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Before: Shri Laliet Kumar & Dr. Mitha Lal Meena
In the Income-Tax Appellate Tribunal, Amritsar Bench, Amritsar
Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member
ITA Nos.517/Amr/2018 Assessment Year - 2018-19
M/s. Bajaj Educational Society, V.S. CIT 19-B, Rajguru Nagar Chandigarh Ludhiana - 141012 PAN:AABTB5167C (Appellant) (Respondent)
Appellant by Sh. Gaurav Sharma, C.A. Respondent by Sh. Anupam Kant Garg, DR.
Date of Hearing 09.07.2021 Date of Pronouncement 16.08.2021
ORDER Per Laliet Kumar, J.M.
This is an appeal preferred by the assessee against the order of the Learned Commissioner Exemption on the following grounds
Grounds of Appeal
That on the facts and the circumstances of the case, the Order of Learned CIT is bad in law. 1. 2. That the Learned Commissioner of Income Tax has erred in holding that the genuineness of the activities carried out by the Appellant Society are in doubt. 3. That the Learned Commissioner of Income Tax has erred in holding that there has been
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contradictory treatment of the same amount in one year as Unsecured Loan and another year as Donation and that this is against the Accounting Principle and that no opportunity has been provided to the Appellant Society to explain the above point raised by the Ld. CIT.
That the Learned Commissioner of Income Tax has erred in holding that there is a manipulative treatment of funds and there is an absence of documentary evidences of the donations, despite the fact that all the documentary evidences are a part of Record of the Ld. CIT.
That, the Learned Commissioner of Income Tax has erred in holding that an Appellant cannot shift from one code (Section 10(23C) of the Act) to another code (Section 12AA of the Act) despite the fact that the objects of the Appellant Society are not restricted to the Educational Activities alone and despite the fact that all the evidences with regard to the above are a part of Record of the Ld. CIT.
That the Learned Commissioner of Income Tax has erred in holding that the Appellant does not qualify for the Registration under Section 12AA of the Act
That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
Brief facts and submissions of assessee
1) The appellant society had applied for registration under section 12 AA
of the Income Tax Act however the registration was rejected by the
CIT exemption on the ground that the assessee had received loans in
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the previous years from various persons. However, in the return of income for the subsequent years the appellant society has shown
the loan as donations towards the corpus fund. It was concluded by the CIT Exemption that the assessee was not able to explain the contradiction in the stand of the assessee wrt amount received in the previous years and therefore the CIT exemption has held that the
activities of the assessee are not genuine. 2) Feeling aggrieved by the order passed by the CIT exemption the assessee is in appeal before us on the ground mentioned
hereinabove. 3) In the written submission appellant stated that M/s Bajaj Educational Society filed an application with the LD CIT(Exemption), Chandigarh
on 14.03.2018, for the purpose of getting itself registered u/s 12AA of the Act. The application society received a show cause notice from DCIT, (HQ) Exemptions, Chandigarh with regard to the above said
application filed by it, to which part reply was filed on 13.08.2018 and the reply to the balance points was filed on 04.09.2018. DCIT(HQ)Exemption asked various queries, the reply to which is as
under:
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I. Details of Corpus received by the Applicant society during the FY 2015-16 are as under:
Name of donor (Voluntary Nature of contributions) donation donations Mr. Joginder Singh Bajaj Rs. Land + Stamp 1,48,34,000/- duty Mrs. Balwinder Kaur Rs. 79,70,009/- Bank Transfer Mrs. Balbir Kaur Bajaj Rs. 35,00,000/- Bank Transfer Mrs. Charan Kaur Bajaj Rs. 2,50,000/- Bank Transfer Mr. Birpal Singh and Mr. Rs. 2,20,500/- Land + Stamp Harjinder Singh Duty
II. The donors of the lands had specifically directed to use the above voluntary contribution in the form of lands for purposes of construction of building to be used for educational purposes and the donors of money and also
specifically directed to use the above voluntary contributions in the form of money donated by them for the purposes of construction of building to be used for educational purposes.
The assessee has provided affidavits (Annexure-I) also. III. DCIT (Hq)Exemption, Chandigarh asked that from which year, the Applicant Society had started operating Bajaj
College?
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IV. The assessee stated that the Applicant Society started the educational activities in Bajaj College in the FY 2015-16.
