Income Tax Appellate Tribunal - Chandigarh
Baba Amarnath Educational Society ... vs Assessee on 22 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B' CHANDIGARH
BEFORE Ms.SUSHMA CHOWLA, JUDICIAL MEMBER
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 825/CHD/2011
Baba Amarnath Educational V CIT-III,
Society (Regd.), Satya Yog Niwas, Ludhiana.
Gill Road, Moga.
PAN: AAAAB-7523L
&
ITA No. 826/CHD/2011
ACE Educational & V CIT-III,
Charitable Society (Regd.) Ludhiana.
48/8, New Town,
Moga.
PAN : AABAA-4439R
(Appellant) (Respondent)
Assessee by : Shri P.N.Arora
Respondent by : Smt.Jaishree Sharma
Date of Hearing : 22.11.2011
Date of Pronouncement : 29.12.2011
ORDER
PER MEHAR SINGH, AM
The present two appeal filed by different assessee societies are directed against the separate order, dated 28.06.2011 passed by the ld. Commissioner of Income-tax u/s 12AA(1)(b)(ii) of the Income-tax Act,1961 (in short 'the Act'). The facts of the appeals and grounds of appeal are identical, we therefore, find it convenient to dispose of the same by a consolidated order.
2. In both the appeals, the assessee appellants raised the following similar Grounds of Appeal:
"1. That the order of the ld. Commissioner of Income-tax III Ludhiana, thereby refusing to 2 registration of the Society is illegal, invalid and void ab-initio and the same is liable to be cancelled.
2. That no reasonable & proper opportunity of being heard has been allowed before refusing to register the Society. The ld. CIT either should have disclosed his mind or he should have allowed reasonable opportunity of being heard before refusing to register the Society. As such, the order of the ld. CI T is illegal and invalid and is liable to be cancelled.
3. That the ld. CI T did not appreciate that the conditions laid down under Section 12A of the Income-tax Act,1961 were duly fulfilled and as such the registration as claimed should have been allowed.
4. That the ld. CI T did not appreciate that the objects of the society are as under:
a) To establish and promote establishment of or to render aid to school, college, educational institutions, technical education institutions, training institutions in one or all fields of engineering research, medical, commerce, arts or any other system of education.
b) To promote Education, Vocational, Technical and otherwise the diffusion of useful knowledge, medical relief, industrial training including all aspects of rural reconstruction and social welfare projects irrespective of race, caste, community or creed.
c) To engage in social welfare activities aimed at improving living conditions and general welfare of the poor and indigent persons of what so ever occupation, irrespective of race, caste, community or creed.3
And there is no violation of the objects of the society and the society ultimately purchased the land and started construction for the objects for which it was created.
5. That the ld. CI T did not appreciate that there was no violation of any provisions of the society as no non-charitable purpose was carried on during the year under consideration and the ld. CIT has not appreciated that the society started the educational institution and it was carried on in the subsequent year. As such the registration as claimed should have been allowed by the ld. CI T and the order of the ld CIT deserves to be cancelled and the registration may kindly be granted.
6. That the ld. CI T did not appreciate that the society is duly registered with the Addl.Registrar of Societies and it fulfilled all the conditions laid down under Section 12A of the Income-tax Act,1961 and there was no justification in refusing to register the society.
7. That the Trust was created for the charitable purposes and even for clause No.(t) of the objects clause there was no violation of any provision within the meaning of Section 2(15) of the Income-tax Act,1961.
8. That the ld. CI T did not appreciate, that the amendment made was clearly applicable retrospectively and as such registration to the society should have been allowed.
9. That the ld. CI T did not appreciate, that the voluntary contributions forming part of the Corpus of the society are not taxable as per Income Tax Law and as such registration of the society should be allowed as claimed.
