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Income Tax Appellate Tribunal, KOLKATA BENCH “D”, KOLKATA
Before: SH. S.S.GODARA & DR.A.L.SAINI
ORDER
PER S.S.GODARA, JUDICIAL MEMBER These two assessee’s appeal arises against the CIT(E), Kolkata’s separate orders: both dated 19.09.2017 in Memo No.10E/1265/2016-17/415A & 10E/1265/2016-17/415B involving proceedings u/s 12AA and 80G of the Income tax Act, 1961 (in short “Act”), respectively.
2. Heard both the parties reiterating their respective stands against in favour of the CIT(Exemption)’s action rejecting section 12AA and 80G registration(s) sought at the assessee’s behest. Case file perused.
3. We come to first appeal i.e. ITA No.2499/Kol/2017. Ld.CIT(Exemption) has refused to grant section 12AA registration vide following detailed discussion:- Order of Rejection u/s 12AA(l)(b)(ii) of the Income-tax Act, 1961 M/s MEASURERS CLUB submitted application for registration u/s 12AA of the Income-tax Act, 1961, vide application dated 31-03-2017.
Hearing was attended by Shri Anup Kr. Ghosh & Shri P.K.Ray (AIRs) on 06- 09-2017. During hearing the following were pointed out:- a. The applicant, claimed as Association of Persons by the Id. ARs, has not submitted any document evidencing its date of creation. & 2500/KOL/2017 b. The applicant failed to submit any authenticated copy, mentioning its objectives. c. The applicant has surplus of Rs. 3,04,467.60/- in AY 2014-15 but not filed Income Tax Return. d. Though the applicant has surplus of Rs. 3,41,899/- in AY 2016-17, it has filed Income Tax Return showing income NIL.
Firstly, the issue of evidence of date of creation is discussed hereunder.- 3A. Section 12A of the Income Tax Act, 1961 deals with the Conditions for applicability of sections 11 and 12. Therein it is clearly mentioned that applicant has to make an application in prescribed manner. The relevant part is reproduced as under: Section 12A(l) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled namely: (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Principal Commissioner or Commissioner . The manner of application has been prescribed under Rule 17 A of the Income Tax Rules, 1962. 3B. Application Cor registration of charitable or religious trusts, etc. 17A. An application under [clause (aa) of sub-section (I)] of section 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form No. 10A and shall be accompanied by the following documents, namely: (a) where the trust is created, or the institution is established. under an instrument, the instrument in original, together with one copy thereof; and where the trust is created, or the institution is established, otherwise than & 2500/KOL/2017 under an instrument. the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof: Provided that if the instrument or document in original cannot conveniently be produced. it shall be open to the Commissioner] to accept a certified copy in lieu of the original; (b) where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years immediately preceding the year in which the said application is made) for which suet, accounts have been made up. 3C. In this instant case the applicant does not have any instrument of creation. So as per the second part of Rule 17A(a) the applicant has to prod lice the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof 3D. To satisfy this condition the applicant has submitted two documents. The first one is titled Measures Club Rules 1983 (a copy of such documents is made a part of the order and marked as Annex A). This document bears the address of Maidan, Kolkata. This document contains only Rules and Regulations of the Measures Club. In this document no charitable objective has been mentioned. A thorough scrutiny of the document would also reveal that there is nothing to suggest from which date the club came into being. Under no circumstances can this be considered as a document evidencing the creation of the institution. 3E. The second document submitted by the applicant is a Memorandum of Association under The West Bengal Societies Registration Act, 1961 (which is made a part of this order and marked as Annex B) which has an enclosure bearing the signature of the Governing Body Members. However, the applicant is not registered with the Registrar of Societies. In the instant case the & 2500/KOL/2017 applicant has claimed that it is a Society under The West Bengal Societies Registration Act, 1961 but is not registered with the Registrar of Societies!!! Further when this so called Memorandum of Association was perused it was seen that the document is not dated and not even signed in many areas. For example, in the penultimate page and last page, the spaces where witnesses and three Governing Body Members are supposed to sign, has been left blank. The most interesting part is the Rules & Regulations as mentioned in the Measures Club Rules 1983 and Memorandum of Association are vastly different. 3F. In view of the above discussion neither the Measures Club Rules 1983 nor the Memorandum of Association can be treated as document evidencing the creation of the trust or the establishment of the institution. 3G. In the write up of activities, this has been submitted by the applicant that, Measurers Club was founded by Mr. R. Elllis in the year 1902, with the initiative and support of the Bengal Chamber of Commerce & Industries to promote sports & games and social activities. But during hearing, the applicant failed to submit any proof of such claim regarding establishment.
4. Now secondly the issue of absence of objectives of the applicant is discussed below:- 4A. As pointed out in para 3E above, the applicant claims that it is a Society under The West Bengal Societies Registration Act, 1961 but not registered with the Registrar of Societies; 4B. Sections 4-6 of the West Bengal Societies Registration Act, 1961, which deals with the procedure of registration clearly mentions that, the Memorandum must contain objects of the association. Section 7 of the same Act mentions that upon being satisfied with the Memorandum & Rules, the Registrar of Societies shall certify under his seal & signature that the society is registered under West Bengal Societies Registration Act, 1961. & 2500/KOL/2017 4C. Memorandum of Association as submitted by the applicant is neither authenticated anywhere by the Principal Officer nor witnessed by any person. Hence, genuineness of the document and the genuineness of the objectives stated therein could not be proved. 4D. Section 12AA(I)(b) of the Income-tax Act, 1961; which deals with the procedure of registration mentions that, "The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant" 4E. The inclusion of the above provision was to provide for a standard procedure to be followed for grant of registration to a trust or institution. It is evident from the plain reading of the Act that section 12AA(I) clearly stipulates that the Commissioner shall satisfy himself about the objects and the genuineness of its activities. Therefore satisfaction of the Commissioner is a must about the genuineness of the objectives, inter alia, before granting of registration. In the absence of the genuineness or authenticated copy of objectives, the genuineness of the objectives could not be substantiated.
Thirdly, if the matter of non-payment of tax as well as non-filing of Income- tax Return despite having taxable income is looked into the position is as follows:- 5A. This has been pointed out in para 2(C) above that, despite having surplus of Rs. 3,04,467.60/- in AY 2014-15 , the applicant did not file Income Tax Return. It is a violation of Section 139(1). Further, the applicant has failed to submit any proof of payment of tax for the surplus during AY 2014-15. In AY & 2500/KOL/2017 2016- 17, though the applicant has furnished Income Tax Return, showing Income as Nil, it had surplus income of Rs.3,41,899/-.”
It is therefore clear that the CIT(E)’s main reason for rejecting assessee’s registration sought u/s 12AA is that it could not file its objects for the CIT(E)’s consideration. Next come its failure(s) in not submitting the relevant documents regarding the date of creation, compliance of section 139 and non-payment of income tax. Learned Counsel submits that the assessee is ready to file all the documents available incase the matter is restored to the CIT(Exemption) for afresh consideration. We observe in these facts and circumstances of the case that larger interest of justice would be served incase the CIT(E) re-examines the entire issue of section 12AA as well as 80G registration afresh as per law after affording three effective opportunity of hearing. We order accordingly.
5. Same order to follow in latter appeal ITA No.2500/Kol/2017.
Both assessee’s appeals are allowed for statistical purposes in above terms. Order pronounced in the open court on 26.10.2018.