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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI CHANDRA MOHAN GARG & LAXMI PRASAD SAHU
O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order dated 27.3.2018 of the CIT(E), Hyderabad u/s.80G(5)(vi) of the Income tax Act, 1961.
2. The assessee has raised the following grounds of appeal:
“1. That the order of the Ld. CIT(E), rejecting the application for granting registration u/s 80G of the Act is void abinitio, against the natural justice, unjustified, erroneous, arbitrary, contrary to facts, bad in law, without jurisdiction and/or excess of jurisdiction and legally untenable.
That the order passed by the Ld. CIT(E) without affording reasonable opportunity is a travesty of justice necessitating interference of this Hon'ble Tribunal and the order is liable to be set aside.
3. That the ld. CIT(E) has failed to appreciate the scope of inquiry mandated by the statute for verification of the fulfilment of the necessary conditions prescribed for grant of benefit u/s 80G(5) and attempted to substitute the regular assessment proceeding for the concerned assessment years for which returns are pending before the assessing officer. The order is therefore unsustainable.
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4. That the rejection of the application by the Ld. CIT(E) on the ground that genuineness of the activities could not be verified in absence of bills/vouchers and books of accounts, is unjust and unwarranted when the facts remain undisputed that not only audited accounts have been regularly filed by the Appellant Trust before the jurisdictional authorities which had undergone the ordeal of scrutiny assessments year after year but also the authorities had accepted the returns of income filed by the Appellant Trust. This itself is a testimony to the fact that the Trust's activities have been as per the objects and that genuine activity of education was being imparted till date.
That the findings of the Ld CIT(E) that the trust is existing only for profit referring to the surplus generated during past years is opposed to the judicial dictum including the landmark judgment of the Apex Court in Queens Educational Society vs CIT (2015) 372 ITR 699 (SC), judgement of the Hon’ble Allahabad High Court in CIT v. Dr V.S.Educational Foundation in ITA 345/2010 and that of Gujarat High Court in the case of N N Desai Charitable Trust v. CIT 246 ITR 452.
6. That the Ld. CIT(E) failed to appreciate the fact that Section 80G does not contemplate different yardsticks or different parameters to be applied to different trusts having similar objectives and. activities of being in education and generating operational surplus. Law laid down in the decision of Bombay High Court in the case of Tax Practitioners Benevolent Fund v. CIT, (2004) 266 ITR 561 (Bom) does not allow authorities to selectively treat the appellant differently whereas for similar activities, other educational trusts have been enjoying the benefit u/s 80G.
7. That the fact of existence of registration u/s 12AA till the date of passing of the order by the Ld. CIT(E) corroborate and reinforce the charitable nature and genuineness of the activity of the Appellant Trust and therefore the order of the Ld. CIT(E) is not legally sustainable.
That the finding of Ld. CIT(E) that the auditor has not verified books, bill and vouchers but has merely put onus on the management is factually misunderstood and negates rationality and jurisprudential conscience and the order is therefore not tenable.
That expressing an observation on initiation of separate proceedings by the Ld. CIT(E) for withdrawal of registration granted u/s 12AA while dwelling on the issue of eligibility of the Appellant Trust u/s 80G is highly illegal when both the sections are diverse and have their own independent intendment.
That the appellant craves leave to add, alter or amend any grounds of appeal
and adduce evidence in the course of hearing.
11. For these grounds and other grounds, if any, that will be adduced at the time of hearing, it is prayed that the order of the Ld. CIT(E) may be P a g e 2 | 5 quashed and/or any order/orders be passed as this Hon'ble Tribunal deems fit & proper.”
Facts in brief are that the assessee trust was originally registered on 9.7.1997 under the Indian Trust Act, 1882. The Board of Trustees was again reconstituted and a fresh trust deed was registered on 10.9.1998. The assessee trust was granted registration under section 12AA of the Act on 25.9.2009 w.e.f. assessment year 2009-10. The main activities of the assessee trust is to impart education and operational surplus is generated from the Government prescribed fees paid by students and there is no grant from the Government for the functioning of the institution. The unutilised surplus fund is carried forward to be utilised for future years in the form of bank deposits including fixed deposits, as prescribed u/s.11 of the Act. Since the institution had surplus funds, hence, it did not apply for registration u/s.80G(5) of the Act alongwith its application u/s.12AA of the Act. Later on, the trust filed applications in Form No.10G on 26.9.2017 seeking approval for Registration u/s.80G of the Income tax Act. From the balance sheet of the assessee trust, the ld CIT(E) observed that the profit ratio generated from the activities of the trust for the assessment years 2012-13 to 2016-17 is ranging from 64% to 23%, hence, it is crystal clear that the assessee trust is existing solely for profit. The assessee has not produced bills, vouchers, cash book and bank book for verification as per the Rule 17A r.w. 11AA, hence, the genuineness of the activities of the trust was not verified. The ld CIT (E) observed that as the assessee has not produced books, bills, vouchers, hence, the assessee has not complied with the requirement for approval u/s. 80G(5)(vi) of the Act. The ld CIT(E), Another aspect considered by the ld CIT(E) for rejecting the approval u/s. 80G(5)(vi) of the Act that from the audited balance sheet furnished
P a g e 3 | 5 by the assessee, the auditor has not verified books, bills and vouchers, hence, the conditions of section 80G have not been fulfilled. In view of above, ld CIT (E) denied the grant of approval u/s.80G of the Act.
At the time of hearing, referring to the grounds of appeal filed by the assessee, ld A.R. submitted that the ld CIT(E) has filed to appreciate the scope of inquiry mandated by the statue for verification of the fulfilment of the necessary conditions prescribed for grant of benefit u/s. 80G(5) and attempted to substitute the regular assessment proceedings for the concerned assessment for which returns are pending before the AO. He submitted that only audited accounts have been regularly filed by the assessee trust. He referred to the decision of Hon’ble apex Court in the case of Queens Educational Society (supra) and the decision of Hon’ble Allahabad High Court in the case of CIT vs. Dr. V.S.Educational Foundation (supra).
5. Replying to above, ld CIT DR submitted that since the assessee does not full the conditions stipulated for grant of approval u/s.80G(5)(vi) of the Act, ld CIT (E) is justified in rejecting the same.
On careful consideration of the rival submissions, we find that the assessee trust has been granted registration u/s.12AA of the Act. Sub Rule (4) of Rule 11 AA also provides that the Commissioner has to be satisfied that if all the conditions laid down in clauses 1 to 5 of sub section 5 of section 80G are fulfilled by the institution, then such satisfaction has to be recorded in writing and its only thereafter that the approval to the institution u/s 80G (5) can be granted. It is not the assessee's case that the approval u/s 80G (5) has been denied to it even
P a g e 4 | 5 though it has fulfilled the requirements for approval as envisaged in Rule 11AA of the Income Tax Rules, 1962. In these circumstances it is our considered opinion that the Ld. CIT(Exemptions) was correct in rejecting the application in Form No. 10G and in refusing the grant approval u/s 80G (5) (vi) of the Income Tax Act 1961 to the assessee's trust . Accordingly, we refuse to interfere.
In the result, appeal of the assessee is dismissed.