APPROVAL PLANS. THE SOCIETY REQUESTED THE NEW DELHI MUNICIPAL CORPORATION FOR THE SAME AND OBTAINED THE BUILDING APPROVAL PLAN IN THE YEAR 2013. THEREAFTER, THE SHRIRAM GROU P INTRODUCED FUNDING TO THE TUNE OF RS.6.59 CRORES TILL THE YEAR ENDED 31 ST MARCH, 2017. MEANWHILE, THE LAND DEVELOPMENT OFFICE AND THE NEW DELHI MUNICIPAL CORPORATION CANCELLED THE NO OBJ ECTION CERTIFICATE AND THE APPROVAL FOR BUILDING PLANS RES PECTIVELY AND THE SOCIETY HAD TO APPROACH THE HONBLE DELHI HIGH COURT FOR RELIEF. THE HONBLE DELHI HIGH COURT DIRECTED THE L AND DEVELOPMENT OFFICE AND THE NEW DELHI MUNICIPAL CORPO RATION TO RECONSIDER THE ASSESSEES REQUEST FOR NO OBJECTION CERTIFICATE AND APPROVAL OF BUILDING PLANS VIDE ORDER DATED 03.06.2 016. 4 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) 2.3 THEREAFTER, THE ASSESSEE SOCIETY FILED APPLICA TION IN FORM NO.10A ON 27.03.2019 SEEKING REGISTRATION U/S 12AA OF THE ACT. THE LD. CIT (E) REQUIRED THE ASSESSEE SOCIETY TO FILE VARIOUS DOCUMENTS AND A NUMBER OF HEARINGS WERE HELD. THE S OCIETY COMPLIED WITH THE REQUIREMENTS AND REPLIED TO THE QU ESTIONNAIRE. HOWEVER, THE LD. CIT (E) OBSERVED THAT ON A PERUSAL OF SOCIETY RULES AND REGULATIONS, IT IS FOUND THAT THE SUBSCRI PTION FEE OF RS.3 AND RS.5 PER MONTH WERE VERY HIGH FOR DIFFEREN T CATEGORIES OF MEMBERS CONSIDERING THAT THE SOCIETY WAS CONSTITUTED IN 1941. THE LD. CIT (E) ALSO OBSERVED THAT THE RIGHT TO ADM ISSION WAS SUBJECT TO THE APPROVAL OF THE MANAGING COMMITTEE A ND, THEREFORE, THE SOCIETY WAS FOR THE BENEFIT OF SPECIF IC PERSONS AND NOT FOR PUBLIC CHARITABLE PURPOSES. IT WAS ALSO OBSE RVED BY THE LD. CIT (E) THAT THE SOCIETY HAD NOT CARRIED OUT AN Y CHARITABLE ACTIVITY DURING THE PAST YEARS AND THAT THE SOCIETY HAD UTILIZED THE AMOUNTS RECEIVED FROM SHRIRAM GROUP TOWARDS CONS TRUCTION OF BUILDING WHICH WAS NOT IN ACCORDANCE WITH THE OBJEC TS OF THE SOCIETY. IT WAS ALSO OBSERVED BY THE LD. CIT (E) THA T THE AUDIT/S OF ACCOUNTS THE SOCIETY FOR THE PERIOD 31.03.2006 T O 31.03.2010 5 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) WERE CARRIED OUT BELATEDLY AND THAT THE AUDITOR HAS OBSERVED THAT THE EXECUTIVE COMMITTEE HAD NOT FOLLOWED THE DIRECT IONS PRESCRIBED UNDER THE RULES REGARDING THE MAINTENANC E OF ACCOUNTS. 2.4 WITH THE ABOVE OBSERVATIONS, THE LD. CIT (E) C ONCLUDED THAT THE ASSESSEE SOCIETY HAD NOT CARRIED ANY CHARI TABLE ACTIVITY ALTHOUGH IT HAD BEEN CREATED IN THE YEAR 1941 AND, THEREFORE, THE CONDITIONS FOR GRANTING REGISTRATION U/S 12AA OF TH E ACT WERE NOT SATISFIED. THE ASSESSEES APPLICATION FOR GRANT OF REGISTRATION WAS REJECTED BY THE LD. CIT (E). 