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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI
Per B.M. Biyani, A.M.:
Feeling aggrieved by order dated 29.03.2019 of learned Commissioner of Income-Tax (Exemption), Bhopal [“Ld. CIT(E)”] u/s 12AA(1)(b)(ii) of the Income Tax Act 1961 [“the act”], the assessee has filed this appeal.
This appeal was required to be argued by Ld. CIT-DR from revenue side, but when the matter was called for hearing, none appeared on behalf of revenue. It is observed that the revenue has been seeking regular adjournments. Vide 1st letter dated 12.08.2022, adjournments have been sought for cases fixed on 16.08.2022 to 18.08.202 on medical-ground of Ld. CIT-DR. Thereafter, vide 2nd letter dated 18.08.2022 (accompanied by a certificate of Dr. Manish Nema), adjournments have been sought for cases fixed on 22.08.2022 to 23.08.2022 on medical-ground. Again vide 3rd letter
Sushila Tiwari Shiksha Sansthan ITA No.647/Ind/2019 dated 23.08.2022, adjournments have been sought for the cases fixed on 24.08.2022 to 25.08.2022 on medical-ground and in the same letter it is also mentioned that the charge had been given to a different CIT-DR, but interestingly it is also mentioned that the new CIT-DR is attending training at IIM, Ahmedabad and therefore unable to represent. It is also observed that in the 2nd letter dated 18.08.2022 and 3rd letter dated 23.08.2022, although request has been made to grant adjournments in “following cases” or “cases as per list” but no details of cases for which adjournments were required is actually furnished. The revenue has not taken care to make a suitable arrangement to represent its cases. Initially for a few days, the ITAT has allowed adjournment-requests but thereafter it was not possible to entertain such requests any more due to discomfort to the litigants and their counsels. Therefore, the adjournment-request of revenue is not accepted in this appeal. We proceed to dispose of appeal after hearing the Ld. AR and material available on record.
By means of various grounds taken in Appeal-Memo which we do not reproduce for the sake of brevity, the assessee has raised its sole grievance that the Ld. CIT(E) was not justified in refusing registration u/s 12AA to the assessee.
The assessee is an educational-society registered under the M.P. Societies Registration Act, 1973. It is running a CBSE-affiliated school named “Ideal International School”. On 29.09.2018, the assessee filed an application to the Ld. CIT(E) in Form No. 10A for grant of registration u/s 12AA of the Act but the Ld. CIT(E) rejected application vide order dated 29.03.2019. Being aggrieved by order, the assessee has now filed this appeal and before us.
Heard the Ld. AR appearing on behalf of assessee at length and perused the material held on record.
We observe that the Ld. CIT(E) has refused registration to assessee for the reason that the assessee has taken a school-building on lease from persons specified in section 13(3) and paid a rent of Rs. 12 lakh per month. Page 2 of 6
Sushila Tiwari Shiksha Sansthan ITA No.647/Ind/2019 During proceeding before Ld. CIT(E), although the assessee filed a justification on rent-payment supported by a certificate of registered-valuer, but the Ld. CIT(E) was not satisfied with the area claimed to have been taken on rent as also the quantum of rent. Finally, Ld. CIT(E) held that the assessee has not justified the payment of huge rent, which constitutes a benefit to the specified person in terms of section 13(3)/13(1)(c) and hence the assessee-society is not carrying out any charitable activity for the public at large and, therefore, does not deserve registration.
