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TMI Blog2021 (9) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... d two aspect and the whole premise of rejection order of the registration was based on utilization of the fund and receipt thereof from the agriculture activities. In our view the same is not permitted in view of the law laid down by the Hon ble Supreme Court in the matter of Anand Social [ 2020 (2) TMI 1293 - SUPREME COURT] , Dawoodi Bohara Jamat [ 2014 (3) TMI 652 - SUPREME COURT] . In the present case the finding recorded by the CIT exemption is not arising out of the record, rather it is contrary to the record. In our view the assessee was able to prove that the objects of the assessee are charitable, and the activities of the assessee are also genuine. Therefore, respectfully following our decision in the case of Saraswati Education [ 2021 (9) TMI 840 - ITAT AMRITSAR] we direct the CIT exemption to grant registration to the assessee society from the date of application. Decided in favour of assessee. - I.T.A. No. 602/Asr/2018 - - - Dated:- 21-9-2021 - SH. LALIET KUMAR, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER For the Appellant : Written Submission For the Respondent : Sh. Sanjay Dhariwal, CIT-DR ORDER Per Laliet Kumar, J.M. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, ledger account of Kacha Aartiya to show J-Forms of Agricultural produce, details of Agriculture Expenses of Rs. 3,02,209/- and copies of construction bills alongwith Annexure-I, Annexure-ll and Annexure-lll forming part of this letter are also enclosed vide ANNEXURE E. The Observations of Worthy Commissioner of Income Tax (Exemptions) are given in Para 7.1 to 7.3 and Para 8. The observations of Commissioner of Income Tax (Exemptions), Chandigarh in Para 7.1 are mentioned as under:- 7.1. In response to the additional queries the applicant trust submitted the reply vide letter dated 24.09.2018. In its reply applicant trust stated that only Toor Dal is produced as agriculture crop which is sold in cash on retail basis and submitted some of the copies of cash receipts issued against sale of agriculture produce. The applicant trust was also asked to provide the ownership of the land on which these agricultural activities were undertaken. In response to this the applicant trust stated that the property is Agriculture Land having area of 35 Killas and temple area about 4 Killas. No documentary evidence has been filed by the applicant in support of the claims of the agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of Books of J-Forms. It is obvious that Book No. is different for each J-Form. This is verifiable from photo copies of J-Forms. In Para 7.2 the Worthy Commissioner of Income Tax (Exemptions), Chandigarh has observed that there is no evidence of the properties of Shri Swami Shankar Nath Parvat Monastery Mata Shri Jawala Ji Mandir having been vested/ managed by the applicant Trust. Your kind attention is invited to the English Translation of the constitution of the applicant Trust Deed particularly at Page 8 where in the preamble itself it is clearly mentioned that this trust has been formed for management and protection of property of Shri Swami Shankarnath Parvat Monastery and Mata Shri Jawala Ji Mandir and the entire Trust Deed deals with the management of these two institutions. Again the details of Agriculture Land are given at Page 30 of the Paper Book. The copies of Jamabandis of Agriculture Land are placed at Pages 31 to 51 and their English Translations are at Pages 52 to 59 of the Paper Book. It is therefore submitted that the observations of Worthy Commissioner of Income Tax (Exemptions), Chandigarh are not correct and opposed to the facts on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are genuine in nature and whether the activities of charitable in nature or not. The CIT exemption vide letter dated 6.8. 2018 and 20 June 2018 and asked the assessee to provide various information. Further information was sought from the assessee by notice dated 20.9.2018. 7. The assessee had submitted that the detailed reply of all the notices received by the assessee, the CIT exemption in paragraph 7.1 and 7.2 mentioned as under:- 7.1 In response to the additional queries the applicant trust submitted the reply vide letter dated 24.09.2018. In its reply applicant trust stated that only Toor Dal is produced as agriculture crop which is sold in cash on retail basis and submitted some of the copies of cash receipts issued against sale of agriculture produce. The applicant trust was also asked to provide the ownership of the land on which these agricultural activities were undertaken. In response to this the applicant trust stated that the property is Agriculture land having area of 35 Killas and temple area about 4 Killas. No documentary evidence has been filed by the applicant in support of the claims of the agricultural land. With regards to agriculture produce it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the assessee had also placed on record the sale of agricultural produce by filing the form J, at page 61 onward. The documents clearly shows that the finding recorded by the CIT exemption was against the record. In any case at the time of grant of registration under section 12 AA of the of the Income Tax Act what is required to be seen is whether the activities of the assessee are genuine, and the object of the assessee are charitable in nature or not. No comments were made by the CIT exemption in respect of above said two aspect and the whole premise of rejection order of the registration was based on utilization of the fund and receipt thereof from the agriculture activities. In our view the same is not permitted in view of the law laid down by the Hon ble Supreme Court in the matter of Anand Social , Dawoodi Bohara Jamat [2014]43 taxmann.com 243 (SC). And other decisions. 9. Recently in the matter of, Saraswati Educational Welfare Society ITA NO 157/2020 , we have held as under 18. In our view, the above said wrong treatment of the admission fees under the head reserve and surplus, would not disentitle the assessee from getting the registration 12AA of the IT Act. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the trust and its activities are charitable since the consequence of such registration is that the trust is entitled to claim benefits under sections 11 and 12 of the Act. In other words, if it appears that the objects of the trust and its activities are not genuine that is to say not charitable the Commissioner is entitled to refuse and in fact, bound to refuse such registration 12. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term 'activities' in the provision includes 'proposed activities'. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities are not camouflage, bogus, artificial and whether these are in accordance with the objects of the institution. The scope of enquiry does not extend beyond that pint.... 20. That the Hon'ble Allahabad High Court in the case of CIT v Red Rose School [2007] 163 Taxman 19 (Allahabad) held that: Section 12AA, which lays down the procedure for registration, does not speak anywhere that the Commissioner, while considering the application for registration, shall also see that the income derived by the trust or the institution is either not being spent for charitable purpose or such institution is earning profit. The language used in the section only requires that activities of the trust or the institution must be genuine, which accordingly would mean that they are in consonance with the objects of the trust/institution, and are not mere camouflage but are real, pure and sincere and not against the proposed objects. The profit earning or misuse of the income derived by charitable institution from its charitable activities may be a ground for refusing exemption only with respect to that part of the income but cannot be taken to be a synonym to the genuineness of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any charitable activities. Due to non-compliance of assessee society, the genuineness of the activities could not be verified. The ld. CIT, therefore, relying on various decisions including the decisions which have been relied on by the ld. CIT in the present case, rejected the claim of registration u/s 12A(1) of the I.T. Act. When the matter travelled to the Tribunal, the Tribunal allowed the claim of registration by holding that at this stage on granting registration u/s 12A the ld. CIT is required to see the objects of the society and not required to examine the application of income which will have to be undertaken by the Assessing Officer on a year to year basis after the assessee files the return of income claiming exemption u/s 11 of the I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the activities of the assessee are genuine as is clear from the chart of the activities reproduced herein above. Further the assessee is also claiming exemption under section 10(23) of the Act from the respondent for the last three years i.e 2017-18 to 2019-20 , which were granted to the assessee for the purposes of imparting the education only( pages 36 to 40 PB) . Thus the first condition as stipulated under section 12AA , regarding the genuineness of the activity have duly been proved by the assessee before the Commissioner exemption. We have no doubt about the genuineness of the activities of the assessee i.e the assessee was/is imparting education and imparting of education is a charitable activities under section 2(15) of the Act. Thus we hold that the activities of the assessee are charitable within the meaning of section 12AA (1) (i) read with 2(15). 22. Further in the matter of Sanatan Dharm Charitable Education Society in ITA no. 600/Asr/2018 vide order dated 05.04.2019 had held as under: 7. We shall now in the backdrop of the aforesaid settled position of law advert to the observations drawn by the CIT(E) for declining the grant of registration to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her embarked upon the issues which though would be relevant at the stage of framing of assessment but would have no bearing to the extent judging of the genuineness of the activities of the assessee society are concerned. Be that as it may, even otherwise as the security deposit received by the assessee society from S/sh. Rajiv Jain and Raj Kumar Nayyar in the F.Y. 2015-16 could not be included in the total income of the assessee for the F.Y. 2015-16, thus no infirmity as regards the manner in which the aforesaid amount has been reflected by the assessee in its final accounts for said year is liable to be drawn. Insofar the observations of the CIT(E) that the inconsistency between the annual rental income of Rs. 10,000/- and Rs. 14,000/- shown by the assessee in F.Y. 2015-16 and F.Y. 2016-17 on the one hand and the advance rent of Rs. 14 lacs is concerned, we are unable to subscribe to the said observations of the CIT(E), which as observed by us hereinabove is based on misconceived facts. As observed by us hereinabove, as the amount of Rs. 13,87,000/- (sic Rs. 14 lac) is the amount received by the assessee society as a security deposit from its tenants, therefore, no feasible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a charitable trust or institution is to carry on activities to sub serve the charitable purpose and not to earn profit. Rather, the charitable purpose should not be submerged by the profit making motive. Fairly stating, the purpose of a charitable trust must be essentially charitable in nature and it should not be a cover for carrying on an activity which has profit making as its predominate object. In our considered view, it would indeed be difficult for a trust or institution to so carry on its activity that the expenditure balances the income and there is no resulting profit. As observed by the Hon ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust (1975) 101 ITR 234 (SC), if the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. It was observed that the test now is the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on charity. In terms of our aforesaid observations, we are of the considered view that an activity involved in carrying out the charitable purpose mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said observations, we are of the considered view that the CIT(E) had erred in declining to grant registration under Sec. 12AA to the assessee society. We thus set aside the order of the CIT(E) and direct him to grant registration under Sec. 12AA to the assessee society. 23. Similarly in CIT vs. Surya Education Charitable Trust in ITA No. 701/2010 the Hon ble Jurisdictional High Court in paragraph 11 had held as under: Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act. On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, the activities are genuine. It cannot be concluded on the basis that the assessee has not filed its income tax returns in earlier years that the activities of the assessee are not genuine. It has been further recorded that Section 13 of the Act comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12AA of the Act. No adverse remarks have been recorded by the CIT (E) with regard to the objects contained in the memorandum of the assessee-trust to come to the conclusion that its activities are not genuine. Thus, it has been rightly directed by the Tribunal to the CIT (E) to grant registration under Section 12AA of the Act. The relevant observations recorded by the Tribunal read thus:- We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The first reason on the basis of which the Commissioner of Income Tax (Exemptions) has refused to grant registration to the assessee is that the assessee has not been filing its income-tax returns in the earlier years. We do not find that it is a good re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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