TMI Blog2021 (8) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... t the same. Acceptance of loan and thereafter in the financial year 2015-16, alleging it to be the donation - Merely on the basis of receipt of loan, and subsequent conversion of loan into donation, Assessee would not be disentitled for the registration under section 12AA of the income tax Act. The correct stage to examination of funds/utilisation of the amount/corpus by the assessee, would be at the time of assessment. Disallowance can be made if any, on examination at the assessment stage it is found that the assessee is not entitled to the exemption under section 11 of the Act and the amount received was chargeable to income of the assessee - at the stage of registration, the CIT exemption cannot deny the registration merely on the basis of the receipt of loan amount. No other reason was given by the CIT exemption for rejecting the application for registration. For that purpose we may rely upon decision in the matter of Ananda Social Educational Trust [ 2020 (2) TMI 1293 - SUPREME COURT] - assessee is entitled to registration under section 12AA - Decided in favour of assessee. - ITA No. 517/Amr/2018 - - - Dated:- 16-8-2021 - Laliet Kumar, Member (J) And Dr. Mitha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the contradiction in the stand of the assessee wrt amount received in the previous years and therefore the CIT exemption has held that the activities of the assessee are not genuine. 2. Feeling aggrieved by the order passed by the CIT exemption the assessee is in appeal before us on the ground mentioned hereinabove. 3. In the written submission appellant stated that M/s. Bajaj Educational Society filed an application with the LD. CIT(Exemption), Chandigarh on 14.03.2018, for the purpose of getting itself registered u/s. 12AA of the Act. The application society received a show cause notice from DCIT, (HQ) Exemptions, Chandigarh with regard to the above said application filed by it, to which part reply was filed on 13.08.2018 and the reply to the balance points was filed on 04.09.2018. DCIT(HQ) Exemption asked various queries, the reply to which is as under: I. Details of Corpus received by the Applicant society during the FY 2015-16 are as under: Name of donor (Voluntary contributions) donations Nature of donation Mr. Joginder Singh Bajaj ₹ 1,48,34 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015- 16 13,78,860 31,63,811 17,84,951 39,98,361 57,83,312 2016- 2017 99,14,470 78,05,472 21,08,998 34,86,185 13,77,187 VII. From the above details, it can be construed that the Applicant Society had not earned any surplus after Depreciation. Therefore, the whole income earned had been applied by the Applicant Society for the charitable purposes (Educational Activities) carried out by it. Further, it is submitted that expenditures mentioned in column No. (3) above does not include any capital expenditure incurred by the applicant society but it includes only the revenue expenditure incurred by the applicant society in the respective year. However, the applicant society had claimed depreciation on the capital expenditure incurred by it as per column (5) above. Therefore, in both the above years, the applicant society earned a deficit i.e. excess of expenditure over income. VIII. DCIT (HQ) Exemption asked that whether the applicant society had been mainta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acceptance of loan by the assessee in the previous year and thereafter the assessee in the financial year 2015-16 had claimed that the loan received by were in the nature of donation. In paragraph 7 the CIT had mentioned as under 7. In response to the additional queries the applicant society submitted the reply. As regards the reason for shifting from section 10(23C) (iiiad) to section 12AA of the Income Tax Act, the applicant has contended that tire gross receipts of the applicant society are ₹ 99,14,469/- during the F.Y. 2016-17 and are as per tire fee receipts, bills and vouchers maintained by the applicant society. Further the applicant society stated that gross receipts has increased to ₹ 1 crore in the F.Y. 2017-18, due to which exemption under section 10(23C)(iiiad) of the Act will not be available to the applicant society during F.Y. 2017-18 and this was the reason of the above said application under section 12AA of the Act is made by the applicant society. The above is not a cogent rationale provided for shifting to the present code. The applicant has claimed in his reply that gross receipts has increased to ₹ 1 crore in tire F.Y. 2017-18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore we reject the same. 11. Another reason for rejection given by the CIT exemption was with respect to acceptance of loan and thereafter in the financial year 2015-16, alleging it to be the donation 12. In our considered opinion at the stage of grant of registration two issues were required to be examined namely whether the purposes of the assessee are charitable in nature and secondly to find out whether the activities of the assessee are genuine or not. Merely on the basis of receipt of loan, and subsequent conversion of loan into donation, Assessee would not be disentitled for the registration under section 12AA of the income tax Act. The correct stage to examination of funds/utilisation of the amount/corpus by the assessee, would be at the time of assessment. For that the disallowance can be made if any, on examination at the assessment stage it is found that the assessee is not entitled to the exemption under section 11 of the Act and the amount received was chargeable to income of the assessee. However, at the stage of registration, the CIT exemption cannot deny the registration merely on the basis of the receipt of loan amount. No other reason was given by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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