COMMISSIONER OF INCOME TAX CHD. vs. M/S SWAMI DAYANAND EDUCATIONAL TRUST

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ITA/257/2016HC Punjab & HaryanaPHHC01110454201604 July 2018Author: MR. JUSTICE SURINDER GUPTA,LOK ADALAT BENCH - 36 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Commissioner had considered irrelevant factors in rejecting the application for registration. The objects of the trust were charitable, and registration cannot be denied simply because the trust pursued only one activity out of 21 proposed objects. There was no allegation that the income derived from fees or donations was used for purposes other than the trust's aims and objectives. The Tribunal's finding that the trust was running a school with a charitable object and that its income was not used for non-charitable purposes was not challenged. The objection regarding the maintenance of meeting records was rejected as the assessee had explained that minutes were maintained as computer printouts duly sanctioned by the Board of Trustees. The Court found no error in the ITAT's order directing the grant of registration. However, it added that if the revenue later finds the activities are not for charitable purposes, action for cancellation of registration under Section 12AA(3) can be initiated. The appeal was dismissed as no substantial question of law arose.

What were the facts?

The Revenue appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated 30.11.2015, which directed the Commissioner of Income Tax (CIT) to grant registration under Section 12AA of the Income Tax Act, 1961, to M/s. Swami Dayanand Educational Trust. The assessee trust was created on 02.08.2011 and runs the Elite International School. The CIT had rejected the trust's application for registration filed on 19.03.2014, primarily on the grounds that the trust had 21 objects but was only pursuing one (opening a school) and that proper records of trust meetings were not maintained. The Tribunal allowed the assessee's appeal, finding no allegations that the trust's objects were not charitable or that its income was used for non-charitable activities.

What were the issues?

The High Court was to decide the following substantial questions of law: 1. Whether the ITAT was correct in holding that the Commissioner, while granting exemption, should only consider the objects of the trust, thereby ignoring the statutory requirement of being satisfied about the genuineness of activities under Section 12AA. 2. Whether the ITAT erred in allowing the appeal despite the trust's composition and certain objects/by-laws imparting a private character, not benefiting the general public. 3. Whether the ITAT was right in allowing the appeal, disregarding the assessee's confession of mistakes in the trust deed and the onus on the applicant to prove eligibility for tax exemption for beneficial clauses. 4. Whether the ITAT was justified in relying on the Karnataka High Court's judgment in Sanjeevamma Hanumath Gowda Charitable Trust Vs. DIT (E) when the Commissioner had not examined the application of income for charitable purposes. 5. Whether the ITAT was correct in granting registration and setting aside the Commissioner's order, rendering the impugned judgment perverse. Contentions of the Revenue: The assessee is pursuing only one out of 21 objects and not maintaining proper records of trust meetings, producing only loose papers instead of a proceedings register. Contentions of the Assessee: Not explicitly recorded in the provided text, but implicitly, the assessee contended that its activities were charitable and its records were in order.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 12A,Section 11,Section 12

AI-generated summary — verify with the full judgment below

ITA No. 257-2016 -1- 201 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 257 of 2016 Decided on : 04.07.2018 The Commissioner of Income Tax (Exemptions), Chandigarh . . . Appellant Versus M/s. Swami Dayanand Educational Trust, Plot No. 166, Sector 51, Near Artimis Hospital Red Light, Gurgaon (PAN: AAKTS8088E) . . . Respondent * * * CORAM : HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE AVNEESH JHINGAN Present : Mr. Denesh Goyal, Sr. Standing Counsel for the appellant-revenue. Mr. Deepak Aggarwal, Advocate for the respondent. * * * AVNEESH JHINGAN, J.

1.

The Revenue (hereinafter referred to as the 'appellant') has filed the present appeal against the order dated 30.11.2015 of Income Tax Appellate Tribunal, New Delhi (in short, 'the Tribunal') allowing the appeal of the assessee and directing the CIT to grant registration under section 12AA of the Income Tax Act, 1961 (for short 'the Act').

2.

According to the appellant following substantial questions of law arise in this appeal :- (i)Whether the ITAT was right in law while insisting that the Commissioner at the time of granting exemptions, should only look at the objects of the trust, thereby in effect PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

ITA No. 257-2016 -2- precluding the other statutory requirement built in Section 12 AA i.e. satisfaction about genuineness of activities. (ii)Whether the ITAT was right in law in allowing the appeal of the assessee inspite of the fact that the composition of the trust and several other objects/ by-laws of the trust deed imparted the character of a private trust to the applciant that does not ensure to the benefit of general public. (iii)Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in allowing appeal of the assessee by ignoring the fact that the applicant had confessed to the mistakes in the trust deed and also the fact that the onus for proving, in case of beneficial clauses, that it qualifies for exigibility from taxation lies on the applicant trust. (iv)Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in placing reliance on the judgment of Hon'ble Karnataka High Court in the case of law the Hon'ble ITAT is right in granting registration to the Society and setting aside the order of Commissioner, hence the impugned judgment is perverse.

3.

