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TMI Blog2021 (9) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 12 of the Income Tax Act 1961. In the present case , the exemption/approval is yet to be granted to the appellant society, therefore in our opinion section 13 (1) (c) would not be applicable to the facts and circumstances of the case. Whether paying the interest at the rate of 9%/12% to the above then person was a benefit to the specified person, was required to be examined by the assessing officer during the assessment proceedings and for that purposes it was incumbent upon the assessing officer to bring on record the contemporaneous comparative instances of the similar society indicating that the interest of rate paid by the assessee was far more than that was prevailing in the open market. In the light of the above, the first objection raised by the CIT(E) was without any basis. Assessee has made addition of van /buses in the financial year 2012-13 to 2014-15 - The assessee had filed the income and expenditure account for all the three years and in the income the assessee has shown the fees of ₹ 13093505/- for the year ending upto 31.03.2015 and the said fees, have been utizlied for various purposes mentioned in the income and expenditure - assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was into imparting of solely for education purposes and this aspect has not been denied by the CIT(E). In our considered opinion payment of the salary to the teacher in violation of 6th pay commission cannot be a ground to deny the approval u/s 10(23C) (vi) of Income Tax Act 1961. Recently, the coordinate bench in the matter of Dr. Madan Lal Atri had held that the scope and ambit of the enquiry at the time of registration should be confined to find out whether the activity of the assessee are charitable and genuine in nature and not. The CIT(E) should not expand the horizon for the purposes of finding whether the assessee is following the conditions laid down by the other Act at the time of approval / affiliation. CIT(E) is directed to grant approval, to the assessee from the date of application i.e. 21.09.2015 u/s 10(23C) (vi) of Income Tax Act 1961 and in view of Reham Foundation [ 2019 (10) TMI 151 - ALLAHABAD HIGH COURT] - Decided in favour of assessee. - I.T.A. No. 583/Asr/2016 - - - Dated:- 31-8-2021 - Sh. Laliet Kumar, Judicial Member And Dr. M. L. Meena, Accountant Member For the Appellant : Sh. Ashwani Kumar, CA. For the Respondent : Sh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT, Bathinda, and due to non-cooperation of the assessee-trust, it was not possible for learned CIT, Bathinda, to verify the source of income and its application. II. Keeping in view the aforesaid opportunity given to the assessee for substantiating its claim, neither assessee nor his authorized representative appeared before him nor satisfied learned CIT, Bathinda, about the genuineness of the activities of the trust or institution and even did not join in the inquiry, which was required to be completed by the learned CIT, Bathinda, on the genuineness of the objectives as well activities of the trust. III. On the report of Assessing Officer, learned CIT, Bathinda, noticed that the Assessing Officer had asked the assessee-society to produce some of the donors for the verification of donations made by them but the assessee failed to produced the donors within the prescribed time. Perusal of the list of donations received from the general public, it is noticed that all the donations amounting to ₹ 33,71,800/- were received only in single month i.e. June, 2009 and also all the donations have been received in cash except in some cases where these have been received through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the power of learned CIT, Bathinda, to make any type of inquiry as he may deem necessary on the subject to satisfy himself about the genuineness of the activities of the trust before issuing registration to the trust or institution. VII. We hold that merely filing an application for registration under Section 12AA of the Act and showing in writing that the aims and objects of the assessee trust are charitable, are not sufficient for granting registration to the society under Section 12AA of the Act until and unless the authority, who grants the registration, satisfies himself that the activities of the trust or institution are genuine or not. To satisfy himself he can make such inquiry as he deem necessary. There is no bar under any provision of law that the authority cannot make an inquiry about the genuineness of the activities of the society trust or institution. Like the case on hand, in which the assessee society remain non-cooperative and has not filed any documentary evidence, as required by learned CIT, Bathinda. The documentary evidence filed by the learned counsel for the assessee along with the case-laws are not helpful to the assessee because the case-laws reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee was solely established for the purpose of education and the CIT(E) has not brought on record any of the activities which in his estimation was not educational. The ld. AR had written submission on 12.07.2021 before the Bench as under: The present appeal has been filed against action Ld. Commissioner of Income Tax (Exemption), Chandigarh in arbitrarily denying the registration u/s 10(23C)(vi) of the Income Tax Act, 1961 (the Act ) to the appellant society. Facts in brief are that the appellant is a society registered under Society Registration Act, 1860 on 29.05.2009 and running a school in the name of Oxbridge World School at Village Dhilwan on Kotakapura to Bhatinda Road. The appellant filed an application for registration u/s 10(23C)(vi) of the Act on 21.09.2015 and Ld. Commissioner of Income Tax (Exemption), Chandigarh vide order dated 21.09.2016 rejected the claim of the appellant society. The appellant society has been created only for educational purposes and not purposes of profit as is clear from perusal of copy of Memorandum Articles of Association (placed at pages 1-7 of the Paper Book). The Ld. CIT has rejected the claim of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Paper Book. Otherwise also it is respectfully submitted that for purposes of registration u/s 10(23C)(vi), the Ld. CIT was only required to examine whether activities of assessee were genuine or not and in the absence of any adverse view Ld. CIT had no reason to deny the registration under said section. For this proposition, Your Honors kind attention in invited to pronouncement of the Hon ble Chandigarh Bench in M/s Ajit Educational Public Welfare Society Vs. CCIT