Income Tax Appellate Tribunal - Raipur
M/S. Guru Ghasidas Vishwavidyalaya, ... vs Commissioner Of Income Tax ... on 9 February, 2024
आयकर अपीलीय अिधकरण, रायपुर यायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी र वश सूद, याियक सद य एवं ी अ ण खोड़ पया, लेखा सद य के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
(ITA No.172 & 173/RPR/2023)
(Assessment Year: NA)
M/s Guru Ghasidas Vishwavidyalaya, V Commissioner of Income Tax (E),
Koni Road, Bilaspur, s REAC, Bhopal (MP)-462016
495009, (C.G.)
PAN: AAAJG2058G
(अपीलाथ /Appellant) . ( यथ / Respondent)
.
िनधा रती क ओर से /Assessee by : Shri Nikhilesh Begani, CA
राज व क ओर से /Revenue by : Shri S.K. Meena, CIT-DR
सुनवाई क तार ख/ Date of Hearing : 01.02.2024
घोषणा क तार ख/Date of : 09.02.2024
Pronouncement
आदे श / O R D E R
Per Arun Khodpia, AM:
The captioned appeals are filed by the assessee against the order of Ld. Commissioner of Income Tax (Exemption), Bhopal (in short, 'The CIT(E)'), both dated 14.03.2023, rejecting the application of the assessee filed in form no. 10AB for grant of registration u/s 12AB and 80G(5).
2. The Grounds of Appeal raised by the assessee in ITA No. 172/RPR/2023, which pertains to registration u/s 12A, are as under:
Ground No. 1: That the order passed by the Ld. CIT(E) is bad in law in the light of the fact that the appellant is directly exempt under section 10(23C) (iiiab) being substantially funded by Govt. and the assessee is entitled to avail registration under section 12A and 80G as the first proviso to section 11(7) 2 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya excludes only those Organisations which are subject to approval under section 10(23C).
Ground No. 2: That the CIT(E) erred legally and factually in treating various consistently followed accounting entries as gross irregularities for the following reasons:
(i) The income of the appellant is a part of the consolidated fund of India and it is unconditional exempt under section 10(23C) (iiiab) and under any view of the matter the income of the appellant is not subject to tax therefore the question of irregularity does not arise.
(ii) That the appellant has been consistently following the impugned accounting treatment and the appellant had applied more than 85% of its income.
(iii) There is a mistake in treating the advances for a period 2007 where the correct fact is that out of total Advance 16.05 Crores, Rs. 13.76 Crores is paid 31.03.2022.
(iv) That the appellant earned Rs. 5,20,11,467/- as interest on corpus and incurred more than 85% even if such interest is treated as part of income.
(v) The appellant temporarily used corpus for specific expenses which is permissible under the law.
(vi) There is a gross error of understanding with regard to Provision on Retirement Benefits as University is Funded by UGC & to comply Format of Annual Accounts prescribed by Ministry of Education such provision is made which is appropriately transferred from Income & Expenditure Account to Receivable A/c, as per Balance Sheet Total Provision Amount in Liability is Equal to Total Receivable Asset Side.
Thus, there is no impact on the income of the Organisation remains a compensating entry on both side of the balance sheet.
Ground No. 3: That the Ld. CIT erred in law and facts by applying the ratio of the Supreme Court decision in New Noble Educational Society v. CCIT [2022] 143 taxmann.com 276 as the genuineness of the appellant is not under dispute being a Central Government owned/controlled University exempt under section 10(23C).
Ground No. 4: That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.
3 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
3. The Grounds of Appeal raised by the assessee in ITA No.173/RPR/2023, which pertains to registration u/s 80G are as under:
Ground No. 1: That the order passed by the Ld. CIT (E) is bad in law in the light of the fact that the appellant is directly exempt under section 10(23C) (iiiab) being substantially funded by Govt. and the assessee is entitled to avail registration under section 12A a 80G as the first proviso to section 11(7) excludes only those Organisations which are subject to approval under section 10(23C).
Ground No. 2: That the CIT(E) erred legally and factually in treating various consistently followed accounting entries as gross irregularities for the following reasons:
(i) The income of the appellant is a part of the consolidated fund of India and therefore, it is unconditional exempt under section 10(23C) (iiiab) and under any view of the matter the income of the appellant is not subject to tax therefore the question of irregularity does not arise.
(ii) That the appellant has been consistently following the impugned accounting treatment and the appellant had applied more than 85% of its income.