In the present appeal we are concerned with the limited issue of grant of registration u/s 12AA. Therefore, de hors the justification of rent-payment, the exact controversy can be fit into a very narrow compass of legality as to whether at the time of grant of registration u/s 12AA, can the Ld. CIT(E) look into the aspects clutched in section 13(3)/13(1)(c) at all? Ld. AR submitted that it is a settled law that at the stage of grant of registration, what is to be seen is the object of assessee and the genuineness of activities only and nothing more. It is further settled that the application of income, more particularly any benefit having been made to the specified person in terms of section 13(3)/13(1)(c), is a point which can be validly examined on year-to- year basis while assessing taxable income of assessee but certainly not at the stage of grant of registration. In support of this proposition, Ld. AR relied upon several decisions including the decision of Hon’ble Jurisdictional High Court of Madhya Pradesh in CIT Vs. Divine Shiksha Samiti (2020) 121 taxamann.com 175, relevant paragraphs of the decision are reproduced below:
“3. Brief facts of the case are that the respondent-Divine Shiksha Samiti (for short "the assessee Society") applied for registration under Section 12AA of the Act before the Commissioner of Income Tax, Bhopal (hereinafter referred to as "the CIT"). The CIT refused to grant registration on the ground that the assessee Society is in existence for the purposes of profit of the office bearers and not for charitable purposes. Against the said order of rejection, the assessee Society filed an appeal before the Income Tax Appellate Tribunal, Indore Bench, Indore. The Tribunal after hearing both the parties and referring to the judicial pronouncements set aside the order of the CIT and allowed the appeal filed by the assessee Society. It was observed that there was no doubt about the genuineness Page 3 of 6
Sushila Tiwari Shiksha Sansthan ITA No.647/Ind/2019 of the objects of the society for grant of registration under Section 12AA of the Act. Feeling aggrieved by the said order of learned Tribunal this appeal has been filed.
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Further, the Tribunal noticed that Section 12AA of the Act nowhere provides that CIT (Exemption) while considering the application for registration is also required to examine whether the income derived by the Trust is being spent for charitable purposes or the Trust is earning profit. It had taken note of the decisions in the cases of CIT Vs. DPR Charitable Trust - (2011) 16 DTR 410, Vidyadayani Shiksha Samiti Vs. CIT (Exemption) - ITA No.309/Del/2016, DIT Vs. Venkatesh Education Society, High Court of Karnataka (2012) 82 CCH 309, Fifth Generation Education Society Vs. CIT, High Court of Allahabad - 87 CIR (All) 169 and some other decisions holding the field and observed as under:-
"5. In view of the above decision coupled with the fact that there is no doubt about the genuineness of the objects, we direct the Ld. CIT to grant registration u/s 12AA of the Act to the assessee society. Further, it is clarified that revenue would be at liberty to examine the issue of rent paid to the members that whether it is reasonable or not, during the assessment proceedings, if any. Grounds raised by the assessee are allowed."
After examining the factual matrix and appreciating the legal position as noticed hereinbefore, we find that the learned Tribunal has rightly come to the conclusion that the genuineness of the objects of the assessee Society could not be doubted and has rightly directed the CIT, Bhopal to grant registration to the Society.”
We observe that the issue involved in present appeal is directly resolved by the above decision of Hon’ble Jurisdictional High Court according to which the payment of rent, whether reasonable or not, could be examined only at assessment-stage and not at registration-stage. At the registration- stage, the satisfaction has to be qua the objects and activities and nothing more. Therefore, the action of Ld. CIT(A) in refusing registration on the foundation of section 13(3)/13(1)(c) is not valid in the light of binding decision of Hon’ble High Court itself.
For the sake of completeness, the Bench required the Ld. AR to briefly explain the objects and activities of assessee. In response, the Ld. AR carried us through various documents already filed by assessee to Ld. CIT(E) and Page 4 of 6
Sushila Tiwari Shiksha Sansthan ITA No.647/Ind/2019 also placed at different pages in the Paper-Book filed to us, to mention a few, (i) the registered bye-laws of assessee which list out various objects / activities (Page 24); (ii) a note on the activities of assessee (Page 7 to 8); (iii) the school run by assessee and affiliation granted by CBSE (Page-11 to 16); (iv) students enrolled from KG-1 to 9th standard (Page-17); (v) a list of teaching and non-teaching staff employed (Page-18); (vi) a comparative chart of fee of various schools which shows that the assessee is charging lower fee (Page-110), and (vii) photographs of class-rooms and activities (Page 111 to 118). Having perused these documents, we are of the considered view that the assessee is having objects and activities which are charitable and for the benefit of public at large.
In view of above and for the reasons stated above, we are of the view that the Ld. CIT(E) was not justified in refusing registration applied for by the assessee. Therefore, we direct the Ld. CIT(E) to grant registration to the assessee and pass a needful order to that effect.
In the result, this appeal of assessee is allowed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 23/09/2022.
Sd/- Sd/-
(SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore Dated : 23.09.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Page 5 of 6
Sushila Tiwari Shiksha Sansthan ITA No.647/Ind/2019 Income Tax Appellate Tribunal Indore Bench, Indore
Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order
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