TMI Blog2019 (8) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... ciety was on generation of excessive surplus and not rendering of education. We are unable to subscribe to the view taken by the CIT(E) that the genuineness of the activities of the assessee society was not proved. In terms of our aforesaid observations, we are of the considered view that the CIT(E) had erred in declining to grant registration under Sec. 12AA to the assessee society. We thus set aside the order of the CIT(E) and direct him to grant registration under Sec. 12AA to the assessee society. - Decided in favour of assessee. - ITA No. 600/Asr/2018 - - - Dated:- 5-4-2019 - Shri N.K. Saini, Vice President And Shri Ravish Sood, Judicial Member For The Appellant : Shri Y.K Sud, A.R. For The Respondent : Shri Lalit Mohan Jindal, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(Exemptions), Chandigarh under Sec. 12AA(1)(b)(ii) of the Income Tax Act, 1961 (for short IT Act ), dated 28.09.2018. The assessee assailing the order of the CIT(E) has raised before us the following grounds of appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yar was towards advance rent for the shops given on rent to them; (iv) that the inconsistency between the advance rent of ₹ 14 lacs and the annual rental income of ₹ 10,000/- and ₹ 14,000/- shown by the assessee in its accounts for F.Y. 2015-16 and F.Y. 2016-17, respectively, impinges on the genuineness of activities of the assessee society; (v) that though the assessee had purchased additional land which was though claimed for constructing a new building, however, what necessitated purchase of the additional land and whether the same was for educational purpose had not been evidenced; and (vi) that as the surplus of income over expenditure in the case of the assessee society (without considering depreciation) during the last three years was highly pitched at 20% to 30% of its gross receipts, therefore, it revealed the emphasis of the assessee society on generating excessive surpluses. On the basis of the aforesaid deliberations the CIT(E) not being satisfied with the genuineness of the activities of the assessee society declined to grant registration under Sec. 12AA of the IT Act. 4. Aggrieved, the assessee has carried the matter in appeal bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the objects of the trust or institution and genuineness of its activities. At the stage of considering an application filed by a trust or an institution the registering authority cannot traverse to examination of the aspect as to whether the income of the assessee had been applied for charitable or religious purposes or not. In our considered view, the stage for considering as to whether the income of the trust or the institution had been applied in conformity with its aims and objectives for charitable or religious purposes would be as and when a return of income is filed by such trust or institution. In fact, if subsequent to the registration the commissioner is satisfied that the activities of the trust are not carried out in accordance with its objects, then he is duly empowered to cancel the registration by taking recourse to sub-section (3) of Sec. 12AA of the IT Act. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Punjab Haryana in the case of CIT Vs. Surya Educational and Charitable Trust (2013) 355 ITR 280 (P H). 7. We shall now in the backdrop of the aforesaid settled position of law advert to the observations drawn by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf to the aspect of the genuineness of the activities of the assessee society, had rather embarked upon the issues which though would be relevant at the stage of framing of assessment but would have no bearing to the extent judging of the genuineness of the activities of the assessee society are concerned. Be that as it may, even otherwise as the security deposit received by the assessee society from S/sh. Rajiv Jain and Raj Kumar Nayyar in the F.Y. 2015-16 could not be included in the total income of the assessee for the F.Y. 2015-16, thus no infirmity as regards the manner in which the aforesaid amount has been reflected by the assessee in its final accounts for said year is liable to be drawn. Insofar the observations of the CIT(E) that the inconsistency between the annual rental income of ₹ 10,000/- and ₹ 14,000/- shown by the assessee in F.Y. 2015-16 and F.Y. 2016-17 on the one hand and the advance rent of ₹ 14 lacs is concerned, we are unable to subscribe to the said observations of the CIT(E), which as observed by us hereinabove is based on misconceived facts. As observed by us hereinabove, as the amount of ₹ 13,87,000/- ( sic ₹ 14 lac) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of the charitable purpose of the trust or institution. In sum and substance, the predominate object of a charitable trust or institution is to carry on activities to sub serve the charitable purpose and not to earn profit. Rather, the charitable purpose should not be submerged by the profit making motive. Fairly stating, the purpose of a charitable trust must be essentially charitable in nature and it should not be a cover for carrying on an activity which has profit making as its predominate object. In our considered view, it would indeed be difficult for a trust or institution to so carry on its activity that the expenditure balances the income and there is no resulting profit. As observed by the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust (1975) 101 ITR 234 (SC), if the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. It was observed that the test now is the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity. In terms of our aforesaid obs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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