Commissioner Of Income Tax, Kota v. M/S Emmanuel Bible Institute Samiti Dadwara, Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 387 / 2011 Commissioner of Income Tax, Kota ----Appellant Versus M/s Emmanuel Bible Institute Samiti Dadwara, Kota. ----Respondent Connected With D.B. Income Tax Appeal No. 110 / 2012 Commissioner of Income Tax, Kota ----Appellant Versus M/s Emmanuel Bible Institute Samiti Dadwada, Kota ----Respondent D.B. Cross Objection Civil No. 27 / 2015 1. The Commissioner of Income Tax (Admn)., Central Revenue Building, Rawat Bhata Road, Kota. 2. The Income Tax Officer. Ward -2(1) Kota ----Petitioners Versus M/s Emmanuel Bible Institute Samiti Dadwara, Kota. Cross Objector--Respondent _____________________________________________________ For Appellant(s) : Mr. Daksh Pareek for Mr. Sameer Jain For Respondent(s) : Mr. Lokesh Tailor for Mr. Mahendra Gargieya _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DEEPAK MAHESHWARI Judgment 22/11/2017 1. In all these appeals common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has assailed thejudgment and order of the tribunal whereby tribunal hasdismissed the appeal of the department and confirmed the orderof CIT(A). In the cross objection, no substantial question of law is framed. 3.This court while admitting the appeals framed followingsubstantial question of law:- Appeal No.387/2011 admitted on 11.9.2015 “Whether the ITAT is right in law in notappreciating that provisions of section 13(1)(b) which have an overriding effect over theprovisions of section 11 & section 12, areapplicable to the assessee society since thesociety has been created/established for thebenefit of a particular community I.eChristians?” Appeal No.110/2012 admitted on 4.7.2012 “Whether the Tribunal was legally justified insetting aside the order of the CIT passed u/s12AA(3) cancelling the registration when theRegistrar of Societies has also cencelled theregistration of the respondent on account ofirregularities found, police case and illegalactivities carried on by the society?” 4.The facts of the case are that the assessee filed return ofincome at nil and the AO completed the assessment u/s 143(3) ofthe Act at an income of Rs.2,02,21,283/-. During the course of assessment proceedings it was noticed by the AO that theassessee was not carrying out its activities in accordance withthe objects of the Samiti so the activities were not genuine. Theexpenditure which was incurred mainly related to propagating ofChristianity. It was noticed by the AO that the Registrar ofSocieties has also cancelled the registration on 27.2.2006.Therefore, under the facts and circumstances the AO assessedthe assessee’s income at Rs.2,02,21,283/-. 5.Counsel for the appellant has taken us to the order of theAO and contended that AO while considering the matter observedthat the activities of the assessee were carried contrary toprovision of Section 11, 12, 13(1)(b) of the Income Tax Act. 6. For ready reference, the said provisions are reproduced asunder:- 11. Income from property held forcharitable or religious purposes (1)Subject to the provisions of sections 60 to63, the following income shall not be includedin the total income of the previous year of theperson in receipt of the income- (a)income derived from property held undertrust wholly for charitable or religiouspurposes, to the extent to which such incomeis applied to such purposes in India; and,where any such income is accumulated or setapart for application to such purposes inIndia, to the extent to which the income soaccumulated or set apart is not in excess oftwenty- five per cent of the income from suchproperty; 6. For ready reference, the said provisions are reproduced asunder:- 11. Income from property held forcharitable or religious purposes (1)Subject to the provisions of sections 60 to63, the following income shall not be includedin the total income of the previous year of theperson in receipt of the income- (a)income derived from property held undertrust wholly for charitable or religiouspurposes, to the extent to which such incomeis applied to such purposes in India; and,where any such income is accumulated or setapart for application to such purposes inIndia, to the extent to which the income soaccumulated or set apart is not in excess oftwenty- five per cent of the income from suchproperty; (b)income derived from property held undertrust in part only for such purposes, the trusthavingbeencreatedbeforethecommencement of this Act, to the extent to which such income is applied to suchpurposes in India; and, where any suchincome is finally set apart for application tosuch purposes in India, to the extent to whichthe income so set apart is not in excess oftwenty five per cent of the income from suchproperty;] (c)income derived from property held undertrust- (i)created on or after the 1st day of April,1952 , for a charitable purpose which tends topromote international welfare in which Indiais interested, to the extent to which suchincome is applied to such purposes outsideIndia, and (ii)for charitable or religious purposes,created before the 1st day of April, 1952 , tothe extent to which such income is applied tosuch purposes outside India: Provided that the Board, by general or specialorder, has directed in either case that it shallnot be included in the total income of theperson in receipt of such income; (d)income in the form of voluntarycontributions made with a specific directionthat they shall form part of the corpus of thetrust or institution. 12. Income of trusts or institutions fromcontributions.- (1)Anyvoluntary contributions.- (1)Anyvoluntarycontributions received by a trust createdwholly for charitable or religious purposes orby an institution established wholly for suchpurposes (not being contributions made witha specific direction that they shall form part ofthe corpus of the trust or institution) shall forthe purposes of section 11 be deemed to beincome derived from property held undertrust wholly for charitable or religiouspurposes and the provisions of that sectionand section 13 shall apply accordingly. (2) The value of any services, being medicalor educational services, made available byany charitable or religious trust running ahospital or medical institution or aneducational institution, to any person referredto in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) ofsection 13, shall be deemed to be income ofsuch trust or institution derived from propertyheld under trust wholly for charitable orreligious purposes during the previous year inwhich such services are so provided and shallbe chargeable to income-tax notwithstandingthe provisions of sub-section (1) of section11. Section 13(1)(b) in The Income- Tax Act,1961 (b) in the case of a trust- for charitablepurposes or a charitable institution created orestablished after the commencement of thisAct, any income thereof if the trust orinstitution is created or established for thebenefit of any particular religious communityor caste; 7.Thereafter the AO mentioned expenses under differentheads which reads as under:- Section 13(1)(b) in The Income- Tax Act,1961 (b) in the case of a trust- for charitablepurposes or a charitable institution created orestablished after the commencement of thisAct, any income thereof if the trust orinstitution is created or established for thebenefit of any particular religious communityor caste; 7.Thereafter the AO mentioned expenses under differentheads which reads as under:- “1. Rs. 2099124/- invested for religiousbooks on priest & pastors & on education,which is as per objections of the society. Wetake children from all background educatethem upto high school level and after that ifa student wants training in Bible College. Weeducatethem,providefoodandaccommodation. Education given to Peachers& Priest head contains the following head ofaccount, Mess expenses, Electricity charges,Telephone bills. Conveyance, travelingexpenses, office expenses etc. Aftergraduate, a student from Bible College weencourage them tom go the poor village ofour nation. For that we provide them vi-cycle, personal bible and some amount fortheir food. This again goes along with ourobjective i.e. to reach the people of everycommunity with god’s love. 2. Rs. 27773165/- Expenses incurred onSchools, Orphanages & churches, whichagain as per objectives of the society. Ourobject is to help poor, downtrodden, widows, orphans, school etc. Details alreadysubmitted during hearing. Our nature ispurpose of religious, education & socialactivities. Now once again we are submittinghead wise detail of expenses to provejustification regarding expenses as perobjectives of the society. 