Income Tax Appellate Tribunal - Chandigarh
Suchinta Educational Society, ... vs Assessee on 16 April, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A', CHANDIGARH
BEFORE SHR I T.R.SOOD, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.1339 /Chd/2012
(Under Section 12AA)
Suchinta Educational Society, Vs. The C.I.T.-I,
House No.3, Sector 11, Chandigarh.
Chandigarh.
PAN: AALTS5160Q
(Appellant) (Respondent)
Appellant by : Shri Tej Mohan Singh
Respondent by : S m t . J yo t i K u m a r i , C I T D R
Date of hearing : 16.04.2013
Date of Pronouncement : 24.05.2013
O R D E R
Per SUSHMA CHOWLA, J.M. :
The appeal filed by the assessee is against the order of non granting of registration under section 12AA of the Income Tax Act, 1961 (in short 'the Act') b y the Commissioner of Income-tax-I, Chandigarh dated 31.10.2012.
2. The grounds of appeal raised by the assessee read as under:
"1. That the Ld. Commissioner of Income Tax has erred in law as well as on facts in rejecting registration under section 12AA of the Act which is arbitrary & unjustified.
2. That the Ld. Commissioner of Income Tax has erred in observing that the assessee society has not effectively carried out any charitable activities which is unfounded, without any basis and as such the order is arbitrary and unjustified.
3. That the registration has been refused only on the basis of suspicion, conjectures and surmises which is not permitted under the Law and as such the order refusing registration is illegal, arbitrary and unjustified.
4. That the order of the Ld. Commissioner of Income Tax is erroneous, arbitrary, opposed to law and facts of the case and is, thus, untenable. 2
3. The brief facts of the case are that the assessee society filed an application under section 12AA of the Act on 24.4.2012. The assessee society was registered under the Societies Registration Act on 13.4.2012. The Commissioner of Income Tax called for a report from the Assessing Officer in order to verify the genuineness of the objects and activities of t h e s o c i e t y. Thereafter an opportunity of hearing was afforded to the assessee in order to verify the genuineness of objects and its activities. The Commissioner of Income Tax vide the documents furnished b y the assessee noted that the brief facts of the case are that "Shishu Niketan Model School" an existing society, is already registered under section 12AA under the I.T. Act since 1978. It has been running four schools, two in Chandigarh, one in Mohali and one in Panchkula in the name of the society. The new Society (the applicant) proposes to take over on lease the management of one of the existing schools and run it on day to day basis. As per the written submissions filed by the Society consisting of balance sheets, Income & Expenditure statement of "Shishu Niketan Model School", Sector 43, Chandigarh, it is seen that this school is already a part of the main society i.e. "Shishu Niketan Model School"
and continues to show the surplus in the hands of the main society. However, no accounts relating to the applicant Society have been furnished. The assessee had furnished note on activities before the Commissioner of Income Tax in which it had submitted that the applicant Society proposes to take on lease the management of the existing school to be run on day to day basis in order to ease the pressure on the existing schools and effectively manage the affairs in a better way. The Commissioner of Income Tax from the replies and documents submitted by the assessee further noted that it is apparent that the applicant Society has not yet taken over the school meaning thereby that no activities have yet been carried out. When confronted, 3 the counsel of the Society filed another reply on 29.10.2012 stating therein that the society for the time being was engaged in completing the legal formalities like registration u/s 12A of the I.T. Act and studying various avenues whereby it could make its presence felt in the field of imparting education and prepare itself to launch a new line in the educational arena from the beginning. The assessee's counsel stated that the Society had recently identified poor deserving students and distributed free stationery to them in order to help them in their studies. The assessee also furnished "Income and expenditure account" for the period ending 30.09.2012 in which no such expenditure like distribution of stationery to the poor students has been shown. The Commission of Income Tax was of the view that The creation of this new society without carrying out such an exercise can best be described as an attempt of the assessee to split up assets of an already existing society and conveniently pass it over to a new one with sole intention of evading tax liability. This if allowed unchecked would in all probability defeat the very purpose for which the exemption provisions have been contained in the I.T. Act. The Commission of Income Tax vide para 8 thus held as under:
It is seen that the Society has been set up by registering with the Registrar of societies on 3.04.2012 but no activity has been started even upto the date of present proceedings. In the absence of any activities having been carried out there is no material before the undersigned to verify the genuineness of objects and activities of the Society.