(iii) There is a mistake in treating the advances for a period 2007 where the correct fact is that out of total Advance 16.05 Crores, Rs. 13.76 Crores is paid on 31.03.2022.
(iv) That the appellant earned Rs. 5,20,11,467/- as interest on corpus and incurred more than 85% even if such interest is treated as part of income.
(v) The appellant temporarily used corpus for specific expenses which is permissible under the law.
(vi) There is a gross error of understanding with regard to Provision on Retirement Benefits as University is Funded by UGC & to comply Format of Annual Accounts prescribed by Ministry of Education such provision is made which is appropriate transferred from Income & Expenditure Account to Receivable A/c, as per Balance Sheet Total Provision Amount in Liability is Equal to Total Receivable Asset Side. Thus, there is no impact on the income of the Organisations remains a compensating entry on both side of the balance sheet.
Ground No. 3: That the Ld. CIT erred in law and facts by applying the ratio of the Supreme Court decision in New Noble Educational Society v. CCIT [2022] 143 taxmann.com 276 as the genuineness of the appellant is not under dispute being a Central Government owned/controlled University exempt under section 10(23C).
4 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya Ground No. 4: That the Appellant craves leave to add, amend, alter or delete all or any of the grounds of appeal at the time of hearing of the appeal.
4. As the aforesaid two appeals are filed by the same assessee and are interconnected having similar issues, therefore, the same are taken together for adjudication under this common order. ITA No. 172/RPR/2023 is taken up as the lead case and our observation/decision in the lead case shall be applied mutatis mutandis in ITA No. 173/RPR/2023.
5. At the outset, Ld. AR on behalf of the assessee submitted that the issue involved in the present appeals regarding rejection of assessee's request for grant of registration u/s 12A and 80G is squarely covered by various case laws wherein Hon'ble Courts have held that the registration under the impugned sections should be on the basis of objects of the trust and its activities. It is further argued that the Commissioner, who is the competent authority is bound to satisfy himself that the object of the trust are genuine, and the activities are in furtherance of objects of the trust. In this respect Hon'ble Jurisdictional High Court of Chhattisgarh in the case of CIT v Chhattisgarh Urology Society in TAXC No.159 of 2017 and CIT v Rishabh Foundation Trust in TAXC No.166 of 2017, has categorically accorded the finding that under the provisions of section 12A, the Commissioner is not empowered to assess the objects vis-à-vis the books of accounts but should look into the objects of the society that they are charitable in nature or not.
Ld. AR further placed his reliance on the order of this tribunal in the case of M/s Shri Agrasen Jan Kalyan Trust v. CIT(E) in ITA No. 334/RPR/2016 and 5 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya Swayam Siddha Foundation Society v. CIT(E) in ITA No. 93 & 312/RPR/2023 , wherein the issue regarding the charitable nature of objects and the activities to be carried out in accordance with such objects are to be looked into by the Commissioner is decided in favour of the assessee by placing reliance on the judgment by the Hon'ble Apex Court in the case of Ananda Social & Educational Trust v. CIT [2020] 426 ITR 340 (SC).
6. Backed by aforesaid submissions, Ld. AR drew our attention to the order of Ld. CIT(E) having common observations while rejecting the application of the assessee u/s12AB and 80G(5) of the Act. For the sake of clarity and completeness, the discrepancies, response of assessee and findings of the Ld. CIT(E) qua the various issues/deficiencies pertaining to FY 2021-22 pointed out by the CAG Audit Report in the case of the assessee are extracted as under:
(i)--lssue raised in show cause Notice- The CAG Audit report dated 24/1 1/2022 has pointed out various deficiencies for FY 2021-22, out of which the deficiencies pointed out have been accepted by the assessee at the S.No. 2(l &ii) of Part B(General) of the reply.
Reply of the Assessee:- The observations as per SAR Part B (General) Sr.No.2 are as follows:-
(i) Advances of Rs 1,39,69,458/- were given to employees (Non-Interest Bearing) during the period 2014 to 03/2022 is outstanding.
(ii) Advances and other amount of Rs 16,05,41 ,586 / of the period 2007 to 03 / 2022 Recoverable in cash or in kind of other is outstanding.6 ITA No.172 & 173/RPR/2023
M/s Guru Ghasidas Vishwavidyalaya Amount of 16,05,41,586/- are advances to various Suppliers for Construction, Equipment Material etc. in which the major amount 13.76 Crore is paid to CPWD for Building Construction work on 31.03.2022. The advances are routine part of work of university & in the CAG Report the values of advances are mentioned in general just to inform & this point is included in every year's report, here we are agreeing with the observation of the audit, and we are continuously pursuing to recover/adjust above advances and letter also issued in this regard. Hopefully maximum amount of advance will be recovered / adjusted at the earliest.
