Income Tax Appellate Tribunal - Delhi
Soham For Kids Education Society, ... vs Assessee on 22 March, 2011
ITA 2241/Del/2011
Soham For Kids Education Society
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G" NEW DELHI
BEFORE SHRI R.P. TOLANI AND SHRI S.V. MEHROTRA
ITA No. 2241/Del/2011
U/s 12A of the I.T. Act.
Soham For Kids Education Society Vs. Director of Income-tax (E),
Centre, Delhi-110092. New Delhi.
PAN: AAEAS 3722 L
( Appellant ) ( Respondent )
Appellant by : Shri R.K. Kapoor C.A.
Respondent by : Shri Ramesh Chandra CIT (DR)
ORDER
PER R.P. TOLANI, J.M::
This is assessee's appeal against the order dated 22-3-2011 passed by the Director of Income-tax (Exemptions), New Delhi U/s 12AA(1)(b) r.w.s. 12A of the Income-tax Act, 1961. Following effective grounds are raised:
"1. That the order u/s 12AA(1)(b) r.w.s. 12A of the Income- tax Act dated 23-03-2011 passed by the Director of Income-tax (Exemptions), Delhi rejecting appellant's application dated 14- 09-2010 for registration of Charitable Institution u/s 12(a) of the Income tax Act is bad in law on the facts of the case and in view of the fact that it has been passed without allowing opportunity of being heard under proviso to section 12AA(1) of the Income Tax Act.
2. That the Director of Income-tax (Exemptions) while rejecting the application erred in observing that the Trust could not prove the genuineness of the activities of the Trust without 2 appreciating the submissions made in appellant's letter dated 20-12-2010."
2. Brief facts are: The assessee a registered society, applied for registration u/s 12AA of the I.T. act on 14-9-2010. In response to DIT(E)'s letter dated 11-11-2010 the assessee filed the necessary annual balance- sheet, income and expenditure account, other compliances and contended that the society was formed with aims and objectives which are charitable in nature. It being the first year of society by the time of filing application for registration there were no substantial activities. DIT(E), however, without asking any further question rejected the application by following observations:
2. "On perusal of the details it is seen that as per rules and regulations of the society Life members & General members are required to pay Rs. 1000/- & 500/- respectively as admission fee which has not been paid to the society. When such rule is not complied with then the society is not validly constituted. On perusal of the details it is seen that the society as registered with Registrar of Society on 17-11-2009. The income & exp. a/c for the year ending 31-03-2010 shows income of Rs. 3.00 as interest and expenses of Rs. 13927/-
towards legal & proof charges. It is further noticed that the society has not been able to raise funds from the public and nor from amongst themselves. This shows that the intention to carry out charitable activities by the applicant society is not genuine. It has in its letter dated 25/11/10 clearly stated that "no activities have been started as yet". There has to be activity to establish genuineness. The reliance in this regard is placed on the decision of the Hon'ble High Court in the case of Self 3 Employees Service Trust vs. CIT 247 ITR 18(Kerala). In this case although the nature of the objects was charitable and voluntary, the trust had not commenced any of its activities. The trust could not produce any evidence before the CIT regarding the genuineness of its activities and, therefore, th4e Hon'ble High Court dismissed the trust's appeal against CIT's order rejecting registration u/s 12AA.
3. The provisions of section 12AA stipulate the following conditions for registration u/s 12A of the I.T. Act, 1961:-
(i) The objects of the society should be of charitable in nature;
(ii) The activities of the society should be genuine.
Therefore, one of the conditions for granting registration u/s 12AA is also not satisfied.
4. Since the applicant has not done any charitable activity, the genuineness of the activities could not be established. Therefore, one of the conditions for granting registration u/s 12AA is also not satisfied. Accordingly, the application filed by the applicant for grant of registration u/s 12AA is hereby rejected."
2.1. Aggrieved, assessee is before us.
3. Ld. Counsel for the assessee contends that the DIT(E) has no where disputed, the fact that the objects of the society are charitable in nature. Application has been rejected mainly by the following observations:
(i) The society has not been able to raise funds which shows that intention to carry out charitable activity is not genuine.
(ii) Thus, though it has not been disputed that the objectives of the trust are genuine, however, because of the non-collection of 4 donations it has been held that there appears to be no intention and in the absence of activities the objectives are held to be non-
genuine.
3.1. The society was in existence as on 31st March 2010 for about 3-4 months only. During this period a web site has been created and the process of undertaking the activities of the trust has commenced. The scheme of registration and assessment of trust is well laid out in the Income-tax Act inasmuch at the time of registration the DIT(E) has to examine whether the objects of the society trust are charitable or not, no dispute has been raised in this behalf. Whether the activities which are carried out after registration are genuine or not fall in domain of the assessing officer while framing the assessment where he can examine these aspects and accordingly apply the provision. The assessee being a new trust undertook first the activity of creating a web site and making its objects and activities known to public. This is an activity towards the promotion of objects of the trust. Even if it is held that there are no charitable activities, the registration cannot be refused at initial stage by ld. DIT(E) for this reason. Reliance is placed on the following judicial decisions :
(i) Hon'ble Punjab & Haryana High Court in the case of O.P. Jindal Global University, Sonepat Vs. CCIT (E) (CWP No. 6171 of 2010), holding that such approval is not required to be sought each year. This is an one time approval. At page no. 16 of the judgment it 5 has been held that the Commissioner is required to examine the objective of establishing an educational institute or university and the fact that it intends to achieve such objectives. So long as the objective on forming is not in doubt, the exemption cannot be denied on the ground that no substantial activities have been undertaken immediately on the incorporation of the Society.
(ii) Hon'ble Delhi High Court in the case of Director of Income-tax Vs. Foundation of Ophthalmic and Optometry Research Education Centre (2013) 355 ITR 361 holding as under:
"Held, dismissing the appeal, that under section 12AA of the Income-tax Act, 1961, there are no restrictions of the kind which the Revenue was reading into in this case. In other words, the statute does not prohibit or enjoin the Commissioner from registering a trust solely based on its objects, without any activity, in the case of a newly registered trust. The statute does not prescribe a waiting period, for a trust to qualify itself for registration. If the Revenue's contentions were correct then, necessarily, a condition would have to be read into the provision that the Commissioner should be satisfied that the trust was in fact engaged in charitable activities which would in turn inject considerable deal of subjectivity. It is quite possible that if such flexibility is introduced, it would be susceptible to varied interpretation by the different authorities, in that some would be satisfied with the activity of few months, while others may wish to examine the activities of the organization for longer time.
(iii) Hon'ble Allahabad High court in the case of Hardayal Charitable & Educational Trust Vs. CIT (2013) 355 ITR 534, holding that at the time of registration u/s 12AA, the Commissioner is not required to look into the activities where such activities have not actually been undertaken or it is in the process of its initiation. Where 6 a Trust has been set up with objects of establishing charitable activities and it is in the process of establishing such activities, the registration u/s 12AA cannot be refused 3.2. Further reliance is placed on Hon'ble Karnataka High Court decision in the case of DIT(E) Vs. Meenakshi Amma Endowment Trust (2013) 354 ITR 219 that the trust cannot be denied registration at the threshold on account of the fact that no charitable activity has commenced.
3.3. Thus a catena of judgments support the view of the assessee. It is pleaded that the order of ld. DIT(E) may be reversed and the registration may be directed to be granted.
4. Ld. DR on the other hand contends that the ld. DIT(E) while refusing registration held that -
(i) life members and general members ha not contributed the respective contribution.
(ii) Income and expenditure account shows income of Rs. 3/- and expenditure of Rs. 13,927/- which doubted the genuineness of the activities.
(iii) Society has not raised any funds from public and there appears to be no intention to carry out the charitable activities.
(iv) No activities have been carried out as yet and therefore the ld.
DIT(E) has rightly relied on the ratio of decision of Hon'ble Kerala High Court in the case of Self Employees Service Trust vs. CIT 247 ITR 18 (Ker.).
74.1. Ld. DR contends that the case laws cited by the ld. Counsel for the assessee are distinguishable for the reason that in assessee's case apart from no activity, there are various other issues also. Order of DIT(E) is relied on.
5. We have heard rival submissions and gone through the entire material available on record. From the DIT(E)'s order it emerges that no dispute has been raised about the charitable nature of the objectives of the trust as per the memorandum. The adverse inference has been drawn on possible intention, activities i.e. the issues, which, in our view are not germane at the time of grant of registration of trust u/s 12A more so when the assessee's objects are not held to be non charitable. The non-contribution of membership fee by general members and life members may be paid later inasmuch unless the members makes the necessary contribution rights of membership cannot dwell on them.
5.1. Apropos the income and expenditure, it has been accepted by the assessee that it had created a web site for the trust which also is one of the activity to promote the objects of the trust, the fact which is not denied by DIT(E) or the ld. DR. Therefore, the adverse inference nothing to reflect on this aspect. Apropos time to raise the funds and donations it is the discretion of the society that can be undertaken in due course, may be the issue of 80G registration which is consequent to 12A registration may be important. Thus 8 mere non-carrying on of the vigorous activities of trust at the time of registration per se cannot be detrimental for registration of the trust u/s 12A when the objects are charitable and there is no adverse comment about them. In view thereof we find merit in the argument of ld. Counsel and the case laws cited by him and relying on the ratio of decisions in the cases of Foundation of Ophthalmic and Optometry Research Education Centre; O.P. Jindal Global University; Meenakshi Amma Endowment Trust; and Hardayal Charitable & Educational Trust (supra), we hold that the assessee is eligible for grant of registration u/s 12A. the order of DIT(E) is reversed and the assessee is held to be eligible for registration u/s 12A of the I.T. Act.
6. In the result, assessee's appeal is allowed.
Order pronounced in open court on 21-02-2014.
Sd/- Sd/-
( S.V. MEHROTRA ) ( R.P. TOLANI )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 21-02-2014.
MP
Copy to :
1. Assessee
2. AO
3. CIT
4. CIT(A)
5. DR