The assessee is a trust created on 02.08.2011 and duly registered by the name of Swami Dayanand Educational Trust, Gurgaon. The trust is running a school in the name of Elite International School at Village Gawalison, District Jhajjar. An application was filed on 19.03.2014 in Form 10-A for registration under Section 12A(1)(aa) of the Act. The Commissioner of Income Tax (CIT) asked for certain information and PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

ITA No. 257-2016 -3- copies of documents. The required information was furnished. The CIT vide order dated 26.09.2014 rejected the application mainly on the ground that applicant trust failed to substantiate its claim and that trust had 21 objects whereas the trust has done activities in respect of only one object that is opening of school.

4.

Aggrieved of the order, the assessee filed an appeal. The Tribunal vide order dated 30.11.2015 allowed the appeal holding that there are no allegations that objects of the applicant trust are not charitable or that the fees or the donations are being used for activities beyond the objects of the trust. Hence the present appeal by the appellant-revenue.

5.

We have heard learned counsel for the parties.

6.

Learned counsel for the revenue contended that the assessee is pursuing only one object out of 21 objects for which the trust was created. He further argued that assessee was not maintaining the record of the meetings of the trust as only loose papers were produced in place of the Proceedings Register.

7.

The contentions raised are not well founded. Section 12A lays down the conditions for applicability of Sections 11 and 12. Section 12AA provides the procedure for registration. The statute casts no obligation on the trust that for availing the benefit of Section 12A of the Act, it should pursue all the objects for which the trust came into existence. It is not the case of the department that the school is not being run by the trust and the activity being undertaken by the trust is not charitable in nature.

8.

The application of the assessee was rejected on the ground that apart from running the school, the remaining 20 objects are not being pursued. This cannot be a basis in law for rejecting the application. PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

ITA No. 257-2016 -4-

9.

The submission that no proper proceedings of the meetings are being maintained as only loose papers were given to the CIT to show the minutes of the meeting, deserves rejection. Before the Tribunal, it was specifically pleaded by the assessee that all resolutions passed by the Board of Trustees and minutes books were being maintained in the form of computer print outs which are duly sanctioned by the Board of Trustees. The copies of print outs were produced before the CIT. In such circumstances the objection raised by the CIT cannot be sustained.

10.

There is another important aspect of the matter. The Tribunal has given a categorical finding that the assessee trust is running a school with a charitable object and there is no allegation that the donations received or fees quoted are being used for purpose other than the aims and objectives of the trust. There is no challenge to the said findings.

11.

The relevant portion of the Tribunal order is quoted below:- XX XX XX

12.

In the present case, on careful persual of impugned order , we note that the CIT has considered irrelevant factors in rejecting the application of the appellant trust. The objects of the applicant trust as mentioned in Trust deed are charitable in nature and the application for registration cannot be rejected merely because applicant trust undertook only one activity out of 21 objects and activities proposed in the trust deed. So far as the allegation of the CIT that the income derived by the trust either by way of donation or by way of fees from the students is concerned, there is no allegation that the receipts from fees were applied or used by the assessee trust for the purpose other than the aims and objects of the trust. From the impugned order, we further note that it is not the allegation off the CIT that the fees charged from the institutions or donations received have been used for the PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

ITA No. 257-2016 -5- purposes other than running the institution managed by the assessee trust. Admittedly and undisputedly, this fact has been noted by the CIT that the appellant trust is running a school as per its charitable objects and it is not the allegation of the CIT that the activities carried on by the assessee trust are not in consonance with its objects as per trust deed. XX XX XX

16.

On the basis of foregoing discussion, we are of the view that the CIT rejected an application for registration u/s 12AA of the Income Tax Act, 1961 without any justified reason and basis despite the fact that the objects of the applicant trust are charitable and no allegation has been brought out on record by the CIT that the assessee is conducting activities beyond its objects as per trust deed or fees and donations are being used for the activities which are not charitable and beyond the ambit of the objects of the assessee applicant trust, hence, we direct the CIT that the applicant trust should be granted registration u/s 12AA of the Act and accordingly we direct the ld. CIT to grant registration to the applicant trust as per relevant provisions of the Act. XX XX XX

12.

The objects of the assessee trust have been found charitable. Even the photographs annexed with the appeal clearly shows running of a school. The denial of registration by the CIT on mere suspicion and conjectures cannot be upheld. No fault can be found in the order of the ITAT directing the grant of registration to the assessee trust. However, we may hasten to add that in case, subsequently, the revenue is satisfied that the activities of the assessee trust are not for charitable purposes, department can always initiate action for cancellation of registration under PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

ITA No. 257-2016 -6- Sub Section (3) of Section 12AA of the Act.

13.

We do not find any reason to differ with the view taken by the Tribunal. No error has been pointed out in the findings recorded by the Tribunal. No substantial question of law arises.

14.

The appeal is dismissed. [ AJAY KUMAR MITTAL] JUDGE [ AVNEESH JHINGAN ]

JUDGE 04.07.2018 pankaj baweja Whether speaking/reasoned ? Yes / No Whether reportable ? Yes / No PANKAJ BAWEJA 2018.08.28 15:25 integrity of this document High court, Chandigarh

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