TaxTMI 
TaxTMI 
2021 (9) TMI 1482
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.... "Kindly refer to the above noted appeal against the order of Worthy 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 Aff....
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....nbsp; From the above table it is noticed that the serial no. of the Form "J" is not as per dates, vouchers numbers are decreasing with respect to later 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. ....
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....in Para 7.2 above. The Agriculture Lands duly stand vested/ under management in the applicant Trust by virtue of the Trust Deed of the applicant Trust placed at Pages 7 to 14 of Paper Book. In view of the above facts 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 need....
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....chers. 7.2 The applicant trust merely stated that the property is in the name of Shri Swami Shankarnath Parvat Monastery & Mata Shri Jwala Ji Mandir. The trust is created for the management and protection of the property. The applicant trust has given only detail about the land. Further, 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 onwar....
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....ancial 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 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....
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....nce 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 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....
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....ication 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 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 exam....
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.................................................................. ............................................................................................ 25. If we look into the amended provision of section 12AA, , which was inserted in the Act on 1.9.2019, it is clear that the lower authority shall call for such documents or information from the trust or 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....
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.... deposit' of Rs. 14 lacs received by the assessee from its tenants i.e. S/sh. Rajiv Jain and Raj Kumar Nayyar for the shops situated at Guru Nanak Market, Phagwara which had been let out to them, we are unable to endorse the same. Before proceeding further, we may herein record our observations in context of the issue under consideration on the basis of the facts as are discernible from 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 genuinene....
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....nuineness of the activities of the assessee society could have validly been drawn for the reason that it had purchased additional land for the furtherance of its objects. We shall now advert to the observations of the CIT(E) that as the surplus of income over expenditure (without considering depreciation) of the assessee society was between 20% to 30% of its gross receipts during the last 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 institut....
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....urposes and not for the purposes of profit. In the case before us, we find that except for the fact that the assessee society in furtherance of objects of providing education had consistently generated surplus during the last three preceding year, nothing is discernible from the records of the lower authorities which would irrefutably prove that generation of such surplus and not rendering 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 a....
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....o which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income 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, wh....