TMI Blog2020 (9) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 12 would not be available if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied directly indirectly for the benefit of any person referred to sub-section (3) of section 13 of the Act. It is therefore, can be safely construed that where the revenue authority finds that during the previous year, the assessee has applied any part of its income or any property of the trust or the institution directly or indirectly for the benefit of any person referred to in sub-section (3). It can decline the assessee society benefit of section 11 12 of the Act Considering the submissions of the assessee material placed on record and respectfully following the decision of MODERN DEFENCE SHIKSHAN SANSTHAN [ 2007 (2) TMI 255 - ITAT JODHPUR] . We set aside the impugned order of Ld. CIT(E) and restore the application for seeking registration u/s 12AA to the file of Ld. CIT(E) considered in the light of the case laws as relied by the assessee. Appeal filed by the assessee is allowed for statistical purposes. - ITA No.106/Ind/2019 - - - Dated:- 29-7-2020 - Shri Kul Bharat, Judicial Member And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 14.12.2018 as under:- 1.As regards reasonability of payments Salary paid to Smt. Madhulika Jain(President), Prakash Chand Jain(Vice President)Shri Amit Jaih(Secretary) and Smt.Shweta Jain(Treasurer) are for Liasoning work with various governments department to run institution smoothly. They are engaged in administration work also and submitted that the reasonability of house rent and vehicles are given on prevailing market rate. 2.The college maintains two vehicle, one for teaching staff purpose and one for guest and administrative/management staff purpose. One vehicle is owned by institution and another vehicle is taken on monthly rent. The vehicle rent is paid as per the rate prevailing to the market. 3.For staff residential purpose the institution has taken a staff quarter on rent which owned by Prakash Chand Jain(Vice President).As the house is situated near to college hence taken on rent from said person. The same rent is payable if similar house taken on rent from another person. lt is not higher from market rate. 3.3 The above submissions of the assessee regarding reasonability of salary, house rent, vehicle rent have been considered but not found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.C. Jain, Vice President 1,80,000(House Rent)-15,000pm 72,000(Salary) Total=6,42,000/- 2016-17 Madhulika Jain, President 2,40,000(Salary) Sweta Jain, Treasurer 3,00,000(Salary) Total=5,40,000/- Alleging the following:- a. Above persons are members of single family and residing at Badi Chopati,40 shikshak Colony, Badnawar. All are covered u/s 13(3) b. No educational qualification, work experience, certificate provided. c. Copies of rent agreement, rate justification, ownership of property etc. not provided Thus alleging that substantial income/funds of the society have been diverted and activities carried out for benefit of interested parties. SUBMISSIONS A. While Granting Registration u/s 12AA, sec 13 cannot be questioned. The main object of the society is Education and the activities are undertaken for the attainment of its objects only. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 11 and 12. At the time of registration, invoking sec 13is unjustified. the ITAT JODHPUR BENCH in case of: Modern Defence Shikshan Sansthan (2008) 26 SOT 21 (Jodhpur)(PB 134-135 wherein it was held that: We are totally in agreement with learned Authorised Representative, because at the stage of consideration of the issue of registration under section 12AA, it is not a sine gua non to examine the aspect of the application of income. Until registration is granted the question of application of fund does not arise at all. The learned CIT has not given any other reasons, say, the objects etc., which according to him violates the provisions of granting the registration. In these circumstances, when the learned CIT has not doubted the aims and objects of the society, he cannot throwaway the application of registration on this pretext. Therefore, in our view, the registration sought for under section 12AA by the applicant society should have been granted by him. The question of application of the funds, which has been discussed by the learned CIT which attracts the provisions-of sections 13(l)(c}( i), 13(l)(c )(ii) and 13(3)(b) as mentioned above have to be considered on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 4.Ld. counsel for the assessee has also placed reliance on various case laws. Ld. counsel placed reliance on judgment of Hon'ble Supreme Court rendered in the case of CIT, Ujjain vs. Dawoodi Bohara Jamat (2014) 43 taxmann.com 243(SC). Ld. counsel also placed reliance on the decision of Coordinate Benches of this Tribunal rendered in the case of Dawoodi Bohara Jamat (2010) 123 ITD 452(Indore) and the decision of Coordinate Bench rendered in the case of Modern Defence Shikshan Sansthan (2008) 26 SOT 21 (Jodhpur) and reliance is also placed on the judgment of Hon'ble Bombay High Court rendered in the case of CIT(Exemption) Manekji Mota Charitable Trust (2019) 109 taxmann.com 258 (Bom) to buttress the contention that at the time of considering the application for registration Ld. CIT(E) cannot go into question of application of funds. Further, it is contended that so far questions of reasonability of payments to the specified persons is concerned, no notice was issued calling upon the assessee regarding reasonability of payments and also the requisite qualification of specified persons. 5. On the contrary, Ld. CIT-DR opposed the submissions and supported the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of law. In the case in hand ld. CIT(E) had not given any finding regarding activity of the society. For the sake of clarity section 12AA of the Act is reproduced as under: The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under section 12A(1)(aa) or (ab), shall- 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 a. 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: However, no order refusing to register the trust shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the 2a[Principal Chief Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (E) the basis of rejection of application is that while making payments to specified persons it attracted provision to section 13(1)(c) of the Act. Section 13 of the Act is reproduced herein below: Nothing contained in section 11 3 or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust- for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or institution as on the 1st day of June, 1973; (ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983; (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1993, whichever is later; (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.-Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the previous year for consideration which is less than adequate; (g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3): Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees; (h) if any funds of the trust or institution are, or continue to remain, invested for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern in which any person referred to in sub-section (3) has a substantial interest. (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided fami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section. (8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year. (9) Nothing contained in sub-section (2) of section 11 shall operate so as to exclude any income from the total income of the previous year of a person in receipt thereof, if- (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under subsection (1) of section 139 for furnishing the return of income for the said pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has applied any part of its income or any property of the trust or the institution directly or indirectly for the benefit of any person referred to in sub-section (3). It can decline the assessee society benefit of section 11 12 of the Act. The person referred to subsection (3) of section 13 of the Act is as under: (3) The persons referred to in clause (c) of sub- section (1) and sub- section (2) are the following, namely:- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, 2 that is to say, any person whose total contribution up to the end of the' relevant previous year exceeds 3 fifty] thousand rupees]; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (CC) 4 any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, 5 member, trustee or manager] as aforesaid; (e) any concern in which any of the persons refer- red to in clauses (a), (b), (c) 6 , (cc)] and (d) has a substantial interest. 10. The contention of the Ld. couns ..... X X X X Extracts X X X X X X X X Extracts X X X X
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