reported in 166 ITD 61, copy of the judgement is enclosed. Wherein the Hon ble Bench has held that: Provision of section 13(3) are not relevant for purpose of granting approval u/s 10(23C)(vi) and only issue to be examined was genuineness of activities of trust and benefit accruing to persons specified u/s 13(3) cast no reflection on genuineness of activities of trust. Similar view has to be adopted by the Hon ble High Court of Uttrakhand in Maharani Luxmi Bai Memorial Educational Society Vs CCIT in WP(M/S) No. 1108 of 2010, copy of the same is enclosed. It is respectfully prayed that keeping in view the detailed submission made, the claim of the appellant society to be regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 34,65,687/- 18,47,434/- 2013-14 98,52,930/- 31,89,167/- 56,42,062/- 2014-15 1,31,02,919/- 40,48,288/- 33,79,092/- The extract above shows that the net surplus together with depreciation claimed and additions made towards acquiring Van/ Buses etc. amounts to 54.18%, 89.62% and 56.68% of the Gross receipts for the F.Y. 2012-13, F.Y. 2013-14 and F.Y. 2014-15 respectively. Further, the additions made towards buildings during F.Y. 2012-13, 2013-14 F.Y. 2014-15 still remains as less as ₹ 2.2 lakhs, Nil and ₹ 2.7 lakhs respectively. From the above it is clearly held that a major portion of the receipt has been utilized for acquiring vans/ buses and creating surplus and only a meagre amount has been utilized directly for the sole cause of advancement of education which is claimed to be the motive and object of the society. It is evident that surpluses are being generated far in excess of the reasonable surplus laid down by the Apex Court. Moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinues to impart the education in accordance with the systematics schematic scheme of the board of secondary education to the students. The educational activities of the assessee have not been denied by the CIT exemption while passing the impugned order. The CIT exemption however, as mentioned hereinabove had rejected the application of the approval on 3 grounds mentioned hereinabove. 18. The first ground of rejecting the application was that the assessee has taken the unsecured loan from the president, executive member and chief patron of the society and is paying the interest @ 9% to three person and @ 12% to Smt. Prem Rani and thus the assessee is violating the provisions of section 13(1c) of the Act. 19. The ld. AR, during the course of argument as well as written submission had submitted that the interest paid by the society on the loan was far less than the prevailing interest rate of the financial institutions. 20. In our opinion the ld. CIT(E) has not disputed the fact that the loan taken by the assessee from the patron, executive member and the president of the society were solely utilized for the purposes of educational institution. Further the CIT(E) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of depreciation on the fixed assets and was not restricted to only to the buses but was also relatable to the other fix assets as per schedule 5 of the balance sheet. However, nonetheless the facts remains the assessee was only having of actual surplus of ₹ 2,36,800/- (after claiming depreciation). In our view, no fault can be found in the computation of the assessee. In our view, none of the head mentioned by the assessee on the expenditure side shows the utilization of the fund for any purpose other than education. 24. In our considered opinion generation of surplus fund by the educational institution is not a taboo. The Hon'ble Apex Court in the case of Queen's Educational Society vs. CIT [2015] 55 taxmann. Com.255 (SC) has held that when surplus is ploughed back for educational purpose, the educational institutions exist solely for educational purposes and not for purposes of profit. The Apex Court further approved accumulation to the tune of 15% of its total income pertaining to the relevant assessment year as per Sec.11(1)(a) of the Act and laid down the following principles. 11. Thus, the law common to Section 10(23C) (iiiad) and (vi) may be sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is not paying the sufficient salary to the teachers and thereby violating the CBSE guidelines by not paying the 6th pay commission salary. 27. In our considered opinion the scope and ambit of the verification u/s 10(23C) (vi) was only to verify whether the assessee was established / running solely for the purpose of education or not. Once the CBSE grant affiliation to the assessee, then it is for the CBSE to ensure compliance of the terms and condition of attached with the affiliation. Undoubtedly, the assessee was into imparting of solely for education purposes and this aspect has not been denied by the CIT(E). In our considered opinion payment of the salary to the teacher in violation of 6th pay commission cannot be a ground to deny the approval u/s 10(23C) (vi) of Income Tax Act 1961. Recently, the coordinate bench in the matter of Dr. Madan Lal Atri had held that the scope and ambit of the enquiry at the time of registration should be confined to find out whether the activity of the assessee are charitable and genuine in nature and not. The CIT(E) should not expand the horizon for the purposes of finding whether the assessee is following the conditions laid down by the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine whether the assessee is subjected to provision of law and is required to comply the relevant provision of law. The Authorities created under various ACTS should function within their respective domain and should not encroach or interfere in other areas, this is necessary for smooth functioning of various organs of state. Though Section 12AA of Act has been widely worded any other law however the same has been given restricted or narrowed by the other words used in the section namely as are material for the purpose of achieving its objects . Therefore before embarking upon any enquiry by the Commissioner exemption, it is sine qua non(essential) to inform the assessee as to which are the various laws under which the assessee should have the approval/permission before seeking the registration. 40. The Commissioner Exemption should keep in mind that various approvals/permission cannot be sought from the assessee or in other words it is not possible for the assessee to even apply and seek approval/permission at the stage of registration of the trust under section 12AA, as those approvals/permission can only be granted after the setting up or commencement of the charit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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