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Income Tax Appellate Tribunal, DIVISION BENCH’A’, CHANDIGARH
Before: SHRI N.K. SAINI & SHRI SANJAY GARG
PER N.K. SAINI, VICE PRESIDENT :
This is an appeal by the Assessee against the order dt. 26/09/2016 of Ld. CIT(E)-, Chandigarh.
The only grievance of the assessee in this appeal relates to the rejection of application moved by the assessee for grant of Registration under section 12A of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
The facts of the case in brief are that the assessee is an ongoing entity in operation since 12/10/2015 and furnished the application in Form No. 10A for grant of Registration under section 12A of the Act in the office of Ld. CIT(E), Chandigarh.
The Ld. CIT(E) discussed the aims and objectives of the society in para 2 of the impugned order and the provisions of the Section 12AA of the Act in para 3 to 5 of the aforesaid order. The Ld. CIT(E) asked the assessee to furnish certain documents / clarifications. He mentioned the queries and response received from the assessee in para 6 of the impugned order which read as under:
i. The papers reveal that the applicant has been constituted as a Board. The relevant Act's details under which the Board has been constituted may be provided. If that be the case you are also required to explain why application
under the relevant provisions of Chapter III of the IT. Act, 1961 has not been made? � As regards the applicant has been constituted as a Board is incorrect. In fact it is the name of the society which is registered under the Haryana Registration and Regulation of Societies Act, 2012 and copy of the certificate dated 05.09.2015 is attached herewith for your good self. The society was notified by the Government of Haryana vide notification dated 12.10.2015 and a copy of the notification was submitted to your good self on 09.09.2016. As regards application under Chapter III of the Act it is submitted that the applicant applied for registration u/s 12AA of the Act which is covered under Chapter 111 of the Income Tax Act, 1961.
ii. Notwithstanding the above, you are required to explain the rationale behind creation of the society and the stated objects behind the said creation. You may provide details of the category, envisaged by the Society's Registration Act, 1860, under which the same has been registered. A clear exposition may be made how the stated objects get covered by the definition of charitable purposes envisaged by section 2(15) of the I.T. Act. What is the charity being done and who are intended beneficiaries?
� As regards rationale behind the creation of the society is to preservation of monuments or places or objects of artistic or historic interest covered under section 2(15) of the Income tax Act, 1961. It is clarified that after 2012 all societies are registered under the modified act of 2012. The charity being done by the society has already been explained in para 1 of my submission dated 09.09.2016.
iii. Further, you are required to furnish details of income from property held for charitable purpose as envisaged u/s 11 of the I.T. Act and income of institution from contributions as envisaged u/s 12 of the I.T. Act that are sought to be exempted. � As regards detail of income from property held for charitable purpose as envisages u/s 11 of the Act it is submitted that till 31.03.2016 the applicant has received Rs. 301 lakhs as grant in aid from Government of Haryana and Rs. 1,951/- as interest from the said funds parked in the Bank. The applicant is at the beginning of the activities and expected to receive income from the grant in aid help as property for charitable purpose. Accordingly it has applied for the registration u/s 12AA of the Act.
iv. You may file details of the level of financial assistance that is received from the Government and the way the same has been utilized for the stated purposes. Can the same be construed in any way to be voluntary donations? Are there instances of generation of income from the activities of the society that needs to be exempted? � As regards details of level of financial assistance that is received from Government and the way the same has been utilized for the stated purposes I have submitted the same vide para 2 of my submission dated 09.09.2016. It is a corpus fund as it can be utilized only for Saraswati heritage regarded as a monument. Yes the applicants expect generation of income from the activities of the society that needs to be exempted which will not be a business income from activity of trade or commerce but voluntarily contribution etc.
v. Please elucidate how the functions of the society are controlled by the government. Which is the controlling ministry within the state government?
� The controlling ministry will be cultural affair and the chairman of the applicant is Chief Minister of Haryana as per clause 6 of the Bye-laws of the notification date 12.10.2016.
vi. You are required to elucidate whether the society is authorized to take decisions independent of the government. If yes, please explain how. Instance may be cited. � As regards the applicant is guided and authorized by clause 7 of the Bye- laws as per notification dated 12,10.2015.
vii. The composition of the society reveals that the same is drawn mainly from the Government set-up. There is seemingly no representation from the intended beneficiaries neither are the experts in the field associated. In this light the composition is restrictive and not enuring to the benefit of the general public. This presumption may be rebutted. � It is correct that the applicant is a Government set up and there is no debar in the Income Tax Act, 1961 from such set up. It is pertinent to note that Government official are for the general public welfare and the main object of the applicant is rejuvenation of Sarasvati River and is a monument of historic interest which is to be used by the general public at large being a heritage of Saraswati.