4
10. Any other ground of appeal which may be urged at the time of hearing of the appeal."
3. Ld. 'AR' submitted that the submissions made before the Bench are applicable to both the appeals. In the course of present appellate proceedings, ld. 'AR' contended that the real activities undertaken by the appellant, intended to achieve the primary object of the societies and the same is covered by the definition of 'charitable purpose' as provided u/s 2(15) of the Act. He vehemently contended that the proviso added to Section 2(15) of the Act, by Finance Act, 2008 w.e.f. 01.04.2009, is not applicable to the first three limbs of the 'charitable purpose' enumerated in the said definition. He, further, contended that a further proviso inserted below Section 2(15) of the Act, supports his case. The said proviso mandates that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is or less than the prescribed limit. In the present case, object marked as clause 't' was never implemented and remained on paper, which was even deleted from the objects of the appellants before the conclusion of proceedings before the CIT. Ld. 'AR', further, contended that the impugned assessee appellants namely Baba Amarnath Educational Society and ACE Educational & Charitable Society are carrying on similar activities, with similar objects and the main objectives of both the appellants are to impart education including technical and vocational education. He specifically made a mention of the concrete activities 5 carried out by the assessee, with a view to achieving the stated objects. In this context, he referred to page 31 of the Paper Book containing details of activities undertaken by the appellant. The CIT passed order u/s 12A read with Section 12AA of the Act, on 28.06.2011, declining grant of registration in both the cases. The ld. 'AR', further, argued that application in both the cases was filed, on 20.12.2010, and the deletion of the object clause 't' was carried out, on 10.6.2011, in the case of Baba Amarnath Educational Society and on 11.6.2011, in the case of ACE Educational & Charitable Society. Accordingly, clause (t) of the Memorandum of Association was validly deleted following the prescribed procedure under the Societies Registration Act. He also referred to page 33 of the Paper Book wherein it was contended by the appellant that the language of the object clause marked as (t) suffered from clarity and real intention was to set up technical education and thereby producing technocrats who will promote exports of computer, hardware, software, telecommunication etc. The relevant communication clarifying the intention of the appellant vide letter dated 15.6.2011,, as appearing at page 30 of the Paper Book, is reproduced hereunder:
"That the clause (t) of the Object Clause of Memorandum of Association i.e. "To Promote exports of Computers Hardware/Software, Telecommunication, Internet, e-Commerce and allied service" has been adopted by the society with the intention that being educational society they will setup technical institution and thereby producing technocrats who will promote exports of 6 computers, hardware/software, telecommunication, internet, e-commerce and allied service and contribute to the growth of the economy of the country. The language of the clause(t) as mentioned in the Memorandum is not so much clear and does not represent intention of the society precisely. Hence keeping in mind the main objects of the society the management has decided to drop the object clause (t) and accordingly filed an application for deletion of such object in clause (t) by passing a resolution. The copies of acknowledgement for application filed with the Registrar of Society and Resolution passed in the Board meeting to delete the object clause (t) is enclosed herewith for your consideration.
That the copies of the vouchers relating to receipt of Corpus Donations are enclosed herewith"
4. The ld. 'AR', further, mentioned that the activities of the appellant are at its initial stage and concrete activities were carried out with a view to achieving the main object of imparting education. He annexed various evidences to support his claim and the relevant details of such activities as carried out by the appellant are reproduced hereunder (Paper Book Page 31):
