Income Tax Appellate Tribunal - Agra
Vijay Sudha Smarak Trust, Siddharth ... vs Cit Exmp. , Lucknow on 20 March, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND
DR. MITHA LAL MEENA, ACCOUNTANT MEMBER
ITA No. 436 /AGR/2017
(Assessment Year N/A)
Vijay Sudha Smarak Trust, CIT(Exemption)
Birdpur No.8, Post Office: Vs. Lucknow
Mohanjot, Tehsil- Naugarh,
Distt- Siddharth Nagar.
APPELLANT RESPONDENT
Appellant by: ShriShashank Agarwal, Advocate
Respondent by: ShriInderjeet Singh, CIT DR
Date of hearing: 15/03/2018
Date of Pronouncement: 20/03/2018
ORDER
PER, DR. MITHA LAL MEENA, AM:
This appeal, by the assessee is directed against the order dated 20.09 2017 of Commissioner of Income Tax (Exemptions), Lucknow [hereinafter refer to as ("the CIT")], challenging rejection of its application for registration under section 12AA (1)(b)(ii) of the Income Tax Act, 1961("The Act" in short).
2. Facts as per record are thatthe assessee society has applied an application for registration u/s12A(a) of the Act, on 29-03-2017 with the Ld. CIT (Exemption), Lucknow for granting registration in 2 ITA No. 436 /AGR/2017 the prescribed Form No. 10. The Ld. CIT (E), vide para-3 of the impugned orderfound that applicant society has merely submitted the trust deed and failed to furnish evidences on carrying on of any charitable activity as per provisions of section 12AA(1)(b)(ii) of the Act; that the applicant failed to prove the genuineness of the activities for charityas prerequisite conditions to be satisfiedfor granting the registration and therefore, he held that the applicant society has not been carrying out genuine charitable activities and furthering the cause of charity.
3. The ld CIT(E), in para-8 has observed that sufficient material required for satisfaction regarding charitable purpose of the trust in this case has not been made available by the applicant. In fact, part reply has been filed by the applicantincompliance to the notices. The CIT(E) held that mere recital of objects and activities without corroborative evidence is not sufficient themselves to enable a registering authority to arrive at the satisfaction mandated by law. Thus, in absence of sufficient material required for formation of satisfaction the applicant claim for registration u/s 12AA was rejected.
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4. Before us, the ld Counsel for the assessee submitted that the Assessee Society has been formed with the objects which are charitable in nature; thatit is an educational trust registered with theRegistrar of Societies on 07-10-2016 with the aims and objects as per trust deed (APB6-7); that the assessee has not carried out any activity till date and, therefore, there is no question of any genuineness of the activity or satisfaction of the Ld. CIT(E) in this regard. On facts, the action of the Ld. CIT(E) in rejecting the assessee's application for registration u/s 12AA(1)(b)(ii) of the Act by observing that no activities of charitable nature were carried out by the assessee trust is not justified.
5. The learned A.R. further submitted that at the time of registration under section 12AA, the Commissioner is not required to look into the activities, where such activities have not been commenced or are in the process of its initiation. Where a Society/Trust, set up to achieve its objects of establishing educational institution or is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused on the ground that the trust has not yet commenced the charitable or religious activity. Any enquiry of 4 ITA No. 436 /AGR/2017 thisnature would amount to putting the cart before the horse. At this stage only, the genuineness of the objects has to be tested and not the activities, which have not commenced. The enquiry of the Commissioner at such preliminary stage should be restricted to genuineness of the objects and not the activities unless such activities have commenced. The trust or society cannot claim exemption, unless it is registered under section 12AA and, thus, at such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused. For this purpose, he relied on the decisions of the High Courtand ITAT's as enumerated hereunder:
5.1 The Jurisdictional Hon'ble Allahabad High Courtin the case of 'CIT(E) vs. SheedharSewa Trust Asharfi Bhawan, Ayodhya Faizabad', ITA No. 33 of 2017, dated 07-09-2017 whereinit is held that at such initial stage when the trust has not yet commenced the charitable activity, the test of the genuineness of the activity cannot be the ground to reject the registration.
