Income Tax Appellate Tribunal - Amritsar
Sukhmani Society For Citizen Services, ... vs Assessee on 27 January, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. A.D. JAIN, HON'BLE JUDICIAL MEMBER, AND
SH. B.P. JAIN, HON'BLE ACCOUNTANT MEMBER
I.T.A. No.45/Asr/2014
(Assessment Year: 2007-08)
Sukhmani Societ y for Citizen Vs. The Assistant Commissioner
Services, Kapurthala, Distt. of Income Tax Officer,
Courts, Kapurthala Circle IV,
PAN:AAGTS1390H(Appellant) Jalandhar.
(Respondent)
Appellant by: Sh. Padam Bahl, CA.
Respondent b y: Sh. Tarsem Lal, DR.
Date of hearing: 8.12.2014
Date of pronouncement: 27.01.2015
ORDER
PER: B.P. JAIN (AM):
This appeal of the assessee is arising from the order of Learned CIT(A), Jalandhar, dated 12.11.2013 for the Assessment Year 2010-11.
2. The assesses has raised the following grounds of appeal:
"1. That the learned Commissioner of Income Tax(Appeals) Jalandhar has grossly erred in confirming the action of the learned Assistant Commissioner of Income Tax, Circle IV, Jalandhar in denying exemption U/s 11 of Income Tax Act,1961 on Rs.3,76,761/- being surplus generated by the Society.
2. That both learned Commissioner of Income Tax(Appeals), Jalandhar & Assistant Commissioner of Income Tax, Circle IV, Jalandhar have failed to appreciate that the Society has duly complied with the provisions of Section 2(15) of Income Tax Act, 1961.2
3. That both the learned Commissioner of Income Tax (Appeals), Jalandhar & Assistant Commissioner of Income Tax, Circle IV, Jalandhar have failed to appreciate the real import of the previous of Sec.2(15) of Income Tax Act, 1961."
3. The brief facts of the case arising from the order of the AO passed u/s. 143(3) dated 03.01.2013 in para 2 to 9 at pages 1 to 15 are reproduced for the same of convenience as under:
"2. The assessee the Sukhmani society for citizen services (Suwidha Centre) D.C. Office, Kapurthala is engaged in providing citizen services enter through out the district for and has shown surplus/income of Rs.3,76,761/- out of total receipts of Rs.78,22,625/- thereby following net profit at 4.81%. The assessee has claimed the exemption of this profit under section 11 of the I.T.Act.1961.
3. The Objective and Functions of the Society are as under:
a) To establish, manage operate, maintain and control the service centres, namely, the Sukhmani centers throughout the District for providing citizen services in an integrated manner to the public in an efficient, transparent, convenient, friendly and cost effective manner through the use of IT or otherwise in all or any aspects of citizen services to maximize speed, accountability, objectivity, affordability and accessibility from the perspective of the citizens.
b) To identify and recommend the Citizen Services which can be provided in consultation and co-ordination with the concerned departments on priority by various departments/organizations.
c) To Workout and implement the action plan for the establishment of citizen's service centres in the district on a self sustaining revenue model in collaboration with the private sector, NGOs or other innovative methods as per the requirements of the specific areas.3
d) To ensure and maintain the Standard of Service as per the Service Level Agreements between departments, Punjab State E-Governance Society, Sukhmani Service Cenres, franchisees, Financial Institutions and the government.
e) To workout and recommend the service fee or user charges that could be charged from the end customers for the approval of the competent authority and concerned departments/ organizations over and above the prescribed bill amount/fee/statutory fee for providing the services through Sukhmani Centres/ Financial Institutions or Franchisees.
f) To collect the revenue/payments/service charge on behalf of Punjab State E-Governance Society, various government departments and organizations and to issue receipts on behalf of the Punjab E-Governance Society and concerned Departments and Organisations.
g) To Chalk out detailed procedure for the collection of revenue for various services provided by the Sukhmani centres and to transfer the revenue in to the accounts of the Punjab State E-Governance Society and to the concerned departments and organizations as per the Policy guidelines of Punjab State E-
Governance Society. To keep detailed account of the revenue collected and the transactions.
Regular reconciliation of bank accounts between all stakeholders including the concerned departments, the financial institutions, the Sukhmani Centre and the Punjab E-governance Socieity.
i) To buy, sell, let on hire, lease, trade, import, export, repair or otherwise deal with IT resources, services & support on the turkey basis like hardware, software, connectivity, networking, training, stationary, consumables etc. including operational & managerial manpower, hiring of professionals, consultancy services by following the procedure prescribed. To ensure the other infrastructure requirements including site preparation and timely availability of the necessary resources for the various activities under the project.4
j) To liason with the associated IT companies for the analysis, design, development, testing and the implementation of the application software, networking, connectivity and other solutions necessary for providing Citizens services through the use of information technology.
k) To enter into collaborations, partnerships, agreements and contracts with Indian or foreign individuals, companies or organizations for establishment of Sukhmani Centres in the district.
l) To enter into any agreement with any Government or other authorities or any corporations/ companies, or persons which may seem conducive to theSociety's objects or any of them and to obtain from any such Government authorities, corporations, companies, societies or persons any contracts, rights, privileges and concessions which the society many think desirable and to carry out, exercise and comply with any such contrcts rights, privileges and concessions.
m) To create, maintain, update, common databases at the district level as per the guidelines of the Department of Information Technology in collaboration with the concerned the Departments and to monitor, administer and control the flow of the date and information between the Sukhmani centres and the concerned agencies.
n) to recruit and deploy the operational and managerial staff and other human resources, purely on a self sustaining and contract basis, for operaion, maintenance and running of the Citizen service centres as per the requirement / norms fixed by the Society from time to time.
o) To take all publicity measures and campaigning through media like TV, radio, newspaper, conferences, seminars, public meetings, banners and posters etc for creating awareness about the services of the Sukhmani centres for the benefit of the common man, specially the rural masses.5
p) To interact with the various agencies associated with the services to be rendered through the Sukhmani ceners and to facilitate inter-departmental coordination in all IT related matters.
q) To recommend the necessary administrative reforms or processes reengineering required to accomplish the objectives of good governance through IT or otherwise To test and recommend modifications to be made in the system or the process involved.
r) To take necessary steps to ensure security, safety, backup, disaster recovery and protection of the Government electronic date, both on-line and off-
line, as well as physical records of various departments, agencies and organizations.
s) To set procedures for taking routine backups regularly; generating various Management Information System reports of the revenue, payments and operation and maintenance related information of Sukhamani Centres with all the stake holders like Financial Institution concerned, concerned departments, agencies and the Punjab E-Governance Society.
t) To establish and implement a system of regular detailed review and monitoring mechanism for constantly evaluating the progress, performance, consistency and quality of the Citizen services given by various franchises and other centres with respect to the agreed quality in the service level agreements. u) To facilitate and assist in implementation of Citizen Charters framed by the other departments through the use of E-governance and IT as a tool. Also assist the concerned departments in measuring the performance of Citizen charters with respect to the agreed quality.
v) To take all steps necessary to promote efficiency, reduce delays, enhance accountability, transparency and objectivity in the functioning of the concerned government departments participating in the Sukhmani centres, directly or indirectly.
6w) To make all other expenditures in connection with providing Citizen services through the Citizen services centre including salaries, connectivity costs, cost of power, cost of maintenance and consumable, cost of up-gradation of equipment, other facilities to citizens etc.
x) To lend or deposit moneys belonging to or entrusted to or at the disposal of the Society or franchisees and other having dealings with the society with or without security, upon such terms as may be thought proper and to guarantee the performance of contracts by such persons or company provided that the Society shall not carry on banking business as defined in Banking Companies Regulations Act 1949. To borrow and raise money with or without security or to receive money and deposit on interest or otherwise in such manner as the Society may deem fit.
y) To draw, issue, accept and endorse discount and negotiate promissory notes, bills of exchange, delivery orders, warrants, warehouse, certificates and other negotiable or commercial or mercantile instruments connected with the business of the Society.
z) To establish and maintain any agencies and franchises in the district for the conduct of the business of the Society.
aa) To improve, mange, work, develop, alter, exchange, lease, mortgage, turn to account, abandon or otherwise deal with all or any part to the property rights and concessions of Society. To let out on hire all or any of the properties of the Society including every description of apparatus appliances of the Society. bb) To create any depreciation fund, reserve fund, sinking fund, insurance fund or any special or other fund whether for depreciation or for repairing improving, extending or maintaining any of the properties of the Society and to transfer any such fund or part thereof to any of the other funds herein mentioned.
cc) To do all such other lawful things as may be necessary, incidental or conducive to the attainment of the above objects.