3. Rs. 4376747/-, The object of society isrunning orphanages, hospitals, churches &schools, hence we are helping EmmanuelSchool Society. Emmanuel School Societywas in great Financial crisis due to heavy Taxdemand of Rs.4276747/-(Not Penalty). Asour object of the society to help the schoolwe paid Rs.4376747/- towards tax demandof Emmanuel School Society. 4. Rs. 9502/- Expenses on maintenance ofRaipura church as per objectives of thesociety. 5. Rs. 903309/- The society is runningorphanages, schools & churches etc whenguest come from India & abroad we providethemfood,accommodation,travel,entertainment expenses & hotel charges etc.Above expenses are only for collecting moreforeign contribution to meet out objectives ofthe society. 6. Rs. 180640/- when the Donors some toIndia we encourage them to visit the projectside. In such case we use the money ofdonor through the society. Donors also wouldlike to visit our orphanages, widows andLeper colonies where they presently working.The President & Chairman of the organizationvisit in India and abroad to promote theobjective of the society. He visiting the Donor& updating them, During the visit they needdonors share about the need of Organization,attend conferences. Personally invitesmedical professional and teachers to comeand give free service to orphanages atdifferent places. 7. Rs.606171/-, Gift given for promotion offund collection to fulfill objective of thesociety. 8. Rs. 2513385/- We helped them in theconstruction of prayer hall/ communitycentre. Our churches are mainly established and organized to impart spititual educationand awareness to the people. We havechurch building where the local Chirstiancommunity gathers for worship. Ourchurches are also a means of reaching out tothe needy people with help. We have gonethrough the social activity. 9. Rs.10000/-, We paid donation to otherChristian school like Chiristian Council forMother Teresa Social Justice and other. Insuch school there are student who are fromvery poor family. Our small amount helps toprovide the basic need for those children.This is done not only for the Christian Schoolbut mainly for the children.” 8. Rs. 2513385/- We helped them in theconstruction of prayer hall/ communitycentre. Our churches are mainly established and organized to impart spititual educationand awareness to the people. We havechurch building where the local Chirstiancommunity gathers for worship. Ourchurches are also a means of reaching out tothe needy people with help. We have gonethrough the social activity. 9. Rs.10000/-, We paid donation to otherChristian school like Chiristian Council forMother Teresa Social Justice and other. Insuch school there are student who are fromvery poor family. Our small amount helps toprovide the basic need for those children.This is done not only for the Christian Schoolbut mainly for the children.” 7.1Therefore, those expenses were not allowed to be deducted.The matter was further considered by CIT(A) who while partlyallowing the appeal observed as under:- “In this case, registration u/s 12A wasgranted and still continues i.e. it was notwithdrawn, meaning there by the bar ofChiristian Religion as used by the ld. AO, isnot at all relevant”(para 8 of letter-dated26.03.2010). The appellant claimed that history of thecase was “completely lost sight by the ld.AO” and emphasised, “the appellant societyhas been running and carrying out itsactivities in the same manner & method andwith the same set of objects. Expenditureshave been incurred on all these veryactivities in the past also. The accounts werealso made in the same manner. Therefore,the appellant society has been claimingbenefit of exemption u/s 11 & 12 of the Act.However, the department never deniedbenefit, the way it did this year andassessment were completed right from A.Y.1982-83 to 2006-07. Even some of the yearswere assessed under scrutiny e.g. A.Y. 2004-05, was assessed vide order u/s 143(3)dated 22.12.2006 (PB 61-64). Sameexpenditure have been incurred in A.Y. 2004-05 and yet the ld. AO recorded a categoricalfinding in para 3 of the order that expenditure were incurred for achieving theobjective of the trust and are fully vouched.Thus, there appears no valid reason or freshmaterial as to why the ld. AO has takendeparture from this settled history of thecase from last several years”. The appellantreferred to decision in cases of Kehar Singh[195 ITR 769 (Raj)] and MangalchandBhanwarlal & co. [144 ITD 359 (JP)] toassert, “Although the doctrine of res-judicatanormally do not apply to Income taxproceedings. However, it