In view of the feels discussed above, the applicant Society is not eligible for grant of registration u/s I2AA Act being no activity in the nature of charitable activity having been carried out since its inception. The application of the Society for registration u/s 12AA of the Act s, therefore, rejected.
4. The assessee is in appeal against the said order of the Commissioner of Income Tax passed under section 12AA of the Act 4 r e f u s i n g r e g i s t r a t i o n t o t h e a s s e s s e e s o c i e t y. The learned A.R. for the assessee pointed out that the assessee society was found on 13.4.2012 and the aims and objects of the assessee society were placed at page 7 of the Paper Book. Our attention was drawn to clause 4(i) and (ii) to point o u t t h e a i m s a n d o b j e c t s o f t h e a s s e s s e e s o c i e t y. The learned A.R. for the assessee pointed out that the Commissioner of Income Tax has refused to grant registration under section 12AA of the Act observing that no activities were being carried out by the assessee even today though assessee had distributed books to poor students. The learned A.R. for the assessee pointed out that even if no activities had commenced the assessee was entitled to grant of registration under section 12AA of the Act. Reliance was placed by the learned A.R. for the assessee on CIT Vs. B.K.K. Memorial Trust [213 Taxman 1 (P&H)] and on Director of Income Tax (Exemptions) Vs. Meenakshi Amma Endowment Trust [20 SOT 1 (Delhi)].
5. The learned D.R. for the Revenue pointed out that the Commissioner of Income Tax while granting registration under section 12AA of the Act is to look into the aims and objects of the society and a l s o g e n u i n e n e s s o f t h e a c t i v i t i e s o f t h e s o c i e t y, w h i c h h a s n o t b e e n specified in the present case. It was further pointed out by the learned D.R. for the Revenue that the activities taken over by assessee society were not genuine activities and hence do not merit registration under section 12AA of the Act. The learned D.R. for the Revenue also referred to the aims of the assessee society and pointed out that the same appear to be non-charitable. The learned D.R. for the Revenue placed reliance on the ratio laid down by the Hon'ble Kerala High Court in Self E m p l o ye e s S e r v i c e S o c i e t y V s . C o m m i s s i o n e r o f I n c o m e T a x [ 2 4 7 I T R 5 18 (Ker)] and H a r d a ya l C h a r i t a b l e a n d E d u c a t i o n a l T r u s t V s . C I T - I I [138 ITD 179 (Agra)]
6. We have heard the rival contentions and perused the record. The assessee society came into existence w.e.f. 13.11.2012 and is registered as society under the Societies Registration Act. The certificate of registration of societies is enclosed at page 6 of the Paper Book. The assessee at pages 7 to 8 of the Paper Book has placed on record the M e m o r a n d u m o f A s s o c i a t i o n o f t h e a s s e s s e e s o c i e t y. As per clause 4(i) and (ii), the aims and objects of the assessee society are as under:
i) To provide advancement, Research and dissemination of education-literacy, scientific and scholastic and opening and to start, establish, run, takeover or manage and maintain schools with an object to provide sound pre-primary, primary, middle, secondary and higher education including running of engineering and medical colleges, polytechnic institutes and various vocational courses to children seeking recognition. The society shall provide education to the students for the various examinations conducted by different Indian/Foreign Universities, Boards and Institutions etc.
ii) To affiliate, get recognition of the schools and colleges maintained by the society to the Universities, Education Boards and other Authorities and to observe the Rules and Regulations prescribed by them or contained in the Education Code, etc. and to receive grants-in- aid.