V. DCIT (Hq)Exemption, Chandigarh asked to provide the details of surplus earned by the applicant society from educational operation run by it since the FY in which such
operation had started? VI. The assessee stated that it is already submitted that the applicant society started the educational activities in Bajaj
College in the FY 2015-16. Further, the assessee has already furnished the copies of financial statements of the applicant society for the FY 2015-16 and 2016-17 before
DCIT (HQ)Exemption at the time of filing an application u/s 12AA of the Act. The following are the relevant details:
FY Gross Revenue Surplus or Depreciation Surplus or Income(INR) Exp. Other (Deficit) (INR) (Deficit) than before after Depreciation Depreciation Depreciation
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(INR) (INR) (INR) (1) (2) (3) (4) (5) (6) 2015- 13,78,860 31,63,811 17,84,951 39,98,361 57,83,312 16 2016- 99,14,470 78,05,472 21,08,998 34,86,185 13,77,187 2017
VII. From the above details, it can be construed that the
Applicant Society had not earned any surplus after Depreciation. Therefore, the whole income earned had been applied by the Applicant Society for the charitable purposes
(Educational Activities) carried out by it. Further, it is submitted that expenditures mentioned in column no. (3) above does not include any capital expenditure incurred by
the applicant society but it includes only the revenue expenditure incurred by the applicant society in the respective year. However, the applicant society had claimed depreciation on the capital expenditure incurred by it as per
column (5) above. Therefore, in both the above years, the
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applicant society earned a deficit i.e. excess of expenditure over income.
VIII. DCIT (HQ)Exemption asked that whether the applicant society had been maintaining books of accounts on mercantile basis or cash basis, and that it the books of
accounts are maintained on cash basis. Then to provide the receipts and payments account for both the FY 2015-16 and 2016-17.
IX. Regarding the above, it is stated that the applicant society had been maintaining books of accounts on mercantile basis and hence the applicant society has maintained income &
expenditure account for the FY 2015-16 and 2016-17 instead of receipts & payments account and the income &expenditure account for the both the above years have
already been furnished before DCIT(HQ)Exemption along with the application u/s 12AA of the Act. X. DCIT(HQ) Exemption asked to furnish the acknowledgement
of returns of income and computations of income of the
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persons who had lend unsecured loans to the applicant society and are standing in the balance sheet of the
applicant society as on 31.3.2017. XI. It is stated by the assessee that the above documents for the AY 2017-18 are enclosed herewith as Annexure -II. 4. During the course of hearing the Ld.AR had submitted that the CIT exemption
has denied the registration in violation of law laid down by the Jurisdictional High Court in the matter of Beant College of Engineering & Technology* [2019] 108 taxmann.com 196 (Punjab & Haryana) and had also submitted that the assessee
was not given the opportunity of hearing by the official concerned.
It was also the case of the assessee that the CIT exemption has failed to
take the cognizance of the binding judgement of the Delhi High Court in the matter of Smt. Basanti Devi & Shri Chakhan Lal Garg Education Trust, ITA No. 927/09 vide its order dated 23.9.2009 which deals with the issue of corpus
donation in respect of the non registered charitable trust.
The Ld.DR for the revenue relied upon the order passed by the lower authorities.
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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.
The CIT exemption while denying the registration to the assessee, in paragraph had wrongly mentioned that as the assessee has shifted from the regime of 10(23C) to 12AA, the same is not permissible in the law and therefore the CIT exemption has denied the registration. Further CIT exemption in paragraph 8 had mentioned above the acceptance of loan by the assessee in the previous year and thereafter the assessee in the financial year 2015-16 had claimed that the loan received by were in the nature of donation. In paragraph 7 the CIT had mentioned as under “ 7. In response to the additional queries the applicant society submitted the reply. As regards the reason for shifting from section 10(23C) (iiiad) to section 12AA of the Income Tax Act, the applicant has contended that tire gross receipts of the applicant society are Rs. 99,14,469/- during the F. Y. 2016-17 and are as per tire fee receipts, bills and vouchers maintained by the applicant society. Further the applicant society stated that gross receipts has increased to Rs. 1crore in the F.Y. 2017-18, due to which exemption under section 10(23C)(iiiad) of the Act will not be available to the applicant society during F. Y. 2017- 18 and this was· the reason of the above said application under section 12AA of the Act is made by the applicant society.
The above is not a cogent rationale provided for shifting to the present code. The applicant has claimed in his reply that gross receipts has increased to Rs. 1 crore in tire F.Y.2017-18, due to which exemption under section 10(23C)(iiiad) of tire Act will not be available to tire applicant society during F. Y. 2017-18 and this was tire reason of the above said application under section 12AA of the Act is made by the applicant society. The applicant society has been claiming exemption u/s 10(23C)(iiiad) of the LT. Act. For cases
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claiming automatic exemption u/s 10(23C)(iiiad) approval u/s 10(23C)(vi) is to be sought on receipts crossing the threshold of Rs. One Crore. The applicant had all the reasons to apply for exemption under the provision of section 10(23C)(vi) following the statutory provisions. This issue needs to be seen in light of the fact that numerous years in the past the society has been filing returns and claiming exemption u/s 10(23C)(iiiad). Is it the case that the moment receipts exceeded Rs. One Crore the applicant society has ceased to be existing "solely for educational purposes" and "not for profits"? Here it is also pertinent to mention that Judicial precedents have allowed pursuance of alternative claims either for 12AA or 10(23C) but at the same time haven't allowed shifting from one provision to the other when the applicant has consistently availed benefits for a number of year under section 10(23C)(iiiad). The alternatives had to bechosen from at the beginning a choice that has already been exercised. Natural progression entails and entitles the educational societies to go for 10(23C)(vi) in such cases. It is also the case that if such a shift is allowed the provisions of section 10(23C)(vi) would be rendered redundant andinfructuous. This clearly is neither the legislative intent nor scheme of the Act that provisions for two different sets of codes with different parameters as also conditionality. It's also relevant in the particular case that the character and objects of the applicant have not changed to warrant a change in the code of exemption that has a completely different set of conditions. This contention of the applicant is certainly not acceptable.”
In our considered opinion the reasoning given by the CIT exemption cannot be countenanced as the same is contrary to the law laid down by the honourable jurisdictional High Court in the matter of Beant College of Engineering & Technology* [2019] 108 taxmann.com 196 (Punjab & Haryana). Therefore this ground of rejection is not sustainable and therefore we reject the same.
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Another reason for rejection given by the CIT exemption was with respect to acceptance of loan and thereafter in the financial year 2015-16, alleging it to be the donation
In our considered opinion at the stage of grant of registration two issues were required to be examined namely whether the purposes of the assessee are charitable in nature and secondly to find out whether the activities of the assessee are genuine or not. Merely on the basis of receipt of loan, and subsequent conversion of loan into donation, Assessee would not be disentitled for the registration under section 12 AA of the income tax Act. The correct stage to examination of funds/ utilisation of the amount/corpus by the assessee, would be at the time of assessment.For that the disallowance can be made if any ,on examination at the assessment stage it is found that the assessee is not entitled to the exemption under section 11 of the Act and the amount received was chargeable to income of the assessee. However, at the stage of registration, the CIT exemption cannot deny the registration merely on the basis of the receipt of loan amount. No other reason was given by the CIT exemption for rejecting the application for registration. For that purpose we may rely upon decision in the matter of Ananda Social & Educational Trust [2020] 114 taxmann.com 693 (SC)
In the light of the above we set aside the order passed by the Commissioner Exemption.In the light of the above we are of the considered opinion that the assessee is entitled to registration under section12AA of the Income Tax Act 1961. Accordingly, we direct the Respondent to grant registration to the assessee from the date of its application. For that purposes we rely upon the decision of the judicial
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High Court in the matter of Reham Foundation LKO.* [2019] 111 taxmann.com 379 (Allahabad) , wherein it was held “10. A perusal of Section 12AA of the Income Tax Act shows that the Principal Commissioner or the Commissioner, on receipt of an application for registration of a Trust or an institution, may call for such document or information as he thinks necessary to satisfy himself about the genuineness of the activities of the Trust or the Institution, as it deems necessary. After calling for such an information and satisfying himself about the object and genuineness of the activities of the Trust, he shall pass an order for registering the Trust or the Institution or in the alternate, refuse such registration. In view of the aforesaid provision, the registration of the Trust is subject to satisfaction of the Commissioner, not only over the genuineness of the activities of the Trust, but also about the objects of the Trust or the Institution. In view of above, the registration of the Trust requires satisfaction of the Commissioner. In case the Commissioner is satisfied with the genuineness of the activities and even the objects, he can register the Trust under Section 12AA of the Act of 1961 and in case the Commissioner is not satisfied or refuses registration, then the Appeal lies to the Tribunal to challenge such order under Section 254 of the Act, 1961.
In such case, the Appellate Tribunal needs to adjudicate the issue raised before it because it is the last court of facts. The exemption under Sections 11 & 12 of the Act of 1961 can be sought only
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after registration of the Trust, thus satisfaction of the Commissioner before registration has been given importance. In view of above, the argument of the learned counsel for the Revenue is that unless such a satisfaction, as envisaged under Section 12AA of the Act of 1961 is recorded by the Commissioner, a direction for its registration should not be given by the Tribunal. As against the aforesaid, the argument of learned counsel for the assessee is that if Tribunal is satisfied about the genuineness of the activities and the object then it can direct for registration.”
Accordingly the appeal of the assessee is allowed.
Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Sr. Private Secretary Income Tax Appellate Tribunal Agra Bench, Agra