2.5 THE ASSESSEE HAS NOW APPROACHED THE TRIBUNAL CHALLENGING THE REJECTION OF THE ASSESSEES APPLICA TION FOR GRANT OF REGISTRATION BY RAISING THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT (EXEMPTION) REJECTING THE APPELLANTS APPLICATION FOR GRANT OF REGISTRATION U /S.12A OF THE INCOME TAX ACT IS ERRONEOUS BOTH ON FACTS AN D IN LAW. 2. THE CIT (E) ERRED IN CONCLUDING THAT THE APPELLANT SOCIETY HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITI ES THOUGH THE SAME WAS CREATED IN THE YEAR 1941 AND AL SO HAS NOT COMPLIED WITH ITS RULES AND REGULATIONS. 6 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) 3. THE CIT (E) FAILED TO APPRECIATE THAT THE OBJECTS OF THE APPELLANT SOCIETY ARE CHARITABLE IN NATURE AS EVIDENCED BY ITS CHARTER AND THE ACTIVITIES OF THE SOCIETY HAVE ALWAYS BEEN GENUINE. 4. THE CONCLUSION OF CIT (E) THAT THE SOCIETY HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES THOUGH THE SA ME WAS CREATED IN THE YEAR 1941 IS CONTRARY TO HIS OWN FINDING IN PARA 9 OF HIS ORDER THAT THE APPELLANT SOCIETY IN PAST FEW YEARS HAS NOT CARRIED OUT ANY CHARITABLE ACTIVITIES. 5. THE CIT (E) FAILED TO APPRECIATE CONSTRUCTION OF BUILDING FOR USE AS AUDITORIUM, READING ROOM ETC., IS FOR THE PURPOSE OF PROMOTION AND DEVELOPMENT OF ART AND CULTURE AND CONSTITUTES AN INTEGRAL PART OF CHARITA BLE PURPOSE. 6. THE CIT (E) FAILED TO APPRECIATE THAT THE ALLEGED NON ADHERENCE BY THE EXECUTIVE COMMITTEE/MANAGING COMMITTEE/ HONORARY SECRETARY TO CERTAIN RULES OF T HE SOCIETY REGARDING ACCOUNTS/CESSATION OF MEMBERSHIP/CASH EXPENSES NONE OF WHICH WERE FRAUDULENT OR SERIOUS VIOLATIONS DID NOT MILITATE A GAINST THE GENUINE NATURE OF THE ACTIVITIES OF THE APPELLA NT SOCIETY AND GRANT OF REGISTRATION U/S.12A. 7. THE CIT (E) OVER LOOKED THE FACT THAT THE APPELLAN T WAS REGISTERED UNDER THE SOCIETIES REGISTRATION ACT 1860 (ACT XX1 OF 1860) WAY BACK IN 1941 AND THE SOCIETY HAD ITS ORIGINS PRIOR TO THAT AS WELL, THAT THE SOCIETY GOT A PLOT OF LAND FROM THE GOVERNMENT IN NOVEMBER 1934 ON PERPETUAL LEASE AND A PART OF THE LANDS WAS SUBLEAS ED TO DELHI TAMIL EDUCATION ASSOCIATION IN 1945 FOR RU NNING A SCHOOL AND THAT SCHOOL EXISTS. 