TMI Blog2018 (10) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... bed in this regard. From the trust deed which who filed before the CIT the objects of ,he trust coald be ascertained. From perusal of cl. (3) of the trust deed we find that the objects of the trust are charitable in nature and are in tune with s. 2 (15) of the Act and therefore, the Tribunal rightly opined that the order of the CIT rejecting the application under s.12A was unjustified. See COMMISSIONER OF INCOME TAX VERSUS D.P.R. CHARITABLE TRUST [2011 (8) TMI 1136 - MADHYA PRADESH HIGH COURT] - Decided in favour of assessee. - ITA No.1034/Ind/2016 - - - Dated:- 5-10-2018 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Appellant : Shri Gagan Tiwari, AR For The Respondent : Shri Lal Chand, DR ORDER PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the CIT(Exemption), Bhopal dated 5.8.2016. The assessee has raised following grounds of appeal:- 1. That on the facts and in the circumstances of the case, the Ld. CIT (Exemption) erred and was not justified in holding that the society is existing for the purpose of profit of office bearers and not for charitable purposes. 2. That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, one with unrelated party and three with related party covered by section 13[ 1) [c). b. That the rent to related parties is not on pro rata basis though the premises are adjoining. c. c. It is further observed that Rent agreements with office bearers of the society [who are related parties) do not provide for expenses on maintenance and taxes to be borne by assessee but the assessee has incurred and borne these expenses [Rs. 789850/- for the year 2014-15) and funds are being diverted for personal purpose of office bearers/ families and therefore, it can be said that the society exists for the purpose of profit of the office bearers. It was therefore held that it is clearly seen that the society is existing for the purpose of profit of office bearers and not for charitable purposes and the registration sort u/s 12AA was refused. Hence this appeal inter alia. GROUNDWISE SUBMISSION ARE AS UNDER: Ground No 1 2 Ground No.1 That on the facts and in the circumstances of the case, learned CIT (Exemption) erred and was not justified in holding that the society is existing for the purpose of profit of office bearers and not for charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of 3500 sqft. The Total built up area for all the 3 floors comes to 10500 sqft. The learned CIT (Exemption) has taken built up area as 3500 sqft instead of 10500 sqft. Copy of Rent agreement and sale deed are enclosed as per PB Page No. 50 to 57 c. Regarding the observation of Learned CIT (Exemption) about the assessee has incurred and borne repair and maintenance expenses (Rs. 789850/- for the year 2014- 15) and funds are being diverted for personal purpose of office bearers/ families and therefore, it can be said that the society exists for the purpose of profit of the office bearers, it is submitted as under :- In Rent Agreement it is clearly mentioned that the premises shall be kept clean and white wash of the building shall be done by the tenant. Hence at the ousted, it is submitted that the observation of The learned CIT (Exemption) that the expenses on maintenance and taxes are not to be borne by the assessee is totally factually incorrect. Relevant clause no. are summarized as under :- s. No Landlord Name Clause No of relevant Rent Agreement PB Page No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Expenses on Maintenance of Sports Equipments ₹ 12,200/ - Expenses on Maintenance of office Equipments ₹ 15,300/- Expenses for water tanker ₹ 53,760/- General Repair Maintenance. ₹ 32,515/ TOTAL Rs.7,89,850/- d. Notwithstanding the above submission most respectfully we also place reliance on he following judicial pronouncements in which it is held that the registration U/s 12AA should be granted by verifying the objects of the society :- o) The High Court of Madhya Pradesh in the case of CIT Vs DPR Charitable Trust reported in (2011) 79 CCH 0594 While dealing with the application for registration The CIT has to examine whether the application is made in accordance with section 12 A rwr 17 A r section 12 AA nowhere provides that The CIT while considering the application has to verify whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit . Copy e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party and 3 with related parties covered by section 13(1)(c). The premises are adjoining. Therefore, rent should be nearly same on pro-rata basis. The same is not apparently so. Therefore, Assessee was asked to show cause as to why the registration not be allowed. 2.2 In view of above, the case was adjourned for hearing on 25-07-2016. On 25-07- 2016, the AR of the society, Shri Pramod Sharma attended and submitted letter dated 25-07-2016. The same is placed on record. The justification of the assessee is not tenable in the light of the following chart:- S. No. Name of building owner Land area Built up area Open area No. of Rooms Validity of rent agreement Annual rent Covered by section 13(1)(c) Remark 1 Kapoori Devi 8255 3575 4680 - 2004-2011 - No 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the objectives of the society. In the present case, the only ground for not allowing registration by the Ld. CIT is that the fund of the society is diverted for the personal gain of the office bearer of the society. The basis of this suspicion is that the society has taken on rent building from the members of the society, wherein the excessive rent is being paid. It is the contention of the Ld. Counsel for the assessee that this issue is required to be considered at the assessment stage. He submitted that at the stage of registration of application, the Ld. CIT has to confine to the extent of verification of the genuineness of the objects of the society. He submitted that the Ld. CIT has not brought any adverse material with regard to the genuineness of the objects of the society. The society is running school, which is a charitable activity. Ld. Counsel for the assessee has relied upon the judgement of Hon'ble M.P. High Court in the case of CIT Vs. D.P.R. Charitable Trust (supra). Hon'ble High Court has held as under: 8. Sec. 12A of the Act prescribes conditions for registration of the trust whereas S. 12AA of the Act prescribes the procedure for registration. A car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e i.e. in favour of the assessee and against the Revenue. In the result the appeal fails and is hereby dismissed. 4. Further, reliance is placed upon the decision of coordinate bench in the case of Vidyadayani Shiksha Samiti Vs. CIT (Exemption) (supra) The coordinate bench has observed as under: 16. Now, coming to the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the Id. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be charitable. The Commissioner has also observed that no activity has been carried on by the society. It is also not the requirement of Section 12A of the Act. Nor has Section 80Gany relevance at this stage. The impugned order cannot, therefore, be sustained and it is quashed. 18. We find the Hon'ble Karnataka High Court in the case of A.S. Kupparaji Brothers Charitable Foundation Trust (supra) has observed as under:- The certificate of registration is only an enabling provision to claim exemption. By merely granting a certificate income is not exempted. That is only a first stage to claim exemption. The Commissioner of Appeals should not have confused these two aspects and seems to think as the trustees and his family members are treating the property as their own and misutilising the property it is not a genuine trust. When once it is admitted that in pursuance of the trust deed and in terms of the objects set out therein, schools and colleges are being run and educational institutions are being run as rightly held by the Tribunal, nothing more requires to be established to show that the trust in question is a genuine trust and therefore, the assessee is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of income. All that he may examine is whether the application is made in accordance with the requirements of s. 12A r/w r. 17A and whether Form No. IDA has been properly filled up. He has also to see whether the objects of the trust are charitable or not. Our view funds support from the Division Bench decision of the Allahabad High Court rendered in the case of Red Rose School (supra) and the decisions in the case of New Life in Christ Evangelistic Association (supra), Fifth Generation Education Society (supra) and Shantagauri Ramniklal Trust (supra). 9. In the backdrop of aforesaid legal position facts of the case may be seen. Admittedly the application submitted by the respondent was in consonance with the procedural requirement prescribed in ,his regard. From the trust deed which wao filed before the CIT the objects of ,he (rust coald be ascertained. From perusal of cl. (3) of the trust deed we find that the objects of the trust are charitable in nature and are in tune with s. 2 (15) of the Act and therefore, the Tribunal rightly opined that the order of the CIT rejecting the application under s.12A was unjustified. 20. The various other decisions relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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