Commissioner of Income-tax-I Chandigarh v. Sri Guru Gorakh Nath Charitable Educational Society
[Citation -2015-LL-0505-3]

Citation 2015-LL-0505-3
Appellant Name Commissioner of Income-tax-I Chandigarh
Respondent Name Sri Guru Gorakh Nath Charitable Educational Society
Court HIGH COURT OF PUNJAB & HARYANA
Relevant Act Income-tax
Date of Order 05/05/2015
Judgment View Judgment
Keyword Tags opportunity of being heard • additional information • reasonable opportunity • educational society • public utility • fresh evidence • medical relief
Bot Summary: A perusal of the above section would go on to show that the Commissioner has to satisfy himself of the objects of the trust and the genuineness of the activities and after giving an opportunity of being heard to the trust or the institution, a refusal can be made to register the trust. Under Section 12A, the provisions of Sections 11 12 shall not apply in relation to the income of any trust or institution unless various conditions are fulfilled. The provisions of Section 12AA, thus, also give the power under sub-section(3) to cancel the registration of the activities of the trust if it is not carried out in accordance with the objects but the Commissioner has to keep in mind that it is not to act as an Assessing Authority while deciding the application under Section 12AA and the enquiry regarding the genuineness of the activities of imparting education with a charitable purpose is to be kept in mind. Relevant observations read as under: On the other hand, Section 10(23C) of the Act are the provisions of the Act in substitution of the earlier provisions of Section 10(22) of the Act as to which income shall not be included in computing the total income of any person. The provisions of Sections 11, 12 or Section 10(23C) of the Act, deal with the income of a Trust or of the Institution and the circumstances as to when such income is to be excluded for computing the total income, but the basis of such benefit is the registration under Section 12AA of the Act. Unless a Trust or Institution is registered under Section 12AA of the Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. The principles laid down for excluding the income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering the application for registration under Section 12AA of the Act.


ITA No.336 of 2013 (O&M) SAILESH RANJAN -1- 2015.05.05 18:20 I attest to accuracy and integrity of this document IN HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA No.336 of 2013 (O&M) Reserved on:23.04.2015 Date of decision:05.05.2015 Commissioner of Income Tax-I Chandigarh ....Appellant Versus Sri Guru Gorakh Nath Charitable Educational Society, Ropar ......Respondent CORAM: HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICE HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Ms.Urvashi Dhugga, Advocate, for appellant. Ms.Radhika Suri, Sr.Advocate with Ms.Rinku Dahiya, Advocate, for respondent. **** G.S.Sandhawalia J. appeal, filed under Section 260A of Income Tax Act, 1961 (for short, 'Act') is directed against order of Income Tax Appellate Tribunal, Chandigarh (for short, 'Tribunal'), passed in ITA No.1121/Chd/2012 dated 19.02.2013 (Annexure A-2). Vide said order, appeal of respondent-Society has been allowed by Tribunal and direction has been issued to Commissioner to grant registration to Society under Section 12AA of Act. 2. two questions of law, on which appeal is admitted, read as under: 1. Whether on facts and in circumstances of case and in law learned ITAT was correct in allowing appeal of assessee especially when family run trust did not submit details ITA No.336 of 2013 (O&M) SAILESH RANJAN -2- 2015.05.05 18:20 I attest to accuracy and integrity of this document of assets and properties that they possessed as well as treatment given to assets of old school being taken over by them. 2. Whether ITAT was right in not upholding findings of CIT u/s 12AA (1)(b)(ii) considering that assessee had failed to comply with provision u/s 12AA(1)(a) in as much as document and information called for was not submitted. 3. factual matrix of case in hand is that respondent-Society was registered with Registrar of Societies on 19.04.2005. It applied for registration under Section 12AA of Act, in form No.10A on 16.03.2012. Commissioner, vide order dated 28.09.2012 (Annexure A-1), rejected application by coming to conclusion that Society had not proved its case whether activities were being run in charitable manner and that Society was not created wholly and exclusively for charitable purposes. reasons which prevailed with Commissioner was that fresh evidence had not been furnished to prove that there was any provision for free subsidized education for poor and whether there was any element of public benefit. It was further found that land and building on lease had been taken from daughter of General Secretary of Society and power of attorney had been signed by father, namely, Amarjeet Singh Saini who was also husband of Mrs.Madhuri Saini, General Secretary. complete details of land and extent of building like number and measurement of rooms constructed on land etc., had not been furnished. terms of lease was also taken into consideration pertaining to annual lease and fact that Society had also taken name of another school namely, St. Carmel School, Giani Zail Singh Nagar, Ropar, along with students, furniture and fixtures. It was noticed that building details were not furnished as such of liability created and expenditure incurred on creation of such assets. factum of Society filing its returns since year 2005-06 and