TaxTMI 
TaxTMI 
2021 (9) TMI 840
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.... treatment of admission fees in Books of Accounts. c) Not to understand that mere classification of one item/transaction in Books of Accounts under disclosed opinion that too not unrealistic, would not make the entire Society illegal/ineligible. Ld. CIT (E) failed to appreciate the Tax Neutral Effect of Admission Fees as per the facts on record in the matter of appellant as without prejudice, even after taking admission fee received of each year to its Income and Expenditure Account the aggregate annual receipts in each year falls below Rs. 1 Crores and provisions of Sec. 10(23C)(iiiad) is squarely applicable as it before. 3. That no reasonable and proper opportunity of being heard has been allowed before refusing to register the Society. 4. That without prejudice to above grounds, the order passed U/s 12A4A4(1)(b)(ii) on 23.09.2020 is invalid, illegal and void-ab-initio as Finance Act, 2020 had inserted Sec. 12AB w.e.f. 01.06.2020 for disposing off all the pending applications, on which no order U/s 12AA(1)(b) was passed before 01.06.2020. The whole Sec. 12AA/remains redundant from 01.06.2020 to 28.09.2020. 5. That the Appellant craves ....
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....t activities undertaken, satisfy the requirements of term "Education" and not falls in the category of trade/commerce/Business. Therefore, not doubted to the charity made by the appellant. b) That the appellant's Objects are charitable and is engaged in charitable/pure/sincere activities in line to the Objects. c) That all Education Fees received from students were spent in accordance to the Objects and not even a single penny was unrelated to the Objects of the Society. Therefore, the Ultimate beneficiaries are the students and not the Authors/Members/family members of the Society. d) That the Fees charged was neither huge nor substantial and there was no diversion of any funds towards non educational purposes. The appellant has not adopted any unethical methods/any wrong means for collection of fees and has not charged any capitation fee. e) That all expenditures are genuine/legitimate/bonafide/and charitable. f) That the Ld. CIT(E), had not doubted that the activity of imparting education has been completely demonstrated in all the previous years by the assessee society in its Financial Statements which were produced before Ld. CI....
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....sed by the CIT exemption and it was his contention that the order was passed in accordance with law. It was submitted that with a view to examine the genuineness of the activities of the assessee, the CIT exemption has examined the profit and loss account and the balance-sheet and found that the admission fees has been wrongly debited to the balance-sheet, though it was to be routed through P&L. It was the opinion of the CIT exemption that by doing so, the assessee had not paid the legitimate taxes to the revenue. 12. We have heard the rival contentions of the parties and perused the material on record. Section 12A and provided in the Income Tax Act on the date of application provides as under:- 12AA.-^19(1) The ^20 [***] ^21[Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a)^22-[or clause (aa) ^23-[or clause (ab)] of sub-section (1)] of section 12A. shall- ^23a[(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,- (i) the genuineness of activities of the trust or institution; and (ii....
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.... six months and one month, respectively, calculated from the end of the month in which the application was received. 14. As per clause (2) of section 12AB where any application is pending before the Commissioner, on which no order has been passed under clause (b) of sub section 1 of section 12AA, then the application was presumed to be made under sub clause (6) of clause a c of sub section 1 of section 12A on that date. 15. By the press note dated 01.10.2020, the applicability of section 12AB has been extended to 01.10.2020. Though it is the contention of the assessee that the order has been wrongly passed under section 12AA (1) (b) (ii) of the IT Act and it should have been passed under section 12AB, and the assessee should have been granted the provisional registration under the new regime. In our view the argument of the assessee was required to be noted for the purposes of summarily rejection. The press note issued by the respondent on 09.05.2020 was issued under the statutory power bestowed on the board under the act and the same is enforcible in the eyes of law. The press note release dated 09.05.2020 was instruction to the subordinate authorities u/s. 119 of the IT Act....
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....8 would below Rs. 1 crore. For the financial year 2018-19 the admission fees during the year was Rs. 506910/- and the total income for the year was 9240017/- thus the total aggregate annual receipt was Rs. 97,46927/-. (Page-22 and 23 of the paper book) thus even for the financial year 2018-19 relevant to the assessment year under consideration the assessee was eligible for u/s. 10(23C)(iiiad). 21. We may like to reproduce the decision of in the case of Dr. Madan Lal Atri Charitable vs. CIT(E) wherein the coordinate bench in paragraph 17 to 20 and paragraph 25 and 26 had held as under:- 17. That it's a well settled law, that at the time of grant of registration under clause(aa) of sub section (1) of section 12A of the Act, the CIT(E) has to see whether the objects are charitable in nature, which has been well defined in the Act and also to see whether the activities are genuine or not. In the case of Ananda Social & Educational Trust v. Commissioner of Income tax, [2020] 272 Taxman 7 (SC) the Hon'ble Supreme Court held as under: "9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and gen....