"Ace Educational & Charitable Society is a society registered under societies registration act, 1860 vide R.No. 51 of 2009. The main objects of the society are to establish and promote establishment of or to render aid to school, colleges, educational institutions, technical education institutions, training institutions in one or all fields of engineering, research, medical, commerce, arts or any other system of education. To fulfill their object, the society decided to establish an Engineering & Management College under the name and style of Ludhiana Group of Colleges. In the year 2009-10 they purchased a piece of land measuring 10.76 Acres and started construction of 7 building, as required under the norms of AICTE to setup an Engineering & Management College. They incurred a sum of Rs. 134.05 Lacs for purchase of Land and Rs. 148.89 Lacs towards construction of Building in the Financial year 2009-10. The amount was spent out of the specified donations of Rs. 288.00 lacs received from various educational institutions, to form part of the corpus funds and Unsecured loans from members to the tune of Rs. 146.00 Lacs. The society received another specified donations to the tune of Rs. 216.00 Lacs in the year 2009-10 to be form part of corpus fund. Further the society received Unsecured Loans from the Members to the tune of Rs. 141.00 Lacs. The amount so received by way of donation and loans, incurred for the completion of building purchase of various equipments etc, necessary for the approval of the Engineering College as per AICTE Norms and for meeting deficit for the year 2009-10. The society got approval to start Engineering & Management College in May 2009 and got it affiliated with Punjab Technical University Jalandhar. The society started an Engineering college and Management College under the name of Ludhiana Group of Colleges at VPO Chowkiman, distt.Ludhiana. Both of these institutes are duly approved by All India Council of Technical Education (AICTE), New Delhi and Govt. of Punjab. The College of Engineering & Technology is affiliated with Punjab Technical University, Jalandhar for running the BTech Courses in Computer Science, Electronics & Communication, Electrical Engineering, Mechanical Engineering and Information Technology. Similarly the Ferozepur Institute of Management is also affiliated with Punjab Technical University to run the courses namely BBA, BCA and MBA & MCA. The first session started in the year July 2010. The Engineering College made an admission of 63 students remaining 193 seats vacant. The admission were made directly as the approval of college was received late after last counseling of PTU. The fee was received as prescribed by the state Govt. The fee received during the year 2010-11 was insufficient to meet the expenses to run the of the college and the society incurred a deficit of Rs. 73.39Lacs which they meet out of the 8 corpus funds and Unsecured Loans. The Construction work of the building is still going on. The college has to built yearwise infrastructure as per AICTE Norms. The next session of 2011- 12 is to be started in July 2011."
5. Ld. 'AR' furnished a long list of case laws to support his contention that the society is eligible for registration u/s 12A r.w. Section 12AA of the Act, which is reproduced hereunder:
" (ITA 825/826/Chd/2011)
1. Digember Jain Society for Child Welfare V Director General of Income-tax (Exemptions) (2010) 329 ITR 459 (Del)
2. M/s Pinegrove International Charitable Trust V Union of India & others (2010) 327 ITR 73 (P&H)
3. ACIT V Thanthi Trust (2001) 247 I TR 785 (S.C)
4. ICAI Accounting Research Foundation & another V Director General of Income Tax (Exemptions) & ors. (2009) 226 CTR 27 (Del)
5. Oxford Academy for Career Development V Chief Commissioner of Income Tax & others (2009) 315 I TR 382 (All)
6. American Hotel & Lodging Association Educational Institute V Central Board of Direct Taxes & others (2008) 301 I TR 86 (S.C)
7. CIT V Dharmodayam Co. (1998) 233 ITR 250 (Ker)
8. Addl.CI T, Gujrat V Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (S.C)
9. Aditanar Educational Institution V Addl.CI T (1997) 224 ITR 310 (S.C)
10. Haryana State Counseling Society V Chief CI T (2010) 40 DTR 169 (P&H)
11. Raebareily Polytechnic Association V CI T (2010) 48 DTR 1 (Lucknow)(Trib)
12. Saint Kabir Educational Trust V CIT (2010) 41 DTR 267 (Asr)(Trib)
13. DCIT-1 Jalandhar V M/s Jyoti Province Sacred Range Heart Congregation I TA No.534(Asr)2009 order dated 21.05.2010 A.Y. 2006-07.
14. Vanita Vishram Trust V Chief CIT & another 327 I TR 121 (Bom) 9
15. CIT-II Chd V Surya Educational& Charitable Trust, I TA No. 701 of 2010 order dated 05.10.2011 (P&H)
16. CIT Bathinda V Baba Deep Singh Educational Society, ITA No. 881 of 2010 order dated 13.10.2011 (P&H)
17. IILM Foundatino Academy V CI T, 44 SOT Page 37 (I TAT Delhi)
18. CIT V Hyderabad Race Club Charitable Trust, 262 I TR 194 (AP)
19. Mahesh Memorial Charitable Trust V CIT, ITA No.906/Chd/2009 (I TAT Chandigarh)"
6. Ld. 'DR' stated that the submissions made are applicable in both the appeals. She contended that none of the case laws cited by the ld. 'AR', in the long list annexed, to the Paper Book is applicable, to the facts of the present cases. Ld. 'DR' placed reliance on the order of the CIT.
7. We have carefully perused the rival submissions, facts of the case and the relevant case-laws cited on the matter. In both the cases under appeal, the assessee filed application on 20.12.2010 for registration u/s 12A(aa) of the Act, in the prescribed form, complying with the required statutory formalities. The order rejecting the grant of registration in such cases was passed by the CI T, on 28.06.2011. A bare perusal of the respective orders passed by the CI T, in respect of the appellants reveals that text and findings of the CI T are almost similar. Therefore, as stated by the ld. 'AR' and ld. 'DR', the submissions made before us are applicable to both the appeals.
8. Ld. CI T primarily declined to grant registration u/s 12AA of the Act, in view of the non-charitable object 10 appearing at object clause (t) alongwith various other charitable objects. The ld. CI T placed reliance, on the decision of the Hon'ble Supreme Court, in the case of Yogi Raj Charities Trust v CI T 103 I TR 777 (S.C) and in the case of East India Industries (Madras) Pvt.Ltd. v CIT 65 ITR 611 (S.C) to support his findings.
8(1) The CI T placed reliance, on the decision of the Hon'ble Apex Court, in the case of Yogi Raj Charities Trust V CIT (supra). A careful perusal thereof reveals that in that case, income tax authorities found that the various industrial and commercial concerns were not started by Ram Krishan Dalmia, in furtherance of the objects of the Trust. The concerns were started for the purpose of earning profits, which were to be distributed to the shareholders who invested share money in those concerns.
It is submitted with utmost respect that the ratio of the Hon'ble Apex Court is not applicable to the present case as the facts are materially different and distinguishable.
In the present case, the object earmarked as clause (t) remained on only paper and was not at all implemented, whereas in the decision relied upon by the CIT, the concerns were started by the Trust. Further, in the present case, the appellants undertook only charitable activities pertaining to the object of imparting education, as is evident from the contents of page 31 of paper book reproduced earlier. In view of this, the decision relied upon by the CIT is not applicable to the facts of the present case. It is, further, mentioned that the Hon'ble 11 Apex Court discussed the decision, in the case of East India Industries (Madras) P.Ltd., 65 I TR 611, while rendering decision in the case of Yogi Raj Charities Trust (supra) relied upon by the CI T. It is, further, pertinent to mention here that the decision rendered by the Hon'ble Supreme Court, pertained to the period prior to amendment to Section 2(15) of the Act inserted by the Finance Act, 2008 w.e.f. 1.4.2009.
9. A bare perusal of the actual and real activities undertaken by the assessee appellant, clearly reveals its intention, to achieve the object of establishing technical institutions and imparting education, both technical and vocational education. The registration of the assessee appellants under the Societies Registration Act, 1860 are not in dispute. The main objects of the society are to promote, establishment or to grant aid to schools, colleges, technical institutions, technical educational institutions, training institutions, in one or all fields to engineering, research, medical, commerce, arts or other educational institutions. The society decided to establish Engineering & Management College, in the name and style of Ludhiana Group of Colleges and, to achieving such an object, the society, in the year 2009-2010, purchased a piece of land measuring 10.76 acres and started construction of a building, as required under the norms of AICTE, to set-up Engineering & Management College. The society incurred the expenses out of donation and loans for the purpose of construction of required buildings, purchase of various 12 equipments etc., necessary for approval of Engineering College as per AICTE norms. The society got approval to start Engineering & Management college in May,2009 and got it affiliated with Punjab Technical University, Jalandhar. The Society started an Engineering & Management College, under the name of Ludhiana Group of Colleges at Village & PO Chowkiman, Distt. Ludhiana. Both the institutions are duly approved by All India Council of Technical Education, New Delhi and Govt.of Punjab. The technical education in various disciplines is provided by the Engineering College and the first session started in the year 2010. The Engineering College made an admission of 63 students, remaining 237 seats were vacant. Management College managed to get admission of 67 students, remaining 193 seats vacant. The admission was made directly as the approval of college was received late after last counseling of PTU. The fee was received as prescribed by the State Government. In view of detailed list of activities carried on by the appellant, as reproduced above, it is evident that the society has carried out activities, pertaining to achieving the charitable objects incorporated under the Memorandum of Association. Deleted object clause at 't' remained purely on paper.
10. A bare perusal of the impugned order passed by the CIT reveals that he did not appreciate the amendment effected to the definition of 'Charitable Purpose', as provided u/s 2(15) of the Act. Similarly, the applicability of the amended provisions of Section 2(15), by way of 13 insertions of first and second proviso has not been considered by the CIT, in the context of factual-matrix of the case. The CIT has not doubted the genuineness of the activities and identity of the assessee appellants. The assessee has carried out concrete activities, to achieve the charitable purpose of imparting education, as discussed above and the first session commenced, in the year 2010. It is undisputed fact that the assessee appellant has not carried out any activity, in pursuance of object clause
(t). The assessee has only carried out charitable activities of imparting education, as contemplated in the definition of 'charitable purpose' provided under Section 2(15) of the Act. The amended provision of Section 2(15), by way of insertion of first proviso is not applicable to the first three objects enumerated in the said definition. The assessee is pursuing the object of imparting all kinds of education, technical or otherwise. Therefore, proviso to Section 2(15) of the Act is not applicable, to the charitable object of imparting education, pursued by the present appellants.
11. It is essential to appreciate that the actual activities carried out in pursuance of achieving the charitable objects are alone relevant. Similarly, the impugned single object not acted upon by the appellant is irrelevant and immaterial. There should be no denial of registration, if actual activities carried on by the assessee appellant are charitable within the meaning of Section 2(15) of the Act. It is imperative to have a holistic reading of the objects for the 14 purpose of proper appreciation of the real intention. It is pertinent to mention here that if the assessee was engaged in the activities, to achieve the ultimate goal, it merits registration, on the ground that it is not the letter or language of the single object clause that is conclusive but the activity of the appellants. It is well established that merely because an object is benevolent, the trust society does not get registration, if its activity is otherwise. It follows that where the activity is benevolent or charitable and falls u/s 2(15) of the Act, the limitation in language need not come, in the way of its right to registration available for such activity. Needless to say that objects should not be understood in isolation, particularly ignoring the actual activities carried on by the assessee. The single inoperative object cannot eclipse the whole range of other charitable objects and actual conduct of 'charitable activities' by the appellant. It is also relevant to draw a distinction between the objects and the powers, with a view to properly appreciating the objects of the institution or trust or fund.
12. Income-tax Act 1961, provides the inclusive definition of the term "charitable purpose" under Section 2(15) of the Act. By the amendment to Section 2(15), by way of insertion of a proviso, to the definition of 'charitable purpose' by the Finance Act, 2008, the scope of the expression "advancement of any other object of general public utility" has been restricted, as is evident from a bare 15 perusal of the proviso reproduced hereunder:
"Provided that the advancement of any other object of general public util ity 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 rel ation to any trade, commerce or business f or a cess or f ree or any other consideration, irrespective of the nature of use or application, or retention, of the income f rom such activity:
Provided f urther that the f irst proviso shall not apply if the aggregate value of the receipts f rom the activities ref erred to therein is ten lakh rupees or less in the previous year."
13. In simple language, the activities incorporated in the newly inserted proviso are excluded from the 'definition' of charitable purpose provided u/s 2(15) of the Act
a) any activity in the nature of trade, commerce or business
b) any activity of rendering any service in relation to trade, commerce or business
c) if fee or cess or any other consideration, irrespective of the nature of use or application or retention of such income by the concerned entity. The aforesaid proviso will be operative from 1.4.2009 and will accordingly apply in relation to assessment year 2009-10 and subsequent assessment years.
14. The Finance Minister has amended the definition of 'charitable purpose' provided under Section 2(15) of the Act by the Finance Act,2008, with effect from 1.4.2009, by adding a proviso, to the Section of just five lines, which will 16 affect the exemption of charitable trusts for "advancement of any other object of general public utility" very substantially.
15. In Para 180 of the Budget speech, the Finance Minister stated as follows:
"Charitable purpose" includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade commerce or business and earning income have sought to claim that their purpose would also fall under 'charitable purpose'. Obviously, this way not the intention of Parliament and, hence, I propose to amend the law to exclude the aforesaid cases.
Genuine charitable organizations will not in any way be affected."
15(1) It will, thus, be noted that the intention of Finance Minister was only to exclude from exemption, entities carrying on business and earning incomes for which exemption was claimed on the basis that the purpose would fall under charitable purpose as defined in the last limb of the definition u/s 2(15) of the Act.
16. The Central Board of Direct Taxes has issued the Circular No.11/2008 dated 19.12.2008, stating that the following implications arise from the amendment, 17 "The newly inserted proviso to Section 2(15) will not apply in respect of the first three limbs of Section 2(15) i.e. relief of the poor, education or medical relief. Consequently where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose, even if it incidentally involves the carrying on of commercial activities."
The Circular states further as follows:
"3. The newly inserted proviso to Section 2(15) will apply only to entities whose purpose is advancement 'of any other object of general public utility' i.e. the fourth limb of the definition of the charitable purpose contained in Section 2(15). Hence such entities will not be eligible u/s 11 or u/s 10(23C) of the Act if they carry on commercial activity. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity."
17. Section 119 of the Income-tax Act,1961, confers jurisdiction, on the Central Board of Direct Taxes (CBDT), to issue such orders, directions and instructions as it may deem fit, for the proper administration of the Act. It is provided in the said Section that the authorities and all other persons employed in the execution of the Act shall observe and follow the circulars issued by the Board. The circulars issued are basically interpretation of the tax law and are meant to guide the officers administering the Act and bring about uniformity about such administration. It 18 is well settled principle of law that such circulars are binding on the Income Tax authorities and this view is fortified by the decisions of Supreme Court, in the following cases; Navneet Lal C.Jhaveri V K.K.Sen AAC (1965) 56 ITR 198 (S.C); Elleramn Lines Ltd. v CIT (1971) 82 ITR 913 (S.C); K.P.Varghese v I TO (1981) 131 I TR 597 (S.C); UCO Bank V CIT (1999) 237 I TR 889 (S.C) etc. 17(1). The principles emerged from the decisions of the Apex Court, are that the circulars issued by the CBDT are binding on departmental authorities, even if the circulars so issued are inconsistent with the statutory provisions. Further, the Department is precluded from challenging their correctness. The Courts, further, held that the circulars quite apart from their binding character, are clearly in the nature of contemporanea ex-positio furnishing legitimate aid in the interpretation of the Statutes. The Court held that a Statute may be interpreted by reference to the ex- position, it has received from contemporary authority.
18. At the stage of considering the application for registration u/s 12A read with Section 12AA of the Act, the Commissioner is not required to examine the application of income of the institution, but whether the application form for registration is made, in accordance with the requirements of Section 12A read with Rule 17A and whether form No.10A has been properly filled up. The only purpose for which registration is required u/s 12A read with Section 12AA of the Act is for establishing its identity, 19 as an institution with genuineness of activities, in consonance with the objects. Such requirements are duly complied with by the appellants.
19. It is settled proposition that registration by itself would not confer the right to exemption. The registration is granted by the CIT u/s 12A read with Section 12AA of the Act, whereas exemption is granted by the AO, on the satisfaction of statutory condition as laid down under Section 11, 12 and 13 of the Act. Further, as per Section 12AA(3) of the Act, CI T is competent to cancel the registration of an assessee if satisfied that its activities are not genuine. The registration u/s 12A read with 12AA, is one of the conditions for exemption and not the only condition for exemption. In this specific context, the CI T, is required to appreciate the real activities and objects but not the enabling powers to achieve the objects.
20. The observation of the ld. CIT that amendment for the purpose of deletion of the object clause marked (t) remains to be established, as carried out, validly by the assessee. Such observation of the CIT is not based on any cogent and credible material brought on record. However, the assessee produced before the CIT form No.II, Certificate of filing, dated 06.07.2011 issued by the Additional Registrar of Societies, Moga mentioning therein that the amendment/deletion in object clause made as per provisions of Section 12 & 12A of the Societies Registration Act,1860. The said certificate as 20 annexed at page 42 of the Paper Book is reproduced hereunder :
CERTIFICATE OF FILING R.No.50/2008-09 OFFICE OF ADDITIONAL REGISTRAR OF SOCIETIES MOGA The Additional Reg is trar of Socie ties, Moga ackno wledge the rece ip t of the under men tioned document(s) relating to Baba Amarnath Educatio nal Socie ty, Satya Yog Niwas, Gill Ro ad, Moga.