7. The assessee moved an application for registration under section 12A of the Act in form No.10A. The copy of the said application is placed at page 2 of the Paper Book. Alongwith the said application the assessee enclosed the copy of the instrument under which the said trust was created and also copy of accounts of the Bank statement of assessee s o c i e t y f o r o n e ye a r . The perusal of the bank statement placed at pages 3 and 4 of the Paper Book reflects that the assessee had made a cash deposit of Rs.5000/- in the said bank statement on 23.4.2012. The 6 assessee during the course of the proceedings in relation to grant of registration under section 12A of the Act furnished a note of activities which is placed at page 20 of the Paper Book which reads as under:
NOTE ON ACTIVITY Suchinta Educational Society was registered as society under Society Registration Act on 13 April 2012 for imparting educational to all as mentioned in Memorandum and Articles of Association. Shishu Niketan Model School existing society is already registered under section 12 A of the Income Tax Act since 1968.It has one of the branches in Sector 43, Chandigarh .The new society proposes to take the existing the school on lease to be run by the new society. Since the old society is running four schools, Two in Chandigarh, Mohali and Panchkula to ease the pressure and to manage the affairs in a better way the new society is being formed. The Existing School at Sector 43, Chandigarh is already having around 1400 Students with the complete infrastructure i.e. Land & Building, Furniture & Fixture and Other Facilities to run the school. The existing Society is registered under Section &0 G and also given registration under Section 10(23)C of the Income Tax Act.
8. The claim of the assessee is that in order to avail deduction under sections 11 and 12 of the Act, the assessee is to get itself registered under section 12A of the Act. Reliance was placed on the ratio laid down in Fifth Generation Education Societ y Vs. CIT ------ for the proposition that for the purpose of registration under section 12A of the Act, only the objects of the trust were charitable or not was to be seen and at the stage of grant of registration by the Commissioner of Income Tax, the application of the income is not to be looked in. The assessee placed on record another note of activities before the Commissioner of Income Tax alonwith letter dated 11.9.2012 which reads as under:
NOTE ON ACTIVITY Suchinta Educational Society was registered as a society under Societies Registration Act 1860, on 13th April 2012 with basic objective of imparting education to alias mentioned in Memorandum and Articles of Association. Shishu Nike tan Model School, an existing society is already registered under section 12 A of the Income Tax Act since 1968. The existing society is running four schools, Two in Chandigarh ,one in Mohali and one in MDC Panchkula The existing Society is registered under Section 80 G and also registered under Section 10(23)C of the Income Tax Act The new society proposes to approach for taking on lease the management of existing school to be run on day to day basis Since the existing society is running four schools, and in order to ease the pressure and effectively manage the affairs in a better way the new society can play a supportive role..7
The existing School at Sector 43 Chandigarh is already having around 1400 Students with complete infrastructure i.e. Land & Building, Furniture & Fixture and Other Facilities to run the school. The school is located on a plot measuring more than one acre allotted by Punjab Urban Development Authority The school building has provision for 60 classrooms, Reception area , Staff rooms , Sports room etc. and a large basement for use for various indoor activities. The school has complete infrastructure as per requirements laid down by CBSE for Computer and Science Laboratories, Library, Drinking water, Fire fighting, Play area etc. The school is Affiliated with Central Board of Secondary Education up to Senior Secondary classes and its students are appearing for the exams under the CBSE curriculum. The school is providing education to all class of students and providing Fee concessions to deserving students under category of Fatherless, Poor means, Merit students and EWS etc, to around 99 students, The school is also required to comply with t h e provisions of the Right to Education Act, 2009.
