TMI Blog2021 (8) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... ied for registration u/s 12A as it was expecting a decline in Government grants. The assessee is free to avail registration under any alternative provision if more than one alternative were available, so it decided to apply for registration u/s 12A under the provisions of law as per principle approved in case of CIT v Beant College of Engineering Technology , [ 2019 (5) TMI 631 - PUNJAB AND HARYANA HIGH COURT] and same preposition followed by in case of Arya Shiksha Mandal KMV Campus v CIT [ 2017 (3) TMI 1765 - ITAT AMRITSAR] We hold that the order under appeal is unsustainable and thus reversed. CIT(E) is directed to grant registration to the appellant forthwith, preferably within one month time of furnishing copy of this order. - I.T.A No. 476/Asr/2017 - - - Dated:- 16-8-2021 - Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member For the Appellant : Sh. Tej Mohan Singh Adv. For the Respondent : Sh. Rajendar Kaur, CIT DR ORDER PER, DR. M.L. MEENA, A.M. : This appeal emanates from the order of ld. CIT(E), Chandigarh, dated 30.05.2017, where the appellant society has challenged the rejection of its applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) [or clause (aa) of sub-section (1)] of section 12A shall (a) Call for such documents or information from the society or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the society or institution and may also make such inquiries as he may deem necessan; in this behalf and (b) After satisfying himself about the objects of the society or institution and the genuineness of its activities, he - (i) shall pass an order in writing registering tire society or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the society or institution. 4. The provisions necessitate examination of two basic conditions for grant of registration u/s 12AA. The same include, apart from the examination of objects of the society, satisfaction of the competent authority in respect of genuineness of activities as well particularly when the applicant is an ongoing entity. In addition it would also be relevant for the competent authority to come to the conclusion, on the basis of documents, accounts, post history etc. filed for the purpose, whether h society deserves registration. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of its creation and operating without having registration under this section? Why is there sudden need for seeking exemption. xiv. The details of salary paid during the last three years and whether the same are guided by TDS provisions or not? . xv. Provide the copy of financial statements for the last three financial years i.e. from F.Y. 2013-14 t0 F.Y. 2015-16. xvi. The note on activities of the society. xvii. Taxability in the case along with full ITR with computation for A.Y. 2014-15 t0 2016-17. xviii. Explanation of the nature of various funds reflected in Balance Sheet as per section 11(6)) of IT Act. 6. In response Sh. Sunil Jain attended on 09.05.2017 and filed reply to the above stated show-cause letter. In the said reply, query regarding various funds were raised and Sh. Vikram Aggarwal, C.A. appeared and filed the reply on 12.05.2017. Further, a few more queries were raised to the applicant on 22.05.2017 regarding the applicant's contentions that its case was covered by section 10(23C)(iiiab) and the filing of application by the applicant for registration after nearly 46 years of its existence. On 24.05.2017, Sh. Sunil Jain, Professor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty percent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year. This is a clarificatory amendment to reiterate the meaning of substantially financed. In the present case, as evident from the table, the grants exceed fifty percent of the total receipts only during FY. 2015-16. The earlier claims would separately be examined by the assessing officer. 9. In the instant case, the applicant has not filed its return of income except for A.Y. 2016-17 on the grounds that its income was exempt under section 10(23C)(iiiab) of the Act. The section 10(23C)(iiiab) of the Act mandates that the exemption claiming entity must be wholly or substantially financed by the Government, which in this case seem contradictory to the financial statements provided by the applicant where government grants are exceeding fifty percent mark in only one financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee society is solely an educational society, running a college providing various degree courses and a collegiate school providing higher secondary education (Classes 11th and 12th grade) to its students. It is admitted fact on record that the College is affiliated to Panjab University, Chandigarh while the collegiate school is affiliated to Punjab School Education Board. The society had been claiming exemption u/s 10(23C)(iiiab). In compliance to the query letters issued by the CIT(E), it was submitted that the assessee society was imparting education to students as reproduced the aims and objects of the Society in Para 2 of the impugned order which have not been rebutted. Thus, the objects being imparting of education stands accepted APB, Pg. 34-37, 39-40 and 42-46. 5. The Ld. AR contended that the CIT(E) mere observation that the assessee was not filing returns in earlier years, could not be a reason for assumption that the assessee societies activities were not genuine. It was submitted that filing of returns became mandatory only after the amendment vide clause 34 of the Finance Act 2015 to Section 139(4C)(e) and as such the returns were filed from AY 2016-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year. ] 10. The Ld. AR argued that before the insertion of this rule, in the absence of specified percentage to be considered as substantially financed, the High Courts have stated various percentages which would be considered as being substantially financed. He relied on the decision of Hon ble Karnataka High Court, in case of Director of Income tax (Exemptions) Vs. Dhamapakasha Rajakarya Prasakta B.M. Sreenivasaiah Educational Trust , [2015] 59 taxmann.com 33 (Karnataka). Head note of the decision is reproduced below: Section 10(23C) of the Income-tax Act, 1961 - Educational institutions (Institutions substantially financed by Government) - Assessment years 2003-04 and 2005-06 - Assessee was running a number of educational institutions - Assessing Officer declined to grant relief claimed by assessee under section 10(23C)(iiiab) - Material on record disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean that they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere and not against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the activities of the trust or the institution. [Para 34] 14. In the case at hand, the assessee was claiming exemption u/s 10(23C)(iiiab) and had applied for registration u/s 12A as it was expecting a decline in Government grants. The assessee is free to avail registration under any alternative provision if more than one alternative were available, so it decided to apply for registration u/s 12 ..... 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