TaxTMI 
TaxTMI 
2018 (10) TMI 430
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....Briefly stated facts are that the assessee society applied for registration u/s 12AA of the Act in form No.10A duly received in the office of CIT on 8.2.2016. Ld. CIT gave opportunity of being heard on 18.7.2016 and after considering material on record, refused to grant registration u/s 12AA of the Act. 3. Aggrieved by this, the assessee is in present appeal. Ld. Counsel for the assessee submitted that Ld. CIT misdirected himself and exceeded the mandate of law. He submitted that at the time of registration of application, the Ld. CIT is required to verify the genuineness of the objects of the society. Ld. Counsel for the assessee has taken us through the objects of the society enclosed in the paper book at page No.16. He submitted that the issue is squarely covered by the judgement of the jurisdictional High Court rendered in the case of CIT Vs. D.P.R. Charitable Trust (2011) 16 DTR 410. The reliance is also placed on the decision of the coordinate bench in the case of Vidyadayani Shiksha Samiti Vs. CIT (Exemption) in ITA No.309/Del/2016. Ld. Counsel for the assessee further reiterated the submissions made in the written synopsis, which is reproduced as under:- "1. The....
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....the society is to spread education. For fulfilling the objectives society is running a Senior Secondary School affiliated to M.P. Board, under the name and style of ST Mary's Higher Secondary School at Sehore. b. Regarding the observation of Learned CIT (Exemption) about the payment of rent to related parties is not on pro rata basis though the premises are adjoining it is submitted that the observation is not correct. It is submitted that there is no such irregularity and the rent paid is most reasonable. It is also well within the fair rental value as assessed by the office of PWD Sehore.Copy enclosed at P.B. Page no. 58 to 63 To further explain we have compiled all the details in a tabular format which explains the total area of land, built up area, open land, rent as per agreement and fair rental value as per PWD Norms as under :- Your Honors, as seen from above there is no disproportionate rent. It appears that the Learned CIT (Exemption) has taken criteria of numbers of rooms only disregarding built up area and open land. In any case the rent paid is well within the fair rental value as assessed by the office of PWD.Copy enclosed at PB Page No.58 to 63 S....
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....hat no taxes have been paid by the assessee but the same have only been paid by the landlord. * In view of above , it is submitted that the observation that assessee incurred Rs. 7,89,850/- in FY 2014-15 for these expenses and diverted for personal purposes of office bearers and families is factually incorrect. * Further amount of Rs. 7,89,850/- has not been fully incurred for building repairs but it is incurred on cleaning charges, sanitation charges, white wash charges, repair to furniture and fixtures, repair of Lab equipments, projectors, sports equipments, office equipments and computers. Copy of ledger account to explain, is enclosed as per P.B. Page No.64 to 74 Summary of repair and maintenance expenses of Rs. 7,89,850/- is os under :- Heads Amount Repair and Maintenance for Furniture Rs. 79,133/- Repair and Maintenance for Computer Rs. 44,743/- Repair and Maintenance for Lab Equipment Rs. 24,800/ - Repair and Maintenance for electricity Rs. 98,320/ - Repair and Maintenance for Sanitation (Plumbing etc) Rs. 41,600/ - Expenses on Maintenance of garden Rs. 61,200/- Expenses on Maintenance of Cle....
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....light of aforesaid judicial pronouncement and as per provisions of law the society be granted registration U/s 12 AA as the objects of the society are Charitable in nature as defined under section 2( 15) Of The Act. " 4. On the contrary, Ld. D.R. supported the order of the Ld. CIT and submitted that Ld. CIT would be within the power to make such enquiry in order to find out the genuineness of the objects of the society. He submitted that Ld. CIT at para 2.2 of his order has categorically stated that the building taken on rent is owned by the member of the society and by this the funds are being diverted for personal purpose of office bearer/families. He therefore, supported the order of the Ld. CIT. 3. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The Ld. CIT rejected the application of the assessee by observing as under: "ln response to the above mentioned notice, Shri Pramod Sharma, CA attended and filed written submission which is placed on record. During the course of hearing the following irregularities are noticed:- There are 4 premises on rent, one with unrelated party a....
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....s and therefore the society does not qualify for registration u/s 12AA of the LT. Act,1961. Accordingly the application in form no.10A, received in this office on 08/02/2016 seeking registration u/s 12AA is hereby rejected and registration sought u/s 12AAis refused." 4. There is no dispute with regard to the fact that the Ld. CIT is within his power to make such enquiry to find out the genuineness of the objectives of the society. In the present case, the only ground for not allowing registration by the Ld. CIT is that the fund of the society is diverted for the personal gain of the office bearer of the society. The basis of this suspicion is that the society has taken on rent building from the members of the society, wherein the excessive rent is being paid. It is the contention of the Ld. Counsel for the assessee that this issue is required to be considered at the assessment stage. He submitted that at the stage of registration of application, the Ld. CIT has to confine to the extent of verification of the genuineness of the objects of the society. He submitted that the Ld. CIT has not brought any adverse material with regard to the genuineness of the objects of the society. T....
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....f the trust deed we find that the objects of the trust are charitable in nature and are in tune with s. 2(15) of the Act and, therefore, the Tribunal rightly opined that the order of the CIT rejecting the application under s. 12A was unjustified. 10. For the aforementioned reasons, the substantial question of the law framed by this Court vide order dt. 10th Aug., 2006 has to be answered in the affirmative i.e. in favour of the assessee and against the Revenue. In the result the appeal fails and is hereby dismissed. " 4. Further, reliance is placed upon the decision of coordinate bench in the case of Vidyadayani Shiksha Samiti Vs. CIT (Exemption) (supra) The coordinate bench has observed as under: 16. Now, coming to the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the Id. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not req....
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.... read with Rule 17 A and whether Form No. 10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this stage, it is not proper to examine the application of income. 4. The order impugned does not say that the objects of the society are not charitable in nature; it merely says that they are general in nature. Just because they are general, they do not cease to be charitable. The Commissioner has also observed that no activity has been carried on by the society. It is also not the requirement of Section 12A of the Act. Nor has Section 80Gany relevance at this stage. The impugned order cannot, therefore, be sustained and it is quashed." 18. We find the Hon'ble Karnataka High Court in the case of A.S. Kupparaji Brothers Charitable Foundation Trust (supra) has observed as under:- "The certificate of registration is only an enabling provision to claim exemption. By merely granting a certificate income is not exempted. That is only a first stage to claim exemption. The Commissioner of Appeals should not have confused these two aspects and seems to think as the trustees and his family members are treating the prop....
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....e considering the application for registration is also required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit. The language employed by the legislature in s. 12M only requires that activities of the trust or institution must be genuine which should be in consonance with the object of the trust. At this stage, the CIT is not required to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of s. 12A r/w r. 17A and whether Form No. IDA has been properly filled up. He has also to see whether the objects of the trust are charitable or not. Our view funds support from the Division Bench decision of the Allahabad High Court rendered in the case of Red Rose School (supra) and the decisions in the case of New Life in Christ Evangelistic Association (supra), Fifth Generation Education Society (supra) and Shantagauri Ramniklal Trust (supra). 9. In the backdrop of aforesaid legal position facts of the case may be seen. Admittedly the application submitted by the respondent was in consonance with the procedural requirement prescribed in....