Income Tax Appellate Tribunal - Chandigarh
M/S Durga Dal Sewa Samiti, Patran vs Cit (Exemptions), Chandigarh on 21 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.106/Chd/2017
(U/s 12AA of the Act)
M/s Durga Dal Sewa Samiti, Vs. The CIT (Exemptions),
New Anaj Mandi, Patran. Chandigarh.
P A N : AAL TS1484M
(Assessee) (Respondent)
Assessee by : Shri RAkesh Cajla
Respondent by : Shri G.K. Dhall, CIT DR
Date of hearing : 27.09.2017
Date of Pronouncement : 21.12.2017
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d e r o f L d . C I T ( E x e m p t i o n) , C h a n d i g a r h [ he r e i n a f t er r e f e r r e d t o a s ' CI T( E ) ] , da t e d 3 0-0 7 - 2 0 1 6 , de n y i ng g r a n t o f r e g i s t r a ti o n u /s 1 2 A t o t he a s s ess e e s o c i et y .
2. B r i e f f a c t s r el a t i n g t o t h e c a s e ar e t h a t a n a p p l i ca t i o n in Form 10A wa s filed by t he assessee on 29 . 0 1 . 2 0 1 6 s e e k i n g r e g i s t r a ti o n u / s 1 2 A . Th e a p p l i c a t i on r e ve a l e d t h a t t h e a s s e s s ee s oc i e t y w a s a n on g o i n g e n ti t y i n o p e r a t i o n s i n c e 1 2 -0 3 - 1 9 96 . Th e p r i m a r y s t a t e d a i m s a n d o b j e c t of t h e s o c i e t y w er e f o u n d t o b e t o ma i n t a i n b r o th e r ho o d i n t h e s o c i e t y t h r o ug h p e a c e an d so c i a l s e r v i ce s , p r o v i de f r e e o r at s u b s i d i z ed r a t e m e d i c a l s er v i ce t o t h e s o ci e t y , o r g a n i ze special a w a r e n es s p r o g r am m e re g a r d i n g h e a l t h, organize s p e c i a l a w a r e nes s p r o g ra m m e to s a v e g i r l s. Du r i n g t he 2 p r o c e e d i ng b ef o re t h e L d . CI T( E ) n e c e s s a r y i n fo r ma t i o n wa s called for an d due re p l y f i l ed by th e a pp l i c a n t , af t e r considering which Ld. CI T( E ) denied r e g i st r a ti o n to the a s s e s s e e f o r t he f o l l o w i ng r e a s ons : -
a) Th e d i s s o l u t i on c l a u s e o f t h e a p p l i c a n t s o c i e t y w a s r e s tr i c t i ve as t h e p re s i d e nt of t h e s oc i e t y , t h ro u g h a r e s o l ut i o n d ul y p a s s ed b y 3/ 4 t h m e m b er s of t h e s o c i e t y , c o ul d d i s s o l v e t h e s o c i et y . L d . C I T( E ) p o in t e d o u t t h a t t h e s ai d c l a u s e m e n t i o n ed t h a t a f r e s h s oc i e t y w o u l d b e f o r m ed t h e r e af t e r by t h e p r e si d e n t t o l o o k a f t e r t he i n te r e st s o f th e s oc i e t y a n d t he a s s et s a n d l i a b i l i ti e s w o u l d b e t r a n s f e rr e d t o t h e p r e s i d e n t o f t h e n e w l y f or m e d s oc i e t y . L d . CI T( E ) i n t e r pr e t e d t h e s a i d clause as e n a bl i n g the d i s t ri bu t i o n of a s s e ts and l i a b i l i t y o f t h e s o c i e t y a m o ng s t t h e m e m b e r s of t h e society o n d i sso l u t i o n , t h u s att r a c t i n g p r o v i si on s o f section 1 3( 1 ) ( c ) of the Act w hi c h p r o h i bi t e d g i v i ng b e n e f i t t o c er t a i n s p e c i fi e d p er so n s b y t r u s t s e nj o y i n g e x e m p t i o n u / s 11 o f t h e Ac t . The r e l e va n t fi n d i n g o f t h e L d . CI T( E ) i n p a r a - 9 o f h i s or d e r i s as u n d er :-
" D is s o l u ti o n c l au s e in th e i n s tan t c as e is r e s tr i c ti v e as th e p r e s id e n t o f th e s o c ie ty th r o u g h a r e s o l u ti o n d u l y p as s e d b y 3 / 4 t h th e me mb e r s o f th e tr u s t c an d i s s o l v e th e S o c ie ty . T he r e af te r a f r e s h s o c ie ty s h al l b e f o r me d b y th e p r e s id e n t f or l o o k in g af te r th e in te r e s ts o f th e s o c ie ty. In c as e th e s o c ie ty i s d i s s o l v e d , i ts as s e ts , l i ab i l i ti e s wi l l b e tr an s f e rr e d to th e p r e s id e n t o f th e n e wl y f o r me d s o c ie ty .
