Case Law Details
Manav Vikas Avam Yoga Prasiskshan Sansthan Vs CIT (ITAT Jaipur)
ITAT Jaipur held that assessee trust under the umbrella of Dayanand Saraswati University, Ajmer is genuinely performing its activities and objects of imparting education to the students coming off from poor or middle class families. Accordingly, denial to register the trust u/s 12AA of the Income Tax Act unjustified.
Facts- The Appellant is a society registered under Rajasthan Societies Registration Act, 1958 having its main objects of imparting education. The Society runs a college in the name of Apex College affiliated to Maharshi Dayanand Saraswati University, Ajmer. In this case, the Application in Form No. 10A seeking registration u/s 12AA was filed by the assessee online on 5/12/18 along with all necessary annexures as required under Rule 17A. The application was rejected by ld. CIT(E) vide order dated 24/06/19. Being aggrieved, the present appeal is filed.
Conclusion- Held that the Bench does not concur with the findings of the ld. CIT(E) denying the exemption u/s 12AA of the Act to the assessee when the assessee trust under the umbrella of Dayanand Saraswati University, Ajmer is genuinely performing its activities and objects of imparting education to the students coming off from poor or middle class families. Thus the appeal of the assessee trust is allowed with the direction to the ld. CIT(E) to register the trust u/s 12AA of the Act.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This is an appeal filed by the assessee against the order of the ld. CIT(E), Jaipur dated 24-06-2019 in the matter of order u/s 12AA(1)(b)(iii) of Income Tax Act, 1961 raising therein solitary ground as under:-
‘’In the facts and circumstances of the case and I law the ld. CIT(E) has erred in not granting the assessee trust registration u/s 12AA of the I.T.Act, 1961. The action of the ld. CIT(E) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by providing requisite registration u/s 12AA to the assessee trust.”
2.1 Brief facts of the case are that the Appellant is a society registered under Rajasthan Societies Registration Act, 1958 having its main objects of imparting education. The Society runs a college in the name of Apex College situated at Noorpura by pass road, Makrana- 341505 District Nagaur (Raj) (www.apexcollegemakrana in) affiliated to Maharshi Dayanand Saraswati University, Ajmer. In this case, the Application in Form No. 10A seeking registration u/s 12AA was filed by the assessee online on 5/12/18 along with all necessary annexures as required under Rule 17A. The application was rejected by ld. CIT(E) vide order dated 24/06/19. It is noted from the ld. CIT(E) order wherein the assessee submitted the following documents before the ld. CIT(E).
1. Bye laws of the organization
2. Permission / approval of college
3. Audited balance sheet and ITR for last three years
4. Fee structure and bank statement and fees ledger
5. Trustee details
6. Other relevant information as asked from time to time.
2.2. The ld. CIT(E) in his order at Para 02 observed that while considering the case for registration u/s 12AA following issues are to be examined.
1. Object of the trust / society
2. Genuineness of the activities
The ld. CIT(E) mentioned in his order that Rule 17 of the I.T. Rules governs the procedure regarding registration. As per the rules, the certified copy of instrument establishing the society/ trust needs to be verified with originals. The applicant is also required to file copy of accounts for last three years or less as the case may be. The ld. CIT(E) mentioned in his order that in the light of above section of the Act and Rules, the Commissioner of Income Tax has been empowered to call for such documents or information from the trust or institution as he thinks necessary and may also make such enquiries as he may deem necessary in this behalf and under such power vested in CIT(E), the applicant was asked to file details vide letter/note sheet enquires but no details were filed. Thus the ld. CIT(E) rejected the application of the assessee trust seeking registration u/s 12AA of the Act by observing as under:-
‘’04. On perusal of above, it is clear that the applicant has not filed the complete details as required vide note sheet entries dated 08-04-2019 and 28-052019 and expressed inability to furnish required details called for even after 6 hearings. In the absence of such details, it is not possible to record satisfaction regarding genuineness of activities. It is pertinent to state that Hon’ble ITAT, Japur in the case of Neeraj Shiksha Prashikshan Samiti in ITA No.51/JP/2019 dated 16-05-2019 has observed that :-
‘’Since, the ld. CIT(E) has not disputed charitable nature of the objects of the assessee trust, therefore, to that extent no further verification is required. Even otherwise, we find that the objects of the assessee trust are charitable in nature being imparting education. As regards the genuineness of the activities of the assessee trust once the assessee has produced all the relevant documents the same ought to have been examined by the ld. CIT(E) to satisfy himself about the genuineness of the activity.
