E- Appell v. Labana Sikh Educational Society, Barara, Ambala, Pan-Aabtl2722M_

IN THE HIGH COURT OF PUNJAB AND HARYANA AT |CHANDIGARH. ITA No. 378 of 2017 (O&M).Date of decision: 05.07.2018 The Commissioner of Income Tax (Exemptions), Chandigarh .--e- Appell Vs. Labana Sikh Educational Society, Barara, Ambala, PAN-AABTL2722M_ .--Respondent CORAM: HON’BLE MR. JUSTICE AJAY KUMAR MITTALHON’BLE MR. JUSTICE AVNEESH JHINGAN Present: |Mr. Denesh Goyal, Senior Standing Counsel for the appellant. | Ajay Kumar Mittal,J. 1]The appellant-revenue has filed the instant appeal under Section260A of the Income Tax Act, 1961 (in short, “the Act’) against the orderdated 18.01.2017, Annexure A.2, passed by the Income Tax AppellateTribunal, Division Bench, Chandigarh (in short, “the Tribunal”) in I.T.A.No.287/CHD/2016, claiming following substantial questions of law. “(1) Whether on the facts and in the circumstances of the case,the order of the ITAT is not perverse in holding that the CIT has’not made adverse remarks on the objects and activities of theapplicant and thereby directing to grant registration to theapplicant whereas the CIT had clearly held in its order that thegenuineness of the activities did not stand corroborated as it was"claiming wrong exemption? — (ii) Whether making wrong claims, in the returns of income, incontravention of the statutory provisions doesn’t have a bearingon the genuineness of the applicant and is it the case that suchentities need to be given benefit of clauses that exempt theirincomes from taxation? — (111) Whether on the facts and in the circumstances of the case,the ITAT has erred in directing the registration to be accordedinstead of reverting it back for re-examination in the light of its’findings?| ?DA few facts relevant for the decision of the controversy involvedas narrated in the appeal may be noticed. The Commissioner of Income Tax.(Exemption) |CIT(E)] rejected assessee’s application for registration undersection 12AA on the ground that the assessee had been claiming exemptionunder Section 10O(23C)(iliad) of the Act, whereas, its receipts exceeded theprescribed limit of=one crore. [t was further noticed that the assesseeinstitute was substantially financed by the Government and as such it was noteligible to claim exemption under Section 10(23C)(iiad) of the Act. Further,the assessee had been running its institutions on commercial lines. Since, theassessee had been making wrong claims of exemption, its activities did notstand corroborated. It was, thus, concluded that the running of the institutionsof the assessee on commercial lines was not of charitable nature and hencenot entitled to registration under Section 12AA of the Act. Aggrieved by theorder, the assessee filed an appeal before the Tribunal. Vide order dated24.01.2017, the Tribunal set aside the order passed by the CIT(E) anddirected to grant the registration. It was held that the CIT(E)’s observation onwrong claim of exemption under Section 1O(23C)(iiiad) of the Act or itsfailure to claim exemption under Section 10(23C)(iliab) of the Act is not a reflection on the genuineness of the activities of the assessee. Hence the instant appeal by the appellant-revenue. | reflection on the genuineness of the activities of the assessee. Hence the instant appeal by the appellant-revenue. | 3,We have heard learned counsel for the appellant-revenue.4Admittedly, in the present case, the assessee’s application forregistration under Section 12AA of the Act was rejected by the CIT(E) videorder dated 29.01.2016, Annexure A.1. As per Section 12AA of the Act, theCIT(E) for the purpose of grant of registration has to consider thegenuineness of the objects and activities of the trust. After examining theentire facts, material on record and the relevant statutory provisions, it hasbeen recorded by the Tribunal that nothing adverse has been found by theCIT(E) regarding the genuineness of the objects of the respondent-society.The main aim of the respondent-assessee was running of Sant Mohan SinghKhalsa Labana Girls College. Thus, the objects of the respondent-assesseerelated to imparting education and were charitable under Section 2(15) of theAct. Genuineness of the activities of the respondent-assessee had not beendoubted by the CIT(E). Even before the Tribunal, the Certificate ofRegistration of Societies was filed showing that the respondent-assessee was.registered on 12[th]of November 1981. Copy of Constitution of the society wasalso filed to prove that it was formed primarily for the purpose of impartingeducation and thus had a charitable object. Further copy of the balance-sheetand profit and loss account for the year ending 31.03.2015 was filed showingreceipts of