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....ivities of the trust or institution; and the compliance of such requirements of any other law for the time being in force by the trust or institution, as are materials for the purpose of achieving its objects, and he may also make such inquiries as he may deem necessary in this behalf. Once he is satisfied about the objects of the trust or institution, and genuineness of its activities, he shall pass an order under the said provision..." 19. That in the case of Fateh Chand Trust & College Committee v. Commissioner of Income Tax (Exemption), Lucknow [2019] 101 taxmann.com 364 (Agra - Trib.), the Hon'ble ITAT, Agra Bench observed the following: "19. We find that learned CIT, while passing impugned order seems to be under gross misconception that it is his satisfaction and definition of 'charitable activities' dehors requirement of law would only enable an institution to be granted registration under section 12AA of the Act as once registration is granted, the entire income of the institution would become exempt The said view, in the light of precedents referred above is wholly opposed to law. Under section 12AA of the Act, the Commissioner is en....
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....Society [2011] 16 taxmann.com 282/[2012] 204 Taxman 11 (Mag.) the Hon'ble Punjab & Haryana High Court held as under: "Section 12AA of the Income-tax Act, 1961 - Charitable or religious trust -Registration procedure - Assessment year 2010-11 - Whether while examining application seeking registration under section 12AA, manner of application of funds of trust do not fall within purview of Commissioner; Commissioner should only satisfy himself about genuineness of aims and objects of trust/institution and genuineness of its activities as enumerated in clause (b) of sub-section (1) of section 12AA - Held, yes" That in the case of Vigyadayani Shiksh Samiti v. CIT (Exemption) [IT Appeal No. 309 (Delhi) of 2016, dated 14-12-2017] wherein while addressing the identical objection raised by the ld. CIT(E), the Hon'ble Lucknow ITAT held as under: "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 grantin....
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....e satisfaction of the Commissioner on the basis of material already on record before the Commissioner The power of the Appellate Tribunal are co-extensive with the power of the Commissioner under Section 12 (AA) of the Act, 1961 subject to what has been indicated herein above In view of the aforesaid the reference is answered." 25. In rebuttal, the ld. AR for the assessee had submitted that the assessee is having the affiliation from Central Board of Secondary Education and is also complying with the requirement of Right to Education Act. It was submitted that the finding of Commissioner exemption that the assessee is not having approvals from various statutory authorities is factually incorrect. Further it was submitted that once the Central Board of Secondary Education, grants the necessary affiliation to the assessee, then the CBSE, had taken care of the compliance of norms of other statutory authorities. During the hearing We had asked the AR to file the documents from various authorities mentioned by the Commissioner exemption in paragraph 8.. 26. We have considered the rival contention of the parties and perused the material available on re....
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....rust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996) and subsequently the Principal Commissioner or Commissioner is satisfied that the 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, as the case may be he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that 50[(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and ....
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....6 to 40 PB). Thus the first condition as stipulated under section 12AA, regarding the genuineness of the activity have duly been proved by the assessee before the Commissioner exemption. We have no doubt about the genuineness of the activities of the assessee i.e., the assessee was/is imparting education and imparting of education is a charitable activities under section 2(15) of the Act. Thus we hold that the activities of the assessee are charitable within the meaning of section 12AA(1)(i) read with 2(15). 22. Similarly in CIT vs. Surya Education Charitable Trust in ITA No. 701/2010 the Hon'ble Jurisdictional High Court in paragraph 10 & 11 had held as under: 10. On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration un....
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....me of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12AA of the Act. No adverse remarks have been recorded by the CIT (E) with regard to the objects contained in the memorandum of the assessee-trust to come to the conclusion that its activities are not genuine. Thus, it has been rightly directed by the Tribunal to the CIT (E) to grant registration under Section 12AA of the Act. The relevant observations recorded by the Tribunal read thus:- "We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The first reason on the basis of which the Commissioner of Income Tax (Exemptions) has refused to grant registration to the assessee is that the assessee has not been filing its income-tax returns in the earlier years. We do not find that it is a good reason to reject the application for registration since the two conditions which the Commissioner of Income Tax (Exemptions) has to satisfy while granting the registration under Section 12A of the Act, are that the objects of the assessee are charitable in nature and the acti....