Hon’ble Tribunal has ruled that even if objects are charitable, such as in education, the genuineness of activities needs to be examined. It is worth mentioning that the onus lies on the applicant to file complete details but it failed to discharge the same.
5. Sufficient opportunity has been provided to the society to produce details and documents in support of his claim for registration u/s 12AA of the I.T. Act, 1961 but society had failed to do so. In the light of the above facts, the application seeking registration u/s 12AA is hereby rejected and filed.”
2.3. During the course of hearing, the ld. AR of the assessee trust submitted that in the course of proceedings for grant of approval extensive details were sought by ld. CIT(E)i.e. as many as 26 queries were raised by ld. CIT(E) (PB 5-7). All the 26 queries were duly responded by submitting appropriate explanations/ evidences (PB 25-27). The Appellant Society also submitted audited financial statements for the immediately preceding three years. He further submitted that the ld. CIT(E) further required details of fees received from students in a particular manner. In response to the requirement of details of fees received from the students, the Society submitted the Ledger Accounts of fees received maintained in its audited financial statements but the Ld. CIT(E) wanted the fees receipts to be presented in a particular format and reconciled in a particular manner. The Appellant Society submitted that the students are mainly from poor or middle class familiesand they seek concession in fees payments. The fee is also paid by the studentsas per the convenience and affordability of their parents. Many students even do not pay the fees. The Appellant Society, being a charitable institution, allows such students also to pursue their studies. Under these circumstances the fees receipt is accounted for on cash basis. Hence, the Appellant Society could not submit the fees details in the particular manner. Hence, the Ld. CIT(E) for the reason of non-submission of reconciled fees details rejected the application holding at para 4 of his order that in the absence of such details, it is not possible to record satisfaction regarding genuineness of activities. It is submitted by the ld. AR of the assessee that the purpose of seeking these details have been mentioned at page 3 of the order ‘’that such details were called for ascertaining genuineness of activities as well as accounts maintained by the assessee.”
2.3.1 It is also pertinent to mention that during the course of hearing the ld. AR of the assessee filed a detailed written submission with the prayer to set aside the order of the ld. CIT(E) by granting registration u/s 12AA of the Act and thus the appeal may kindly be allowed.
SUBMISSION
‘’7.1. Section 12AA undisputedly requires the CIT(E) to satisfy himself about the objects of the trust and the genuineness of the activities of the trust or institution.
7.2. So far as the objects of the trust are concerned Id. CIT(E) has not expressed any dissatisfaction.
7.3. However in respect of genuineness of activities, for want of proper details of fees receipt, Id. CIT(E) held that he was not in a position to ascertain the genuineness of the activities of the Trust.
7.4. The genuineness of the activities of the Trust has to be seen with reference to the objects of the trust. It is undisputed that the Appellant is running a college duly affiliated to Maharshi Dayanand Saraswati University, Ajmer. Its students are awarded degree by the said University (PB 68-71). The University grants affiliation after proper due diligence of the college. In this view of the matter the genuineness of the activity of imparting education is conclusively established and leaves no doubt nor any question in this regard deserves to be raised.
7.5. Non submission of the fees details in a particular reconciled manner may reflect inadequate accounting system at the end of the Appellant Society. The same cannot lead to any adverse inference so far as genuineness of imparting education is concerned. Short comings in the functioning of a society cannot be considered as lack of genuineness of the activities of the society, therefore, Registration under s 12AA cannot be denied [Director of Income Tax (Exemptions) v M/s Venkatesha Education Society (2012) 48 (1) ITCL 27 (Kar-HC)] (CLC 1-12)
7.6. While conducting enquiry for the purposes of grant of approval u/s 12AA Id. CIT(E) is not expected to go beyond what is required for establishing the genuineness of the activities with reference to the objects.
