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TMI Blog2021 (8) TMI 1158X X X X Extracts X X X X X X X X Extracts X X X X ..... Act viz. existing society for educational purposes and not for profit. 3. That the Ld. CIT (Exemptions) has erred in not following the binding judgment of the Hon'ble Supreme Court in the case of 'Pine Grove Society' and has wrongly appreciated the facts of our case. 4. That the Ld. CIT (Exemptions) has erred in not considering that society is registered under Society's Registration Act XXI of 1860 on 20.01.2004. 5. That the Ld. CIT (Exemption) has erred in mentioning that the applicant did not produce the consolidated receipts and payments account and other details since the requisite details as asked vide questionnaire, dated 13.12.2016 had been duly replied by Mail as desired by the Ld. CIT(Exemption) and which had not been considered. 6. That application for grant of approval u/s. 10 (23C)(vi) has been rejected against the facts and circumstances. 7. That submissions filed during the course of hearing has not been considered properly. 8. That no reasonable and sufficient opportunity was afforded to the assessee to hear the case properly." 2. The appellant society is claimed to be an Educational Institution, which has been in operation 20.01.2004. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to show cause letter dated 13.12.2016 wherein certain details and clarifications were asked for (copy of the notice is forming part of the paper book from page no. 17 to page no. 18). Further to the reply of the Assessee, Worthy CIT(Ex.) quoted that: "the applicant did not produce the consolidated receipts and payments account as asked for. Also there is no response provided by the Applicant on inter unit transfer of funds as well. To that extent the genuineness of activities of the applicant are not corroborated. It is reiterated that the queries posed were very pertinent to examine what appeared prima facie to be intra society and inter-unit machinations. One of the schools generating large surpluses without debiting salary is particularly stark. (i) The Worthy CIT(Ex.), while drawing this conclusion has totally overlooked the facts of the case of the Assessee Society, firstly, imparting of education is the main objective of the society as stated the memorandum of association vide point no. 1 & 2. (Copy of the Memorandum of Association is forming part of the Paper Book from Page 1 to 7). Secondly, the main activity carried on by the society is imparting education throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee Society which are managing the different spheres of education for the society. Therefore, it is a case of single Assessee and the inter unit balances standing in one or the other institution does not make any difference since at the year end, the accounts are merged. * It is wrongly said that no salary expense has been debited as vide point no. 5 of reply dated 13.12.2016, it was submitted that the teaching staff of BBB School of Nursing and BBB College of Nursing is same and therefore the salary of the staff is debited in the books of college instead of staff. Moreover, when the books of the institutes are consolidated at year end, it does not make any difference. Also, return of income is filed as per consolidated balance sheet. (Copy of the reply dated 13.12.2016, referred in the above paragraphs is forming part of the Paper Book at Page No. 19) 2. Further, regarding imparting of education, Worthy CIT (Exemption) has not pointed out any defect in the application made by the Assessee in Form No. 10A. It has been held by various Hon'ble Courts that the Worthy CIT is not an assessing authority and unless there is any specific defect in the application of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f judgment set) d) CIT vs. B.K.K. Memorial Trust [2013] 29 taxmann.com 286 (Punjab and Haryana) (placed on Page No. 11-17 of judgment set) e) CIT vs. Niranjanbapu Education And Charitable Trust [2014] 52 taxmann.com 158 (Gujarat) f) Hardayal Charitable & Educational Trust vs. CIT [2013] 32 taxmann.com 341 (Allahabad) g) DIT(E Zzz vx.) vs. The North Indian Association 148 DTR 76 Bom HC (2017) (placed on Page No. 18-21 of judgment set) h) Society for Participatory Research in Asia vs. Income Tax Officer 47 CCH 0790 Del Trib (27.05.2016) i) Saint Kabir Educational Trust vs. CIT 41 DTR 27 Asr Trib (placed on Page No. 22-26 of judgment set) j) CIT vs. IILM Foundation Academy as reported in 389 ITR 148 order dated 16.09.2016 (placed on Page No. 27-32 of judgment set) k) CIT vs. Baba Deep Singh Educational Society in ITA No. 881 of 2010 (P & H HC) (placed on Page No. 33-37 of judgment set) l) American Hotel and Lodging Association Educational Institute vs. CBDT 301 ITR 86(SC) m) Commissioner Of Income tax Vs. Mahasabha Gurukul Vidyapeeth Haryana (2010) 326 ITR 25 (Pun) (placed on Page No. 38-39 of judgment set) n) Tishir Shiksha Prasar Samiti vs. CIT in ITA No. 412/A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been established that the Assessee Society was engaged in the activity of imparting education, it cannot be concluded that the Assessee Society does not exist for the purpose of imparting education when the Financial Statements are depicting a picture completely opposite to the conclusions of Worthy CIT(E). He has Also, submitted that the complete list of all the institutions run by Assessee was filed before Worthy CIT(E) along with the Balance Sheets and Income & Expenditure Account of each institution and consolidated Financial Statements of account. 