7 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) 8. THE CIT (E) FAILED TO APPRECIATE THE FACT THAT DUR ING MORE THAN SIX DECADES OF ITS EXISTENCE SINCE ITS IN CEPTION, THE APPELLANT SOCIETY WAS MANAGED BY DIFFERENT GOVERNING BODIES FROM TIME TO TIME AND THAT DURING SOME PART OF THE PERIOD THE OLD BUILDING FROM WHERE THE ACTIVITIES WERE BEING CARRIED OUT BECAME DILAPIDATE D AND UNSAFE AND DANGEROUS FOR OCCUPATION AND WAS ALSO SEALED AS MENTIONED IN THE AUDITORS REPORT FOR THE PERIOD 2006 TO 2010 REFERRED TO BY THE CIT(E) IN HI S ORDER WHICH CAUSED INTERRUPTION IN THE ACTIVITIES OF THE APPELLANT SOCIETY. 9. THE CIT (E) FAILED TO APPRECIATE THAT THE PRESENT GOVERNING BODY AS SOON AS TAKING OVER THE MANAGEMEN T OF THE APPELLANT SOCIETY IN THE YEAR 2010, TOOK STE PS IN RIGHT EARNEST TO REVIVE AND CONTINUE THE ACTIVITIES OF THE APPELLANT SOCIETY. 10. THE CIT (E) FAILED TO APPRECIATE THAT THE GOVERNIN G BODY WHICH TOOK OVER THE MANAGEMENT IN THE YEAR 201 0 PUT IN LOT OF EFFORTS TO CONTINUE THE ACTIVITIES OF THE SOCIETY. 11. THE CIT (E) FAILED TO APPRECIATE THAT THE NEW MANAGEMENT MOBILISED RESOURCES INTERNALLY, OBTAINED THE REQUISITE STATUTORY LICENSE AND APPROVAL FOR CONSTRUCTION OF A NEW AUDITORIUM BUILDING WITH READ ING ROOM ETC., AND ALSO SUCCESSFULLY FOUGHT THE CASE IN THE DELHI HIGH COURT WHEN THE APPROVALS GRANTED BY THE AUTHORITIES WERE WITHDRAWN ABRUPTLY OWING TO ENCROACHMENTS BY ANOTHER PARTY AND NOT DUE TO ANY VIOLATION BY THE APPELLANT SOCIETY. 12. THE CIT (E) FAILED TO APPRECIATE THE FACT THAT THE INTERRUPTION IN THE ACTIVITIES OF THE SOCIETY WAS D UE TO REASONS AND CIRCUMSTANCES BEYOND THE CONTROL OF THE APPELLANT SOCIETY ESPECIALLY THE NEW GOVERNING BODY 8 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) WHICH TOOK OVER THE MANAGEMENT IN THE YEAR 2010 AND SUCH TEMPORARY INTERRUPTION OR CESSATION CANNOT BE HELD AGAINST THE APPELLANT SOCIETY AS A VALID REASON TO REFUSE GRANT OF REGISTRATION U/S.12A OF THE INCOME TAX ACT . 13. THE CIT (E) FAILED TO APPRECIATE THAT DURING THE PERIOD WHEN THE REGULAR ACTIVITIES WERE INTERRUPTED BECAUSE OF THE UNSAFE NATURE OF THE BUILDING THEN GOVERNING BODY COULD NOT CARRY OUT ITS NORMAL FUNCT IONS AND THAT CANNOT BE A VALID GROUND FOR REFUSING REGISTRATION U/S.12A. 14. THE CIT (E) FAILED TO APPRECIATE THAT NON-COMPLIANC E BY THE EXECUTIVE COMMITTEE NON COMPLIANCE WITH SOME OF THE RULES AND REGULATIONS OF THE APPELLANT SOCIETY AS POINTED OUT IN THE AUDITORS REPORT FOR THE YEARS 20 06 TO 2010 WAS CAUSED BY CLOSURE AND SEALING OF THE BUILD ING AS UNSAFE AND THAT WAS ONLY A TEMPORARY CESSATION P RIOR TO THE NEW GOVERNING BODY TAKING OVER THE MANAGEMEN T IN THE YEAR 2010 AND THOSE DEVIATIONS, IF ANY, WERE NOT VALID MATERIAL FOR REJECTING REGISTRATION U/S.12A. 15. THE CIT (E) ERRED IN CONCLUDING THAT THE APPELLANT SOCIETY IS NOT FOR PUBLIC CHARITABLE PURPOSES BECAU SE RIGHT OF ADMISSION TO MEMBERSHIP IS SUBJECT TO APPR OVAL BY MANAGING COMMITTEE. HE ERRED ALSO IN HOLDING THE MEMBERSHIP FEE IS HIGH. 16. THE CIT (E) FAILED TO APPRECIATE THAT THE APPELLAN T SOCIETY FULLY SATISFIED THE CONDITIONS (I) & (II) M ENTIONED IN PARA 12 OF HIS OWN ORDER AND HENCE HIS REJECTION OF THE APPLICATION FOR GRANT OF REGISTRATION IS UNTENABLE. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING IT IS PRAYED THE APPELLANT TRIBUNAL MAY BE PLEASED TO SET ASIDE THE ORDER OF CIT (E) REFUSI NG REGISTRATION AND DIRECT HIM TO GRANT REGISTRATION. 9 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) 3.0 THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE LD. CIT (E) HAD FAILED TO APPRECIATE THAT THE OBJECTIVE S OF THE ASSESSEE SOCIETY WERE CHARITABLE IN NATURE. IT WAS SUBMITTED THAT THE LD. CIT (E) HAD FAILED TO APPRECIATE THAT A PART OF THE LAND HAD BEEN LET OUT TO THE DELHI TAMIL EDUCATION ASSOCIATION WHI CH WAS RUNNING A SCHOOL FROM PREMISES AND THAT SINCE THE B UILDING HAD BECOME VERY OLD AND WAS UNFIT FOR HABITATION, CONSTR UCTION OF NEW BUILDING AFTER DEMOLITION OF THE OLD BUILDING WAS A N ACTIVITY IN FURTHERANCE OF THE OBJECT OF THE SOCIETY INTER ALIA BEING PROMOTION AND DEVELOPMENT OF ART AND CULTURE. IT WAS ALSO SUBM ITTED THAT THE TEMPORARY INACTIVITY OR SUSPENSION OF ACTIVITIE S FOR A LIMITED PERIOD DUE TO UNFORESEEN CIRCUMSTANCES WOULD NOT MA KE THE SOCIETY AS NON-CHARITABLE BECAUSE THE OBJECTS CONTI NUED TO REMAIN THE SAME WHICH WERE, UNDISPUTEDLY, CHARITABLE . IT WAS ALSO SUBMITTED THAT THE LD. CIT (E) HAD MADE IRRELE VANT OBSERVATION LIKE SUBSCRIPTION FEE OF RS.3 AND 5 BEI NG TOO HIGH A FEE FOR A CHARITABLE SOCIETY. THE LD. AUTHORIZED RE PRESENTATIVE PLACED RELIANCE ON NUMEROUS JUDICIAL PRECEDENTS IN THE FORM OF ORDERS OF THE ITAT AND JUDGMENTS OF THE HONBLE COU RTS TO 1 0 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) BUTTRESS ASSESSEES CLAIM THAT THE LD. CIT (E) HAD WRONGLY REFUSED THE GRANT OF REGISTRATION. 4.0 PER CONTRA, THE LD. CIT-DR SUBMITTED THAT THE LD. CIT (E) HAD RIGHTLY REFUSED THE GRANT OF REGISTRATION I N AS MUCH AS THE ASSESSEE HAD APPROACHED THE LD. CIT (E) FOR GRANT O F REGISTRATION IN THE YEAR 2019 ALTHOUGH DURING THE FINANCIAL YEAR S ENDING 31 ST MARCH, 2015, 2016 & 2017, THE AMOUNT/S RAISED THROU GH LOANS EXCEEDED RS.6 CRORES AND, THEREFORE, THE SOCIETY WA S UNDER AN OBLIGATION TO FILE ITS RETURN OF INCOME WHICH