The Ld.CIT(E) rejected the application moved by the assessee by observing that no evidence had either been provided how Saraswati Heritage falls under any of three categories namely monument, place or objects and it had been notified as the monument. The Ld. CIT(E) while rejecting the application moved by the assessee observed in para 9 & 10 of the impugned order as under:
In the instant case it is clear that the society is not free from governmental control given its composition and finances. This is further corroborated by lack of a specific answer about the income of the applicant that is sought to be exempted. It has been claimed that the grants-in-aid provided by the government shall be the income of the society. 'Grant-In-Aid' is a transfer of money from the federal government/ state government to a state government /local government or individual person for the purposes of funding a specific project or program. Grants in aids cannot by any stretch of imagination be construed as voluntary donations as specified in section 12 of the I.T. Act. Further, there are no indications that the grants in aid are to act as corpus of the society having a permanent character from which income would accrue to the society to an extent that would be sufficient for achieving its mandate. That the said grant is not corpus (as has been claimed in the applicant's response) is exemplified by the fact that it is kept as cash balance in the bank and also utilized partly in the form of devolution to district level organizations for holding cultural functions albeit claimed to be related to Sarasvati Heritage development. Corpus is a fund that is akin to the capital of an organization some sort of a permanent fund which can be utilized for earning income to redeem the body's functions but not to be utilized for day to day functions and which can be utilized only in extreme circumstances. Clearly there is no income as per the scheme of sections 11, 12 or 13 of the Act that could be exempted subsequent to 12A registration.
In light of all of the above, the stated aims and objects are not held to be charitable and covered by the provisions of section 2(15) of the Act. The composition of the society, in the present, is held not to be representative and broad-based. Moreover, redeeming government's statutory functions through a society (even though those necessarily have welfare imperatives) cannot be claimed to be charity. The application under section 12A for grant of registration is accordingly rejected.
Now the assessee is in appeal.
Ld. Counsel for the assessee submitted that the Ld. CIT(E) had not appreciate the facts in right perspective and wrongly mentioned that the documents / evidence were not produced before him. It was stated that all the
details asked by the Ld. CIT(E) were furnished, however the same were not appreciated in right perspective by the Ld. CIT(E). Reference was made to page nos. 1 to 107 of the assessee’s compilation. It was emphasized that the notification of Archeological site on the bank of Saraswati River is placed at page no. 100 to 107 of the assessee’s paper book. It was accordingly submitted that the Ld. CIT(E) was not justified in rejecting the application moved by the assessee for registration under section 12A of the Act.
In his rival submissions the Ld. CIT DR strongly supported the order of the Ld. CIT(E) and reiterated the observations made therein.
We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the Ld. CIT(E) in para 7 of the impugned order mentioned that response to the queries by the assessee had been examined. However, it is not brought on record what was the response of the assessee and how the explanation was not plausible. The Ld. CIT(E) has also mentioned that the necessary evidence relating to the notification has not been provided on the contrary the stand of the Ld. Counsel for the assessee was that all the details were furnished before the Ld. CIT(E) who had not taken cognizance of the said documents, reference was made to page nos. 1 to 107 of the assessee’s paper book which are the various documents relating to certificate for registration with the Registrar of the assessee dt. 05/09/2015, various other notification including the notification of Archeological site on the bank of Saraswati River etc. We therefore by considering the contradictory stand taken by the Ld. CIT(E) and the Ld. Counsel for the assessee deem it appropriate to remand this case back to the file of the Ld. CIT(E) to be decided afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee.
In the result, appeal of the Assessee is allowed for statistical purposes.
(Order pronounced in the open Court on 04/06/2019 ) Sd/- Sd/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT Dated : 04/06/2019 AG Copy to: 1.The Appellant, 2. The Respondent, 3. The CIT(A), 4. The CIT, 5. The DR