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Facts
The assessee filed an application for registration under section 12A(1)(ac)(iii) of the Income Tax Act, 1961, which was rejected by the CIT(E) primarily due to the absence of specific clauses like dissolution, investment, irrevocability, utilization, and beneficiary clauses in its Memorandum of Association (MOA). The CIT(E) also noted that donations were collected but not yet spent on religious activities.
Held
The Tribunal condoned the delay in filing the appeal and admitted it for hearing. Although the assessee did not appear, the Tribunal proceeded to hear the appeal based on the grounds and issues involved. The Tribunal observed that the society was duly registered and had obtained provisional registration. The Tribunal also noted that the assessee had agreed to incorporate the missing clauses in its MOA.
Key Issues
Whether the rejection of registration application under section 12A(1)(ac)(iii) is justified solely based on the absence of certain clauses in the MOA, especially when the assessee agrees to amend them and its activities appear to be genuine.
Sections Cited
12A(1)(ac)(iii), 12AB, 12A(1)(ac)(vi), 12A(1)(ac)(iv), 13(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. DIPAK P. RIPOTE & SH. UDAYAN DASGUPTA
This appeal is filed by the assessee against the order of the ld. CIT (Exemptions) Chandigarh dated 11.06.2024 rejecting an application for registration u/s 12A(1)(ac)(iii) of the Income Tax Act, 1961.
Assessment Year: N.A.
Condonation of delay: It is pointed out by the registry that the appeal is filed belatedly by 13 (thirteen) days and the assessee has filed an application for condonation explaining the fact that the assessee has erroneously filed the appeal before the Hon’ble ITAT, Chandigarh Bench on 9th Aug., 2024 under the impression that Ludhiana falls under the jurisdiction of the Chandigarh Bench. However, on being advised by the office of the Tribunal regarding the appellate jurisdiction being held by the ITAT Amritsar Bench, the appeal was filed at Amritsar on 13th Aug., 2024 which had to be subsequently rectified because of improper signature. Subsequently, proper appeal memorandum has been filed on 23.08.2024 which was belated by 13 days and has prayed for condonation of delay in absence of any willful neglect or default on the part of the assessee.
Considering that sufficiency of reasons, we condone the delay and admit the appeal to be heard on merits.
In course of hearing, there has not been any appearance by the assessee or his ld. counsel on repeated calls neither physically nor in virtual mode. However, considering the grounds of appeal and the issues involved, we proceed to dispose of this appeal after hearing the ld. DR.
Brief facts emerging from records are that the assessee has made an application for registration u/s 12A(1)(ac)(iii) of the Act on 28.12.2023. During the course of Assessment Year: N.A. registration process, queries were raised and submission has been made accompanied by copies of provisional registration u/s 12AB, copies of memorandum of association, financial statements and copies of bank statement with narrations of debit and credit entries, but the application for registration has been rejected by the ld. CIT(E) in absence of any dissolution clause, investment clause, irrevocability clause, utilization clause and beneficiary clause mentioned in the memorandum of association with the observation that in absence of aforesaid clause, the presumption of law is that the assets and liabilities of the societies will be distributed amongst the members of the society in case of society closes its operation. It was further alleged that though the donations has been collected but there has not been any spending on any religious activity so far as it is evident from the financial statement.
Now, the assessee is in appeal before the Tribunal on the grounds contained in the memorandum of appeal which are as follows:
“1) The appellant society was formed in the year 2021, taking inspiration from Acharaya Arun Muni Ji Maharaj Sahib. In India various S.S. Jain Sabha Society have been in existence which manage the Jain Religious activity and Jain worship place i.e. "Jain Sthanak" (Temple for Jain Religion). Jain Sthanak is a pious place where men & women having belief in Jain religion happened to visit for Darshan of Jain monks and saints, prayers, Satsang, meditation and worshipping God. The appellant to fulfil point 4 of Objective clause no. 5, started work to construct a Jain Sthanak in the Golf link area. Beside, during the financial year of 2022- 23 S.S. Jain Sabha has done many work for Jain religious activity which include every 15th day "Namokar Mantar Path", organize the pravachan of Jain saints, Vihar of Jain saints, promote the Jain philosophy and knowledge to young generation, as per the objectives of the appellant.
2) To further its objectives, the society initially received a 200 sq yard land donation from a member to commence its activities. Recognizing the need for a larger space to effectively achieve its goals, it sold the old plot and purchased a larger plot of size 322 sq. yard. The society then started construction thereupon. Construction of the worship place is in itself a part of religious activities as there can be no second use of the property other than worship. All the donations received by the members of the society and devotees are entirely put into making of the worship place.
3) That the power to grant regular registration to any trust is based upon two factors as per Section 12AB(1):
-To satisfy about the genuineness of its activities.
-To satisfy about the compliance of such requirements of any other law which are material for the purpose of achieving its objects.
4) We also refer to the "specified violation" as mentioned in explanation to sub section 4 of section 12AB, your honour will appreciate that no-where the appellant is falling under the specified violations from clause (a) to clause (g). The society is only performing activities in accordance with the objectives as enumerated in its MOA.
5) The appellant operates exclusively for religious purposes and does not seek to misuse any tax benefits. The cancellation provisions were introduced to address the misuse of trust funds for private gain, which is not applicable in this case. The society has not engaged in any trade, commerce, business, or service activities. Therefore, cancelling the registration would undermine the very foundation of the society's genuine objective.
