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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
Before: SHRI C.M. GARG & SHRI L.P. SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘D’ NEW DELHI BEFORE : SHRI C.M. GARG, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 6799/Del./2013 Lord Krishna Charitable Trust, vs. Commissioner of 510/35, Janta Colony, Rohtak. Income-tax, Rohtak. [PAN: AAATL 6430D] (Appellant) (Respondent) Appellant by : Shri Naveen Gupta, Advocate Respondent by : Shri Sanjay Kumar, CIT/DR Date of hearing : 01.07.2016 Date of pronouncement : 06.07.2016 ORDER Per L.P. Sahu, Accountant Member: This appeal by the assessee is directed against the order dated 05.11.2013 passed by the Commissioner of Income-tax, Rohtak, rejecting the claim of appellant for registration u/s. 12AA of the Income-tax Act. The only effective ground raised by the assessee is that the ld. CIT erred in rejecting the application of the assessee for registration u/s. 12AA although Society fulfills all the conditions for registration and all the objects and activities of the Society are eligible for grant of registration u/s. 12AA of the Act.
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The relevant facts, in brief, leading to the present case are that the appellant’s application for registration u/s. 12AA was rejected by the ld. CIT, Rohtak vide order dated 26.09.2011. This order was challenged by assessee before the Tribunal, who vide its order in ITA No. 5266/Del./2011 dated 31.08.2012 restored the mater of registration to the file of CIT for deciding the same afresh on merit in accordance with after affording reasonable opportunity of being heard to the assessee. The impugned order reveals that the appellant trust filed an application for registration u/s. 12AA of the IT Act, 1961 on 30.03.2011 accompanied by copy of trust deed dated 14.12.2007, income & expenditure account and balance sheet for A.Ys. 2007-08, 2008-09 and 2009-10. In compliance to the Tribunal’s directions, in order to verify the nature of appellant’s activities and objects, the Commissioner of income-tax called for a report from the Assessing Officer through joint commissioner of Income Tax, Rohtak, who vide his letter dated 18.10.2013 furnished their report and did not recommend for registration u/s. 12AA. The learned Commissioner of Income- tax, however, held that the aims and objects of the assessee are not charitable in nature and rejected the application for registration on the following objections :
(i). That the appellant trust has charged fees from the students, which are outside the scope of sec 11 and 12, as the fees cannot be voluntary and are, therefore, taxable under the head profit and gains of the business or profession. The fees imply direct involvement of consideration for the service rendered.
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(ii). That the assessee failed to discharge its onus to prove the identity and creditworthiness of those persons from whom unsecured loans were received as also the genuineness of the transaction.
These two objections of the Commissioner led him to reject the application of assessee for registration vide the impugned order, aggrieved by which the assessee-trust has come up in appeal before us.
The ld. counsel for the assessee argued that all the objects of the appellant trust are charitable in nature as can be seen from the Trust deed submitted. The Trust is created wholly for charitable purposes and not for the benefit of any particular religion or caste nor is there any element of business profit. It was submitted that Form No. 10A was properly filled in and the income of the assessee has been accepted at nil by the AO for the A.Y. 2012-13 vide assessment order u/s. 143(3). It was submitted that the enquiry of the Commissioner of Income-tax for granting registration should be confined to the fact whether the trust created is genuine or not and whether the aims and objects of the Trust are charitable in nature. For this proposition, reliance is placed on the following decisions :-
(i). Fifth Generation Education Society v. CIT, 185 ITR 634 (All.) (ii). Surya Educational and Charitable Trust, 355 ITR 280 (P&H). (iii). Maliram Charitable Trust vs. CIT, 260 ITR (AT) 118 (Amr.) (iv) Sanjeevamma Hanumanthe Gowda Charitable Trust vs. DIT, 285 ITR 327 (Karn.)
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(v). St. Don Bosco Educational Society v. CIT 90 ITD 477 (Luck) and (v). Aggarwal Mitra Mandal Trust v. DIT, 106 ITD 531 (Del.)
