Gurudwara Sahib Parbhandhan Committee Vs CIT (Exemptions) (ITAT Amritsar)
The assessee appealed against the order dated 18.09.2019 passed by the Commissioner of Income Tax (Exemptions), Chandigarh, rejecting its application for registration under Section 12AA of the Income-tax Act, 1961 for Assessment Year 2019-20. The assessee contended that the Commissioner had incorrectly observed that the Memorandum of Association (MOA) had not been furnished and had wrongly concluded that the trust’s aims and objects were restrictive. According to the assessee, its objects included the welfare of the citizens of Balluana irrespective of caste, creed or religion, development and maintenance of the Gurudwara Sahib for religious and charitable purposes, and establishment of schools, reading rooms, dispensaries and other charitable activities. It also submitted that substantial expenditure had been incurred on construction and renovation of the Gurudwara building and relied on CIT v. Guryani Brij Balabh Kaur Trust (1980) 125 ITR 381 (P&H) in support of its claim for registration.
The assessee had electronically filed Form No. 10A on 19.03.2019 seeking registration under Section 12AA. The Principal Commissioner observed that the society was an existing entity registered under the Societies Registration Act, 1860 and that its stated objects included welfare of the citizens of Balluana, maintenance and expansion of the Gurudwara Sahib, and charging maintenance charges for use of society property. During the proceedings, further queries were raised seeking a certified copy of the Memorandum of Association, an explanation regarding withdrawals from the bank account in the name of Sadhu Singh, and the lease agreement relating to lease income.
The Commissioner noted that the assessee failed to submit the certified copy of the Memorandum of Association and bye-laws filed before the Registrar of Societies. It was further observed that the constitution of the society lacked utilization, investment and beneficiary clauses. The Commissioner held that, in the absence of these documents and clauses, the genuineness of the activities could not be correlated with the stated aims and objects and that the deficiencies rendered the society unsuitable for registration. The Commissioner also observed that the society could file a fresh application after removing the deficiencies.
The Commissioner further held that the principal aims and objects were restrictive, being confined to the welfare of the citizens of Balluana and the development and maintenance of the Gurudwara Sahib situated there. It was observed that these activities were restricted to a specific group and could not be regarded as benefiting the public at large. The Commissioner also found that, apart from expenditure on langar charges for specific persons, no major expenditure corresponding to the stated charitable objects had been shown in the financial statements. On this basis, the Commissioner concluded that the activities were not carried on for the benefit of the general public, that the stated charitable objects were merely ostensible, and rejected the application under Section 12A.
Before the Tribunal, no one appeared on behalf of the assessee, although written submissions were filed. The assessee submitted that it had subsequently been granted provisional registration in Form 10AC on the basis of the same documents and requested that registration for the relevant year also be granted. The Departmental Representative supported the Commissioner’s order.
The Tribunal observed that the Commissioner had rejected the application because the assessee had not produced the certified Memorandum of Association and other relevant documents, preventing verification of whether the activities were genuine and consistent with the trust’s objects. It further noted the Commissioner’s findings regarding withdrawals made through Mr. Sadhu Singh, lease income, and the restrictive nature of the activities. The Tribunal observed that the activities were confined to the people of village Balluana and that the trust had failed to demonstrate that its activities were covered by the definition of “charitable purpose” under Section 2(15).
The Tribunal rejected the contention that subsequent provisional registration entitled the assessee to registration for the year under appeal, observing that provisional registration is granted to enable commencement of activities and that the Commissioner is empowered to examine whether the actual charitable activities are genuine and in accordance with the trust’s objects. The Tribunal held that the Commissioner was empowered to verify the genuineness of the trust’s activities and observed that, in the absence of supporting documents and explanations regarding withdrawals, the trust had failed to rebut the findings recorded by the Commissioner. The Tribunal recorded that the trust had not produced corroborative documentary evidence before either the Commissioner or the Tribunal to establish that its activities were genuine and in consonance with its stated objectives.
