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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ : NEW DELHI
Before: SHRI R.S. SYAL & SHRI N.K. CHOUDHRY
PER N K CHOUDHRY, JUDICIAL MEMBER :
The Assessee/Appellant has preferred the instant appeal on feeling aggrieved against the order dated 26.09.2014 impugned herein passed by the ld. CIT, Faridabad under section 12AA of the Income-tax Act, 1961 (hereinafter called as ‘the Act’). The grounds of appeal raised by the assessee are as under :-
“1. That on the facts and in the circumstances of case and in law, the ld. Commissioner of Income Tax has erred both on facts and in law in rejecting the application for grant of registration under Section 12A of the Income Tax Act, 1961.
2. That the CIT has wrongly dismissed the application for Registration u/s 12AA of the Income-tax Act, 1961, without giving appropriate opportunity for submitting the case and ignoring all merits of the case.
3. That the ld. CIT has also wrongly concluded that the aims & objects of the Society are vague and unspecific.
4. That the ld. CIT has passed the order in haste and is against the facts, law and provisions of the Income Tax Act, 1961 and Rules made there under.
5. That the ld. CIT had wrongly ignored the fact that the appellant trust exists solely for educational and charitable purpose and not for the purpose of profit.”
In brief, the facts of the case are as under:- The assessee society has applied for registration under section 12AA of the Act in Form No.10A on 31.03.2014. For consideration of the same, the show-cause notice dated 22.07.2014 was issued to the assessee society which was replied by the assessee society vide reply dated 30.07.2014. Thereafter, again vide letter dated 15/17.09.2014, the assessee society was asked to file copy of the prospectus of school/institution run by the society which was also replied by the assessee society vide letter dated 25.09.2014 by enclosing prospectus of Sheetla Vidya Peeth School. Thereafter, the case of the assessee society was considered by the ld. CIT and finally declined to grant registration as applied u/s 12AA of the Act by citing certain reasons which are relevant for adjudication of this appeal, hence are reproduced herein below :- “8.1 The applicant society is non-cooperative and did not furnish the required information/details, apparently just to avoid verification:- i) Books of accounts were not produced as called for vide letter dated 22.07.2014 and 15/17.09.2014. ii) Copy of old registration certificate and old memorandum have not been furnished as called for vide this office letter dated 22.07.2014. iii) As mentioned above, information including copy of prospectus in respect of R.K. College of Engineering was not furnished. iv) Proper details of head-wise break-up of school fee and expenses against each head of fee have not been furnished as called for vide letter dated 15/17.09.2014.
8.2 The applicant society did not furnish evidence regarding compliance of the Right to Free and Compulsory Education Act, 2009, which envisages 25% admission to the wards of parents belonging to economic weaker section. The applicant did furnish a list of 113 names of students saying that these are not being charged any fee and this constitutes about 10% of total students strength. However, the applicant did not furnish any documentary evidence, which may establish that the names of the students as per the list supplied are of wards of parents belonging to the economical weaker section. Also the prospectus of Sheetla Vidya Peeth submitted by the applicant society does not mention of any quota (or anything) about admission of the wards of parents belonging to the economic weaker section.
9. Keeping in view the aforesaid facts and circumstances, it is clear that the applicant failed to substantiate its claim that applicant's aims/objects and terms of memorandum are of the charitable nature and also failed to prove that the activities of the applicant Society are being carried out for furtherance of Aims and Objects contained in Memorandum of Association, in spite of enough opportunities afforded.
10. Looking into totality of facts and circumstances, the request of the applicant Society for registration u/s 12AA of the Income-tax Act, 1961 cannot be acceded to and the application in Form 10A is, therefore, rejected accordingly u/s 12AA(1)(b)(ii) of the Income-tax Act, 1961.
At the outset, our attention was drawn by the ld. AR for the assessee society that the same ld. CIT, in the case of Om Shiva Education & Welfare Society vide order dated 26.09.2014 declined to grant registration u/s 12AA of the Act by citing exactly the same reasons , which are relevant and hence, reproduced herein below:- “8.1 The applicant society is non-cooperative and did not furnish the required information/details willfully and intentionally just to avoid verification:- i) Books of accounts were not produced as called for vide letter dated 22.07.2014 and 15/17.09.2014. ii) Copy of old registration certificate and old memorandum have not been furnished as called for vide this office letter dated 22.07.2014. iii) Proper details of head-wise break-up of school fee and expenses against each head of fee have not been furnished as called for vide letter dated 15/17.09.2014.
