9911796707
TMI Blog2018 (5) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... registration u/s. 12AA of the Act. 2. The assessee-society, formed and registered as such on November 8, 2011, applied for registration u/s. 12AA in the prescribed form on 30.11.2016. The only activity, as stated, pursued by it since inception is running a school by the name 'The Lords School' at Katron, Manal Road, Village Ramnagar Channa, Tehsil Sherpur, which started it's first academic session from 01.04.2013 (refer para 16 of the assessee's reply dated 18.05.2017, at PB pgs. 77-78, and PB pg. 85). Though initially the society had varied objects in its Memorandum of Association (MOA), vide supplementary deed dated 14.09.2016 (PB pgs. 14-26), the same was restricted only to providing education to all persons irrespective of their caste, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority ; or' This did not meet the approval of the competent authority. The two, i.e., section 10(23C)(vi) and sections 11 and 12 (requiring, per section 12A, registration u/s. 12AA), represented different and separate codes under the Act. It was not permissible to change track mid-way, for which no rationale had been furnished. The financial statements of the assessee-society revealed it to have sources of income other than from the school, which had thus not been divulged. Clearly, therefore, the society had pursued activities, i.e., apart from school, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the school building, being situate on a leasehold land. This is as the lease, beginning 16/2/2012, is for a period of 30 years (PB pgs. 88-101, with english translation at PB pgs. 88A,89A). The lessors, who are the family members of the founder members of the assessee-society, are, as per the lease-deed, entitled to take back the possession of the land at the end of the lease period. How would the school building, constituting the principal asset of the society, be then taken possession of by it at the end of the lease term? In fact, this eventuality could occur even earlier, where the land is resumed, as on account of non-payment of lease rent, which as per the financial accounts is unpaid up to 31.03.2016 (enclosed as a part of the paper- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itably compensated for the goodwill in the event of it being unable to continue to run the school beyond the lease term, from the persons who may undertake to run it thereafter - being by then (presumably) well established. Mr. Goyal would further state that the lessors could furnish an undertaking that the lease shall be renewed, etc. or the society suitably compensated for the building. However, on being asked about the legal sanctity of such an undertaking, he could not furnish any satisfactory answer. Why, the lease rent, which is a reasonable sum at present, may stand increased manifold by the lessors as a condition for the renewal of the lease! We are not, we may clarify, raising a false alarm - the incident not likely to occur in rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,81,533/- Rs. 4,24,749/- Rs. 36,73,929/- Rs. 2,69,833/- 2014-15 Rs. 52,54,142/- Rs. 12,97,093/- Rs. 29,66,200/- Rs. 6,67,279/- 2015-16 Rs. 87,54.528/- Rs, 29,04,932/- Rs. 64,69,972/- Rs. 2,54,412/- Apart from a minor gain for f.y. 2013-14 (being the excess of donation received - at Rs. 14.68 lacs, over the society expenses), the consolidated surplus is lower than that of the school. The ld. CIT(E) has clearly failed to observe this apparent fact. The donation aforesaid also explains the increase in the gross receipt of the society over that of the school for f.y. 2013-14. The assessee is booking expenditure on lease rent; depreciation (on school building); interest on term loan (for the building and buses); accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the level of 20% to 25% (of the gross receipt) which obtains for f.ys. 2014-15 & 2015-16, being only the second and third years of its operation. This is as the total fees (cost to the students) could be reduced by as much, while still meeting the cost, which would only stabilize in future. All the receipts and expenses being accounted, with the accounts being audited, we find no basis for drawing any adverse inference from the deposit of cash in bank post 08.11.2016. The facts are required to be seen in perspective, which we find has not been by the competent authority. 5. Under the circumstances, we only consider it proper that the matter is restored back to the file of ld. CIT(E). We have already noted two aspects on which we find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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