TaxTMI 
TaxTMI 
2021 (9) TMI 1482
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....thy Commissioner of Income Tax (Exemptions), Chandigarh rejecting the assessee's application u/s 12AA of the Income Tax Act, 1961 for A.Y. 2018-19. It is submitted that that the undersigned has been advised by the Doctors to stay at home due to indifferent health. It is therefore humbly requested that the following written submission filed by the undersigned may kindly be considered while disposing of the appeal. Written Submissions:- The above noted appeal is against the order dated 29/09/2018 passed by Worthy Commissioner of Income Tax (Exemptions), Chandigarh rejecting the application of the assessee u/s 12AA of the Income Tax Act, 1961. It is submitted that the assessee had filed replied to the queries raised by Worthy Deputy Commissioner of Income Tax (Exemptions) as per the following letters, the copies of which are enclosed:- (i) Copy of letter dated 18.08.2018 seeking adjournment after 06.09.2018- ANNEXURE A. (ii) Copy of letter dated 01.09.2018 filed with the Deputy Commissioner of Income Tax (Exemption) giving replies to 24 queries- ANNEXURE B. (iii) Copy of Affidavit of Sh. Brij Bhushan Jalota as required- ANNEXURE C. (iv) Copy of letter dated 11.09.201....
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....er dates. Also the amount shown in income & expenditure receipts is Rs. 17,00,506/- whereas total amount of the vouchers is Rs. 18,00,504/- which creates suspicious about the genuineness of the vouchers." The Agriculture intome has been correctly shown at Rs. 19,36,111/- out of which Rs. 17,00,506/- is from Bhardwaj Trading Co. and Cash Receipts have been shown at Rs. 2,35,605. The copy of Account of Kacha Aartiya appears at Page 60 of the Paper Book at Rs. 17,00,506/-. The details of Cash Sales appears at Annexure-ll to letter dated 24/09/2018. The details given by Worthy Commissioner of Income Tax (Exemptions), Chandigarh in the Order shows J-Form detail at Rs. 18,00,504/-. The first item dated 18/11/2017 is Rs. 98,218/- but has been shown at Rs. 1,98,218/- which is a mistake. That is why there is a difference of Rs. 1,00,000/-. Nothing is wrong with figures provided by the assessee. The copies of JForms appear at Pages 61 to 65. The J-Forms for next year are at Pages 66 to 69. The JForm dated 18/11/2017 is for Rs. 98,218/- and not Rs. 1,98,218/-. The Commissioner of Income Tax (Exemptions), Chandigarh has also observed that JForms numbers are not as per dates. It is submit....
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....s and the written submissions your honours are requested to kindly set aside the order of Worthy Commissioner of Income Tax (Exemptions), Chandigarh and grant registration u/s 12AA to the applicant." 4. Per contra DR for the revenue had vehemently relied upon the order passed by the lower authority. 5. 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. Undoubtedly the stated objects of the assessee trust as mentioned by the CIT exemption in the order of the as under "The stated aims and objects of the trust are in Monastery and Mata Mandir, promoting spiritual values, spreading traditions, celebrates festivals, promotion of Indian Culture and promotion of Sanskrit Language, grants of the trust should be spent as per requirement. Open the sewing centre, marriage of poor girls, blood camp, medicine to poor and needy people, ambulance and organise medical camps." 6. Undoubtedly at the stage of grant of registration, the CIT exemption is required to examine the twin conditions provided by the Act namely whether the activities of the assessee ar....
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....er, the applicant trust didn't submit the proof of the ownership of land with the Mandir and the trust despite specifically being asked. In the absence of the proof of ownership of land it can be presumed from the fact that there is no property vested with the trust income from which could be sought as exempt. It's pertinent to mention that both the monastery and the temple are separate entities. There is no evidence of the said entities allowing the applicant trust to manage their properties. 8. We have gone through the record from the record it is discernible that the ownership document per duly placed by the assessee before the CIT exemption and also before us (paper book page 31 to 51) , which clearly shows that the ownership of the land vested in the assessee. Further, the assessee had also placed on record the sale of agricultural produce by filing the form J, at page 61 onward. The documents clearly shows that the finding recorded by the CIT exemption was against the record. In any case at the time of grant of registration under section 12 AA of the of the Income Tax Act what is required to be seen is whether the activities of the assessee are genuine, and the obje....
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....er:- "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 appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration 12. Since section 12AA pertains to the r....
