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TMI Blog2022 (3) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of hearing objected to the assessee's application for condonation of delay merely on the general reason of Covid-19. 3.1 We have heard both the parties and perused the materials available on record. We find that there is national wide Covid 19 Pandemic situation which is beyond the control of the human being. It is observed that the assessee is prevented by sufficient cause in not filing the appeal in time. The assessee also relied on the extension of limitation granted by the Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020. 3.2 In respect of condonation of delay, the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji, 167 ITR 471 observed as under:- ''The Legislature has conferred power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression " sufficient cause " in section 5 is adequately elastic to enable the courts to apply the law in a meaningful manner which subserves the ends of justice--that being the life-purpose of the existence of the institution of courts. A justif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enting the welfare schemes. It is noted that on 13-09-2019, the assessee society under a bonafide belief filed an application u/s 12A(1)(ab) of the Act in Form No. 10A, as the section has been amended and therefore, to comply with the amended provision w.e.f. 01-04-2018. The application dated 13-09-2019 was filed to place on record the amendment made on 04-05-2013 in the objects of the society. 7. On realizing the fact that there was no need of making an application u/s 12A(1)(ab) which came subsequently but the amendment was made in 2013. Therefore, the assessee society filed a letter dated 06-03-2020 seeking permission to withdraw application made by the assessee society. 8.1 Even though the assessee society has withdrawn its application, ld. CIT(E) went on to examine the facts of the case and ultimately rejected the registration u/s 12AA of the Act vide order dated 20-09-2020 wherein he has observed that :- (a) The applicant society is already in receipt of 12AA certificate dated 20-03- 2001. Later on, the applicant society modified its objects on 04-05-2013. (b) Hence, the contention of the ld.AR in withdrawal application is not acceptable as per facts of the case. (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out activities under the category of General Public Utility (GPU) only and is in receipt of contractual payments from various payers which forms integral and substantial part of income in I/E Accounts of the applicant society for different FYs. 8.6 Accordingly, information u/s 133(6) of the I.T. Act was sought from various deductors/ payers. The deductors furnished bill/ vouchers, MOU/Contract Agreement which are placed on records. In most of the cases, tenders were invited and thereafter agreements/MOUs were made and work orders were executed. The MOUs agreements specifically states about the work to be performed by the assessee society for which payments at a certain rate to be made by the deductors. It is an evident that the payers had made payments due to work performed by the assessee society as per conditions laid down in MOUs/ Agreements. Further, the Payers have also deducted TDS on such payments under section 194C of the I.T. Act which reveals that the payments are contractual payments after completion of work as desired by the payers. Since the work performed/ done by the assessee society is at the instance of conditions of MOU/Agreements only and not out of the societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct amounts. The activity of the assessee confined to such sub-contracts cannot be deemed to be a charitable activity and hence the Trust is not entitled to Registration u/s 12AA... The assessee, as rightly found is engaged in a business and there can be no registration as a charitable institution.'' 8.9 Similar issue came up before ITAT, Jaipur Bench in the case of M/s. Eternal Foundation vs CIT (Exemptions), Jaipur in ITA No. 1504 & 1505/JP/2018 wherein the ITAT, Jaipur Bench has observed as under:- ''Thus the ld. CIT (Exemptions) has followed the decision of Hon'ble Kerala High Court in the case of CIT vs Annadan Trust (supra) which in our view is squarely applicable in the facts of the present case where the assessee is engaged in the activities which are sponsored by the Pharmaceutical Companies (MNCs) in their regular business activity. Accordingly, in view of the above facts, we do not find any error or illegality in the impugned order of the CIT (Exemptions)'' Tribunal has clearly held that the activities which have been performed by the applicant society wherein the payments have been received at the instance of fulfillment of the conditions as laid down in MOUs & A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (pages 6 to 32 of CIT(E) order) held that the assessee society was carrying out charitable activities under the limb of General Public Utility (GPU). 