2024 (1) TMI 478 - AT - Income Tax

Exemption u/s 11 - genuineness of the activities of Society - CIT(Exemptions) had rejected the claim of assessee u/s 80G(5)(vi) of the Act on the ground, inter alia, that gross receipts in all the five years are far in excess of Rs. One crore and the assessee Society has wrongly claimed exemption u/s 10(23C)(iiiad) - HELD THAT - As decided in SHIV PUBLIC SCHOOL MANAGING COMMITTEE 2018 (2) TMI 2109 - ITAT DELHI society as indulging predominantly in activities on cash basis and has kept substantial amounts of its so-called receipts out of the regulated banking channels. Society s indulgence in cash transactions makes the activities not amenable to proper verifications. It doesn t make the functioning of the entity, based on public funding and sitting over public money, transparent and amenable to scrutiny by the beneficiaries from amongst the general public as also the regulating agencies. In the light of aforesaid discussion the issue is restored to the file of Learned CIT(Exemptions) to examine the amended and active Memorandum of Association and bye-laws of the Society for the purpose of satisfaction about the genuineness of the activities of Society and pass order afresh in the light of aforesaid observations. Appeals are allowed for statistical purposes.

Summary

Issues Involved:
The judgment involves issues related to the examination of the claim of the assessee under sections 12AA & 80G(5)(vii) of the Income-tax Act, 1961, based on the Memorandum of Association (MOA) and Bye-laws of the Society, as well as the eligibility for exemption under section 10(23C)(iiiad) of the Act.

Examination of Claim under Sections 12AA & 80G(5)(vii):
The assessee appealed against orders passed by the Commissioner of Income Tax (Exemptions) based on the limited scope of activities as per the Memorandum of Association dated 29.04.1994. The assessee highlighted an amendment in the MOA under the Haryana Registration And Regulation of Societies Act, 2012, expanding the aims and objectives to include various educational institutions. The Learned CIT(Exemptions) erroneously considered the scope based on the old MOA, failing to acknowledge the updated objectives. The assessee's claim under section 10(23C)(iiiad) was mistakenly examined, as the focus should have been on the genuineness of activities under Section 12AA only.

Eligibility for Exemption under Section 10(23C)(iiiad):
The judgment highlighted errors in the examination of the assessee's eligibility for exemption under section 10(23C)(iiiad) due to consistently high receipts above Rs. One crore. The assessee had wrongly claimed exemption under this section in past years, despite exceeding the income threshold. The applicant society was found to be running a college not originally intended as per the MOA, leading to doubts about the genuineness of activities. Additionally, the society's significant cash transactions raised concerns about transparency and proper verification. The judgment directed the file to be reexamined to ensure compliance with the amended Memorandum of Association and bye-laws for the satisfaction of the activities' genuineness.