It was further submitted that there is no statutory condition that the Trust could not charge fees to meet its educational expenses from the students. There is no allegation by the ld. CIT that the assessee-trust has charged any fee against the University norms. He therefore, submitted such an objection cannot be made a basis for rejection of appellant’s registration. In support, reliance is placed on the following decisions :
(i). Indo American Society v. ADIT, 96 ITD 61 (Mum); (ii). Gaur Brahmin Vidya Pracharini Sabha, 34 SOT 371 (Del.), (iii). Kaushalya Medical Foundation 31 SOT 119 (Mumbai); (iv). Aryan Educational Society, 93 ITD 546 (Del.) (v). O.P. Jindal Global University, 127 ITD 164 (Del.) and (vi). Shri Gian Ganga Covational & Educational Society 143 ITD 297.
It was further submitted that the ld. CIT cannot examine the source of unsecured loans in the registration proceedngs. Reliance is placed on the following decisions :
(i). Sonipat Hindu Educational and Charitable Society vs. CIT 278 ITR 262 (P&H) (ii). N.N. Desai Charitable Trust vs. CIT, 246 ITR 452 (Guj) and (iii). Kalyanam Karoti vs. CIT, 123 ITD 317 (Luck.).
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On the strength of these submissions, the ld. counsel for the assessee-trust urged for allowing the appeal.
On the other hand, the ld. DR supported the order of the ld. Commissioner of Income-tax, rejecting the application for registration.
We have considered the rival submissions and have perused the material available before us. The provisions of section 12AA provide for a procedure to be followed by the Commissioner for the grant of registration to a trust or an institution. According to this procedure, the Commissioner shall call for documents and information and conduct enquiries to satisfy about the genuineness of the activities of the trust or institution. After the Commissioner is satisfied about the charitable or religious nature of the objects and genuineness of the activities of the trust or institution, he will pass an order granting registration. If he is not so satisfied, the provisions of section 12AA require him to pass an order refusing such registration. We thus note that section 12AA of the Act prescribes the scope and ambit of the enquiry that the Commissioner is authorized to carry out at the time of grant of registration to a trust or institution. The scope and ambit of the enquiry revolves around the nature of the objects being charitable or religious, and the genuineness of the activities of the trust or institution. In this context, Hon'ble Karnataka High Court in the case of
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Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income Tax (Exemption) [285 ITR 327] has set out the guidelines that for the purposes of registration under section 12A the authorities have to be satisfied about the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable purpose and not the nature of the activity by which the income is being derived by the trust. The Assessing Officer while passing the scrutiny assessment u/s. 143(3) for A.Y. 2012-13 has accepted the income of assessee at Nil as returned by assessee. In this view of the matter, it can hardly be said that the income derived by the trust by way of fees from the students were applied by the assessee-trust for the purpose other than the aims and objects of the trust. It is also not the case of the Commissioner that the fees charged from the students received have been used for the purposes other than running the Educational Institution managed by the Assessee Trust. It is also not the case of the Commissioner that the activities carried out by the assessee are not in consonance with its objects. The ld. CIT has also not mentioned the exact enquiry report sent by the departmental authorities to ascertain as to on what basis they did not recommend for registration to the assessee. The decision relied upon by the Commissioner in the case of Kale Khan Mohammad Hanif v. CIT may be relevant for assessment proceedings, but not for registration u/s. 12AA and hence, distinguishable on
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facts. Therefore, in view of decision of Hon’ble Karnataka High Court referred to above and various other decisions relied upon by the ld. counsel for the assessee- trust, we are of the considered opinion, that the ld. CIT was not justified in rejecting the application of assessee for grant of registration. Accordingly, we hold that the appellant-trust is eligible for registration and accordingly direct the ld. CIT to grant registration to the assessee trust as per law.
In the result, the appeal of the assessee-trust is allowed.
Order pronounced in the open court on 06.07.2016. Sd/- Sd/- (C.M. GARG) (L.P. SAHU) Judicial Member Accountant Member Dated : 06.07.2016 *aks/- Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi