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Income Tax Appellate Tribunal, ‘C’ BENCH, BANGALORE
Before: SHRI VIJAY PAL RAO & SHRI INTURI RAMA RAO
O R D E R
Per INTURI RAMA RAO, AM :
This appeal is filed by the appellant-trust directed against the order of the ld. Commissioner of Income-tax(Exemptions) [‘CIT(E)’ for short] dated 31/07/2015 denying grant of registration u/s 12A of the IT Act, and recognition u/s 80G of the IT Act, 1961.
Briefly, the facts of the case are that the appellant-trust was formed on 24/07/1991 and it was duly registered with the & 1228/Bang/2015 Page 2 of 8 Sub-registrar, Bangalore. The appellant trust was formed with the following objects:
1. 1. To advance the cause of education and diffusion of knowledge without distinction of caste, creed, sex or language.
2. To provide establish, endow, maintain, control and manage schools and other educational institutions and to do all the acts and things necessary for or conducive o the promotion of schools of the Montessori and Kindergarten types Primary, Secondary, Higher commercial, technical and industrial education at Nelamangala or elsewhere and for this purpose to start, establish conduct, maintain, manage, reading rooms, libraries, laboratories, gymnasiums, workshops, publishing houses, hostel residential quarters and the like.
3. To disseminate knowledge by publishing books, pamphlets and through lectures on Gandhian principles of truth non-violence and universal brotherhood.
4. To run night schools or to arrange to hold adult education class or physical training classes on such times or at such centres or at such time of the year as may be found convenient to the trust and to take up the social work.
5. To arrange to hold training classes or seminars on subjects like co-operation, education, agriculture, industry, banking and commerce etc. for the students studying in its institutions.
6. To sponsor establish and maintain consumer cooperative societies for the benefit of the staff and the students of the institutions.
7. To institute research scholarships in the field of education small scale industries and social activities.
8. To print and publish and/or to exhibit any books, pamphlets or posters that may be considered desirable for the promotion of the objects of the trust.
9. To start and conduct magazines, periodicals and Newspapers and issue pamphlets to carry on & 1228/Bang/2015 Page 3 of 8 educational propaganda and in furtherance of the aims and objects of the trust be means of lectures. 10.To do all such other lawful acts, deeds or other tings as are incidentals or conducive to the attainment of the above objects. 11.And generally on such objects of charity and public good as the trustees may think proper and those which are covered by the definitions of charitable purpose as 2(15) of the IT Act, 1961 with all statutory deficiations and replacements thereof in future.
Thus, the appellant-trust was formed with the object of advancing the cause of education, diffusion of knowledge environment, to establish run schools etc. The assessee society made an application in form No.10A dated 18/12/2014 to the CIT(E) Bangalore for registration of the Trust u/s 12A of the IT Act, 1961 and for approval u/s 80G of the IT Act, 1961 in Form No.10G vide application dated 28/01/2014 for grant of approval u/s 80G of the IT Act, 1961. The ld. CIT(E) vide his letters dated 16/04/2015, 29/06/2015 and 15/07/2015 sought certain information which has been duly complied with by the appellant- trust vide its letters dated 28/04/2015, 24/06/2015, 06/07/2015 and 15/07/2015. After perusing the information filed by the appellant-trust, the CIT(E), vide his impugned orders dated 31/07/2015 had denied the registration u/s 12A and approval u/s 80G of the Act by holding that the appellant-trust did not explain the details of receipt of rental income of Rs.47,420/- for conducting the tuitions. The ld.CIT(E) further held that the & 1228/Bang/2015 Page 4 of 8 appellant-trust was not interested in prosecution of the applications and therefore dismissed the applications invoking the doctrine of ‘Vigilantus non dormantibus jura subveniunt’.
Being aggrieved, the appellant-trust is before us with the present appeals.
The ld.AR contended that the appellant-trust had complied with all the queries raised by the ld.CIT(E) and furnished all the details. In this connection, he has drawn our attention to the paper book wherein the copies of letters of correspondence with the ld.CIT(E) are placed. He further submitted that mere receipt of nominal rental income from the teachers who conducted the tuitions for students does not render the objects non-charitable.
On the other hand, ld. CIT(DR) relied on the orders of the CIT(E).
We have heard the rival submissions and perused the material on record.
In the present appeals, the only issue to be adjudicated is whether the CIT(E) is justified in denying the registration u/s 12A of the Act and approval u/s 80G of the IT Act, 1961. The ld. CIT(E) denied the registration only on the ground that the appellant-trust had not furnished the clarification as to receipt of rental income for conducting tuitions and the appellant-trust was & 1228/Bang/2015 Page 5 of 8 not serious in prosecuting the applications. In our considered opinion, the contentions of the ld.CIT(E) are not tenable in the facts of the present case as the appellant-trust had duly complied with all the letters issued by him and therefore, the ld.CIT(E) should not have held that the appellant-trust was not serious in prosecuting the applications. The receipt of rental income by the appellant-trust can be examined only during the course of assessment proceedings by the Assessing Officer after grant of registration. It was so held by the Hon’ble jurisdictional High Court in the cases of Sri Gururaja Seva Samithi. The Hon’ble jurisdictional High Court in this case had clearly held that the question of verifying the activities of the trust can be considered only after it is registered and carries on activities subsequently. The Hon’ble High Court after referring to its earlier decision in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs DIT(Exeptn.) held as follows; “4. It is an undisputed fact that at the time of application for registration the respondent society had not commenced its activities and had not received the income. The question of verifying the genuineness of the activities of a trust can be considered only after it is registered and carries on the activities. It is settled law that in the first year when the trust is sought to be registered, it could not have carried out any activity, thus the question of verifying the genuineness of such activities cannot be considered. The refusal to register the trust on such ground by the DIT(Exptn.) could not be justified. The Tribunal has relied on the Division Bench judgment of this court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs DIT(Exptn.) 285 ITR 327, wherein it has been held that for arriving at the satisfaction for genuineness of the society or trust, the CIT has to & 1228/Bang/2015 Page 6 of 8 look at the objects of the trust and it is not authorized to go into the nature of the activity by which the income is derived by the trust. 5. In the present case, the question is with regard to the registration of the trust in question wherein the objects have been clearly specified. The question of assessing the activities of the trust would arise only after the trust is registered and carries on the activities. At the time of initial registration, the same cannot be a question to be considered. In our view, the Tribunal has rightly allowed the appeal and directed the DIT(Exemption) to register the society as a religious trust u/s 12A of the Act”. It may be further added that the Co-ordinate Bench of the Delhi Tribunal (Hon’ble AM is the author) in the case of Paramount Public School Vs CIT, Rohtak in ITA No.5712/Del./2013 dated 28/10/2015 after referring to the decision of the Hon’ble High Court of Karnataka in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs DIT(Exemption) 285 ITR 327 (Kar.), Hon’ble P&H High Court in the case of CIT Vs Surya Education and Charitable Trust (2013) 355 ITR 280(P&H) and Allahabad High Court in the case of Fifth Generation Education Society Vs CIT 185 ITR 634 (All.) held as follows vide para-7 of the judgment.
“7. The ratio that can be culled out from the above decisions is that the Commissioner is only entitled to examine whether the objects of the institutions are charitable or not. Once the objects of the institutions are found to be charitable, the Commissioner has no option, but to grant registration. In the present case the Commissioner has not found that any objects of the trust are not charitable in nature. The objections raised by the CIT that the appellant had failed to comply with the direction of the Commissioner of Income, Rohtak to file the details of donors of corpus funds and the institution was collecting the fees from the students & 1228/Bang/2015 Page 7 of 8 are not relevant considerations at the time of grant of registration under Section 12AA of the Act. These are the issues to be examined during the assessment proceedings after grant of the registration under section 12AA of the Act. Therefore, we direct the Commissioner of Income Tax, Rohtak, to grant registration to the appellant society within a period of 30 days from the date of receipt of this order. Accordingly, the grounds of appeal filed by the appellant society are allowed in full.
Therefore, the propositions laid down in the aforesaid cases are that genuineness of the activities of the trust and nature of receipt of any sum of money cannot be gone into at the time of registration of the trust. It is only after the activities of the trust are commenced, the genuineness of the objects can be examined during the course of assessment proceedings, after the grant of registration by the IT Authorities. Respectfully following the ratio laid down in the cases cited supra, we direct the ld.CIT(E) to grant registration u/s 12A of the IT Act. Thus, the appeal filed by the trust is allowed. : 10. Since we have directed the ld.CIT(E) to grant the registration of the trust under the provision of sec.12A of the Act, in the appeal No.1227/Bang/2015, therefore, the issue of approval u/s 80G is only consequential in nature and therefore, we direct the ld.CIT(E) to grant approval u/s 80G of the IT Act. & 1228/Bang/2015 Page 8 of 8 11. In the result, the appeals filed by the assessee-trust are allowed.