WAS NOT DONE. THE LD. CIT-DR ALSO SUBMITTED THAT THE NO OBJECTION CERTIFI CATE FROM THE LAND DEVELOPMENT OFFICE WAS CANCELLED BECAUSE THERE WAS UNAUTHORIZED CONSTRUCTION ON THE LAND ALLOTTED BY T HE GOVERNMENT TO THE SOCIETY. THE LD. CIT-DR ALSO SUBM ITTED THAT THE OBJECTS CLAUSE RESTRICTED THE BENEFIT OF THE SO CIETYS ACTIVITIES TO ITS MEMBERS AND THAT THE APPROVAL OF MANAGING CO MMITTEE WAS NECESSARY FOR THE PURPOSE OF BECOMING A MEMBER O F SOCIETY. IT WAS ALSO SUBMITTED BY THE LD. CIT-DR THAT ONLY A PORTION OF THE LAND SO ALLOTTED BY THE GOVERNMENT ON PERPETUAL LEASE WAS BEING UTILIZED FOR RUNNING A SCHOOL AND THE REMAINI NG PORTION WAS 1 1 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) BEING USED TO RUN A CLUB-HOUSE WHICH COULD NOT BE C ONSIDERED A CHARITABLE ACTIVITY BY ANY STRETCH TO IMAGINATION. THE LD. CIT-DR ALSO SUBMITTED THAT THE VARIOUS JUDGMENTS RELIED UP ON BY THE LD. AUTHORIZED REPRESENTATIVE WERE DISTINGUISHABLE ON T HE FACTUAL MATRIX OF THE CASE. THE LD. CIT-DR SUPPORTED THE OR DER OF THE LD. CIT (E) VEHEMENTLY AND SUBMITTED THAT THE REGISTRAT ION HAD BEEN RIGHTLY REFUSED. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE A LSO PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO CAREFU LLY GONE THROUGH THE IMPUGNED ORDER. A PERUSAL OF THE IMPUGN ED ORDER SHOWS THAT ONE OF THE REASON SPECIFIED BY THE LD. CI T (E) FOR REJECTING THE ASSESSEES APPLICATION FOR REGISTRATI ON U/S 12AA OF THE ACT IS THAT SINCE NO ACTIVITIES HAD BEEN UNDERT AKEN BY THE SOCIETY, IT WAS NOT POSSIBLE TO REGISTER IT PRESUMA BLY BECAUSE IT WAS NOT POSSIBLE TO FORM SATISFACTION ABOUT WHETHER T HE ACTIVITIES OF THE SOCIETY WERE GENUINE, WE FIND THAT THIS ISSU E HAS BEEN SETTLED BY THE HONBLE APEX COURT IN THE CASE OF ANANDA SOCIAL & EDUCATIONAL TRUST VS. CIT VIDE ORDER DATED 19.02.20 20 REPORTED IN 1 2 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) [2020] 114 TAXMANN.COM 693 (SC). THE RELEVANT OBSERVATIONS OF THE HONBLE APEX COURT ARE CONTAINED IN PARAGRAPHS 9 TO 12 OF THE SAID ORDER AND THE SAME ARE BEING REPRODUCED HE REIN UNDER FOR A READY REFERENCE: 9. SECTION 12AA UNDOUBTEDLY REQUIRES THE COMMISSIONER TO SATISFY HIMSELF ABOUT THE OBJECTS O F THE TRUST OR INSTITUTION AND GENUINENESS OF ITS ACT IVITIES AND GRANT A REGISTRATION ONLY IF HE IS SO SATISFIED . THE SAID SECTION REQUIRES THE COMMISSIONER TO BE SO SATISFIED IN ORDER TO ENSURE THAT THE OBJECT OF THE TRUST AND ITS ACTIVITIES ARE CHARITABLE SINCE THE CONSEQU ENCE OF SUCH REGISTRATION IS THAT THE TRUST IS ENTITLED TO CLAIM BENEFITS UNDER SECTIONS 11 AND 12 OF THE ACT. IN OT HER WORDS, IF IT APPEARS THAT THE OBJECTS OF THE TRUST AND ITS ACTIVITIES ARE NOT GENUINE THAT IS TO SAY NOT CHARI TABLE THE COMMISSIONER IS ENTITLED TO REFUSE AND IN FACT, BOUND TO REFUSE SUCH REGISTRATION. 