9. Alongwith the said letter dated 11.9.2012 filed before the Commissioner of Income Tax, the assessee had enclosed Balance Sheet and Profit & Loss Account of the existing Shishu Niketan School, Sector
4 3 , C h a n d i g a r h f o r t h e ye a r 2 0 0 9 - 1 0 a n d 2 0 1 0 - 1 1 a l o n g w i t h c o p y o f CBSE affiliation letter to the existing school and land allotment letter from Estate Office, Chandigarh. All the above said documents alongwith forwarded letter are placed at pages 28 to 50 of the Paper Book. The assessee has also enclosed the copy of registration of existing school under sections 12A, 80G and 10(23) of the Act at page 50 of the Paper Book. However, the assessee society vide letter dated 19.10.2012 p o i n t e d o u t t h a t o u t o f t h e s e v e n m e m b e r s o f t h e p r e s e n t s o c i e t y, f o u r members were alread y managing the existing Shishu Niketan Model School which was running four schools. The claim of the assessee was that as it already had experience in the field of education and the new society so formed for imparting education and running of school was e n g a g e d i n t h e s a i d a c t i v i t y. The assessee alongwith said letter had enclosed the Balance Sheet of Shishu Suchintan Educational Society at page 52 of the Paper Book alongwith Profit & Loss Account at page 53 of the Paper Book. Under the head 'corpus fund' it had shown Rs.5000/- and balance cash in hand after expenses was shown at Rs.3480/-. The assessee alongwith letter dated 23.10.2012 filed before the Commissioner of Income Tax placed at page 54 of the Paper Book, enclosed a request for providing the management contract of Shishu 8 Niketan Public School, Sector 66, SAS Nagar, Mohali under which it is intimated that the request made by the assessee society was under
consideration. The assessee furnished before the Commissioner of Income Tax the Balance Sheet as on 30.9.2012 alongwith income and expenditure account for the period ending 30th September, 2012, under which the corpus fund was reflected at Rs.10,000 with cash in hand at Rs.3420/- and the bank balance at Rs.5000/-. The expenditure incurred by the assessee was legal expenses of Rs.1100/- and miscellaneous expenses of Rs.480/- which was booked up to 31.3.2012.
10. The issue arising in the present appeal in the given facts and circumstances is that whether the assessee is entitled to the claim of registration under section 12AA of the Act. Under the provisions of section 12A of the Act it is provided that in order to avail the exemption under sections 11 and 12 of the Act, the trust or institution is to get itself registered as per section 12A of the Act. The relevant provisions of section 12A and 12AA of the Act read as under:
12A. [(1)] The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:--
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [***] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, [whichever is later and such trust or institution is registered under section 12AA] :
[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,--
(i) from the date of the creation of the trust or the establishment of the institution if the [***] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the [***] Commissioner is not so satisfied:] 9 [Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;] [(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA;]
(b) where the total income of the trust or institution as computed under this Act without giving effect to [the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the pres-cribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]
(c) [***] [(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.] 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 deem 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 a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
[(1A) All applications, pending before the Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the Commissioner and the Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.] (2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.] [(3) Where a trust or an institution has been granted registration under clause (b) of sub-
section (1) and subsequently the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.] 10
11. In order to avail the benefit of exemption under section 11/12 of the Act, a trust or institution is to get itself registered under section 12A of the Act. The requirement of the Act is that the assessee is to apply to the Commissioner of Income Tax for registering the trust or institution being held for charitable or religious purposes. The trust or institution is required to make an application for registration of the trust or institution in the prescribed form provided under Rule 17A in form No.10A alongwith Instrument evidencing the creation of the trust. The s a i d a p p l i c a t i o n i s t o b e m a d e b e f o r e t h e e x p i r y o f a p e r i o d o f o n e ye a r from the date of creation of the trust or the establishment of the institution. The procedure for registration is provided under section 12AA of the Act where the Commissioner on receipt of an application for registration of a trust or institution made under section 12A of the Act shall call upon the applicant to furnish such documents or information as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or the institution. The Commissioner of Income Tax may also make such enquiry as he deem necessary in this behalf. The Commissioner of Income Tax on being satisfied about the objects of the trust and genuineness of its activities is to pass an order in writing registering the trust or institution or refusing to register the trust or institution, copy of which is to be served upon the assessee. It is further provided under the section that no order under sub-clause(ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard. The time limit for passing the order granting or refusing the registration under sub-section (1) shall be before the expiry of six months from the end of month in which the application was received by the Commissioner of Income Tax, as per sub-section (2) of section 12AA of the Act. Under section 12AA(3) of the Act, the Commissioner of Income Tax is empowered to withdraw the 11 registration already granted to a trust or institution in case he is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution.
12. In view of the above said provisions of the Act, the Commissioner on receipt of the application for registration of a trust or institution has to satisfy himself about the objects of the trust or institution and also call for and collect information about the genuineness of the activities of the trust or institution. The Commissioner is empowered under the Act to make enquiries in this regard as he may deem fit. In order to avail benefit of registration under section 12AA of the Act, the applicant is to satisfy the Commissioner to whom such application has been made under section 12A of the Act, that the objects of the trust are charitable in nature and also to establish its case of genuineness of the activities being undertaken or going to be undertaken by the trust or institution.
