TaxTMI 
TaxTMI 
2007 (2) TMI 575
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....s registered on 29-3-1982, of which Smt. Shashi Mishra was the President and Sri R.C. Mishra, her husband, was Mantri/Manager of the Society. The said Society was running school at Rajajipuram, Lucknow and at Gomti Nagar, Lucknow. The third branch of the institution was under construction at Vishnulok Colony, Kanpur Road, Lucknow. 4. The ITO, however, found that the assessee Society had been making investment in purchase of library books and noted that books worth Rs. 50,000 were purchased by the assessee from Orient Longman Pvt. Ltd. on 1-12-2000 and again books were purchased for Rs. 50,100 vide bill dated 31-7-2000. The ITO was of the view that these books were for higher studies and not fit for the standard of school run by the assessee Society. She further noted that on enquiry from Orient Longman Pvt. Ltd., the name of the assessee Society was not having any account, but the books were purchased by Nav Jagriti Kendra and that assessee Society had shown expenses on account of educational contribution to Nav Chetna Kendra which was running to several lakhs of rupees, whereas Nav Chetna Kendra was another Society registered on 21-5-1993, in which Sri R.C. Mishra was the Secre....
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.... scope of enquiry as propounded by its Bench at Lucknow in the case of St. Don Bosco Educational Society v. CIT [2004] 90 ITD 477 held that considerations made by the Commissioner of Income-tax and report submitted by the ITO were, in fact, not sufficient to reject the plea of registration and that at the time of registration, the Commissioner was obliged only to see that (i) the objects of the Society are not against public policy; and (ii) the activities of that Society are genuine. 11. The Tribunal also held that it was the duty of the Assessing Officer to examine the case of the assessee for exemption under section 11/13 of the Act when assessee files necessary return in the relevant years and in case he finds that the assessee was indulging in such activities, which may debar it from getting exemption, he may pass necessary orders and that mere registration will not be sufficient to allow the assessee to claim exemption as that will be the domain of the Assessing Officer to examine each and every fact including the defects noted by the Commissioner of Income-tax. 12. Section 12A of the Act under the heading 'Conditions as to registration of trusts etc.' says that provisi....
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....f sub-section (1) and sub-section (2) are the following, namely:- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c ), (cc) and (d) has a substantial interest." 16. The aforesaid provisions, namely, section 11 along with its sub-clauses as well as section 12 along with its sub-sections, are the provisions, which provide that the income, as described therein, shall not be included in the total income of the previous year of the person in receipt of such income and that such a person would be entitled to the exclusion of such income from being computed with th....
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....t or the institution to seek registration under section 12AA, if such trust or institution intends to have the benefit of the provisions of section 11 and section 12 of the Act, which have been referred to above. 20. These provisions thus, make it clear that if the trust or the institution is not registered under section 12AA, it would not be able to claim any exemption or exclusion of its income from the total income of the previous year, even if such income is otherwise liable to be excluded under any of the clauses of section 11 or section 12 of the Act. 21. Thus, in a case where registration is refused, the trust or the institution would not be allowed to claim any such exemption or exclusion of its income from the total income of the previous year. 22. The procedure for registration has been given in section 12AA, which reads as under: "12AA. Procedure for Registration.-(1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) of section 12A, shall - (a )call for such documents or information form the trust or institution as he thinks necessary in order to satisfy himself about the genuineness....
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....self about the objects of the trust or institution and the genuineness of its activities, he shall pass an order in writing registering the trust or institution and if he is not satisfied, he would refuse the registration. 24. Sub-section (3) inserted with effect from 1-10-2004, gave power of cancellation of registration to the Commissioner, if subsequently he finds and is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution. 25. Power of cancellation of registration has been conferred with a view to ensure that if once a registration has been granted under section 12AA, the trust or the institution may not take liberty of misusing the provision and consequently go haywire in furthering the object of the trust or its activities do not remain genuine any further. 26. The moot question which has been pressed from both the sides, as per their own interests, is regarding the scope of authority and the extent of investigation by the Commissioner for the purpose of satisfying about the genuineness of the activities of the trust or institution, for the purpose of grant of reg....
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....n 12AA, it makes clear that the Commissioner has to satisfy himself about the genuineness of the activities of the trust or institution and also about the objects of the trust or the institution. 31. On being satisfied about the genuineness of the activities of the trust or the instruction and also about its objects, the Commissioner would either grant the certificate or would reject the prayer. In order to satisfy himself about the genuineness of the activities of the trust or the institution, he can call for such documents or information from the trust or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. 32. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. 33. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, re....
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....h income is applied 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 such property. 37. Sub-section (2) of section 11 states about a situation where eighty five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either 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 previous year of the person in receipt of the income, provided the conditions given in sub-clauses (a) and (b) are complied with. 38. This also means that even that income, which could not be exempted under sub-clause (a) or (b) of sub-section (1), can still be exempted, if the conditions attached to sub-section (2) in its sub-clauses (a) and (b) are complied with. 39. Sub-section (3) again says that if any i....
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....tration, the trust or the institution would not be entitled to claim any exemption of the income derived, though it is being run for charitable purposes, the registration has to be considered in the light of the specific provisions aforesaid and in the manner that it furthers 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. 44. 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 year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry by the Commissioner shall remain restricted to the examina-tion, as to whether the assessee, who has moved the application for registration under section 12A, is actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objects thereof, which ....
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....ainst public policy or do not fall within the category of activities, which are for charitable purposes. Education in itself is a charitable purpose and activities related thereto, which include, both physical and mental development and also instilling of a feeling of self-confidence through exercise, sports and extensive reading of good books, cannot, in any manner, be described as a non- charitable purpose or much less a non-educational activity. Education means and includes not only knowledge of text books or prescribed educational courses but overall development of the child, which includes personality development and his physical fitness, apart from his capacity to analyse things and reach to logical conclusion on a given issue. Schools may, for the purpose, organize various cultural and educational entertainment programmes, sports meet, debates and seminars etc. and all such activities shall form part of the education. 49. We thus find that the objects of the Society were well in consonance with the scheme of the Act. 50. In regard to the genuineness of the activities, the Commissioner of Income-tax has given very many reasons, which have been though discussed by the IT....
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....t on record that the amount advanced by the assessee to the Nav Chetna Kendra was not for any other object, except that mentioned in the objects of that Society. There is nothing on record to show that money so advanced was for personal benefit of any office bearers of the assessee Society or any other person. It not being in dispute that Nav Chetna Kendra Society runs the library of the institution, an object related to charitable purpose, where the money has been advanced by the assessee Society in furtherance of the said object i.e. for running a library, which is again an educational purpose, it cannot be a ground for refusing registration of the assessee Society. 55. There is no finding that the aforesaid activities of the Society were not genuine. 56. The Tribunal has also considered that the balance sheet could not be reconciled as earlier the balance sheet was not audited and the audited balance sheets, which were filed before the Commissioner, did not show any discrepancy. 57. So far the non-deduction of provident fund from the salary paid to certain employees is concerned, that in itself again would not constitute a ground for rejection, as no such requirement st....