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2016 (4) TMI 37 - ITAT DELHI

2016 (4) TMI 37 - ITAT DELHI - [2016] 48 ITR (Trib) 743 - Registration under section 12AA denied - non charitable activities - siphoned off or misappropriation of income of the Society - Held that:- It is clear that the assessee society unsuccessfully tried to justify that family members of the management committee members rendered any kind of services. The fact that the names of 4 ladies were appearing in the attendance registers of the teachers and no attendance was marked against their names .....

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st their name, clearly established that the subsequent explanation by the assessee society of having separate attendance register was not true. The Assessing Officer has observed that the remuneration paid to those family members was also more than armís length remuneration. The facts of the case clearly show that the assessee society was engaged in siphoning of money under the garb of carrying out charitable activity in the name of education. - Thus we are of considered opinion that the mem .....

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ided against assessee - ITA No. 5581/Del/2014 - Dated:- 30-3-2016 - Sh. H. S. Sidhu, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Sh. K. Sampath, Advocate For the Respondent : Sh. Amit Mohan Govil, CIT (DR) ORDER Per O. P. Kant, A. M. This appeal of the assessee is directed against order dated 11/09/2014 of the Commissioner of Income Tax, Haldwani, rejecting the registration under section 12AA of the Income-tax Act, 1961. The ground of appeal raised by the assessee i .....

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lege at Kashipur. The assessee society applied to the Commissioner of income tax, Haldwani, for granting registration under section 12AA of Income- tax Act, 1961 (in short the Act ) on 16/04/2014. The Commissioner of Income Tax refused to grant registration to the society on the ground that members of the management committee were found to be violating the primary object of the society that it was not for profit motive. The Commissioner of Income Tax in his order observed that a survey under sec .....

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Act by the Commissioner of Income Tax, the assessee is in appeal before the Tribunal. 3. The Ld. Authorized Representative of the assessee submitted that the assessee fulfils both the conditions i.e. the charitable object and genuineness of its activities, for granting registration under section 12AA of the Act. He submitted that the assessee society is engaged in providing education which is one of the charitable object as defined in section 2(15) of the Act. The Ld. Authorized Representative, .....

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. We have heard the rival submissions and perused the material on record. The Commissioner of Income-tax while refusing the registration, noted as under: 2. It runs an educational institution in the name of Tempton college at Kashipur. In the past, it had made application before the Chief Commissioner of income tax, Dehradun seeking approval under section 10 (23C)(vi) of the IT Act, 1961 (on 29/03/2011). The same was rejected by the order dated 28/03/2012, holding that its activities appeared to .....

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. Eventually, it was held by the AO in the course of assessment that the assessee had given undue benefit to the persons specified in section 13(3) of the IT Act ,1961 read with Explanation-12 that section. There is nothing on record to suggest that the adverse finding has been overturned by any appellate authority. 3. The essence of trust is complete absence of private profit. The assessee was formed a society, promising that there was no such profit motive. But, in practice, the members of the .....

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f the assessment order of the assessee society for assessment year 2011-12, which is reproduced as under: 4. Facts gathered during the course of survey proceedings: At the time of survey proceedings, an attendance register of all the teachers was examined and on examination, it was noticed that the most of the teachers had put their signatures on the attendance register whereas the four lady teachers did not sign on the attendance register and the column for signature was left blank right from t .....

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in the reason about the absence of the four lady teachers and produced the leave application if any given by them. But only it has been stated by the Principal in his statement on oath that the employees were on leave but he could produce any leave application under the plea that the application may be made available only after the teachers join the school. 4.1 The Accountant of the school who used to manage all the accounts and financial affairs was also asked in his statement on oath to explai .....

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ncealment of the income of the society by way of showing payment of salary to the following family members and close relatives of the members/chairman of the society. S. No. Name of the family member Relation with member/chairman Amount of salary paid (per month) 1. Smt. Sonal Agarwal Wife of society member ₹ 22,000/- 2. Smt. Prachi Agarwal Wife of society member ₹ 17,000/- 3. Smt. Kamlesh Agarwal Sister-in-law of society member ₹ 15,000/- 4. Smt. Shruti Agarwal Daughter-in-law .....

