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TMI Blog2018 (10) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for registration u/s 12AA of the Act in form No.10A duly received in the office of CIT on 8.2.2016. Ld. CIT gave opportunity of being heard on 18.7.2016 and after considering material on record, refused to grant registration u/s 12AA of the Act. 3. Aggrieved by this, the assessee is in present appeal. Ld. Counsel for the assessee submitted that Ld. CIT misdirected himself and exceeded the mandate of law. He submitted that at the time of registration of application, the Ld. CIT is required to verify the genuineness of the objects of the society. Ld. Counsel for the assessee has taken us through the objects of the society enclosed in the paper book at page No.16. He submitted that the issue is squarely covered by the judgement of the jurisdictional High Court rendered in the case of CIT Vs. D.P.R. Charitable Trust (2011) 16 DTR 410. The reliance is also placed on the decision of the coordinate bench in the case of Vidyadayani Shiksha Samiti Vs. CIT (Exemption) in ITA No.309/Del/2016. Ld. Counsel for the assessee further reiterated the submissions made in the written synopsis, which is reproduced as under:- "1. The appellant society is registered with The Registrar Firms & Socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ST Mary's Higher Secondary School at Sehore. b. Regarding the observation of Learned CIT (Exemption) about the payment of rent to related parties is not on pro rata basis though the premises are adjoining it is submitted that the observation is not correct. It is submitted that there is no such irregularity and the rent paid is most reasonable. It is also well within the fair rental value as assessed by the office of PWD Sehore.Copy enclosed at P.B. Page no. 58 to 63 To further explain we have compiled all the details in a tabular format which explains the total area of land, built up area, open land, rent as per agreement and fair rental value as per PWD Norms as under :- Your Honors, as seen from above there is no disproportionate rent. It appears that the Learned CIT (Exemption) has taken criteria of numbers of rooms only disregarding built up area and open land. In any case the rent paid is well within the fair rental value as assessed by the office of PWD.Copy enclosed at PB Page No.58 to 63 Specific observations on the rent paid are as under :- i. Lissy Babu :- In the premises of Lissy babu, there was open land for playground which has also been mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal purposes of office bearers and families is factually incorrect. * Further amount of Rs. 7,89,850/- has not been fully incurred for building repairs but it is incurred on cleaning charges, sanitation charges, white wash charges, repair to furniture and fixtures, repair of Lab equipments, projectors, sports equipments, office equipments and computers. Copy of ledger account to explain, is enclosed as per P.B. Page No.64 to 74 Summary of repair and maintenance expenses of Rs. 7,89,850/- is os under :- Heads Amount Repair and Maintenance for Furniture Rs. 79,133/- Repair and Maintenance for Computer Rs. 44,743/- Repair and Maintenance for Lab Equipment Rs. 24,800/ - Repair and Maintenance for electricity Rs. 98,320/ - Repair and Maintenance for Sanitation (Plumbing etc) Rs. 41,600/ - Expenses on Maintenance of garden Rs. 61,200/- Expenses on Maintenance of Cleanliness Rs. 1 ,31 ,699/ - Expenses on whitewash of Building about 26700 sq. ft. built up area Rs. 1,75,780/- Expenses on Maintenance of playground Rs. 18,800/ - Expenses on Maintenance of Sports Equipments Rs. 12,200/ - Expenses on Maintenance of office Equipmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to find out the genuineness of the objects of the society. He submitted that Ld. CIT at para 2.2 of his order has categorically stated that the building taken on rent is owned by the member of the society and by this the funds are being diverted for personal purpose of office bearer/families. He therefore, supported the order of the Ld. CIT. 3. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The Ld. CIT rejected the application of the assessee by observing as under: "ln response to the above mentioned notice, Shri Pramod Sharma, CA attended and filed written submission which is placed on record. During the course of hearing the following irregularities are noticed:- There are 4 premises on rent, one with unrelated 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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 careful reading of the relevant provisions would reveal that app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sult 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 and vouchers etc. for verification of the ld. CIT for which the ld. CIT he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 entitled to the registration under section 12M of the Act. As set out above, even if the registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 on by the ld. counsel for the assessee in the Paper Book also support his case. In view of the above disc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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