2020 (6) TMI 291

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....as adjourned to 28-02-2018 on request. Another request for adjournment was received on 28-02- 2018 and the matter was adjourned to 06-04-2018. Shri Kaustav Chakraborty, [Dy. Commissioner of Police (Traffic) and Treasurer] attended the hearing on 06- 04-2018. The sole income of the society is by way of collection of subscription from operation of pre-paid taxi services at Sealdah and Kolkata railway stations. The objectives of the society is to establish, operate and manage pre-paid taxi booth and providing the facility to passengers at designated stations. Despite having taxable income in FYs 2013-14, 2014-15, 2015-16 and 2016-17, the Society has neither filed Income tax Return nor has paid the due taxes. 3. There are two issues, which are to be considered before grant of registration u/s 12AA is decided which are namely:- a. Whether the objectives and activities are charitable in nature? b. Whether registration u/s 12AA can be granted when Income-tax has not been paid on surplus of income over expenditure? 3A. OBJECTIVES and ACTIVITY The primary objective of the Society is to establish, operate and manage pre-paid taxi booths o....

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.... such things as may be considered necessary by the Society and may be incidental or conductive of its objectives. Presumably the application has been filed claiming the society as charitable under the limb of advancement of general public utility. A perusal of para above clearly establishes that the society has been set up to discourage the Taxi Workers' Unions to arrange and operate pre-paid taxi booths at designated stations. The policy of encouraging or discouraging the taxi unions for operating the prepaid taxi booth is beyond the scope of review under the Income-tax Act. The Constitution of India provides that India is "........socialistic....democratic........" The unions are important pillars of a democratic society. Socialism is characterized by social ownership and democratic control of the means of production. The Trade Unions have been traditionally encouraged to promote socialism through the democratic control of the means of production. Any endeavour to discourage these unions apparently in contradiction to the democratic and socialistic principles enshrined in the Constitution, cannot be for the advancement of general public utility. The finding of a....

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.... good in view of the proviso to Section 2(15) which holds that irrespective of the nature of use or application or retention of the income from such business activities it shall not amount to charitable purposes if the receipts exceed more than 20% of the total receipts. Therefore, in view of the proviso to section 2(15) also it is held that the activities of the society are not for charitable purpose. 4B. NON-PAYMENT OF INCOME TAX As per audited Financial statements, the Society has Surplus of income over expenditure as mentioned in the table below:- Financial Year Surplus of income over expenditure 2016-17 Rs. 33,67,297/- 2015-16 Rs. 34,18,698/- 2014-15 Rs. 31,42,130/- 2013-14 Rs. 16,88,244/- Despite having Surplus of income over expenditure, the Society has not filed Income Tax Returns for the respective Assessment Years. As per Section 139(1)(b) of the Income-tax Act, 1961; it was obligatory on the part of the Society to file Income Tax Returns, as the income exceeded the maximum amount which was not chargeable to income tax. During the course of hearing, it was observed that the applicant was legally obliged to ....

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....and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year" The first proviso states that the provision of section 11 and 12 shall apply to any assessment which is pending on the date of grant of registration. It does not state that the provision of section 11 and 12 will be applicable to all income right from the inception of the trust whose objects are charitable in nature. The benefit of grant of registration u/s 12AA is, therefore, applicable only in case of pending assessments. The 2nd proviso further states that, 'no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year' Thus, if registration u/s 12AA is granted in this scenario, the AO will be precluded....

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.... Section 12A is interpreted in a way to mean that the income of the Trust or institution becomes exempt or eligible for the benefit of section 11 and 12 since its inception and in all cases, not only in the pending assessment proceedings, then the violators of the Act will get more benefit than the one who complied with it. This can never be the intention of any statute. Grant of registration will be an exercise in futility if neither the CIT nor the AO will have jurisdiction in such type of cases. The Act, specifically excludes the jurisdiction of the AO to issue notice u/s 147. Therefore the C1T has to consider non-payment of taxes on admitted surplus as non-genuine and consequently deny registration as per the statute. The stand of the applicant that department cannot take any action in such cases of blatant violation cannot be accepted. This act has to be considered as not genuine. Failure to do so shall be a certificate to the applicant for non-payment of taxes on admitted surplus. As stated above, the law only provides that the benefits of Section 11 and 12 shall be available to the applicant is cases of pending assessments. Registration u/s 12AA in such cases will b....