Remarks by the undersigned-The assessee has accepted the said observation of CAG report. The assessee accepted that huge amount of advances of Rs 1,39,69,458/- and Rs 16,05,41 ,586/- is outstanding since long time i.e. 2014 and 2007 respectively.
(ii)Issue raised in show cause Notice- As per the schedule IA of the balance sheet for the year ending 31/03/2022, the interest amounting to Rs.5,20,11 ,467/- and the recovery of salary etc at RsÅ,02,58,005/ have been directly accounted for in the balance sheet. It was asked as 'Co why the interest income has not been offered.
Reply of the Assessee:- A interest earned in FY.2021-22 Rs.5,20,11,467/belongs to corpus fund. In the FY .2020-21 under Salary etc. & other Recurring Grant was Sanctioned Rs.18,10,00,000/- under this grant the excess Expenses of Rs.1,02,58,005/- is temporary utilized out of Corpus fund and shown in utilization certificate. In FY2021-22 this amount is returned to corpus fund. (Utilization Certificate of FY2020-21 & FY.2021-22 attached Page No 1 to 6) Remarks by the undersigned- The assessee has accepted that the interest of Rs 5,20,11,467/- has not been offered as income during the year and explanation offered by the assessee is not acceptable. The assessee was required to offer the interest amount as income of the year. The assessee also accepted that Rs. 1,02,58,005/- is temporary utilized out of Corpus fund which is also in violation to the provisions of the Act as the Corpus Fund has to be utilized for the designated purposes only and general expenditure cannot be incurred out of corpus fund.
7 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
(iii)lssue raised in show cause Notice- in FY 2021-22, Regarding the salary expenses out of corpus fund shown at Rs.1,86,32,125/-, it has been stated that whenever, there is shortage of funds in the salary head, the required fund is utilized out of corpus fund and when the same is reimbursed through the UGC grant, it is deposited in the corpus fund.
Reply of the Assessee:-ln FY2021-22 UGC Sanctioned of Rs.70.30 crore and expenses of Rs.72.17 crore excess expenses Amount of Rs. 1,86,32,125/-, is temporarily used from corpus fund and in FY.2022-23 this amount is released by UGC under Salary Head is transferred to corpus fund. (Utilization Certificate in F.Y. 2021-22 & Sanction letter in FY2022-23 is attached Page No.7 to 11).
Remarks by the undersigned- The reply of the assessee is not acceptable as accounting system followed by the assessee for salary grant is not correct. The salary grant received by the assessee is part of income and cannot be transferred to Corpus Fund.
(iv)lssue raised in show cause Notice- The interest income has been earned on the Designated fund during FY 2021-22, which has not been offered as income.
Reply of the Assessee: Some designated fund likes Student welfare fund & Teachers benefit fund are specific/Endowment/ earmarked fund the interest earned on the designated fund is added to that particular fund. (Sch.2 of Annual Account Attached Page No. 12) Remarks by the undersigned- The assessee has accepted that the interest amounts of various designated funds have not been offered as income of current year. Explanation offered by the assessee is also not acceptable. The assessee was required to offer the interest amount as income of the year.
(v)lssue raised in show cause Notice- Income from consultancy has been shown at Rs.4,00,000/- which has been received after T DS from NHAI. No GST has been charged on this income.
8 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya Reply of the Assessee:- GST in Income from consultancy charges if any shall be deposit.
Remarks by the undersigned- The assessee has accepted the default which is in violation to section 12AB(1)(b)(i)(B) of the Act by not following the any other law time being in force.
(vi)lssue raised in show cause Notice- The provision of superannuation pension has been shown at Rs.2,08,64,39,747/- and accumulated leave encashment has been shown at Rs. 29,83,16,409/- in the balance sheet. It has been submitted by the assessee that it is based on actuarial valuation as per the format of accounts prescribed by the Ministry of Expenditure and CAG norms.