7.7. Grant of registration u/s 12AA is not conclusive for availing exemption u/s 11. The scheme of the Act is such that in spite of having registration u/s 12AA the income of the Trust may be liable to tax on account of various reasons/ conditions enumerated in section 11, 12, 12A and 13. Ld. CIT(E) is not allowing exemption u/s 11 which is the duty conferred on Id. AO to be performed during assessment proceedings. Therefore what is to be seen at the time of assessment by Id. AO cannot be a subject matter of enquiry by the Id. CIT(E) at the time of grant of approval u/s 12AA.
7.8. The genuineness of the activities would mean that the activities are not bogus or artificial or camouflaged by some means and whether the activities are in accordance with the object of the institution. If a trust or institution having objects of imparting education is found to be involved in preaching terrorism or attempting religious conversion in the guise of imparting education then the activities of that trust or institution can definitely be held to be non- genuine. There is no finding in this direction by the Id. CIT(E). Ld. CIT(E) has attempted to examine the accounts maintained by the Society which is not relevant for ascertaining the genuineness of the activities of the society pursuant to its objects. It is reiterated that fees details, in the form of ledger account, were submitted (PB 53) and also the audited financial statements (PB 28-51),
7.9. Reliance is placed on the judgement of the Hon’ble High Court of Allahabad in the case of CIT v. Red Rose School 212 CTR 394 wherein the Hon’ble High Court at Para 34 of the order has held as under (CLC 1321)
“The language used in the section only requires that activities of the trust or the institution must be genuine, which according lywould mean, they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure, sincere, nor against the proposed objects.”
The Hon’ble High Court further held as under at para 44 of the order:
“It is significant to mention that registration under section 12AA, does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purpose of determination of tax liability but it only entitles the assessee to claim such exemption, which otherwise could not be claimed in the absence of registration. The enquiry of the Commissioner shall remain restricted to the examination, as to whether the assessee, who has moved the application for registration under section 12A, is actually in the activities which are genuine. Genuineness of the activities of the trust or the institution has to be seen, keeping in mind the objectives thereof, which necessarily means that the Commissioner shall satisfy himself about the facts that the activities are genuine and in consonance with the objects of the trust or the institution. In other words, if establishing and running a school is the object of the Society, as given in its bye-laws, it has to be satisfied that the Society has established the school, where education is being imparted as per rules and the factum of establishment and running school is a genuine activity. The enquiry regarding genuineness of the activities cannot be stretched beyond this.”
7.10. Further reliance is placed on another judgement of Hon’ble High Court of Allahabad in the case of CIT v. Babu Ram Education Society [2018] 96 Taxmann.com 606 wherein the Hon’ble High Court at para 7 has held as under (CLC 22-24)
“Having heard counsel for the parties, we find that registration of the trust does not involve enquiry into the actual activities or application of funds, etc. The Tribunal has committed no error in following the earlier order. At that stage, the only enquiry required to be conducted was with respect to the object of the trust alone. The objection raised by the Commissioner pertain to matters that may be examined at the stage of assessment. At that stage, if the assessee were to be found to have actually engaged in any non- charitable activity, the benefit of exemption may be denied at that stage in the manner provided by the Act.”
7.11. Hon’ble Gujarat High Court in the case of Shantagauri Ramniklal Trust v. CIT [1999] 239 ITR 528 has also clarified the scope of enquiry while considering application u/s 12A vis-a-vis scope of enquiry while granting exemption u/s 11 by Assessing Officer. Following observation is worth noticing: (CLC 25-27)
‘’While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fed the exemption must follow whether registration is accorded or not.”