The Tribunal further observed that, since the assessee was an ongoing trust already carrying on activities, the Commissioner was required to examine both the trust’s objects and the genuineness of its actual activities while considering registration under Section 12AA. It held that the decision of the Supreme Court in Anand Social and Educational Trust v. CIT was not applicable because that case concerned a newly constituted trust proposing to undertake activities, whereas the present trust was already functioning. The Tribunal stated that the decision supported the Commissioner’s approach and held that the other authorities relied upon by the assessee were distinguishable on facts. It reiterated that Section 12AA requires the Commissioner to satisfy himself that both the objects and activities of the trust are charitable before granting registration and that the Commissioner is entitled to call for audited accounts and other documents for that purpose. Finding no merit in the assessee’s contentions, the Tribunal upheld the rejection of registration and dismissed the appeal.
Cases Discussed
- M/s Anand Social and Educational Trust v/s CIT (SC), Civil Appeal No.5437-5438/2012, order dated 19/02/2020
- CIT v. Guryani Brij Balabh Kaur Trust (Punjab & Haryana High Court), (1980) 125 ITR 381 (P&H)
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Exemptions), Chandigarh dated 18.09.2019 in respect of Assessment Year 2019-20.
2. The assessee has raised the following grounds of appeal:
“1. That the order of the Ld CIT (exmption) is bad both factually as well as legally.
2. That the applicant filed MOA along with his original application dt 19/03/2019 and later on submitted certified copy through e-proceedings response as stated in statement of facts and as such the observation by Ld CIT (Exemption) in para 7 of the order is not only wrong but also without any basis.
3. That the observation of Ld CIT (Exemption) vide para 8 is also incorrect. The Ld CIT(Exemption) has observed that the aims and objectives are restrictive in nature which is very strange incorrect observation. As per clause 3 of MOA the AIMS & OBJECTIVES of society are :-
i. The society aims at welfare of citizen of Balluana irrespective of caste, creed or religion.
ii. The society undertakes the development & maintenance of the Gurudwara Sahib situated at Balluana. The society will maintain, repair, and expand the Gurudwara Sahib for all type religious, charitable purposes.
4. The society may adopt diversified measures of the following lines for achievements of the above-mentioned aims.
a. To establish its branch at desired places.
b. To-adopt any institution.
c. to open school, reading rooms, dispensary, organize cultural shows audiovisual shows or any other such activities etc etc as per clause (d, e & f).
It has been mentioned para 2 that “The Society undertakes the development & maintenance of the Gurudwara Sahib situated at Balluana. The society will maintain, repair and expand the Gurudwara Sahib for all types of Religious Charitable Purpose.” These activities are covered by charitable purpose as the society has filed copy of income and expenditure account in which the major portion of receipts is from lease money which has been spent towards construction /renovation for the Gurudwara Sahib building and the building account shows a balance of Rs. 1781529/- towards assets side as on 31/03/2018 as against lease (Rent) receipt of just 650000/- for the said year. Thus the observation of the Id CIT exemption that the major expenditure are towards langer and no other major expenditure, is totally false. The applicant has incurred expenditure of Rs. 1781529/- towards construction of the Gurudwara Sahib building during the two years i.e. 2016-17 & 2017-18. Your kind attention is drawn towards CIT v. Guryani Brij Balabh Kaur Trust(1980) 125 ITR 381 (P&H)-where the samadhis of Gurus were held in reverence and the people at large used to pay homage and worship at such Samadhis, the maintenance of the same would certainly be a public purpose of religious nature. Further, the object of holding of Mela at such Samadhis being for propagating and reminding the people of the teachings of the Guru, having sanctity for general public, was itself an object of general public utility. The assessee is running a maintaining a Gurudwara in a village and the above ruling of P&H High Court fully applies to assessee and there is no reason that registration be denied.
4. That the assessee may add or amend the existing ground(s) of appeal and may take additional ground(s) of appeal at the time of the hearing of the case.”