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4. On perusal of Memorandum and Articles of Association of M/s. Sukhmani Society for Citizen Services, Kapurthala, it has been found that there are twenty nine objectives and functions of the society, the main object of the society shall be to provide citizen services in an integrated manner. The society is registered with the Addl. Registrar of Socieiies Kapurthala. Perusal of the objects and functions of the society reveals that the activities of the society are in commercial nature rather than charitable in nature and the society has been earning huge profit and therefore, the activities of the societies are of commercial in nature and aimed at deriving profit and not for charitable purpose. The main object of the society to provide citizen's services to the common people for their convenience and the Society also explained that the Society receives application from the common citizen for various services on behalf of the departments of State Government, forwards the same to the concerned departments and deliver back the same to the citizen within a specified time frame. The Society is charging prescribed fee from the citizen for providing services. The Society charges as much as Rs.1000/- for issuing NOC for petrol pump, Rs.500/- for registration of marriage, Rs.500/- application for New Arms License and so on. It is also noticed that these charges are in addition to the statutory fees charged by the State Govt. Department. These charges/fees are charged by the Society for providing alleged citizen services. The activity of the society is in the nature of trading, commerce or business and activity of rending service in relation to the trade, commerce or business for a fee. The Society provides certain services to the trade,. Commerce or business for a fee. The Society provides certain services to the common man and charges fee for the same and this act of the Society hardly go to establish any charitable purpose. The Society is doing all work and rendering services to the citizens which the State Govt. was supposed to perform without charging any such additional fees. Therefore, the activities of the Society are not charitable in nature within the meaning of proviso to section 2(15) of the Act and it does not quality to be treated as a charitable society.
5. Thus, the society has number of objects, not all of them charitable as evident from the above like To workout and recommend the service fee or user 8 charges that could be charged from the end customers for the approval of the competent authority and concerned departments / organizations over and above the prescribed bill amount / fee / statutory fee for providing the services through Sukhmani Centres/ Financial Institutions or Franchisees.
In East India Industries (Madras)(P) Ltd v. CIT(1967) 65 ITR 611(SC)], and Yogiraj Charity Trust v CIT(1976) 103 ITR 777(SC)] the Hon'ble Supreme Court had held that, where the main or primary objects of a trust are distributive, each and every one of the objections must be charitable if the trust is to be upheld as a valid charitable.
"Wholly for religious or charitable purposes" - The words ' wholly for religious or charitable purposes' as mentioned in section 11(1) of the I.T. Act show that the income from trust property would be exempt only if all the objectis of a trust are of a charitable or religious purpose".
Power to apply income to non-charitable object- jeopardizes the exemption- In case a trust has ten distinct objects and nine of them are of a religious or charitable nature but the tenth is not, and there is nothing to prevent the trustees from applying the property to the trust in carrying out any of the objects of the trust including the object which is not a religious or charitable nature the income derived from the property of the trust would not be exempt. The reason is that the trustees in such an even can apply the property of the trust exclusively for that purpose which is not of a religious or charitable nature. [CIT v. Jaipur Charitable Trust, (1971) 81 ITR 1,9 (Delhi), affirmed, (1976) 103 ITR 777 (SC); Zenith Tin Works Charitable Trust v. CIT, (1976) 102 ITR 119(Bom).
In the case of Kedia Jatia Sahayak Sabha and Fund v CIT(1963) 49 ITR 74 (Cal), the Division Bench of the High Court in their judgment and order dated March 2, 1962, held that in the case of society having more than one object and registered under the Societies Registration Act, 1860 and the association or its executive committee was entitled to spend the amounts under any of the clauses of the objects clauses, some of which were charitable in nature and others not, the 9 income derived by the society cannot be exempt under the provisions of section 4(3)(i) of the Act of 1922 in respect of assessment year 1951-52.
6. Thus, the Society having number of objects, not all of them are of charitable nature, is not eligible for its income derived by society exempted under section 11 of the I.T. Act.
This claim of the assessee of running Citizen Services society for "no profit"
is patently wrongly and contrary to actual facts. The Society has been earning huge profit and earned surplus of Rs.3,76,761/- during the year. This surplus and profits, the society has earned out of various activities and objects as mentioned above gives the nature of all the receipts.
Since the assessee has numerous objects, and activities, not all of them can be charitable by any angle, it is not eligible for its income to be exempted under section 11 of the Income tax Act as per the judgment of the High Court and the Hon'ble Apex Court in this regard as mentioned in para above.
7. Members of the Society:
Sr. Name & Designation Address Ex-Officio
No. Members
1. Mr. Samir Kumar, IAS D.C. Kapurthala. Chairman &
Deputy Commissioner C.E.O
Kapurthala.
2. Mrs. Bhawan Garg, IAS A.D.C.(Gen)., Member
A.D.C.(Gen.)Kapurthala. Kapurthala. Secretary
3. Mrs. Ranjit Kaur, PCS AC(Gen)., Joint Member
A.C. (Gen.) Kapurthala. Kapurthala Secretary
4. Mr. H.S.Garcha, A.D.C. A.D.C.(Dev)., Member
(Dev), Kapurthala; Kapurthala.
5. Mr. B.S.Dhaliwal, PCS S.D.M; Phagwara Member
S.D.M; Kapurthal
6. Mr. A.K. Sikka, PCS S.D.M. Kapurthala. Member
S.D.M; Kapurthala.
10
7. Mr. Iqbal Singh Sandhu, A.C.(Gri) Member
PCS A.C. (Gri), Kapurthala
Kapurthala.
8. Mr. Shashi Kumar D.R.O. Kapurthala. Member
Chandha D.R.O,
Kapurthal.
9. Mr. Manjit Singh, Tehsildar, Member
Tehsildar, Kapurthal. Kapurthala.
10. Mr.Balaraj Dhingra, DIO, NIC, Kapurthala. Member
NIC, Kapurthala.
11. Mr. R.K. Mittal E.O., M.C; E.O., M.C; Member
Kapurthal. Kapurthala
12. Mr. V.K. Makol, Secretary, Secretary, Red Finance-Cum
Red Cross, Kapurthala Cross, Kapurthala. Office
Secretary
13. Three IT experts to be I.T. Member
nominated by the Govt. in
the Dept. of I.T. Member.
14. Three eminent citizens to Member
be nominated by the Govt.
in the Dept. of I.T.
Member.
15. Any other member which Co-opted
the Board of Governors or Member
by the govt. in the Deptt.
Of I.T. decide to co-opt Co-
opted Members.
a) The Society shall consist of the following:-
i) All the ex-officio members as per the provision at Sr. No.1 to 12 of para 5
in the constitution of the Board of Governors.
ii) The members nominated by the Government as per the provision at Sr.
No.13-14 of para 5 in the constitutin of the Board of Governors. 11
iii) Other individuals, institutions, organization and corporate bodies to be accepted in future as Co-opted Members as per terms and conditions of eligibility as may be laid down and approved by the Board of Governors from time to time as per the provision at Sr. No.15 of para 5 in the constitution of the Board of Governors.
b) The society shall keep a Roll of nominated and co-opted Members and every such members of the Society shall sign the roll and state therein his name, occupation and address.
c) If a nominated and co-opted member of the Society changes his address, he shall inform his new address to the Member Secretary who shall thereupon enter his new address in the Roll of such Members. But if he fails to inform his new address, the address in the Roll of Members shall be deemed to be his address.
Membership to the society is not open, as per the Memorandum and Articles of Association of the Society.
8. On perusal of the income and expenses account of the Society, it revealed that society has been earning profit that will even put the most profitable company or professionally manged Multinational Company, a distant second.
During the last three year the society has been showing huge surplus, and the surplus, as submitted being deployed for further expansion of the business of 'education'.
Fin. Year 2006-07 2007-08 2008-09 2009-10
Receipts 84,83,787 85,11,918 76,14,717 78,22,625
Expenditure 53,80,114 56,37,090 78,82,234 74,45,863
Income/surplus 31,03,672 28,74,827 -2,67,517 3,76,761
of receipts
over Exp.
12
Since the assessee has shown receipts of Rs.78,22,625/- it was important to go through the nature of receipts shown by the assessee. On perusal of the nature of receipts, it is found that it includes:
Sr. No. Particulars Rate 1. Application for new ARMS License 500 2. Application for duplicate ARMS License 200 3. No Objection Certificate for Petrol Pump 1000 4. Counter Signing of Documents 100 5. Dependent Certificate to wards of Freedom 0 Fighters 6. Issue Passes to handicapped people 0 7. Issue of New Passport 100 8. Copy of Documents 50
9. Registration of Marriage under special Marriage 500 Act 10. Ratio Cards 20 11. Affidavit Attestation 20 12. Indemnity Bond 20 13. Surety Bond 50 14. Issue for Identity Card 20 15. Addition of Name in Birth Record 50 16. Late Birth Registration 50 17. Late Death Registration 50
18. Permission for Showering Flowers through 200 Aeroplane 19. Caste Certificate 50
20. Doctor Fee and Blood Checkup Fee (Combined 35 Fee) 13 21. Issue of License Agriculture 50 22. Renewal of License Agriculture 20
23. Application under Right to Information Act 0 24. Issuance of Birth Certificate 50 25. Issuance of Death Certificate 50 26. Permission to use Loud Speakers ETC. 50 27. Issue of Marriage ability Certificate 200 28. CDPO: Old Age Pension 0 29. CDPO: Widow & Dependent Women Pension 0 30. CDPO: Dependent Children Below 21 Year 0 31. CDPO: Handicapped People 0 A perusal of the above said chart shows that applicant charges as much as Rs. 1000/- for issuing NOC for petrol pump, Rs.500/- for registration of marriage, Rs.500/- for application for New Arms License and so on. It is pertinent to mention here that these charges are in addition to the statutory fees charged by the State Govt. Departments. These charges/fees are charged by the applicant for providing the alleged citizens services. In fact looking into the nature of income and fees & other charges, it makes one to sit-back and ponders whether the Society has not been exploiting the Public by charging exorbitantly, in the guise of providing services & at the same time claiming charitable activity.