1.2 On further observing that for most of the work, which the assessee society was doing, tenders were invited, MOU/Agreements were entered into, assessee society was performing works as specifically stated in the MOU/Agreements and TDS u/s 194C was deducted, ld. CIT(E) opined that the assessee society was carrying out activities of commercial nature i.e. activities in the nature of trade, commerce and business for consideration and with profit motive. 1.3 Income in Income and Expenditure Account from such commercial activities was calculated and it was observed that from F.Y. 2016-17 to F.Y. 2018-19 aggregate receipts from such activities exceeded 20% and, hence, as per the proviso to section 2(15) the activity of the assessee society were treated to be not for charitable purpose. 1.4 It is submitted that perusal of Income and Expenditure Account and Form 26AS for F.Y. 2016-17 to F.Y. 18-19 (pages 6 to 32 of CIT(E) order) reveals that the assessee society received amounts from Government, Government Companies, Government Agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment, Jhunjhunu Proper functioning of General Provident Fund Any other object of general public utility Deductor 9 - page 16, Deductor 7 - page 21, Deductor 4 - page 27 Mahila Suraksha Salah Kendra Jhunjhunu and Ajmer Programme Officer Women Empowerment (DWDA) Ensuring safety and security of the aggrieved women Any other object of general public utility Deductor 11 - page 16, Mahila Adhikarita Churu and Amrita Haat Mahila Adhikarita Churu Zila Mahila Vikas Abhikaran Jhunjhunu Running Beti Bacho Beti Padhao, etc programmes Education Deductor 13 - page 17, Deductor 13 - page 23 ICICI Commission ICICI Bank Limited Encouraging Micro Finance initiative by developing Self Help Groups and providing financial services to the unreached and unserved poor household. Relief of poor Deductor 15 - page 18, Deductor 15 - page 25, Tourist Department Jhunjhunu Tourist Reception Centre Jhunjhunu Promoting Tourism and preserving monuments Preservation of Monuments and places Deductor 12 - page 22, Deductor 8 - page 29 Insurance Life Insurance Ensuring insurance of Poor Relief of Poor Deductor 9 - page 22 Deductor 6 - page 28 HDFC Bank Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through other specialized NGOs is encouraged. Similar MOU/Agreements are entered into and amount is handed over to local NGOs for applying the same for charity in accordance with the terms of MOU/Agreement. 1.10 It is submitted that it is not the case of ld. CIT(E) that the receipt of amounts from the parties mentioned in Income & Expenditure A/c or Form 26AS were utilized elsewhere and not for the purpose of advancement of object of general public utility as per MOU/Agreements i.e. for the welfare schemes. 1.11 Ld. CIT(E), prejudiced his mind, without looking at the actual activities carried out, because the payer deducted TDS. It is submitted that the fact of deduction of TDS would not alter the nature of activities carried out by the assessee society. 1.12 Therefore, proviso to section 2(15) do not operate in the case of assessee society. Whatever activities were undertaken were charitable and not trade, commerce or business. Reliance is placed on the decision of Hon'ble High Court of Allahabad in the case of CIT vs Shri Bajaji Samaj Vikas Samiti [2018] 91 taxmann.com 26 (All.). "..27. Merely because the State had itself not been able to cook and supply cooked food by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re be a charitable purpose under Section 2(15) of the Act..." 1.13 Ld. CIT(E) has misplaced his reliance on judgments of Hon'ble Kerala High Court in the case of CIT vs Annadan Trust [2018] 96 taxmann.com 207 (Kerala) which is distinguishable as under: In the said case Naandi Foundation and not the Government outsourced the work of Preparation of Food for Mid-Day meals to Annadan Trust. Meaning thereby Annadan Trust was not the NGO which was selected by the Government whereas in the case of the assessee society it is the NGO which has been selected by the Government itself for acting as its agent/ extended arm. Further, the work of Annadan Trust was restricted to preparation of meal whereas the assessee society from start to end is responsible for implementation of the scheme. Also there was a specific finding in Annadan Trust case that the trust was not carrying out activities in accordance with its objects which is not the case with the assessee society. 