T h e p r o v is io n s o f s e c tio n 1 3 ( 1 ) ( c ) of th e IT A c t s tate s th at " i n c as e o f a tr u s t f or c h ar i t ab l e o r r e l ig i o u s p u r p o s e s o r a c h ar i t a b l e o r r e l ig io u s i n s ti tu ti o n , an y i n c o me th e r e o f -
• If s u ch tr u s t o r in s ti tu t i o n h as b e e n c r e ate d o r e s tab l i s h e d af te r th e c o mme n c e me n t o f th i s A c t 3 an d u n d e r th e te r ms o f th e tr u s t o r th e r u l e s g o v e r n in g th e in s ti tu t i o n , an y p a r t o f s uc h in c o me e n u r e s , or ( i i) If an y p ar t o f in c o me o r an y p r o p e r ty o f th e tr u s t or th e i n s ti t u tio n ( wh e n e v e r c r e ate d or e s tab l i s h e d ) is d u r in g th e p r e v io u s u s e d o r ap p l ie d , d ir e c tl y o r in d ir e c tl y f or th e b e n e f it o f an y p e r s o n r ef er re d to i n s u b - s e c ti o n ( 3 ) : " a mb i t In c as e o f a r e s tr ic t iv e d i s s o l u tio n c l au s e , th e p r e s u mp t io n o f th e l a w is th a t th e as s e ts an d l i ab i l i ti e s o f th e s o c ie ty wi l l b e d is tr i b u te d a mo n g s t th e me mb e r s of th e s o c i e ty/ tr u s t i n c as e th e tr u s t c l o s e s i ts o p e r at i o n s o r i s d is b an d e d . T h e p r o v is i o n s o f S e ct io n 1 3 ( 1 ) ( c ) o f th e A c t ar e c l e ar l y a ttr ac te d if th e d is s o l u ti o n c l a u s e is r e s tr i c t iv e . F u r th e r in th i s c as e th e d is tr i b u t i o n o f as s e ts in th e e v e n t o f d is s o l u ti o n h as b e e n r e s tr i c te d o n l y to an o th e r s o c ie ty f or me d b y th e p r e s id e n t an d to th at e x te n t o th e r s o c ie t i e s h av e b e e n p r e c l ud e d .
3. I t w a s f u r th e r f ou n d b y t h e L d. C I T( E ) t h er e w a s j u s t o n e d o c to r s ho wn t o h av e b ee n w o r k i n g i n t he ho s p i t a l a n d s i n c e e x em p t i o n u / s 1 0 ( 2 3) ( c ) ( i i i ae ) h a d b ee n c l ai m e d b y t he a s s e s s e e s o c i e t y i n e a r l i er y e a rs , w h i c h h a d b e e n d e n i e d t o it and the said claim had n ot b e e n f o rg o n e s i n c e t h e a s s e s s e e f i l e d an a p p e a l a g a i ns t t h e s a i d o r d e r , L d . CI T( E ) s t a t e d t h a t i t wa s n o t c l e a r a s t o h o w s i ng l e d o c t o r w as p r o v i d i n g al l s e rv i c e s w h i c h we r e r e q u i r e d t o b e pr o v i d e d by h o s p i t a l s an d i ns t i t u t i o ns w h o w e r e e l i g i bl e f o r e x e m p t i o n u / s 1 0 ( 2 3 C ) . Th e r e l e va n t fi n d i ng o f Ld . CI T( E ) o f p a r a- 1 0 a s u n d e r :-
" It i s s e e n f r o m th e d e ta i l s th a t th e r e is ju s t o n e d o c to r wh o h as b e e n s h o wn as wo r k in g f o r th e h o s p i t al . It' s al s o th e c as e th a t d u r in g th e p r e v io u s ye ar s th e ap p l i c an t h as b e e n c l a i mi n g e x e mp t i o n u / s 1 0 ( 2 3 C ) ( i i i a e ) , wh i c h h as b e e n r e je c te d b y th e A s s e s s in g O f f ic er . T he ap p l i c an t, s e lf p r of e s se d l y, i s in ap p e al ag a i n s t th e s aid o r d e r an d to th a t e x te n t h as n ' t f or e g o n e i ts c l ai m s f or e x e mp ti o n 4 u n d e r s e c ti o n 1 0 ( 2 3 C ) . It is at t h is ju n c tu r e al s o r e l e v an t to q u o te th e p r o v is io n s o f 1 0 ( 2 3 C ) ( i i i ae ) .
