Sanatan Dharam Sabha Durga Bhawan Vs CIT (Exemption) (ITAT Delhi)
ITAT Held that at the stage of granting registration u/s. 12AA of Income Tax Act, 1961 CIT cannot examine whether the conditions for availing exemptions under Section 11 of the act are fulfilled or not.
Facts-
The assessee is a society registered with Registrar of Societies. Claiming that the objects of the society are of charitable and religious nature, assessee applied for registration under Section 12A of the Act. After considering the submissions of the applicant-society and material available on record, learned Commissioner of Income-Tax (Exemption) observed that assessee has transferred its funds to its sister concern, which could only have been done after grant of registration under Section 12AA of the Act. Further, he observed that assessee without any approval had wrongly claimed exemption under Section 10(23) (BBA) and 10(23C)(b). Further, he observed, on exemption of the accounts of assessee, it was found that assessee had invested an amount of Rs.66,04,782 in construction of new building. Whereas, the return of income filed by the assessee shows that the donation received were utilized for day to day affairs. Thus, according to him, the assessee could not explain the source of investment in construction of building. Learned CIT(Exemption) observed, even though, assessee has not been granted registration under Section 12AA of the Act, hence, not entitled for exemption under Section 11, however, it has shown corpus donation, which is against this statutory provision.
Conclusion-
Held that at the stage of grant of registration under Section 12AA of the Act, what is required to be seen is, whether activities of the trust or institution are genuine and secondly, its objects are of charitable and religious nature. At the stage of granting registration under Section 12A of the Act, authority concerned should not assume the role of assessing officer to examine whether the conditions for availing exemptions under Section 11 of the Act are fulfilled or not. These aspects certainly can be looked into at the stage of assessment. In any case of the matter, even after grant of registration under Section 12AA of the Act, if in future, it is found that the activities of the trust are ingenuine and the trust is deviating from the objects based on which registration was granted, the authority concerned can proceed to cancel the registration. In the facts of the present case, there is nothing on record to suggest that either the activities of the trust are ingenuine or the objects are not of charitable or religious nature.
FULL TEXT OF THE ORDER OF ITAT DELHI
Captioned appeals are by the same assessee. One of the appeals is against the order dated 29.09.2016 passed by learned Commissioner of Income-Tax (Exemption), Chandigarh, rejecting assessee’s application for registration under Section 12A of the Income-Tax Act, 1961. Whereas, the other appeal is against order dated 29.09.2016, rejecting assessee’ s application for approval under Section 80G of the Act. Since, both the appeals are interlinked, they are disposed of in a consolidated order, for the sake of convenience.
2. At the outset, we must observe, these appeals have been filed with delay of 137 days. Assessee has filed application seeking condonation of delay.
3. It has been explained by assessee that the assessee society has strength of 150 members. It is submitted, when the issue relating to the course of action to be taken against the orders passed rejecting the application for registration under Section 12AA and 80 G of the Income-Tax Act, 1961 was kept for discussion in a meeting of working committee of the society, there were conflicting views of members, which necessitated forming of a sub-committee to take a decision on the issue. Only after the recommendations of the subcommittee, steps were immediately taken for filing the appeals.
4. We have heard learned counsel for the assessee and learned Departmental Representative on the issue of condonation of delay.
5. After considering the circumstances leading to delay in filing the appeals, we are satisfied that the delay in filing the appeals was due to reasonable cause. Accordingly, we condone the delay and admit the appeals for adjudication on merits.
6. This appeal is against rejection of application seeking registration under Section 12A of the Act.
7. Briefly, the facts are, assessee is a society registered with Registrar of Societies. Claiming that the objects of the society are of charitable and religious nature, assessee applied for registration under Section 12A of the Act. After considering the submissions of the applicant-society and material available on record, learned Commissioner of Income-Tax (Exemption) observed that assessee has transferred its funds to its sister concern, which could only have been done after grant of registration under Section 12AA of the Act. Further, he observed that assessee without any approval had wrongly claimed exemption under Section 10(23) (BBA) and 10(23C)(b). Further, he observed, on exemption of the accounts of assessee, it was found that assessee had invested an amount of Rs.66,04,782 in construction of new building. Whereas, the return of income filed by the assessee shows that the donation received were utilized for day to day affairs. Thus, according to him, the assessee could not explain the source of investment in construction of building. Learned CIT(Exemption) observed, even though, assessee has not been granted registration under Section 12AA of the Act, hence, not entitled for exemption under Section 11, however, it has shown corpus donation, which is against this statutory provision. He also observed that the receipts filed in support of corpus donation did not show any specific direction for use of corpus fund. Thus, on the basis of aforesaid observations, learned CIT(Exemption) ultimately concluded that the activities of the society are not at all transparent. Hence, he declined to grant registration to the assessee under Section 12AA of the Act. While challenging the order of Learned CIT(Exemption), submissions of the learned counsel appearing for the assessee, in sum and substance, are as under:
