SAINT KABIR EDUCATION SOCIETY,HISAR vs. CIT(E), CHANDIGARH

The grounds of appeal

That further finding that “such facilities cannot be extended to entities that have mis-utilized the provisions of the Act that accord something akin to automatic approval to entities professing to exist solely for education and not for profits and have in the barraging accorded benefits to its members in the shape of luxury items” is not based on correct appreciation of facts, provisions of law and hence untenable.

That mere holding of cars by charitable trust cannot be a ground to deny a registration u/s 12AA of the Act.

An application in Form No. 10A was received by Commissioner of Income Tax (Exemptions) on 23/02/2017 seeking registration u/s 12A of the Income Tax Act, 1961. The Society is an ongoing entity that has been in operation since 26/04/1989. An aims and objects of the society are to run and manage M/s Saint Kabir Education Society, Hisar to utilize the resources of society for propagation of education; to establish and run education institutions for promotion of modern education in Haryana; to prepare buildings, hostels, sports ground and library for institutes of society. The CIT (Exemption) rejected the application u/s 12A for grant of Registration on the ground that there is no genuineness of activities of the society which can be corporate with the aims and objects of the society. The Commissioner further observed that the activities of the applicant got severely compromised when a society professing to be charitable is seen to utilize its receipt on assets of luxury of personal use that in no manner can qualify for the benefit of general public.

The Ld. AR further submitted that according to Section 12AA (1)(b) of the Act, the Commissioner of Income Tax at the time of registration has to restrict to two aspects. Firstly, to see whether objects of the society and secondly genuineness of the activities carried out by the society. The Ld. AR further submitted that the Commissioner of Income Tax cannot go into application of income u/s 11 & 12 of the Act as the same is beyond the scope of registration u/s 12AA of the Act and also alleged infringement of Section 13 are not to be examined at the time of registration. The Ld. AR relied upon the various decisions including the decision of the Hon'ble Supreme Court in case of on Queen’s Educational Society Vs. CIT 372 ITR 699 and CCIT Vs. St. Peter’s Educational Society 385 ITR 66. The Ld. AR further submitted that from the activities of the trust some surplus is generated, the same will not disentitle the trust for the claim of exemption u/s 11 & 12 of the Act. The Ld. AR further submitted that so long no trustees is entitled to benefit of surplus and surplus is utilized for promotion of objects of the trust. Therefore, exemption cannot be denied. The Ld. AR submitted that both during the existence of society and on dissolution of the society, the income and property shall be applied towards the object of the society and no fund shall be distributed/transferred directly /indirectly to the member of the society. Thus, the Ld. AR submitted that the order of the Commissioner of Income Tax (Exemptions) be quashed and direct the Commissioenr to grant registration to the applicant society u/s 12AA of the Act.

The Ld. DR submitted that despite giving adequate opportunity, the applicant did not furnish details called for by the CIT (E). No details were filed regarding computation of income to verify eligibility of assessee u/s 10(23C)(vi) of the Act. In past three years, despite turnover being more than Rs. 1 crore, the applicant claimed deduction u/s 10(23C) (vi) of the Act. The society has shown cars like BMW & Endeavour in its financial statements but the cars were found to be registered in the name of Shri K. S. Saini, Director and Sh. Ujjal Singh. Thus, it is a clear violation of provisions to Section 13(1) (c) (ii). The Ld. DR relied upon the following decisions:

We have heard both the parties and perused the material available on record. The Ld. DR’s submission that no details were filed regarding computation of income to verify eligibility of assessee u/s 10(23C)(vi) of the Act. But the requirement of Section 12AA registration is only to the extent that the Commissioner has to satisfy himself about the objects of the trust or institution and the genuineness of its activities. Further, it is of great importance that the activities of such institutions be looked at carefully whether the activities are genuine or not. The Revenue authorities also have to look into the said activities whether the same are carried out in accordance with law or not. In the present case, the applicant society is not deviating from its main object to utilize the resources of society for propagation of education, to establish and run education institutions for promotion of modern education in Haryana, to prepare buildings, hostels, sports ground and library for institutes of society. The Commissioner of Income Tax, at no point of time has pointed out that the applicant society is not doing these activities. The case laws referred by the Ld. AR are apt in the present case. Thus, Commissioner of Income Tax has not followed the proper guidelines given by Section 12AA when should be applied. Therefore, we are of the opinion that registration should have been granted u/s 12AA of the Act to the Applicant Society as the objects are charitable in nature and as there are no violations of either sec. 11(5) or Sec. 13 during this year or in the next year and possibility of the applicant society contravening the provisions is not a ground to reject the registration. Therefore, we direct the Commissioner of Income Tax (Exemption) to grant the registration to the Applicant Society u/s 12AA of the Act. Hence, appeal of the applicant society is allowed.

In result, the appeal of the assessee/appellant is allowed. Order pronounced in the Open Court on 13th June, 2019.