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however, the assessee tried to justify that those 4 ladies are not teaching staff and a separate attendance registers was being maintained. This explanation was not found convincing by the Assessing Officer, as no such attendance register was found or produced in the course of survey proceeding. Further, the name of 4 lady members was entered in the attendance register of the teachers and no attendance was marked against their name, clearly established that the subsequent explanation by the asse .....

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ollowing cases: 1. Fifth General Education Society versus CIT (1990) 185 ITR 634 2. DCIT versus Cosmopolitan Educational Society (2000) 244 ITR 494 (Raj) 3. DIT versus Parivar Sewa Sansthan (2002) 254 ITR 268 (Del) 4. Orpat charitable trust versus CIT (2002) 256 ITR 690 (Guj) 5. Guru Govind Singh Education Society versus CIT (2009) 118 ITD 207 (ASR) 6. CIT versus Spring Dale education society (2011) 204 Taxmann 11 (P & H) 7. DIT versus JITO Channai chapterr (2012) 204 Taxmann 157 (Madras) 8. .....

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so not the requirement of section 12A that any activity should be carried on by the charitable Society for obtaining registration. 8. In the case of assessee in hand, the activities were carried for a long time and registration has been refused on the ground of non genuineness of the objects/activities of the assessee and thus the facts of the case in hand are different from the facts of the above cited case and thus the ratio laid down is not applicable over the facts of the assessee. 9. In the .....

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ble High Court having regard to the finding of the facts recorded held that no substantial question of law arose from the order of the Tribunal. Since the Hon ble High Court has not decided any question of law in the case, the reliance placed by the assessee is not helpful. Moreover in the present case the misappropriation and siphoning of funds has been established and thus facts of the present assessee are different from the facts of the case of DCIT versus Cosmopolitan Educational Society (s .....

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on conference and clinic was part of charitable activities and, therefore, there was no violation of provisions of section 13(1)(c) and (d) of the Act and the assessee was entitled to exemptions under section 11 of the Act. The Hon ble High Court held that above findings were essentially factual giving rise to no question of law. Since in the case no legal issue has been decided by the court, the reliance placed by the assessee is of no assistance. The facts of the case are different from the f .....

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that the assessee trust had acted in contravention of section 11(5) of the Act was not held to be justified. Since the issue in dispute in the present case is registration under section 1 AA of the Act, the ratio of the cited judgments is not applicable over the facts of the assessee. 12. In the case of Guru Gobind Singh Educational Society versus Commissioner of income tax (supra) the assessee was an educational society and was granted registration under section 12AA(3) of the Act, however subs .....

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f these irregularities, he cancelled registration granted to the assessee under section 12 AA of the Act. The Tribunal found from records that the amounts deposited in the bank accounts of the members of the assessee society had not been utilized by the members for their personal use and no proof had been brought to show any concealed income of assessee society and siphoning of its income in manner alleged and further dispute between members had no effect on objects and activities of the assesse .....

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d to the assessee. The facts of the cited case are different from the facts of the assessee. In the cited case no misappropriation or siphoning off of income of the Society was established, whereas in the present case siphoning of income of the society by the family members of the members of the management committee has been duly established, and therefore the ratio of the said decision is not applicable over the facts of the case of the assessee. 13. In the case of Commissioner of Income Tax-1, .....

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t case, the Commissioner of income tax has refused registration as he did not find the activities of the Society as genuine, thus, the facts of the present case are different from the facts of that cited case, hence ratio of the said case is not applicable over the present case. 14. In the case of Director of Income-Tax (Exemptions) vs. JITO Channai chapterr that registration under section 12 AA of the act was refused on the ground that object clause of the deed contained provision for domestic .....

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the assessee was entitled for registration under section 12AA of the Act. The facts of the present case are different from the facts of the cited case. 15. In the case of Commissioner of Income Tax versus Bharat Sewa Sansthan (supra) the assessee, a Society registered under section 12A of the Act, was denied exemption by the Assessing Officer observing that (i) huge amounts spent by the assessee and passed on to two other organization had no obvious link with charitable purpose and their immedi .....

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sessing Officer has not found misappropriation of funds, whereas in the present case the Commissioner of Income-tax has brought on record misappropriation or siphoning off income by the family members of the members of the Society, and thus the ratio laid down in the cited case is not applicable over the facts of the present case. 16. In the case of Commissioner of income tax versus State Urban Development Agency (supra) it was held by the Hon ble High court that nonmaintenance of accounts prope .....

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