TMI Blog2021 (8) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... rial which can be produced by the assessee or filed on record by digital mode. In the case of CIT-1, Chandigarh vs. Sri Guru Gorakh Nath Charitable Educational Society ,[ 2015 (5) TMI 363 - PUNJAB HARYANA HIGH COURT] had answered the question that Whether power of Commissioner to look into objects of society and genuineness of same could not be doubted when basis was of non-supply of information and as such it would be appropriate for Commissioner to undertake exercise afresh on basis of application which had been filed keeping in view material which could be produced by assessee and matter remanded back. Hon'ble Apex Court in the case of Ananda Social Education Trust Vs. CIT [ 2020 (2) TMI 1293 - SUPREME COURT] has held that Even without any activity having been undertaken by trust, it is entitled to be considered for registration under section 12AA and various high court on the issue for grant of registration, that the CIT(E) has to be examine the genuineness of the objects only the stage of registration, and not genuineness of activities - we hereby set aside the order of the CIT(E) with a direction to decide expeditiously, the application, filed for registrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. That submissions filed during the course of hearing has not been considered properly. 8. That no reasonable and sufficient opportunity was afforded to the assessee to hear the case properly. 2. The appellant society is claimed to be an Educational Institution, which has been in operation 20.01.2004. It has filed an application in Form No. 10A (i.e., for seeking registration u/s. 12AA of the Act) before the Worthy CIT(E) on 06.01.2016 while adjudicating upon, the CIT(E), has rejected the application of the Assessee by holding that there are certain defects and deficiencies in the basic documents and rules and regulations and doubts about the charitable activities to verify basic purpose of objectives of the Society. The CIT(E), rejected the assessee's application by holding that the Appellant Society was not incorporated for solely education purpose and had been engaged in profit making activities. 3. At the outset, the Ld. Counsel Sh. Sudhir Sehgal, Advocate submitted that the Assessee is carrying on the charitable activity of imparting education as defined u/s. 2(15) of the Act through its society. The Assessee has been duly maintaining books of accounts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(Ex.), while drawing this conclusion has totally overlooked the facts of the case of the Assessee Society, firstly, imparting of education is the main objective of the society as stated the memorandum of association vide point no. 1 2. (Copy of the Memorandum of Association is forming part of the Paper Book from Page 1 to 7) . Secondly, the main activity carried on by the society is imparting education through various schools, colleges and institutions is clearly evident from the Balance Sheet and Income Expenditure Account of the Assessee society of past many years duly filed before Worthy CIT(Ex.). (Copies of the Balance Sheets for AY 2013-14, 2014-15 2015-16 is forming part of the Paper Book form Page no. 20 to 108). Thirdly, the scope of inquiry is restricted only to ascertain the genuineness of the activities of Assessee society. Once it has been established that the Assessee Society is engaged in the activity of imparting education, it cannot be concluded that the Assessee Society does not exist for the purpose of imparting education when the Financial Statements are depicting a picture completely opposite to the conclusions of Worthy CIT(Ex.). Also, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet. (Copy of the reply dated 13.12.2016, referred in the above paragraphs is forming part of the Paper Book at Page No. 19) 2. Further, regarding imparting of education, Worthy CIT (Exemption) has not pointed out any defect in the application made by the Assessee in Form No. 10A. It has been held by various Hon'ble Courts that the Worthy CIT is not an assessing authority and unless there is any specific defect in the application of the Assessee, the registration under section 12AA of the Act cannot be rejected. The defects as found by the CIT cannot be base for rejecting the application of the Assessee. 