7.12. Similarly, in the case of St. Don Bosco Educational Society v. CIT (2004) 90 ITD 477 the Hon’ble Lucknow Bench has also.. clarified the scope of enquiry for deciding the genuineness of activities for the purpose of grant of approval u/s 12AA The relevant portions of the order are being reproduced below: (CLC 28-34)
Para 21: “We have to examine the order of CIT-I in the above context and a perusal of the order of the CIT-I, which is in appeal before us, does not show that CIT-I has given out any finding that activities of the assessee society are not genuine. The case of the assessee was very much specific that assessee society was found running a college and school and CIT-I had also looked into the accounts of college and school. The number of students of college and school as well as number of staff, which were found working in both the institutions had not been doubted. The existence of college and school is also established-in view of this admitted fact, the scope of enquiry ends as and when finding is recorded to that fact that assessee society was found running a college and school in which substantial number of students as well as staff was there. The second stage will be of claim of benefit from tax of assessee society and that will be given power to the Assessing Officer to examine as to whether assessee who is claiming benefit under section 11/13 of the Act is fulfilling the requirement to claim that benefit or not. The exercise done by the CIT-I may be relevant at that stage, but fact remain that provisions of section 12AA of the Act restrict the power of the CIT to examine as to whether assessee who has moved an application for registration under section 12A of the Act is actually carrying on the activities which are genuine or not. The second requirement is whether the object of the Assessee Society! Institution is in consonance with the requirement of section 11/13 of the Act. No other enquiry is contemplated by this section of the Act. We have to abide by the words used by the Legislature. The Legislatures are wise enough and they must be fully aware about the applications of using words ‘genuineness of the activities of the Trust or Institution. If they were going to give more powers. the Legislatures must have used the other words clothing the CIT that other powers to verify as to whether assessee Trust or Institution is carrying on such activities which may prima facie indicate that he is entitled to get benefit under section 11/ 13 of the Act. Unless Legislatures have not used these words, it is not within the competence of the authonties to add or delete any words or infer any implied words in any provisions of the Act. It is well settled proposition of law that fiscal statute are to be examined, as the same stand. The authorities concerned when interpreting the same are not permitted to add/ alter any word here and there, but they are supposed to read it as it stand and to use the general meaning of the words used by this Legislature. Here the scope of the powers of the CIT is confined to examine the genuineness of the activities of the Trust or Institution and to examine the object of the Trust or Institution. Once the CIT has not doubted on the genuineness of the activities of the assessee society nor doubted the object, his powers ends and he cannot be allowed to travel beyond it and to enter into the scope to find out as to whether assessee is a charitable institution or not or whether assessee is carrying on any activity which is covered under the definition of section 2(15) of the Act. It is Assessing Officer who will be having exclusive jurisdiction to examine this aspect of the matter when assessee will claim any tax benefit and then the observation of the CIT-1 in the impugned order before us may be relevant, but not at this stage.”
Para 28: “On the basis of the above, the inevitable conclusion is that assessee society is entitled to get registration under section 12AA of the Act as the CIT-I had not doubted on the objects and genuineness of the activities of the assessee society. Therefore, we direct the learned CIT-I to grant the registration. However, this order may not come in the way of the Assessing Officer who is free to examine the case of the assessee society for exemption under section 11/13 of the Act, for which purpose each year is to be considered as independent year and the Departmental Authorities can examine the claim of the assessee society.”
7.13. Attention is also drawn towards the fact that the Act (Section 12AA(3)] itself confers ample powers to the CIT(E) for withdrawal of already granted approval if subsequent to grant of approval it is found that the activities of the trust or institution are not genuine pursuant to its objects.
7.14. Attention is drawn towards the recent amendments brought in by the Finance Act, 2020 with reference to the procedure for grant of registration with effect from 01/06/20 wherein section 12AB(1)(c) allows provisional registration of new trusts, without any enquiry, for three years. Thus, the legislative intent is manifest in the recent provisions that the trusts should not be refused registration at the threshold level in view of the ample safeguards available to the Revenue for withdrawal of approval subsequently as well as not granting exemption u/s 11 by the Assessing Officers at the time of assessment, in spite of 12AA registration, if the various conditions required to be complied with are not duly so complied with by the trust or the institution. The Revenue does not lose anything by merely granting registration.
7.15. Ld. CIT(E), while refusing the grant of registration, misplaced his reliance on the judgement of Hon’ble Jaipur Bench decision in the case of Neeraj Shiksha Prashikshan Samiti v. CIT in ITA No, 51/JP/2019 (CIT(E) page 4) (CLC (35-41). In the said judgement the Hon’ble Jaipur Bench upheld the legal position of requirement of verifying genuineness of activities. However, what details are necessary for verifying the genuineness of activities or what is the extent of the scope of enquiry by Id. CIT(E) in this regard was not the subject matter of the said decision and accordingly the said judgement has not adjudicated this aspect of the matter which is the real dispute in the present appeal.