In the first instance, on going through the receipts and expenditure accounts of the society since financial year 2006-07, it has been found that the Society has been showing surplus even after providing claim of depreciation on the fixed assets. The amount of Rs.3,76,761/- is surplus out of the receipts of Rs.78,22,625/- during the year, showing profit of 4.81% In fact fees and charges of the Society are exorbitant which has resulted in hefty surplus of receipt over expenditure. The aim and objects of the society also mentions of charging moderate fees from the Public. Moderate is no way 14 charitable or concessional. In the current year the such surplus is 4.81% which is by any standard hefty and cannot be said to be doing 'charitable' activity. Huge surplus earned and extracted from the Public throughout, since inception proves that the predominate object of the assessee is to earn more and more profit.
The case where profit making is the end to which the activity of the trust is directed or where the predominant object of the activity is the making of profit. Where an activity is not pervaded by profit motive but is carried on primarily for serving the dominant charitable purposes, it would not be correct to describe it as an activity for profit. But where, on the other hand, an activity is carried on with the predominant object of earning profit it would be an activity for profits though it may be carried on in the advancement of the charitable purpose of the Society- In this view, when applying section 11, it is open in an appropriate case to pierce the veil of what is proclaimed on the surface by the document of the true propose of the Society. The true purpose must be genuinely and essentially charitable.
Predominant object of the activity is the test- It is now firmly established by the decision of the Supreme Court in Addl. v. Surat Art Silk Cloth Manufacturers Association [(1980) 121 ITR 1(SC)] and CIT v. Bar Council of Maharashtra [(1981) 130 ITR 28(SC),] that the test is "What is the predominant object of the activity whether it is to carry out a charitable purpose or to earn profit" [CIT v. Andhra Pradesh State Road Transport Corporation, (1986) 159 ITR 1, 10(SC). Thiagarajar Charities v. Addl. CIT, (1997) 225 ITR 1010, 1026 (SC); Ciriraj Co-operative Corporation Ltd. V. CIT, (1989) 178 ITR 359, 364 (AP)].
Thus, the assessee has snot been found engaged in the charitable activities as per definition of the charitable purpose under section 2(15) of the I.T. Act and held by the Hon'ble Apex Court as discussed above. Penalty proceedings initiated under section271(1)(c) of the I.T.Act for furnishing of inaccurate particulars of income for claiming of exemption u/s 11 of the Income tax Act.
15
"Section 2(15): "Charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment [including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility."
In the case of the assessee there is no relief as such to the Citizen addition to fee, all other possible charges at exorbitant rate are also being collected. Since the basic and primary condition for application of se. 11(1) (a) of the Act is that the Society should be wholly charitable is not fulfilled, and accordingly income, if any, of the Society will be out of the ambit of the provision of sec.11 of the I.T. Act.
The mere fact that the Trust has been granted registration under Section 12A of the Income Tax Act, 1961 does not confer any right or entitlement upon the assessee/applicant regarding the operation of section 11,12 and 13 or any other provision of the Income Tax Act, 1961. The assessee Trust is to file returns of income regularly and the operation of Section 11,12 and 13 or any other provision of the I.T. Act 1961 is to be decided by the A.O. depending upon the merits of the case for each such year under consideration. Hence the availability of the benefit of registration is strictly subject to the provisions of the Income Tax Act, 1961 read with the Income Tax Rules 1962 and in particular the provisions in the light of which the income qualifies to be considered as "exempt" and the provisions pertaining to the utilization/Investment/manner of deposit of the funds. Any existing or subsequently framed rules and regulations and law and bye-laws governing the Trust, contrary to the provisions of the Income Tax Act,1961 read with the Income Tax Rules, 1962 shall render this order null and void.
The Ld. ITAT Amritsar Bench, Amritsar in Appeal No.551(Asr)/2011 dated 26.09.2012 in the case of Sukhmani Society for Citizen Services, Mansa Vs. Commissioner of Income tax, Bathinda dismissed the assessee's appeal on the issue of Registration under section 12AA of the Income tax Act,1961 which is held as under:-
16
Keeping in view the aforesaid discussion, we are of the considered view that the activities of the assessee-society are not charitable in nature within the meaning of provisions of section2(15) of the Act and it does not qualify to treat as charitable institution. Since the assessee has not established that its society is formed with objects of any charitable purpose, then the question of discussion of citations relied upon by the Society does not arise, even otherwise these judgments are different from the facts of present case and are not helpful the Society. The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because of this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart as reproduced in the foregoing paragraphs. We are of the considered opinion that no interference is called for in the well reasoned order passed by the Ld. CIT, Bathinad. Therefore, we uphold the impugned order dated 26.09.2011 by dismissing the present appeal filed by the assessee-society.
In the result, the appeal filed by the assessee-society is dismissed.
9. Keeping in view the aforesaid discussions, the activities of the assessee-
society are not charitable in nature within the meaning of provisions of section 2(15) of the Act and it does not qualify to treat as charitable Society. Since the assessee has not established that its society is formed with objects of any charitable purpose, The society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because of this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart as reproduced in the foregoing paragraphs, thus it is not eligible for exemption under section 11 of the I.T.Act. Therefore, exemption claimed u/s 11(1) amounting 17 to Rs.3,76,761/- is disallowed and added back to the income of the assessee. Penalty proceedings initiated under section 271(1)( c) of the I.T. Act for furnishing of inaccurate particulars of income for claiming of exemption u/s 11 of the Income tax Act,1961."
10. Before the learned CIT(A) the assessee made the submissions and after considering the submissions, the learned CIT(A) rejected the appeal of the assessee and relevant findings in para 6.2, 6.3 and 6.4 of the learned CIT(A)'s order are reproduced for the sake of convenience as under:
"6.2 During the course of appellant proceedings, the appellant society was asked to furnish further comments taking into account the decision of the Hon'ble ITAT, Amritsar in the case M/s Sukhmani Society for Citizens Services, Mansa (2012) 27. taxman.com 199 (Asr)[(2013) 153 ITJ 235 (Amritsar)] wherein it was held that the Society is not engaged in any type of charitable activity. In this case, order regarding denial of exemption to the Society u/s. 12AA of the Income Tax Act, 1961 was upheld by the Hon'ble ITAT, Amritsar. In response to this, however, no further submissions were filed. In fact, it was fairly conceded that the decision of Hon'ble ITAT is against the assessee society on the issue under reference.
6.3. I have considered the observations of the Assessing Officer on the issue under reference as made in the assessment order. I have also considered the written submissions of the assessee society filed during appellate proceedings. I have further considered the other material brought on record with regard to the issue under reference. After careful consideration of the material brought on record, assessment order and written submissions of the assessee society, I am of the considered opinion that the Assessing Officer is justified in denying exemption to the assessee society u/s 11 of the Income Tax Act, 1961 by holding that the assessee is not engaged in any type of charitable activity but is an profit 18 earning body and is not entitled to any exemption u/s. 11 of the Income Tax Act,1961. the decision of the Hon'ble Jurisdictional ITAT is also against the assessee society as the issue under reference is squarely covered against the assessee society by the order of Hon'ble ITAT(Supra) 6.4. In the above stated facts and in the circumstances of the case, I am of the considered opinion that the Assessing Officer is justified in denying exemption u/s 11 of the Income Tax Act, 1961 to the assessee society and bringing to tax excess of income over expenditure of Rs.3,76,761/-. The addition made by the Assessing Officer is, therefore, confirmed on the issue under reference. In the result, ground of appeal No.2 taken by the assessee is, therefore, dismissed."
