Case Law Details
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:
- All the objects of the appellant Society are charitable and religious in nature.
- Society is created wholly for charitable and religious purposes.
- Society is not created to carry on any business for profit.
- Income is not for the benefit of any particular individual person.
- Form 10A was properly filled in.
- Activities of the appellant are charitable and religious in nature.
- All statutory conditions for grant of registration u/s. 12AA are fulfilled in this case.
- All the objections of the Ld. CIT(E) relates to computation of income only. It is well settled that for the registration u/s. 12AA, only enquiry to be made by the CIT is that the Aims and objects of the Society should be charitable in nature & the society should be genuine as held in Surya Educational and Charitable Trust 355 ITR 280 ( P&H), Fifth Generation Education Society v. CIT 185 ITR 634 (All), Mormugao Port Trust v. CIT 109 ITD 303 (Panaji), Malli Ram Charitable Trust v. CIT 260 ITR (AT) 118 (mr), St. Don Bosco Educational Society v. CIT 90 ITD 477 (Luck) and Aggarwal Mitra Mandal Trust v. DIT 106 ITD 531 (Del.).
- Activities of the appellant is running a temple at Rohtak (Haryna). In Temple, we are also running a langar and dharamshala, without any discrimination.
8. Thus, learned counsel submitted, without examining the charitable and religious nature of objects of assessee, learned CIT(Exemption) has rejected the application seeking registration under Section 12AA of the Act.
9. Learned Departmental Representative submitted, since, assessee has alleged that its objects were not properly considered, the matter may be restored back to the authority concerned for fresh sdjudication.
10. We have considered rival submissions and perused the material available on record. We have also applied our mind to the decisions cited before us. Undisputedly, assessee is a society registered under the Societies Registration Act. As per the bye laws of the society, the objects for which it is created are as under:
a) The propagation of the teachings of Shri Samriti Ved, Puran
b) To promote the feelings of fraternity and brotherhood.
c) To propagation of the teachings of Sanatan Dharam.
d) To work for the welfare of the people and to create love and affection for Sanatan Dharam.
e) To protect and manage the temples, Muths, the places of pilgrimage, Dharamshala, Shivalas etc. and to give education to children.
f) To form and organize Mahabir Dals and Ram Lila Committee for propaganda and to open schools for the spread of education.
g) To arrange marriages of poor and needy girls, help them by giving donation in kind. To render all assistance to the families who have suffered untimely death of wage earner.
11. On a careful examination of the objects of the society, prima facie, it appears that they are of charitable and religious nature. In fact, in the impugned order of learned CIT(Exemption), there is no adverse comments regarding the charitable and religious nature of the objects for which the society has been formed. The objection of Learned CIT(Exemption) while declining grant registration under section 12AA of the Act are basically on certain claim made by assessee in the return of income filed before the departmental authorities. Learned CIT(Exemption) has observed, assessee has wrongly claimed deduction under Section 10(23)(BBA) and 10(23C)(v) of the Act in the return of income filed for the assessment years 2013-14, 2014- 15 and 2015-16. This wrong claim of exemption under the aforesaid provisions, even assuming the allegations of Learned CIT(Exemption) to be correct, in our view, would not debar assessee from getting registration under Section 12AA of the Act, as, registration under Section 12AA of the Act is not dependent upon either section 10(23)(BBA) or 10(23C)(v). What is required to be examined at the time of grant of registration, as per the provisions existing at the relevant point of time, is the genuineness of the activities of the trust or institution and the objects of the trust. In so far as the objects are concerned, as discussed by us earlier, the very nature of objects for which the society was created, as appearing in the bye laws, clearly demonstrate that it is for charitable and religious purpose. Therefore, there cannot be any doubt regarding the objects of the trust. As regards, genuineness of the society, materials on record reveal that it is carrying out activities to advance its objects. Therefore, there cannot be any serious doubt regarding the genuineness of the society. The so called infraction pointed out by Learned CIT(Exemption), such as, claim of exemption under Section 10(23BBA) and section 10(23C)(v) of the Act, in our view, neither impinge on genuineness of the Trust nor its charitable/religious nature. In case, assessee claims wrong exemption, it can be dealt with appropriately under the relevant provisions of the Act. However, a wrong claim of exemption, by itself, cannot debar assessee from getting exemption under Section 12AA of the Act. As per settled legal principles, though, assessee may be enjoying registration under Section 12A/12AA of the Act, however, its claim of exemption under Section 11 is not automatic. In case of violation of any of the conditions of sections 11 and 13 of the Act, the claim of exemption can be denied. However, that by itself does not affect the grant of registration under Section 12A/12AA of the Act.
12. As regards, the allegations of learned CIT(Exemption) that the source of investment in construction of building was not properly explained, it is observed, in response to the query raised, assessee has furnished supporting evidence to explain such source. In fact, Learned CIT(Exemption) also accepted the aforesaid factual position. However, alleging that the return of income only shows the donations to have been utilized for day to day affairs and payments were made to other societies from the donations, he has persuaded himself not to grant registration under Section 12AA of the Act. One more allegation of the Learned CIT(Exemption) is regarding the receipt of corpus donation in absence of registration under Section 12AA of the Act. In our view, these issues should not cloud the vision of Learned CIT(Exemption) at the stage of granting registration under Section 12AA of the Act. At the cost of repetition, we may observe, 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.
13. In view of the aforesaid, we set aside the impugned order of Learned CIT(Exemption) and direct him to grant registration to assessee under Section 12AA of the Act. Grounds are allowed.
14. In the result, the appeal is allowed.
15. This appeal is against rejection of application seeking approval under Section 80G of the Income-Tax Act,1961.
16. We have heard the parties and perused the material available on record.
17. The only reason on which learned CIT(Exemption) has rejected assessee’ s application seeking approval under Section 80G is because of denial of registration under Section 12AA of the Act. While deciding assessee’s appeal in ITA No.2469/Del/2017 (supra), since, we have directed the authority concerned to grant registration under Section 12AA of the Act to the assessee, we restore the matter back to the file of learned CIT(Exemption) for considering assessee’ s application seeking registration under Section 80G of the Act afresh and grant approval subject to fulfillment of conditions mentioned in the said provision.
18. Needless to mention, assessee must be provided reasonable opportunity of being heard in the matter. Grounds are allowed for statistical purposes.
19. In the result, the appeal is allowed for statistical purposes.
20. To sum up, ITA No. 2469/Del/2017 is allowed and ITA No.2468/Del/2017 is allowed for statistical purposes.
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