TMI Blog2024 (2) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 12AB(1)(b)(i)(B), still Ld. CIT(E) has valid reasons for her dissatisfaction on the basis of reported deficiencies and non-compliances on the part of assessee which may adversely affect the objects, therefore, the impugned order of cancellation cannot be squarely suffering with error of law and thus, the request of assessee to struck down the same cannot be accepted. Since the material effect of deficiencies and non-compliances on the accomplishment of objects of the assessee are not specifically brought on record by the Ld. CIT(E), therefore, in the interest of justice, for the sake of verification and clarification regarding effect of the deficiencies and non-compliance towards the achievement of the objects of the assessee university, we find it appropriate to restore the issues raised back to the Ld. CIT(E), to revisit the application of the assessee for grant of registration u/s 12AB - Assessee appeal partly allowed by way of remand. - Shri Ravish Sood, JM And Shri Arun Khodpia, AM For the Assessee : Shri Nikhilesh Begani, CA For the Revenue : Shri S.K. Meena, CIT-DR ORDER PER ARUN KHODPIA, AM: The captioned appeals are filed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the ratio of the Supreme Court decision in New Noble Educational Society v. CCIT [2022] 143 taxmann.com 276 as the genuineness of the appellant is not under dispute being a Central Government owned/controlled University exempt under section 10(23C). Ground No. 4: That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal. 3. The Grounds of Appeal raised by the assessee in ITA No.173/RPR/2023, which pertains to registration u/s 80G are as under: Ground No. 1: That the order passed by the Ld. CIT (E) is bad in law in the light of the fact that the appellant is directly exempt under section 10(23C) (iiiab) being substantially funded by Govt. and the assessee is entitled to avail registration under section 12A a 80G as the first proviso to section 11(7) excludes only those Organisations which are subject to approval under section 10(23C). Ground No. 2: That the CIT(E) erred legally and factually in treating various consistently followed accounting entries as gross irregularities for the following reasons: (i) The income of the appellant is a part of the consolidated fund of India and therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that the registration under the impugned sections should be on the basis of objects of the trust and its activities. It is further argued that the Commissioner, who is the competent authority is bound to satisfy himself that the object of the trust are genuine, and the activities are in furtherance of objects of the trust. In this respect Hon ble Jurisdictional High Court of Chhattisgarh in the case of CIT v Chhattisgarh Urology Society in TAXC No.159 of 2017 and CIT v Rishabh Foundation Trust in TAXC No.166 of 2017, has categorically accorded the finding that under the provisions of section 12A, the Commissioner is not empowered to assess the objects vis- -vis the books of accounts but should look into the objects of the society that they are charitable in nature or not. Ld. AR further placed his reliance on the order of this tribunal in the case of M/s Shri Agrasen Jan Kalyan Trust v. CIT(E) in ITA No. 334/RPR/2016 and Swayam Siddha Foundation Society v. CIT(E) in ITA No. 93 312/RPR/2023, wherein the issue regarding the charitable nature of objects and the activities to be carried out in accordance with such objects are to be looked into by the Commissioner is decided in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted for in the balance sheet. It was asked as 'Co why the interest income has not been offered. Reply of the Assessee:- A interest earned in FY.2021-22 Rs. 5,20,11,467/belongs to corpus fund. In the FY .2020-21 under Salary etc. other Recurring Grant was Sanctioned Rs. 18,10,00,000/- under this grant the excess Expenses of Rs. 1,02,58,005/- is temporary utilized out of Corpus fund and shown in utilization certificate. In FY2021-22 this amount is returned to corpus fund. (Utilization Certificate of FY2020-21 FY.2021-22 attached Page No 1 to 6) Remarks by the undersigned- The assessee has accepted that the interest of Rs 5,20,11,467/- has not been offered as income during the year and explanation offered by the assessee is not acceptable. The assessee was required to offer the interest amount as income of the year. The assessee also accepted that Rs. 1,02,58,005/- is temporary utilized out of Corpus fund which is also in violation to the provisions of the Act as the Corpus Fund has to be utilized for the designated purposes only and general expenditure cannot be incurred out of corpus fund. (iii)lssue raised in show cause Notice- in FY 2021-22, Regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actuarial valuation as per the format of accounts prescribed by the Ministry of Expenditure and CAG norms. Reply of the Assessee: The objective of provision for employees' terminal benefits to recognize a liability when an employee has provided service in exchange for employee benefits to be paid in future. Every year university receives letter from UGC for Finalization of Budget Estimates for Grant of salary, Employees Retirement and Terminal Benefits etc. as it is 100% funded. In reply university provides number of employees to be retired in that particular F.Y. and amount due for payment of Retirement and terminal Benefits which UGC disburses. Since retirement of employees is a continuous process, the disbursement of such amount for retiring employees by the UGC is done for one year only whereas provision is required for all the employees, so if we assume that all the employees will retire the UGC shall disburse whole amount. Accordingly, as stated above as per format of Annual Accounts by MHRD Schedule 15 requires to make provision for Employees Retirement and Terminal benefits, university provisioned 271.16 Crore (Copy of Actuarial Valuation Attached Page No. 19 to 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cond proviso importantly indicates that before granting approval to any fund, trust or institution, the Commissioner or the concerned authority 'may call for such documents' including audited annual accounts or information from the fund, or trust or Institution etc., as is deemed necessary for recording satisfaction about the genuineness of the activities. The judgment in American Hotel (supra) dealt extensively with the effect of the provisos to Section 10(23C). While doing so, the court made certain remarks with respect to the effect of these provisos characterizing a few of them as those dealing with the stage of considering applications for approval or registration and other as those dealing with application of income or receipts of the trust. In respect of the latter, this court was of the opinion that the question of application of income or profits could arise only at the stage of assessment. The court was also of the opinion .that the audited books of accounts would be of little or no relevance at the stage of registration or approval. Having regard to the plain terms of the second proviso to Section 10(23C), which refers to the procedure for approval of application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the settled principle of law. Ld. AR placed his reliance on following case laws: Ananda Social Educational Trust v. CIT [2020] 426 ITR 340 (SC) 9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration. 