does apply wherethere is no change in the facts upon which adecision in the past has already been arrivedat”. Based on the assessment order, in myopinion, crux of decision of the assessingofficer is that various expenses during theyear, amounting to Rs. 2,02,21,283/-, werenot incurred on charitable purposes andconditions of registration under section 12AAof the I.T. Act, 1961 were violated. The mainreason for this decision is his observationthat such expenditure was incurred for thebenefit of a particular religious community,namely Christians. From a plain reading of section 11, it isevident that benefit of this section isavailable for both charitable and religiouspurposes, a view underscored by Hon’bleITAT, Cochin Third Member Bench in the caseof The society of Presentation Sisters (ITA #457/Coch/2007-datd22.09.09),relevantportion of which is reproduced below: Based on the assessment order, in myopinion, crux of decision of the assessingofficer is that various expenses during theyear, amounting to Rs. 2,02,21,283/-, werenot incurred on charitable purposes andconditions of registration under section 12AAof the I.T. Act, 1961 were violated. The mainreason for this decision is his observationthat such expenditure was incurred for thebenefit of a particular religious community,namely Christians. From a plain reading of section 11, it isevident that benefit of this section isavailable for both charitable and religiouspurposes, a view underscored by Hon’bleITAT, Cochin Third Member Bench in the caseof The society of Presentation Sisters (ITA #457/Coch/2007-datd22.09.09),relevantportion of which is reproduced below: “So for as the provision of sec. 11(1)(a) isconcerned, no distinction is made betweencharitable and religious purposes. Acharitable institution can have religiouspurposes; whereas a religious institution maybe partly charitable. Even otherwise reliefand help to the poor, medical help to theneedy, looking after of deity and temples(mosque, church included) are no doubtreligious purposes but these are alsoconsidered as charitable in India. Therefore,the view taken that exemption under Sec11(1)(a) can not be allowed to a charitabletrust as it is also carrying on some purposeswhich are termed as ‘religious’ is totallyunwarranted. Pt. Ram Chandra Shukla vs. Mahadeoji mahabirji & Hazrat All Kanpur &Ors. AIR 1970 SC 450 applied; CIT vs SocialService Centre (2001) 169 CTR (AP) 130(2001) 250 ITR 39 (AP), Addl. CIT vs. A.A.Bibijiwala Trust (1975) 100 ITR 516 (Guj)and CIT vs Barkate Saifiyah Society (1995)213 ITR 492 (Guj) relied on; Calicut IslamicCultural Society ITA Nos. 729/Coch/2006 and641/Coch/2006 dated 31[st]July, 2008impliedly approved.” A perusal of memorandum of Association ofthe appellant confirms the claim that theappellant Samiti was not meant or createdfor the benefit of members of a particularcommunity, creed or religion. From detailsmade available to me, it is evident that theChildren Homes at Kota, Piploda, Chawala,new Delhi and Tindor in Rajasthan hadadmitted Hindu and Muslim children as well,where as all 37 children in the children Homeat Fatehgarh, in Madhya Pradesh wereHindus. These details, submitted before methrough letter dated 26.03.2010, were madeavailable to the assessing officer, who did notmake any adverse observation on the same.It is obvious enough that the claim of theassessing officer that the appellant cateredto Christians only is not correct. It is alsosignificant that expenditure on schools andChildren homes is the single largest item ofexpenditure his year. Further, in the case of Shri Digamber jainmandir, Chaksu [(2009) 29 DTR 65 (Raj)],the Hon’ble Rajasthan High Court held that“The language of Sec. 12A does not indicate,not even remotely, that an institution ofreligious nature cannot get itself registeredu/s 12A. In other words, the institutions ofreligious nature as well as for charitablepurpose can claim registration u/s 12A.” In light of above, in my considered opinion,decision of the assessing officer thatexpenditure of Rs. 2,02,21,283/- was notincurred on charitable purposes, is based ona narrow and an incorrect view of section 11of the IT Act, 1961. It is narrow because section 11 recognizesboth charitable and religious purposes, aview confirmed by higher appellate authorities: “no distinction is made betweencharitable and religious purposes” in section11 of the IT Act, 1961. In light of above, in