TMI Blog2018 (3) TMI 809X X X X Extracts X X X X X X X X Extracts X X X X ..... the other conditions of section 11 have been complied. The registration under section 12AA is only fait accompli to the objects of the institution [‘ACIT vs. Surat City Gymkhana’, (2008 (4) TMI 16 - SUPREME COURT)]. The activities of an institution, though genuine at the time of grant of registration, may not remain so during its life-span and the registration granted to it cannot be a life-time guarantee that it would remain so. That is why the law itself prescribes a procedure for withdrawal of the registration granted, in appropriate cases. CIT(E) has erred in rejecting the assessee’s application for registration u/s 12AA of the IT Act - Decided in favour of assessee - I.T.A No. 408/Agra/2017 - - - Dated:- 13-3-2018 - SHRI A. D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER For The Appellant : Shri M. M. Agarwal, C.A. For The Respondent : Shri Rajarshi Dwivedy, CIT. DR. ORDER PER, A. D. JAIN, JUDICIAL MEMBER: This is assessee s appeal against the order passed by the CIT(Exemption), rejecting the assessee s application for registration under section 12AA of the I.T. Act. 2. We have heard the parties and have perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he applicant to have filed the ITRs in time and remitted the due taxes to the government but till date no tax has been paid and no ITR has been filed by the applicant which again places a question mark on the so claimed pious intentions of the applicant. Any institute that claims to exist for charitable or philanthropic purposes is expected to have inherent characteristic of a law abiding institution coherent with its claim of charity, but the applicant in the instant case has failed on dual fronts. Not only has it failed to establish genuineness of its activities nor has been able to corroborate the fact that it is not solely existent for commercial interest in the business of education that it currently is pursuing. In addition to the failure on the part of applicant to file ITRs and remit the taxes have dealt its claim a tarnishing blow which just expedite the process of rendering it deficient for the said registration and incapacitate its claims which appear nothing but a saga of lofty ideals lacking any pious intentions. In each of the last 3 FYs gross income and surplus/profit and the percentage thereof is as under:- F.Y. Gross Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not enough for according the said recognition. It is only when acts of charity are established by cogent evidences like vouchers and production of books that an institution can be awarded the recognition of pursuing genuine charitable activities. The fact that needs consideration here is that despite providing ample opportunities the applicant has not been able to show case even a single voucher with respect to any activity as claimed to be carried out in addition to that the applicant society has not provided books of accounts despite ample opportunities being tendered. The consistent failure on the part of the applicant to bypass the production of genuine evidences is a clear indication that so called charitable acts of applicant have been merely fabricated on paper to secure the said registration. The applicant society needs to retrospect the fact that engaging itself in business of education on commercial lines without providing any element of charity to the people doing fake declaration of charity without carrying out any genuine charitable activities is not going to earn its eligibility for qualifying the test mandated by law for according the registration. It is also imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urden lay on applicant society to prove that the beneficiaries of its pursuits was general public and not a set of distinguished individuals belonging to Agrawal community but the applicant failed to prove the same. The applicant has declared that its focus lies on a set of people not distinguishable from a specified set of individuals and this is where the provisions of section 13(1)(b) get attracted for the applicant. The important thing to note here is that the aforestated object has catered to the benefit of a distinguished set of individuals belonging to the Agrawal community and not the general public at large. This act of the applicant society stands in clear violation of the norms mandated by law which forbid the grant of registration to a charitable trust that exists for benefitting a particular religious community or caste. It can be easily inferred from the material available on record that the applicant society, despite claiming to be a charitable institute that exists for the benefits of all, is only involved in working towards the welfare and benefit of a set of individuals belonging to the Agrawal community. This kind of discrimination being pursued by the applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income tax Act, 1961. 7. Reliance is also placed on the Hon ble Delhi High Court s judgment in the case of Kirti Chandra Tarawati Charitable Society vs. DIT (Exemption) 232 ITR 11 in which it was held that there is no obligation on the CIT to grant registration merely by looking at the instrument creating the Society and shutting eyes on the actual activities carried out by it. On the perusal of Society s Memorandum it is seen that there are several objects. However, failure on the part of the applicant to corroborate them with satisfactory evidences places fatal allegation on genuineness of the activities of the applicant. It clearly proves that the applicant has done a false declaration with respect to the objects set out in the memorandum and it is not actually working towards its attainment. Therefore the activities of the Trust are not in tandem with its memorandum. 8. The Hon ble ITAT Lucknow bench in order ITA No. 809/LKW/2014 dated 26.02.2015 has held that We have considered the submissions of Learned D. R. of the Revenue, perused the material available on record and gone through the impugned orders of learned CIT II, Kanpur. It is noted by learned CIT-I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Photocopy of PAN card and evidence of filing return of income for last three years. 2. A declaration that no part of the income of the Society ensures, directly or indirectly to the benefit of any person specified in Section 13(1)(c) of the Act and that no part of the income or property of the Society was ever used or applied for the benefit of any person specified in section 13(1)(c) of the Act , duly signed by Authorized Signatory. 