3. Learned counsel for the assessee Mr. Padam Bahl ,CA at the outset submitted that the facts in the present case are identical to facts in the case of Sukhmani Society for Citizen Services, D.C. Offices, Mansa vs. The CIT, Bathinda by ITAT, Amritsar in ITA No.551/Asr/2011 dated 26.09.2012 where the ITAT Amritsar Bench vide para 7 to 8 of its order have held that activities of the Sukhmani Society for Citizens Services, Mansa are not charitable in nature within the meaning of provisions of Section 2(15) of the Act and it does not qualify to be treated as charitable institution and the society is doing business and charging huge fees from the public which is in addition to the prescribed fees of the Punjab Govt. and the order of the learned CIT(A) was confirmed by the ITAT, Amritsar Bench vide order dated 26.09.2012(supra). Mr. Padam Bahl, CA argued that the facts in the case of M/s Sukhmani Society for Citizens Services, Mansa are identical to the facts in the present case. But that the order of the ITAT, Amritsar Bench in ITA No.551/Asr/2011 dated 26.09.2012 is a wrong order and in fact the assessee trust does not carry any business activity and if at all the ITAT, Amritsar 19 Bench holds in the present case that the assessee is running the business then the assessee does not have any case. He relied upon the decision of Hon'ble Gujrat High Court in the case of Director of Income Tax(Exemption) vs. Sabarmati Ashram Gaushala Trust in Tax Appeal No.1162 of 2013 dated 15.01.2014 and decision in the case of GSI India vs. DGIT (Exemptions) 2013 [262 CTR 585] (Del.)
4. On the other hand, learned DR Mr.Tarsem Lal relied upon the order of the CIT(A) and AO and the decision of ITAT Amritsar Bench in the case of Sukhmani Society for Citizens services, Mansa (supra). He argued that the State Govt. has launched these societies in every district squarely with a view to gather/make profits or gather income which the State Govt. is otherwise under obligation to supply such services to its citizens without charging any fee and also with a view to circumventing the provision of RTI Act where documents are provided with a nominal cost of Rs 1/- per photocopy of document.
5. We have heard the rival contentions and perused the facts of the case. On reading the provisions of Section 11(1) certain incomes are not included in the total income of the previous year of the person i.e. such income derived from the property under the trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India and where any such income is accumulated or set apart for application of such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen percent of the income of such property. Accordingly we have to peruse the whether income derived by the assessee trust is income wholly for charitable purpose to the extent to which such income is applied. On perusal of the main 20 objects of the society reproduced herein above and the balance sheet and income and expenditure account which are part of the paper book, none of the expenditure was found to be of charitable in nature. The learned counsel for the assessee have not been able to point out any expenditure incurred by the assessee trust as that of charitable in nature of having been incurred for charitable purpose or for the advancement of any other object of general public utility. As substituted by the finance Act 2008 w.e.f. 1.4.2009 in section 2(15) in first proviso which reads that the advancement of any other object of general public utility shall not be a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business for a cess of fee or any other consideration, irrespective of the nature of use or applicable or retention if the income from such activity. Second proviso to sec.2(15) in the present case is not applicable since the receipt in the impugned year are exceeding Rs.25 lacs. Therefore, in the present circumstances and facts of the case and keeping in view the provisions contained in Section 11(1), we have perused that whether the assessee trust has derived the income wholly for charitable purpose during the impugned year, in view of Section 2(15) specifically with reference to the first proviso. The learned Counsel for the assesse Mr. Badam Bahl CA at the out set has argued that the facts in the present case are identical to the facts in the case of Sukhmani Society for Citizen Services, Mansa(supra) where the activities of the society have been held of not charitable in nature and assessee has been held of doing business in that case. On the other hand, the learned counsel for the assessee has argued that the order of the ITAT, Amritsar Bench in the case of Sukhmani Society for Citizens services, Mansa (supra) is a wrong order. Pointing out of the 21 perversity in the case of Sukhmani Society for Citizen Services, Mansa(supra) before us is not a right forum which in fact is the Jurisdictional High Court. As regards arguments by Ld. AR that the assessee does not carry on business activities, the fact is undisputed that the society is charging the fees from citizens for providing the services as much as Rs.1,000/- for getting NOC for petrol pump, Rs. 500 for registration of marriage, Rs.500 for new arms license and so on as per details available at AO page 10 & 11. Fees charged by assessee are in addition to the statutory fees if any charged by the State Govt. departments. The charges/fees are charged by the society for providing alleged citizen services for which in fact the State Government is obliged to provide such services without any charges/fees or by charging some nominal/statutory fees. The charging of additional charges in addition to charging of statutory fees for getting the work done from State Govt. Departments is purely an activity of commercial in nature and with an intent to earn profit and such activities shall be termed as activities in the nature of commerce, trade or business and such activities cannot be said to be the activities for charitable purpose in view of first proviso to section 2(15) of the Act. On the perusal of the income and expenditure account of the impugned year, we do not find that the assessee has incurred any expenses of charitable in nature. From the perusal of objects of trust and the activities carried out by the trust, we have found out that the assessee is free to take uncontrolled decision to spend the whole of the trust fund in the manner it likes. At page 5 of AO's order, the assessee in its object has the power to establish and maintain any agencies and franchises in the district for the conduct of the business of the society and otherwise also the assessee has not been able to establish any of the expenditure incurred for the charitable purpose. Though we are aware that surplus of any institution cannot be 22 an indicator to hold the institution as of non-charitable in nature, unless corroborated by non-charitable activities. The assessee has derived the surplus of Rs.31,03,672/-, Rs.28,74,827/- and Rs.3,76,761 as against receipts of Rs. 84,83,787, Rs.85,11,918 and Rs. 78,22,625 for the Assessment year 2006-07, 2007-08 and 2009-10 except in the assessment year 2008-09 there is a negative surplus of Rs.2,67,517/- as against receipts of Rs.76,14,717/-. As per our findings hereinabove, the reason for such surplus is charges on account of additional charges fees charged from customers which activities are termed as commercial activities. In fact, providing of such facilities or services is a concern of State Govt. and its Departments free of cost or by charging statutory fees only. Whereas charging the public so exorbitantly cannot be given a name of charging the moderate fee. Even if fees so charged is named as moderate fees still it does not loose its character of being commercial, trade or business in nature in view of our findings hereinabove, which in fact is a continuous and systematic activity having a character of profit motive and is having the essential character of that of business i.e. the transaction is carried out between two persons which involves reciprocity which is an essence of a business and not a unilateral act. The business is being carried on sound business principles with reasonable continuity. The learned Counsel for the assessee has mainly relied upon the decision in the case of Sabarmati Asharam Gaushala (supra) where the assessee carried the matter in appeal. CIT(A) rejected the appeal and confirmed the order of the Assessing Officer. The assessee, therefore, approached the Tribunal in second appeal. Tribunal reversed the decision of the revenue authorities holding that the assessee is a charitable trust and proviso to section 2(15) of the Act will not apply. The Tribunal relied on the Finance Minister's speech in the Parliament explaining proviso to Section 2(15) as also the CBDT 23 Circular No.11/2008 of 19th December, 2008. The Tribunal took note of the objects of the Trust and came to the conclusion that the Trust was carrying on its activities on non- commercial basis with no motive to earn profit. The aims and objects of the Trust were charitable in nature. While implementing such objects, if there was any profit, incidentally generated, the same would not be hit by proviso the section 2(15) of the Act. In the conclusion, the Tribunal clarified that the decision was delivered in peculiar facts of the case. On appeal by revenue the Hon'ble High Court of Gujrat referred to the Finance Minister's speech:-
" I once again assure the House that genuine charitable organizations will not in any way be affected. The CBDT will, following the usual practice, issue an explanatory circular containing guidelines for determining whether any entity is carrying on any activity in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business. Whether the purpose is a charitable purpose will depend on the totality of the facts of the case. Ordinarily, Chambers of Commerce and similar organizations rendering services to their members would not be affected by the amendment and their activities would continue to be regarded as "advancement of any other object of general public utility".
Interpreting the said speech, the Hon'ble High Court of Gujrat interpreted the statutory provisions as explained in the speech of Finance Minister and CBDT Circular No.11 of 2008 dated 19.12.2008 that activity of the Trust would be excluded from the term charitable purpose if it is engaged in any activity in the nature of trade, Commerce or business or records any service in relation to any trade, commerce or business, for access fee or any other consideration. It is not aimed at excluding the genuine charitable trust of general public utility but is aimed at excluding activities in the nature of trade, 24 commerce or business which are masked as 'charitable purpose'. The Hon'ble Gurjat High Court in fact confirmed the order of the Tribunal. Keeping in view the objects of that trust which are to breed the cattle and endeavor to improve the quality of the cows and oxen in view of the need of good oxen as India is prominent agricultural country and the cow milk as food is both conducive to and requisite for good health and longevity of human life. In order to improve the quality of the cattle, it is very essential to use a high quality bulls and to produce and to get produced the best pedigreed bulls and to castrate the scrub bulls and propagate the work to prepare bullocks by castrating the bulls which do not become good bulls and to popularize the use of cow milk and to hold and cultivate or get cultivated agricultural lands to keep grazing lands etc. the necessary or desirable for cattle keeping and breeding the improvement in agriculture. Also to make necessary arrangements for getting scientific knowledge and to do scientific research with regard to keeping and breeding of the cattle, agriculture, use of milk etc. It was with this view the activities were treated as charitable in nature and the Tribunal held that proviso to Section 2(15) of the Act was not applicable in such case and accordingly the Hon'ble High Court confirmed the order of the Tribunal that first proviso to section 2(15) is not applicable. Whereas facts in the present case are quite different and accordingly the decision of Hon'ble Gujrat High Court in the case of Sabarmati Ashram Gaushala Trust (supra) is not applicable in the present facts and circumstances of the case. Further, the Hon'ble Court has mainly relied upon the decision of the Hon'ble Delhi High Court in the case Institute of Chartered Accountants of India & Anr. Vs. Director General of Income Tax[Exemptions] & Ors. reported in [2012] 347 ITR 99 (Delhi) where application u/s 10(23C)(iv) was rejected. The Hon'ble Court held the fundamental or dominant function 25 of the Institute was to exercise overall control and regulate the activities of the members/enrolled chartered accountants. A very narrow view had been taken that the Institute was holding coaching classes and that this amounted to business. The Institute had framed the Chartered Accountants Regulations, 1988, and the Regulations provided for training of students, their examination, award of degrees and memberships of the Institute. There was a clear distinction between coaching classes conducted by private coaching institutions and the courses and examinations which were held by the Institute. The question whether the Institute carried on business had not been examined with proper perspective. The Institute maintained that it never granted any loan and/or advance to the Institute of Chartered Accountants of India Accounting Research Foundation. The facts regarding this question had not been considered. The order denying the exemption was not valid. It is with these peculiar facts the denying of exemption was held to be not valid, whereas facts in the present case are quite different as discussed hereinabove. Further, the Hon'ble Gujrat High Court relied upon the test as prescribed in Raipur Manufacturing Company [1967] 19 STC 1(SC) and decision in the case of Hon'ble Supreme Court, in the case of Sai Publication Fund (2002) 258 ITR70 (SC); [2002] 126 STC 288(SC). The facts and the decision of Hon'ble Supreme Court in the case of Sai Publication Fund (supra) is reproduced for the sake of convenience as under:
" The respondent was a trust created by four devotees of Saibaba of Shiridi with the object of spreading the message of Saibab. In furtherance of and to accomplish that object, the trust published books, pamphlets and other literature containing the message of Saibaba, which were made available to devotees on nominal charges to meet the cost. The sale proceeds of such publications went to the trust and formed part of the property of the trust. There was a specific provision in the trust deed that in the event of failure of the trust to carry on its 26 aims and objects the remaining fund in its hands would be handed over to the Sansthanam of Shiridi. On an application made by the trust under section 52(1)(a) of the Bombay Sales Tax Act, 1959, seeking determination of the questions whether the trust could be said to be carrying on "business" as defined in section 2(5A) and whether it was a "dealer" under section 2(11) of the Act, the Deputy Commissioner held that the activity of publication an sale of books, etc., amounted to business and the trust was a dealer, and, therefore, the trust was liable to sales tax on the value of the publications sold. The Sales Tax Tribunal, on appeal, held that the trust was not a "delaer" within the meaning of section 2(11) as it was not engaged in activity which amounted to "business" in view of its object and activities. On a reference, the High Court affirmed the decision of the Tribunal. On appeal to the Supreme Court:
Held, affirming the decision of the High Court, (i) that a person would not be a "dealer" under section 2(11) in respect of the goods sold or purchased by him unless he carried on the business of buying and selling of such goods;
(ii) That under section 3 the liability to pay sales tax was only on dealers;
(iii) That on a combined reading of sections 3,2(5A) and 2(11), the tax under the Act was leviable on the sales or purchases of goods by a dealer and not every person; and
(iv) That, since the sole object of the trust was to spread the message of Saibaba of Shiridi and the books, literature, etc., containing the message of Saibaba were distributed by the trust to devotees at cost price, the primary object of the trust was to spread the message of Saibaba and its main activity did not amount to "business". The activity of publishing and selling books and literature was incidental or ancillary to the main activity of spreading the message of Saibaba and not any business as such. The trust was not established with an intention of carrying on business of selling or supplying goods. The trust did not carry on the business of selling and supplying goods so as to fall within the meaning of "dealer" under section 2(ii).27
The question of profit motive or no profit motive is relevant only where the person carried on a trade, commerce, manufacture or adventure in the nature of trade, commerce, etc. Under section 2(5A), if the main activity is not business, then any transaction incidental or ancillary would not normally amount to "business" unless an independent intention to carry on "business" in the incidental or ancillary activity is established. In such cases, the onus of proof of an independent intention to carry on "business" in the incidental or ancillary activity of sales rests on the department. The inclusion of incidental or ancillary activity in the definition of "business" contained in section 2(11) pre-supposes the existence of trade or commerce, etc. The definition of "dealer" in section 2(11) clearly indicates that in order to hold a person to be a "dealer", he must "carry on business" and then only he may also be deemed to be carrying on business in respect of transactions incidental or ancillary thereto.
The decision of Hon'ble Supreme Court in fact was with reference to the object to message of Saibaba of Shirdi and the books, literature etc. containing the message of Saibaba which were distributed by the trust to devotees at cost price and the primary object was to spread message of Saibaba and it is with this background, the Hon'ble Supreme Court held that trust was not established with an intention of carrying on business of selling or supplying goods. The question arose whether the trust was a dealer u/s 2(11) of Bombay Sales Tax Act, 1969, it was held by Hon'ble Court that a person would not be a dealer in respect of good sold or unless he carried business of buying or selling of such goods . Under section 3, the liability to pay sales tax was only on dealers; and not every person. It was further held that, since the sole object of the trust was to spread the message of Saibaba of Shirdi and the books, literature, etc, containing the 28 message of Saibaba were distributed by the trust to devotees at cost price, the primary object of the trust was to spread the message of Saibaba and its main activity did not amount to "business". Since facts in the case of Saibaba Publication Fund (supra) are peculiar to the circumstances of that case which are quite different to the fact in the present case since in the present the predominate object and intention of the assessee is to earn profit and therefore, the assessee is charging fees over and above costs i.e., the statutory charges and therefore, the case of Sai Publication Fund (supra) is not at all applicable in the present circumstances and facts of the case. Therefore, the decision of Sabarmati Ashram Gaushla Trust relied upon by the learned counsel for the assessee is not applicable in the present facts and circumstances of the case. 5.1. The Ld. Counsel for the assessee further relied upon the decision of Hon'ble Delhi High Court in the case of GSI India vs. DCIT (2014) 360 ITR 138 where the facts of the case and the decision of Hon'ble Court was that assessee was a "Not-for- Profit" Society promoted by Ministry of Commerce and India Industry, duly registered under Societies Registration Act, 1860. It acquired intellectual property rights qua bar coding system from GSI Global Office, Belgium. It permitted use of these intellectual property rights by third parties under license agreements for initial registration fee and subsequent annual registration fee from financial year 2006-07 onwards. Registration u/s 10(23C) was denied to assessee holding that no charitable activity was involved in permitting use of intellectual property right for consideration which is nothing but royalty income and activity of assessee was in nature of trade, commerce or business. Held by the Hon'ble Court that the assessee is not engaged in activities which constitute business, commerce or trade. Underlying and propelling motive of assessee was not to earn profits 29 or commercially exploit but "general public good" i.e. to promote and make GSI coding system available to India traders, manufacturers, government etc. Assessee does not cater to lowest or marginalized section of society. No fee is charged from users and beneficiaries like stockiest, whole sellers, government department etc., while a nominal fee is only paid by manufacturer or marketing agencies. Fee is fixed and not product specific or quantity. Registration and annual fee entitles person concerned to use GSI identification on all their products. Charging a nominal fee to use coding system and to avail advantages and benefits was neither reflective of business aptitude nor indicative of profit oriented intent. Charitable activities require operational/running expenses as well as capital expenses to be able to sustain and continue in long run. Assessee has to be substantially self -sustaining in long-term. Accumulation of money/funds over a period of 2-3 years may not be relevant in determining nature and character of activity and whether same should be treated as indicative of profit motive. Charitable activity undertaken and performed by assessee relates to promotion, dissemination of knowledge and issue of unique identification amongst third parties etc. Business activity undertaken by assessee is integral to charity/charitable activities. Assessee was not required to maintain separate books of accounts. Second proviso which refers to aggregate value of receipt of activities of Rs.10 lacs (now enhanced Rs.25 lacs vide Finance Act 2011 with effect from 1.4.2012) or less in a previous year, cannot be invoked. Assessee cannot be denied benefit of registration/notification u/s 10 (23C)(iv). Assessee's written petition was allowed.
5.2. In the said case, the assessee is not subjecting to market mechanism/dynamics rather it is motivated and promoted to serve the beneficiaries. It does not cater to lowest 30 or marginalized section of society but the Government, Public and Private sector. No fees is charged from users and beneficiaries like stockist, whole-sellers, Government Department etc. The fees is fixed and not quantity related. It justifies the test of charitable activity and the intention behind the entire activities is philanthropic. Element of give and take is missing. In contract, in the present case the assessee is open in the market mechanism to serve any person for money i.e., the element of give and take rather is the essence in the present case. The fees is not the one but is fixed as per work to be done by the assessee. The intent and purpose of assessee trust is purely a commercial in nature to earn profit. The present assessee fails the test of charitable or philanthropic Institution. Therefore, in the circumstances and facts of the present case, the decision of Hon'ble Delhi High Court in the case of GSI India (supra) is not applicable. 5.3. Accordingly, in the present case the activities of the assessee trust are in the nature of trade, commerce or business within the meaning of provision of section 2(15) of the Income Tax Act and it fails the test of a charitable institution and accordingly is not eligible for exemption as claimed u/s 11(1) of the Act in view of our findings hereinabove.
5.4. The facts of the present case are exactly similar to the facts as in the case of Sukhmani Society for Citizen Services, Mansa, which was decided by this Bench of ITAT, Amritsar on 26.09.2012, in ITA No. 551(Asr)/2011 though the issue in the said case was with reference to registration u/s 12AA of the Act, which was denied by the Ld. CIT and confirmed by us. The facts of the said case and relevant findings of ITAT Amritsar Bench vide order dated 26.09.2012 are very relevant and support the present case and accordingly for the sake of convenience the same is reproduced hereinbelow: 31
"The Sukhmani Society for Citizen Services (Suwidha Centre) D.C. Office, Distt. Administrative Complex Mansa (hereinafter called the 'Society') filed an application for registration under section 12AA of the Income-tax Act, 1961 ( In short the 'Act'), on 30.03.2011 in the prescribed form to the Ld. Commissioner of Income Tax, Bathinda. In order to verify the genuineness of the activities of the assessee-society, the ld. CIT, Bathinda called the Society alonwith complete set of books of account and other relevant documents for the last three years for 21.04.2011. In compliance of the same, the authorised representative of the Society attended the proceedings and furnished the requisite information. The application of the Society was referred to the ITO Ward 1(4), Mansa, to verify the genuineness of the activities of the Society, in compliance of the same, the Assessing Office vide his report dated 05.09.2011 stated that the Society has failed to produce the books of account in absence of which, it is not possible to verify the genuineness of activities of the Society and keeping in view all these facts, the AO did not recommend the case of the assessee for registration under section 12AA of the Act. The Jt. C.I.T. Range-1, also endorsed the findings of the A.O. The Ld. CIT Bathinda fixed the case for hearing in his office on 27.03.2011 and authorised representative of the Society attended the proceedings and also filed the requisite information alongwith the details of activities and other documents.
2. The Society is registered with the Additional Registrar of Societies, Mansa vide No.44 of 22.03.2004. The aims and objects of the Societies are contained in Memorandum of Association of the Society. After perusing the objects and functions of the Society, the Ld. CIT Bathinda is of the view that the activities of the Society are in commercial nature rather than charitable in nature. The Ld. CIT, Bathinda has also perused the income and expenditure of the society which reveals that the Society has been earning huge profit and, therefore, he was of the view that the activities of the Society are of commercial in nature and aimed at deriving profit and not for charitable purpose.
3. The Ld. CIT, Bathinda confronted the above said facts to the Society and the Society contended that the main object of the Society is to provide citizen's services to the common people for their convenience and the Society also explained that the Society receives application from the common citizen for various services on behalf of the departments of State Govt, forwards the same to the concerned department and deliver back the same to the citizen within a specified time frame. The Society is charging prescribed fee from the citizen for providing services. The Ld. CIT, Bathinda perused the chart produced by the Society showing charges received by the Society and he is of the view that the Society charges as much as Rs.1000/- for issuing NOC for petrol pump, Rs.500 for registration of marriage, Rs.500 for NOC on building plan and so on. He is also of the view that these charges are in addition to the statutory fees charged by the State Govt. Departments. These charges/fees are charged by the Society for 32 providing alleged citizen services. The Ld. CIT, Bathinda finally held that the activity of the Society is in the nature of trading, commerce or business and activity of rendering service in relation to the trade, commerce or business for a fee. The Society provides certain services to the common man and charges fee for the same and this act of the Society hardly go to establish any charitable purpose. Finally, the Ld. CIT also held that the Society is doing all work and rendering services to the citizens which the State Govt. was supposed to perform without charging any such additional fees. Therefore, he is satisfied that the activities of the Society/Institutions not charitable in nature within the meaning of proviso to section 2(15) of the Act and it does not qualify to be treated as a charitable institution. Hence, he rejected the request of the assessee for grant of registration under section 12AA of the Act, vide impugned order dated 26.09.2011.
4. The assessee is aggrieved by the impugned order dated 26.09.2011 passed by the ld. CIT, Bathinda and filed the present appeal.
5. The Ld. counsel for the assessee stated that the Society was registered on 22.0.30004 with the Additional Registrar Office, Mansa and formation of the Society was on initiation and instructions of Government of Punjab to implement 'Suwidha' (Single User's Friendly Window Disposal helpline for Applicants) and is a project of the State Government. The State Govt. had instructed all the District Offices to form Societies on a similar pattern, with official website SUWIDHA.nic.in. The main object of the Society is to provide Single Window Services to the Citizens against a minimum fees for their services and to provide services within scheduled time. He further stated that the organisation of the Society was framed and Deputy Commissioner, Mansa is an Ex-officio member alogwith various other Additional Commissioners as well as Sub-Divisional Magistrates and other Officers of the District Mansa, as the office bearers for the completion of the Society. He further stated that the D.C. Mansa is the Chairman of the present Society and the Additional Deputy Commissioner (General) is a Member/Secretary, Additional Deputy Commissioner (Development) Member, SDM, Mansa and Executive Engineer, PWD, B&R, Mansa, are the Members of the Society. He stated that the motive of the society is to provide services from a single window, taking up minimum possible charges as per chart of facilitation charges, which are fixed by the State Government. He has also produced copy of chart showing service-wise charges taken by the Society from the Citizens for rendering its services. He has also drew our attention towards the object of the Society which are mentioned in the Memorandum of Association i.e. about 29 objects. He has also drew our attention towards present Board of Governors and stated that almost all the Board Members are high officials of the Punjab Government. Finally, he stated that the Society is working for charitable purposes as well as for public utility purposes and he requested that the Society deserves registration under section 12AA of the Act. But the Ld. CIT, Bhatinda has wrongly rejected the request of the assessee vide impugned order dated 26.09.2011. In support of his contention he has placed reliance on the following decisions:33
i) Commissioner of Income Tax, Panchkula vs. Haryana Warehousing (2011) 196 Taxman 260 (P&H).
ii) Commissioner of Income Tax, Panchkula vs. Haryana Building Other Construction Works Welfare Board 196 Taxman 255 (P&H).
iii) Commissioner of Income Tax vs. Gujarat Maritime Board (2007) 289 ITR 139 (Guj.)
iv) Commissioner of Income Tax vs. Aggarwal Sabha Mahajaraj Aggarsain Bhawan (2011) 198 Taxmann 172 (P&H)
v) Sanjeevamma Hanuman the Gowda Charitable Trust Vs. Director of IncomeTax (Exemptions) (2006) 285 ITR 327 (Kar).
vi) Bar Council of Maharashtra vs. CIT 126 ITR 27.
vii) Commissioner of Income Tax vs. Dredging Corporation of India (1988) 174 ITR 682 (AP).
6. On the contrary, the Ld. DR, Sh. Amrik Chand, relied upon the order passed by the Ld. CIT, Bathinda and stated that the Society has not done any charitable as well as public utility work till date. The Ld. DR further stated that the assessee is charging a very huge fees from the public for rendering its services to the Society, which is in addition to the charges levied by the Punjab Government and is additional burden upon the common man. Lastly, he stated that the activities of the Society are not charitable in nature within the meaning of proviso to section 2(15) of the Act, because the assessee is doing its business and gaining a huge profit by doing the work of public and has not done any single charitable work till date. Therefore, the request of the assessee for registration of the Society u/s 12AA of the Act, has rightly been rejected by the Ld. CIT, Bathinda.
7. We have heard both the parties and perused the relevant records available with us. The Ld. counsel for the assessee filed a chart of services and charges against the services rendered by the Society that are about 36 in number. For the sake of convenience, we reproduce the 17 services rendered by the Society and the charges taken by the Society, which are as under:
SUKHMANI SOCIETY FOR CITIZEN Vs. CIT. I.T.A. No.
SERVICES BATHINDA 551/ASR-2011
SERVICE Facili. Time Financial Year Financial Year Financial Year
Charg 2008-09 2009-10 2010-11
es Frame
(Rs.) Days No. of %age No. of %age of No. of %age of
of Cases Total
Cases Cases Total
34
Total
1 Issuance of Nationality 20 15 0 0 0 0.00% 11856 24.70%
Certificate
2 Issuance of Birth Certificate 20 7 5001 32.46% 5419 11.62% 7462 15.55%
3 Driving Licences related 20 7 0 0.00% 20041 42.96% 7326 15.26%
services
4 Arm Licences related Servess 500 45 4282 27.79% 5855 12.55% 5173 10.78%
5 Issuance of Affidavits 20 Same Day 1036 6.72% 4258 9.13% 5011 10.44%
6 Registration of Vehicle 100 5 0 0.00% 6096 13.07% 4675 9.74%
Services
7 Issuance of Copy of a 30 7 1473 9.56% 1257 2.69% 1904 3.97%
Document
8 Issuance of Death Certificate 20 7 975 6.33% 951 2.04% 1577 3.29%
9 Submission of Passport 100 20 2101 13.63% 1654 3.55% 1282 2.67%
Applications
10 Agriculture related 100 30 274 1.78% 779 1.67% 614 1.28%
11 Non-Encumberence 20 0 0 0.00% 0 0.00% 374 0.78%
Certificate
12 Form seeling 0 0 0 0.00% 0 0.00% 160 0.33%
13 Issuance of Surety Bonds 50 Same Day 5 0.03% 29 0.06% 151 0.31%
14 Registration of Marriage 500 Same Day 60 0.39% 88 0.19% 63 0.13%
15 Others 0 0 202 1.31% 218 0.47% 373 0.78%
16 NOC of Petrol Pump 1000 40 0 0.00% 0 0.00% 0 0.00%
17 NOC for Building Plan 500 30 0 0.00% 0 0.00% 0 0.00%
TOTAL 15409 46645 48001
(COUNSEL FOR THE
ASSESSEE (APPELLANT)
35
7.1. The Ld. CIT, Bathinda has also mentioned in para 3.3 at page 3 & 4 in the impugned order that the applicant has furnished a chart showing fee chargeable for providing various services to the citizens. A perusal of the chart shows that the applicant charges as much as Rs.1000/- for issuing NOC for petrol pump, Rs.500 for registration of marriage, Rs.500 for NOC on building plan and so on. It is pertinent to mention here that these charges are in addition to the statutory fees charged by the State Govt. Departments. These charges/fees are charged by the applicant for providing the alleged citizens services.
7.2. The Ld. counsel for the assessee has filed balance sheet as on 31.03.2009 in which the Society has shown liabilities and assets as well as Income & Expenditure account for the year ended 31.3.2009. For the sake of convenience, the balance sheet as on 31.03.2009 as well as Income & Expenditure for the period ended 31.03.2009 of the Society are reproduced as under:
SUKHMANI SOCIETY FOR CITIZEN SERVICES (D.C. OFFICE), MANSA BALANCE SHEET AS ON 31.03.2009 LIABILITIES AMOUNT (Rs) ASSETS AMOAUNT General Funds Fixed Assets 1452088.00 O. Balance- 3389932.99 (Details Attached) Less: Old Dep 1028849.00 Add : Tfd from 1344307.50 Telephone Security 500.00 I & E A/C _____________3705391.49 Loan to Distt.Nazar 143150.00 State Govt. 500000.00 Receivable from Ex. 77860.00 Clerk cum Accountant Sh. Ashok Kumar.
Security from Computer 10000.00
Bank Balances:
S.B.O.P., Mansa 1573840.99
Amount More deposited in 270.0 SBOP, Mansa ( I/A) 371818.00
Bank Account PNB, Budhlada 334408.50
SBOP, Sardulgarh 257726.00
36
Cash in Head 4270.00
--------------- ----------------
4215661.49 4215661.49
---------------- ----------------
REPORT :- SUBJECT TO OUR SEPARATE AUDITED
FOR REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCONTANTS
PLACE : MANSA (SANJEEV KUMAR)
DATED : 18.08.2009 M. No. 500277
SUKHMANI SOCIETY FOR CITIZEN SERVICES (D.C. OFFICE), MANSA INCOME & EXPENDITUE ACCOUNT FOR THE PERIOD ENDING 31.03.2009 EXPENDITURE AMOUNT (Rs) INCOME Amount AMOUNT(Rs) To Pb. State e-goverance 381533.50 By Receipts 2592150.00 Society, CHD By Bank Interest48843.00 To Printing & Stationery 29907.00 To Salary 539204.00 To Bank Exp. 490.00 To Computer Repair 27735.00 To Audit Fee 11000.00 To Electricity Bill 34028.00 To Telephone 5727.00 To SMS Exp. 945.00 To Photostate 1035.00 To Electric Repair 225.00 To Travelling 5150.00 To Depreciation 259706.00 37 To Income over Exp. 1344307.50
--------------- ---------------
2640933.00 2640933.00
---------------- ----------------
REPORT :- SUBJECT TO OUR SEPARATE FOR
REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCUONTANTS
PLACE : MANSA (SANJEEV KUMAR)
DATED : 18.08.2009 M. No. 500277
7.3. Similarly, the balance sheet as on 31.03.2010 as well as the Income & Expenditure account for the period ending 31.03.2010 are also reproduced as under:
SUKHMANI SOCIETY FOR CITIZEN SERVICES (D.C. OFFICE), MANSA BALANCE SHEET AS ON 31.03.2010 LIABILITIES AMOUNT (Rs) ASSETS AMOAUNT General Funds Fixed Assets 1431952.00 O. Balance- 3705391.49 (Details Attached) Add : Tfd from 1487573.50 Telephone Security 500.00 I & E A/C _____________5192964.99 Loan to Distt.Nazar 15000.00 Security from Computer 10000.00. SDM Budhlada. 3000.00 Supplier Ch. Issued not Presented 16356.00 S.B.O.P.(Sweep in) 2784690.00 38 Bank Balance :
S.B.O.P, Mansa 50281.00
SBOP, Mansa ( I/A) 377866.00
PNB, Budhlada 9349.00
SBOP, Budhlalda 296960.00
SBOP, Sardulgarh 429722.00
--------------- ----------------
5219320.99 5219320.
---------------- ----------------
REPORT :- SUBJECT TO OUR SEPARATE AUDITED
FOR REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCOUNTANTS
PLACE : MANSA (SANJEEV KUMAR)
DATED : 22.06.2010 M. No. 500277
INCOME & EXPENDITURE ACCOUNT FORTHE PERIOLD ENDING ON 31.3.2010 Expenditure Amount Income Amount To Pb. State e-governance 486084.50 By Receipts 3420275.00 Soceity Chd.
To Printing & stationery 146145.00 By Bank Interest 86517.00
To Salary 917004.00 By Excess Deposit 250.00
To Bank Exp. 911.00 By Excess credit bank 10.00
To computer repair 64880.00
To Audit fee 7000.00
To electricity bill 49702.00
39
To Telephone 10590.00
To SMS Exp. 1122.00
To Advertisement 13113.00
To Electric Repair 4969.00
To Travelling 2346.00
To Misc. Exp. 670.00
To Postage 500.00
To Depreciation 314442.00
To Income over Exp. 1487573.00 ----------------------------
3507052.00 3507052.00
REPORT :- SUBJECT TO OUR SEPARATE
FOR REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCOUNTANTS
PLACE : MANSA (SANJEEV KUMAR)
DATED : 22.06.2010 M. No. 500277
7.4. Lastly, the balance sheet as on 31.03.2011 as well as Income & Expenditure account for the period ending 31.03.2011 are reproduced as under:
BALANCE SHEET AS ON 31.03.2011 LIABILITIES AMOUNT (Rs) ASSETS AMOAUNT General Funds Fixed Assets 1285660.00 O. Balance- 5192964.99 (Details Attached) Add : Tfd from 901085.93 Telephone Security 500.00 I & E A/C _____________6094050.92 Loan to Distt.Nazar 15000.00 40 Security from Computer 10000.00. SDM Budhlada. 3000.00 Supplier Salary Payable 114120.00 Stamp Paper and stamps 40147.00 PSEGS Payable 63697.00 TDS 45253.00 Ch. Issued not Presented 358996.00 NICI, Delhi 352000.00 S.B.O.P(Sweep in) 4807579.58 Bank Balances :
SBOP, Mansa 3088.00
SBOP, Budhlada 8547.50
SBOP, Sardulgarh 3590.00
SBOP, (NCC) Mansa 75589.84
Cash in Hand 909.00
--------------- ---- -------
6640863.92 6640863.92
---------------- -------------
REPORT :- SUBJECT TO OUR SEPARATE AUDITED FOR
REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCOUNTANTS
PLACE : MANSA (SANJEEV KUMAR)
DATED : 05.09.2011 M. No. 500277
INCOME & EXPENDITURE ACCOUNT FORTHE PERIOLD ENDING ON 31.3.2011 Expenditure Amount Income Amount To Pb. State e-governance 478259.50 By Receipts 3132591.00 Society Chd.