my considered opinion,decision of the assessing officer thatexpenditure of Rs. 2,02,21,283/- was notincurred on charitable purposes, is based ona narrow and an incorrect view of section 11of the IT Act, 1961. It is narrow because section 11 recognizesboth charitable and religious purposes, aview confirmed by higher appellate authorities: “no distinction is made betweencharitable and religious purposes” in section11 of the IT Act, 1961. Further, this view of the assessing officer,based on his assumption that suchexpenditure was incurred for the benefit of aparticular religious community, namelyChristians, is incorrect because Memorandumof Association shows that Samiti was notcreated for the benefit of a community, acreed or a religion. In course of assessmentproceedings, the assessing officer did notbring any evidence on record to show thatactivities of the appellant were meantexclusively for members of the Christiancommunity. As mentioned above, there isevidence to show that Children Homes run bythe Samiti do admit Hindu and Muslimchildren, a fact on which the assessing officerdid not make any adverse observation, incourse of appeal proceedings. For the sake of argument, even if it isaccepted that the appellant was catering onlyto Christians, in the opinion of the Hon’bleRajasthan High Court, the appellant was stilleligible for registration and, thus, entitled tobenefit of section 12 A of the IT Act, 1961. It is pertinent that Samiti was grantedregistration under Section 12A of the IT Act,1961 on 17.09.80. Since then it has beenpursued the objects laid down in theMemorandum of Association and there hasbeen no change in the constitution or theobjects of the Samiti. Further, from AY 82-83and up to AY 06-07, the department neverdenied benefits of section 11 and 12A of theIT Act, 1961. The assessing officer has not explained theimport of his observation that even while theSamiti is registered under the FCR Act, 1976,the government has no control over fundsreceived by the appellant from foreigndonors and he did not elaborate the impactof this observation on entitlement of theappellant under section 11 and 12A of the ITAct, 1961. To sum up, though a Christian organization,its Memorandum of Association isunambiguous and categorical that it was created for the benefit of all people,irrespective of caste, creed or religion and ithas been mentioned above that there isevidence to show its beneficiaries includeHindus and Muslims. At the same time, thereis no evidence to show that during the periodunder consideration the appellant incurredexpenses for purposes other than its statedobjectives. Even if its is held to be a religiousorganization, in light of decision of theHon’ble Rajasthan High Court mentionedabove, it is my view, it is eligible forregistration and entitled to benefits of section12A of the IT Act, 1961. In this backdrop and as there is no change infacts and circumstances over earlier years, inmy view, decision of the assessing officer todeny benefits of section 11 and 12A of the ITAct, 1961 is not tenable; consequently theaddition of Rs.2,02,21,283/- is notconfirmed. Grounds 1 to 3 of the appeal areaccepted.” 7.2Further, the tribunal observed as under:- In this backdrop and as there is no change infacts and circumstances over earlier years, inmy view, decision of the assessing officer todeny benefits of section 11 and 12A of the ITAct, 1961 is not tenable; consequently theaddition of Rs.2,02,21,283/- is notconfirmed. Grounds 1 to 3 of the appeal areaccepted.” 7.2Further, the tribunal observed as under:- “2.4 We have heard both the parties. TheRevenue for the assessment year 2004-05has treated the income of the assesseeexempt u/s 11 of the Act. Page 15 of thepaper book filed by the ld. AR showed thecopy of Registration Certificate u/s 12A of theAct. It is nowhere mentioned in theRegistration Certificate that the society isbeing registered as charitable society. If onegoes through the nature of the expenses andexplanation given before the AO, it is clearthat the expenses at serial no. 1 and theexpenses given at serial no. 8 can only berelated to religious activities. Other expensesare not for religious purposes and have beenincurred for Schools, orphanages etc. TheHon’ble Jurisdictional High Court in the caseof CIT Vs. Digamber jain Mandir, Chaksu(supra) has held that institutions of religiousnature can be allowed registration. The