claiming exemption under Section ITA No.336 of 2013 (O&M) SAILESH RANJAN -3- 2015.05.05 18:20 I attest to accuracy and integrity of this document 10(23C) on fact that receipts were below `1 crore, was taken into consideration. It was further noticed that amount of income is likely to exceed `1 crore in financial year 2012-13 and details of office bearers and members of general body had not been furnished along with identity of office bearers. Accordingly, by holding that Society was earning profits and had nothing to do with charity and had no visible plans and having not been satisfied with objects and genuineness of society and keeping in view definition of charitable purpose under Section 2(15), registration was denied. As noticed, Tribunal, vide impugned order dated 19.02.2013, has allowed appeal and directed that registration be granted to Society. 4. Counsel for Revenue has, accordingly, contended that once relevant materials have not been furnished, Commissioner was well justified in denying registration and Tribunal was not justified in directing registration and even otherwise, matter should have been remanded for fresh enquiry on basis of some directions laid down and it was not appropriate for Tribunal, in such circumstances, to allow appeal, in view right of Commissioner to go into issue to satisfy itself of objects and genuineness of its activities. 5. Counsel for assessee, on other hand, vehemently assailed order of Commissioner and submitted that order was based on judgment of Supreme Court in MCD Vs. Children Book Trust 1992 (3) SCC 390. In later judgment of Supreme Court in M/s Queen's Educational Society Vs. Commissioner of Income Tax 2015 (3) TMI 619, it had been specifically held that earlier judgment of Apex Court was dealing with property tax provisions and therefore, could not have been relied upon and even judgment of Uttarakhand High Court had been reversed. Accordingly, ITA No.336 of 2013 (O&M) SAILESH RANJAN -4- 2015.05.05 18:20 I attest to accuracy and integrity of this document reasoning given by Tribunal was projected to be correct. 6. After hearing counsel for parties, we are of opinion that Tribunal was not justified in allowing appeal and issuing necessary direction and should have sent matter back to Commissioner for fresh enquiry. Admittedly, factum of additional information being asked for was never denied by respondent-Society. In appeal, assessee had only raised issue as to whether order of Commissioner is arbitrary and unjustified and whether activities of Society did not qualify in nature of charity and finding had been based on suspicion and conjectures. additional information being asked for, as such, was never controverted. It was not contended that information had been supplied but was not taken into consideration. Under Section 12AA, procedure for registration is prescribed, which reads as under: Procedure for registration. 12AA. (1) [Principal Commissioner] or Commissioner, on receipt of application for registration of 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 trust or institution as he thinks necessary in order to satisfy himself about genuineness of activities of trust or institution and may also make such inquiries as he may deem necessary in this behalf; and (b) after satisfying himself about objects of trust or institution and genuineness of its activities, he (i) shall pass order in writing registering trust or institution; (ii) shall, if he is not so satisfied, pass order in writing refusing to register trust or institution, and copy of such order shall be sent to applicant : Provided that no order under sub-clause (ii) shall be passed unless applicant has been given reasonable opportunity of being heard. [(1A) All applications, pending before [Principal Chief ITA No.336 of 2013 (O&M) SAILESH RANJAN -5- 2015.05.05 18:20 I attest to accuracy and integrity of this document Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before 1st day of June, 1999, shall stand transferred on that day to [Principal Commissioner or] Commissioner and [Principal Commissioner or] Commissioner may proceed with such applications under that sub-section from 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 expiry of six months from end of month in which application was received under clause (a) [or clause (aa) of sub-section (1)] of section 12A.] [(3) Where trust or institution has been granted registration under clause (b) of sub-section (1) [or has obtained registration at any time under section 12A [as it stood before its amendment by Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently [Principal Commissioner or] Commissioner is satisfied that activities of such trust or institution are not genuine or are not being carried out in accordance with objects of trust or institution, as case may be, he shall pass order in writing cancelling 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 reasonable opportunity of being heard.] 