5.2 In the case of 'The CIT vs.R.S. Bajaj Society(2014)' 111 DTR 166, (All HC), their lordships held that at the time of 5 ITA No. 436 /AGR/2017 registration only genuineness of the objects was to be tested, not the activities which were not commenced by that time.
5.3. Similarly, Hon'ble ITAT Chandigarh Bench in the case of Ashutosh Charitable Trust of Educational & Medical Sciences, vs CIT (Exemptions), Chandigarh. ITA No. 864/CHD/2016 date of order: 12-01-2017, has held that:
"The assessee has filed copy of the Trust Deed which clearly revealed that the aims and objectives of the assessee trust are to run and manage educational institution and to run hospitals and dispensaries etc. Therefore, the main aims and objectives of the assessee trust are charitable in nature. Even this fact is not denied by the CIT (Exemption) in the impugned order. ........ Therefore, there is nothing wrong if assessee started purchasing land for the purpose of establishing educational institution as well as hospital etc. for the purpose of the assessee trust....................At the stage of grant of registration under section 12AA of the Act, CIT is required to examine the objects of the assessee trust and genuineness of its activities. At the time of registration under section 12AA of the Act, which is necessary for claiming exemption under section 11 and12, the CIT (Exemption) is not required to look into the activities, where such activities have not or are in the process of its initiation. Where assessee trust is set up to achieve its objectives of establishing educational/medical institutions, is in the process of establishing such institution and receives donations, registration under section 6 ITA No. 436 /AGR/2017 12AA cannot be refused on the ground that trust has not yet commenced charitable activities. At this stage only, genuineness of the objects has to be tested and not the activities which have not commenced."
5.4 In objection to theCIT(E) observation in para 4 that "In the light of the above facts that the applicant society could not produce the books of accounts and vouchers, the genuineness of activities could not be verified", the ld counselsubmitted that non-production of books of accounts/documents cannot be the reason for rejecting the registration u/s 12AA in view of the following authoritative pronouncements.
5.5.1 The ITAT, Delhi Bench in the case of Vidyadayani Shiksha Samiti vs. CIT (Exemption), Lucknowin ITA No. 309/Del/2016, 2018) 51 CCH 0645 (Del.Trib) date of order 14.12.2017, where the registration was refused by Ld. CIT(E) on similar ground that due to non-production of books of accounts and vouchers, the genuineness of activities could not be verified.
The contention of the revenue that, "the Ld. CIT has got ample power u/s 12AA to examine the books of account of the assesse. By not allowing him to examine the books of account and thereby restricting his powers is contrary to the provisions of the Act." was rejected by Hon'ble ITAT as under:
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"16. Now, coming to the powers of the Commissioner as to whether while granting registration u/s 12A he is required to examine the books of account etc. or he is only to satisfy himself regarding the objects of the trust and genuineness of the activities of the trust, we find various courts have held that while granting registration u/s 12A the ld. CIT is required to see only the objects of the assessee trust/society and not to examine the application of income. He is not required to examine whether the income derived by the trust is being spent for charitable purposes or the trust is earning profit while granting registration. He is only required to examine the objects of the trust. We find identical issue had come up before the Tribunal in the case of Bhartiya Kisan Sangh Sewa Niketan (supra). In the said case also the assessee trust did not produce the books of account, bills and vouchers etc. for verification of the ld. CIT for which the ld. CIT held that the assessee society is not carrying out any charitable activities. Due to non-compliance of assessee society, the genuineness of the activities could not be verified. The ld. CIT, therefore, relying on various decisions including the decisions which have been relied on by the ld. CIT in the present case, rejected the claim of registration u/s 12A(1) of the I.T. Act. When the matter travelled to the Tribunal, the Tribunal allowed the claim of registration by holding that at this stage on granting registration u/s 12A the ld. CIT is required to see the objects of the society and not required to examine the application of income which will have to be undertaken by the Assessing Officer on a year to year basis after 8 ITA No. 436 /AGR/2017 the assessee files the return of income claiming exemption u/s 11 of the I.T. Act."
