Case Law Details
Shaheed Bhagat Singh Educational Society Vs CIT(Exemption) (ITAT Amritsar)
It is not obligatory for the assessee for maintain dissolution clause which will not be the issue for rejection of registration u/s 12A of the Act. Accordingly the registration U/s 12A could not be denied to the assessee-society for non maintain the dissolution clause.
Facts- The appellant is a society registered u/s Society Registration Act, 1860. The society filed an application for registration u/s 12A in Form No.10A on 20.06.2019 before the ld. CIT(E). The ld. CIT(E) rejected the application in the following reasons;
i. Absence of dissolution clause in the Memorandum Of Association.
ii. The aims and objects of the trust includes running of coaching centre, technical and professional institute which are not covered u/s 2(15) for charitable purpose.
iii. The accounts of assessee are not being maintained in systematic manner.
Aggrieved assessee filed appeal before us.
Conclusion- It is not obligatory for the assessee for maintain dissolution clause which will not be the issue for rejection of registration u/s 12A of the Act. Accordingly the registration U/s 12A could not be denied to the assessee-society for non maintain the dissolution clause.
It is no doubt that maintaining a coaching centre is not a charitable work. On other hand, in the factual matrix the activity of the assessee-society had never run coaching centre. Also, a CBSE School cannot run a coaching centre as per the guidline of Board. Also income of the expenditure account of assessee no such income was reflected from coaching centre. The number of years the assessments were done by the revenue authorities u/s 143(3) for assessee. But no specific point was pointed out related to maintain of coaching centre. So, the rejection of the registration on the basis of ancillary object i.e. running coaching centre is uncalled for.
All three reasons are not proper indication for rejecting the application of registration u/s 12A. For registration u/s 12A the steerage of the Act is that the identity of assessee and the activity relating to the main object of the society.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The instant appeal was filed against the order of the ld. Commissioner of Income Tax (Exemption), Chandigarh [in brevity ld. CIT(E)], the order passed u/s 12AA (1)(b)(ii) of the Income Tax Act 1961 [in brevity the Act] bearing order no. ITBA/Exm/S/Exm1/2019-20/1023142872(1) dated 26.12.2019.
2. Brief fact is that the appellant is a society registered u/s Society Registration Act, 1860 bearing registration no. ASR/129 of 2009-10 and is running a school in the name of “Shaheed Bhagat Singh International School”. The society was established on 08.09.2009 with the objects to establish, maintain and / or run schools, colleges, universities Technical & Professional Institutes and other development /advancement of society without any distinction between caste, creed and religion. The society filed an application for registration u/s 12A in Form No.10A on 20.06.2019 before the ld. CIT(E). The ld. CIT(E) rejected the application in the following reasons;
i. Absence of dissolution clause in the Memorandum Of Association.
ii. The aims and objects of the trust includes running of coaching centre, technical and professional institute which are not covered u/s 2(15) for charitable purpose.
iii. The accounts of assessee are not being maintained in systematic manner.
3. Aggrieved assessee filed appeal before us.
4. The ld. Counsel of the assessee, Mr Rohit Kapoor filed a written submission with brief fact on dated 24.12.2021 which is kept un record. As per the ld. Counsel the revenue rejected the registration on three reasons which are discussed above here. For the sake of justice we are adjudicating the three issues here under:-
5. Issue:- Absence of dissolution clause.
5.1. As per the argument of ld. Counsel, the dissolution clause is not obligatory for maintenance the society. However, as per Mr Kapoor the MOA of the assessee-society was amended. The resolution was executed on dated 02/12/2013 by the executive members of the society, in which, the dissolution clause was duly inserted. Copy of the resolution on dated 02/12/2013 is reproduce hereunder:-
“Shaheed Bhagat Singh Education Society VPO Varpal Distt. Amritsar.
The Member of Shaheed Bhagat Singh Educational Society met on 2nd day of December 2013, at registered office at village Varpal.
It has been observed that the Memorandum governing the Society Does not provide for closure clause of the Society and no instructions have been laid out regarding the disposal of the assets so created in achievement of goals of society. At the Meeting held today and as is essential to do so it is resolved as under:
“The Society shall continue to exist and if on any unavoidable circumstance the society has to closed and wound up then the assets created in name of society plant machinery building any movable or immovable assets so created will be used only for educational acts and no other personal benefit of the members of the society. On closure the assets will be transfered only to another society running for educational activities and will not dispose off the assets so created for profit or other benefits of the members of the society.”
