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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRIB.M. BIYANI
आदेश / / / O R D E R / O R D E R O R D E R O R D E R
Per B.M. Biyani, A.M.:
THIS APPEAL:
This appeal filed by the assessee is directed against the order dated 27.08.2019 of learned Commissioner of Income-Tax (Exemption), [“Ld. CIT(E)”], Bhopal u/s 12AA(1)(b)(ii) of the Income Tax Act, 1961 [“the act”].
BACKGROUND:
St. Meera’s Convent School Shikshanit Samiti ITA No.897/Ind/2019
The assessee is an educational Society running primary, middle and higher secondary schools. It is registered with the Registrar of Societies vide order dated 21.09.1978. On 15.02.2019, the assessee filed an application to Ld. CIT(E) in Form No. 10A for grant of registration u/s 12AA of the act. However, the Ld. CIT(E) rejected assessee’s application vide order dated 27.08.2019. Feeling aggrieved by this order of Ld. CIT(E), the assessee has filed present appeal and now before us.
GROUNDS:
The assessee has raised following grounds: “
1. On the facts and in the circumstances of the case the Ld. CIT(E) Bhopal has rejected the application for registration of Samiti u/s 12AA of the Income Tax Act 1961 on the following grounds-
1. Payment made to related parties 2. Violation of section u/s 269SS and 269T” SUBMISSION OF LD. AR:
During hearing, the Ld. AR carried our attention to the order dated 27.08.2019 passed by Ld. CIT(E) and submitted that the Ld. CIT(E) has rejected the assessee’s application for three reasons stated below:
(i) The assessee has made payment to the persons specified in section 13(1)(c) of the Act.
(ii) The assessee has taken/repaid loan in cash which is a violation of section 269SS/269T of the Act, and (iii) The assessee has submitted wrong Pan Numbers of the office-bearers / directors in Form No. 10A.
Ld. AR made an elaborate submission in relation to all these reasons, one by one, as under:
St. Meera’s Convent School Shikshanit Samiti (i) Reason No. 1 - The assessee has made payment to the persons specified in section 13(1)(c) of the Act:
Ld. AR, firstly, submitted that it is true that the assessee was paying salary to Mr. Dinesh Tripathi and Mrs. Nisha Tripathi who were relatives of Mr. Ramesh Chand Tripathi, a member of the assessee- society. But the fact is that Mr. Ramesh Chand Tripathi retired from the membership of assessee in November 2018 itself and he was not a member of assessee on 15.02.2019 when the application in Form No. 10A was filed. Ld. AR also clarified that in Form No.10A, the name of Shri Ramesh Chand Tripathi was shown as founder-member of the assessee because he was a member at the time of formation of the assessee. Thus, the Ld. AR submitted that as on the date of filing application in Form No. 10A, there was no payment which could attract section 13(1)(c) of the Act. Secondly, Ld. AR submitted that the assessee was paying salary to Mr. Dinesh Tripathi and Mrs. Nisha Tripathi because both of them were directors and managing day-to-day activities of the assessee. According to Ld. AR, section 13(1)(c) does permit payment of reasonable salary to the specified persons for legitimate services and therefore also there was no violation of section 13(1)(c). Thirdly, the Ld. AR submitted that even otherwise the payment to specified person u/s 13(1)(c) of the Act is nothing to do with the grant of registration u/s 12AA of the Act. According to Ld. AR, the payment to specified persons, whether violating section 13 or not, is relevant at the time of computation of taxable income on year-to-year basis and not at the stage of grant of registration.
(ii) Reason No. 2 - The assessee has taken/repaid loan in cash which is a violation of section 269SS/269T of the Act:
Ld. AR submitted that the assessee has taken loan in cash from a villager who lives in a village no served by any bank and in this Page 3 of 7 St. Meera’s Convent School Shikshanit Samiti ITA No.897/Ind/2019 connection, a letter of Village Sarpanch had already been submitted to Ld. CIT(E). Ld. AR further submitted that even otherwise the violation of section 269SS / 269T, if any, has a different consequence in Income- Tax Act, 1961 in the form of penalty, but it is nothing do with the grant of registration u/s 12AA of the Act.
