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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI R.C.SHARMA & SHRI SANDEEP GOSAIN
O R D E R
PER SANDEEP GOSAIN, JM:
1. The present appeal is directed against the order of Director of Income Tax (Exemption) (for short ‘(DIT(E))’ dated 22.02.2011 passed under order u/s 12AA(1)(b)(ii) r.w.s 12A of the Income Tax Act, 1961 (for short ‘the Act’)
thereby rejecting the application for registration filed by the assessee on the following grounds of appeal:
1) Under the facts and circumstances of the case and in law, the learned Director of Income Tax (Exemption) erred in rejecting the Registration Application on the ground that the trust is involved in non genuine activities. 2) In any event, under the facts and circumstances of the case and in law, the trust was an education trust to impart to run the schools for pre- primary, primary, secondary, higher secondary, technical schools, colleges and for cultural developments for citizens of India in general and for poor and backward class students irrespective of their caste or language and therefore the Director of Income Tax (Exemption) erred in refusing the Registration u/s.12A of the Income Tax Act. 3) In any event, the renting out of the property to Tata Ryerson Ltd. and Challenger Nursery School, Pune were given since the new building which were acquired by the trust for the purpose of running nursery school could not run the same. Consequently, the same was let out to the party who is running the nursery school. The rent amount realized from the said school and the Tata company have been utilized for running the schools in Bombay for educational purposes. Consequently, the Director of Income Tax (Exemption) erred in rejecting the Registration Application on such flimsy ground. 4) In any event, the Director of Income Tax (Exemption) ought to have appreciated that the trust was running educational schools affiliated to Secondary School Board and the school premises acquired at Pune could not be run by the trust. Hence, the same was let out to other parties to run nursery school in the said premise and therefore the order rejecting the Registration Application is unwarranted, unjustified and requires to be cancelled. 5) In any event, under the facts and circumstances of the case and in law, the school fees and other income of the trust were kept in the name of Shri Dashrath P. Patil, the trustee as trust money could not be equated as non genuine activity, especially when entire amount of trust money standing in the name of trustee Shri Dashrath P. Patil was transferred on redemption to the trust account and therefore the order of rejection of Registration Application is unjustified and deserves to be cancelled. 6) In any event, under the facts and circumstances of the case and in law, the learned Director of Income Tax (Exemption) erred in rejecting the Registration Application on the ground that the trust has given advances to various institutions which in point of fact are the institution run by the trust. Therefore, it is incorrect to state that their advances are given to various institutions and therefore it is incorrect to state that the trust has advance loans to various institutions. Consequential order rejecting the Registration Application is incorrect, unjustified and requires to be cancelled.
The brief facts of the case are that the assessee filed an application in Form No. 10A on 06.08.2010 for registration u/s 12(A)(a) of the Act, the Assessee-trust has been constituted on 23.07.1987 by the Constitution. The DIT(E), Mumbai had perused the details filed by the assessee for registration of trust and has rejected the application filed by the assessee for registration by giving findings which are as under:-
ORDER U/s.12AA(1)(b)(ii) READ WITH SECTION 12A OF THE INCOME TAX ACT, 1961 The applicant trust has filed an application in Form N0.10A on 06.08.2010 for registration u/s.12A of the I.T.Act, 1961. The: trust has been constituted on 23.07.1.987 by the Constitution.
2. On perusal of the details filed it is seen that the trust is engaged in commercial activities. The trust has received rent from challenger nursery school. Further it has also received rent from Tata for leasing out the property at Pune. It is important that the trust should carry out charitable activities on its own and receiving rent from some nursery school cannot be treated as a charitable activity. Hence a show cause notice dated 15.02.2011 was issued to the applicant trust requesting them to show cause as to how the above activities are charitable within the meaning of section 2(15) of the I.T. Act. In response to the above the trust vide letter dated 17.02.2011 stated that "we trustee say that in the objects of the trust it is clearly say that trust can let out property to fulfill objects of the trust as on page (1) object 3 & 4. The submission is considered carefully and the object (3) is revisited. Object (3) does not say anything regarding the letting out of property infact it states that it can raise funds by means of donation, subscription, loans deposit and government grants. As regards object (4) it states that "to acquire by purchase lease exchange or otherwise any movable or immovable property for carrying out aims and objects of the sanstha." This object clearly stales regarding acquiring of property and not letting of property. It states to acquire by lease. It does not state to let out and lease the property of sanstha. Further, on closer examination of the receipt and payment account filed for the year ending 31.03.2010, it is seen from the payments side that applicant trust has given advances to various institutions, this is a commercial transaction. The institution should have charitable character to certify itself as a public charitabl public charitable trustee trust. The very commercial activity forbids the institution from being characterised as public charitable trust.
To sum up the assessee has acted beyond the scope of the objects of the trust and hence the application for registration is rejected. Further it may also be noted that one of the trustee Shri Dashrath Patil who is assessed with 1'1'0-26(2)(2), Mumbai under PAN AIMPP 5063E has shown huge amounts in his accounts and has stated to the concerned authority that the entire transactions are pertaining to the trust. On perusal of balance sheet of the applicant trust it is nowhere seen that Shri Dashrath Patil has done such transactions for the trust. As prima facie the trust is involved in non- genuine activities the application for registration is rejected.
3. Aggrieved by the order of DIT(E), the assessee filed the present appeal before us on the grounds reproduced hereinabove.
The assessee also filed a Paper-book containing following documents:
Sr. No. Particulars Page No.
Application For Registration as a Charitable Institution along with 1-31 relevant annexures.
2. Notice issued by the DIT(E) seeking various details dated 32 10.12.2010 3. Reply of the Appellant to DIT(E) along with relevant annexures 33-35 dated 14.01.2011 4. Further show cause notice from DIT(E) dated 15.02.2011 56 5. Reply of the Appellant dated 17.02.2011 to the above show cause 57 notice.
6. Appellate Order dated 27.09.2011 in the case of Shri Dashrath patil, 58-75 Trustee of the Appellant.
The ld. Authorised Representative (AR) representing the assessee submitted that he wants to rely upon the registration certificate and documents relating to grants granted by Government in favour of the assessee. All the documents are relevant and important documents and goes to the roots of the case. These documents are being relied upon by the assessee by way of additional evidence. The AR further submitted that since all the aforementioned documents are part of Public Record which goes to the roots of the case, therefore, it is necessary and imperative for the AO to verify the documents and to decide the request of the assessee for registration u/s 12AA of the Act.
On the other hand, ld. Departmental Representative (DR) representing the Revenue also admitted that the documents now being relied upon by the assessee needs verification.
We have heard both the parties and perused the material available on record, we are of the opinion that the documents now relied upon by the assessee and filed before us are important documents and are necessary to be verified by the AO before adjudicating the claim for registration filed by assessee, therefore, considering the interest of justice, we set-aside the impugned order dated 22.02.2011 and remand back the case to the file of the AO along with the documents filed by the assessee with a direction to consider and verify the documents relied upon by the assessee and to decide the request for registration filed by assessee afresh. Needless to mention that in case, assessee wants to file any other documents in support of his claim for registration then in that eventuality the assessee is at liberty to file the documents at the earliest before the AO and thereafter AO would decide the application for registration afresh after affording opportunity of hearing to the assessee.
In the result, appeal filed by the Assessee is allowed for statistical purposes.
Order pronounced in the open court on this 23rd day of December, 2015.