TMI Blog2019 (4) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax, Kanpur Others Vs. Society for the Promn. Of Edn. Allahabad [2016 (2) TMI 672 - SUPREME COURT] which upheld the judgment of CIT Vs. Sahitya Sadawart Samiti (2017 (8) TMI 374 - RAJASTHAN HIGH COURT) held that once the limitation prescribed under Section 12AA expired and the consequential default on the part of the CIT(E) in deciding the application would result deemed grant of registration is a settled proposition. Therefore, it has been held by the Tribunal that the judgment of the CIT(E) is reversed on merits and registration would stand granted to the assessee by prescription of law made in Section 12AA(2) of the Act. The Tribunal in this behalf relied on the judgment of Lucknow Bench of the Tribunal in Harshit Foundation Vs. CIT (2014 (6) TMI 298 - ITAT LUCKNOW) in which case it was held that where the Commissioner does not pass any order even after six months from receipt of Tribunal s order remitting the matter to him, the registration will be deemed to have been granted. This is subject to exercise of Commissioner s power under Section 12AA(3) of the Act in appropriate cases. - D. B. Income Tax Appeal No. 10/2019 - - - Dated:- 15-3-2019 - Mr. Justice Mohammad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e lease deed, the rent was paid to the persons specified under Section 13(3) of the Act. Section 13 of the Act, in categoric and unambiguous terms lays down that any part of income, if used for the benefit of the person specified in sub-section 3 of Section 13 is prohibited. It is submitted that once, it has been established that the benefit has been extended to the person specified under Section 13(3), then even benefit of single penny would make the assessee ineligible for the benefit under Section 11 and 12 of the Act. Learned counsel submitted that in the earlier round of litigation as also in subsequent round of litigation, the assessee failed to provide any detail of investment made in the building so as to reach to the conclusion that rent paid was reasonable or excessive. The CIT(E) has categorically held that the assessee did not comply with the directions issued by the Tribunal while restoring the matter back to the file of CIT(E). It is argued that the Tribunal has failed to appreciate the fact that the hospital is being run in a manner in which a private hospital is being run with a profit motive which cannot be held to be a charitable object and the funds of the hos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medical facility being hospital. The area of the hospital building is not in dispute and, therefore, the assessee has taken the building which consists of five stories on a plot of 746 sq. yards. The ld. CIT (E) has not disputed this fact that the building in question comprising of five stories on a plot of 746 sq. yards and, therefore, if the rent paid by the assessee is unreasonable or excessive by comparing the fair market rent then to the extent of such excess rent paid by the assessee would constitute the income of the assessee society is applied or deemed to have been applied for the benefit of the persons referred under section 13(3) of the Act. However, the ld. CIT (E) without ascertaining or getting any report of the AO on this point has assumed that the rent paid by the assessee is the income deemed to have been used or applied for the benefit of the persons specified under section 13(3) of the Act. The ld. CIT (E) has not given the finding that the quantum of rent is excessive or unreasonable keeping in view the total constructed area under the tenancy of assessee society for running the hospital. Even otherwise, whether the rent paid by the assessee is excessive or unr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O for the assessment years 2010-11 to 14-15 while passing the scrutiny assessment under section 143(3) read with section 147 and 143(3) respectively has not questioned or doubted the reasonableness of rent paid by the assessee to the related parties. Though the AO was not required to examine the issue in the light of the provisions of sections 11 to 13 of the Act, however, even in the normal assessment proceedings if the rent is paid to the related parties then it is always subject matter of scrutiny of the AO to ascertain whether the payment made by the assessee was reasonable or excessive in comparison to the fair market price or rent. Hence when the AO while passing the scrutiny assessment in all the assessment years repeatedly has not doubted the reasonableness of the rent paid by the assessee society, then the finding of the ld. CIT (E) without conducting any enquiry is based purely on assumption and conjectures and not on the correct facts. 8. The second objection raised by the ld. CIT (E) is regarding income from medical shop. It is not in dispute that the assessee never invested any amount in the medical shop but the shop was owned and run by Smt. Kamla Ranwa. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exemptions. Prima facie, the donations received by the assessee through cheques satisfy the condition that the donations were received from the parties though it may be a subject matter of assessment proceedings to go into the deep enquiry and investigation to find out whether these donations are genuine or not and consequently the same can be treated as income and not eligible for deduction under section 11 of the Act r/w section 115BBC, however, at the stage of granting registration under section 12A if the assessee was able to establish that the entire donation was received through cheques and from the different persons then non providing of PAN and complete address at that point of time would not disentitle the assessee from registration when the other facts of charitable nature of objects and running the hospital by the assessee are not in dispute. Hence we find that the ld. CIT (E) has raised these objections only for sake of objections to deny the registration to the assessee instead of giving a concluding finding that the donations are actually bogus and assessee s own income has been routed back in the garb of donation. While arriving on the aforesaid conclusion, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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