SRI GURUTEGH BAHADUR EDUCATION SOCIETY ,JABALPUR vs. COMMISSIONER OF INCOME TAX, EXEMPTION, , BHOPAL

O R D E R PER OM PRAKASH KANT, A.M.: This appeal by the assessee is directed against the order dated 01.09.2022 passed by Ld. Commissioner of Income Tax(Exemption), Bhopal [in short “Ld.CIT(E)”] for assessment year 2022-23, in relation to application for registration u/s 12AB of the Income Tax Act, 1961 (in short “the Act”). The assessee has raised following grounds of appeal:-

Sri Gurutegh Bahadur Education Society vs CIT(E) 1. “That the Ld. CIT, Exemption, Bhopal has erred in facts and circumstances of the case to pass order without giving proper reasoning for rejection of application of registration.

2. That the Ld. CIT has not considered reply filed in response to notice issued while rejecting the application of registration U/s 12AA of IT Act, 1961.

3. That the activity of the appellant is exclusively educational, hence refusal of registration is not justified.

2.1 On further appeal, the Coordinate Bench of Tribunal in vide order dated 21/07/2022 set aside the matter back to the ld CIT(E) for one more opportunity to the assessee for substantiating its claim.

Sri Gurutegh Bahadur Education Society vs CIT(E) 2.2 Meanwhile, the assessee in view of amended provisions of registration u/s 12AB applied before the ld CIT(E) invoking section 12A(1)(ac)(v) of the Act. The relevant section provides for application for registration before the competent authority where the trust or institution has adopted or undertaken modifications of the objects, which don’t conform to the conditions of registration, within thirty days from the date of such adoption or modification. On such application by trust u/a 12A(1)(ac)(v) of the Act, further procedure has been prescribed u/s 12AB as under :

Procedure for fresh registration. 12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,— (a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years; (b) where the application is made under sub-clause (ii) or sub- clause (iii) or sub-clause (iv) or sub-clause (v) 66[or item (B) of sub-clause (vi)] of the said clause,— (i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about— (A) the genuineness of activities of the trust or institution; and Sri Gurutegh Bahadur Education Society vs CIT(E) (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; (ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub- clause (i),— (A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing,— (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub- clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;].” 2.2.1.The ld CIT(E) under above procedure rejected the application of the assessee observing that no change or modification in the objects off the society was made. The relevant finding of ld CIT(E) is reproduced as under:

The assessee has applied for registration under the new provisions of section 12AB of the Act under section 12A(1)(ac)(v) of the Act and an opportunity letter was also issued to the assessee and various documents were called to process the Sri Gurutegh Bahadur Education Society vs CIT(E) application and to verify the object and activities of the assessee. In response to the letter, the assessee has submitted a reply alongwith the various documents. On perusal of the documents submitted by the assessee and documents available on record it is noticed that there is no change or modification in the objects of the society for which section 12A(1)(ac)(v) of the Act is applicable & rdquo; Considering the facts of the case, the application of the assessee is hereby rejected.

2.3 Thereafter, in compliance of the order of the Tribunal dated 21/07/2022, the ld CIT(E), vide his order dated 27/02/2023 allowed registration u/s 12AA for the period from AY 2017-18 to AY 2021-22 subject to certain conditions. The relevant part of his order granting registration is reproduced as under:

V. In light of the aforesaid facts & circumstances and considering the application of the applicant and the material available on record, the applicant is hereby granted approval under section 12AA(1)(b)(ii) of the Income Tax Act, 1961 with effect from the assessment year 2017-18 to AY 2021-22 (After 01.04.2021, the new provisions of Section 12AB would apply)subject to the conditions mentioned under: 1- As and when there is a move to amend or alter the objects/rules and regulations of the applicant, prior approval of the Commissioner shall be sought along with the draft of the amended deed and no such amendment shall be effected until and unless the approval is accorded. 5 | P a g e Sri Gurutegh Bahadur Education Society vs CIT(E) 2- In the event of dissolution, surplus and assets shall be given to an organization, which has similar objects and no part of the same will go directly or indirectly to anybody specified in section 13(3) of the Income Tax Act, 1961. 3- In case the trust/institution is converted into any form, merged into any other entity or dissolved in any previous year in terms of provisions of section 115TD, the applicant shall be liable to pay tax and interest in respect of accreted income within specified time as per provisions of section 115TD to 115TF of the Income Tax Act, 1961 unless the application for fresh registration under section 12AA for the said previous year is approved by the Commissioner. 4- The Trust/ Institution should quote the PAN in all its communications with the Department. 5- The registration u/s 12AA of the Income Tax Act, 1961 does not automatically confer any right on the donors to claim deduction u/s 80G. 6- Order u/s 12AA(1)(b) read with section 12A does not confer any right of exemption upon the applicant u/s 11 and 12 of Income Tax Act, 1961. Such exemption from taxation will be available only after the Assessing Officer is satisfied about the genuineness of the activities promised or claimed to be carried on in each Financial Year relevant to the Assessment Year and all the provisions of law acted upon. This will be further subject to provisions of section 2(15) of the Income Tax Act, 1961. 7- No change in terms of Trust Deed/ Memorandum of Association shall be effected without due procedure of law and Sri Gurutegh Bahadur Education Society vs CIT(E) its intimation shall be given immediately to this office. The registering authority reserves the right to consider whether any such alteration in objects would be consistent with the definition of "charitable purpose" under the Act and in conformity with the requirement of continuity of registration. 8- The Trust/ Society/ Non Profit Company shall maintain accounts regularly and shall get these accounts audited in accordance with the provisions of the section 12A(1)(b) of the Income Tax Act, 1961. Separate accounts in respect of each activity as specified in Trust Deed/ Memorandum of Association shall be maintained. A copy of such account shall be submitted to the Assessing Officer. A public notice of the activities carried on/ to be carried on and the target group(s) (intented beneficiaries) shall be duly displayed at the Registered/ Designated Office of the Organisation. 9- The Trust/ Institution shall furnish a return of income every year within the time limit prescribed under the Income Tax Act, 1961. 10- Separate accounts in respect of profits and gains of business incidental to attainment of objects shall be maintained in compliance to section 11(4A) of Income Tax Act, 1961. 11- The registered office or the principal place of activity of the applicant should not be transferred outside the jurisdiction of undersigned except with the prior approval. 12- No asset shall be transferred without the knowledge of undersigned to anyone, including to any Trust/ Society/ Non Profit Company etc.