3. Further the following points are worth to consider: a) The CIT has not given any observation regarding the ongoing School/Colleges for past many years. b) The CIT has not given any comment regarding the imparting of education being the charitable activity and duly covered u/sec 2(15) of the Act. c) The CIT has not stated as to how the working of the Assessee Society is not a charitable activity. d) The CIT has not given any comment regarding the free education given to the students of the School/College. e) The CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) CIT vs. IILM Foundation Academy as reported in 389 ITR 148 order dated 16.09.2016 (placed on Page No. 27-32 of judgment set) k) CIT vs. Baba Deep Singh Educational Society in ITA No. 881 of 2010 (P H HC) (placed on Page No. 33-37 of judgment set) l) American Hotel and Lodging Association Educational Institute vs. CBDT 301 ITR 86(SC) m) Commissioner Of Income tax Vs. Mahasabha Gurukul Vidyapeeth Haryana (2010) 326 ITR 25 (Pun) (placed on Page No. 38-39 of judgment set) n) Tishir Shiksha Prasar Samiti vs. CIT in ITA No. 412/Agra/2011 order dated 18.05.2012 5. The Ld. CIT(DR) relied on the impugned order. He contended that the aims and objects mentioned at Para 4 of the MoA reads that the society is established to arrange social religious programs, to organize cultural programs and to collect funds for public welfare schemes by issuing various schemes. These aims and object carried out by the society's were against its primary objective of education as claimed. 6. We have heard the rival contentions and perused the material on record and case laws relied. The CIT (E) has discussed on Page No. 3 in Para 7 of the impugned order that there is no menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at no reply to the show cause notice dated 13.12.20106 was filed by the Assessee, is factually incorrect as the Assessee had duly filed the reply to the notice via email sent to the office of Worthy CIT(E) on 20.12.2016 along with all the supporting documents as an attachment of the mail. (APB, Pg. 19A); that the Assessee duly filed the consolidated accounts for the period under consideration alongwith the preceding two years, as attachment No. 1 of the reply sent via mail (APB, Pg. 19A) and that the assessee explained in point No. 4 of reply sent via mail (APB, Pg. 19A), that the inter unit fund transfers were made by the society within the institutes, supervised and controlled by society itself. He further explained that all the institutions are controlled and managed by the society, the books of accounts of the institutions are consolidated into the accounts of the society and the Return of Income of the Society is filed on the basis of such consolidated financials accounts; that there were branches of the Assessee Society which are managing the different spheres of education for the society and so it was a case of single Assessee and the inter unit balances standing in one or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowing the unit to generate other expenditure required for running a school clearly point out to non-transparent accounting practices and unclear depiction of the activities, would require production of necessary books and statement of account to corroborate the charitable purpose of activities to satisfy the object of imparting education as a charity and not profit earning. 11. We understand that under the statute, it is the satisfaction of the CIT(E) that the applicant society was an educational institution existing solely for educational purpose and not for purposes of profit making. In the instant case, the society's bye-laws do not specify the institution for which the society has been registered and this is held to be a clear departure from the tenet established in the case of Pinegrove International as the assessee society was not only undertaking several activities with an eye on profit, but it had several other activities apart from imparting education. 12. From the perusal of section 12AA, it is revealed that the Commissioner has to satisfy himself of the objects of the trust and the genuineness of the activities and after giving an opportunity of being heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich reads as under: 12AA. Procedure for registration--(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall-- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- (i) shall pass an order in writing registering the trust or institution; (ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. (1A) All applications, pending before the Principal Chief Commissioner or Chief Commissioner on which no order has been passed under clause ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciding the application under Section 12AA and the enquiry regarding the genuineness of the activities of imparting education with a charitable purpose is to be kept in mind. The objects of the trust, thus, have to be taken into consideration. Section 2(15) defines charitable purpose and the same includes relief in education and advancement of any other object of general public utility. In case the utility is carried out in the nature of trade, commerce, business, the proviso provides that the same will not be a charitable purpose. Sub-section 2(15) reads as under: 'Sub-section 2 (15) - charitable purpose includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment. 10. In such circumstances, the heavy reliance by the counsel for the assessee upon the judgment of the Division Bench in the case of Pinegrove International Charitable Trust (supra), as has been done by the Tribunal, also, would be without any basis. The power of the Commissioner to look into the object ..... X X X X Extracts X X X X X X X X Extracts X X X X
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