TaxTMI 
TaxTMI 
2021 (8) TMI 762
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.... from retrospective effect He has wrongly held that the provisions of rule 2BBB regarding receipt of financial grant are applicable to the preceding year also, while the amendment has been made by the (IT Thirteenth amdt.) Rules 2014 w.e.f 12.12.2014. iv. That the CIT (Exemptions) has drawn wrong inference from the decision of the Apex Court in the case of Islamic Academy of Education & another vs. State of Karnataka and others (2003) 6 SSC 697, as facts of the applicant case are distinguishable v. That the CIT (Exemptions) has wrongly mentioned at para 8 of its order that the net surplus of the school run by the Trust is 20%, 27.5% and 27.7% during the financial year 2014- 15, 2015-16 and 2016-17 respectively, while the net surplus is 13.53%, 6.67% and 15.79% for above financial years. vi. That the CIT(Exemptions) has wrongly mentioned that the consolidated income & expenditure account of the trust reveals net surplus of 43.9%, 69.3% and 73.7% during the financial year 2014-15, 2015-16 and 2016-17 respectively in para 8 of its order, while actual surplus is -8.33%, -1.08% and -0.27% respectively. vii. That the CIT(Exemptions) has wrongly inferred in para 9 of its order tha....
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....6-17. Being not satisfied with the explanation of the Assessee trust, CIT(E) rejected its application by observing as under: 7. In response to the query raised the applicant submitted the reply vide letter dated 15.03.2018. perusal of the reply submitted by the applicant reveals that the applicant trust runs a school in the name & style of "Guru Teg Bahadur Public School" which receives income from collection of annual fund/admission fee, transport charges and tuition fee. Copy of financial statements reveal that the total receipts of the school for all the three years i.e. F.Y. 2014-15, 2015-16 & 2016-17 exceeds Rs. One crore. It has been asserted that the trust is pursuing charitable activity through providing education by running educational institute and has claimed exemption u/s 10(23C)(iv) of I.T. Act, 1961 till filling of ITR for assessment year 2014-15 to A.Y. 2016-17 and u/s 11 for the A.Y. 2017-18. The applicant has claimed exemptions without having any approval u/s 10(23C)(vi) or registration u/s 12AA of the I.T. Act. the applicant vide reply dated 15.03.2018 has also submitted that the assessee has not claimed exemption u/s 10(23C)(iiiad) of the I.T. Act for the F.Y. ....
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....State of Karnataka and others (2003) 6 SSC 697 wherein reasonable surplus has been pegged at 6 to 16 % and further reiterated in the case of Viswesvaraya Technological Universities Vs. ACIT in civil appeal Nos. 4361-4366 of 2016 the applicant has been held earlier as existing for profits since Income & Expenditure account of the school run by the trust shows a net surplus of 20%, 27.5% and 27.7% during the F.Y. 2014-15, 2015-16 and F.Y. 2016-17 respectively. Applicant has also submitted copy of consolidated Income & Expenditure account of the Trust, which reveals that the net surplus of the applicant trust is at 43.9%, 69.3% and 73.7% during the F.Y. 2014-15, 2015-16 and F.Y. 2016-17 respectively. In the instant case, the applicant has been charging various fee for earning profits and creation of assets on commercial principles and has opted for registration under this section. 9. It is further held that the scheme of the Act doesn't allow change of code midway after availing the benefits of a particular code for years together. Even though the judicial authorities have been holding that an applicant is free to adopt any of the alternatives available to it the issue that the asse....
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....tions under these sections. Such blatant infraction of the Income Tax Act clearly impinges on the genuineness of activities claimed by the applicant. Moreover the financial statements as discussed above also do not reveal the actual state of affairs of the applicant trust. Also there are no grounds for a fresh application under a different code when the applicants case is still pending u/s 10(23C) of the act for adjudication (proceedings of which are underway). The application for grant of registration u/s 12AA is accordingly rejected. 3. The Ld. Counsel for the assesse submitted that the CIT(E )'s order passed u/s 12AA(1)(b)(ii) by the Commissioner of Income Tax (Exemptions) is against the law and facts of the case in rejecting assessee trust application for registration u/s 12AA of the Act owing to the reasons that the applicant has claimed exemptions u/s 10(23C) (iiiad) that the CIT (Exemptions) has drawn wrong inference regarding amendment made in the provisions of the Income Tax Act, in regard to applicability of substantial grants prior to the amendment, i.e amendment is effective from retrospective effect and he has wrongly held that the provisions of rule 2BBB regarding re....
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....ncome and Expenditure account of the Trust for the financial year 2015-16 17-18 5. Income and Expenditure account of Guru Teg Bahadur Public School for the financial year 2015-16 19 6. Consolidated Balance Sheet and Income and Expenditure account of the Trust for the financial year 2016-17 20-21 7. Income and Expenditure account of Guru Teg Bahadur Public School for the financial year 2016-17 22 The counsel for the assessee has further submitted CPB pages 1 to 116 and he relied in the case of CIT(E) vs. Sh. Mahavir Jain Society ITA No.231 of 2016 order dated 11th September, 2017 ( P & H ) and others as under : Sr. No Description Page No. 1. Pinegrove International Charitable Trust & Ors. Vs. Union of India & Ors. (2010) 327 ITR 73 (P&H) 1-24 2. American Hotel & Lodging Association Educational Institute vs. Central Board of Direct Taxes & Ors. (2008) 301 ITR 86 (SC) 25-37 3. CIT vs. Vijay Vargiya Vani Charitable Trust (2014) 369 ITR 0360 (Raj) 38-41 4. Sree Anjaneya Medical Trust vs. CIT (2016) 382 ITR 0399 (Ker) 42-47 5. CIT vs. Surya Educational & Charitable Trust (2013) 355 ITR 0280 (P & H) 48-50 6. Vikas Lok Sewa Smiti vs. CIT-I....
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....te of affairs of the applicant trust but he has not crystalized that it was not revealed with reference to charitable nature of objects and genuineness of activities. We understand that there are no grounds for a fresh application under a different code when the applicants case is still pending u/s 10(23C) of the act for adjudication (proceedings of which are underway) , but at the same time, there is no bar on the applicant to avail benefit of exemption u/s 12AA and 10(23c) of the Act. Thus, disposal of the applicants case if any, pending u/s 10(23C) of the act for adjudication cannot be a prerequisite condition for grant of registration u/s 12AA and such a reasoning for rejection of 12AA cannot be approved. 08. The Ld. AR referred to the paper book filed as above, and contended that the CIT(E) had wrongly mentioned that the consolidated income & expenditure account of the trust reveals net surplus of 43.9%, 69.3% and 73.7% during the financial year 2014-15, 2015-16 and 2016-17 respectively in para 8 of its order, while actual surplus is -8.33%, -1.08% and -0.27% respectively, that the CIT(Exemptions) had wrongly inferred in para 9 of its order that the application u/s 12(A) of I....