13. Section 2(15) provides as under:
"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: Provided 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 or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity."
14. The definition under section 2(15) of the Act defining charitable purpose as an inclusive definition under which the trust or institution c a r r yi n g o n t h e f o l l o w i n g a c t i v i t i e s a r e s a i d t o h a v e c a r r i e d o n c h a r i t a b l e activities:
a) Relief to the poor;
b) Education;
12
c) Medical relief;
d) Preservation of environment;
e) Preservation of monuments or places or objects of artistic or historic interest;
f) Advancement of any other object of general public utility.
15. In order to avail the benefit of exemption under section 11/12 of the Act the activities of the trust or institution is to be charitable or for religious purposes. As pointed out in the paras hereinabove, the conditions for applicability of sections 11 and 12 of the Act are provided under section 12A of the Act and one of the conditions is that the person in receipt of the income which he claims to be for charitable purposes is to make an application for registration of the trust or the institution in the prescribed form and in the prescribed manner to the Commissioner within the stipulated period of creation of the trust or the establishment of the institution. On receipt of the application in the requisite form No.10A alongwith Instrument of creation of the trust or the institution, the procedure for registration of the trust or the institution by the Commissioner is provided under section 12AA of the Act. A d m i t t e d l y, at the time of grant of registration the Commissioner is not empowered to examine the application of income but he has to examine whether the application is made in accordance with the requirements of section 12A of the Act and whether form No.10A has been properly filled in. The Commissioner is further to examine whether the objects of the trust are charitable or not and also to satisfy himself about the genuineness of the activities of the trust or the institution. The Commissioner is not to examine the application of income at this juncture. The Hon'ble Supreme Court in CIT Vs. U.P. Forest Corporation [230 ITR 944 (SC)], held that in order to take advantage of the provisions of section 11 of the Act, the trust or the institution has to get itself registered. Whether the income of the institution can be regarded as being held for 13 charitable purposes and whether the institution is entitled to registration under section 12A of the Act, requires investigation of facts. In view thereof, section 12AA of the Act recognizes the principle laid down by the Hon'ble Supreme Court and Commissioner under section 12AA of the Act is empowered to call for such documents or information from the trust or the institution in order to satisfy himself that the objects of trust are charitable and also about the genuineness of the activities of the trust or the institution and is also empowered to make such enquiries as he deem necessary in this regard.
16. Now coming to the facts of the present case the Commissioner on receipt of application for registration under section 12A of the Act from the assessee/applicant, had directed the Assessing Officer to make certain enquiries and forward the same to the Commissioner. Further enquiries were made by the Commissioner during the course of proceedings in relation to grant of registration under section 12A of the Act. We have elaborately referred to the enquiries made by the Commissioner under para 3 and note on activity and the explanation filed by the assessee before the Commissioner in paras 7 to 9 of our order. The aims and objects of the assessee society as per clause 4(i) and 4(ii) are placed at pages 7 and 8 of the Paper Book provides as under:
i) To provide advancement, Research and dissemination of education-literacy, scientific and scholastic and opening and to start, establish, run, takeover or manage and maintain schools with an object to provide sound pre-primary, primary, middle, secondary and higher education including running of engineering and medical colleges, polytechnic institutes and various vocational courses to children seeking recognition. The society shall provide education to the students for the various examinations conducted by different Indian/Foreign Universities, Boards and Institutions etc. 14
ii) To affiliate, get recognition of the schools and colleges maintained by the society to the Universities, Education Boards and other Authorities and to observe the Rules and Regulations prescribed by them or contained in the Education Code, etc. and to receive grants-in- aid.
