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TMI Blog2020 (9) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(E) had not given any finding regarding activity of the society. Benefit of section 11 12 would not be available if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied directly indirectly for the benefit of any person referred to sub-section (3) of section 13 of the Act. It is therefore, can be safely construed that where the revenue authority finds that during the previous year, the assessee has applied any part of its income or any property of the trust or the institution directly or indirectly for the benefit of any person referred to in sub-section (3). It can decline the assessee society benefit of section 11 12 of the Act Considering the submissions of the assessee material placed on record and respectfully following the decision of MODERN DEFENCE SHIKSHAN SANSTHAN [ 2007 (2) TMI 255 - ITAT JODHPUR] . We set aside the impugned order of Ld. CIT(E) and restore the application for seeking registration u/s 12AA to the file of Ld. CIT(E) considered in the light of the case laws as relied by the assessee. Appeal filed by the assessee is allowed for statistical purposes. X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2018 as under:- 1.As regards reasonability of payments Salary paid to Smt. Madhulika Jain(President), Prakash Chand Jain(Vice President)Shri Amit Jaih(Secretary) and Smt.Shweta Jain(Treasurer) are for Liasoning work with various governments department to run institution smoothly. They are engaged in administration work also and submitted that the reasonability of house rent and vehicles are given on prevailing market rate. 2.The college maintains two vehicle, one for teaching staff purpose and one for guest and administrative/management staff purpose. One vehicle is owned by institution and another vehicle is taken on monthly rent. The vehicle rent is paid as per the rate prevailing to the market. 3.For staff residential purpose the institution has taken a staff quarter on rent which owned by Prakash Chand Jain(Vice President).As the house is situated near to college hence taken on rent from said person. The same rent is payable if similar house taken on rent from another person. lt is not higher from market rate. 3.3 The above submissions of the assessee regarding reasonability of salary, house rent, vehicle rent have been considered but not found acceptable in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Alleging the following:- a. Above persons are members of single family and residing at Badi Chopati,40 shikshak Colony, Badnawar. All are covered u/s 13(3) b. No educational qualification, work experience, certificate provided. c. Copies of rent agreement, rate justification, ownership of property etc. not provided Thus alleging that substantial income/funds of the society have been diverted and activities carried out for benefit of interested parties. SUBMISSIONS A. While Granting Registration u/s 12AA, sec 13 cannot be questioned. The main object of the society is Education and the activities are undertaken for the attainment of its objects only. There is no doubt on the educational objects of the society and the activities are also undertaken for attainment of its object. The following proofs were submitted: i. Membership of federation of M.P Minority Educational Institutions certificate (PB 85- 89). ii. Affiliation of various courses by DAVV (PB 85-89}.{.. P B 90 - 105) iii. Newspaper Cutting and Press release as proof of educational activities undertaken. {PB 106-120} As the language of section 12AA of the Act provides that while granting registratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot arise at all. The learned CIT has not given any other reasons, say, the objects etc., which according to him violates the provisions of granting the registration. In these circumstances, when the learned CIT has not doubted the aims and objects of the society, he cannot throwaway the application of registration on this pretext. Therefore, in our view, the registration sought for under section 12AA by the applicant society should have been granted by him. The question of application of the funds, which has been discussed by the learned CIT which attracts the provisions-of sections 13(l)(c}( i), 13(l)(c )(ii) and 13(3)(b) as mentioned above have to be considered only thereafter. Accordingly, we direct the learned CIT to grant registration to the society under section 12AA of the Act. B Genuineness of Payments a.The Salary to Management Staff is given in lieu of their services in managing the affairs of the society and that does not make the payment for the benefit of specified person. The salary chart is on PB 20. The salary is reasonable and fully justifiable. b.The Society has also made payment of House rent to Shri Prakash Chand Jain for his Property located at Ward no 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance is also placed on the judgment of Hon'ble Bombay High Court rendered in the case of CIT(Exemption) Manekji Mota Charitable Trust (2019) 109 taxmann.com 258 (Bom) to buttress the contention that at the time of considering the application for registration Ld. CIT(E) cannot go into question of application of funds. Further, it is contended that so far questions of reasonability of payments to the specified persons is concerned, no notice was issued calling upon the assessee regarding reasonability of payments and also the requisite qualification of specified persons. 5. On the contrary, Ld. CIT-DR opposed the submissions and supported the impugned order. 6. Ld. CIT-DR submitted that there was a categorical query by the Ld. CIT(E) regarding the payments made to the specified persons. He submitted that the case laws as relied by the ld. counsel for the assessee are distinguishable, as the facts are different from the facts that were before the Hon'ble Supreme Court and the Coordinate Bench of this Tribunal. He submitted that there is no ambiguity under the law while considering application for registration u/s 12AA of the Act. It is incumbent upon the Ld. CIT(E) to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries as he may deem necessary in this behalf; and a. after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he- i. shall pass an order in writing registering the trust or institution; ii. shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and a copy of such order shall be sent to the applicant: However, no order refusing to register the trust shall be passed unless the applicant has been given a reasonable opportunity of being heard. [(1A) All applications, pending before the 2a[Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the 2a[Principal Commissioner or] Commissioner and the 2a[Principal Commissioner or] Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.] (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub- section (3): Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of subclause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person refer- red to in sub- section (3), if such use or application is by way of compliance with a mandato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1993, whichever is later; (iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year. Explanation.-Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business. Explanation.-For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972. (2) Without prejudice to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in sub-section (3) has a substantial interest. (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds fifty thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. (4) Notwithstanding anything contained in clause (c) of subsection (1) but without prejudice to the provisions contained in clause (d) of that sub-section, in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub-section (3) has a substantial interest, does not exceed five per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt thereof, if- (i) the statement referred to in clause (a) of the said sub-section in respect of such income is not furnished on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for the previous year; or (ii) the return of income for the previous year is not furnished by such person on or before the due date specified under subsection (1) of section 139 for furnishing the return of income for the said previous year. Explanation 1.-For the purposes of sections 11, 12, 12A and this section, "trust" includes any other legal obligation and for the purposes of this section "relative", in relation to an individual, means- (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant or descendant of the individual; (v) any lineal ascendant or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v); (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der or person is a Hindu undivided family, a member of the family; (CC) 4 any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, 5 member, trustee or manager] as aforesaid; (e) any concern in which any of the persons refer- red to in clauses (a), (b), (c) 6 , (cc)] and (d) has a substantial interest. 10. The contention of the Ld. counsel for the assessee is that the issue of payments could be examined by the assessing officer while making assessment. It is submitted that issue is well settled that at the stage of considering application for registration. The Ld. CIT(E) need not to go in question of application of funds by the Trust. For this proposition, he heavily relied on the judgment of Hon'ble Bombay High Court rendered in the case of CIT(E) vs. Moekji Mota Charitable Trust (supra). Further reliance has been placed on the Coordinate Bench of this Tribunal rendered in the case of Modern Defence Shikshan Sansthan vs. CIT (supra) wherein the Coordinate Bench held as under: "4. It has been contended before us by the Ld. Authorized Representative that the ld. CIT invoked the provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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