mainheading for Section 11 is “Income fromproperty held for charitable or religiouspurposes. Section 11(1)(a) says that incomederived from property held under trust wholly for charitable or religious purposes isto be allowed exempt in case such income isapplied to such purposes in India. The word‘such purposes’ referes to the charitable aswell as religious purposes. Thus one has to see the requirement thatapplication of income for charitable orreligious purposes is to be made to theextent of 85%. The Hon’ble Apex Court inthe case of Hazrat Pirmahomed Shah SahibRoza Committee vs. CIT, 63 ITR 490 had anoccasion to consider as to whether theincome of the Roza property held for whollyreligious purposes is exempt fromassessment. The Hon’ble Apex Court heldthat the Roza properties were held for whollyreligious purposes and income is exempt u/s4(3)(i) of the Act 1922 corresponding toSection 11 of the Income Tax Act, 1961. Inthat case, the Tribunal noticed that surplusincome of the property was utilized forrunning Madrassas, Library and giving foodto pilgrims attending Roza and the Mosqueon festive occasions. It is not the case of theRevenue that the expenses have not beenincurred for purposes for which the societywas established. It is also nt the case of theRevenue that the expenses have beenincurred for benefit of the persons referred toSection 13(3) of the Act. The ld. CIT(A) hasreferred to the decision of Third Member ofCochin Bench in the case of Society ofPresentation Sisters (ITA No. 457/Coch/2007dated 22.09.2009). The Third Member hasobserved as under:- “So far as the provisions of Section 11(1)(a)is concerned, no distinction is made betweencharitable and religious purposes. Acharitable institution can have religiouspurposes; whereas a religious institution maybe partly charitable. Even otherwise reliefand help to the poor, medical help to theneedy, looking after the deity and temples(mosques, church included) are no doubtreligious purposes but these are alsoconsidered as charitable in India. Therefore,the view taken that exemption u/s 11(1)(a)cannot be allowed to a charitable trust as itis also carrying on some purposes which aretermed as ‘religious’ is totally unwarranted.Pt Ram Chandra Shukla vs Mahadeoji Mahabirji & Hazrat Ali Kanpur & Ors, AIR1970 SC 450 applied; CIT vs Social ServiceCentre (2001), 169 CTR (APP) 130 (2001),250 ITR 39 (AP), Addl. CIT vs A.A. BibijiwalaTrust (1975) 100 ITR 516 (Guj.) and CIT vsBarkate Saifiyah Society (1995), 213 ITR 492(Guj.) relied on; Calicut Islamic CulturalSociety (ITA No. 729/Coch/2006 and641/Coch/206 date 31[st] July, 2008) impliedlyapproved.” Mahabirji & Hazrat Ali Kanpur & Ors, AIR1970 SC 450 applied; CIT vs Social ServiceCentre (2001), 169 CTR (APP) 130 (2001),250 ITR 39 (AP), Addl. CIT vs A.A. BibijiwalaTrust (1975) 100 ITR 516 (Guj.) and CIT vsBarkate Saifiyah Society (1995), 213 ITR 492(Guj.) relied on; Calicut Islamic CulturalSociety (ITA No. 729/Coch/2006 and641/Coch/206 date 31[st] July, 2008) impliedlyapproved.” 8.Regarding other appeal (110/2012), counsel for theappellant contended that registration was cancelled in view of thefact that the registration was not granted by the competentauthority. 8.1Further tribunal while considering the matter observed asunder:- “19. Initially, the Bench thought that thematter is covered by the order of thetribunal in the case of the assessee forassessment year 2007-08 but it was noticedthat there are some aspects which were notconsidered and these are: (i) Cancellation of registration of society bythe Registrar of Society. Copy of order is tobe obtained. (ii) Whether Section 13(1) and proviso toSection 2(15) will have impact for requiringthe cancellation. Copy of order of Registrar of Society andcopy of written petition filed before theHon’ble High Court was filed. 20. We have heard both the parties. Section12AA(3) refers to the power of ld. CIT tocancel the registration of trust or institution.The word cancel of registration has beenmentioned in Section 186 of the IT Act and inthat provision it has been mentioned asunder:- “If where a firm has been registered or isdeemed to have been registered or itsregistration has effect u/s 7 of the Section184 for an assessment year, the AO is ofopinion that there was during the previousyear no genuine firm in existence asregistered, he may, after giving the firm areasonable opportunity of being heard cancelthe registration of the firm for thatassessment year.” 21.The dictionary meaning of cancellation isto annul, abrogate or terminate. Hence thelegislature provided u/s 186 for cancellationfor particular assessment year but in Section12AA(3), it is mentioned that ld. CIT cancancel the registration. It mean the order ofregistration passed by the ld. CIT is cancelledand hence order u/s 12AA(3) will terminateor annul that order. 