TMI Blog2016 (2) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... her charitable purpose and acquired land for setting up a Nursery School on 31/07/2013. On 21/07/2014 it paid fees for approval of its construction plan on the impugned land, to the concerned authority. It is evident therefore that the assessee society was in the process of setting up educational institution and as held by the jurisdictional High Court, in such circumstances it could not be denied registration u/s 12AA for not carrying out any charitable activity. - Decided in favour of assessee. - ITA No.191/Ag/2014 - - - Dated:- 9-2-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER For The Appellant : Sh. Pankaj Gargh For The Respondent : Sh. Rajarshi Dwivedy ORDER PER ANNAPURNA MEHROTRA A.M. This appeal has been filed by the assessee against the order of Ld. CIT-II, Agra, dt.29/05/2014 rejecting the assesses application for the registration under section 12AA of the Income Tax Act. 2. The assessee has raised the following grounds of appeal: 1. BECAUSE the learned Commissioner of Income tax, II, Agra (CIT) is not justified on facts and law to reject the application of the Society for registration u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and law to conclude that the applicant trust is , in reality, only a medium to channel the unaccounted / undisclosed income of the trustees into the books of the Trust. 14. BECAUSE the whole of the order is bad on facts and law. 3. Brief facts relating to the case are that the assessee society came into existence on 05/08/2010. On 22/11/2013 the assessee applied for grant of registration under section 12A of the Income Tax Act. Ld. CIT after conducting necessary enquiry and calling for necessary information and documents, held that the assessee was not eligible for grant of registration under section 12AA for the reason that the assessee society had raised funds through cloak of donation and unsecured loans which were nothing but means of funneling unaccounted or undisclosed income of the trustees or office bearer of the assessee society. The Ld. CIT held that thus the source of funds of the assessee society was dubious and highly suspect and in such circumstances the trust could not be regarded as genuine. Ld. CIT held that question of genuineness of the activity of the assessee trust could not be decided by turning a completely blind eye to the ways and means of raising it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee fulfilled all the necessary conditions required for grant of approval under section 12A. 6. The Ld. DR on the other hand relied upon the order of Ld. CIT and stated that as per the enquiry conducted by the Ld. CIT, it was very much evident that the assessee routed its own unaccounted income / money into the trust in the form of donation and unsecured loans and was using assessee society as a medium for channelizing its unaccounted money. Ld. DR held that neither the assessee had carried on any charitable activity since the date of its inception nor did there appear to be any intention to do so. Ld. DR therefore stated that the Ld. CIT had rightly held that the genuineness of the assessee society was not established in the light of the above facts and therefore the assessee society had been rightly denied registration under section 12AA. 7. We have heard rival submissions and perused the orders of the authorities below and also the documents placed before us. 8. The only issue in the present appeal is the refusal of registration under section 12AA of the Income-tax Act. 9. We find that the Ld. CIT has refused registration to the assessee society primarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d loans. Thus the Ld. CIT held that the unsecured loans were not genuine and were only colorable device to channel the unaccounted or undisclosed money of the trustees / office bearer of the applicant society. 10. We find that the issue of genuineness of donation and unsecured loans cannot be a reflection or have a bearing on the genuineness of the activity being carried out by the assessee society. Even if it is presumed that undisclosed income of the trustees / office bearer of the assessee society is being routed through donation and unsecured loans into the assessee society, it does not mean that the activity of the assessee society are not genuine. The activity of the assessee society are to be gauged from its conduct relating to carrying out of its charitable activity. Admittedly the assessee society has purchased land for the purpose of Building a Nursery school thereon. This fact is evident from the sale deed of the impugned land purchased, wherein the property description has been stated as plot for nursery school. Further the copy of its receipt for approval of construction filed before the Development authority also shows the intention of the assessee society to const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the institution, as he thinks necessary and he is also empowered to make such enquiries as he may deem necessary in this behalf. The objects of the trust can be had from the bye-laws or the deed of trust, as the case may be and unless, of course, the objects of the trust apparently make out that they were not in consonance with the public policy or that they were not the objects of any charitable purpose, registration cannot be refused accordingly on this ground. In regard to the genuineness of the activities of the trust or the institution, whose objects do not run contrary to public policy and are, in fact, related to charitable purposes, the CIT is again empowered to make enquiries as he thinks fit. In case the activities are not genuine and they are not being carried out in accordance with the objects of the trust/society or the institution, of course, the registration can again be refused. But on mere presumptions and on surmises that income derived by the trust or the institution is being misused or that there is some apprehension that the same would not be used in the proper manner and for the purposes relating to any charitable purpose, rejection cannot be made. Sec. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of registration. In view of the above we hold that the Ld. CIT had erred in refusing registration to the assessee society for the reason that the donation and unsecured loans received by it were found to be ingenuine. 11. Ld. CIT we find has also refused registration to the assessee society for the reason that it has not commenced any charitable activity in the preceding three 3 years. This issue is also settled in favour of the assessee by the Hon ble jurisdictional High Court in the case of Hardayal Charitable and Educational Trust Vs. CIT wherein the court has held as follows: The preponderance of the judicial opinion of all the High Court including this Court is that at the time of registration under Section 12AA of the Income Tax Act, which is necessary for claiming exemption under Section 11 and 12 of the Act, the Commissioner of Income Tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under Section 12AA cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
