GUJRATHI SHIKSHAN SANSTHA ,PUNE vs. COMMISSIONER OF INCOME TAX, EXEMPTIONS, PUNE

This appeal by the assessee against the order dated 08-08-2020 passed by the Commissioner of Income Tax (Exemption), Pune [„CIT(Exemption)‟].

This appeal was filed with a delay of 97 days. The assessee filed an affidavit explaining the reasons for delay. After hearing both the parties, we find that the reasons stated by the assessee are bonafide which really prevented the assessee to file the present appeal in time. Therefore, the delay of 97 days are condoned.

The assessee raised 5 grounds amongst which the only issue is to be decided is as to whether the CIT(Exemption) justified in rejecting the application filed seeking registration u/s. 12AA of the Act in the facts and circumstances of the case.

The ld. AR, Shri Bhuvanesh Kankani submits that the assessee made an application seeking registration u/s. 12AA of the Act on 24-09- 2019. The assessee is a charitable trust registered under Bombay Public Trust Act, 1950 vide registration No. E-6/LATUR dated 17-10-1985. The CIT(Exemption) rejected the application seeking registration basically on one ground that non-payment of taxes on surplus fund and treated the activities of the assessee as non-genuine. Further, he held that the assessee collected various fees and also kept funds idle in FD‟s without utilizing them for the objects of the trust. The ld. AR submits that the CIT(Exemption) went beyond his purview u/s. 12AA of the Act treating the activities of the assessee as non-genuine and non-utilization of funds for the objects of the trust. These aspects are part of assessment proceedings and not in the purview of CIT(Exemption) in deciding and granting of registration u/s. 12AA of the Act. The CIT(Exemption) has not objected on the activities carried out by the assessee and did not show a single rupee of the FD is utilized for any object other than object of the trust. He submits that the trust is accumulating these funds with a vision to construct schools on the plots owned by the trust and referred to Page No. 11 of the paper book. He also placed on record a list of students to whom admission have been given in the academic year 2019-20 and submitted total admissions were given 62 students and out of 62 students, 11 students were in the category of RTE. The ld. AR placed on record order dated 18- 12-2020 in passed by this Tribunal in the case of Sant Zolebaba Sansthan Chikhali and referred to Para Nos. 7 to 10 and submits that this Tribunal decided the similar issue in the said case and directed the CIT(Exemption) to grant registration u/s. 12AA of the Act. He submits that this Tribunal held that at the time of granting registration the CIT(Exemption) is only required to examine whether the objects of the trust are charitable in nature or not and the activities of the trust are genuine. Since, the issue is similar and the direction in the said case may be followed in the present case also and prayed to allow grounds of appeal.

The ld. DR, Shri Deepak Garg submits that the CIT(Exemption) rejected granting of registration u/s. 12AA of the Act on two aspects, one is, activities of the trust are not genuine wherein the assessee could not pay taxes on surplus funds and placed reliance on Para No. 5 of the impugned order. Further, he submits that there are mismatch of accounts and referred to Para No. 5 of the impugned order and submitted that in the Balance sheet of F.Y. 2018-19 the FD‟s at Rs.3.78 Crores were lying in bank accounts which are out of total assets of Rs.6.18 Crores and there is mismatch compared to Balance sheet as on 31-03-2019 placed at Page No. 13 of the paper book. In reply, the ld. AR submits that the assessee running educational institute in Latur in the name of Gujarati English School for 1st standard to 10th standard and Kids Planet Pre-Primary School. The assessee has shown the assets separately institution wise and there is no mismatch as pointed by the ld. DR.

Heard both the parties and perused the material available on record. We note from the impugned order as rightly pointed by the ld. AR that the CIT(Exemption) did not point out the activities of the assessee are non- genuine and he rejected only on the ground that the assessee accumulated funds and kept the same in FDs not utilizing the same for the objects of the trust. This Tribunal in the case of Sant Zolebaba Sansthan Chikhali held the issue of grant of registration and the assessment of income of trust are distinct and separate, by placing reliance in the case of Ananda Social and Educational Trust Vs. CIT reported in 272 Taxman 7 of Hon‟ble Supreme Court held the mandate of the provisions u/s. 12AA of the Act is to examine whether objects of the trust are charitable in nature are not and the activities of the trust are genuine, but however, in the present case as discussed above the CIT(Exemption) did not point out anything against the objects and genuineness of the activities of the trust but however rejected the registration on examination of financial statements of the assessee for the last four years by holding the assessee has made surplus and no taxes paid thereon on such surplus funds. We find that it is a settled principle that the grant of registration and the issue of assessment or exemption u/s. 11 of the Act are separate and distinct. The process of registration is not on occasion for deciding the issue of exemption of donation u/s. 11 of the Act. The issue of exemption cannot be examined during the process of registration. Therefore, in our opinion, the order of CIT(Exemption) in denying the registration u/s. 12AA of the Act cannot be sustained and the impugned order is set aside.

In view of the above, the assessee is entitled to have registration u/s. 12AA of the Act in terms of decision of Hon‟ble Supreme Court in the case of Ananda Social and Educational Trust (supra) as relied on by this Tribunal in the case of Sant Zolebaba Sansthan Chikhali. Accordingly, we direct the CIT(Exemption) to grant registration u/s. 12AA of the Act to the assessee from the date of application.

In the result, the appeal of assessee is allowed.