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TMI Blog2016 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ociety applied to the Commissioner of income tax, Haldwani, for granting registration under section 12AA of Income- tax Act, 1961 (in short the 'Act') on 16/04/2014. The Commissioner of Income Tax refused to grant registration to the society on the ground that members of the management committee were found to be violating the primary object of the society that it was not for profit motive. The Commissioner of Income Tax in his order observed that a survey under section 133A of the Act was conducted on 04/08/2010 and in the course of survey, it was found that four ladies, which were family members of the management committee, were paid salaries without rendering any services. The Commissioner of Income Tax also noted that the assessee society was rejected approval under section 10(23C)(vi) of the Act by the Chief Commissioner of Income Tax, Dehradun vide his order dated 29th March 2011. Aggrieved with refusal to grant registration under Section 12AA of the Act by the Commissioner of Income Tax, the assessee is in appeal before the Tribunal. 3. The Ld. Authorized Representative of the assessee submitted that the assessee fulfils both the conditions i.e. the charitable object and gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh the finding relates to the financial year 2010-11, I am not satisfied with the activities of the assessee being charitable in nature and refused to register it under section 12 AA of the IT Act, 1961." 6. The facts gathered during the course of survey under section 133A of the Act and explanation submitted by the assessee in this respect are mentioned in detail in para 4 of the assessment order of the assessee society for assessment year 2011-12, which is reproduced as under: "4. Facts gathered during the course of survey proceedings: At the time of survey proceedings, an attendance register of all the teachers was examined and on examination, it was noticed that the most of the teachers had put their signatures on the attendance register whereas the four lady teachers did not sign on the attendance register and the column for signature was left blank right from the month of April 2010 till the date of survey on 04.08.2010. The names of the lady teachers are as under: 1. Smt. Sonal Agarwal 2. Smt. Prachi Agarwal 3. Smt. Kamlesh Agarwal 4. Smt. Shruti Agarwal Even all of the four lady teachers were found absent from duty on the day of survey. The Principal of the sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot found convincing by the Assessing Officer, as no such attendance register was found or produced in the course of survey proceeding. Further, the name of 4 lady members was entered in the attendance register of the teachers and no attendance was marked against their name, clearly established that the subsequent explanation by the assessee society of having separate attendance register was not true. The Assessing Officer has observed that the remuneration paid to those family members was also more than arm's length remuneration. The facts of the case clearly show that the assessee society was engaged in siphoning of money under the garb of carrying out charitable activity in the name of education. The authorized representative of the assessee submitted a list of various cases, however at the time of hearing he relied on the following cases: 1. Fifth General Education Society versus CIT (1990) 185 ITR 634 2. DCIT versus Cosmopolitan Educational Society (2000) 244 ITR 494 (Raj) 3. DIT versus Parivar Sewa Sansthan (2002) 254 ITR 268 (Del) 4. Orpat charitable trust versus CIT (2002) 256 ITR 690 (Guj) 5. Guru Govind Singh Education Society versus CIT (2009) 118 ITD 207 (ASR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (d) of the Act, however the Tribunal found that salary, rent, etc, paid to Chief Executive Officer and Project Coordinator were not excessive and the loan allowed to certain foundation was for promotion of its charitable objective and the expenditure incurred on conference and clinic was part of charitable activities and, therefore, there was no violation of provisions of section 13(1)(c) and (d) of the Act and the assessee was entitled to exemptions under section 11 of the Act. The Hon'ble High Court held that above findings were essentially factual giving rise to no question of law. Since in the case no legal issue has been decided by the court, the reliance placed by the assessee is of no assistance. The facts of the case are different from the facts of the present assessee as salary etc. paid to Chief Executive Officer and Project coordinator has not been found to be excessive, whereas in the present case not only the salary has been found excessive but it has been paid to family members of the management committee even without rendering any services. 11. In the case of Orpat Charitable Trust versus Commissioner of income tax (supra) the issue of refusal to grant approval t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed, and therefore the ratio of the said decision is not applicable over the facts of the case of the assessee. 13. In the case of Commissioner of Income Tax-1, Ludhiana versus Spring Dale Educational Society (supra), the Hon'ble court has held that while examining application seeking registration under section 12AA of the Act, manner of application of funds of trust do not fall within the purview of the Commissioner and Commissioner should only satisfy himself about the genuineness of the aims and objects of the trust / institution and genuineness of its activities as enumerated in clause (b) of subsection (1) of section 12AA of the Act. In the present case, the Commissioner of income tax has refused registration as he did not find the activities of the Society as genuine, thus, the facts of the present case are different from the facts of that cited case, hence ratio of the said case is not applicable over the present case. 14. In the case of Director of Income-Tax (Exemptions) vs. JITO Channai chapterr that registration under section 12 AA of the act was refused on the ground that object clause of the deed contained provision for domestic and overseas markets and also for sett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax versus RS Bajaj society the Hon'ble High Court has held that the registration under section 12AA cannot be refused on the ground that trust had not yet commenced charitable or religious activity and only genuineness of the objects was to be tested at the time of registration and not activities which was not commenced by that time. Whereas in the present case the activities started long ago, and therefore facts of the present case being different from the cited case, the ratio of the cited case is not applicable over the facts of the case. 18. In the light of above discussion, we are of considered opinion that the members of the management committee has siphoned off or misappropriated the income of the Society and thus the activity of the Society, cannot be termed as genuine and the Society in the garb of charitable activity of education, is engaged in enriching its members through undue means. It is evident that the Commissioner of Income Tax has not found the object of the society and genuineness of its activities as satisfactory, and refused the registration as per section 12AA(1)(b)(ii) of the Act. Accordingly, we hold that the Commissioner of Income Tax has rightly refus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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