TaxTMI 
TaxTMI 
2019 (8) TMI 791
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.... application of income which are to be examined only at the time of assessment. 4. That the order of the CIT(E) is against the law and facts of the case." 2. Briefly stated, the assessee is a society registered with the Registrar of Societies, District Kapurthala, vide registration certificate dated 11.02.2015. As is discernible from the aims and objects, the assessee society which was formed with the object of providing quality education to the public is running a school viz. SD Model Senior Secondary School at Phagwara. The assessee society which is an ongoing entity in operation since 11.02.2015, had filed an application in Form No. 10A for registration under Sec. 12AA of the IT Act. 3. The CIT(E) in order to verify as to whether the activities of the assessee society were in conformity with the stated aims and objects, called upon the assessee to furnish certain details/clarifications. Apart there from, the CIT(E) also directed the assessee to submit copies of the financial statements of the school for F.Y(s). 2014-15, 2015-16 and 2016-17. On the basis of the details and the financial statements placed on record by the assessee the CIT(E) was not satisfied with t....
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.... the scope of his jurisdiction. It was the contention of the Ld. A.R that the CIT(E) at the time of considering the application of the assessee for grant of registration under Sec. 12AA of the IT Act was supposed to confine himself to the objects of the trust/society and the genuineness of its activities and was not vested with any jurisdiction at the said stage to examine as to whether the income of the trust or the institution was applied for charitable or religious purposes, or not. In support of his aforesaid contention the Ld. A.R. relied on the judgment of the Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Surya Educational and Charitable Trust (2013) 355 ITR 280 (P&H) and the order of the ITAT, Amritsar in the case of M/s Arya Shikhsha Mandal Vs. CIT(Exemptions) (ITA No. 522/Asr/ 2016; dated 27.03.2017). In sum and substance, it was the contention of the Ld. A.R that the CIT(E) by exceeding the arena of his jurisdiction had rejected the application filed by the assessee for grant of registration under Sec. 12AA. 5. Per contra, the Ld. Departmental Representative (for short 'D.R') relied on the order of the CIT(E). It was submitted by the Ld. D.R that as the....
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....o bearing for adjudicating the genuineness of its activities. Apart there from, in our considered view as the 'advance fee' received by the assessee society during the year would not form part of its 'total income' for the year under consideration, therefore, no infirmity can be attributed to the assessee society which is maintaining its accounts as per the mercantile system of accountancy for the reason that it had shown the same under the head 'current liability' in its respective balance sheets for the said preceding years. As regards the adverse inference drawn by the CIT(E) in respect of the 'security deposit' of Rs. 14 lacs received by the assessee from its tenants i.e. S/sh. Rajiv Jain and Raj Kumar Nayyar for the shops situated at Guru Nanak Market, Phagwara which had been let out to them, we are unable to endorse the same. Before proceeding further, we may herein record our observations in context of the issue under consideration on the basis of the facts as are discernible from the balance sheet of the assessee society as on 31.03.2016 viz. (i) that the assessee society during the F.Y. 2015-16 was in receipt of an amount aggregating to Rs. 13,87,000/- from its tenants (i.....
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....l purposes, we find it beyond our comprehension as to how the same would have any bearing for verifying the genuineness of the activities of the assessee society. In our considered view, if subsequently the said land which had been purchased by the assessee society in furtherance of its objects of providing education is used for any purpose which is not as per the objects of the assessee society, then the CIT(E) is vested with the powers under sub-section (3) of section 12AA to cancel the registration so granted to the assessee society. However, in our considered view no adverse inference as regards the genuineness of the activities of the assessee society could have validly been drawn for the reason that it had purchased additional land for the furtherance of its objects. We shall now advert to the observations of the CIT(E) that as the surplus of income over expenditure (without considering depreciation) of the assessee society was between 20% to 30% of its gross receipts during the last three years, therefore, it substantially proved that the emphasis of the assessee society was on generating excessive surpluses. In our considered view, in order to characterize a trust or an ins....