6) Moreover, rejecting the application of regular registration, in the absence of dissolution clause, investment clause, irrevocability clause, utilization clause and beneficiary clause in the applicant's MOA, would be unjust as appellant is a society which is duly registered and bound by the framework of society's registration Act that ensures that its objectives are non- commercial in nature and that the society is bound to operate not for any private gains. The Assessment Year: N.A. society has obtained registration certificate from the society's registration Act which in itself is an absolute proof that the society is only and only meant for the public religious purpose and not for any private benefits of its members. Further, in its earlier correspondences, upon being notified by the CIT (A), the appellant has agreed to incorporate the missing clauses in the MOA of the society in accordance with the Income Tax Act and in accordance with the CIT (A) findings. The appellant, hereby again states that it acknowledges its oversight and is ready to revise the MOA to incorporate the mentioned clauses if a reasonable opportunity is being granted by the Honorable ITAT.
7) A fair reading of the society's MOA, reveals that in clause no. 19 and in clause no. 20, it is explicitly mentioned that society will never get dissolved and would be perpetual in nature. Further that no benefit will be passed on by the society to its members. That the society's objective is to utilize the fund raised in Jain worship place and activities related to Jain religion as written in the objective clause of the society. In the above background, the rejection of registration needs reconsideration.
8) The appellant would also like to draw honorable ITAT's attention to the recent case law of Ajit Education & public welfare society vs. CIT (2019). As well as in the case of CIT v. Tapagacha Sangh Mota (2015) 232 taxman 715(Gj.) in both these cases, there was an absence of dissolution clause in the MOA of the assessee society. On this pretext, exemption was denied purporting that on dissolution, benefit would go to specified persons u/s 13(3) of the Income Tax Act, 1961. The reason for rejection by revenue could not be sustained as the benefit which may or may not accrue w's 13(3), did not have an effect on the genuineness of the activities of the society. It was held that the eventuality relied upon by the revenue was based on whims and fancies without there being any definite basis that any mis-utilization would occur for sure in future.
9) Likewise, in the case of CIT Central Circle v. AS kapparaju brothers’ charitable foundation trust (2012) 17 Taxmann.com 56 (Chen 'A'-Trib)-it was held that the purpose of creation of trust was to save the property of authors of trust from various enactments such as urban ceiling act etc-such inference is totally based on presumption hence registration cannot be denied.
Assessment Year: N.A. 10) The appellants-case is similar to the above cited case laws wherein ITAT opined that the Ld. Chief commissioner has denied the approval not because he found the activities not genuine but for the reason that an event may occur in future benefitting certain specified persons, the occurrence of the event being also not definite. The reason for denying is far- fetched and against the grain and spirit of this section which extends the benefit of exemption from tax to genuine societies. It further opined that undoubtedly, a contingency occurring in the future cannot change the fact situation in the present. Consequently, the case was set aside and exemption was entitled to the assessee by the honorable ITAT.
11) The appellant is ready to modify the MOA which is under active consideration.
12) The appellant craves leave to alter, modify, amend, withdraw or raise additional grounds of appeal on or before completion of appellate proceedings.”
The ld. DR reiterated the same argument as contained in the ld. CIT(E) order and has prayed that in absence of any activity carried out by the society and also considering the deficiencies contained in the memorandum of association, the order of the ld. CIT(E) may please be upheld.
We have heard the ld. DR and considered the materials on record and we find that the appellant society is duly registered under the ‘Societies Registration Act, 1860’ under the hand of ‘Additional Registrar of Societies, Ludhiana’ vide certificate of registration dated 12th May, 2021. The society was also granted provisional registration in Form 10 AC u/s 12A(1)(ac)(vi) for the period of assessment years 2022-23 to 2024- 25 vide ld. CIT(E) order dated 08.02.2022. We further observe that the objects of the society is to engage in religious activities like promotion of Jain Religion, its principles
Assessment Year: N.A. and its preachings, construction and maintenance of Jain worship place apart from the objects of construction and operation of school, hospital, libraries and other charitable activity for the poor and needy people irrespective of the religion. As per new provisions of the Act, the assessee society applied for regular registration u/s 12A(1)(ac)(iv) in Form No. 10AB which was subsequently revised by making afresh application under Clause-3 on 28.12.2023 which was rejected vide observations that ‘MOA is very skeletal and lacks some of the important clauses such as dissolution clause, investment clause, irrevocability clause, utilization clause and beneficiary clause’. However, it is also noted by us that in course of hearing before the ld. CIT(E) the assessee has already submitted that this particular society, has the view of non- dissolution, as this is a religious society and it was declared that they will add the clause of non-dissolution in the memorandum of association in the upcoming AGM.
It is further observed by us that the society received a plot of land as donation from a member to commence its activities and the said plot of land was sold, against which the society has purchased a larger part of the land, upon which the construction of the place of worship has been carried out, which also indicates towards application of fund for the objects of the society. We also find that the activities of the society are genuine and there is no observation or findings regarding the in-genuineness of the objects or the activities and as such we are of the opinion that in such cases, the registration cannot be denied more so when the assessee society has agreed to Assessment Year: N.A. incorporate the dissolution clause by necessary modification/alteration in the MOA, as
per procedure.
As such, we remand the matter back to the files of the ld. CIT(E) to consider the application for registration afresh and we also direct the assesseee society to furnish all necessary documentary evidences including the revised memorandum of association incorporating the dissolution clause and the ld. CIT(E) shall proceed with this application for registration on meris as per the provisions of law.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court as on 20.03.2026