Reply of the Assessee: The objective of provision for employees' terminal benefits to recognize a liability when an employee has provided service in exchange for employee benefits to be paid in future. Every year university receives letter from UGC for Finalization of Budget Estimates for Grant of salary, Employees Retirement and Terminal Benefits etc. as it is 100% funded. In reply university provides number of employees to be retired in that particular F.Y. and amount due for payment of Retirement and terminal Benefits which UGC disburses. Since retirement of employees is a continuous process, the disbursement of such amount for retiring employees by the UGC is done for one year only whereas provision is required for all the employees, so if we assume that all the employees will retire the UGC shall disburse whole amount. Accordingly, as stated above as per format of Annual Accounts by MHRD Schedule 15 requires to make provision for Employees Retirement and Terminal benefits, university provisioned 271.16 Crore (Copy of Actuarial Valuation Attached Page No. 19 to 20).
Remarks by the undersigned- The reply submitted by the assessee is not correct. Explanation offered by the assessee is not as per the books of accounts of the assessee. For Example- during FY 2021-22, The assessee has made following entries for expenditures in I/E accounts:-
Staff payments & Benefits- In Schedule 15- Rs.140,53,27,476/- As per schedule 15(S.N. d)- Retirement & Terminal Benefits- Rs. 51,90,44,865/-9 ITA No.172 & 173/RPR/2023
M/s Guru Ghasidas Vishwavidyalaya In Schedule 15A- Bifurcation of Rs. 51,90,44,865/- has been given and entries of provisions made during the year are shown as under:
Provisions to be made in the current year Pension - Rs. 36,94,03,874/-
Gratuity - Rs. 6,21,03,123/-
Leave Encashment --Rs. 4,00,81,939/-
Total Provisions - Rs. 47,15,88,936/-
As per the above figures, it is clear that the assessee has claimed Rs. 47,15,88,936/- as expenses which have not been actually incurred but only provisions for future expenditure has been made. In this way the assessee has reduced the profit of the year by Rs. 47,15,88,936/-.
(4) The discrepancies mentioned above were also pointed out to the assessee during the physical verification by ITO(E), Bilaspur but the assessee failed to provide the relevant details and explanation on above mentioned points. Hence, the accounts of the assessee are not found genuine and correct and the assessee intentionally not making proper entries to reduce the income. The above-mentioned discrepancies have been pointed out for FY 2021-22 only, however, the assessee is making same accounting in various earlier years. The assessee has submitted Audit reports for FY 2019-20 and FY 2020-21 also and the same discrepancies have been noticed therein.
(5) - Recently Hon'ble Supreme Court in the case of CIVIL APPEAL NO.
3795 OF 2014 M/S NEW NOBLE EDUCATIONAL SOCIETY APPELLANT(S) VERSUS THE CHIEF COMMISSIONER OF INCOME TAX 1 AND ANR. RESPONDENT(S), Para 62 held that--
The second proviso by sub-clause (ii) requires the Commissioner to make such enquiries to specify about the genuineness of the activities of the fund, trust or institution and compliance of such requirements of other laws in force by such fund, trust or institution. Upon considering the materials the Commissioner or the concerned authority can pass -an appropriate order granting approval for a specific period of time or reject 10 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya the application. The second proviso importantly indicates that before granting approval to any fund, trust or institution, the Commissioner or the concerned authority 'may call for such documents' including audited annual accounts or information from the fund, or trust or Institution etc., as is deemed necessary for recording satisfaction about the genuineness of the activities. The judgment in American Hotel (supra) dealt extensively with the effect of the provisos to Section 10(23C). While doing so, the court made certain remarks with respect to the effect of these provisos characterizing a few of them as those dealing with the stage of considering applications for approval or registration and other as those dealing with application of income or receipts of the trust. In respect of the latter, this court was of the opinion that the question of application of income or profits could arise only at the stage of assessment. The court was also of the opinion .that the audited books of accounts would be of little or no relevance at the stage of registration or approval. Having regard to the plain terms of the second proviso to Section 10(23C), which refers to the procedure for approval of applications including those made by trusts and institutions imparting education, one can discern no such restrictions. From the pointed reference to 'audited annual accounts' as one of the heads of information which can be legitimately called or requisitioned for consideration at the stage of approval of an application, the inference is clear: the Commissioner or the concerned authority's hands are not tied in any manner whatsoever.
"While considering applications for approval, the Commissioner or the concerned authority as the case may be is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. "11 ITA No.172 & 173/RPR/2023
M/s Guru Ghasidas Vishwavidyalaya (6) Considering the facts of the case, the application of the assessee filed in Form IOAB for grant of registration u/s 12AB & 80G(5) of the Act is hereby rejected and the provisional registration/approval u/s 12AB in Form 10 AC vide URN No. AAAJG2058GE20221 dated 25.01.2023 & provisional registration/approval u/s 80G(5) in Form 10 AC vide URN No. AAAJG2058GF20225 dated 04.04.2022 granted by CPC is also hereby cancelled as per the provisions of section 12AB(1)(b)(ii)(B) of the Act and as per the second proviso to section 80G(5) of the Act respectively.