8. The Ld. AR again submitted that the finding recorded by the Ld. CIT(E) that no reply to the show cause notice dated 13.12.20106 was filed by the Assessee, is factually incorrect as the Assessee had duly filed the reply to the notice via email sent to the office of Worthy CIT(E) on 20.12.2016 along with all the supporting documents as an attachment of the mail. (APB, Pg. 19A); that the Assessee duly filed the consolidated accounts for the period under consideration alongwith the preceding two years, as attachment No. 1 of the reply sent via mail (APB, Pg. 19A) and that the assessee explained in point No. 4 of reply sent via mail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize cultural programmes and to collect funds for public welfare schemes by issuing various schemes and not being existed for sole purpose of education as claimed. The finding of fact as recorded by the CIT(E) that Baba Banda Bahadur College of Nursing has shown an advance of 4.29 cr to the society and at the same time it has shown a liability of 1.29 cr from BBB school of Nursing and questioned the rationale for such intra-society transfers and that BBB School of Nursing has also advanced 2.81 cr to BBB MEM Society where the Income & Expenditure statement of the same school does not have any expenditure on salary etc. thereby allowing the unit to generate other expenditure required for running a school clearly point out to non-transparent accounting practices and unclear depiction of the activities, would require production of necessary books and statement of account to corroborate the charitable purpose of activities to satisfy the object of imparting education as a charity and not profit earning. 11. We understand that under the statute, it is the satisfaction of the CIT(E) that the applicant society was an educational institution existing solely for educational purpose and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry. Admittedly, the factum of the additional information being asked for was never denied by the respondent-Society. In appeal, the assessee had only raised the issue as to whether the order of the Commissioner is arbitrary and unjustified and whether the activities of the Society did not qualify in the nature of charity and the finding had been based on suspicion and conjectures. The additional information being asked for, as such, was never controverted. It was not contended that the information had been supplied but was not taken into consideration. Under Section 12AA, the procedure for registration is prescribed, which reads as under: "12AA. Procedure for registration--(1) The Principal Commissioner or Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) or clause (aa) of sub-section (1) of section 12A, shall-- (a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about the objects ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l not apply in relation to the income of any trust or institution unless various conditions are fulfilled. The said sections provide that income from property held for charitable purposes shall not be included in the total income of the previous year of the person in receipt of the income. 8. The provisions of Section 12AA, thus, also give the power under sub-section (3) to cancel the registration of the activities of the trust if it is not carried out in accordance with the objects but the Commissioner has to keep in mind that it is not to act as an Assessing Authority while deciding the application under Section 12AA and the enquiry regarding the genuineness of the activities of imparting education with a charitable purpose is to be kept in mind. The objects of the trust, thus, have to be taken into consideration. Section 2(15) defines charitable purpose and the same includes relief in education and advancement of any other object of general public utility. In case the utility is carried out in the nature of trade, commerce, business, the proviso provides that the same will not be a charitable purpose. Sub-section 2(15) reads as under: 'Sub-section 2 (15) - "charitable pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also which it may contemplate to undertake. The insertion of sub-section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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