7. perusal of above section would go on to show that Commissioner has to satisfy himself of objects of trust and genuineness of activities and after giving opportunity of being heard to trust or institution, refusal can be made to register trust. Thus, section gives power to Commissioner to look into genuineness of activities of trust and to satisfy himself about its activities. Under Section 12A, provisions of Sections 11 & 12 shall not apply in relation to income of any trust or institution unless various conditions are fulfilled. said sections provide that income from property held for charitable purposes shall not be included in total income of previous year of person in receipt of income. ITA No.336 of 2013 (O&M) SAILESH RANJAN -6- 2015.05.05 18:20 I attest to accuracy and integrity of this document 8. provisions of Section 12AA, thus, also give power under sub-section(3) to cancel registration of activities of trust if it is not carried out in accordance with objects but Commissioner has to keep in mind that it is not to act as Assessing Authority while deciding application under Section 12AA and enquiry regarding genuineness of activities of imparting education with charitable purpose is to be kept in mind. objects of trust, thus, have to be taken into consideration. Section 2(15) defines charitable purpose and same includes relief in education and advancement of any other object of general public utility. In case utility is carried out in nature of trade, commerce, business, proviso provides that same will not be charitable purpose. Sub-section 2(15) reads as under: Sub-section 2 (15) - "charitable purpose" includes relief of 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 advancement of any other object of general public utility: Provided that advancement of any other object of general public utility shall not be charitable purpose, if it involves carrying on of any activity in nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for cess or fee or any other consideration, irrespective of nature of use or application, or retention, of income from such activity:] [Provided further that first proviso shall not apply if aggregate value of receipts from activities referred to therein is [twenty-five lakh rupees] or less in previous year;] 9. These aspects have not been taken into consideration by Tribunal which has placed heavy reliance upon judgment of this Court in Pinegrove International Charitable Trust Vs. Union of India & others [2010] 327 ITR 73, which has now been upheld by Apex Court in case of M/s Queen's Educational Society (supra). However, it is also to be noted that Division ITA No.336 of 2013 (O&M) SAILESH RANJAN -7- 2015.05.05 18:20 I attest to accuracy and integrity of this document Bench of this Court in Commissioner of Income Tax Vs. Surya Educational & Charitable Trust [2013] 355 ITR 280, subsequently, held that principles laid down for excluding income under Section 10(23C) are not applicable while considering application for registration under Section 12AA. It was also further held that genuineness of objects of trust are to be taken into consideration. Relevant observations read as under: On other hand, Section 10(23C) of Act are provisions of Act in substitution of earlier provisions of Section 10(22) of Act as to which income shall not be included in computing total income of any person. Therefore, provisions of Sections 11, 12 or Section 10(23C) of Act, deal with income of Trust or of Institution and circumstances as to when such income is to be excluded for computing total income, but basis of such benefit is registration under Section 12AA of Act. Unless Trust or Institution is registered under Section 12AA of Act, such Trust or Institution shall not be entitled to exclude from its total income, deductions or contributions or from other sources. Therefore, principles laid down for excluding income from consideration under Section 10(22) now 10(23)(C) or Sections 11 and 12 are not applicable while considering application for registration under Section 12AA of Act. application for registration is required to be made within one year of creation of Trust. Section 12AA of Act, requires satisfaction in respect of genuineness of activities of Trust, which includes activities which Trust is undertaking at present and also which it may contemplate to undertake. insertion of sub-section (3) to Section 12AA of Act, clarifies said fact, when it empowers Commissioner to cancel registration if activities of Trust are not carried out in accordance with such objects. Therefore, object of Section 12AA of Act, is to examine genuineness of objects of Trust, but not income of Trust for charitable or religious purposes. stage for application of income is yet to arrive i.e. when such Trust or Institution files its return. Therefore, we find that judgments referred to by learned counsel for appellant are not applicable to facts of present case arising out of question of registration of Trust and not of assessment. ITA No.336 of 2013 (O&M) SAILESH RANJAN -8- 2015.05.05 18:20 I attest to accuracy and integrity of this document 10. In such circumstances, heavy reliance by counsel for assessee upon judgment of Division Bench in case of Pinegrove International Charitable Trust (supra), as has been done by Tribunal, also, would be without any basis. power of Commissioner to look into objects of Society and genuineness of same cannot be doubted when basis is of non-supply of information. In such circumstances, it would be appropriate that Commissioner undertakes exercise afresh, on basis of application which has already been filed, keeping in view material which can be produced by respondent-assessee. 11. Accordingly, order of Tribunal dated 19.02.2013 is set aside with direction to Commissioner to decide application, filed under Section 12AA, afresh. Since application was filed more than 3 years ago, it would be appropriate that same is decided expeditiously. With above observations, present appeal stands allowed. (S.J.Vazifdar) (G.S.Sandhawalia) Acting Chief Justice Judge 05.05.2015 sailesh Commissioner of Income-tax-I Chandigarh v. Sri Guru Gorakh Nath Charitable Educational Society
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