10. IT WAS ARGUED BEFORE US THAT THE COMMISSIONER IS REQUIRED TO BE SATISFIED ABOUT TWO THINGS - FIRSTLY THAT THE OBJECTS OF THE TRUST AND SECONDLY, ITS ACTIVITI ES ARE GENUINE. IF THERE HAVE BEEN NO ACTIVITIES UNDERTAKE N BY THE TRUST THEN THE COMMISSIONER CANNOT ASSESS WHETHER SUCH ACTIVITIES ARE GENUINE AND THEREFORE, THE COMMISSIONER IS BOUND TO REFUSE THE REGISTRATION OF SUCH A TRUST. 11. WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE ABOVE SUBMISSIONS MADE BY MS. AISHWARYA BHATI, LEARNED SENIOR COUNSEL APPEARING FOR THE APPELLANT - 1 3 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) DIRECTOR OF INCOME-TAX AND FIND THAT IT IS NOT POSS IBLE TO AGREE WITH THE SAME. THE PURPOSE OF SECTION 12AA OF THE ACT IS TO ENABLE REGISTRATION ONLY OF SUCH TRUS T OR INSTITUTION WHOSE OBJECTS AND ACTIVITIES ARE GENUIN E. IN OTHER WORDS, THE COMMISSIONER IS BOUND TO SATISFY HIMSELF THAT THE OBJECTS OF THE TRUST ARE GENUINE A ND THAT ITS ACTIVITIES ARE IN FURTHERANCE OF THE OBJEC TS OF THE TRUST, THAT IS EQUALLY GENUINE. 12. SINCE SECTION 12AA PERTAINS TO THE REGISTRATION OF THE TRUST AND NOT TO ASSESS OF WHAT A TRUST HAS ACTUALLY DONE, WE ARE OF THE VIEW THAT THE TERM ACTIVITIES IN THE PROVISION INCLUDES 'PROPOSED AC TIVITIES'. THAT IS TO SAY, A COMMISSIONER IS BOUND TO CONSIDER WHETHER THE OBJECTS OF THE TRUST ARE GENUINELY CHARITABLE IN NATURE AND WHETHER THE ACTIVITIES WHI CH THE TRUST PROPOSED TO CARRY ON ARE GENUINE IN THE S ENSE THAT THEY ARE IN LINE WITH THE OBJECTS OF THE TRUST . IN CONTRAST, THE POSITION WOULD BE DIFFERENT WHERE THE COMMISSIONER PROPOSES TO CANCEL THE REGISTRATION OF A TRUST UNDER SUB-SECTION (3) OF SECTION 12AA OF THE ACT. THERE THE COMMISSIONER WOULD BE BOUND TO RECORD THE FINDING THAT AN ACTIVITY OR ACTIVITIES ACTUALLY CAR RIED ON BY THE TRUST ARE NOT GENUINE BEING NOT IN ACCORDANC E WITH THE OBJECTS OF THE TRUST. SIMILARLY, THE SITUA TION WOULD BE DIFFERENT WHERE THE TRUST HAS BEFORE APPLY ING FOR REGISTRATION FOUND TO HAVE UNDERTAKEN ACTIVITIE S CONTRARY TO THE OBJECTS OF THE TRUST. 