8.2 The applicant society has not furnished evidence regarding compliance of the Right to Free and Compulsory Education Act, 2009, which envisages 25% admission to the wards of parents belonging to economic weaker section. The applicant did furnish a list of 113 names of students saying that these are not being charged any fee and this constitutes about 10% of total students strength. However, the applicant did not furnish any documentary evidence, which may establish that the names of the students as per the list supplied are of wards of parents belonging to the economical weaker section. Also the prospectus of Marigold Sr. Sec. School submitted by the applicant society does not mention of any quota (or any thing) about admission of the wards of parents belonging to the economic weaker section.
Keeping in view the aforesaid facts and circumstances, it is clear that the applicant society failed to substantiate its claim towards its aims/objects and failed to work in accordance with the terms and conditions laid down in its memorandum of association. The applicant society has also failed to prove that the activities carried out by it are of charitable in nature and as per it aims and objectives, in spite of enough opportunities afforded.
Looking into totality of facts and circumstances, the request of the applicant Society for registration u/s 12AA of the Income-tax Act, 1961 cannot be acceded to and the application in Form 10A is, therefore, rejected accordingly u/s 12AA(1)(b)(ii) of the Income-tax Act, 1961.”
The aforesaid order of the ld. CIT, passed in Om Shiva Education & Welfare Society was subjected to the appeal before the co-ordinate Bench at Delhi in and the co-ordinateBench vide order dated 21.12.2017 while allowing the appeal of the assessee society , directed to grant registration u/s 12A of the Act. The relevant findings of the co-ordinateBench in the aforesaid case are reproduced hereunder:- “6. We have heard the rival parties and have gone through the material placed on record. We find that at the time of grant of registration u/s 12AA of the Act, the Ld. CIT(E) is empowered to look into the objects of the society and also the genuineness of its activities with respect to achievement of those objects. In the present case, it is an admitted fact by the Assessing Officer who vide order dated 19/02/2016 for Assessment Year 2014-15 had admitted that the assessee was engaged in running of a school in the name of Marigold High School and has also allowed deduction u/s 10 (23C) (iiiad) of the Act. The Assessing Officer in Assessment Year 2013-14 vide order dated 9/12/2015 has also admitted the same fact & had allowed exemption u/s u/s10 (23C) (iiiad) of the Act. By accepting the claim of Assessee the genuineness of its activities has also been accepted. Therefore, the factum of carrying charitable activities as also the genuineness of activities is established. Therefore, both conditions for getting satisfaction u/s 12AA are met with and therefore assessee is eligible for registration u/s 12AA of the Act. The Hon’ble Tribunal in the case of Regional Educational Development and Welfare Society vide its order dated 4/10/2017 after following a number of cases decided by Hon'ble Supreme Court and various High Courts vide Para 6 to 9 has allowed the appeal of the assessee by holding as under:-
“6. We have heard the rival submissions and have also perused the material on record. It is an admitted fact that the assessee society exists for education purpose only which has been duly recorded in Para 2.3 of impugned order. Further, three consecutive orders passed u/sl43(3) of the Income Tax Act have accepted assessee’s claim of exemption u/s 10(23C)(iiiad). Thus, there remains no doubt that the objective of the assessee society is ‘education’. The Hon’ble Punjab & Haryana High Court made the following observations in the case of Sonepat Education Society (supra):
“....It is well-settled that for the purpose of construing the purpose of a trust, it is not necessary that one remains confined to the objects of the society or the trust, as set out in the memorandum of association or the trust deed, as the case may be. What is required to be found is the real purpose of establishment of the trust. There can be no quarrel with the proposition that the CIT, conferred with the power to grant exemption, is fully competent to find out the real purpose, as distinguished from, the ostensible purpose of establishment of the society or the trust. If the CIT is convinced that the purpose of the society or the trust is not charitable, nothing debars him from denying the approval but, at the same time, if he is satisfied that the objects of the trust, as set out in the deed of declaration, were charitable, then having regard to the object of the provision, the approval should not be denied on mere technicalities. As a matter of fact, the power to grant or negative the claim for approval is coupled with a duty..."