(Descrip tion of documen t(s)
1. Resolu tion f or dele tion of objec t clause " t" of the Me morandum of Association ( Date of f iling 13.06.2011)
2. Ame nded Me morandum of Associatio n of Baba Amarnath Educational Socie ty ( Date of f iling 17.06.2011) Re marks : The Resolution amending (dele tion) of objec t clause " t" placed on record and clause "t" of the Object clause in Me morandum of Associatio n s tand dele ted f ro m the date of the resolutio n. The cer tif ied copy of Amended Me morandum of Associatio n issued on reques t.
Further the Amendmen t/De le tion in Obje ct clause made as per the prov is io ns of Section 12 and 12A of Socie ties Reg is tration Act,1860."
Sd/-
Additional Reg is trar of Socie ties, Moga Dated : 06.07.2011"
21. Similarly, such documentary evidence has been filed by the assessee, in the case of ACE Educational & 21 Charitable Society, Moga, as is evident from the perusal of Paper Book page 39.
22. A perusal of the Rules & Regulation of the Society reveals that its clause bearing No. 19 confers power to make amendment in the Memorandum, Rules and Regulations, in accordance with Section 12 and 12A of the Societies Registration Act, 1860, as applicable to the State of Punjab. This is evident from the reproduction of the said clause (19). The said clause is reproduced hereunder :
"19" AMENDMENT Any amendment in Memorandum, Rules & Regulations will be carried out in accordance with Section 12 and 12A of the Societies Registration Act, 1860 as applicable to the State of Punjab".
23. The ld. 'AR' placed reliance, on various decisions, as listed herein before, but he discussed the decision of the Amritsar Bench, in the case of St.Kabir Educational Trust V CIT (2010) 41 DTR (ASR)(Tri) 267; decision of the Amritsar Bench in the case of DCIT V M/s Jyoti Province Sacred Range Heart Congregation in ITA No.534 (ASR)2009 order dated 21.05.2010; decision of the Hon'ble Supreme Court, in the case of Addl.CI T, Gujrat V Surat Art Silk Cloth Manufacturers Association 121 ITR (1980) 1 (S.C); the decision of the jurisdictional High Court, in the case of Pine Grove International Charitable Trust V Union of India & others (2010) 327 ITR 73 (P&H). In the decision, in the case of St.Kabir Educational Trust (supra), the scope and nature of enquiries at the stage of grant of registration has been 22 defined. It has been held therein that the CI T has no jurisdiction, to conduct enquiries, which falls beyond the pale of such statutory prescriptions. It was held therein that the statutory conditions prescribed for eligibility of exemption u/s 11 & 12 are not to be looked into, by the CIT while considering a case u/s 12AA for the purpose of granting registration. In the present case, the CIT has focused on the deleted and unimplemented object clause marked at 't', ignoring the actual activities conducted by the assessee.
24. The decision relied upon by the assessee, in the case of M/s Jyoti Province Sacred Range Heart Congregation (supra) is not applicable to the facts of the present case, as the first appellate authority, dealt with exemption u/s 11 in this case. We are dealing with a case of grant of registration u/s 12AA of the Act. The granting of exemption u/s 11 is different and distinct vis-à-vis the grant of registration u/s 12AA of the Act.
25. The assessee relied on the decision, in the case of Pinegrove International Charitable Trust V Union of India (supra), the Hon'ble Punjab & Haryana High Court where it was held as under:
"Even af ter the ne w dispensation from April 1,1999, the test of pre-dominant object of the activity continues to apply as under Section 1-(22) of the Act. As long as an institution exists solely f or educational purposes, it would qual if y f or grant of exemption u/s 10(23C)(vi) of the Act. Merely because prof its have resul ted f rom the 23 activity of imparting education, that would not change the character of the institution existing solely for educational purpose.