17. The perusal of the above said objects of the assessee society reflect that the assessee has a wide range of objects, which it may consider as its activity of running the trust. The objects of the assessee are in different directions and different fields and are general in nature. If we have look at clauses 4(i) and 4(ii) of aims and objects, the objects, of the trust are to provide:
a) Advancement, Research and dissemination of
education-literacy, scientific and scholastic;
b) Opening and to start, establish, run, takeover or
manage and maintain schools;
c) Running of engineering and medical colleges,
polytechnic institutes and various vocational
courses to children seeking recognition;
d) Education to the students for the various
examinations conducted by different
Indian/Foreign Universities, Boards and
Institutions etc;
e) Affiliate, get recognition of the schools and
colleges maintained by the society to the
Universities, Education Boards and other
Authorities;
f) To observe the Rules and Regulations prescribed
by them or contained in the Education Code, etc.
and to receive grants-in-aid.
18. In view of the varied objects of the trust provided in the aims and objects of the institution, the Commissioner during the course of p r o c e e d i n g s r e q u i s i t i o n e d t h e a s s e s s e e t o f u r n i s h " N o t e o n A c t i v i t y" t o be undertaken by the assessee society in order to carry on the objects of its trust. The first note on activity was furnished by the assessee alongwith letter dated 5.6.2012 filed before the Assessing Officer, Chandigarh, which provided as under:
15
NOTE ON ACTIVITY Suchinta Educational Society was registered as society under Society Registration Act on 13 April 2012 for imparting educational to all as mentioned in Memorandum and Articles of Association. Shishu Niketan Model School existing society is already registered under section 12 A of the Income Tax Act since 1968.It has one of the branches in Sector 43, Chandigarh .The new society proposes to take the existing the school on lease to be run by the new society. Since the old society is running four schools, Two in Chandigarh, Mohali and Panchkula to ease the pressure and to manage the affairs in a better way the new society is being formed. The Existing School at Sector 43, Chandigarh is already haying around 1400 Students with the complete infrastructure i.e. Land & Building, Furniture & Fixture and Other Facilities to run the school. The existing Society is registered under Section &0 G and also given registration under Section 10(23)C of the Income Tax Act.
19. During the proceedings before the Commissioner the assessee p l a c e d a n o t h e r " N o t e o n A c t i v i t y" alongwith letter dated 11.9.2012 which reads as under:
NOTE ON ACTIVITY Suchinta Educational Society was registered as a society under Societies Registration Act 1860, on 13th April 2012 with basic objective of imparting education to alias mentioned in Memorandum and Articles of Association. Shishu Nike tan Model School, an existing society is already registered under section 12 A of the Income Tax Act since 1968. The existing society is running four schools, Two in Chandigarh ,one in Mohali and one in MDC Panchkula The existing Society is registered under Section 80 G and also registered under Section 10(23)C of the Income Tax Act The new society proposes to approach for taking on lease the management of existing school to be run on day to day basis Since the existing society is running four schools, and in order to ease the pressure and effectively manage the affairs in a better way the new society can play a supportive role.. The existing School at Sector 43 Chandigarh is already having around 1400 Students with complete infrastructure i.e. Land & Building, Furniture & Fixture and Other Facilities to run the school. The school is located on a plot measuring more than one acre allotted by Punjab Urban Development Authority The school building has provision for 60 classrooms, Reception area , Staff rooms , Sports room etc. and a large basement for use for various indoor activities. The school has complete infrastructure as per requirements laid down by CBSE for Computer and Science Laboratories, Library, Drinking water, Fire fighting, Play area etc. The school is Affiliated with Central Board of Secondary Education up to Senior Secondary classes and its students are appearing for the exams under the CBSE curriculum. The school is providing education to all class of students and providing Fee concessions to deserving students under category of Fatherless, Poor means, Merit students and EWS etc, to around 99 students, The school is also required to comply with t h e provisions of the Right to Education Act, 2009.
20. During the course of hearing, the learned A.R. for the assessee was specifically asked as to what were the activities for which the said society was formed. The learned A.R. for the assessee specifically pointed out that the trust was formed on 13.4.2012 and its objects were as per clause 4(i) and 4(ii). Our attention was drawn to the observations 16 of the Commissioner in para 3 wherein it had been clearly claimed by the assessee that the existing society i.e. Shishu Niketan Model School was already registered under section 12AA of the Act and was running four schools. The applicant under the new society was proposing to take over on lease the management of one of the existing schools and running on d a y- t o - d a y b a s i s . The learned A.R. for the assessee further pointed out that the assessee had provided free books to poor students, which was in furtherance in carrying on charitable activities. When confronted with t h e f a c t t h a t t a k i n g o v e r o f r u n n i n g s c h o o l w a s i n t h e n a t u r e o f c a r r yi n g on the business and not in the line of imparting education per-se. The learned A.R. for the assessee pointed out that the society may consider establishing or running a school. In the totalit y of the facts and circumstances of the case, we are of the view that the objects of the trust are varied and the objects are not in any particular direction of imparting education or for the relief of the poor. Further the assessee himself had not identified the particular object which it wants to undertake to carry on the activities of the society and it is not a case of trust where the sole object is in line of providing education by way of establishing the school, college, University and the steps taken by the t r u s t f o r c a r r yi n g o n t h e s a i d a c t i v i t i e s c o u l d b e r e c o g n i z e d a s t h e objects of the trust in order to establish the genuineness of the activities t o b e u n d e r t a k e n b y t h e s o c i e t y. T h e a s s e s s e e b e f o r e u s h a d p o i n t e d o u t in paras hereinabove too many objects, which are in varied directions and some of the objects are not charitable in nature. The assessee till date has not identified the primary objects which the trust wants to undertake in order to carry on its charitable activities. Once the direction of the trust is not established, the genuineness of the activities cannot be verified by the Commissioner. The Hon'ble Madras High C o u r t i n C I T V s . O o t a c a m u n d G ym k h a n a C l u b [ 1 1 0 I T R 3 9 2 ( M a d ) ] h a d 17 held that on an application being filed under section 12A of a trust of institution is registered as charitable or religious one and the registration itself would be sufficient proof of the fact that the trust or institution concerned was created or established for charitable or religious purpose.
21. The Hon'ble Supreme Court in CIT Vs. Andhra Chamber of Commerce [55 ITR 722 (SC)] had held that "If there were two distinct objects, one of which was charitable and the other not charitable and if the fund of the association could be applied for either of these purposes at the discretion of those in authority, then it cannot be held that there was any property held under trust wholly for charitable purpose".
22. The objects of the assessee society have to be charitable or religious, as the case may be, in order to avail the benefits under sections 11 and 12 of the Act. The case of the assessee was that some of the trustees were already running schools and it proposes to take over one of such schools for better administration. The second plea was that it had provided free books to poor students, for which no evidence was filed. The activities proposed to be undertaken by the assessee society are not charitable in nature. Another aspect to be considered in the case of the assessee that it had not taken any step to initiate any of the activities out of primary objects as provided under the aims and objects of the society and in the absence of the same the second limb of the exercise to be carried on by the Commissioner of satisfaction of the genuineness of the activities could not be addressed by the Commissioner.
23. T h e H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t i n C I T V s . B . K . K . Memorial Trust (supra) has held that at the stage of granting 18 registration, objects of the trust only had to be considered by the Commissioner and the registration could not be denied on the ground that it was not utilizing its income for charitable purposes.
24. In view thereof, the Commissioner is to look into the objects of the societ y to determine whether the same are charitable in nature or not. In the facts of the present case and as held by us in the paras hereinabove, on consideration of the factual aspects we find that some of the objects of the assessee society are not charitable in nature and we are in conformity with the finding of the Commissioner of Income Tax that though the assessee society was registered with Registrar of Societies on 13.4.2012 but no activity had been started up to the date of present proceedings and in the absence of the same there was no material to verify the objects and activities of the society and their genuineness. In view thereof, we uphold the order of Commissioner in refusing to grant registration to the assessee under section 12AA of the Act and the grounds of appeal raised by the assessee are thus dismissed.
25. In the result, the appeal filed b y the assessee is dismissed.
O r d e r p r o n o u n c e d i n t h e o p e n c o u r t o n t h i s 2 4 t h d a y o f M a y, 2 0 1 3 .
Sd/- Sd/-
(T.R.SOOD) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 24 t h May , 2013
*Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 19