7. It is clearly, the Hon’ble Kerala High Court in case of Sree Anjaneya Medical Trust reported in 382 ITR 399 (Ker) observed as under:-
“It is clear from a plain reading of sections 12A and 12AA of the Act that what is intended thereby is only a registration simplicitor of the entity of a trust. This has been made a condition precedent for claiming the benefits of exemption. No examination of the modus of the application of the funds of the assessee or an examination of the ethical background of its settlers is called for, while considering an application for registration. The stage for consideration of the relevance of the object of the assessee and the application of its funds arises at the time of the assessment. Where benefits are claimed by assesses in terms of sections 11 and 12 of the Act, the question as to the nature of such contribution and income can be looked into. At the time of registration of the assessee what is to be looked into is whether the assessee is a genuine one or whether it is a sham institution floated only to avail of the benefits of exemption under the Act.”
8. Coming to the facts of the present case, the observations of the Ld. CIT in the impugned order are contradictory. The Ld. CIT, on the one hand, mentions that the assessee society has been running a school and on the other hand he mentions that the objects appear to exist only on paper. This coupled with the fact that the department has also accepted the assessee’s claim of exemption u/s 1023C (iiiad) for three consecutive years leaves no doubt about the genuineness of the objects of the society. We also find support from the observations of the Hon’ble Punjab and Haryana High Court and the Hon’ble Kerala High Court as reproduced above. Accordingly, we reverse the order passed by the Ld.CIT(A) and direct him to grant registration to the assessee society.”
The facts in the present case are para materia with the facts in the case law relied on by Ld. AR except the objection with regard to diversion of funds which though we feel that there do not seem to be any diversion as the building of President which he had given to society without consideration was being utilized for educational purposes and any expenditure thereon will again be said to be incurred for educational purposes only but even then Assessing Officer during assessment proceedings can always look into the provisions of Section 13 to disallow Exemption u/s 11 if he finds any violation including diversion of funds as mentioned in Section 13 of the Act.
The case laws relied on by Ld. DR are not applicable to the facts and circumstances of the case as in the case of DIT(E) Vs. Devki Devi Foundation 56 Taxmann.com 56 (Delhi- Trib.), the assessee was allowed the land at very concessional rates and the assessee had utilized the land for commercial purposes where as in the present case there is no allegation of utilizing the land for commercial purposes and also there is no allotment of land at concessional rates. The second case law is also not applicable as in that case, it was held that the assessee did not carry any charitable activity where as in the present case it is an admitted fact that the assessee was engaged in charitable activities. In view of the above facts and circumstances of the case, the Ld. CIT(E) is directed to grant registration to the assessee u/s 12AA of the Act.
9. In view of the above, the appeal filed by the assessee is allowed.”
We have heard the parties at length and perused the orders on record as stated above as well as the order dated 04.10.2017 passed by the co-ordinate Bench at Delhi in the case of Regional Education Development and Welfare Society vs. CIT (ITA No.6513/Del/2014 ) and the order dated 21-12-2017 passed in the case of Om Shiva Education & Welfare Society (ITA no. 6511/Del/2014, wherein the co-ordinate Bench considered the similar and identical issue and granted the registration to the society u/s 12AA of the Act. It is also a fact that the assessee society was subjected to assessment proceedings for A.Y. 2013-14, in which the AO vide order dated 21.12.2015 accepted the objects carrying out by the society, by observing that the assessee society is registered at Sl.No.501 of year 2003-04 with the Registrar of Society and is engaged in providing qualitative education by running institute in the name of Sheetla Vidya Peeth and R.K. College at Main Road, Jyoti Park, Gurgaon. The main sources of income of the assessee society are from student fees and interest received from bank and claimed deduction u/s 10(23)(c)(iiiad) of the Act being total receipt below Rs.1 crore.
Considering the assessment order dated 21.12.2015 relevant to AY 2013-14 as well as the orders passed by the co-ordinate Benches of the Tribunal, specifically in in the case of Om Shiva Education & Welfare Society (supra) in which the reasoning of denial of registration by the Ld CIT was exactly the same as in the instant case, which was subjected to aforesaid appeal before co-ordinate bench and the co-ordinate bench vide its order dated 21-12-2017, while setting aside the order passed by the Ld. CIT, granted the registration u/s 12AA of the Act . Even there is nothing to suggest any dissimilarity in the facts and circumstances of the instant case and of the aforesaid case, therefore we are in concurrence with the claim of the Ld A.R. to the effect that issue in the instant case is squarely covered by the aforesaid order passed in ITA No.6511/Del/2014 by co-ordinate bench, hence respectfully following the dictum of said order, we direct the ld. CIT to grant registration to assessee society u/s 12AA of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in open court on this 27th day of July, 2018.