7. Against the aforesaid observations of the Ld. CIT(E), Ld. AR argued that the deficiencies reported under the special audit report by the CAG are regarding loans, advances and deposits, interest income not offered as income, temporary utilization of corpus fund for salary on account of shortage of funds which is again reimbursed to the corpus funds on receipt from UGC grant, GST default, provision of future expenses of accumulated leave encashment etc. are duly explained by the assessee however, are not considered in right sprit of law by the Ld. CIT(E), who was duty bound to consider the activities of the assessee instead of focusing on the accounts and discrepancies therein while granting the registration u/s 12AB & 80G(5), as per the settled principle of law. Ld. AR placed his reliance on following case laws:
Ananda Social & Educational Trust v. CIT [2020] 426 ITR 340 (SC)
9. Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so satisfied. The said section requires the Commissioner to be so satisfied in order to ensure that the object 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 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
10.It was argued before us that the Commissioner is required to be satisfied about two things - firstly that the objects of the trust and secondly, its activities are genuine. If there have been no activity undertaken by the trust then the Commissioner cannot assess whether such activities are genuine an therefore, the Commissioner is bound to refuse the registration of such a trust.
11.We have given our anxious consideration to the above submissions made by Ms. Aishwarya Bhati, learned Senior Counsel appearing for the appellant - Director of Income-tax and find that it is not possible to agree with the same. The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine.
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 genuine 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 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 accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found have undertaken activities contrary to the objects of the Trust.
13.We therefore find that the view of the Delhi High Court in the impugned judgment is correct at liable to be upheld.
CIT v Chhattisgarh Urology Society in TAXC No.159 of 2017
10.The provision contained under Section 12A nowhere empowers the CIT to assess the objects vis-a-vis the books of accounts. Even otherwise, it is not to be seen at this stage as to whether the fulfillment of the charitable trust would eventually benefit the members of the society. If the constituent of the trust engages in some genuine charitable activity which may benefit them in some other aspect of their personality which may include their vocation in life, it would not affect the genuineness of the objects of the trust. A person does not engage in charity for not doing anything in the other walks of life. A charity for one particular object is not for destroying the career for an individual which he is otherwise entitled to profess. If this ground is considered to be affecting the genuineness of the trust, people successful in different walks of life would never engage in charitable activity.
13 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
11.In the matters of Commissioner of Income Tax vs Vijay Vargiya Vani Charitable Trust1 and Fifth Generation Education vs Commissioner Income Tax2, it is held that at the stage of Section 12A, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No.10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this State, it is not proper to examine the application of income.
12.In the case at hand, the order passed by the CIT does not say in definite terms, that the objects of the society are not charitable in nature. Merely because the trust consists of Urologist Doctors and the charitable activity may mutually benefit those members, the object itself would not cease to be charitable in nature.
13.For the foregoing, we are satisfied that the Appellate Tribunal has rightly interfered with the order passed by the CIT. No substantial question of law arises in this appeal for determination in view of the plain language of Section 12A of the Act, 1961. The appeal being sans substance, it deserves to be and is hereby dismissed.
CIT v Rishabh Foundation Trust in TAXC No.166 of 2017
11. The provision contained under Section 12A nowhere empowers the CIT to assess the objects vis-a-vis the donation received in the first year of its establishment. In a given case it may happen that the trust is not able to commence the charitable activities for various reasons, however, that may not be conclusive of the fact that the trust does not intend to carry on the aims and objects for which it is established. If the aims and objects clearly project the activities of the trust to be charitable in nature, it is not the stage for lifting the veil and assessing whether those activities are actually carried on at the first year of establishment of the trust.
12. In the matters of Commissioner of Income Tax vs Vijay Vargiya Vani Charitable Trust1 and Fifth Generation Education vs Commissioner Income Tax2, it is held that at the stage of Section 12A, the Commissioner is not to examine the application of income. All that he may examine is whether the application is made in accordance with the requirements of Section 12A read with Rule 17A and whether Form No.10A has been properly filled up. He may also see whether the objects of the trust are charitable or not. At this Stage, it is not proper to examine the application of income.