5.5.2 The ITAT Delhi Bench on identical facts in the case of Aasho Charitable Trust vs. CIT (E) ITA No. 5617/Del/2016 order dated: 30-01-2018 has held that:
12. From a bare reading of the above provisions of the Act contained in section 12AA(1) of the Act, it is evident that the CIT has to examine the objects of the trust or institution and the genuineness of the activities. Since in the present case there is no activity carried out by the assessee, therefore, there is no question of genuineness and satisfaction of the ld. CIT. Accordingly, the said conditions of section 12AA(1) of the Act become infructuous.
The only condition left is satisfying about the objects of the trust or institution which have been reproduced in the present case. The ld. CIT(E) has not brought an iota of evidence to prove that the said objects of the assessee society are not of charitable in nature. Therefore, in such facts and circumstances of the case, the ld. CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration u/s 12AA (1) of the Act."
In view of the above, rejection of registration on the ground that no activities were started by the assessee trust, may not be sustained as this is in direct conflict with the law laid down by Hon'ble jurisdictional High Court and various Benches of Hon'ble ITAT.
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6. Per contra, the ld CIT-DR, vehemently supported the orders passed by the ld CIT(E) by stating that the application was rejected when there was no information forthcoming from the side of the assessee who had applied for registration and in view of no evidence the ld CIT(E) was quite justified in refusing to grant registration under section 12AA(1)(b)(ii) of the Act.
7. We have considered the rival submissions, facts on recordsand the impugned orders. It is undisputed fact that the assessee trust has not conducted any activities during the year relevant and therefore the enquiry conducted by the CIT(E) to examination of 'genuineness of activities' of the assessee is misdirected. The only question before CIT(E) to decide was that whether the objectives of the assessee society/Trust were charitable in nature?
8. The ld Counsel contended that enough material was brought on records by the assessee before the ld CIT(E) to his satisfaction that the society qualifies for grant of registration; that the 'objects of the society arecharitable in nature and thatthe activitiesare not yet commenced.
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9. It is seen that the assessee has enclosed following evidences with prescribed application in Form-10A, dated 29.03.2017 I. Resolution of Trust and Certified copy of trust (APB-1). II. Copy of Registered Trust Deed,(APB,3-14).
III. Objectives of Trust, (APB,6-7).
IV. List of Member of Trust (APB-15).
10. In compliance to the CIT(E)'s letter dated 10/08/2017, the assessee society has furnished required details/ information vide letter dated 20/09/2017 (APB, 16-21) as follows:
I. Copy of PAN Card with IT Returns for last 3 years.
II. Declaration that no part of incomeor property of the trust has been used for direct or indirect benefit of any person specified in section13(1)(c) of the Act.
III. Object has been to establish educational Institutions to impart from primary level to professional level courses.
IV. Certified copy of Trust Deed.
V. PAN Card/Aadhar Card ID of all trustees of the Trust.
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ITA No. 436 /AGR/2017
VI. The Trust was incepted on 01/07/2016. It is being the first year no activities could be conducted during the year.
VII. Details of donations received alongwith name, addresses and amount of donations received since, the inception of the trust till 31/08/2017.
VIII. Details of assets- Movable and immovables.
IX. Books of account and bank accounts.
X. Statements of account, i.e., Balance sheet, ledger, cash book, bank book, Income and expenditure stamen etc. for F.Y. 2016-17 (APB, 22-37)
11. We have gone through the Memorandum specifying the objects of the society (APB-6). In the impugned order, also there is no challenge to the objects being not charitable in nature.
Though the ld CIT(E) has mentioned that assessee has to prove that its objects are charitable in nature but even after having objects of the society on records, filed alongwith the application itself on 29.03.20157 the ld CIT(E) has not commented upon the objects as mentioned in the Memorandum. From these 12 ITA No. 436 /AGR/2017 documents, it is amply clear that the object of the assessee society are charitable in nature.
12. It is seen that the notice dated 10.08.2017 issued by the ld CIT(E) (APB, 38-39) was duly responded by the assesseecomplying on all points contained in the said notice on 20.09.2017(APB-716-21) during the course of hearing. In these circumstances, in absence of any denial on part of the CIT(E) in respect of various assertions challenging the claim made in the impugned order rejecting application u/s 12AA, it cannot be assumed that assessee has not filed sufficient material as required by the CIT(E) to form satisfaction regarding charitable purpose of the trust.
