TaxTMI 
TaxTMI 
2021 (9) TMI 840
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....nderstand 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 leave to add, alter or amend the grounds of appeal at or before the hearing. Brief facts 1. An ap....
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....fore, 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. CIT (E) and did not have doubted/recorded any of the activities which are not in accordance with the objects of the society. 9. In response to the observation of the lea....
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....e 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) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and] (b) after sati....
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....nder 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 and the applicability of section 12AB has been deferred up to 31.03.2021. In view of the above the objection of the assessee that the order has been wrongly passed u/s. 12AA(1)(b) is rejected. Hence the ground 4 of the appeal is rejected. 16. The ld. CIT(E), admittedly in the order has not objected to the charitable object of the society. In fac....
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....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 genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it a....
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.... 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 entitled to see that whether the objects are charitable in nature, which term has been well defined in the Act and also to see whether the activities are genuine or not The genuineness of activities would mean to see that activities are not camouflage, bogus, artificial and whether these are in accordance with the objects of the institution. The scope of enquiry does not extend beyond that pint..." 20. That the Hon'b....
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....nuineness 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 granting registration u/s. 12A the ld. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (....
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....uirement 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 record, including the judgments cited at bar during the course of hearing by both the parties. Before we deal with the facts of the present case, it would be appropriate for us to reproduce the relevant provision of income tax act dealing with the registration of the charitable society/trust, which were applicable on the case of 'Assessee Trust'. "12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub-....
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....e 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 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration sh....
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....d, 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 under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the a....
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....f 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 activities are genuine. Just because the assessee has not filed its income tax returns in earlier years, it cannot be said that the activities of the assessee are not genuine. Reliance placed by the learned counsel for the assessee on the judgment of the Allahabad High Court as well as the order of the Chennai Bench of the Tribunal are not out of place, whereby it has been held that non-filing of return cannot be one of the reasons for denying registration under Section 12A of the Act. With regard to the second objection raised by the Commissioner of Income Tax (Exemptions) that as per clause-12 of the Memorandum of trust, the trustees have been given absolute powers to manage the property. We have perused the clause-12 of ....