13. In the present case, the order passed by the Tribunal has discussed the matter in detail and has assigned justifiable reason as to how the CIT has failed to exercise jurisdiction vested in it at the stage of examining the application under Section 12A. As earlier discussed, the list of donations and the list of charitable activities are not to be looked into at this stage.
14 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
14. Accordingly, we are satisfied that the Appellate Tribunal has rightly interfered with the order passed by the CIT. No substantial question of law arises for determination in view of the plain language of Section 12A of the Act, 1961. The appeal being sans substance, it deserves to be and is hereby dismissed.
M/s Shri Agrasen Jan Kalyan Trust v. CIT(E) in ITA No. 334/RPR/2016
10. We have heard the rival contentions, perused the material available on records and case laws relied upon. In view of the aforesaid decision in the case of Ananda (supra), since the actual activities of the trust cannot be the deciding factor while granting the registration u/s 12A, but the object of the trust should have been looked into, the activities have to be looked into by the Assessing Officer at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s.12AA of the Act, which is substantiated by the department itself by granting registration u/s 12AA on 25.03.2021 vide order ITBA/EXM/S/12AA/2020- 21/1031751676(1). In such circumstances, respectfully following the judgment in the case of Ananada (Supra), we are of the considered opinion that the rejection of application for registration u/s 12AA of the Act by Ld. CIT(E) was erroneous application of law, thus, cannot sustain, accordingly we quash the same and direct to grant registration to the assessee as per law.
Swayam Siddha Foundation Society v. CIT(E) in ITA No. 93 & 312/RPR/2023
9. We have considered the rival submissions, perused the material available on record and the case laws submitted by the assessee society in support of their contentions. The issue in the present case regarding rejection of the application of the assessee for registration u/s 12AB, as have been dealt with by the coordinate bench of the ITAT, Raipur in the case of Shri Agrasen Jan Kalyan Trust v. Commissioner of Income-tax (Exemption) In ITA no. IT APPEAL NO. 334 (RPR) OF 2016 vide order dated July, 4, 2023 wherein the issue has been discussed and principle of law as laid down by Hon'ble Supreme Court in the case of Ananda Social & Educational Trust v. CIT [2020] 114 taxmann.com 693/272 Taxman 7/426 ITR 340 (SC) [19-02-2020], wherein Hon'ble Apex Court has held as under:
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 15 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya 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 accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applied for registration found to have undertaken activities contrary to the objects of the Trust.
10. On perusal of the objects of the society it is apparent that the society has charitable objects and, therefore, the request of the society for grant of registration u/s 12AB cannot be denied on the basis of assessment of the activities, which has actually been carried out by the assessee society. Hon'ble Apex Court has even held that the "activities" in the provision includes 'proposed activities'. Accordingly, the view taken by the tribunal in the case of Shri Agrasen Jan Kalyan Trust, for the sake of clarity is extracted as under:
10. We have heard the rival contentions, perused the material available on records and case laws relied upon. In view of the aforesaid decision in the case of Ananda (supra), since the actual activities of the trust cannot be the deciding factor while granting the registration u/s 12A, but the object of the trust should have been looked into, the activities have to be looked into by the Assessing Officer at the time of assessment proceedings. It is also a fact that the trust was formed with charitable objects eligible for approval u/s.12AA of the Act, which is substantiated by the department itself by granting registration u/s 12AA on 25-3-2021 vide order ITBA/EXM/S/12AA/2020-21/1031751676(1). In such circumstances, respectfully following the judgment in the case of Ananda (supra), we are of the considered opinion that the rejection of application for registration u/s 12AA of the Act by Ld. CIT(E) was an erroneous application of law, thus, cannot sustain, accordingly we quash the same and direct to grant registration to the assessee as per law.
11. In terms of the aforesaid observations respectfully following the judgment in the case of Ananda (supra), in absence of any contrary decision, fact, or submission by the revenue, we are of the considered view that the rejection of the request of registration u/s 12AB of the Act in the present case was unjustified, uncalled for, and against the settled principle of law.
Consequently, we are inclined to set aside the order of Ld. CIT(E), Bhopal, vide DIN No. ITBA/EXM/F/EXM45/2022-23/1049976056(1) dated 21.02.2023 and direct to grant registration u/s 12AB in accordance with law.
16 ITA No.172 & 173/RPR/2023M/s Guru Ghasidas Vishwavidyalaya
8. On the basis of submissions, relying upon the aforesaid case laws Ld. AR requested to struck down the order of Ld. CIT(E), by directing to grant registration u/s 12AB & 80G of the Act to the assessee, who is a Central Government owned/controlled University exempt u/s 10(23C) of the Act, thus, entitled for such registration, accordingly.