5.1 UNDISPUTEDLY, IN THE PRESENT CASE, THE LD. CI T (E) HAS NOT RECORDED A FINDING THAT THE ACTIVITIES OF THE S OCIETY WERE NOT 1 4 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) GENUINE OR WERE NOT IN ACCORDANCE WITH THE OBJECTS O F THE SOCIETY. RATHER, IT IS THE OBSERVATION OF THE LD. CIT (E) TH AT NO ACTIVITIES HAD BEEN CARRIED OUT BY THE ASSESSEE SOCIETY. THERE FORE, IT IS OUR CONSIDERED OPINION THAT THE LD. CIT (E) HAS UNNECES SARILY ENLARGED THE SCOPE OF THE MANDATE TO BE EXERCISED B Y HIM AT THE TIME OF GRANT OF REGISTRATION U/S 12AA OF THE ACT. HE HAS GONE INTO AN ALL TOGETHER DIFFERENT CONSIDERATION FOR GR ANT OF REGISTRATION WHEREAS HE WAS ONLY TO CONSIDER WHETHER T HE OBJECTS AND THE ACTIVITIES WERE GENUINE WERE NOT. THUS, THE OBSERVATION OF THE LD. CIT (E) THAT SINCE NO ACTIVITIES WERE CA RRIED OUT, THE REGISTRATION CANNOT BE GRANTED, DOES NOT HOLD GOOD. 5.2 WE ALSO NOTE THAT THE LD. CIT (E) WENT ON TO MA KE AN IRRELEVANT OBSERVATION THAT THE SUBSCRIPTION FEE OF RS. 3 & RS. 5 TO BE CHARGED FROM VARIOUS CATEGORIES OF MEMBERS WAS HIGH AND, THEREFORE, THE ACTIVITY OF THE SOCIETY COULD NOT BE CONSIDERED CHARITABLE. WE FIND OURSELVES UNABLE TO BE IN AGREE MENT WITH THE LD. CIT (E) AS THIS BEING A VALID REASON FOR REFUSA L TO GRANT OF REGISTRATION U/S 12AA OF THE ACT. THE QUANTUM OF FEE/SUBSCRIPTION ONLY WITHOUT ANY OTHER CORROBORATIN G FINDING 1 5 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) ESTABLISHING THAT THE ACTIVITIES ARE NOT CHARITABLE CANNOT BE A GROUND FOR REFUSAL FOR GRANT OF REGISTRATION AND WE HOLD THAT REGISTRATION COULD NOT HAVE BEEN DENIED ON THIS GRO UND ALSO. 5.3 THUS, THE LD. CIT (E) HAS GIVEN ALTOGETHER INV ALID REASONS FOR REFUSING THE GRANT OF REGISTRATION U/S 12AA OF THE ACT. HE HAS ALSO CHOSEN NOT TO COMMENT ADVERSELY ON THE NATURE OF THE OBJECTS WHICH STRENGTHENS THE CAUSE OF THE ASSES SEE SOCIETY. THEREFORE, WE SET ASIDE THE ORDER OF THE LD. CIT (E ) BY HOLDING THAT THE LD. CIT (E) HAS DISMISSED THE APPLICATION FOR REGISTRATION WITHOUT ANY JUSTIFIABLE REASON AND BY CONSIDERING CO MPLETELY IRRELEVANT FACTORS. THE LD. CIT (E) HAS ALSO NOT RE CORDED ANY ADVERSE FINDING THAT THE OBJECTS OF THE SOCIETY WER E NOT CHARITABLE OR WERE NON-GENUINE. UNDER SUCH CIRCUMSTANCES, WE H AVE NO OPTION BUT TO SET ASIDE THE ORDER OF THE LD. CIT (E ). THE LD. CIT (E) IS DIRECTED TO GRANT OF REGISTRATION U/S 12AA O F THE ACT TO THE ASSESSEE SOCIETY. 1 6 ITA NO.8338/DEL/2019 THE SOUTH INDIA CLUB VS. C IT(E) 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESSE E STANDS ALLOWED. ORDER PRONOUNCED ON 13/08/2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBER DATED:13/08/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI