Shri Dhar Sabha Vs CIT – Exemption) (ITAT Amritsar)
Conclusion: Registration under section 12A was allowable to assessee-society as the objects of the society was charitable in nature and activities were genuine; even if the control of the trust property was not vested in the public but was retained by the settlors and moreover, registration with the Registrar of Societies was not a precondition for granting registration u/s 12A.
Held: Assessee society had filed an application in Form No. 10A seeking registration under section 12A. The aims and objectives of the assessee were to develop the place of Deviji renovation of house for the benefit of traveller to make efforts to avoid the suffering of travellers. CIT(E) denied the grant of registration to assessee on various grounds such as the bank account were in the name of secretary of the Sabha and not the society, the dissolution clause was not there and no evidence had been filed regarding the acceptance of change in composition of the society by the Registrar of the Society and assessee society had not included the resolution clause. It was held assessee had furnished the copy of bank accounts which revealed that the bank accounts were in the name of the assessee society. Therefore, the objection of the CIT(E) while rejecting the application moved by assessee on the basis of bank accounts were rejected. In the instant case, the registration with the Registrar of the Society was not a precondition for granting the registration under section 12A. The only requirement for granting the registration was that the object of the society should be charitable in nature and its activities were genuine. Therefore merely on this basis that the registrar of the society had not informed about the change in the composition, could not be a ground to refuse the registration under section 1 2A. Regarding assessee society had not included the resolution clause, it was a totally irrelevant ground without pointing out as to how CIT(E) was not satisfied either about the object of the Trust or the genuineness of its activities. In the instant case, CIT(E) denied the registration by observing that the head of the society was restricted to be from Shree Dhar Vansh and no other member of the Sabha would have any right to raise any objection. That could not also be a ground to refuse the registration when the object of the assessee society were charitable in nature. CIT(E) himself admitted in the body of the impugned order that the establishment of free Hospital and Dharamshala were objects seemingly qualified for the label of charitable purposes. Therefore CIT(E) was directed to grant the registration under section 1 2AA to the assessee society.
FULL TEXT OF THE ITAT JUDGEMENT
On account of difference of opinion between the Ld. Accountant Member and Ld. Judicial Member of the ITAT, Amritsar Bench, this matter has been referred to me by the Hon’ble President ITAT for consideration and disposal under section 255(4) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). It may be noted that even while framing the point of difference there was a difference of opinion and different questions have been framed by both the Ld. Members. The Ld. Judicial Member formulated the following questions:
(i) Whether the Ld A.M. is justified in granted registration, while sidelining the observation of the Ld. CIT(E), (which is not denied by the Appellant Society) to the effect that the details furnished reveal that the Bank Accounts are in the name of Secretary of the Sabha and not the Society per se, which is clear indicator of the society’s claimed finances not being in its control and susceptible to misuse. Whereas in view of the Hon’ble J.M., the same is not in-consonance with law and spirit of the objects of the society and creates the doubt qua genuineness of its activities.
(ii) Whether the Id. A.M. is justified in holding that from the copy of Bank account of Oriental Bank of Commerce, clearly indicates that the bank account was in the name of Assessee Society, therefore the objection of the Hon’ble J.M. regarding bank account in the name of Secretary is not based upon the facts of the case. Whereas it is admitted fact that the appellant society has 03 bank accounts, however the Hon’ble A.M., sidelined the other 02 bank accounts.
(iii) Whether it is not mandatory for the Appellant Society to get registered, any change in composition of the Society, by The Registrar of the Societies. Whereas it is admitted fact that although it was claimed by the Appellant that the Composition of the Society has been changed by Resolution dated 06-02-2011 and same sent to the Registrar of Society for Registration, however the same was never produced by the Appellant society neither before the Ld. CIT (E) till passing of the impugned order dated 08-12-2016 nor before this Appellate Forum till hearing of the case as on 06-11-2017.
(iv) Whether the Ld. A.M. is justified in holding that there is no requirement in law for filling the incorporation of dissolution clause, before the Registrar of societies for its registration.
(v) Whether the restriction imposed in the Constriction of the Appellant Society that no other member of the Sabha will have any right to raise any objection, which severally impinges on the rights and say of other members of the Sabha, which not only amounts to restriction in the fair play of the Society but also amounts to in-genuineness of its activities.
2. On the other hand the Ld. Accountant Member formulated the following questions while referring the matter to the Hon’ble President.
“Whether in the facts and circumstances of the case, Learned Judicial Member was justified in dismissing the appeal of the assessee against refusal for registration u/s 12A of the Act specifically in view of the fact that he himself has held that objects of the assessee are in parlance with the mandate of definition u/s 2(15) of the Act.
3. From the aforesaid questions referred by both the Ld. Members it is clear that controversy to resolve, relates to the registration under section 12A of the Act denied by the Ld. CIT(E), Chandigarh.
4. Facts related to this issue has been discussed by both the Ld. Members in their respective orders, however for the clarity it is necessary to discuss the facts in brief as mentioned by the Ld. CIT(E) in his order dt. 28/12/2016.
5. Facts in brief are that the assessee filed an application in Form No. 10A seeking registration under section 12A of the Act which revealed that the assessee society was an ongoing entity and had been in operation since 20/10/1970. The aims and objects of the society are inter alia to develop the place of Devi Ji to remove curse present at the abode of God; renovation of houses for the benefit of travelers and to make efforts to avoid the suffering of travelers to make place of Shree Dhar Baba Ji memorable to establish the statute of Shree Dhar Baba Ji at Devi Ji to make an office of Shree Dhar Sabha at Katra and to establish free hospital and Dharamshala at Katra.
6. The Ld. CIT(E) issued a show cause letter dt. 15/11/2016 and asked the assessee to provide the following documents/clarifications :
(i) Details of property vested in the society, as envisaged u/s 11 of the l.T. Act, income from which is sought to he exempted.
(ii) Details of voluntary contributions received by the society, as envisaged u/s 12 of the l.T. Act and whether any specific directions have been received by the persons making voluntary contributions.
(iii) Originals of MOA/Bye-laws of the society along with the Registration Certificate.
(iv) Copies of Bank statements through which activities are being propagated highlighting the receipts and the different items of expenditure that are being claimed.
(v) Details of grants received from the Government and whether the same are being utilized as per Government guidelines.
(vi) Complete details of Donations received or intended lo be received and documentary evidence as regards to Grants received.
(vii) Copies of the I.T Returns filed (if any) along with a note regarding any kind of exemptions under I.T. Act having claimed earlier.
(viii) Whether the applications for registration has been filed for the first time. The fate of the earlier application along with copy of the order.
(ix) Donation received under FCRA along with relevant details such as copy of the return for FCRA and the copy of specified bank account (if any).
(x) The details of corpus fund and whether the same are with any written specific directions.
(xi) Details regarding charitable activities being conducted by the society clarifying as to which specific limb under section u/s 2(15) of the l.T.Act is being
(xii) Financial statements of the society since inception or for last three years whichever is later.
6.1 The Ld. CIT(E) also asked the assessee to provide the rationale as to why registration should be granted in the absence of any apparent charitable activity being pursued. He also asked to provide copy of Income Tax Return for the A.Y. 2015-16 and copy of Bank Statement for the said year through which activities were being propagated.
6.2 The Ld. CIT(E) again on the basis of documents available on record issued a final show cause and raised the following queries:
(i) Proof of ownership of land, vesting with the society, on which building has been constructed.
(ii) Copies of all the three bank accounts for Y. 2015-16 and till date as the statement of affairs show balance in three bank accounts..
(iii) Evidence of expenses on establishment, powers/fuel and repair & maintenance for the F.Y. ending 31.03.2016.
(iv) Evidence for the payment of taxes u/s 115BBC of the Act on anonymous
(v) In response to show cause about incorporation of new trustee/ manager of the society, vide response dated 08.12.2016, copy of a resolution dated 06.02.2011 has been furnished. It has been claimed that the same was sent to Registrar o f Societies. It is presumed that since a substantial lime has elapsed after 2011, the change in composition must have been accepted and incorporated as such by the Registrar of Societies. Evidence o f the same may be provided.
6.3 In response to the above, the assessee furnished the proof of ownership, copy of bank account etc vide letter dt. 19/12/2016.
6.4 The Ld. CIT(E) after considering the details furnished by the assessee society observed that the bank accounts were in the name of secretary and not the society per se which was indicator of the society claimed finances not being in its control and susceptible to misuse.
6.5 The claim of the assessee was that a sizeable component of the receipts was in the shape of the anonymous donations, the Ld. CIT(E), therefore asked the assessee as to whether taxes were paid on the same under section 115BBC of the Act. In response the assessee claimed to be a religious trust/society. However the Ld. CIT(E) considered the said claim to be an afterthought by observing that nowhere in the application nor during the course of proceedings, the issue of assesse being a religious society had been flagged and that the assessee society had not been paying taxes in the past on the large amounts of anonymous donations.
6.6 The Ld. CIT(E) observed that financial statements of the assessee society revealed that the receipts were mainly being used for making the FDRs or kept as bank balances and that the claim of the assessee having its object of running a free hospital had not been pursued. The Ld. CIT(E) gave the details receipts and bank balances etc. as under:
