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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI S.S. VISWANETHRA RAVI, HON’BLE JM & DR. DIPAK P. RIPOTE, Hon’ble AM
आदेश / ORDER
PER DR. DIPAK P. RIPOTE, AM: This is an appeal filed by the Assessee directed against the order of ld. Commissioner of Income Tax, (Exemption), Pune (in short, the CIT(E)) dated 27.02.2019. The Assessee has raised following grounds of appeal: “1. Commissioner of Income Tax(Exemption) has erred in not granting the Registration u/s 12A of the Income Tax Act, 1961 Appellant prays to grant the same. 2. Appellant prays to add, alter, amend, take additional ground/s and /or withdraw the ground/s, during appeal proceedings. Appellant prays to allow the same.” 2. Brief facts of the case, are that the Appellant had applied for registration u/s 12AA of the Income Tax Act, 1961(in short, the Act) on 08/08/2018 before the CIT(E), Pune. Appellant is a society registered under Societies Registration Act on 08th January, 2001. The CIT(E) rejected the application vide his order dated 27/02/2019. The CIT(E) rejected the application on the ground that the society has not incurred any expenditure on objects of the trust. The CIT(E) further stated that appellant has earned surplus which explains that activities are not charitable in
ITA No.466/PUN/2019 Association of Consulting Civil Engineers (A) nature. The CIT(E) has mentioned that the society has not utilized the surplus towards the objects of the society. The CIT(E) has given categorical finding that no
details have been furnished by the appellant to process the application filed by appellant U/s 12AA of the Act. The CIT(E) has also mentioned that the deed does not contain dissolution clause. Therefore, the CIT(E) rejected the application of the
appellant filed U/s 12AA of the Act.
Before us, the ld. AR submitted the paper book containing 59 pages. However, ld. AR has not certified that the documents of the paper book were filed before the CIT(E). The paper book contained copy of income & expenditure
account, balance sheet for the A.Y. 2014-15, 2015-16 and 2016-17, note on activities and sample broachers. The ld. AR vehemently argued that at the time of granting registration U/s 12AA of the Act, the Commissioner has to only verify the
objects of the trust. The CIT(E) is not empowered to verify the activities of the trust. Ld. AR invited our attention to the sample broachers enclosed in paper book to emphasise that the society had organised exhibition on 15th February, 2015
which was based on “Go Green Theme” to create environment awareness. Ld. AR also invited our attention to page No. 56 of the paper book which was dated 15th September, 2012, it was a programme schedule of 15th September, 2012 of
Engineer's Day celebration. The ld. AR explained the Engineer’s Day was celebrated every year. The Ld.AR also claimed that the society had organised blood donation camp.
Ld. DR relied on the order of the CIT(E). The Ld. DR vehemently submitted that the CIT(E) has to verify the genuineness of the activities of the appellant trust. Accordingly, in this case, the CIT(E) has given categorically finding that though the Trust was formed in 2001 but the appellant has not spent any money on the
objects of the trust as evident from the income & expenditure account. Therefore, 2
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the Ld. DR submitted that genuineness of the trust itself is in doubt as no charitable
activities have been carried on.
We have heard both the parties and perused the record. The Appellant had
filed copies of Income & Expenditure Account for three years. Appellant claimed
that the same was also filed before the CIT(E). On perusal of the said Income &
Expenditure accounts, following things have been observed: As on 31st March, 2017 Expenditure Rs. Income Rs. To Expenditure in respect - By Interest (accrued) 112,245.00 of Properties— Realized On bank account________ To Establishment Expenses 2,342,507.50 -Shedule 1 By ACCE annual fees a/c 413,214.00 Other Expenses By Calender sponsorship a/c 60,869.00 To Audit Fees To Miscellaneous Expenses 1,860.00 By Engineer’s sponsorship 30,000.00 a/c To Expenditure on objects -- of the Trust— By competition fee 15,000.00 By booklet spons A/c 84,347.00 To Depreciation 93,496.00 By Advt. & Meeting spon 52,126.00 -Shedule 2 A/c By Seminar Spon A/c 21,739.00 To Surplus Carried over to 1,204,129.50 By stall rent 2,852,453.00 Balance Sheet 3,641,993.00 3,641,993.00
As on 31ST March, 2016 Expenditure Rs. Income Rs. To Expenditure in respect - By Interest (accrued) 82,126.00 of Properties— Realized On bank account________ To Establishment Expenses 975,386.00 -Shedule 1 By ACCE annual fees a/c 140,000.00 Other Expenses By Calender sponsorship a/c 79,474.00 To Audit Fees To Miscellaneous Expenses 3,403.00 By Engineer’s sponsorship 60,000.00 a/c To Expenditure on objects - of the Trust— By compitition fee 12,000.00 By booklet spons A/c 6,579.00 To Depreciation 117,613.00 By Advt. & Meeting spon To Surplus Carried over to A/c Balance Sheet (641,925.00) By Seminar Spon A/c By stall rent 65,000.00 9,298.00 454,477.00 454,477.00
ITA No.466/PUN/2019 Association of Consulting Civil Engineers (A) As on 31ST March, 2015
Expenditure Rs. Income Rs. To Expenditure in respect - By Interest (accrued) 33,135.00 of Properties— Realized On bank account________ To Establishment Expenses 2,320,072.00 By ACCE annual fees a/c Other Expenses To Audit Fees 1,400.00 By Calender sponsorship a/c 54,000.00 To Miscellaneous Expenses - To Expenditure on objects - By Engineer’s sponsorship 66,300.00 of the Trust— a/c To Depreciation - By Meeting sponsorship a/c 176,000.00 By booklet spons A/c 50,500.00 To Surplus Carried over to Balance Sheet By Advt. & Meeting spon 465,590.00 1,128,391.00 A/c 2,604,338.00 By stall rent 3,449,863.00 3,449,863.00
Thus, it is observed:
F.Y Total Income Amount Spend on Surplus % Objects 2014-15 34,49,863/- NIL 32.7% 2015-16 4,54,477/- NIL Loss 2016-17 36,41,993/- NIL 33%
Thus, the appellant, as observed from the Income & Expenditure Account has not
spent a single Rupee on the objects of the Society. The Appellant, though have
claimed that it has carried out activities like organizing Seminar, but in the Income
& expenditure account, no expenditure is seen towards the objects of the trust. The
Appellant only claimed that the society has carried out activities, but no specific
evidence has been filed by the appellant to prove the fact that it has carried out