13. From the facts, as noted above, it is self evident that the observation of the ld CIT (E) is certainly contrary to the facts and evidences on records as the assessee has sufficiently proved with corroborative evidence that the object of Society are charitable in nature and in pursuance of the said objects it has instituted the society for imparting education in a systematic manner from the primary level of education.
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14. The ld CIT(E) has placed reliance to few judgements in its order, none of which has any application to the case on hands. In CIT Vs. Jamna Lal Bajaj Seva trust 171 ITR 568 it was held by the Hon'ble Bombay High Court that where the capital gain arisen was claimed exempt under section 13(4) of the Income Tax Act. The Hon'ble Court has held that the assessee is not entitled for exemption under section 11 in respect for it. In CIT Vs National Institute of Aeronautical Education Society, 181 Taxman 205 (Uttarakhand) the finding of fact recorded by authorities below was that the 'appellant' was carrying any activity of trade and commerce. In the case on hands there is no such allegation therefore, this case is of no help to the revenue. Reliance placed to ITAT, Lucknow Bench in ITA No. 809/LKW/2014is also misplacedas in absence of supply of copy of the unreported order to the assessee, it cannot be expected from the assessee to rebut the case. In the case of Kirti Chandra Tarawati Charitable Society Vs DIT(Exemption) 232 ITR 11, Judgement, delivered by the Hon'ble Delhi High Court was in the context of renewal of approval under section 80G of the 'Act. Thus, none of the case has relevance to the facts of instant case.
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15. The Hon'bleJurisdictional Allahabad High Court in the case of 'CIT(E) vs. SheedharSewa Trust Asharfi Bhawan,'(Supra) hasdecided the issue in favour of assessee, consideringit squarely covered by its own DB judgement in the case of 'CIT Vs. R.S. Bajaj Society',(Supra) holding as under:
"1................The preponderance of the judicial opinion of all the High courts including this court is that at the time of registration under section 12AA of the Income tax Act, which is necessary for claiming exemption under sections11 and 12 of the Act, the Commissioner of Income tax is not required to look into the activities, where such activities have not or are in the process of its initiation. Where a trust, set up to achieve its objects of establishing educational institution, is in the process of establishing such institutions, and receives donations, the registration under section 12AA cannot be refused, on the ground that the trust has not yet commenced the charitable or religious activity. Any enquiry of the nature would amount to putting the cart before the horse. At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced. The enquiry of the Commissioner of Income tax at such preliminary stage should be restricted to the genuineness of the objects and not the activities unless such activities have commenced. The trust or society cannot claim exemption, unless it is registered under section 12AAof the Act and thus at that such initial stage the test of the genuineness of the activity cannot be a ground on which the registration may be refused."
16. The assessee society objected to the ld CIT(E) observation as regards his non-satisfaction about 'genuineness of activities as no activities were started by the assessee trust since, it was incepted on 01/07/2016 and being the first year of the trust no activities could be conducted during the year. On fact, in the 15 ITA No. 436 /AGR/2017 absence of activities, any enquiry of the nature would amount putting the cart before the horse. At this stage, only the genuineness of the objects has to be tested and not the activities, which have not commenced. We find that on the facts, the findings of the Ld. CIT(E) regarding the 'genuineness of activities' isin direct conflict with the law laid down by Hon'ble jurisdictional High Court. Thus, at the initial stage when the trust has not yet commenced, the test of the genuineness of the activity cannot be the ground for the rejection of the registration of the assessee trust.
17. In view above, we accept the grievance of the assessee is justified. Therefore, reverse the findings recorded by the CIT(E) and direct to issue Certificate granting registration under section 12AA in the name of the applicant society, forthwith from the financial year in which application was filed.
18. In the result, both the appeals of the assessee are allowed. Order pronounced, in the open Court on 20/03/2018.
Sd/- Sd/-
(A.D. JAIN) (DR. MITHA LAL MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 20/03/2018
Aks
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ITA No. 436 /AGR/2017
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
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ITA No. 436 /AGR/2017
Date
1. Draft dictated (DOC) 15.03.2018 PS
2. Draft placed before author 20.03.2018 PS
3. Draft proposed & placed before the second member JM/AM
4. Draft discussed/approved by Second Member. JM/AM
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head Clerk.
10. Date of dispatch of Order.