( i i i ae ) " A n y h o s p i tal o r o th e r i n s ti tu t io n f o r th e r e c e p ti o n an d tr e at me n t o f p e r son s s uf f er in g f r o m i l l n e s s o r me n t al d ef e c ti v e n e s s o r f or th e r e c e p ti o n an d tr e a t me n t o f p e r s o n s d u r in g c o n v al e s c e n c e o r of p e r so n s req u ir in g me d i c al at te n ti o n or r e h ab i l i t a t i o n , e x is ti n g s o l e l y f o r p h il an th r o p ic p u r p o s e s an d n o t f o r p u r p o s e s o f p r of i t, if th e ag g r e g ate an n u al r e c e ip ts o f s u c h h o s p i t al o r i n s ti tu ti o n d o n o t e x c e e d th e amo u n t o f an n u al r e c e ip ts as may b e p r e s c r ib e d "
I t i s c l e ar th at th at e x e mp t i o n is ap p l ic ab l e to h o s p i t al s an d i n s ti tu t i o n s f o r p ro v id in g a h o s t o f s e r v ic e s . It i s u n c l e ar h o w wi th a s in g l e d o c to r al l th e r e q u ir e d s e r v ic e s ar e b e in g p r o v id e d . F u r th e r , i n s u c h c as e s s e c tio n 1 0 ( 2 3 C ) ( v i a) wo u l d b e th e mo r e ap p r o p r i a te an d r e l e v an t s e c tio n if at al l th e g r o s s r e ce ip ts e x c e e d th e p r e s c r i b e d l i mi t. I t may we l l b e th e c as e ma t th e ap p l i c an t s o c ie ty h as c o me u p wi th th e ap p l ic a ti o n f o r gr an t o f r e g is tr at i o n u / s 1 2 A A of th e A c t ju s t to c o v e r u p th e e s c ap e me n t o f tax e s o n c e th e s ame h as b e e n p o in te d o u t b y th e A s s e s s in g O f f ice r . "
4. F o r t h e a b o v e s ta t e d r e as o n s t h e a s s e s s ee w a s de n i e d r e g i s t r a ti o n u /s 1 2 A A .
5. A g g r i e v e d a ga i n st t h e s a m e t h e a s s e s s e e s o ci e t y h a s c o m e u p i n a p p ea l b e f o r e u s r ai s i n g t h e f ol l o w i n g g r o u n d s : -
1. T h at th e o r d e r o f th e L d . C o mmi s s i o n e r o f In c o me T ax ( E x e mp ti o n s ) , C h an d i g ar h is b ad i n l a w an d ag a in s t f ac ts o f th e c as e .
2. T h at th e L d . C o mmi s s i o n e r o f In c o me T ax ( E x e mp t i o n s ) , C h an d ig ar h i s n o t ju s tif ie d i n r e je c t i n g th e ap p l ic a t io n f or r e g is tr a t i o n s u b mi t te d b y th e as s e s s e e , c o m p l e te in al l r e s p e c t wi th o u t g o in g in to th e f ac ts & me r i ts o f th e c as e .