9. Ld. CIT DR on the other hand vehemently and strongly supported the order of Ld. CIT(E).
10. We have considered the rival submissions, perused the material available on record and case laws placed before us for our consideration.
Before dealing with the issue in hand and interpreting the facts of the case in terms of provisions u/s 12AB, we find it appropriate to extract hereunder the relevant provisions for the sake of immediate reference:
12AB. (1) The Principal Commissioner or Commissioner, on receipt of an application made under clause (ac) of sub-section (1) of section 12A, shall,-
(a) where the application is made under sub-clause (i) of the said clause, pass an order in writing registering the trust or institution for a period of five years;
(b) where the application is made under sub-clause (ii) or sub-clause
(iii) or sub-clause (iv) or sub-clause (v) 66[or item (B) of sub-clause
(vi)] of the said clause,--
(i) call for such documents or information from the trust or institution or make such inquiries as he thinks necessary in order to satisfy himself about--
(A) the genuineness of activities of the trust or institution; and (B) the compliance of such requirements of any other law for the time being in force by the trust or institution as are material for the purpose of achieving its objects;17 ITA No.172 & 173/RPR/2023
M/s Guru Ghasidas Vishwavidyalaya
(ii) after satisfying himself about the objects of the trust or institution and the genuineness of its activities under item (A) and compliance of the requirements under item (B), of sub- clause (i),--
(A) pass an order in writing registering the trust or institution for a period of five years; or (B) if he is not so satisfied, pass an order in writing,--
(I) in a case referred to in sub-clause (ii) or sub-clause (iii) or sub-clause (v) of clause (ac) of sub-section (1) of section 12A rejecting such application and also cancelling its registration;
(II) in a case referred to in sub-clause (iv) or in item (B) of sub-clause (vi) of sub-section (1) of section 12A, rejecting such application, after affording a reasonable opportunity of being heard;]
(c) where the application is made under item (A) of sub-clause (vi) of the said clause or the application is made under sub-clause (vi) of the said clause, as it stood immediately before its amendment vide the Finance Act, 2023, pass an order in writing provisionally registering the trust or institution for a period of three years from the assessment year from which the registration is sought,] and send a copy of such order to the trust or institution.
11. On perusal of the aforesaid provisions, wherein the principal Commissioner or Commissioner on receipt of application of the assessee is required to make inquiries necessary in order to satisfy himself about the genuineness of the activities of the trust or institutions and to verify the compliance of such requirements of any other law for the time being in force by the trust or institutions as are material for the purpose of achieving its objects. In the present case, Ld. CIT(E) have thoroughly discussed various discrepancies reported by the CAG to the assessee university for the FY 2021-22, as apparent in the part B of special report wherein it is specifically observed that the loans, advances and deposits 18 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya are without prior sanction of MoE/UGC. Further, the violation of GST which is accepted by the assessee in its reply before the Ld. CIT(E), it is also observed that the assessee has temporarily utilized the corpus funds against the designated purpose in violation of the provisions of the Act.
The contention of the assessee that the competent authority should not have looked into the accounts and activities of the assessee based on various judgments referred to supra while granting the registration as requested can be accepted, but at the same time, we cannot be oblivion of the facts emanating from the observations of the Ld. CIT(E), who was under obligation to look into the and enquire regarding genuineness of the activities of the trust and also the compliance of requirement of any other law for the time being in force, which Ld. CIT(E) have exercised and was came across the details /information culled out from CAG report, establishing deficiencies on the part of assessee for the FY 2021-22 leading to non-compliance of law, which she has further checked and found that same discrepancies are existing in the audit report of the assessee for FY 2019-20 and FY 2021 also. Under such facts and circumstances, the various case laws relied upon by the assessee referred to supra cannot rescue the contention raised by the assessee being the facts and decision in all the referred case laws are distinguishable and are addressing an issue which is not the cause of rejection in the present case. The rejection of application of assessee u/s 12AB was on account of assessee's deficiencies reported by CAG leading to non-compliance and violation of the provisions of respective applicable 19 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya laws by triggering the provisions of section 12AB(1)(b)(i)(B) r.w.s.