3. A note specifying the main area of your charitable/religious activities and a projection/plan of the main charitable/religious activities to be undertaken in next two years. 4. Please attach a No Objection Certificate from the owner of the premises along with proof of his ownership or owned by the Society 5. Please attach certified copy of annual accounts since inception/last three years 6. Please attach a certified copy of Memorandum of Association and produce original copy for verification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Your Memorandum of Association does not have clause providing that the funds/property of the Society will be used only for the objectives of the Society. Please include this clause in your Memorandum of Association and file a certified copy of amended Memorandum of Association. 19. In case, applying for registration under section 80G, please produce original registration certificate under section 12A/10(23C) of the Act . 20. Please produce copy of bank statement/pass book as on date 21. Please produce all relevant papers/documents/registers/ books of accounts, bill/vouchers in original for verification. 22. Name of Society/Trust/Section 8 company, where any of your Member/Trustee is in that Society/Trust/Section 8 company with its PAN and copy of 12A/80G/10(23C), if any. 23. Please explain whether any funds have been set apart/accumulated during last 3 years for any specific object of the trust as required under provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice dated 12.08.2017 (APB 7). 7. All the above documents have been certified by the assessee to have been filed before the ld. CIT(E). No denial thereto has been put forward. 8. The impugned order also observes that ample opportunities were provided to the assessee to produce details, like details of salaries, etc. However, the notice and the order sheet entries do not mention any such opportunity. Rather, para 2 of the impugned order itself shows that the matter was fixed for hearing only once, i.e., on 19.09.2017, on which date itself, the impugned order was passed. So, this observation of the ld. CIT(E) is also erroneous, being against the record. 9. On merits, the CIT(E) has referred to one of the objects of the assessee, i.e., Sarv Sadharan Mei Our Vishestaya Agrawal Samaj Mei Upyukt Shiksha Ka Prachar Karna . He has interpreted this object to mean as for the benefit of a set of distinguished individuals belonging to the Agrawal Community. This conclusion is evidently wrong, as the object itself starts with the words Sarv Sadharan , which expression undeniably translates to mean general public . Read as a whole, this object is specifically directed towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile framing assessment and not by the CIT while considering an application for registration under section 12AA. 13. The Hon ble Supreme Court, in the case of CIT vs. Dawoodi Bohara Jamat , 364 ITR 31 (SC) has held that:- 42. We would now proceed to examine the objects under the provisions of Section 13(1)(b) of the Act. It becomes amply clear from the language employed in the provisions that Section 13 is in the nature of an exemption from applicability of Sections 11 or 12 and the examination of its applicability would only arise at the stage of claim under Sections 11 or 12. Thus, where the income of a trust is eligible for exemption under section 11, the eligibility for claiming exemption ought to be tested on the touchstone of the provisions of section 13. In the instant case, it being established that the respondent-trust is a public charitable and religious trust eligible for claiming exemption under Section 11, it becomes relevant to test it on the anvil of Section 13. X X X 49. In the present case, the objects of the respondent-trust are based on religious tenets under Quran according to religious faith of Islam. We have already noticed that the peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses debited in the accounts of the appellant. b) The definition of charitable purposes , as contained in section 2(15) of the Act. This is an inclusive definition to include: (i) relief to poor, (ii) education, (iii) yoga, (iv) medical relief, (v) preservation of environment including watersheds, forest and wildlife, (vi) preservation of monuments or places or objects of artistic or historic interest; and (vii) advancement of any other object of general public utility The proviso to said section provides that advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on any activity in the nature of trade, commerce or business etc. Thus, the restriction with regard to activity in the nature of trade, commerce or business is restricted to only advancement of other object of general public utility and not with regard to any other activity, i.e., relief to poor , education , yoga , etc. This view has been specifically reiterated by the Board by issuing Circular no. 11/2008 dated 19.12.2008. In para 2.1 of the Circular it has been stated that where the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to see whether such application has been done and the other conditions of section 11 have been complied. The Assessing Officer has to see whether exemption under section 11 is barred by application of section 13. An institute, though registered under section 12AA, would still be taxed on the income which has not been applied in accordance with section 11, or in respect of which section 13 comes into play. Even in respect of income hit by section 13, other provisions of the Act regarding levy of tax on maximum marginal rate would come into play. Thus, the registration under section 12AA is only fait accompli to the objects of the institution [ ACIT vs. Surat City Gymkhana , (2008) 300 ITR 214 (SC)]. The activities of an institution, though genuine at the time of grant of registration, may not remain so during its life-span and the registration granted to it cannot be a life-time guarantee that it would remain so. That is why the law itself prescribes a procedure for withdrawal of the registration granted, in appropriate cases. 18. In view of the above, we hold that the ld. CIT(E) has erred in rejecting the assessee s application for registration u/s 12AA of the IT Act. The impu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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