3. T h at th e L d . C o mmi s s i o n e r o f In c o me T ax ( E x e mp t i o n s ) , C h an d ig ar h is e r r e d in r e je c ti n g th e ap p l ic a ti o n f o r r e g is tr a t i o n wi th th e o b s e r v at io n s th a t p r o v is i o n s o f se c tio n 1 3 ( 1 ) ( c ) of th e A c t a r e at tr ac te d i n th e c as e of as s e s s e e . W h il e d o in g s o , h e f ail e d to ap p r e c i a te th e f ac t th e p r o v is i o n s ar e n o t at al l ap p l ic ab l e .5
4. T h at th e L d . C o mmi s s i o n e r o f In c o me T ax ( E x e mp t i o n s ) , C h an d ig ar h i s n o t ju s tif ie d i n r e je c t i n g th e ap p l ic a t i o n f o r r e gi s tr a t i o n o n i r r e l e v an t c o n s id e r ati o n s .
5. T h e as s e s s e e C r av e s l e av e to ad d , a me n d o r d e l e te an y o f th e g r o u n d ( s ) of ap p e al b e f o r e i t i s f in al l y h e ar d .
6. D u r i n g t h e co u r se o f h e a r i n g b e f or e u s , L d . C ou n se l f o r the a s s es s e e cou n t e r e d both th e a l l e ga t i o n s of the Ld. C I T( E ) . Vi s a v i s t h e d i s s ol u t i o n c l a u s e , wh i c h wa s r e f e r red t o b y t h e L d . CI T( E ) a n d s t a t ed t o b e r e s t r i c t i v e an d t h u s i n v i o l a t i o n o f p r ov i s i o n o f s e c t i on 1 3 ( 1 ) ( c) o f t he A c t , L d.
C o u n s e l f o r t h e a s s e s s e e s t at e d t h a t i t w a s p o i nt e d o u t t o t h e L d .CI T( E ) , t ha t t h e s a i d c l au s e h a d b e e n s ub s e q u e n t l y amended r e q u i ri n g a l l a s s et s an d l i a b i l i t i e s o f t h e s o c i e t y w o u l d b e t r a n s f er r e d t o a n e w s o c i e t y f o r d i s s ol u ti o n , w h i ch w o u l d t h e r ea f t e r l o o k a f t e r t h e i n t e r e s t o f t he so c i e t y a n d w a s n o t r e s t ri c t i v e a t a l l . O u r at t e n t i o n w as d r a w n t o t h e r e l e v a n t cl a u s e re p r o d u c e d at p ag e N o . 1 1 , w h i c h s t a t e d a s under:-
"Whereas Sh. Durga Dal Sewa Samitti Charitable (Regd) Patran Mandi Tehsil Patran Distt. Patiala has been duly registered and Shri Madan Lai is its president and under his president ship, a resolution has been passed on this day 20lh day of July 2016 in which it has been decided that in case the Sh. Durga Dal Sewa Samitti Charitable (Regd) Patran Mandi is disbanded in any manner, the property kept and maintained by Sh. Durga Dal Sewa Samitti Charitable (Regd) Patran Mandi will be handed over to some Society doing the work for the welfare of the public which will be decided with the consent of all the members and president."
7. L d . C o u n se l f o r t h e a s s e ss e e f urt h e r p o i nt e d o ut t h a t even as pe r t he Society R e g i st r a t i o n Ac t , 1 86 0 , w h i ch a p p l i e d to i t , i t co u l d n o t h a v e di s t r i b u t e d p r o fi t s a m o n g s t 6 i t s m e m b e r s a s w a s t h e a p p r eh e n s i o n o f t h e L d . CI T( E ) . L d . C o u n s el f o r th e a s s e ss e e d re w o u r a tt e n t i on t o c l a u s e 1 3 & 1 4 o f t h e s a i d A c t w hi c h s ta t ed t h a t an y s oc i e t y c o u l d b e d i s s o l v e d b y t h e c o n s e nt o f t h r ee - f i f t h o f t h e mem b e r s an d that no m e m be r was to r e ce i v e any profit on such d i s s o l u t i o n . Th e r e l e v a n t c l au s e s o f t h e S o c i e t y R eg i s t r a t i o n A c t , w a s p l a c e d b e f o r e u s w h i c h s t a t e d a s u n d e r: -
13. Provision for dissolution of societies and adjustment of their affairs. --
Any number not less than three-fifths of the members of any society may determine that it shall be dissolved, and thereupon it shall be dissolved forthwith, or at the time then agreed upon, and all necessary steps shall be taken for the disposal and settlement of the property of the society, its claims and liabilities, according to the rules of the said society applicable thereto, if any, and, if not, then as the governing body shall find expedient, provided that, in the event of any dispute arising among the said governing body or the members of the society, the adjustment of its affairs shall be referred to the principal Court of original civil jurisdiction of the district in which the chief building of the society is situate; and the Court shall make such order in the matter as it shall deem requisite;
Assent required. Provided that no society shall be dissolved unless three-fifths of the members shall have expressed a wish for such dissolution by their voles delivered in person, or by proxy, at a general convened meeting for the purpose:
Government consent Provided that whenever any Government is a member of or a contributor to or otherwise interested in, any society registered under thisAct, such society shall not be dissolved without the consent of the Government of the State of registration.