10.It was argued before us that the Commissioner is required to be satisfied about two things - firstly that the objects of the trust and secondly, its activities are genuine. If there have been no activity undertaken by the trust then the Commissioner cannot assess whether such activities are genuine an therefore, the Commissioner is bound t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not doing anything in the other walks of life. A charity for one particular object is not for destroying the career for an individual which he is otherwise entitled to profess. If this ground is considered to be affecting the genuineness of the trust, people successful in different walks of life would never engage in charitable activity. 11. In the matters of Commissioner of Income Tax vs Vijay Vargiya Vani Charitable Trust1 and Fifth Generation Education vs Commissioner Income Tax2, it is held that at the stage of Section 12A, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No.10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this State, it is not proper to examine the application of income. 12. In the case at hand, the order passed by the CIT does not say in definite terms, that the objects of the society are not charitable in nature. Merely because the trust consists of Urologist Doctors and the charitable activity may mutually benefit those members, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is hereby dismissed. M/s Shri Agrasen Jan Kalyan Trust v. CIT(E) in ITA No. 334/RPR/2016 10. We have heard the rival contentions, perused the material available on records and case laws relied upon. In view of the aforesaid decision in the case of Ananda (supra), since the actual activities of the trust cannot be the deciding factor while granting the registration u/s 12A, but the object of the trust should have been looked into, the activities have to be looked into by the Assessing Officer at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s.12AA of the Act, which is substantiated by the department itself by granting registration u/s 12AA on 25.03.2021 vide order ITBA/EXM/S/12AA/2020- 21/1031751676(1). In such circumstances, respectfully following the judgment in the case of Ananada (Supra), we are of the considered opinion that the rejection of application for registration u/s 12AA of the Act by Ld. CIT(E) was erroneous application of law, thus, cannot sustain, accordingly we quash the same and direct to grant registration to the assessee as per law. Swayam Siddha Foundation Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: 10. We have heard the rival contentions, perused the material available on records and case laws relied upon. In view of the aforesaid decision in the case of Ananda (supra), since the actual activities of the trust cannot be the deciding factor while granting the registration u/s 12A, but the object of the trust should have been looked into, the activities have to be looked into by the Assessing Officer at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s.12AA of the Act, which is substantiated by the department itself by granting registration u/s 12AA on 25-3-2021 vide order ITBA/EXM/S/12AA/2020-21/1031751676(1). In such circumstances, respectfully following the judgment in the case of Ananda (supra), we are of the considered opinion that the rejection of application for registration u/s 12AA of the Act by Ld. CIT(E) was an erroneous application of law, thus, cannot sustain, accordingly we quash the same and direct to grant registration to the assessee as per law. 11. In terms of the aforesaid observations respectfully following the judgment in the case of Ananda (supra), in absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iting registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing, (I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration; (II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;] (c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,] and send a copy of such order to the trust or institution. 11. On perusal of the aforesaid provisions, wherein the principal Commissioner or Commissioner on receipt of application of the assessee is required to make inquiries necessary in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIVIL APPEAL NO. 3795 OF 2014 M/S NEW NOBLE EDUCATIONAL SOCIETY APPELLANT(S) VERSUS THE CHIEF COMMISSIONER OF INCOME TAX 1 AND ANR. RESPONDENT(S), Para 62 held that The second proviso by sub-clause (ii) requires the Commissioner to make such enquiries to specify about the genuineness of the activities of the fund, trust or institution and compliance of such requirements of other laws in force by such fund, trust or institution. Upon considering the materials the Commissioner or the concerned authority can pass -an appropriate order granting approval for a specific period of time or reject the application. The second proviso importantly indicates that before granting approval to any fund, trust or institution, the Commissioner or the concerned authority 'may call for such documents' including audited annual accounts or information from the fund, or trust or Institution etc., as is deemed necessary for recording satisfaction about the genuineness of the activities. The judgment in American Hotel (supra) dealt extensively with the effect of the provisos to Section 10(23C). While doing so, the court made certain remarks with respect to the effect of these pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mandated under the provisions of section 12AB(1)(b)(i)(B), still Ld. CIT(E) has valid reasons for her dissatisfaction on the basis of reported deficiencies and non-compliances on the part of assessee which may adversely affect the objects, therefore, the impugned order of cancellation cannot be squarely suffering with error of law and thus, the request of assessee to struck down the same cannot be accepted as such, however since the material effect of deficiencies and non-compliances on the accomplishment of objects of the assessee are not specifically brought on record by the Ld. CIT(E), therefore, in the interest of justice, for the sake of verification and clarification regarding effect of the deficiencies and non-compliance towards the achievement of the objects of the assessee university, we find it appropriate to restore the issues raised in the present appeal to the Ld. CIT(E), to revisit the application of the assessee for grant of registration u/s 12AB and to dispose of the same as per law, in terms of our aforesaid observations. Needless to say, the assessee shall be provided with reasonable opportunity of being heard. 13. In the result, ITA no. 172/RPR/2023 of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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