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TMI Blog2021 (8) TMI 766X X X X Extracts X X X X X X X X Extracts X X X X ..... me, or the preuniversity three year degree course and Two year Postgraduate course, in the faculty of Arts, Science, Commerce, Computer Science or other courses; to start, establish, take-over and run all kind of schools and colleges/ chain of schools or colleges both residential and no-residential to impart quality education; to develop mind as well as physique of the children through games and extra-curricular activities and create personality and leadership traits in the children; to promulgate and to spread the teaching of eminent personalities and develop active habits and produce intelligent and good citizens; to organize cultural, social and sports meet at various levels to promote national integration and produce good sportsmen; to develop land for promoting club facilities recreational and sports facilities arid for any other purpose; all the incomes, earnings, movable and immovable properties of the college/school shall be solely utilized and applied towards the promotion of its aim and objects only as set forth in the memorandum of Association and no portion thereof shall be paid or transferred by way of dividends, profits, bonus or in any manner to the present or past m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and whether any specific directions have been received by the persons making voluntary contributions. iii. The originals of MOA/Bye-laws of the society along with the Registration Certificate. iv. The copies of Bank statements through which activities are being propagated. The receipts and the different items of expenditure that are being claimed. v. The complete details of the Donations received or intended to be received and documentary evidence as regards to Grants received. vi. Copies of the I. T Returns for the last three assessment years i.e. A. Y. 2014-15 to A.Y. 201617 along-with a note regarding any kind of exemptions under I. T. Act having claimed earlier during any of the past years. vii. Whether the applications for registration has been filed for the first time. The fate of the earlier application along with copy of the order. viii. If any donation under FCRA had been received, the relevant details of it. The copy of the return for FCRA and the copy of specified bank account (if any). ix. The details of corpus fund and whether the same are with any written specific directions. x. The details regarding charitable activities being conducted by the societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt aided and financed institution and has been availing the exemption under section 10(23C)(iiiab) of the Income Tax Act, 1961. Further, the society perceives that the government grants are likely to decline in the coming years due to deficit in the revenue of the state government, it has applied for registration under section 12A of the Act. 8. Perusal of the reply submitted by the applicant reveals that the society was established on 01.01.1971 and has claimed to be existing solely for educational and charitable purposes. The society has filed its Income Tax Return for the first time in A.Y. 2016-17 showing exempt income of Rs. 7,59,62,719/-. The copies of financial statements of last three years reveal the following details: F.Y. Gross Receipts (Rs) Net Surplus (Rs) Govt. Grants Received (Rs) 2013-14 7,54,86,375/- 1,40,85,291/- 3,52,29,445/-(46.7%) 2014-15 5,62,559,055/- (-)27,30,653/- 1,71,45,413/-(30.5%) 2015-16 7,59,62,719/- (-)41,97,005/- 4,17,58,543/-(55%) The society has claimed itself to be an institution substantially financed by the Government and therefore has not filed its return of income " As per Rule 2BBB (inserted w.e.f 12 Dec. 2014) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 46 years of its existence, to seek registration under section 12AA. Registration, as is commonly understood, is a thing to be done at the initial stages. No other Act that entails registration envisages the same to be done after a lapse of 46 years. Moreover the provision of registration cannot be invoked after attaining a receipt base of around 7.5 crores and keeping the same way from any kind of scrutiny in the past. 11. In view of the above, the applicant society's quest for registration is not held to be tenable. This, however, shall not impinge on the exemption of the applicant or otherwise if it files a return u/s 10(23C)(iiiab). The application for grant of registration u/s 12AA is rejected. 3. The Ld. AR for the assessee society submitted that the Ld. CIT(E) has erred in law and on facts in rejecting registration under section 12AA of the Act in arbitrary manner for the reason that no returns were being filed which was not the requirement for claiming registration under section 12 AA and as such the order is arbitrary and unjustified and that such refused only on the basis of suspicion, conjectures and surmises in view of the various unfounded findings as enumerate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udents among the society without any caste, creed and Colour. 8. It is admitted fact on record that the College is affiliated to Panjab University, Chandigarh while the collegiate school is affiliated to Punjab School Education Board. The observation of the CIT(E) that the assessee society had received grants in excess 50% of total receipts only in FY 2015-16 and the earlier claims would separately be examined by the Assessing Officer was unwarranted at this stage, because such an observation has no adverse bearing on the matter of grant of registration u/s 12AA for which the assessee had filed an separate application in prescribed formatted with the requisite details and had further complied with the queries raised during the proceedings u/s 12A of the Act. 9. The Ld. CIT(E) has referred to Rule 2BBB (inserted w.e.f 12.12.2014) which reads as under: [Percentage of Government grant for considering university, hospital etc. as substantially financed by the Government for the purposes of clause (23C) of section 10. 2BBB. For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution, hospital or other instituti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal thus taking a view that Government was substantially financing and interested in management of assessee, allowed its claim for exemption - Whether since no perversity was pointed out by revenue in findings recorded by Tribunal, same did not require any interference - Held, yes [Paras 11 and 13] 12. Thus, there was no hard and fast rule as to what was the specific percentage being adopted for the purpose of "substantially financed" till the insertion of Rule 2BBB inserted w.e.f. AY 12/12/2014. 13. We understand that the issue before the CIT(E) was regarding grant of registration u/s 12AA and that of 10(23C) (iiiab). As such, the scope of enquiry before grant of registration u/s 12AA was limited to the objects being charitable in nature and activities were genuine. Once the objects have been accepted to be educational, the Commissioner is required to see that the activities are genuine and in consonance with the objects at the time of grant of registration as held by the Hon'ble Jurisdictional High court in case of "CIT v Shri Shirdi Sai Darbar Charitable Trust", Supra and Allahabad High Court in case of "CIT V Red Rose School",(Supra). In CIT V Red Rose School, it was that- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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