M/S. SOCIETY FOR EDUCATION & EXCELLENCE,NEW DELHI vs. CIT(E), CHANDIGARH

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ITA 2246/DEL/2016Status: DisposedITAT Delhi17 August 20186 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that at the stage of processing an application for registration under Section 12AA, the CIT is not expected to delve into excessive detail. Their powers are limited to examining whether the assessee's objects are charitable and assessing the genuineness of activities. The Tribunal found that the CIT(E) had observed the assessee's main object was to run an educational institute. However, the CIT(E) erred by rejecting the application without adequately examining the genuineness of the objects and without following due legal procedure. Consequently, the Tribunal set aside the CIT(E)'s order and remanded the matter back for reconsideration of the registration application as per law. The grounds raised by the assessee were allowed for statistical purposes.

What were the facts?

The assessee, Society for Education & Excellence, registered on August 25, 2014, with the primary object of establishing and running educational institutions, applied for registration under Section 12AA of the Income Tax Act, 1961, on August 22, 2015. The Commissioner of Income-Tax (Exemptions) [CIT(E)], Chandigarh, issued a show-cause notice. Following a response from the assessee, the CIT(E) rejected the application, citing no activity to date, the society being a close family trust, and the lack of permanent arrangements for establishing a school. The assessee appealed this order to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the Ld. CIT(E) erred in law and fact by denying registration under Section 12AA of the Income Tax Act, 1961, based on the observation that no permanent arrangements were made for establishing a school, and by allegedly recording incorrect facts and findings without adequate opportunity for hearing. Assessee's Contentions: The assessee argued that it had entered into an agreement with Malibu Little Star Primary School Pvt. Ltd. to rent premises and had received letters from Chamanpura Cooperative Society L/C Ltd. and Saini Dharamshala offering space for its charitable educational activities. These, the assessee contended, demonstrated sufficient efforts to establish permanent arrangements. Revenue's Contentions: The Ld. DR relied on the CIT(E)'s order, arguing that the agreements lacked legal sanctity as they were unregistered and that no permanent arrangement for running the proposed school had been made.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 11,Section 12

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI

Before: SHRI R.S.SYAL & SMT. BEENA A. PILLAI

Hearing: 16.08.2018

ORDER

PER BEENA A PILLAI, JUDICIAL MEMBER

1.

The present appeal has been filed by assessee against order dated 20.02.2016 passed by Ld. Commissioner of Income-Tax (Exemptions), Chandigarh on the following grounds.

ITA 2246/Del/2016 A.Y.: Not Applicable Society for Education & Excellence, New Delhi “1. That having regard to facts and circumstances of the case, Ld.CIT(E) has erred in law and on facts in denying registration u/s 12AA of the Income Tax Act, 1961 (the Act) and that too by observing that there is no arrangement having been made regarding establishment of school in a building on permanent basis, and that too by recording incorrect facts and findings and without considering submissions and evidences of the assessee and without giving adequate opportunity of hearing.

2. That in any view of the matter and in any case, action of Ld.CIT(E) in denying registration u/s 12AA is bad in law and against the facts and circumstances of the case.

3. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

2.

Facts of the case in brief:- Assessee got registered with Registrar of Societies, Gurgaon on 25.8.2014. It has been submitted that main object of society is to establish, run and maintain educational institution for imparting education. Assessee Society filed an application before ld.CIT(E), Chandigarh in Form No.10A on 22.8.2015 for registration of society u/s 12AA of the Income Tax Act, 1961 (the Act).

2.1. On receipt of Application dated 28.05.2015, Ld.CIT issued Show Cause Notice. In response to notice, Representative of assessee appeared before Ld.CIT and filed By-Laws of Society. However, Ld.CIT rejected application by observing as under:

“7. Considering the totality of the material on record it appears that there has been absolutely no activity till now in deference to the stated purposes/objects for which the society has been formed. The society is a close family trust and cannot be described as public

ITA 2246/Del/2016 A.Y.: Not Applicable Society for Education & Excellence, New Delhi charitable trust. Moreover no arrangements have been made regarding the establishment of the school in a building on permanent basis which is the basic bare minimum necessities for redeeming any charitable purpose / necessary conditions as defined in sections 11 and 12 f the I T Act, 1961. The activities so far do not stand corroborated vis-a-vis the stated objects. As such I am not inclined to grant the registration to the applicant society. The application is hereby rejected.”

3.

Aggrieved by the Order of Ld.CIT, assessee is in appeal before us now.

4.

Ld.AR submitted that assessee has made an agreement with Malibu Little Star Primary School P Ltd. wherein it is stated that Malibu Little Star has agreed to let out the premises to assessee on rent and assessee has agreed that. Assessee referred to a letter received from Chamanpura Cooperative Society L/C Ltd., wherein it has been submitted that they have themselves shown desire to provide 6 rooms to assessee for attaining the charitable objects.

4.1. A copy of letter from Saini Dharamshala has been relied upon by Ld.AR, wherein it has been stated that Saini Dharamshala offered space of 10 rooms in respect of educational and development activities for girls and they will not charge any expenditure for these charitable objects. Further, it is also submitted that assessee is a new entity and is stepping forward towards educational activities. The above

ITA 2246/Del/2016 A.Y.: Not Applicable Society for Education & Excellence, New Delhi explained evidences itself shows that assessee society has made enough efforts for establishing permanent arrangements to impart education.

5.

On the contrary Ld.DR relying upon order of Ld.CIT submitted that there is no legal sanctity to agreements, as they are not registered. Further he submitted that no permanent arrangement for running proposed school has been made.

6.

We have perused the submissions advanced by both the sides in the light of the records placed before us.

7.

In our considered view at the time of processing application for registration under section 12AA of the Act, Ld. CIT is not expected to go in to details, and powers are limited only to examine as to whether or not objects of assessee are “charitable” in nature and examination regarding genuineness of the activities. In the event Ld. CIT do not have sufficient material to doubt genuineness of activities, registration under section 12AA of the Act, cannot be refused to assessee. It is also observed that Ld.CIT in Paragraph 2 observed that main object of society are essentially to run educational institute for imparting education. In our considered opinion, Ld.CIT has not examined genuineness of objects and erred in rejecting application for registration under section 12AA of the Act, without following due procedure as per law. 7.1. We are, therefore, inclined to set aside this issue back to Ld.CIT for reconsideration of application for registration under section 12AA of the Act as per law.

ITA 2246/Del/2016 A.Y.: Not Applicable Society for Education & Excellence, New Delhi

8.

Accordingly grounds raised

by assessee stands allowed for statistical purposes.

9. In the result appeal filed by assessee stands allowed for statistical purposes. Order pronounced in the Open Court on 17th August, 2018.

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