1.14 Without prejudice to above it is submitted that if two Non-Jurisdictional High Courts have contrary views, on in favour of assessee is to be followed. Reliance is place on the judgment of the Hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(E) is without jurisdiction and contrary to principles of natural justice 3.1 The order of ld. CIT(E) is without jurisdiction. The proceedings were initiated on the basis of application filed by the assessee society. This application was withdrawn by the assessee society. Not allowing withdrawal of such application is not within the powers of ld. CIT(E). No law confers such authority to ld. CIT(E). This application is not like appeal before CIT(A) or ITAT which cannot be withdrawn. Even fresh application for registration are routinely allowed to be withdrawn by the Department. Thus, there was no foundation for the proceedings to continue or sustain. 3.2 It is further submitted that the Show Cause Notice issued by the ld. CIT(E) was for rejection and not for withdrawal of existing registration (CIT(E) page 2 and 3). The application having been withdrawn and, therefore, the issue of rejection did not arise as ld. CIT(E) had no Locus Standi. 3.3 No Show Cause Notice was given by ld. CIT(E) for withdrawal of existing registration. Without giving specific Show Cause Notice for withdrawal the assessee society was never afforded opportunity as specifically required u/s 12AA(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity. The Tribunal also noticed that when there is employment given in pursuance of a contract work, there are many labour friendly legislations which had to be complied with by the employer. Mere employment of people from the weaker sections of Society would not absolve the contractor from the labour legislations and such work is one carried out with a clear intention at making profit. The assessee having bid in a competitive tender had been awarded the work for a consideration agreed upon between the parties and carrying on of such work cannot be categorised as a charitable work merely because the poor or persons from marginsalised sections are given employment. The execution of the work awarded by the Railways, is not a public utility service carried on by the assessee and the mere fact that the poor are employed in such execution of contract awarded, would not make it a charitable purpose.'' 11. Looking to the receipts being contractual in nature and working placed by ld. CIT(E) in his order, he has argued to uphold the view of ld. CIT(E). 12. In the rejoinder, the ld.AR submitted that the legal ground can be raised at any stage and thus the same is raised before the Bench. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any prior permission for any amendment of the object of the society nor is there any specific provision requiring the assessee to intimate the Department about the amendment in the object of the society at relevant point of time. It is important to note that Finance Act 2017 has brought an amendment in Section 12A, effective from A.Y. 2018-19 by inserting a new sub-clause (ab) in sub-section(1) of Section 12A requiring the trust/ institution to file an application to ld. CIT(E) within 30 days of the adoption /modification of the object which do not conform the condition of registration. It is thus very clear and not disputed by ld. DR also that this amended provision was not in force when the amendment in the object carried out in 2013. This legislative development also vindicates the appellant's stand that there was no statutory requirement at the relevant time to intimate the amendment/ modification in the object of the institution claiming exemption u/s 11 of the Act.Since then there is no change in the facts and circumstances of the case, the fundamental facts accepted by the Department in past has to prevail as per principles of law laid down by the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Emphasis supplied] 17. Looking to ld.AR's submission on merits explaining each activities specifying that they are within the definition of Section 2(15) as tabulated in para 1(1.6) of the assessee and the comparison of the receipts alongwith the limb of Section 2(15), the GPU percentage is also less than 20%, the same is reproduced in assessee's submission hereinabove and thus even on merits the views of ld. CIT(E) is incorrect on facts . 18. The decision that the ld. DR as pointed out in relation to the execution of commercial contract of Railways whereas in the case before us the same is implementation of various relief schemes and therefore, the same is differentiated. 19. In view of the above finding, it is apparent and clear that the order passed by the ld. CIT(E) dated 20-03-2001 cancelling the registration of the Society u/s 12A(1)(ab) merely on a finding that the assessee is involved in the activities of the nature of business / commerce within the meaning of Section 2(15) of the Act is bad in law as well as on facts and therefore, the registration canceled is required to be continued and thus the appeal of the assessee is allowed as indicated hereinabove. 20. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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