(iii) Reason No 3 - The assessee has submitted wrong Pan Numbers of the office-bearers / directors in Form No. 10A:
Ld. AR frankly admitted that it is a fact that the assessee submitted wrong PAN numbers of certain office-bearers / directors in Form No. 10A. But Ld. AR very humbly submitted that the assessee has given an affidavit dated 19.01.2022 signed by Shri Bhupendra Singh Bhadoriya, secretary of the assessee-society wherein it is averred that certain members of the assessee-society were not having PAN numbers and since e-filing of Form No. 10A was not possible without mentioning PAN Numbers, there was a compulsion to mention wrong PAN Numbers so that the Form No. 10A could be filed. However, there was no mala fide intention involved in mentioning such wrong PAN Numbers. Ld. AR urged that the wrong mention of PAN Numbers was only to expedite the process of filing of Form No.10A and not to derive any other benefit or cause any loss to the revenue. Ld. AR further submitted that at the best this is a technical mistake and that too negligible. Hence it is not a sound basis for rejection of registration.
Ld. AR further submitted that in terms of the provisions of section 12AA, the Ld. CIT(E) can reject application for registration only if he is not satisfied with the objects and the genuineness of activities of the assessee. According to Ld. AR, in the present case, nowhere in the order passed by him, the Ld. CIT(E) has expressed any kind of dis-satisfaction. Hence there is no lawful reason to reject the application of assessee.
With these submissions, the Ld. AR submitted that there is no valid reason for rejection of registration. Hence the order of Ld. CIT(E) be quashed Page 4 of 7 St. Meera’s Convent School Shikshanit Samiti and matter be remanded back with a direction to grant registration as applied for.
SUBMISSION OF LD. DR:
Ld. DR supported the order of Ld. CIT(E). Although Ld. DR made a serious attempt to oppose the submission of Ld. AR but could not controvert the same.
OUR ANALYSIS:
We have considered rival submissions of both sides and also perused the material held on record. After due consideration, we observe that there is sufficient weightage in the submissions of Ld. AR. We observe that the Ld. AR has successfully contested that there was no payment being made to any specified person at the time when the application in Form No. 10A was filed and even otherwise any such payment, even if made, is not relevant at the stage of grant of registration. This is very much clear from the wording of section 13 which reads as under:
“13(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof ….”
From a bare reading it can be found that the section 13(1) prohibits the operation of section 11 or section 12 and that too for a previous year. We also know that first of all section 11 or 12 applies only if the registration u/s 12AA has been granted. Therefore, if registration u/s 12AA is not granted, how will section 11 or 12 operate and how will then section 13 prohibit the operation of section 11 or 12? This clearly shows that at the stage of grant of registration, the violations prescribed in section 13(1) are not at all relevant. We also find substance in the submission of Ld. AR that the violation of section 269SS, even if there be, has a different consequence and does not come in the way of grant of registration. We also find that the assessee has given sufficient explanation for mentioning wrong PAN Numbers in the Form Page 5 of 7 St. Meera’s Convent School Shikshanit Samiti No. 10A and even otherwise this point is not a fatal point to deny registration. On a careful reading of section 12AA of the act, we agree with the submission of Ld. AR that the registration u/s 12AA can be refused only if the Ld. CIT(E) is not satisfied with the objects or genuineness of the activities of the assessee. On perusal of the entire order dated 27.08.2019 passed by Ld. CIT(E), we do not find any iota of dis-satisfaction recorded by Ld. CIT(E) with regard to the objects and genuineness of the activities of the assessee. Therefore, in view of these facts and the provision of section 12AA of the Act, we are of the considered view that the reasons advanced by Ld. CIT(E) are not adequate for rejection of registration. Hence we are persuaded to hold that the assessee is eligible for registration. Therefore, we set aside the order passed by Ld. CIT(E) and direct him to grant registration as applied for by the assessee.
Before parting, we would like to express our sincere appreciation to the Ld. AR appearing on behalf of the assessee who, despite her occasional appearance before the ITAT as it seems so, has done her best efforts to provide a meaningful assistance for a proper disposal of this appeal.
DISPOSITION:
In the result, this appeal of assessee is allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules 1963 on 22.06.2022.