5.2. As per the Mr Kapoor, the certified copy of the amended MOA and Rules and Regulation was asked by the revenue. But the executed registered deed was received on 20.02.2020. But the revenue had passed the rejection order on 26.12.2019. The reasonable opportunity was denied for submitting the same. The said amended deed is annexed in the paper book in page no. 43 to 45 which is kept in the record.
5.3. In this context, the reliance was made in the following decision of the Tribunals and Hon’ble High Courts which are as follows:
i. CIT(E), Chd. vs. Durgamata Mandir (2020) 121 com 31 (P & H).
ii. The CIT(E) Chd, vs. M/s Ajit Educational and Public Welfare Society 2018 (10) TMI 1039- (P & H) High Court.
iii. CIT(E) vs. Setco Foundation, 2019(2) TMI 532- Bombay.
iv. CIT(E) vs. Geeta Lalwani Foundation, 2018 (7), TMI 2053 Bombay.
v. CIT(E) vs. Tapagachha Sangh Mota [2015] 59 com 204 (Guj.).
vi. DCIT(E) vs.Vanchhara Tirthadhipati-Chintamani Paraswaprwabhu [2015] 59 com 417 (Guj.).
5.4. Considering the ratio decidendi, it is not obligatory for the assessee for maintain dissolution clause which will not be the issue for rejection of registration u/s 12A of the Act. Accordingly the registration U/s 12A could not be denied to the assessee-society for non maintain the dissolution clause.
6. Issue:- The aims and objects of the trust includes running of coaching centre, technical and professional institute which are not covered u/s 2(15) for charitable purpose.
6.1. In this context Mr Kapoor mentioned that in the object clause maintaining coaching centre is not primary object. Though it is mentioned in MOA, but no activity was done to run the coaching centre. The same is evident from the Income and Expenditure Account which was submitted during the assessment proceedings for assessment year 2017-18 and 2018-19. Both the Income and Expenditure Account and the related assessment order of the NeAc for assessment year 2017-18 and 2018-19 are enclosed in the paper book from the page no. 57 to 67. In this respect the ld. Counsel relied on the judgment in the case of Yogiraj Charity Trust Vs. CIT 103 ITR 777 in which it has duly been stated that the registration cannot be denied based on existence of any ancillary object. In the present case the appellant had never provided any activity other than the education of student enrolled in the school. Further the society is running a school affiliated under the CBSE Board which does not allow to operate any coaching centre. Mr Kapoor further relied on in the case of Bhai Gurdas Educational Trust vs. CIT, Patiala [2015 (8) TMI 1365] in the same context.
6.2. The ld. CIT-DR only relied on the order of the CIT(E) and vehemently objected the submission of the counsel considering the factual matrix. It is no doubt that maintaining a coaching centre is not a charitable work. On other hand, in the factual matrix the activity of the assessee-society had never run coaching centre. Also, a CBSE School cannot run a coaching centre as per the guidline of Board. Also income of the expenditure account of assessee no such income was reflected from coaching centre. The number of years the assessments were done by the revenue authorities u/s 143(3) for assessee. But no specific point was pointed out related to maintain of coaching centre. So, the rejection of the registration on the basis of ancillary object i.e. running coaching centre is uncalled for.
7. Issue:- The accounts of assessee are not being maintained in systematic manner
7.1. The ld. Counsel for the assessee submitted the following submissions which are reproduced as under:-
“10. Submissions in respect of non maintenance of financial statements in systematic manner
i) The Ld. CIT(Exemption) has grossly erred in law & facts by stating that non claim of depreciation in a year indicates non maintenance of financial statements in systematic manner leading to doubt on genuineness of affairs, whereas the assessee has duly been assessed to income tax proceedings on regular basis and books have duly been accepted.
ii) It is a matter of record that the case of the appellant was selected by the department for AY 2011- 12. 2017-18 and AY 201819. In all the years. Income Tax Return was accepted as filed by the department. The copy of Assessment order completed u/s 143(3) for the A.Y 2011-12,2017-18 and 2018-19 is enclosed at page no. 57-61 of paper book. Since, in the earlier years, the income of the assessee has been accepted by the department and the assessment in earlier year was completed without making any addition to the income of the appellant on the same issue. As such, the rejection order passed by the CIT ( E) is bad in law.
iii) Without prejudice to the previously mentioned, even if, the accounts of the assessee were not correctly maintained, the said fact does not affect the genuineness of the activities of the trust. The said view has been affirmed by Hon’ble ITAT Chandigarh in the case of BHAI GURDAS EDUCATIONAL TRUST VERSUS CIT, PATIALA [2015 (8) TMI 1365] in which it is held that ” While granting or refusing registration to a Trust the Ld. CIT is only required to examine whether the objects of the Trust were for charitable purpose and whether the activities of the Trust were genuine. The finding of the Ld. CIT that the accounts of the assesse were not correctly maintained does not affect the genuineness of the activities of the Trust. Genuineness of the activities of the Trust has to be seen keeping in mind the objects of the Trust The Ld. CIT has to satisfy himself about the fact that the activities are genuine and in consonance with the objects of the Trust. The enquiry regarding genuineness of the activities cannot be stretched beyond this. We therefore find that this around for rejecting registration u/s 12AA is not correct.
vi) Furthermore, the appellant society had not claimed depreciation till F.Y. 2014-15 and started to claim the same from F.Y. 2015-16. The said claim was made for the first time due to the amendment made by finance act 2015. It is matter of record that the appellant society had not claimed application in any of the previous years and considering the amendment in section 11(6) depreciation shall not be allowed while computing income subject to application against those assets which have been treated as application in earlier years. Therefore, it is pertinent to mention or a mere reason that depreciation was not claimed up to 2014-15 and claimed from cannot render the books of accounts unreliable/ unsystematic.
vii) The CIT(E), before alleging that the financial statements were not being maintained in systematic manner, must bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. The obligation on the part of the appellant is to bring the accounts/documents before the Assessing Officer whenever it is required.
Thus, in view of the above facts and judicial pronouncements, the order of the Ld. CIT(E) rejecting the application seeking registration u/s 12AA is liable to be quashed.”
7.2. In this context the ld. CIT relied on the order of the ld. CIT(E):
“7. Further, on perusal of income and expenditure for FY 201415 & before, it is noticed that the applicant has not claimed any depreciation but in FY 2015-16 and onwards, the applicant is continuously claiming depreciation as expenses which indicates that the applicant is not maintaining its financials in a systematic manner which further creates a doubt on the genuineness of the school affairs.
8. In the absence of the activities enuring for the public at large, restrictive & commercial clauses in aims & objectives of the society, there is no way the genuineness of activities of the society can be corroborated with the stated aims and objects as per the documents submitted by the applicant. Accordingly, the application under section 12A for grant of registration is rejected.”
From above context It is clear that the assessing authority did not raise any question during assessment U/s 143(3) of the Act related maintenance of books of accounts. The ld CIT(E) did not recognise any specific lacuna in the books of assessee.
7.3. We considered the rival submission and documents available on record. The assessee-society was denied the registration for three reasons which are discussed above. The resolution was taken for dissolution cluase which was informed to the ld. CIT(E). The registered amended-MOA was received by assessee-society in hand after rejection order of revenue. All three reasons are not proper indication for rejecting the application of registration u/s 12A. For registration u/s 12A the steerage of the Act is that the identity of assessee and the activity relating to the main object of the society. In following two points was not properly considered by the ld. CIT(E). The maintaining a coaching centre only was incorporated in the order of the CIT(E). But no proper verification was done from the books of account and from the activities of the assessee by revenue. Related to maintenance of proper accounts no specific lacuna was found out by revenue. In the case of CIT(E) Chd. Vs. Shri Durga Mata Mandir [2020] 121 taxmann.com 31 / 275 taxman 575 (P & H) [02.03.2020] the following observation was made by the Hon’able Court which is as under:-
“4. Learned counsel for the appellant is not able to dispute that there is nothing on record to show that the assessee was not working for achieving its aims and objects or that the accumulated funds were used for purposes other than aims and objects. He has not been able to show that the findings recorded by the Tribunal quoted above are erroneous much less perverse. In such circumstances, no question of law much less substantial question of law arises. No interference is called for in the order of the Tribunal.”
7.4. In view of the detailed discussions above, we are of the considered view that ld. CIT (E) has erred in rejecting the application for registration u/s 12AA of the Act filed by the applicant. Hence ld. CIT (E) is directed to grant registration u/s 12AA of the Act to the assessee/applicant. Consequently, the appeal filed by the assessee/applicant is allowed.
8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 10.05.2022
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