At the initial stage, when the appl ication f or exemption is f iled by an educational institution, the scope of inquiry is restricted only to ascertaining the genuineness of the activities of such an institution. Such an inquiry may even extend to the examination of accounts of the institution, application of its income to the ob ject and purposes of education and the other cognate aspects. Once on the basis of genuineness of the activities of an educational institution approval is granted f or exemption......
The words 'not f or the purposes of prof it' accompanying the words 'existing solely f or educational purposes' have to be read and interpreted in vie w of third proviso to Section 10(23C)(vi)......."
26. The assessee relied on the decision in the case of Addl. CIT Gujrat V Surat Art Silk Cloth Manufacturers Association (supra). The Hon'ble Supreme Court has held as under :
"(ii) The requirement of s. 2(15) is satisf ied where there is either a total absence of the purpose of prof it-making or it is so insignif icant compared to the purpose of advancement of the ob ject of general publ ic util ity that the dominating role of the latter renders the f ormer un worthy of account. If the prof it making purpose holds a dominating role or even constitutes an equal component with the purpose of advancement of the general public util ity, then clearly the def inition in s.
2(15) is not satisfied.
(iii) If the purpose is charitable in real ity, the mode adopted must be one which is directed to carrying out the charitable purpose. It would include a business 24 engaged in f or carrying out the charitable purpose of the trust or institution. The carrying on of such a business does not detract from the purpose which permeates it, the end result of the business activity being the effectuation of the charitable purpose.
(iv) The real question whether a trust is created or an institution is established f or a charitable purpose fails to be determined by ref erence to the real purpose of the trust or the institution and not by the circumstance that the income derived can be measured by standards usually appl icable to a commercial activity. The quantum of income is no test in itself . It may be the result of an activity permissible under a truly charitable purpose f or a prof itable activity in working out the charitable purpose is not excluded".
27. The decision of the Hon'ble Supreme Court, is applicable to the extent of "Charitable Object" of the assessee.
28. In view of the above legal and factual-discussions, it is evident that the real intention of the assessee appellant is discernible, from the nature of activities undertaken by it, in pursuance of the charitable object of imparting education. This intention has not been in dispute and doubt. The object clause marked at 't' has since been deleted in accordance with Section 12 & 12A of the Societies Registration Act, 1860, as is applicable to the State of Punjab. This factum of deletion has been duly recorded by the competent authority in Certificate of Filing dated 6.7.2011, reproduced in the foregoing para of this order. The single non-operative and deleted object marked as 't' cannot obliterate the whole range of charitable objects and 25 the actual activities undertaken by the assessee appellants, in pursuance of such objects.
28(1) In the light of the above discussions, findings of the ld. CI T cannot be sustained. Consequently, we set aside the impugned order passed by the CIT and direct that registration applied for by the assessee appellants u/s 12AA of the Act be granted.
28(2) In view of the above finding, the first 8 grounds of appeal, being inter-connected, and revolve around the single issue of declining of the grant of registration, by the CI T, stand disposed of.
28(3) Ground No.9, raised by the assessee appellant pertains to the contention that CIT did not appreciate that voluntary contribution forming part of the corpus of the assessee are not taxable income as per Income Tax Law and such registration of the society should be allowed as claimed. We are of the considered opinion that the voluntary contribution, forming part of the corpus of the assessee is not within the contemplation of Section 12A r.w.s. 12AA of the Act. Such subject matter is to be considered and adjudicated by the AO, at the time of framing the assessment. The CIT, while considering registration u/s 12AA of the Act is not competent, to adjudicate such issue and such issue doesn't arise from the impugned order passed by the CI T. Consequently, the issue raised by the assessee, in this ground of appeal is dismissed.
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29. Ground No., 10 raised by the assessee is general in nature and, hence, needs no separate adjudication.
30. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 29 t h Dec.,2011.
Sd/- Sd/- (SUSHMA CHOWLA (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29 t h Dec.,2011. 'Poonam' Copy to:
The Appellant, The Respondent, The CI T(A), The CIT,DR Assistant Registrar, I TAT Chandigarh