3. An application in form No. 10A was electronically filed by the appellant on 19.03.2019 seeking registration u/s 12AA of the Income Tax Act, 1961. The applicant society is an ongoing entity in operation since 24.08.2016 and registered under Societies Registration Act, 1860 (21 of 1860) as per its application for registration u/s 12A of IT Act, 1961. The Ld. PCIT stated that the society has been constituted with the stated aims and objects of welfare of the citizens of Balluana irrespective of caste, creed or religion; the society undertakes the development & maintenance of the Gurudwara Sahib situated at Balluana. The society will maintain, repair and expand the Gurudwara Sahib for all types of religious, charitable purposes; the society will charge maintenance charges as decided by the society from all persons who uses the property of the society, whether it is moveable/immoveable.
4. The Ld. PCIT while rejecting the application for registration has observed as under:
“On perusal of the submissions of the company, the additional queries were raised which was sent to the applicant on 06.09.2019 and the date was fixed on 12.09.2019 to submit the reply and the queries are reproduced as under:-
“1. Please provide the certified copy of MoA.
1. It is noticed that regular withdrawal are being done from bank account in the name of Sadhu Singh, Please explain the relationship of Sadhu Singh with the Society.
2. You have shown lease income in your financial statement. Please furnish the lease agreement for the same in English translation.”
7. In response to the additional queries raised, the applicant submitted the response to the additional queries. On perusal of the submission it was observed that the applicant society has not submitted the certified copy of memorandum of association and bye-laws which the applicant has submitted in the office of registrar of societies and firms/Joint stock Companies. In the absence of which the genuineness of activities of the society can be corroborated with the stated aims and objects the genuineness of the activities. Besides this, the constitution of the society also doesn’t have Utilization clause, Investment clause and Beneficiary clause. The absence of these important clauses, make a society revocable, not enuring to the benefit of general public and open to any possibility of society property being utilized for the benefit of the members of the society, hampers its quest for registration. It is pertinent to mention that the society may, if it so desires, file a fresh application after removing the deficiencies as explained in the above para and also if there were any new circumstances that required fresh application.
8. Further, the aims & objectives mentioned at Sr. No. 1 & 2 are restrictive in nature which are reproduced as under:-
“1. The society aims at welfare of the citizens of Balluana irrespective of caste, creed or religion
2. The society undertakes the development & maintenance of the Gurudwara Sahib situated at Balluana. The society will maintain, repair and expand the Gurudwara Sahib for all types of religious, charitable.”
The claims of the assessee contended that these activities are contributing towards the long term benefit of larger masses. Prima facie none of the activities get covered by any of the limbs of “charitable purpose” envisaged in section 2(15) of I.T. Act, 1961. Moreover these activities would be restricted to specific group i.e. people of village Balluana and the same cannot be claimed to be enuring to the benefit of the general public. This issue further gets exacerbated by the fact that apart from the expenses on longer charges for specific people only, no other major expenditure that could be attributable to the stated objects of the society has been claimed by the applicant in the financial statements for the last years. This arrangement of the applicant clearly leads to conclude that the applicant is not pursuing the charitable objects for public at large but is restricted to people of village Balluana only. The other stated charitable objects are merely ostensible.
9. In the absence of the activities enuring for the public at large & restrictive 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.”
5. None attended for the appellant, however, a written submission has been filed with a request to decide the appeal considering the written submission contending therein that details have been prescribed in the statement of facts and grounds of appeal and that that the Principal Commissioner of Income Tax has granted provision registration on the basis of same set of documents. The appellant has attached the copy of form 10AC (Order for provisional registration) and pleaded that the necessary registration for the year under consideration may also be granted.
6. The Ld. DR supported the Impugned order.
7. Heard the Ld. DR at Length, perused the material on record, written submissions of the appellant and citations filed before us. The PCIT (E ) stated that the applicant society has not submitted the certified copy of memorandum of association and bye-laws as submitted in the office of registrar of societies and firms/Joint stock Companies. In the absence of which the genuineness of activities of the society can not be corroborated with the stated aims and objects and the genuineness of the activities thereof. The appellant submitted that he society undertakes the development & maintenance of the Gurudwara Sahib situated at Balluana and the society will maintain, repair and expand the Gurudwara Sahib for all types of religious, charitable. Since, these activities would be restricted to specific group i.e. people of village Balluana and the same cannot be claimed to be enduring to the benefit of the general public and prima facie none of the activities claimed to be undertaken as observed by the PCIT(E) that withdrawal made from bank by Mr. Sadhu Singh and issue of property leased etc are covered by any of the limbs of “charitable purpose” envisaged in section 2(15) of I.T. Act, 1961. Moreover. Further gets exacerbated by the fact that apart from the expenses on longer charges for specific people restricted to people of village Balluana only, no other major expenditure that could be attributable to the stated objects of the society as claimed by the applicant in the financial statements for the last years. This arrangement of the applicant clearly leads to conclude that the applicant is not pursuing the charitable objects for public at large but is restricted to people of village Balluana only. The other stated charitable objects are merely ostensible.
8. In the absence of the activities of enduring benefit to the public at large & restrictive clauses in aims & objectives of the society, the genuineness of activities of the society cannot 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 was rejected by the Ld. PCIT.
9. The contention of the appellant that he has been granted provisional registration in form 10AC and therefore, he may be granted registration cannot be accepted. The provision registration is granted to commence activities of the Trust and the PCIT is empowered to examine that the nature of charitable activities undertaken by the trust whether genuine and in consonance to aims and objectives of the Trust.
10. We are of the considered view that the ld. CIT(E) has been empowered to examine and verify that the activities carried out in lieu of the objects of the trust were charitable in nature and in consonance to the objects of the Trust. The ld. CIT(E) objection was that there was 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 before him. As the trust has made huge withdrawal from bank through Mr Sadhu Singh without furnishing details, it becomes clear that the funds of the trust are misused by trustee/members of the appellant trust. In our view, the applicant trust has been created an arrangement whereby it is not only laundering its income but also diverting the same in the hands of the trustee/members. Thus, the CIT(E) held that the applicant trust is not established for the purpose of charity as its activity are restrictive and not in the interest of public at large rather it is misused as an instrument in the hands of trustee/members and thus, the activities carried out by it are not genuine by any definition.
11. The assesse has merely alleged that the Learned Principal Commissioner of Income tax (Exemptions) has not considered completely the information/ evidence brought on record in correct perspectives while denying the registration u/s 12AA of the Income Tax Act, 1961. The assessee failed to file corroborative documentary evidence before the PCIT and even before us, in rebuttal to the observation of the Ld. PCIT that the activities of Applicant trust were not in consonance to the objectives of the Trust. In our view, the appellant Trust was not established for the purpose of charity. Meaning thereby that the appellant Trust was involved in activities which are not genuine by any definition.
12. Since, the appellant Trust, is an ongoing entity, at the stage of grant of registration u/s 12AA of the Act, the Ld. CIT(Exemption) is supposed to examine both the objects of the Trust and genuineness of its activities in consonance to its objectives. In the Judgement given by the Hon’ble Supreme Court in the case of M/s Anand Social and Educational Trust v/s CIT in Civil Appeal No.5437-5438/2012 vide order dated 19/02/2020 is not applicable to the fact of the present case because in that the trust was newly constituted and proposed to undertake the activities whereas the present trust is an old trust, and carrying out activities from earlier years. In our view, the decision of Hon’ble Apex Court rather supports the decision of the Ld. PCIT. The other case law relied by the ld. AR are distinguishable on peculiar facts of the instant case.
13. As per mandate, the section 12AA requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable, since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Principal Commissioner is entitled to refuse and in fact, bound to refuse such registration.
14. In the present case, the appellant Trust has been an ongoing entity, actually carrying its activities, therefore, the Commissioner has been bound to record the finding to the effect whether the activity or activities actually carried on by the Trust were genuine and charitable in nature, in accordance to the objects of the Trust. From, the record it is evident that the instant appellant trust has although have undertaken activities but contrary to the objects of the Trust. In our view, the PCIT while considering applications for grant of registration under section 12AA, is bound to examine not only objects of institutions or society trust, to ascertain genuineness of activities but he is also free to call for audited accounts or other such documents for recording satisfaction where society, trust or institution genuinely seeks to achieve object which it professes.
15. In the above view, we find no merit in the ground and contention raised by the appellant through written submission. Accordingly, the Impugned order of the PCIT(E) rejecting registration is sustained
16. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 28.02.2023