In view of the above the order of Id. CIT(E) deserves to be set aside and registration u/s 12AA deserves to be allowed by allowing the appeal of the Appellant.”
2.3.2 It is also imperative to mention that during the course of hearing, the ld. AR of the assessee also filed the copy of provisional registration dated 6-04-2022 which was granted to the assessee trust by the PCIT u/s 12A(1)(ac)(vi) which pertain from AY 2022-23 to 2024-25.
3.1. On the other hand, the ld. DR relied upon the order of the ld. CIT(E).
3.2. We have heard both the parties and perused the materials available on record including the written submissions and case laws cited by the assessee. Brief facts of the case are that the Appellant is a society registered under Rajasthan Societies Registration Act, 1958 having its main objects of imparting education. The Society runs a college in the name of Apex College situated at Noorpura by pass road, Makrana- 341505 District Nagaur (Raj) (www.apexcollegemakrana in) affiliated to Maharshi Dayanand Saraswati University, Ajmer. In this case, the Application in Form No. 10A seeking registration u/s 12AA was filed by the assessee online on 5/12/18 along with all necessary annexures as required under Rule 17A. The application was rejected by Id. CIT(E) vide order dated 24/06/19 ‘’holding that the applicant was asked to file details, vide letter/note sheet entries as discussed above but no details were filed.” It is mandatory that Section 12AA requires the ld. CIT(E) to satisfy himself about the objects of the trust and the genuineness of activities of the trust. It is also noted from the order of the ld. CIT(E) where as regards of the trust, he did not express any dissatisfaction. However, in respect of genuineness of activities for want of proper details of fees receipt, the ld. CIT(E) held that he was not in a position to ascertain the genuineness of the activities of the Trust. It is worth mentioning that the genuineness of the activities of the trust can be seen with reference to the objects of the trust and this trust of the assessee has affiliation with Maharshi Dayanand Saraswati University, Ajmer which has fame and the students are awarded degree by the said University (PB Page 68 to 71) and thus there remains no doubt about imparting education by the assessee trust to the students enrolled therein. As regards non-submission of the fees details in a particular manner many reflect inadequate accounting system at the end of assessee society for which no adverse inference can be drawn that the objects of the assessee society of imparting education is not being fulfilled. Hence such shortcoming in the functioning of the society cannot be considered as lack of genuineness of the activities of the trust. We draw strength from the order of ITAT , Lucknow Bench in the case of St. Don Bosco Educational Society vs CIT [2004] 90 ITD 477 wherein the Bench clarified the scope of enquiry for deciding the genuineness of activities for the purpose of grant of approval u/s 12AA wherein at para 21 the Bench held that ………………………. .once the CIT has not doubted on the genuineness of the activities of the assessee society nor doubted the objects, his powers end and he cannot be allowed to travel beyond it and enter into the scope to find out as to whether assessee is a charitable institution or not or whether assessee is carrying on any activity which is covered under the definition of Section 2(15) of the Act. It is Assessing Officer who will be having exclusive jurisdiction to examine this aspect of the matter when assessee will claim any tax benefit and then the observation of the CIT-I in the impugned order before us may be relevant, but not at this stage. In para 28, the Bench held that “On the basis of the above, the inevitable conclusion is that assessee society is entitled to get registration under section 12AA of the Act as the CIT-I had not doubted on the objects and genuineness of the activities of the assessee society. Therefore, we direct the learned CIT-I to grant the registration. However, this order may not come in the way of the Assessing Officer who is free to examine the case of the assessee society for exemption under section 11/13 of the Act, for which purpose each year is to be considered as independent year and the Departmental Authorities can examine the claim of the assessee society.”. Taking into consideration entire conspectus of the case, the Bench does not concur with the findings of the ld. CIT(E) denying the exemption u/s 12AA of the Act to the assessee when the assessee trust under the umbrella of Dayanand Saraswati University, Ajmer is genuinely performing its activities and objects of imparting education to the students coming off from poor or middle class families. Thus the appeal of the assessee trust is allowed with the direction to the ld. CIT(E) to register the trust u/s 12AA of the Act.
4. In the result, the appeal of the assessee is allowed
Order pronounced in the open Court on 28 /07/2023.
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