Sri Gurutegh Bahadur Education Society vs CIT(E) 13- The registration so granted is liable to be cancelled at any point of time if the registering authority is satisfied that activities of the Trust Institution/ Non Profit Company are not genuine or are not being carried out in accordance with the objects of the Trust/ Institution/ Non Profit Company. 14- If it is found later on that the registration has been obtained fraudulently by misrepresentation or suppression of any fact, the registration so granted is liable to be cancelled as per the provision u/s section 12AA(3) of the Act. 15- This certificate cannot be used as a basis for claiming non- deduction of tax at source in respect of investments etc. relating to the Trust/ Institution. 16- All the Public Money so received including for Corpus or any contribution shall be routed through a Bank Account whose number shall be communicated to this office.” 2.4 Thus, in view of registration u/s 12AA granted post facto for the period from AY 2017-18 to AY 2020-21, the assessee society has now become eligible for applying for registration u/s 12AB of the Act making application under section 12A(1)(ac)(i) of the Act, which reads as under:-

Conditions for applicability of sections 11 and 12. 12A. “(1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:— Sri Gurutegh Bahadur Education Society vs CIT(E) (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form56 and in the prescribed manner to the Principal Commissioner or Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such trust or institution is registered under section 12AA: Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the pro-visions of sections 11 and 12 shall apply in relation to the income of such trust or institution,— (i) from the date of the creation of the trust or the establishment of the institution if the Principal Commissioner or Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons; (ii) from the 1st day of the financial year in which the application is made, if the Principal Commissioner or Commissioner is not so satisfied: Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007; (aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the 9 | P a g e Sri Gurutegh Bahadur Education Society vs CIT(E) Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (ab) the person in receipt of the income has made an application for registration of the trust or institution, in a case where a trust or an institution has been granted registration under section 12AA 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 has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, in the prescribed form and manner, within a period of thirty days from the date of said adoption or modification, to the Principal Commissioner or Commissioner and such trust or institution is registered under section 12AA; (ac) notwithstanding anything contained in clauses (a) to (ab), the person in receipt of the income has made an application in the prescribed form and manner to the Principal Commissioner or Commissioner, for registration of the trust or institution,— (i) where the trust or institution is registered under section 12A [as it stood immediately before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] or under section 12AA [as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020)], within three months from the first day of April, 2021; (ii) where the trust or institution is registered under section 12AB and the period of the said registration is due to Sri Gurutegh Bahadur Education Society vs CIT(E) expire, at least six months prior to expiry of the said period; (iii) where the trust or institution has been provisionally registered under section 12AB, at least six months prior to expiry of period of the provisional registration or within six months of commencement of its activities, whichever is earlier; (iv) where registration of the trust or institution has become inoperative due to the first proviso to sub-section (7) of section 11, at least six months prior to the commencement of the assessment year from which the said registration is sought to be made operative; (v) where the trust or institution has adopted or undertaken modifications of the objects which do not conform to the conditions of registration, within a period of thirty days from the date of the said adoption or modification; (vi) in any other case, where activities of the trust or institution have— (A) not commenced, at least one month prior to the commencement of the previous year relevant to the assessment year from which the said registration is sought; (B) commenced and no income or part thereof of the said trust or institution has been excluded from the total income on account of applicability of sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, or section 11 or section 12, for any previous year ending on or before the date of such application, at Sri Gurutegh Bahadur Education Society vs CIT(E) any time after the commencement of such activities,] and such trust or institution is registered under section 12AB.” 2.5 Accordingly, we set-aside the impugned order dated 1/09/2022 and restore the matter back to him for deciding afresh in the light of order of ld CIT(E) dated 27/02/2023 invoking the provision of section 12AB(1)(a) of the Act. The Grounds raised by the assessee are accordingly, allowed for statistical purposes.

Order pronounced in the open Court on 22/09/2023.