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Income Tax Appellate Tribunal, AMRITSAR BENCH; AMRITSAR
Before: SH. T.S. KAPOOR & SH. N.K.CHOUDHRY
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. T.S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A Nos.599(Asr)/2016 Assessment Years:
M/s Saint Paul’s Education Vs. CIT(Exemptions), Society, Chandigarh. Gonianan Road, Adarsh Nagar, Bathinda. PAN:AAETS-0642Q (Appellant) (Respondent)
I.T.A Nos.600(Asr)/2016 Assessment Years:
M/s Radiant Society of Vs. CIT(Exemptions), Education, Chandigarh. Radiant Kids Play Way School, 100 Ft. Road, 6/34, Bathinda, Punjab. PAN:AADAT-4630R (Appellant) (Respondent)
Appellant by: Sh. Vineet Krishan (Ld. Adv.) Respondent by: Sh. S.S.Kanwal (Ld. DR)
Date of hearing: 09.11.2017 Date of pronouncement: 07.02.2018 ORDER PER N.K.CHOUDHRY, JM: The aforesaid two appeals have been preferred by the Appellants/ Societies, on feeling aggrieved against the orders dated 30.09.2016 & 28.09.2016 , respectively passed by the Ld. CIT (Exemption), Chandigarh, ,
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while declining the registration u/s 12AA of the Income Tax Act (hereinafter called as the ‘Act’).
In both the appeals, the issues and grounds of appeals are almost identical, similar and common, therefore, for the sake of convenience and brevity, both the appeals have been taken for adjudication simultaneously, however, the facts and grounds of ITA No.599(Asr)/2016 have been taken into consideration for adjudication and the result of the same should also be applicable to the ITA No.600(Asr)/2016.
The grounds of appeal raised in ITA No.599(Asr)/2016 are as under:
“1. That the order passed under section 12AA of the Income Tax Act, 1961 by the Learned Commissioner of Income Tax (Exemptions), Chandigarh dated 30.09.2016 is contrary to law and facts of the case. 2. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Exemptions) gravelly erred in not granting appellant society registration under Section 12AA of the Income Tax Act, 1961. 3. That the aims and objects of the society are charitable in nature as they are for the purpose of educational only, therefore, society should have been granted registration under Section 12AA of the Income Tax Act, 1961. 4. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Exemptions) gravelly erred in denying the appellant- society registration under Section 12AA on the allegations which are baseless and are on assumptions. 5. That the appellant craves to add, amend or alter any ground of appeal before or at the time of hearing of appeal, with the permission of the Hon’ble Income Tax Appellate Tribunal, Chandigarh.” 4. The brief facts of the case are as under: The application for seeking registration u/s 12AA of the Act was filed by the Appellant Society in the office of the CIT(E)-1 on 30.03.2016 by revealing the facts that the society is an on going entity since, 03-08-1988. The object of society was projected as providing education and it was shown
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that society has been filing its return of income U/s. 10(23C) of the Act and claiming exemption thereto. The appellant society was asked to file some documents as well as to clarify some of the issues, vide show cause notice dated 19.09.2016 by the Ld CIT(E). In response to which, written submissions have been filed by the appellant society, however, considering the material on record and written submissions of the appellant society, the Ld. CIT(E) declined the registration to the appellant society u/s 12AA of the Act.
Feeling aggrieved against the order passed by the Ld. CIT(E), the appellant society preferred the instant appeal and in support of its case submitted that the aims and objects of the society are
To establish, manage, control and finance educational institutions, to embark class instructions on health and realistic lines with provisions of modern subjects like vocations education to computer education etc. to organize deputations and cultural missions for spreading the aims and objectives of the association in India and abroad.
T o p r ov i de f or h ol di n g e x h i bi ti o n s , e n te r tai n m e n t m e e ti n g s , l e c tu r e s, d i s pl ay s o r cl as s es a n d to u n d e r t ak e t h e p u bl ic ati o n of wo r ks wi th a n ai m to d i r ec tl y or i n d ir e c tl y ad v an c e th e ob je c ti v es of the So c ie ty an d to p r o mo te an d s u pp or t th e m o r al , so c i al an d r el i g i o us o r d er of th e so ci e ty .
T o tak e , r ec e iv e m on e y , ac q u i r e mo ve a bl e an d i m m o v abl e p r op e r ty o r o th e r v al u ab l e se cu r i ty b y wa y of s ub s cr i p ti o n o r d o n at i o n wi th o u t g i v i n g th e d o n o r a r i g h t t o th e m e m b e rs h i p of th e so ci e ty an d s p e n d th e s am e i n th e b e s t i n te r e s t of th e i n s ti tu ti o n an d to m ai n t ai n c o r r ec t a n d p r o pe r ac c o u n ts of th e s am e , d u l y au d i te d b y th e au th o r i z e d c h ar te r e d ac c o u n t an ts . To e re c t, c o ns tr u c t, p u r c h as e , tak e o n l e a3 o o r h i r e or o th e r wi s e ac q u i r e an d m ai n t ai n l an d an d b u i l di n g s of re q u i r ed k in d an d n e c e s si ty f or th e As so ci ati o n to f ulf il l i ts ai m s an d o b jec ti v e s. T o o b tai n r e c o g n i ti o n an d f i n an c i al a s s is ta n c e f rom th e g o ve r n m e n t an d o th e r i n s ti tu ti o n s to c ar r y o n th e ob je c ti v e s of the s oci e ty .
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Further, it was submitted by the Ld. AR of the appellant society that the main object of the society is to provide education and the object of the appellant society has not been doubted by the Ld. CIT(E) in its order, however, Ld. CIT(E) has traveled beyond the provision of the Sec.12AA of the Act by giving reasons, for declining registration to the effect that the society has advanced loans to other society under the name and style of M/s Radiant society of Education, Radiant Kids Play Way School and further the School is being run on commercial principals, by charging a large fee amounting to Rs.3750/- per child and this fee figure is derived from the Bank Statements which depicting credit of Rs.3750/- Rs. 4050/- Rs.4550/- on regularly bases and the explanation on this issue was not forthcoming.
In reply to the aforesaid reasons, the Ld. AR submitted that the aforesaid reasons cannot be grant for rejection because mere charging high fee does not amounts to not doing a charitable activity and even otherwise, the loan advanced to the other society also does not create any impediment in the claim of the appellant society for claiming registration 12A of the Act. Further, it was submitted by the Ld. AR that with regard to query on account of salary structure, it was submitted by Ld. AR that the same is being paid strictly in accordance with the CISCE guidelines, however, the Ld. CIT(E) by his own notion held that the cryptic reply has been submitted by the Appellant Society. Further, it was also submitted by the Ld. AR that the Ld. CIT(E) has wrongly observed that it is also clear from the accounts that the proceeds from the receipts of the school are not being redeployed into education.
On the contrary, the Ld. DR relied upon the order passed by the Ld. CIT(E) does not suffer any perversity, illegality and impropriety, hence, does not require any interference by this Court.
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We have gone through with the facts and circumstances of the case as well as rival submissions of the parties and material placed on records. From the order, it reflects that the Ld. CIT(E) has observed that the application is held to be not adhering to the ostensible charitable intent shown in its objects. However, nowhere the Ld. CIT(E) has doubted any of the objects appellant society, which goes to show that one of the twin criteria to be taken into consideration by the CIT(E) to satisfy himself about the objects of the trust or institution, goes to show that the assessee has plausible case to succeed, however, with regard to the genuineness of its activity, the Ld. CIT(E) observed that the society has advanced loans to the other society namely M/s Radiant Society of Education, Radiant Kids Play Way School, which is neither registered u/s 12AA of the Act nor having exemption u/s 10(23C) (vi), for which the appellant society has replied that the advances has been given to the said society because the students of Radiant Kids Play Way School and the management of the appellant society is intricately linked with the Kids Play Way School because Director and Principal of Radiant Society of Education, Radiant Kids Play Way School are seen to be the President and Vice President of Society and advances have been given to that School presumably from the receipts from students and to further enhance the earning capacity of the group as a whole.
Further, it was observed by the Ld. CIT(E) that the School under the society is being run as commercial enterprises, where huge amount are being charged from kids. To this reason, the Ld. AR although replied, but also reflects from the written submissions that the appellant society is not getting any donation from any individual or organization and the school is being run with the fees from the students only which can be treated as
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operating on non-commercial principles. Further the Ld. CIT(E) has also observed that the management of statutory expenses like salary etc. and other expenses are not transparent whereas the appellant society has shown to have been strictly following the guidelines of the CISCE on account of salary structure of the employees of the school. Further, the Ld. Ld. CIT(E) has also observed that it is also clear from the accounts that the proceeds from the receipts of the school are not being redeployed into education and retaining large case balances in the bank, buying car and advancing money to the family of the Director and the Principal who are also part of the governing body of the society apart from loan to sister concern.
We have given our thoughtful consideration to the reasons for declining in the registration u/s 12A by the Ld. CIT(E) as well as the reply submitted by the appellant society. From the reasons, it des not reflect that the activity of the society are in-genuine. In our considered view, in the instant case, the Ld. CIT(E) has already satisfied himself about the objects of the appellant society on any of the object and on its activities, however, derailed by observing that the activities of the society are in-genuine. Hence, in our considered view, the appellant society is entitled to get registration, resultantly the Ld. CIT(E) is directed to grant registration to the appellant society.
However, it is clarified that in future, if the ld. CIT(E) finds that the society is not running its activity in accordance with the objects and of law of the land, genuineness of its activities becomes doubtful and the appellant society does not follow the CISCE guidelines strictly qua salaries structure of the employees of the school then certainly the CIT(E) shall be at liberty to cancel or to revoke the registration u/s. 12A of the Act.
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In the result, ITA No.599(Asr)/2016 is allowed . 9. ITA No.600(Asr)/2016 also stands allowed in view of the order passed herein.
Order pronounced in the open Court on 07.02.2018.
Sd/- Sd/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated:07.02.2018. /PK/ Ps. Copy of the order forwarded to: (1) M/s Saint Paul’s Educational Society, Bathinda. (2) M/s Radiant Society of Education, Radian Kids Play School, Bathinda. (3) The CIT, (Exemption), Chandigarh. (3) The CIT(A), (4) The CIT, (5) SR DR, I.T.A.T.,