SARVODAYA WELFARE SOCIETY,RANCHI vs. CIT EXEMPTION , PATNA

1 ITA No.237/Ran/2017 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.237/Ran/2017 Assessment Year : NA Sarvodya Welfare Society, vs CIT(E), Patna Bethany Convent Compound, Kadru Road, Near Kadru Over Bridger, P.ODoranda, Dist-Ranchi- 834002 PAN/GIR No. : AANAS 3371 A .. Respondent (Appellant) Assessee by : Shri Devesh Poddar, AR Revenue by : Shri Inderjit Singh, CIT(Sr.DR) Date of Hearing : 22.11.2018 Date of Pronouncement : 26.11.2018

O R D E R Per Pavan Kumar Gadale, JM: The assessee has filed this appeal against the order of CIT(E),

Patna, dated 09.08.2017 in rejecting the grant of registration u/s.12AA of

the Act on the following grounds of appeal :-

“1. For that Ld. Commissioner of Income Tax (Exemptions) was not justified in rejecting the application of the Appellant filed for registration U/s.12AA. Ignoring the direction given by Hon'ble ITAT in its order dated 02/03/2017 to consider the objectives of the society and whether activities of the society are genuine. Ld. CIT (A) went out of way and beyond the order of Hon'ble ITAT. 2. For that numerous details along with constitution and by laws were filed and detailed requirement in respect of scholarship paid during F.Y. 2015-16 were submitted. Ld. CIT (Exemptions) failed to consider the objectives and proved various charitable works being done by the society. The application was rejected again on the grounds that appellant was working only for a particular religion and community.

2 ITA No.237/Ran/2017 3. For that Ld. CIT (Exemption) rejected application of the appellant in a summary manner without considering the fact in a judicious manner. The order passed by Ld. CIT (Exemptions) is unjustified, illegal, incorrect and fit to be set aside. The appellant should be granted registration U/s 12AA of the Income Tax Act considering the objective of the trust and other activities. 4. For that other grounds in detail will be argued at the time of hearing.” 2. The assessee filed an application for registration u/s.12AA of the Act

and it was rejected by the CIT(E), Patna and subsequently on appeal the

Tribunal has restored the matter back to CIT(E), Patna and during the

course of hearing proceedings on 03.05.2017, the assessee has

represented through his AR and filed written submissions and the CIT(E)

has observed that society has received contribution and donation as on

31.03.2016 of Rs.3,80,137/- and the major amount was utilized for giving

scholarships to some students and also the society failed to work as per its

main objective i.e. uplift and relief of the poor and the weaker sections

irrespective of caste, creed, language, region and sex and rejected the

application. On appeal before the Tribunal, ld. AR submitted that

registration u/s.12AA of the Act was rejected by the CIT(E) as the

assessee could not produce any evidence and also the trust is regulating

with regard to particular community. Ld. AR submitted paper book to

substantiate that complete information was filed and also list of donations

made and prayed for allowing the appeal.

record. The sole crux of the issue is with respect to granting of registration

3 ITA No.237/Ran/2017 u/s.12AA of the Act. Ld. AR submitted that the CIT(E) in the hearing

proceedings has called for information and the said information was filed

on 19.05.2017 along with the details of the minutes of the General Body

Meeting and also the receipts of the donations. Further ld. AR submitted

that donations are not in respect to any particular religion but for the poor

and needy people. Ld. AR also demonstrated before us along with copy of

the memorandum of registration at page 1 4(ii) which reads as under :-

“4(ii). To establish, manage, administer, carry on, conduct, support and promote formal, non-formal education of all levels, Environment Protection Women and Child Development, Health Care Services, Care of the Aged and Handicapped, Centre for distressed children and women, Legal Aid centres, Uplift and relief of the poor, and the weaker sections irrespective of caste, creed, language, region and sex. Income Generation Programmes, Formation of Self Help Groups, Cooperative Movement and all such activities which would empower people to take care of their own development and enable them to build a just and humane Society.”

the poor and needy and without considering the caste and creed, whereas

the CIT(E) having not verified the details has come to a conclusion that the

trust is relating to a particular religion community. Therefore, registration

cannot be granted. Though the CIT(E) observed that the main objective of

the society is for upliftment and relief of the poor and caste, creed,

language, region and sex but he has overlooked the fact that the trust is in

the process of making applicability of objects. Ld. AR further submitted that

trust is in existence and is for the charitable purposes, whereas the ld. DR

submitted that the CIT(E) has rightly rejected the registration and could not

bring any material evidence to support the CIT(E) order. We found that the

4 ITA No.237/Ran/2017 CIT(E) at the time of registration has overlooked the purpose of the

scholarships and without going through the objects and objectives. Ld. AR

has demonstrated with paper book with the order of ITAT and also copy of

the submissions filed on 19.05.2017 supporting with various evidences.

registration the CIT(E) has not doubted the objects and activities of the

trust, therefore, we are of the firm opinion that the CIT(E) at the time of

registration has to consider the objectives and we support our view with the

decision of Hon’ble Allahabad High Court in the case of CIT, (Varanasi) vs

Varanasi Welfare Trust in ITA No.22 of 2014 order dated 2.11.2014

wherein the Hon’ble High Court has held that the preponderance of the

judicial opinion of all the High Court’s including this Court is that at the time

of registration u/s.12AA of the Act, which is necessary for claiming

exemption u/s.11 & 12 of the Act that the CIT is not required to look into

the activities, where such activities have not or are in the process of in its

initiation. Where a trust, set up to achieve its objectives of enabling

educational institution, is in the process of establishing such institution and

receives donations, the registration u/s.12A cannot be refused on the

ground that the trust has not yet commenced, the charitable or religious

activities. Any enquiry of the nature would amount to putting the cart

before the horse. At this stage, only the genuineness of the objects has to

be tested and not the activities which have not yet commenced. The

enquiry of the CIT at such preliminary stage should be restricted to

5 ITA No.237/Ran/2017 genuineness of the objects and not of the activities unless such activities

have commenced. The rust or society cannot claim exemption, unless it is

registered u/s.12AA of the Act and at that such initial stage, the test of

genuineness of the activities cannot be a ground on which the registration

may be refused.

Charitable Trust vs DIT (E) in ITA No.5591/Del/012 held that the DIT (E)

has not pointed out any defect or doubt about the charitable objects of the

assessee trust. From the impugned order, we clearly observe that the

DIT(E) has rejected the application of the assessee trust for grant of

registration u/s.12A of the Act by holding that in absence of any charitable

activity, the genuineness of the activities cannot be held to be established.

At the same time, we observe that as per ratio of the decision of Hon'ble

Jurisdictional High Court in the case of DIT(E) vs Foundation of Ophthalmic

and Optometry Research Education Centre, registration u/s.12A is not

dependent on commencement of charitable activity. The registration

granting authority is not required to examine the question whether the trust

has actually commenced and carried on its charitable activities. We also

take cognizance of decision of Hon'ble High Court of Allahabad in the case

of R.S.Bajaj Society, as relied by the assessee, wherein, their Lordships

held that at the time of registration, only genuineness of the objects was to

be tested and not the activities which were not commenced at that time.

6 ITA No.237/Ran/2017 9. The Hon’ble Punjab and Haryana High Court in the case of CIT Vs.

Surya Educational & Charitable Trust, [2011] 15 taxmann.com 123 (Punjab

& Haryana) has held as under :- “8. We have heard learned counsel for the appellant, but find no merit in the present appeals. As per Section 12AA of the Act, an application for registration of the Trust and Institution is required to be made within one year from the date of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub-section (3) of Section 12AA of the Act, empowers the Commissioner to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the Trust or Institution. 9. Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act. 10. On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section

7 ITA No.237/Ran/2017 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. 11. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment. 12. In view of the above, we do not find that any substantial question of law arises for consideration in the present appeals. Hence, the same are dismissed. 10. The Hon’ble Madras High Court in the case of DIT(E) Vs. Seervi

Samaj Tambaram Trust, [2014] 43 taxmann.com 142 (Madras) has held

as under:-

“It is not denied by the assessee that on the date of the application under section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned by the Commissioner. Considering the fact that the continuance of registration is further a subject matter of scrutiny by the Commissioner as contemplated under section 12AA(3), the revenue would not be justified in refusing the registration at the threshold.” [Para 9]

8 ITA No.237/Ran/2017 11. In the instant case, we find that the CIT(E) has refused registration

on the ground that the assessee failed to establish that activities of the

assessee are genuine, whereas the CIT(E) has not raised any doubt or

objection about the charitable objects of the assessee society, therefore,

registration u/s. 12AA of the Act cannot be denied on the ground that the

genuineness of the charitable activities cannot be held to be established in

absence of any genuine charitable activity. We support our view with above

judicial decisions and, therefore, direct the CIT(E) to grant registration to

the assessee society u/s.12AA of the Act. Accordingly, ground of appeal of

the assessee is allowed.