the college and school run by the respondent-society primarilyfrom fees. Thus, the genuineness of the activities carried out by therespondent-assessee were proved. With regard to the finding given by theCIT(E) that the respondent-assessee had wrongly claimed exemption undersection 10(23C)(itiad) of the Act, since the total income of the society,college and school run by it, exceeded=one crore which was the limit set under the statute for claiming exemption, it was recorded by the Tribunal thatthis had no reflection on the genuineness of the activities carried out by therespondent-assessee. Thus, it was rightly concluded by the Tribunal that theobjects and activities of the respondent-society had not been doubted.Consequently, the order passed by the CIT(E) was rightly set aside by theTribunal. The relevant findings recorded by the Tribunal read thus:- “7. In this legal backdrop, we find that the facts in the presentcase demonstrate that nothing adverse has been found by theCommissioner Of Income Tax regarding the genuineness of theobjects of the applicant society. In fact, the observations of thelearned Commissioner of Income Tax in this regard are that themain aim of applicant society is running of Sant Mohan SinghKhalsa Labana Girls College and other objects and any othereducational institute with a view to providing all round balancedand wholesome education to the youth so as to make themworthy citizens of this great country. Clearly, the objects of theappellant society relate to imparting education and are charitableas defined under section 2(15) of the Act. Further we find thatthere is no adverse observation regarding the activities carriedon by the appellant society by way of imparting education filedbefore the learned Commissioner of Income Tax, copy ofregistration of the society, the constitution/ by-laws, the letter ofregistration all were filed before the learned Commissioner ofIncome Tax, who after perusing the same has not found anythingadverse regarding the activities carried on by the assesseesociety. Thus, clearly, the genuineness of the activities of theapplicant society has not been doubted by the learnedCommissioner of Income Tax. Even before us the Certificate ofRegistration of Societies was filed showing that the applicantsociety was registered on 12[th]November, 1981. Copy of|Constitution of the society was filed to prove that it was formedprimarily for the purpose of imparting education and thus had acharitable object. Further copy of the Balance Sheet and Profit and Loss Account for the year ended on 31.03.2015 was filedshowing receipts of the College and School run by the applicantsociety primarily from fees, thus proving the genuineness of theactivities carried out by it. 8 What the learned Commissioner of Income Tax found/§objectionable is that the applicant society, being liable to claimexemption under section 10(23C)(illab), since it is whollyfinanced by the State Government has not done so. Clearly, thisis not a reflection on the genuineness of the activities beingobservation of the learned Commissioner of Income Tax, theapplicant society is eligible to claim exemption under section10(23C)(iiab) of the Act which grants exemption to institutionsexisting solely for the purpose of imparting education. The otheradverse finding of the learned Commissioner of Income Tax isvis-a-vis the fact that applicant society has wrongly claimedexemption under section 10(23C)(iliab) of the Act sinceaggregating the income of the society, college and school runby it, the same exceeds Rs.]1 Crore which is the limit set underStatue for claiming exemption under section 10(23C)(iliab) ofthe Act. Again we find that this has no reflection on thegenuineness of the activities carried out by the applicant society,but is an affirmation of the genuineness of the activities since itcalls into question the claim of exemption under section10(23)(iuiab) of the Act, which grants exemption from tax ofincomes of institutions receipts during a financial year does notexceed a Specified limit, on account of the income exceeding aparticular limit but does not doubt the genuineness of theactivities carried out by the assessee. Further the observation ofthe Ld. CIT that the institutions of the applicant society arebeing run on commercial lines, we find has no basis. Ld. CIThas merely made a general comment on the above lines which is"not supported by any affidavit.” 5]Learned counsel for the appellant-revenue has not been able topoint out any error or illegality in the findings recorded by the Tribunal watranting interference by this Court. No substantial question of law arises. Consequently, the appeal stands dismissed. (Ajay Kumar Mittal) Judge