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....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'ble Allahabad High Court in the case of CIT v Red Rose School [2007] 163 Taxman 19 (Allahabad) held that: "Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while consideri....
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..... 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 ITA No. 3/Agra/2021 13 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 (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any ch....
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....r institution as he thinks necessary in order to satisfy himself about,- a. the genuineness of activities of the trust or institution; and b. 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] 26. So far as the first respect of satisfaction of the lower authority pertaining to genuineness of the activities of the trust is concerned, the law is fairly settled by the decision of the Hon'ble Supreme Court in the matter of Anand social (supra), which requires the lower authorities to examine the memorandum of Association/or objects of the trust for the purpose of coming to the conclusion whether the activities of the assessee are genuine or not. Undoubtedly in the present case the activities of the assessee are genuine as is clear from the chart of the activities reproduced herein above. Further the assessee is also claiming exemption under section 10(23) of the Act from the respondent for the last three years i.e 2017-18 to 2019-20 , which were granted to the assessee for the purposes of impar....
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....m 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.e. Sh. Rajiv Jain : Rs. 3,87,000/- and Sh. Raj Kumar Nayyar : Rs. 10,00,000/-) and not an amount of Rs. 14 lac as stated by the CIT(E) in his order passed under Sec. 12AA(1)(b)(ii); (ii) that the aforesaid amount of Rs. 13,87,000/- was received by the assessee society as a 'security deposit' from its tenants S/sh. Rajiv Jain and Raj Kumar Nayyar, and not towards advance rent as find mentioned in the order passed by the CIT(E) under Sec. 12AA(1)(b)(ii). As observed by us hereinabove, the CIT(E) had traversed beyond the scope of his jurisdiction and instead of confining himself to the aspect of the genuineness of the activities of the assessee society, had rather embarked upon the issues which though would be relevant at the stage of framing of assessment but would have no bearing to the extent judging of the genuineness of the activities of the assessee society are concerned. Be that as it may, even otherwise as the 'security deposit' received by the assessee society from S/sh. Rajiv Jai....
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....ast 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 institution as one which has as its object profit making, it must be shown that the predominate object of the activity in the case of such trust or institution was that of making of a profit. In fact, where an activity is not pervaded by profit motive but is carried on primarily for serving the charitable purpose, it would be incorrect to describe it as an activity for profit. However, on the other hand where the activity is carried on with the predominate object of earning profit, it would be an activity for profit, though it may be carried on in advancement of the charitable purpose of the trust or institution. In sum and substance, the predominate object of a charitable trust or institution is to carry on activities to sub serve the charitable purpose and not to earn profit. Rather, the charitable purpose should not be submerged by the profit making motive. Fairly stating, the purpose of a charitable trust must be essentially charitable in nature and it should not be a cover for carryin....
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....ring of the education was the predominate object of the assessee society. In fact, we find that the surplus in the hands of the assessee society (after claim of depreciation) ranges from 15% to 23%. The aforesaid surplus we find had been ploughed back by the assessee society for the furtherance of its object. We thus in terms of our aforesaid observations are of the considered view that the generation of surplus by the assessee society in furtherance of its predominate object of rendering education can in no way help to arrive at a conclusion that the emphasis of the assessee society was on generation of excessive surplus and not rendering of education. We thus in terms of our aforesaid observations are unable to subscribe to the view taken by the CIT(E) that the genuineness of the activities of the assessee society was not proved. In terms of our aforesaid observations, we are of the considered view that the CIT(E) had erred in declining to grant registration under Sec. 12AA to the assessee society. We thus set aside the order of the CIT(E) and direct him to grant registration under Sec. 12AA to the assessee society." 23. Similarly in CIT vs. Surya Education Charitable Trust in....
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....ncome of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment." 24. Similarly in paragraph 4 of the jurisdictional High Court in the matter of Shirdi Sai Darbar Charitable Trust had held as under: "4. The matter has been examined by the Tribunal after perusing the relevant statutory provisions. It has been categorically recorded by the Tribunal that the CIT (E) has to satisfy two conditions while granting registration under Section 12AA of the Act. Firstly, whether the objects of the assessee are charitable in nature and thus, the activities are genuine. It cannot be concluded on the basis that the assessee has not filed its income tax returns in earlier years that the activities of the assessee are not genuine. It has been further recorded that Section 13 of the Act comes into play at the time of granting exemption under Section 11 of the Act and not at the....