22. The tribunal in the case of the assesseefor the assessment year 2007-08 (140 TTJ508) has held that expenses of Rs.2.02 croreare to be considered as applied for theobjects of the society. The tribunal also heldthat assessee is entitled to registration as areligious trust. It will be useful to refer to held portion:- “It is nowhere mentioned in the registrationcertificate that the society is being registeredas charitable society. If one goes through thenature of the expenses and explanation givenbefore the AO, it is clear that the expenses atserial no.1 and the expenses given at serialNo.8 can only be related to religiousactivities. Other expenses are not forreligious purposes and have been incurredfor schools, orphanges, etc. The mainheading for Section 11 is “income fromproperty held for charitable or religiouspurposes”. Section 11(1)(a) says that incomederived from property held under trustwholly for charitable or religious purposes isto be allowed exemption in case such incomeis applied to such purposes in India. Thewords ‘such purposes’ refer to the charitableas well as religious purposes. This one has tosee that requirement that application ofincome for charitable or religious purposes isto be made to the extent of 85 per cent. Considering the legal position, the ld. CIT(A)was justified in deleting the addition becausethe assessee was a religious and charitablesociety and the expenses have been incurredfor the purpose for which society wasestablished-The Society of PresentationSisters vs. ITO (2009) 125 TTJ (Coch) (TM)909: (2009) 30 DTR (Coch) (Tribunal) (TM) 1followed. Considering the legal position, the ld. CIT(A)was justified in deleting the addition becausethe assessee was a religious and charitablesociety and the expenses have been incurredfor the purpose for which society wasestablished-The Society of PresentationSisters vs. ITO (2009) 125 TTJ (Coch) (TM)909: (2009) 30 DTR (Coch) (Tribunal) (TM) 1followed. Conclusion: Assessee being a religious andcharitable society, the expenses incurred byit relating to both religious as well ascharitable activities were for the purpose forwhich the society was established and,therefore, the expenses incurred for religiouspurposes could not be disallowed for thepurpose of exemption u/s 11. 23. It is true that the present appeal was notheard along with the appeal against order ofITO u/s 143(3) for assessment year 2007-08though matters considered by Ld. CIT shouldhave been brought to our knowledge. Inrespect of satisfaction of the Ld. CIT inpassing order u/s 12AA(3), it is clear thatthere was a report from the AO. Satisfactionrequires to apply the mind and came to theconclusion that prima facie the action isneeded. Hence requirement of satisfactionstands complied. 24. The assessee is saying that report of AOhas not been provided. The Ld. CIT is usingthat report and hence natural justicedemands that copy of such report to beprovided to assessee. On this grounds thatcopy of such report to be provided toassessee. On this ground, the order isrequired to be set aside to be made again. 25. The Registrar of Societies cancelledregistration on account of certainirregularities and the following are relevantfor Income Tax matter. (a) Without amending the regulations, theposts of president and Chairman werecreated. Furthermore, father and son wereshown as elected for these two posts. (b) Enquiry committee constitute by socialweelfare department has noticed serious allegations. A case on the basis of this reportis pending with police department. (c) The society is receiving huge sums fromforeign services and the society is registeredunder foreign contribution Act. The sum isnot being spent for the purpose for which thefunds were received. (d) The society is doing unconstitutionalactivities by hurting the sentiment of personsbelonging to other religions. It is trying tocreate hatred against other religion. (e) The irregularities committed by thesociety and the documentary evidencesavailable show that the society is indulging inunconstitutional activities and such activitiesare also against the national security. 