activities for the objects of the Society. It is an accepted fact that the appellant
society was formed in the year 2001.However, the appellant has not carried out any
activity to fulfill the objects of the society. On perusal of the income & expenditure
account, it is observed that the appellant has generated revenue from
advertisement, meetings sponsorship, calendar sponsorship, seminar sponsorship,
engineer’s sponsorship. Every year, appellant has carried out these revenue
generating activities. 4
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5.1 The objects of the society as submitted by the appellant are as under:
To assist in solving the various problems created in the field of Civil- engineering field. 2. To arrange and conduct seminars, workshop, study-tours, Exhibition to enhance the knowledge of engineering faculty. 3. To represent reg. problems of civil engineers concerned authorities and try to solve the same. 4. To educate public regarding the role of civil engineers in the society. 5. To execute charitable works as and when required. 6. To undertake research and development in the field of engineering. 7. To demonstrate the appropriate and advanced technology. 8. To organize short-term, medium-term and long-term standard training 5.2 Though there are many objects, however, no expenditure has been incurred
for these objects. No evidence has been filed to establish that the society has
carried out activities towards the objects of the society. This society is in existence
for more than 10 years.
5.3 Section 12AA is reproduced here as under:
12AA. (1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) or clause (ab) of sub- section (1) of section 12A, shall— 54[(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about,— (i) the genuineness of activities of the trust or institution; and (ii) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects, and may also make such inquiries as he may deem necessary in this behalf; and] (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities 55[as required under sub-clause (i) of clause (a) and compliance of the requirements under sub-clause (ii) of the said clause], he— (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant : Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Principal Commissioner or Commissioner and the Principal Commissioner or Commissioner may proceed with such applications under that sub- section from the stage at which they were on that day. (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) or clause (aa) or clause (ab) of sub-section (1) of section 12A. (3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently the Principal Commissioner or Commissioner is satisfied that the activities of such trust or institution are not genuine or are not 5
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being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution: Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard. (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that 56[(a) the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13; or (b) the trust or institution has not complied with the requirement of any other law, as referred to in sub-clause (ii) of clause (a) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-compliance has occurred, has either not been disputed or has attained finality, then, the Principal Commissioner or the Commissioner may, by an order in writing, cancel the registration of such trust or institution:] Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. The plain reading of Section 12AA explains that the Pr.CIT or
Commissioner has to satisfy himself regarding genuineness of the activities of the
trust. He has also to satisfy himself about genuineness of the object of the trust.
Thus, there will be two situations, first situation is that a trust has applied for
registration U/s 12AA, within a short period of formation of the trust. Therefore,
naturally, in such newly formed trust, there will not be any activity. In such
situation, the CIT(E) has to verify the objects of the trust vis a vis Section 2(15) of
the Act.
The second situation will be a trust which is in existence for a long time. In
this situation, the CIT(E) has to verify whether activities of the trust are charitable
or not, he has to also verify the objects of the trust.
The Hon’ble Supreme Court in the case of Ananda Social & Educational Trust Vs
CIT reported in (2020) 114 taxmann.com 693 (SC) has observed as under:
“The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine.”
ITA No.466/PUN/2019 Association of Consulting Civil Engineers (A) The appellant before us is existing since 2001. However, as demonstrated in earlier paragraphs that though the appellant has earned substantial income, not a rupee has been spent on objects of the society. Rather, appellant is generating income with an intention to earn profit as is visible from the income & expenditure account. Though the appellant claimed that it had carried out charitable activities like blood donation etc, no evidence has been filed to substantiate the claim. Also, the CIT(E) has not mentioned anything about the objects of the society. Further he has not given any reasoned findings whether the objects are charitable or not. During the registration proceedings u/s 12AA, the CIT(E) has to decide whether the objects are charitable or not as defined u/s 2(15) of the Act. Therefore, after considering the facts and circumstances of the case and in the interest of the justice, we remand the matter back to the file of CIT(E) for reconsideration of the application filed by the assessee society U/s 12AA of the Act and pass an order afresh. The Appellant is also directed to file/produce all necessary documents as desired by CIT(E). The CIT(E) shall afford reasonable opportunity of hearing to the assessee before passing the order. Thus, this case is set aside and remanded back to the CIT(E).
In the result, this appeal of the appellant is allowed for statistical purpose. Order pronounced in the open Court on 24th March, 2022.
Sd/- /- Sd/- /- (S.S. VISWANETHRA RAVI) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 24th March, 2022/ *Ranjan आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(E), Pune. 4. The Pr. CIT concerned. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “ए” ब�च, 5. 7
ITA No.466/PUN/2019 Association of Consulting Civil Engineers (A) पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
आदेशानुसार / BY ORDER,
// TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.