M/S. BRAHMANAND SHIKSHA PARASAR SAMITI,PANIPAT vs. CIT, HARYANA

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ITA 6567/DEL/2014Status: DisposedITAT Delhi12 October 20176 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Commissioner of Income Tax was not justified in refusing registration to the assessee society under Section 12AA of the Income Tax Act, 1961. Regarding the issue of salaries paid to the two ladies, the Tribunal found that while their occupation was shown as 'housewife' at the time of the Trust's formation, their qualifications and experience were not doubted. Furthermore, the salaries paid were less than the amounts prescribed by the Government of Haryana. Therefore, it could not be concluded that the Trust used its funds for the benefit of its members by paying these salaries. Concerning the Assessing Officer's objection regarding violations of Section 40A(3) and the nature of donations (corpus vs. regular), the Tribunal opined that these issues could be addressed at the time of assessment and were not grounds for denying registration under Section 12AA. The Tribunal also found no activities carried out by the trust that were not in accordance with its aims and objects. Consequently, the grounds raised by the assessee were allowed, and the appeal was allowed.

What were the facts?

The assessee, Brahmanand Shiksha Prasar Samiti, applied for registration under Section 12AA of the Income Tax Act, 1961, before the Commissioner of Income Tax (CIT), Karnal, for the assessment year 2013-14. The CIT rejected the application, citing that members of the society were drawing higher salaries than prevalent rates without justification. The CIT also noted that the occupation of two members was shown as 'housewife' in the Memorandum of Association, yet they were paid salaries as teachers. The Assessing Officer's report indicated that the society's activities were not in accordance with its stated objects, and numerous cash payments were made in violation of Section 40A(3). Furthermore, corpus donations claimed for building construction were allegedly regular donations, violating Section 13(1)(c). The CIT concluded that the society furnished inaccurate particulars and was used for the benefit of its members, thus denying registration.

What were the issues?

1. Whether the Commissioner of Income Tax erred in refusing registration under Section 12AA of the Income Tax Act, 1961, to the assessee society, and whether the appellant society is a genuine charitable society liable for registration? 2. Whether the Trustees have taken undue advantage or benefit from the society? 3. Whether the Samiti, being solely an educational institution doing charitable activities in accordance with Haryana Government rules, is liable for registration under Section 12AA of the IT Act, 1961? 4. Whether the Learned CIT erred in basing the opinion on past activities to deny registration, when the Samiti applied for registration for the future? Assessee's contentions: The assessee argued that the salaries paid to Ms. Sangeeta and Ms. Sunita were commensurate with their qualifications and experience and were less than the rates prescribed by the Haryana Government. They submitted that showing 'housewife' as an occupation at the time of registration should not be a ground to deny registration when they were appointed as teachers. The assessee contended that the society is a genuine charitable society imparting education and its objects are not non-charitable. They also argued that the CIT erred by relying on past activities for future registration. Revenue's contentions: The Learned DR heavily relied on the order of the learned CIT.

Which sections of the Income-tax Act were involved?

Section 12AA,Section 13(1)(c),Section 13(3),Section 40A(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI

Before: SHRI R. K. PANDA & MS. SUCHITRA KAMBLE

For Appellant: Shri K. C. Aneja, ITP
For Respondent: Smt. Aparna Karan, CIT(DR)

O R D E R

PER R. K. PANDA, AM :

1.

This appeal filed by the assessee is directed against the order dated 27.10.2014 of the Commissioner of Income Tax, Karnal (in short “the CIT”) refusing registration u/s 12AA of the I.T. Act, 1961.

2.

Facts of the case, in brief, are that the assessee M/s Brahmanand Shiksha Prasar Samiti was registered with the Registrar of the Societies on 17.07.2002 which got renewed under the Haryana Registration & Regulation of Societies Act, 2012 on 06.11.2013 with the Distt. Registrar, Firms & Societies, Panipat.

An application for registration u/a 12AA was filed before the CIT in Form No.10A on 20.01.2014. During the course of hearing of the registration, ld. CIT examined the activity of the assessee as per its Memorandum of Association.

He also examined the various details filed by the assessee society from time to time. From the details furnished by the assessee society, ld CIT observed that the members of the assessee society are drawing higher salary as compared to the prevalent rates, which has no justification. On perusal of the Memorandum of Association, he observed that the occupation of Smt. Sunita and Smt.

Sangeeta being members of the Trust has been shown as housewife whereas salary has been paid to them as teachers as per salary register. Therefore, he concluded that the assessee society has furnished inaccurate particulars of income of the Trust and the same is being used for the benefit of the members of the society. According to him, as per the provisions of section 13(1)(c), a society is not allowed to give any direct or indirect benefit to the trustee/members as defined in section 13(3) of the I.T. Act. He further observed that the Assessing Officer in his report has reported that the activities of the assessee society are not in accordance with the objects as per the aims and objectives in the Memorandum of Association. The Assessing Officer had further noted that numerous payments to single party in cash in violation of section 40A(3) has been given. The Assessing Officer has stated that during the course of assessment proceedings for the assessment year 2011-12 that the exemption claimed by the assessee society was rejected and income claimed as exempt u/s 11 of the I.T. Act was treated as “income from business and profession”. Further, the assessee trust has claimed corpus fund donation towards construction of building at Rs.3,41,000/- whereas on verification, these were found to be regular donations and not corpus fund donations, which according to the ld. CIT is in violation of provisions of section 13(1)(c). In view of the above, the ld. CIT rejected the application for registration u/s 12AA on the ground that the objects of the society/trust and the genuineness of the activities could not be proved satisfactorily by the assessee.

3.

Aggrieved with such order of the CIT, assessee is in appeal before the Tribunal by raising the following grounds :-

“1.) That on the facts & in the circumstances of the case Learned CIT has erred in refusing to grant Registration u/s 12AA of the I.T. Act, 1961. The appellant society is a genuine charitable society liable to Registration as applied for. 2.) That The Trustees have not taken undue advantage or benefit from the society. 3.) That the Samiti is solely educational institution and is doing educational charitable activities in accordance with the rules of The Haryana Govt. as such is liable to registration u/s 12AA of the IT Act, 1961. 4.) The Samiti has applied u/s 12AA of the act for future as such The Learned CIT having based her opinion on past activities erred to grant Registration which is wrong.”

4.

Ld. counsel for the assessee referring to page 1 of the Paper Book drew the attention of the Bench to the certificate issued by the District Registrar, Firms and Society, Panipat. Referring to the order passed by the office of Commissioner Director General School Education, Haryana, Chandigarh vide order No.17/37-07 PS(2) dated 25.01.2008, copy of which is placed at page 3 – 4 of the Paper Book, ld. counsel for the assessee drew the attention of the Bench to the Circular issued by the Government, according to which salary of Rs.39,800/- has been fixed for Principal, Rs.31,240/- for PGT and Rs.18,409/- for Librarian. Referring to page 7 of the Paper Book, he submitted that Ms.

Sangeeta is M.A. in Hindi and B.Ed. and is drawing salary of Rs.18,000/- per month, at the relevant time whereas she joined the school as Teacher on 01.04.2004 with salary at Rs.7,000/- per month. Similarly, Ms. Sunita, who is the Principal of the School and is M.Com and B.Ed is drawing salary of Rs.20,000/- per month at the relevant time whereas she joined the school as Principal on 01.04.2004 with salary of Rs.6,000/- per month. Referring to page 9 of the Paper Book, which contains the list of persons or list of staff with their qualification and salary, he submitted that merely because the occupation of the ladies had been shown as housewife at the time of registration the same cannot be a ground to deny registration on being appointed as teachers and paid salary commensurate with their qualification. He submitted that denial of registration u/s 12AA by ld. CIT under the facts and circumstances of the case is unjustified since the assessee trust is imparting education and the objects of the society has not been proved to be non-charitable in nature.

5.

Ld. DR on the other hand heavily relied on the order of the ld. CIT.

6.

We have considered the rival arguments made by both the sides, perused the order of the CIT and the Paper Book filed on behalf of the assessee. We find from the order of the CIT that the reason on which registration has been denied is due to the fact that the assessee society used the funds of the society for the benefit of the members. Further, the Assessing Officer had reported that the activities of the society are not in accordance with the objects as per the aims and objects of the Memorandum of Association. It is also the case of the Assessing Officer that the society had made numerous payments to a single party in cash in violation of section 40A(3). We find from the details furnished by the assessee that although the two ladies as per the order of the ld. CIT were housewives at the time of formation of the Trust however their qualification and experience has not been doubted. Further, the salary paid to the two ladies are much less than the salary prescribed by the Government of Haryana. Therefore, it cannot be said that the Trust by giving salary to the two ladies, who are Post- Graduates and B. Ed. and who have been paid less salary than the amount prescribed by the Government, has used the funds of the society for the benefit

7.

So far as the objection of the Assessing Officer that the assessee trust has violated the provisions of section 40A(3) is concerned, the same is in our opinion can be taken care at the time of assessment and cannot be a ground for denying the registration u/s 12AA of the I.T. Act. So far as the objection of the Assessing Officer in his report that the activities of the assessee society are not in accordance with the objects as per the aims and objects in the Memorandum of Association is concerned, we do not find any activity carried out by the trust which is not in accordance with the aims and objects of the assessee trust. Even report of the Assessing Officer that the assessee has claimed corpus for donation of Rs.3,41,000/- towards construction of building whereas the same were found to be regular donation and, therefore, there is violation in provisions of section 13(1)(c) is concerned, the same also in our opinion can be considered at the time of assessment and cannot be a ground for denying registration u/s 12AA. In this view of the matter, we hold that the ld. CIT was not justified in refusing the registration to the assessee society u/s 12AA of the I.T. Act, 1961. The grounds raised by the assessee are accordingly allowed.

8.

In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 12th day of October, 2017.

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