26. On the basis of various proceduralirregularities and the regularities referred toabove, the Registrar of societies cancelledthe registration of societies vide order dated27.2.2006. Against this order the societyfield Writ Petition before the Rajasthan HighCourt. The Writ petition was dismissed by theSingle Judge of the Hon’ble High Court.Against the order of the Single Judge, thesociety filed an appeal before the DivisionBench of Rajasthan High Court. Before theDivision Bench it was submitted that theRegistrar of Societies acts quasi judicial andtherefore, he has no right to cancel theregistration unless the power of cancellationis provided under the provision of theSocieties Act. The counsel appearing onbehalf of the State government admitted thatthere is no provision to cancel theregistration. However, the power can beassumed by the Registrar under the GeneralClause Act. Hon’ble Jurisdictional High courtwhile admitting the appeal observed that theorder of canceling the registration requiresconsideration has prima facia the Registrarhas no authority to do the same in view ofthe ratio of the supreme court decision in thecase of Indian National Congress (I) Vs.institute of Social Welfare and others (2002)5 SSC 685. The Hon’ble Jurisdictional HighCourt stayed the operation of the order ofthe Single Judge. It will be useful to reproduce the relevant extract of the decisionof the Hon’ble Jurisdictional High court:- “It is nowhere mentioned in the registrationcertificate that the society is being registeredas charitable society. If one goes through thenature of the expenses and explanation givenbefore the AO, it is clear that the expenses atserial no.1 and the expenses given at serialNo.8 can only be related to religiousactivities. Other expenses are not forreligious purposes and have been incurredfor schools, orphanges, etc. The mainheading for Section 11 is “income fromproperty held for charitable or religiouspurposes”. Section 11(1)(b) says that incomederived from property held under trustwholly for charitable or religious purposes isto be allowed exemption in case such incomeis applied to such purposes in India. Thewords ‘such purposes’ refer to the charitableas well as religious purposes. Thus one hasto see that requirement that application ofincome for charitable or religious purposes isto be made to the extent of 85 per cent.Considering the legal position, the ld. CIT(A)was justified in deleting the addition becausethe assessee was a religious and charitablesociety and the expenses have been incurredfor the purpose for which society wasestablished-The Society of PresentationSisters vs. ITO (2009) 125 TTJ (Coch) (TM)909: (2009) 30 DTR (Coch) (Tribunal) (TM) 1followed. Conclusion: Assessee being a religious andcharitable society, the expenses incurred byit relating to both religious as well ascharitable activities were for the purpose forwhich the society was established and,therefore, the expenses incurred for religiouspurposes could not be disallowed for thepurpose of exemption u/s 11.” 27. The Hon’ble Jurisdictional High Court hasleft open the authorities to take action underthe provisions of law in case there areirregularities or any illegal Act by the society.The Registrar has referred to Police case andhas also referred that the society is indulgingin anti-national activities. Therefore, the Ld.CIT will have to ascertain the nature of thecase, if any, filed against the society and if these cases have impact on cancellation ofregistration then such factors are to beconsidered. We, therefore, fiil that the orderof Ld. CIT u/s 12AA(3) of the Act is requiredto be set aside to be made again afterconsidering our observations given in theorder. The assessee will be given anopportunity of hearing before passing thefresh order.” 9.Taking into consideration the fact that the matter which ispending before the High Court, the observations made by thetribunal are just and proper. 12AA registration could not havebeen given on the basis which is stayed by the High Court. 10.In that view of the matter, the issue is answered in favour ofthe assesee and against the department. 11.The appeals stand dismissed and cross objection filed by theassessee also stand dismissed. (DEEPAK MAHESHWARI)J. (K.S. JHAVERI)J. Brijesh 163-165.