14. Upon a dissolution no member to receive profit.---
If upon the dissolution of any society registered under this Act there shall remain, after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the said society or any of them, but shall be given to some other society, to be determined by the votes of not less than three-fifths of the members present 7 personally or by proxy at the time of the dissolution, or, in default thereof, by such Court as aforesaid:
Clause not to apply to Joint-stock Companies. Provided, however, that this clause shall not apply to any society which shall have been founded or established by the contributions of shareholders in the nature of Joint- stock Company."
8. Th u s , L d . C o u n se l f o r t h e a s s ess e e s t a t e d t ha t t h e r e w a s n o m e r i t i n c o n t e n t i on o f t he L d . CI T( E ) t h a t b y v i r t u e of the di s s o l u ti o n clause b e n ef i t would a c c r ue to the m e m b e r s an d t he r e f o r e th e d i s sol u t i o n c l a u s e c ou l d n o t b e t e r m e d t o b e r e st r i c t i v e o r i n v i ol a t i o n o f t h e p r ov i s i o n s of s e c t i o n 13 ( 1 ) ( c) o f t h e Ac t a n d th u s c o u l d n o t ha v e f o r me d t h e b a s i s f or r e je c t i n g t h e ap p l i c a t i o n f o r re g i s tr a t i o n u / s 1 2 A f i l e d b y t he a s s e s s e e .
9. V i s a v i s i s s u e o f a p p o i n t m e n t o n l y o n e d o c t or o ur a t t e n t i o n w a s dr a w n t o t h e sub m i s s i o n ma d e d u r i n g t h e i m p u g n e d p r o c eed i n g s b ef o r e t h e L d . CI T( E ) i n th i s r e g ar d v i d e l e tt e r da t e d 2 0 - 0 7 - 20 1 6 pl ac e d i n p a p e r b o ok a t p ag e - 7, as per which the assessee had submitted that the s o c i e t y h a d e n g ag e d t h e s e rv i c e s o f o n l y o n e d o ct or w h o w a s a n M B B S d o c t o r a n d w a s b e i n g pa i d a s a l a r y o f Rs . 7 5 , 0 0 0 /- p . m . a n d f u r t h er t h a t t he s o c i e t y w a s ru n n i n g a h o s p i tal w i t h t h e ma i n ob j e c t o f pr o v i d i ng s e r v i c es t o n ee d y p e o p l e at s u b si d i z e d ra t e and also am b u l a n c e s e r vi ce s to the p u b l i c at s u b si di z e d r a te . Th e re l e v a n t s u b m i s si o n s o f th e assessee are as under:-
" O n l y o n e d o c to r n a me d S h . K ar an B h atn ag a r ( M B B S ) r e s id e n t at H o u s e N o . 7 0 , H ir a B ag h , R ajp u r a R o ad , P at i al a is wo r k in g wi th th e h o s p i t al . T h e s al ar y o f R s . 7 5 , 000 / - p e r mo n th is b e in g p aid to h i m.8
A s s ta te d e ar l ie r th e s o c ie ty is r u n n in g a h o s p i t a l wi th th e ma in o b je c t, o f p ro v id i n g s e r v ic e s to th e n e e d y p e o p l e at s u b s id i z e d r at e . H o we v e r , th e d e tai l s o f s o me c h ar i t ab l e ac t i v i t i e s c ar r i e d o u t b y th e s o c ie ty i s as u n d e r : -
Sr. No. D ate A c tiv i t ie s
1. 1 1 . 0 7 . 2 0 14 B l o o d D o n ati o n C a mp
2. 2 2 . 0 2 . 2 0 05 F r e e E ye C h e c k -up
3. 1 5 . 0 7 . 2 0 16 B l o o d D o n ati o n C a mp
A p ar t f r o m i t th e s o c ie ty i s p r o v id in g A mb u l an c e s e r v ic e s to th e p u b l ic a t v e r y s u b s id i z e d r ate s . T h es e ar e th e a p p ar e n t c h ar i t ab l e ac ti v i t i e s . T he p r o v id i n g o f me d ic al r e l ie f is c o v e r e d u n d e r C h ar i t ab l e p u r p o s e s an e n v is ag e u / s 2 ( 1 5 ) an d 1 1 o f th e In c o me T ax A c t. "
10. L d . C o u n s el for the a s s es s e e ,re l y i n g on the above s u b m i s s i on s ma d e , c o nt e n d e d that it w as b e y o nd c o m p r e h e ns i o n a s t o h o w e m p l o y m e n t o f o n l y o n e d o c t o r c o u l d b e re a d ag a i n s t t h e a s s e ss e e s o c i et y s o as t o d e ny r e g i s t r a ti o n to i t a s a c ha r i t a bl e s o c i e t y u / s 1 2 A o f t h e Ac t , when the said fact p r o ve d b e yo n d any d ou b t that the a s s e s s e e w a s g e nu i n e l y c ar r y i n g ou t c h a r i ta b l e a cti v i t i e s . I t was also c o n t en d e d that for the p u r po s e of g r a n t i ng r e g i s t r a ti o n u / s 1 2 A t h e CI T h a d t o o n l y c o n s i d er w h e t h er the objects of the applicant were charitable and the a c t i v i t i e s c a rr i e d o u t b y i t w e re ge n u i n e a nd i n con s o n a n c e w i t h t h e s t a t e d o b j e c t s . I n t h e ab s e n c e o f a n y s uc h f i n d i ng a n d m e r e l y o n th e b a s i s o f s u rm i s e s a n d co n j ec t u r e s t h at how could the assessee r e nd e r medical se r v i c e s by e m p l o y i n g o nl y o n e d o c t o r , r e g i str a t i o n c o u l d n o t h a v e b e e n d e n i e d t o t h e as se s s e e s o ci e t y .
9
11. L d . D R o n o t h e r h a n d r e l i e d u p on t h e o r d er o f CI T( E ) .
12. W e h a v e h e a r d th e c o n t e n t i o n s of t h e b o t h t h e pa r t i e s a n d g o n e t h r o u gh t h e o r d e r o f L d. C I T( E ) a n d t h e d o c u m e n t s r e f e r r e d t o b ef o re u s . W e f i n d m er i t i n t h e c o n t e nt i o n o f t h e L d . C o u n s el f o r th e a s s e s s ee . I t ha s b e e n d u l y d em o n s t r a t ed b e f o r e us t h at t he d i s s ol u t i o n c l au s e w a s n o t r e s tr i c t i v e a nd t h a t o n d i s s o l ut i o n a l l t h e a s se t s a n d l i a b i l i t i e s o f t h e a s s e s s e e s o c i et y w o u l d b e t r a ns f e r r e d t o a n e w s o c i e t y to l o o k a ft e r th e i n te r e s t of t h e s o ci et y . E v en a s p e r se c t i o n 1 3 & s e c t i on 1 4 of t h e S o c i et y R eg i s t r a t i o n A c t , u nd e r w h i ch a s s e s s e e s oc i e t y w a s r e g i s t er e d , n o p r o f i t i n a ny c a s e c o u l d b e t r a n s f er r e d by t h e a p p l i c a n t s o c i e t y t o i t s t ru s t e e s or members. Th u s the allegation and a p p r e h e n si o n of Ld. C I T( E ) t ha t t h e p r e s i d e n t o f t h e s o c i e t y h a d t h e p o w e r to dissolve the s oc i e t y an d distribute p ro f i t s am o n g s t its members, we find, is m i s pl a c ed . Th e contention of the C I T( E ) t h a t s e ct i o n 1 3 ( 1 ) ( c ) o f t he A c t , w o u l d b e a t t r a c t e d on d i s t r i b u ti o n of profits of the assessee society on dissolution is t h e r e f o r e, we hold, w i th o u t any basis. M o r e o v e r t he H on ' b l e P u n j ab & H a r y a n a H i gh Co u r t i n t h e case of CI T v s S u r y a E d u c a ti o n a l & C h a r i t a b l e Tru s t i n I TA n o . 7 0 1 of 2 0 10 ,d t . 0 5 / 1 0 /1 2 , has h e l d t h a t w h i l e g r a n ti n g r e g i s t r a ti o n , t h e o n l y i ss u e s to b e c o n s i de r e d are w h e t h e r t h e o b j e c t o f t he s o c i e t y a r e c ha r i t a b l e a n d t h e a c t i v i t i e s c a r r i e d o u t by i t a r e i n c o n s on a n c e w i t h t he s a i d o b j e c t a n d g e n u i ne a n d t h a t t h e p r o v i si o n s o f s e ct i o n 11 & 1 2 of 10 the Act, come into operation fo r c a l c u l a t i n g t h e e x e m p t i n c o m e on c e re g i s t r a ti o n u /s 1 2 A h a s b e e n gr a n t e d . Th e r e l e v a n t f i n d i ng s o f t h e H o n ' b l e Hi g h C o u r t a r e as u n d e r :
"As per Section 12AA of the Act, an application for registration of the Trust and Institution is required to be made within one year from the date of creation of the Trust or the Establishment of such Institution. The procedure for registration of the Trust or Institution is prescribed under Section 12AA of the Act. In terms of Clause (a) of Section 12AA of the Act, the Commissioner is to satisfy himself about the genuineness of the activities of the Trust on such inquiries as he may deem necessary. Sub-section (1A) and (2) of Section 12AA of the Act, are procedural in nature, whereas Sub- section (3) of Section 12AA of the Act, empowers the Commissioner to cancel the registration of the Trust or Institution, if he is satisfied that the activities of such Trust or Institution are not genuine or are not carried out in accordance with the objects of the Trust or Institution.
9. Section 11 of the Act contemplates that the income as specified therein shall not be included in the total income of the previous year of the person in receipt of the income derived from the property held under the Trust wholly for charitable or religious purposes, whereas Section 12 of the Act, deals with the contributions received by the Trust or an Institution, established for charitable and religious purposes, receiving contribution, shall not be an income in terms of Section 11 of the Act. The benefit of Sections 11 and 12 of the Act, are available only if such Trust or Institution is registered under Section 12AA of the Act.
10. On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. Therefore, the provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, the principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act. The application for registration is required to be made within one year of the creation of the Trust. Section 12AA of the Act, requires satisfaction in respect of the genuineness of the activities of the Trust, which includes the activities which the Trust is undertaking at present and also 11 which it may contemplate to undertake. The insertion of sub- section (3) to Section 12AA of the Act, clarifies the said fact, when it empowers the Commissioner to cancel the registration if the activities of the Trust are not carried out in accordance with such objects.
11. Therefore, the object of Section 12AA of the Act, is to examine the genuineness of the objects of the Trust, but not the income of the Trust for charitable or religious purposes. The stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that the judgments referred to by the learned counsel for the appellant are not applicable to the facts of the present case arising out of the question of registration of the Trust and not of assessment."
13. Th i s p r o p o s i t i on h a s b e e n r e i t e r a t e d b y t h e H o n ' b l e P u n j a b & H a r y an a H i g h Co u r t i n t h e c a s e o f CI T( E ) v s S h ri S h i r d i S a i D a r b ar c h a r i t a bl e t r ust , D h a r a ms a l l a re p o r t e d i n 3 9 5 I TR 5 6 7 . Th e r e f o r e a l s o w e ho l d t h a t t h e L d . C I T( E ) h a s e r r e d i n d en y i ng r e g i s t r at i o n t o t h e a s s e s se e ' s s o c i e t y o n account of t he alleged r e s t ri c t i v e d i s s ol u t i o n clause a t t r a c t i ng t h e p ro v i s i o n of s e c ti on 1 3 ( 1 ) ( c) o f t h e A c t .