12AB(1)(b)(ii)(B) relying upon the following decision:
(5) - Recently Hon'ble Supreme Court in the case of CIVIL APPEAL NO. 3795 OF 2014 M/S NEW NOBLE EDUCATIONAL SOCIETY APPELLANT(S) VERSUS THE CHIEF COMMISSIONER OF INCOME TAX 1 AND ANR. RESPONDENT(S), Para 62 held that--
The second proviso by sub-clause (ii) requires the Commissioner to make such enquiries to specify about the genuineness of the activities of the fund, trust or institution and compliance of such requirements of other laws in force by such fund, trust or institution. Upon considering the materials the Commissioner or the concerned authority can pass -an appropriate order granting approval for a specific period of time or reject the application. The second proviso importantly indicates that before granting approval to any fund, trust or institution, the Commissioner or the concerned authority 'may call for such documents' including audited annual accounts or information from the fund, or trust or Institution etc., as is deemed necessary for recording satisfaction about the genuineness of the activities. The judgment in American Hotel (supra) dealt extensively with the effect of the provisos to Section 10(23C). While doing so, the court made certain remarks with respect to the effect of these provisos characterizing a few of them as those dealing with the stage of considering applications for approval or registration and other as those dealing with application of income or receipts of the trust. In respect of the latter, this court was of the opinion that the question of application of income or profits could arise only at the stage of assessment. The court was also of the opinion that the audited books of accounts would be of little or no relevance at the stage of registration or approval. Having regard to the plain terms of the second proviso to Section 10(23C), which refers to the procedure for approval of applications including those made by trusts and institutions imparting education, one can discern no such restrictions. From the pointed reference to 'audited annual accounts' as one of the heads of information which can be legitimately called or requisitioned for consideration at the stage of approval of an application, the inference is clear: the Commissioner or the concerned authority's hands are not tied in any manner whatsoever.
"While considering applications for approval, the Commissioner or the concerned authority as the case may be is not bound to examine only the objects of the institution. To ascertain the genuineness of the institution and the manner of its functioning, the Commissioner or other authority is free to call for the audited accounts or other such documents for recording satisfaction where the society, trust or institution genuinely seeks to achieve the objects which it professes. The Commissioner or other authority is not in any manner constrained from examining accounts and other related documents to see the pattern of income and expenditure. "20 ITA No.172 & 173/RPR/2023
M/s Guru Ghasidas Vishwavidyalaya
12. In light of the aforesaid observations, it is the admitted fact that the assessee university was found in default in terms of certain deficiencies and non-compliances as reported by CAG, which were examined by the Ld. CIT(E) and has culminated the order of rejection by recording her dissatisfaction under the provisions of section 12AB(1)(b)(ii)(B), however Ld. CIT(E) have not doubted or commented adverse about the objects, nature of activities and genuineness of the activities and also have not commented as to how the non-compliances /deficiencies noted are material for the purpose of achieving the objects of the assessee university which is necessary as mandated under the provisions of section 12AB(1)(b)(i)(B), still Ld. CIT(E) has valid reasons for her dissatisfaction on the basis of reported deficiencies and non-compliances on the part of assessee which may adversely affect the objects, therefore, the impugned order of cancellation cannot be squarely suffering with error of law and thus, the request of assessee to struck down the same cannot be accepted as such, however since the material effect of deficiencies and non-compliances on the accomplishment of objects of the assessee are not specifically brought on record by the Ld. CIT(E), therefore, in the interest of justice, for the sake of verification and clarification regarding effect of the deficiencies and non-compliance towards the achievement of the objects of the assessee university, we find it appropriate to restore the issues raised in the present appeal to the Ld. CIT(E), to revisit the application of the assessee for grant of registration u/s 12AB and to 21 ITA No.172 & 173/RPR/2023 M/s Guru Ghasidas Vishwavidyalaya dispose of the same as per law, in terms of our aforesaid observations.
Needless to say, the assessee shall be provided with reasonable opportunity of being heard.
13. In the result, ITA no. 172/RPR/2023 of the assessee is partly allowed and ITA No. 173/RPR/2023 is also partly allowed by restoring the same to the Ld. CIT(E) in terms of our decision in ITA no. 172/RPR/2023.
14. In combined result, both the appeals of the assessee are partly allowed.
order pronounced in the open court on 09/02/2024.
Sd/- Sd/-
(RAVISH SOOD) (ARUN KHODPIA)
याियक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
रायपुर/Raipur; दनांक Dated 09/02/2024
Vaibhav Shrivastav
आदे श क ितिल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. यथ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A),
4. आयकर आयु / CIT
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur
6. गाड फाईल / Guard file.
// स या पत ित True Copy //
आदे शानुसार/ BY ORDER,
(Assistant Registrar)
आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur