Income Tax Appellate Tribunal - Chandigarh
Sikh Educational Shiromani Budha ... vs Commissioner Of Income Tax ... on 23 March, 2026
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'B' CHANDIGARH
BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND
SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA Nos.143 &178/CHD/2026
नधारण वष / Assessment Year: 2025-26
Sikh Educational Society The CIT (Exemptions),
Shiromani Budha Dal, Vs Chandigarh.
BDPS, Lower Mall, Patiala.
थायी लेखा सं./PAN NO: AADTS3991B
अपीलाथ /Appellant यथ /Respondent
Assessee by :Shri Ashwani Kumar, CA &
Ms. Muskan Garg, CA
Revenue by : Dr. Vivek Aggarwal, CIT DR
Date of Hearing : 11.03.2026
Date of Pronouncement : 23.03.2026
PHYSICAL HEARING
ORDER
PER RAJPAL YADAV, VP The pr es et t wo appeal s ar e d ir e cted aga ins t t he ord ers of ld. Co m mi ssioner o f Inco m e Tax (Ex em p tions ) [i n shor t ' the C IT (E )' ] dat ed 03. 12 .2 02 5 and 09. 12 .2 02 5 . ITA 14 3/CH D/ 2026
2. T he gr ie vance of the ass essee in ITA No . 14 3/ CHD /2 0 26 i s t hat the l d. CI T (E) has er re d in ITA No.143 & 178/CHD/2026 A.Y.2025-26 2 can cell in g t h e r egi str ati o n gran ted t o the T rus t u/ s 12 AB of the Incom e Tax Act , 1 96 1 by ex er c isi ng the p ow er s u/ s 12 AB( iv) of the I ncom e Tax Act.
ITA 17 8/CH D/ 2026
3. In this ap peal, asses se e has pl eaded that ld . CI T ( E) has err ed in rej ecti ng the ap pl icati o n f or gr ant of r egis t rat ion on the gro und that si nc e she has ca nce l le d t he ear l ier regi str at io n gr anted to t he asse ssee , ther e for e, ther e is no rea so n t o r enew such r egi str ati o n u/ s 12 AB of the I ncome Tax Act.
4. T he b ri ef f acts o f t he case ar e t hat asse sse e is a T rus t und er the nam e an d st y le of th e Si k h Ed ucat io nal Soc ie t y of Shi rom an i Budha Dal. The So cie ty cam e into exi stenc e on 1 2.0 8. 19 85 . I t has app lie d fo r gr ant of re gis tr at ion u/ s 12 A of th e Inc om e Tax Act a nd s u c h r egist r ation was gra nted to th e assess ee on 3 1 .03 .199 9. Cop y of the regi str at io n i s availab le at pa ge N o . 19 of t he P ape r B ook. The S ch eme to grant r eg is tr ati o n has b e en c hanged w .e. f . Fin a n ce Act 01 .04. 2021 . The So ci e tie s /Tr us t s who w ere enjo yi ng r egi str atio n u /s 1 2A of th e I ncom e Tax Act , w ere ITA No.143 & 178/CHD/2026 A.Y.2025-26 3 req ui re d to app ly f or gr ant of fr esh regi s t r at ion and regi str at io n is t o b e gr ant e d fo r a per io d of 5 ye ar s. The ld. CI T (E ) ha d i ssued a notic e for ca ncel lat i on of the regi str at io n on 20. 06. 20 25 on t he gr ound t hat Risk Mana g em en t Str at egy o f t he Inco m e Ta x De part m ent has fla gge d tha t as sessee So cie ty has depo s it ed huge cash of Rs .15 ,4 5, 27 ,2 77 /-. The ld .C IT (E ) has i s su ed notice s t o the assessee a nd Societ y has g iv en r epl y. The l d. CI T (E) d id not fin d any v iolat i on qua all ege d hug e d epo si t s i n cash, r ather po in t ed out th r ee se parate reasons for cancel li ng t he regi str at io n. Acco r ding to t he ld.C IT (E ), the as ses see has ma de a n a d vance of R s .1, 16 , 00, 00 0/- to one M MK U sar i Co m pa ny f or const r uctio n o f new scho o l bui ld ing, howe v e r, no b uil di ng was con str uct ed and thi s su m w as not reco ve red by t he assess e e fo r a lo ng per iod . T he allegat ion of th e l d. CI T (E) is t hat asses s e e has no t got the Agre em ent regi st er ed a nd did not take step s f o r r eco ver y of the allege d ad vance p ai d to t he co nstr uct ion com pa ny. I n the second rea so n, ld. CI T ( E) alleg ed t hat Soc iet y had inc urr ed ex pend it ur e of Rs. 5 ,56 ,000 / - for pur chase of jew ell er y it em s fr om J agdi sh J ewe ll e rs. I t failed to expla in the r eas on ITA No.143 & 178/CHD/2026 A.Y.2025-26 4 fo r sp end in g t hi s m one y on jew el l ery and the t hi rd re as on assi gne d by t he l d. C IT (E) is that Soc i et y had p aid Rs .36 ,8 7, 60 0/- to Ms. Su khv i nd erji t Kaur, P res i d ent of the So ciet y and Rs. 31, 10 ,4 00 /- to Shr i Kar an Rajbi r Si ngh, Dir ect or of Educat ion Soc iet y . T hese expe nses ar e not necessa r y for the Soci ety i n achieving i ts obj ecti v es. For these r eason s, l d.C IT (E) h as cance lle d t he r e gis tration of the asses see.
5. T he ld . coun sel f or th e ass esse e w hil e im pu gni ng the or d er of ld .C IT (E) sub m i tted that ass ess ee Soc ie ty is run n in g ed ucat i o nal i nstit ut ion s f r om its incep t ion and i t ha s been en joyi ng r eg is trati on under the Inco m e Tax Ac t since 15 .0 4.1 99 9. I t has neve r b een char ge d w ith s uc h t yp e of accu sa ti o n. Its assessm ent o rder s have be en passe d u/s 14 3(3 ) . Co py o f o ne of the ass es s me nt or de r has b een placed on t he reco rd f o r ass es s ment y ea r 20 16 -17 . The l d. co un sel f or t he assessee s ubm itt ed t ha t adv ance m ade to MM K U sa ri C ompany was in t he o rd inar y cours e of devel opm ent of educat ion al I nst it ut io n. Somehow , for ob ta ini ng ne cessar y per mi ssio ns, bui ld ing could not be ITA No.143 & 178/CHD/2026 A.Y.2025-26 5 co nstr uct ed . The to tal co ntr act value w as Rs .12 ,5 0, 00 ,0 00 /- and a p rep arat ory adv ance of Rs .1, 16 , 0 0, 000/- w as m ad e t o thi s c onc er n. I t is d ul y ref lec te d in the accounts as w ell as i n the cop y of the Agre em ent. H e to ok us thro ug h Cl aus e N o . 4 of the Agre em ent r ep r od uced i n t he i mp ug ned ord er as well as placed i n t he Paper B o ok and subm itt e d t hat m ode of paymen t ha s dul y been pr o vide d in t he A gr eem e n t, thu s t his ad vance was r epr ese nt in g the m o bilizat i on advanc e. The assessee ha s re cei ved so me o f t he m one y back dur ing t he year 20 21 i t sel f. In o the r w o rds, out of t otal Rs .1, 16 , 0 0, 000/-, Rs. 30 la cs w as re cei v ed in the year of paymen t its e lf . The ass essee has bee n pe r s uad ing other co ncer n to m ake paym ent o f b al ance amount and ult imat el y Rs .86 la cs has been r ec eived i n the year 20 2 5 to 2 02 6. Thu s, t h is is no t a step whic h can be attr ib uted tow ar ds mi s-m a na ge me n t of t he So ciet y fu nds , r ather it was a step tow ard s better m en t o f the So cie ty.
5.1 Wit h r egar d to ob j ect io n o f ld. C IT (E) for p ur c hase of je w el ler y it em s, it w as s ubm itt e d that thes e it e ms r epr esent ITA No.143 & 178/CHD/2026 A.Y.2025-26 6 pr iz es give n to t he stud e nts at Annual Func t ion. Pho to gr ap hs of suc h pr iz e s w er e shown to t he l d. C IT ( E ) and accor d in g to t he ld. co unse l f o r the asses se e, t hi s cannot be a r eason to cancel t he regi st r at io n o f an old Insti t ution whi ch is s uc cessful ly ru nn in g t he sc ho ols f r om last more tha n 2 6 y ear s.
5.2 W ith regar d to the t h ir d reaso n as signe d b y the ld . CI T (E ) that So ciety has m ade p ayme nts to M s. Suk hv in d er ji t Kaur and Shr i K aran Raj b i r Singh, if so m ethi ng ha s b een pa i d over and ab o ve the m ar ke t r ate for suc h ser vi ce s, then that am ount can b e d is allowe d u/s 13 (3 ) a nd ca n be broug ht to t ax but that cannot be a reason fo r ca ncelli n g the r eg i strat io n.
6. Th e ld. CI T DR, o n the other hand took u s through Sect i on 12 AB (4 ) as well as Exp lanatio n app end ed t o this Sect i on w hi ch pr ov ides s pe c ifi ed v i olations on whose ful film ent regi st r at ion gr ant ed t o an assesse e u/ s 12 AB c an be ca nce ll ed. He subm it te d tha t i f sp ecifi e d v iolati ons are bei ng p erus ed, t he n it wo ul d de mo nstr ate t hat case of the assessee f alls in clau se (e ) su b- claus e ( i), nam el y it s ITA No.143 & 178/CHD/2026 A.Y.2025-26 7 acti vit ies of mak in g advances t o a con struct io n comp any ar e no t to b e consi dered as ge nui ne.
7. We h ave duly c o nsid ere d the r iva l c onte ntio ns and gon e t hro ugh t h e recor d ca r eful ly. Secti o n 12 AB sub -cla us e (4 ) a n d E xp la na ti o n app ende d t o t his i s hav in g bear ing on ad jud ic at io n of t hi s iss ue. Th erefo r e , i t is im per at ive up on us t o ta k e not e o f this clau s e :
"Procedure for fresh registration.
12 AB(1). x x x
x x x x
(4) Where registration or provisional registration of a trust or an institution has been granted under clause (a) or clause (b) or clause (c) of sub-section (1) or clause (b) of sub-section (1) of section 12AA, as the case may be, and subsequently,--
(a)the Principal Commissioner or Commissioner has noticed occurrence of one or more specified violations during any previous year; or
(b)the Principal Commissioner or Commissioner has received a reference from the Assessing Officer under the second proviso to sub-section (3) of section 143 for any previous year; or
(c)such case has been selected in accordance with the risk management strategy, formulated by the Board from time to time, for any previous year, the Principal Commissioner or Commissioner shall--
(i)call for such documents or information from the trust or institution, or make such inquiry as he thinks necessary in order to satisfy himself about the occurrence or otherwise of any specified violation;
(ii)pass an order in writing, cancelling the registration of such trust or institution, after affording a reasonable opportunity of ITA No.143 & 178/CHD/2026 A.Y.2025-26 8 being heard, for such previous year and all subsequent previous years, if he is satisfied that one or more specified violations have taken place;
(iii)pass an order in writing, refusing to cancel the registration of such trust or institution, if he is not satisfied about the occurrence of one or more specified violations;
(iv)forward a copy of the order under clause (ii) or clause (iii), as the case may be, to the Assessing Officer and such trust or institution.
Explanation.--For the purposes of this sub-section, the following shall mean "specified violation",--
(a)where any income derived from property held under trust, wholly or in part for charitable or religious purposes, has been applied, other than for the objects of the trust or institution; or
(b)the trust or institution has income from profits and gains of business which is not incidental to the attainment of its objectives or separate books of account are not maintained by such trust or institution in respect of the business which is incidental to the attainment of its objectives; or
(c)the trust or institution has applied any part of its income from the property held under a trust for private religious purposes, which does not enure for the benefit of the public; or
(d)the trust or institution established for charitable purpose created or established after the commencement of this Act, has applied any part of its income for the benefit of any particular religious community or caste; or
(e) any activity being carried out by the trust or institution--
(i) is not genuine; or
(ii) is not being carried out in accordance with all or
any of the conditions subject to which it was registered; or
(f) the trust or institution has not complied with the requirement of any other law, as referred to in item (B) of sub-clause (i) of clause (b) of sub-section (1), and the order, direction or decree, by whatever name called, holding that such non-
compliance has occurred, has either not been disputed or has attained finality; or ITA No.143 & 178/CHD/2026 A.Y.2025-26 9
(g) the apo referred to in clause (ac) of sub-section (1) of Section 12A is not complete or it contains false or incorrect information.
(5)The order under clause (ii) or clause (iii) of sub-section (4), as the case may be, shall be passed before the expiry of a period of six months, calculated from the end of the quarter in which the first notice is issued by the Principal Commissioner or Commissioner, on or after the 1st day of April, 2022, calling for any document or information, or for making any inquiry, under clause (i) of sub-section (4).]]
8. A p er usa l of t he r ecor d woul d indi cate t hat as s esse e's case do es no t f all wit h in any o f the spec if ied v iol at ions. The co nte nti on of t he ld. C I T DR w as that ei t her t he activ ity car r ied out by t he So ci ety is no t ge nu ine or is not b eing car r ied o ut in a ccor da nce wit h on e o r any of the c ond i tions sub ject to which it w as r egist e r ed. As f ar as condit ion o f rest r ict ions a re co ncer ned , t he y ar e not be ing pr ov id ed eit he r i n 19 99 Regi st ratio n C er t i fic ate o r in the sub s eque nt. The a sse s see ha s made ad vanc es to a c o nst r ucti on comp any fo r constr uct io n of a new schoo l b uil d in g at Talw and i Sab o Ra m R oad , B athi nda. The to tal co nstr u ct ed area agr eed upo n be t we en t he ass e ssee as we l l as the const r uction co m pan y wa s 1 3850 0 sq. ft . The co nstr u ct ion v alue wa s of Rs .12 ,5 0, 00 ,0 00 /-. The assess e e has just given 15 % tow ard s mo bil iz at ion charg e s. Acco rd ing t o the asses s ee, it co uld n ot g et ap p roval s f r o m the co m pete nt aut h or ities and ITA No.143 & 178/CHD/2026 A.Y.2025-26 10 ult ima t el y bu il d in g was no t con st ru ct ed. T he c onst r uc tion co m pan y ha s ref und ed R s.3 0 l ac s i mm e di at e l y but it ha s to per sua d e th e co m pany to ret ur n the b al a nc e. T he c harge of the ld. CI T (E) i s th at this Agr e em ent wa s not re gist er ed b y the as ses see. It is per tine nt to o b ser ve that e ver y Agre em ent is no t r equir ed to be r e gister e d. Eve n a non- regi st er ed Agree ment ha s equa l f o rce in t he law . It is also ob ser ved t ha t e ven f or an agr eem e nt to pur c hase land or bui ld in g, it i s n ot nec es sar y t hat agr eem e nt i s t o be regi st er ed b eca use su ch unr egi ster ed a gr ee me nt s are pr o tected b y t he p rovis o a pp ende d to Sect io n 49 of Indian Re gist r a tio n Act. This aspec t h as b een c onsid er e d b y jur i sd ict io na l H igh C o ur t i n t h e case of Ram K ishan V s Bijen der M an (2 01 3) 1 PLR 1 95. This A gree m e nt w as ent er ed by th e assessee i n i ts or dina ry c ou rse of fulf i lm ent of ob jec t ive s of t he S o cie t y so t hat b et ter ed u cat iona l inst it uti o ns ca n be cr eat ed. T he l d. C IT (E) has un necessa ri ly draw n a dv er se i nf erenc e qua this transa ct io n. I t can be lo o ke d in t o at the tim e of asse s sment pr o ceedi ng s but it canno t be a reason to cance l the ITA No.143 & 178/CHD/2026 A.Y.2025-26 11 regi str at io n of a societ y wh ich is r unni ng ins tituti ons for the la st 2 6 year s.
9. As f ar a s the seco nd r easo n ass ig ne d by t he ld. CI T (E ) is co ncer ned t hat asses see h as inc ur re d exp end it ur e of Rs .5. 56 la cs on purchas e o f si lv er jew el le r y, t he asse ss ee ha s pla ced on r eco r d co p ie s of the i nvoice s and dem onst r ated t hat the se we re s il ver ar tic les p ur chas ed for giv in g pr i z es to the s t uden t s. To o ur mi nd , t hi s is not an it em wh ich i s t o b e a pp rec iate d by the ld . C IT (E) whi le co nsid er ing wh et her S ocie ty is acti n g ac cor di ng t o it s ob jec t ive s o r not. It i s an aspect whic h could b e looke d into by the A O a t the t im e o f assess m ent pr oc eed i ngs and if so m ethi ng com es o ut th at asse ssee has not i ncur re d the ex pend it ur e on its obj ect i ve s, then suc h an it em can be tax ed b ut it can no t b e use d f o r cancell ing t he regi str at ion. It is per tin ent t o no te that on Annual Fu nct ions , pr iz es c an be di str ib ut ed to the s tuden ts and it is for the M anag emen t of th e S ociet y t o deci de w hat t yp e of p ri ze i s to be gi ven. With o ut cry stal iz ing deta ils in a m at hem ati ca l pr eci si on, l d. CI T (E) canno t say t hat it is an ex pendi ture w hich i s not ITA No.143 & 178/CHD/2026 A.Y.2025-26 12 ad mi ssibl e to t h e asse sse e t owa rd s app licat ion of ac t ivit ies of the Soci et y.
10 . T he n ext r eason assi gn ed b y the l d. CI T (E) i s tha t assessee ha s paid rem un er atio n of R s. 36. 87 l acs and Rs .31 .1 0 la cs t o Ms. Sukhv in d er ji t Ka ur and Shri Kar an Ra jbi r Si ng h, Di rect or s.
11 . T o o ur mi nd, ld . CI T (E ) has f ailed t o constr ue the me ani ng an d scope o f Section 13(1)(c) and 13(1)(d) read with Section 13(3) of the Income Tax Act. For the facility of reference, we take note of the relevant clauses of these provisions, which read as under :
Section 11 not to apply in certain cases.
13. (1) Nothing contained in section 11 or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof-
x x x
(c) in the case of a trust for charitable or religious purposes or a charitable
or religious institution, any income thereof-
(i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or
(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-
section (3): [such part of income as referred to in sub-clauses (i) and (ii)] Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income ITA No.143 & 178/CHD/2026 A.Y.2025-26 13 or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution:
Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970;
x x x (2)Without prejudice to the generality of the provisions of clause (c)[ and clause
(d)] of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),-
x x x
(c) if any amount is paid by way of salary, allowance or otherwise
during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services;
x x (3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely:-
(a) the author of the trust or the founder of the institution;
(b)[ any person who has made a substantial contribution to the trust or institution, [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds [fifty ]thousand rupees];
(c) where such author, founder or person is a Hindu undivided family, a member of the family;
(cc) any trustee of the trust or manager (by whatever name called) of the institution;]
(d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid;
(e) any concern in which any of the persons referred to in clauses (a),
(b), (c), [(cc)] and (d) has a substantial interest.
x x x
ITA No.143 & 178/CHD/2026
A.Y.2025-26
14
12. A perusal of these provisions would indicate that if any undue benefit is being extended to a person who falls within the ambit of sub-clause (3) of Section 13 i.e. the Author of the Trust and any relative of such author and other concerned person under clauses (a) to (e) of Section 13(3), then that amount would not qualify for availing the exemption u/s 11/11(1) of the Income Tax Act. In other words, that would be excluded from that benefit and brought to taxation. It is pertinent to note that if sim ilar services could be availed on a lesser rate than the one paid for the services from open market, only then disallowance can be made u/s 13(3) of the Income Tax Act. For example, if assessee has availed services of any associated person for a price of Rs.100/- but identical services could be availed at a price of Rs.80/-, then Rs.20/- would be brought to taxation but it cannot be used as a reason to cancel the registration.
The ld. CI T (E) has miserably failed to appreciate this aspect and erred in cancelling the r egistration of the assessee.
13. In view of the above discussion, we are of the view that im pugned order is not sustainable and accordingly, we quash ITA No.143 & 178/CHD/2026 A.Y.2025-26 15 it. We direct the ld. CIT (E) to restore the registration u/s 12A(1)(ac)(i) of the Act.
14. As far as ITA No. 178/CHD/2026 is concer ned, since we have restor ed the registration admissible to the assessee u/s 12A(1)(ac)(i) of the Income Tax Act in ITA No. 143/CHD/2026, ther efore, the registration be renewed to the assessee as per its application and would be subject to the necessary conditions.
15. In the result, bot h the appeals of the assessee are allowed.
Or d er pr onounced o n 23. 03. 20 2 6 .
Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT "Poonam"
आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु / CIT
4. िवभागीय ितिनिध, आयकर अपीलीय आिधकरण, च डीगढ़/ DR, ITAT, CHANDIGARH
5. गाड फाईल/ Guard File सहायक पंजीकार/ Assistant Registrar