14. V i s a v i s t h e a v ai l a b i l i t y o f only one doctor, available w i t h t h e a s s e ss ee w e h o l d t h a t th e s a i d f a c t i s ne i t h e r h e r e nor t h e re f or de t e r m i n i ng w he th e r the activities of the a s s e s s e e 's S o ci e t y a r e g e n u i ne o r n o t , w hi c h i s t he o n l y p r e - r e q u i s i t e f o r g ra n t i n g r e gi s t r a ti o n u / s 1 2 A . I n f a c t the p r e s e n c e of a d oc t o r , w h i ch i s a n a d m i t t e d fa c t , es t a b l i s h es t h a t t h e a s s es s ee ' s s o c i e t y i s g en u i n e l y r e n d e ri ng m e d i c al s e r v i c e s , w h i ch i s a c h a ri t a b l e ac t i v i t y . Th e r e i s n o f i n d i n g a t a l l b y t h e L d .C I T( E ) t h at n o me d i c a l s e rv i c e s we r e i n f a c t b e i n g re n d e r ed b y t h e a s s es s e e s o c i e t y t ha t too w h e n a l l necessary d et a i l s were called fo r and e x a m i n ed by the L d . CI T( E ) d u r i n g t h e e x t a n t p r oc e e d i n g s b e fo r e i t . I n f a c t the a s s e s s ee ha d s u b m i t t ed details of m ed i c a l camps 12 organized by it and had also submitted th at it was r e n d e r i n g a m b ul a n c e s e rv i c e s a t s u b s i d i z e d r at es . N o n e of these c o n t e nt i on s have been co n t r o v e r te d e i t he r by the L d . CI T( E ) o r th e L d . D R be f o r e us . W e t he r e f o re a g r e e w i t h t h e L d . C ou n s e l f o r t h e a ss e s se e t h a t t he L d .C I T( E ) w as m e r e l y a s s um i n g a n d i n f a c t i t wa s o n l y a s u s p i ci o n o f t h e L d . CI T( E ) t h a t th e a s s e s s e e w as n o t r e n d e r i n g a ny m e d i c a l s e r v i c e s . F u r th e r w e f i n d t h a t t h e r e f e r e nc e o f t h e L d . CI T( E ) t o t h e p r o v i si o ns o f s e c t i o n 1 0( 2 3 C ) ( i i i a e ) u n d e r w h i c h t h e assessee had claimed e x e m p t i on in p r e c e di n g years for stating ho w t he a s s e s s ee c o ul d be p o s si b l y r e n d e r i ng s e r v i c e s e n v i s a ge d i n t h e s a i d se c t i o n w i t h t h e h e l p o f o n e d o c t o r , w e fi n d i s t o t al l y i r r e l e va n t t o t h e i s s u e a t h and s i n c e t h e a s s e ss e e h a s i n t h e p r e s e n t c a s e a p p l i e d f o r r e g i s t r a ti o n a s a c h a r i t ab l e s oci e t y u / s 1 2 A o f t h e A c t t o c l a i m e x e m pt i o n u / s 1 1 & 1 2 o f t h e A c t a n d n o t u n d er section 1 0( 2 3 C ) ( i i a e ) . Th e i s su e t h e r e f or e ha s to be e x a m i n e d a s pe r t h e a p p l i c a bl e p r o v i s i o ns w h i c h a r e c l e a r a n d a s p e r wh i c h , a s s t a t e d ab o v e , t he CI T ha s o n l y t o e x a m i n e t h e o bj ec t s a n d t h e g e n ui n e n e s s o f a c ti v i t i e s o f t h e a p p l i c a n t s o c i e t y. Th e r e i s n o n e ed a t a l l t o b o r r ow f r o m a n y o t h e r p r o v i si o n s o f t h e A c t u n l e s s s o s p e c i f i c a l l y p r o v i d e d f o r . Th e r e f o re a l s o w e h o l d t h a t t h e r e co u l d n o t h a v e b e en a n y r e a s o n f o r de n y i n g g r a n t of r e g i s t r a ti o n t o t he a s s e s s ee society.
15. W e , t h e r ef o r e , s et a s i d e th e o r de r o f t h e Ld . CI T( E ) a n d d i r e c t g r a n t of re g i s t r a ti o n t o t he a s s e s s ee s o c i e t y . 13
16. In the r es u l t , the appeal of th e assessee s oc i e t y , t h e r e f o r e, s t a nd s a l l o w e d.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(SANJAY GARG) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated 21 s t December, 2017
*Rati*
Copy to:
1. The Assessee
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
Assistant Registrar,
ITAT, Chandigarh