Case Law Details
IN THE ITAT LUCKNOW BENCH ‘A’
Malik Hasmullah Islamic Educational and Welfare Society
V/s.
Commissioner of Income-tax, Faizabad
IT APPEAL NO. 735 (LKW.) OF 2011
[ASSESSMENT YEAR 2012-13]
JULY 3, 2012
ORDER
Mehar Singh, Accountant Member – This is an appeal filed by the assessee society against the order of CIT, dated 24/11/2011, passed u/s 12AA of the Act (in short referred to as “the Act”. The learned ‘A.R.’ contended before the Bench that the impugned order, passed by learned CIT, is contrary to the provisions of section 12A read with section 12AA of the Act. The learned CIT merely placed reliance on irrelevant consideration of section 11 to 13, for the purpose of denying registration u/s 12AA of the Act. It was, further, highlighted by learned A.R. that the definition of charitable purpose, as contemplated u/s 2(15) of the Act, has been completely ignored by the learned CIT. Similarly, it was stated that the objects of the assessee appellant are in consonance with the definition of charitable purposes, as provided u/s 2(15) of the Act. In view of this, it was prayed that the impugned order passed by learned CIT be quashed and CIT be directed to grant registration u/s 12AA of the Act.
2. Learned ‘D.R.’ on the other hand placed reliance, on the order of CIT.
3. We have carefully perused the rival submissions, facts of the case and the available relevant records. The assessee society has raised four grounds of appeal. However, ground No. 1 & 2, deal with declining of grant of registration u/s 12AA of the Act to the assessee society by the CIT. In ground number No. 4, it is contended that no opportunity was granted as provided under proviso to section 12AA(1)(b)(ii) of the Act by the CIT, before denying grant of registration. The assessee society is registered under the Societies Registration Act, 1860 as per certificate dated 22/02/2010 placed, at page No. 2 of the paper book filed by the assessee.
3(1) A bare perusal of the order passed by learned CIT, reveals that the grant of registration u/s 12A read with section 12AA, has been refused, by invoking provisions of section 11 to 13 of the Act. Similarly, the learned CIT, referred to Article 29 and 30 of Constitution of India, with a view to demonstrate that the credentials of the society are not secular in nature. The learned CIT observed that principal objects of the assessee society are to establish schools for Muslim boys and girls, to teach Urdu, Arabic and Persian, providing Islamic education and holding Islamic seminars, establishing educational institutions under Articles 29 & 30 of the Constitution of India. It was, further, observed by the learned CIT that section 11 to 13 comprise a code distinct, from other provisions of the Act. An institution to which these sections apply is entitled for its income to be treated in a different manner from the income of other persons. The learned CIT further observed that sections 12A and 12AA of the Act are machinery provisions that will draw colour from the substantive stipulations, positive or negative, in sections 11, 12 and 13 of the Act. The learned CIT continued to observe that section 13(1)(b) of the Act provides that in the case of a trust or charitable institution created or established for the benefit of a particular religious community or caste, no income will be excluded from the total income. It was, further, observed by the learned CIT that provisions of section 11 and 12 cannot be extended to an institution established for the benefit of a particular religious community or caste. The learned CIT also observed that in the instant case, the objects show that the purpose of the society is to provide religious and other education to boys and girls of Muslim community. This is, thus, a case where section 11 or 12, will not operate by virtue of section 13(1)(d) of the Act. The learned CIT, further, observed that if section 11 and 12 cannot be applied, the question of registration u/s 12A read with section 12AA would not arise. In view of this, the learned CIT denied registration applied by the assessee society u/s 12AA of the Act.
4. It is pertinent here to reproduce the findings of the CIT, with a view to appreciating the same. The relevant findings of the CIT are reproduced hereunder:
“3. As per the papers filed by the applicant, its principal objects, inter alia, are to establish schools for Muslim boys and girls to teach Urdu, Arabic and Persian, providing Islamic education and holding Islamic seminars, establishing educational institutions under Articles 29 and 30 of the Constitution of India as minority institutions etc.
4.1 Ss. 11 to 13 comprise a coda distinct from other provisions of the Act. An institution to which these sections apply is entitled for its income to be treated in a manner different from the income of other persons. Ss. 12A and 12AA lay down the conditions required for applicability of Ss 11 and 12 and S. 13 provides for certain exclusions. S. 12A and 12AA provide for registration of an institution. It is only after such registration that S. 11 to 13 to will come into play. Ss. 11 to 13 thus have to be read together. Ss. 12A and 12AA are machinery provisions that will draw color from the substantive stipulations, positive or negative, in Ss. 11, 12 and 13.
4.2 S. 13(1)(b) provides that in the case of a trust or charitable institution created or established for the benefit of a particular religious community or caste no income will be excluded from the total income. Thus, provisions of S. 11 and 12 cannot be extended to an institution established for benefit of a particular religious community or caste. In the instant case, the objects very clearly show that the purpose of the institution is to provide religious and other education to boys and girls of Muslim community. This is thus a case where S. 11 or 12 will not operate by virtue of S. 13(l)(b). If S. 11 and 12 cannot be applied, the question of registration u/s 12A r/w S. 12AA would not arise at all.
5. In the written submissions filed by the applicant great stress is laid on the argument that it has been established under the mandate of Article 29 and 30 of the Constitution of India. Decisions of the Hon’ble Supreme Court on the scope of these Articles have also been cited. Articles 29 and 30 pertain to preservation of distinct language, script or culture and prohibition on denial of admission into any educational institution maintained or aided by the State on ground of religion, race, caste and language. It is not clear as to how this argument helps the assessee. The scope of the present proceedings is not the establishment of any institution. These proceedings u/s 12A r/w S. 12AA are extremely limited in scope. Registration merely entitles, an applicant to have its income dealt with as per provisions of Ss. 11 to 13 of the Act. Denial of registration does not in any manner prejudice the fundamental right to establish institutions in accordance with Art 29 and 30. This argument is misconceived and irrelevant and accordingly rejected.
6. By way of its activities a photocopy of an irregularly numbered document listing names and amounts, purportedly donations, has been placed on record. Apart from this document the only other material available with the applicant is a plethora of irrelevant arguments.
7. The satisfaction mandated by law for grant of registration cannot be formed on the basis of such insubstantial material.
8. From the above discussion and documents on record the conditions for the grant of registration u/s 12AA of the Income-tax Act, 1961 are not met by the society. I accordingly reject the application u/s 12AA (1) (b) (ii) of the Income-tax Act, 1961.”
5. In this context, it is pertinent to highlight that conditions for applicability of section 11 and 12 are contained u/s 12A of the Act. The procedure for registration are specified u/s 12AA of the Act. The provisions of section 12AA are reproduced as under:
“12AA. (1) The Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) [or clause (aa) of sub-section (1)] of section 12A, shall—
(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,
and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.”
6. The above findings of the CIT are required to be tested in the light of the provisions of section 12AA of the Act. A bare perusal of the provisions of section 12AA of the Act clearly reveals that the CIT is required to satisfy himself about the genuineness of the activities of the trust or institution and may also make such enquiry as deemed fit in this behalf. Further, after satisfying himself about the objects of the trust or institution and the genuineness of its activities, the case of the assessee, for registration u/s 12AA of the Act is to be considered accordingly. In the present case, the learned CIT invoked only the provisions of section 11, 12 and 13 of the Act, for the purpose of denial of grant of registration u/s 12AA of the Act. Thus, it is clear that the impugned order passed by the learned CIT, is founded, on the consideration of irrelevant provisions of section 11, 12 and 13 of the Act, which are operative and relevant, in the course of assessment proceedings. The provisions of section 12A and 12AA are material and relevant, for the purpose of granting registration u/s 12AA of the Act. Needless to say that it is well settled legal proposition that the registration proceedings u/s 12A read with section 12AA of the Act are not to be confused with the assessment proceedings wherein the provisions of section 11, 12 and 13 of the Act are applicable. The provisions of section 12A and 12AA of the Act confer jurisdiction, on the CIT, for grant of registration or otherwise. The CIT is not competent, to invoke the provisions of section 11, 12 and 13 of the Act intended for the exercise of jurisdiction by the Assessing Officer, for the purpose of declining registration u/s 12AA of the Act. The registration proceedings and assessment proceedings are independent and different proceedings, covered by different and independent provisions of the Act, with different legislative intent.
7. The learned CIT has not brought on record any material, to prove that the activities of the appellant society are not carried out in pursuance of the stated objects. Further, it has not been demonstrated by the learned CIT that the activities of the appellant society are non-genuine. Similarly, it has not been shown by the CIT that the objects of the assessee are not charitable, within the meaning of section 2(15) of the Act.
8. In view of the above legal and factual discussions, we are of the considered opinion that denial of registration to the appellant society u/s 12AA of the Act is contrary to the provisions of section 12AA read with section 12A of the Act. The denial of grant of registration is founded on invocation of provisions of section 11, 12 and 13 by the CIT. In view of this, the action of CIT is contrary to the Legislative intention contained u/s 12A read with section 12AA of the Act. Therefore, order of CIT is set aside and he is directed to grant registration to the assessee society.
9. In the result, the appeal is allowed.
