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2015 (5) TMI 814 - ITAT DELHI

2015 (5) TMI 814 - ITAT DELHI - TMI - Refusal for granting registration u/s 12A(1)(aa) - Held that:- It is an undisputed fact that assessee is running educational institution as is apparent from the assessment order of earlier years and moreover the object clause as suggests that assessee is running school for educational purposes.

The argument of Ld. D.R. that original constitution needs to be examined with respect to objects clause does not hold much force as A.O. in assessment orde .....

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013 - Dated:- 20-5-2015 - SHRI G. C. GUPTA AND SHRI T.S. KAPOOR, JJ. For the Appellant : Shri Ved Jain, CA For the Respondent : Ms. Sulekha Verma, CIT DR ORDER PER T.S. KAPOOR, AM: This is an appeal filed by assessee against the refusal for granting registration u/s 12A(1)(aa) of the I. T. Act, 1961. The assessee has taken six grounds of appeal however the crux of grievance of assessee is the refusal of CIT for granting registration u/s 12A(1)(aa). 2. The brief facts of the case are that the ass .....

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o grant registration on the basis that objects were not charitable in nature and further holding that the assessee was charging hefty fees and therefore, was not making any charity and instead was earning huge profits. In this respect, Ld. A.R. took us to a copy of audited accounts for the years ended 2010-11 to 2012-13 placed in paper book pages 33-77 and invited our attention to the fact that assessee was not earning huge profits and CIT has considered gross receipts onlywhereas the net profit .....

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ere duly replied to and original certificate of registration of society was also produced for his verification. Ld. A.R. submitted that the issue is duly covered in favour of assessee as various Hon'ble High Courts has held that at the time of registration, the commissioner has to examine the objects of the society and if the objects of the society are found to be charitable in nature then he is bound to grant registration under the Act. In this respect, he invited our attention to various c .....

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d lenders were filed vide letter dated 29.04.2013 as placed in paper book page 20. 3. Ld. D.R. on the other hand submitted that the Commissioner is empowered to refuse registration where he finds that the activities were not genuine. In this respect, she submitted that observations of CIT are very important wherein he has raised certain important objection regarding charging of hefty fees and regarding the explanation and source of unsecured loans obtained by assessee. Moreover, she argued that .....

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se and therefore, following the above said decision of Hon'ble High Court, appeal filed by assessee needs to be dismissed. 4. Ld. A.R. immediately interrupted and invited our attention to the judgement of Hon'ble Supreme Court in the case of Queens Educational Society 275 CTR 449placed at pages 4-15 of the paper book and submitted that the findings of Hon'ble High Court in the case law as relied upon by Ld. D.R. has been reversed by Hon'ble Supreme Court in this case. Ld. D.R. in .....

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he exemption is available u/s 11 and 12 subject to registration u/s 12AA. He submitted that though the case law of Queens Educational society is with respect to section 10(23C)(iiiad) but the Hon ble Apex Court has held that it is difficult for an institution to carry out an activity in such a way that no profit accrues to the institution and has further held that mere earning of profits in the course of charitable activities cannot be a reason to deny registration. Therefore, he argued that the .....

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genuineness of activities, he shall pass an order in writing registering the institution or on non satisfaction, refusing the registration thereof as the case may be. However, before passing order for refusal of registration, the assessee will be provided reasonable opportunity of being heard. Therefore, from the above provision of law, we find that at the time of registration u/s 12AA, the Commissioner is only required to examine the objects of the society / institution as well as genuineness .....

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be engaged in charitable activities and was not eligible for registration u/s 12AA of the Act. However, the Hon'ble Supreme Court in the case of Queens Educational Society Vs CIT 245 CTR 449 has held that mere earning of profit cannot be the reason for not allowing registration under the provisions of Section 12AA. The findings of Hon'ble Supreme Court as contained in para 19 are reproduced below: It is clear, therefore, that the Uttarakhand High Court has erred by quoting a non-existent .....

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inal conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall foul of section 10(23C) is to ignore the language of the Sec 'on and to ignore the tests laid down in the Surat Art Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact .....

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b & Haryana High Court in the case of CIT Bhatinda Vs Baba Deep Singh Educational Society vide order dated 13.10.2011 has held that the jurisdiction of the Commissioner at the stage of processing application u/s 12AA of the Act is to examine the genuineness of the objects of the Trust, whether they are genuine and in consonance with the objects of the trust or institution and where education is being imparted as per the rules and the factum of the establishment and running of schools is not .....

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25.9.2009. The CIT came to', the conclusion after examining the income and expenditure and the balance sheet for the period ending on 31.3.2006, 31.03.2007 and 31.3.2008 that the society had received donations and the capacity of donors and genuineness of transactions have not been explained. The CIT while noticing that society was running a Polytechnic College further took into consideration that the society was earning profits for the last two year and had claimed exemption under Section 1 .....

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ritsar Bench, Amritsar (hereinafter referred to as "the Tribunal") which has allowed the appeal of the society and has set aside the order passed by the CIT and directed that registration applied for by the appellant under Section 12AA of the Act be granted. The present appeal is directed against the said order and the following questions of law have been formulated by the revenue:- "1. Whether, in the facts and circumstances of the case, the Id. ITA T was right in law to restrict .....

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bunal while allowing the appeal has noticed at Memorandum of Association and the objects of the society was to do charitable work, projects and activities relating to education which have not been considered while declining the application under Section 12AA of the Act. It was further held that the CIT should have only seen the genuineness of the activities of the society and circular NO.11/2008 dated 19.12.2008 was also referred that the provisions of Section 2(15) of the Act are not applicable .....

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se societies as warranted by the facts of the case. The power of the revenue authorities to cancel registration under Section 12AA (3) of the Act was also taken into consideration on the ground that same can be resorted to if the Commissioner is satisfied that the activity of such society or institution are not genuine or are not being carried out in accordance with the objects of the society/institution. 5. The power of the CIT regarding the scope of Section 12AA of the Act has been considered .....

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he Commissioner to cancel the registration if the activities of the trust are not carried out in accordance with such objects was also noticed. 6. The Allahabad High Court in CIT Vs. Red Rose School [2007] 163 Taxman 19 has held that the jurisdiction of the Commissioner at the stage of processing application under Section 12AA of the Act is limited regarding whether the activities are genuine and in consonance with the objects of the trust or institution and where education is being imparted as .....

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hould be granted to the respondent- society with the rider that the same could always be cancelled if it came to the notice of the CIT that the society was not carrying on the activities as per its objects. The Commissioner while processing the application under Section' 12AA of the Act was not to act as an Assessing Authority and thus, the Tribunal has rightly allowed the appeal filed by the society In the facts and circumstances of the present case. Accordingly, no substantial question of .....

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