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TMI Blog2017 (5) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... tered with Registrar of Societies vide certificate dated 5.2.1988. It is running a school under the name of "New Yashoda Pubic School Society" at Hisar Haryana. Since it was running an educational institution, therefore, it had sought registration u/s 12AA. Looking to its objects of carrying out educational activities as defined u/s 2(15) of the Act, registration was granted by the Learned CIT, u/s 12AA vide order dated 30.9.2002. Since then all its income and expenditure were subject to computation under sections 11 to 13. As mentioned in the impugned order, a Tax Evasion Petition (TEP) was received in the office of the ld. CIT on 31.1.2012, wherein the complaint was made on following allegations:- "(a) That the school was granted exemption from payment of Road Tax by the RTA, Hisar on the plying of buses on the basis that these are owned by the Principal of the school and the school will not charge any money in lieu of lifting the students in the buses. However, the school is charging transport charges from the students. Further, it has been alleged that in the Income Tax Returns filed by the school, it has been shown that the buses are owned by the persons other than Principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Shri Ajit Twickley is a life member and Secretary of the assessee's Society since the beginning and during the course assessment proceedings for the A.Y. 2009-10 it was revealed that he was paid salary of Rs. 1,25,130/-. Further he is also a husband of Smt. Anjana Twickley, Principal of 'New Yashoda Public School' run by the society and he is also a Principal of 'Yashoda Co-ed High School' another school run by the same management. In the TEP it was alleged that as per clause 5 of Memorandum of Association of the school, no remuneration shall be given to any member of the institution or governing body for his appointment as the Member of the Institution of Government Body. Thus, the school is giving remuneration to the Secretary without any legal basis. A reference has also been made for an enquiry conducted by the authorities of Education Department of Haryanathat he is also drawing salary from New Yashoda Public School despite that he is working as Principal of Yashoda Co-ed High School. In this manner the funds of the institution has been diverted to Member of the Trust/Society/School Management Committee which is against the bye laws of CBSE. Further similar payment has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary is in violation of section 7(2) Chapters II of the CBSE Affiliation Laws and also the Memorandum of Association. Regarding the withdrawal of show cause by the Director General of Secondary Education, he observed that the same is not very helpful to the assessee, because it was not dealing with the diversion of income by making payment of salary of Shri Ajit Twickley. Regarding payment of salary to Shri K.P. Mathur, Learned CIT observed that he was a real brother of Yashoda Mathur who was Founder and Director of the school and he has been shown working as Joint Director. The assessee's case was that he was getting gross salary of Rs. 35,156/- per month plus perquisites for looking after administration and working of the school other than teaching. Regarding his payment also Learned CIT observed that the assessee could not show that any proper and transparent procedure was followed for his appointment and whether he has actually performed duties/services which could be said to add values to the assessee's society has not been demonstrated. Thus, payment of salary to two these persons show that these activities are not carried out properly as per its object. * B. Bus Charges: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly recorded in the books of account. As regard plying of buses owned by the office bearers, the assessee before the Ld. CIT submitted the extracts of meeting of governing body held on 21.3.2006 and also filed written quotations from other bidders for plying of buses which were called upon for same routes. When the bidder showed their inability to procure the buses on some of the routes after the opening of the tender, then in such situations, it was decided that school will purchase its own buses and the bidder has consented to run the school buses on various terms which has been elaborated at page 10 the order. For some of the routes the governing body authorized the school to award operation of buses to Dr. Anjana Twickely on the same rate which was quoted by the various parties for the routes. Apart from, all the running and maintenance was done by the service provider (Dr. Anjana Twickley) who shall reimburse the school for insurance, registration charges and any other taxes levied by state government and also require depositing of certain amount as an advance. This was done so because bus could not be registered in the name of Society, therefore, it was decided that office be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g ofregistration u/s 12AA. Therefore, undersigned is satisfied that the activities of the assessee society are neither being carried out genuinely nor the activities are being carried out in accordance with the objects and other clauses of the Memorandum of Association of the society, since date of granting registration u/s 12AA (w.e.f.01.04.2001). 8.2 In view of the above, it is a fit case where registration already granted to the society is liable to be cancelled under section 12AA(3) of the Income Tax Act, 1961 with effect from the date of initially granting the registration u/s 12AA of the Income Tax Act, 1961. As a result, in exercise of powers conferred upon the undersigned by the law, the registration granted to the society under F.No.CIT/HSR/Tech./12AA/2002-03/5019- 22 dated 27/30.09.2002 is hereby cancelled w.e.f. 01.04.2001 onwards (the date of effect of initially granting the registration to the society)." 5. Before us the Ld. Sr. counsel, Shri K. Sampath after explaining the entire facts of the case as discussed above, submitted that after the cancellation of registration, assessments which were completed under 143(3) accepting the genuineness of activities and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Counsel submitted that, once the bus fees are dully recorded in the books of account and no funds whatsoever has been diverted to the officer bearers and the entire expenditure of the buses has not been borne by the school, then there is question of drawing any adverse inference. Similarly, with regard to the maintenance of parallel register also no adverse influence can be drawn as it is not a case of Ld. CIT that it has any adverse impact either to implicate that the assessee's activities are not genuine or there is some violation of objects or any kind of law. The assessee's explanation that one of the register was misplaced and therefore, the other register was prepared, hence, this should not be taken as an adverse point. Thus, the reasoning given by the Learned CIT for cancellation the registration u/s 12AA(3) cannot be upheld. In support of his contention he had also relied upon various decisions like:- (i) CIT, Faridabad vs. Indicula Trust Society Faridabad (2014) 45 taxman.com 158 (ii) Kaliga Institute of Industrial Technology vs. CIT (2008) 23 SDT 74 Cuttuck. (iii). CIT vs. Janki Ji Educational, Society (2013) 39 taxman.com 2 7. On the other hand the ld. CIT DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n found to maintained two parallel registers for annual general meeting for certain period. Section 12AA(3) provides that the registration granted u/s 12AA can be cancelled by the Commissioner only if either of twin conditions or both are satisfied; firstly, that the activities of such trust/institutions are not genuine, or secondly, the activities of the trust or institution are not being carried out in accordance with the objects of trust/institutions. Here in this case, there is absolutely no allegation or any finding that there is any change in the objects of the society post granting of registration u/s 12AA to the assessee vide certificate dated 30.9.2002. 9. Now coming to the various allegation/charges on which registration has been cancelled, as discussed above in detail, it is seen that so far as the first allegation that the assessee has paid salary to the office bearers in violation of clause 5, we find that the said clause itself provides that remuneration can be paid to any members of the institution if he is appointed as officer of the school. The relevant clause reads as under:- "5. No remuneration shall be given by the institution to any member of the institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been held to be excessive under the terms of section 13(2)(c) read with section 13(3) in order to show that the payment of salary is in violation of section 13. It is incumbent that certain bench marking vis-a-vis some comparable instances should be brought on record to show that if these services would have been rendered by the person from outside he would have been paid lesser amount. Thus such a payment cannot lead to any adverse inference for doubting the genuineness of the activities carried out by the assessee's society. So far as the observation of the Ld. CIT that their appointment cannot be said to be fair and transparent, this again is a very general proposition, because unless it is pointed out that the payment made to such person falls within the realm of diversion of funds or giving undue benefit to the persons specified u/s 13(3), no adverse inference can be drawn. Even if it is held that no salary at all was required to be paid to these persons, then also after invoking the provisions of section 13, the entire surplus can be taxed. Thus, these allegations do not hold ground for the cancellation of registration within the scope of section 12AA (3) albeit it could be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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