To Printing 154873.00 By Bank Interest 327855.43
41
To Salary 1413932.00 By Excess Deposit 1969.00
To Bank Exp. 350.00 By Excess credit bank 10.00
To Stationery 74842.00
To computer repair 67450.00
To Audit fee 7000.00
To electricity bill 62279.00
To Telephone 14659.00
To SMS Exp. 279.00
To Advertisement 13084.00
To Electric Repair 8806.00
To Travelling 12760.00
To Misc. Exp. 3135.00
To Depreciation 223130.00
To Income over Exp. 901085.93 ---------------------------
3462515.43. 3462515.43
REPORT :- SUBJECT TO OUR SEPARATE
REPORT OF EVEN DATE
FOR SANJEEV AMAR & ASSOCIATES
CHARTERED ACCOUNTANT
PLACE : MANSA (SANJEEV KUMAR)
DATED : 05.09.2011 M. No. 500277
7.5. After going through the aforesaid balance sheets as well as Income & Expenditure accounts of the assessee for the last three yeas, we have not found any expenditure incurred by the Society on charitable as well as public utility work. Almost all the expenditure has been incurred by the Society on printing and stationery, salary to their employees, Bank expenditure, Computer repair, Audit fee, Electricity Bill, Telephone, Electric repair, traveling, misc. expenditure, postage etc. 7.6. The present Society has filed an application to the Ld. CIT, Bathinda for registration. As per section 12AA of the Act, the Ld. CIT, Bathinda on receipt of an application for registration can call for such documents or information from 42 the present society as he thinks necessary in order satisfy himself about the genuineness of the activities of the society and may also make such inquiries as he may deem necessary in this behalf. If the Ld. CIT, Bathinda is satisfied himself of the objects of the Trust of this Society and genuineness of its activities, he shall pass an order in writing registering the present society and if he is not satisfied then he shall pass order in writing refusing to register the Society after giving reasonable opportunity of being heard. In the present case also, the Ld. CIT, Bathnda referred the application of the Society to the ITO Ward 1(4), Mansa to verify the genuineness of activities of the present society and in compliance of the same, the AO vide his report dated 05.09.2011 has stated that the assessee has failed to produce books of account before him and in the absence of which, it is not possible to verify the genuineness of the activities of the present society and lastly the AO has not recommended the case of the assessee for registration u/s 12AA of the Act, through the Jt. CIT, Bathinda. After receiving the said report dated 05.09.2011 from the AO, the Ld. CIT, Bathinda fixed the case for hearing on 27.03.2011. After hearing the authorized representative of the assessee, the Ld. CIT examined the documentary evidence available with him and stated that the activities of the society are commercial in nature. He has also reproduced the same objects of the present society at pages 2 & 3 in para 3.1(i) to para 3(iii). For the sake of convenience, the objects of the society are reproduced hereunder:
"3.1. The applicant society is registered with the Addl. Registrar of Societies, Mansa vide No. 44 of 22.03.2004.The aims and objectives of the societies are contained in Memorandum of Association of the society, a copy of which has been obtained and is placed on file. As many as 29 objectives have been mentioned in the list in para 4 under the title Objectives and functions of the society. Some of the objectives are such that activities of the society seem to be of commercial nature rather than of charitable nature. The objectives of such nature are as under:
(i) To workout and recommend the service fee or user charge that could be charged from the end customers for the approval of the competent authority and concerned departments/organizations over the above and the prescribed bill amount/fee/statutory fee for providing the services through Sukhmani Centres/Financial Institutions or Franchisees.
(ii) To buy, sell, let on hire, lease, trade, import, repair or otherwise deal with IT resources, services & support on turkey basis like hardware, software, connectivity, networking, training, stationery, consumables etc. Including operational & managerial manpower, hiring of professionals, consultancy services by following the procedure prescribed. To ensure the other infrastructure requirements including site preparation and timely availability of the necessary resources for the various activities under the project.43
(iii) To establish and maintain any agencies and franchises in the district for the conduct of the business of the society.
The Ld. CIT also perused the Income and Expenditure accounts, which we have reproduced hereinabove and finally concluded that the above facts clearly reveals that the activities of the Society are of commercial in nature aimed at deriving profit and not for charity.
7.7. We have also perused the Income & Expenditure accounts, which we have reproduced hereinabove as well as the impugned order alongwith relevant provisions of section 12AA of the Act and section 2(15) of the Act. For the sake of convenience, provisions of section 12AA and section 2(15) of the Act are reproduced as under:
"Section 12AA.(1) The 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 deemed necessary in this behalf; and
b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he
i) shall pass an order in writing registering the trust or institution;
ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution, and copy of the such order shall be sent to the applicant."
"Section 2(15): "charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other object of general public utility."
7.8. Keeping in view the aforesaid discussions as per records as well as per documentary evidence given by the assessee, we find that the main project was initiated by the Govt. of Punjab in the month of August, 2002 at Fatehgarh Sahib. It was inaugurated by the Chief Minister of Punjab on 31.10.2002. The project was founded by the Govt. of India, Department of Communication & Information Technology. The Govt. of Punjab has decided to implement this project in all Districts of Punjab alongwith SUWIDHA Back-end Services (SUBS) of the Deputy Commissioner Branches in December, 2004. The project replication started in all districts with technical support of NIC-District Centres. As of now, the project is being executed in all Deputy Commissioner's offices. The appellant society is registered with the Additional Registrar of Societies, Mansa vide No.44 of 22.03.2004 and its aims and objects are contained in Memorandum of Association of the Society which we have already mentioned in the fore-going 44 paragraphs. After perusing the objects of the Society, we find that the Ld. CIT, Bathinda, has reproduced some important objects of the Society in para 3.1 (pages 2 & 3) of the impugned order which shows that this society has been established for maintaining the agencies and franchises in the district for the conduct of the business of the society, which clearly establishes that the present society is doing business with other agencies and franchises in the district for the conduct of the business. We have not seen any object of the society which shows that the present society is doing any charitable activities for the general public utility. The Ld. CIT, Bathinda has also referred the matter to the ITO Ward 1(4), Mansa to verify the genuineness of the activities of the present society who vide his reported dated 05.09.2011 has stated that the assessee has failed to produce books of account in the absence of which it is not possible to verify the genuineness of the activities of the society and the AO has not recommended the case of the assessee for registration u/s 12AA of the Act. Even otherwise, the assessee has failed to establish before the ld. CIT(A) that the society is doing any charitable work keeping in view its objects. Merely, mentioning about various objects in the nature of charitable activities in the Memorandum of Association, does not mean that the Society is doing any charitable activities for the general public utility and is entitled for registration under section 12AA of the Act. According to section 12AA of the Act, the Commissioner on receipt of application for registration of a trust or institution has to satisfy himself about the genuineness of activities of the trust or institution. In the present case, the Ld. CIT, Bathinda has made the inquiry from the concerned ITO, who has not recommended the case of the Society for registration . Even otherwise, the assessee has also failed to establish that the objects of the society are charitable in nature.
7.9. Keeping in view the aforesaid discussions, we are of the considered view that the activities of the assessee-society are not charitable in nature within the meaning of provisions of section 2(15) of the Act and it does not qualify to treat as charitable institution. Since the assessee has not established that its society is formed with objects of any charitable purpose, then the question of discussion of citations relied upon by the Society does not arise, even otherwise these judgments are different from the facts of present case and are not helpful the Society. The present society is doing its business and charging huge fees from the public which is in addition to the prescribed fee of the Punjab Govt. Even otherwise, the fees charged by the present society is in addition to the burden forced upon the common-man. Because of this service has to be rendered by the Punjab Govt. free of cost to the public against the fee prescribed in the chart as reproduced in the fore-going paragraphs. We are of the considered opinion that no interference is called for in the well reasoned order passed by the ld. CIT, Bathinda.. Therefore, we uphold the impugned order dated 26.09.2011 by dismissing the present appeal filed by the assessee-society.
8. In the result, the appeal filed by the assessee-society is dismissed." 45
6. In view of the findings hereinabove and our decision in the case of Sukhmani Society for Citizen & Services, Mansa (supra) and decision of various court of law relied upon by the authorities below, we do not find any infirmity in the order of the Ld. CIT(A). Thus, all the grounds of assessee are dismissed.
7. In the result, the appeal of the assessee in ITA No.45(Asr)/2014 for the A.Y. 2007-08 is dismissed.
Order pronounced in the open court on 27th January,2015.
Sd/- Sd/-
(A.D. JAIN) (B.P. JAIN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 27th January, 2015
/SKR/
Copy of the order forwarded to:
1. The Assessee: Sukhmani Society for Citizen Services, Kapurthala.
2. The ITO.ACIT, Cir.IV, Jalandhar.
3. The CIT(A), JLR
4. The CIT, JLR
5. The SR DR, ITAT, Amritsar.
True copy By order