Istration Even Though The Averreddecision Was In Respect Of 12Aa Matters?Decision Was In Respect Of 12Aa Matters? v. On 28.3.2018, An Application Was Filed By The Society Claimingregistration Under Section 12Aa Of The Act. The Cit Rejected The Same On28.9.2018 Taking Into Cons

ITA No. 429 of 20191] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 429 of 2019Date of decision: 20.1.2020 The Commissioner of Income Tax (Exemptions), Chandigarh.. Appellant Vv M/s Sanatan Dharam Educational Charitable Society .. Respondent CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEBEESH JHINGHON'BLE MR. JUSTICE AVNEBEESH JHING Present:Mr. Denesh Goyal, Senior Standing Counsel for the appellant.appellant. AVNEESH JHINGAN, J. The revenue has filed the appeal against the order dated5.4.2019 passed by the Income Tax Appellate Tribunal, Camp Bench atJalandhar (for short, ‘the Tribunal’) allowing the appeal of the respondent-society (hereinafter referred to as ‘the society’) and directing theCommissioner of Income Tax (Exemptions) (for short, ‘the CIT") to grantregistration under Section 12AA of the Income Tax Act, 1961 (for short,‘the Act’). Following substantial questions of law have been claimed; “TI. Whether on the facts and circumstances of the case, tHon'ble ITAT has erred in directing the approval to beHon'ble ITAT has erred in directing the approval to be accorded instead of reverting it back for re-examinationfollowing the spirit ofjudgment by the Hon'ble AllahabadHigh Court in appeal No. 112 of 2013 in the case of CITv. A. R. Trust as per which the Hon'ble ITAT does notfollowing the spirit ofjudgment by the Hon'ble AllahabadHigh Court in appeal No. 112 of 2013 in the case of CITv. A. R. Trust as per which the Hon'ble ITAT does not ITA No. 429 of 2019|2]| have powers to direct registration even though the averreddecision was in respect of 12AA matters?decision was in respect of 12AA matters? {IWhether on the facts and circumstances of the case, theHon'ble ITAT has erred on relying upon the case of CITVs. Surya Educational and Charitable Trust (2013) 355ITR 280 where the fact of the present case was totallydifferent. In the said case the trust was newly establishedwhere as in the present case the applicant has alreadyconducted various activities|Hon'ble ITAT has erred on relying upon the case of CITVs. Surya Educational and Charitable Trust (2013) 355ITR 280 where the fact of the present case was totallydifferent. In the said case the trust was newly establishedwhere as in the present case the applicant has alreadyconducted various activities| II. Whether on the facts and circumstances of the case, theHon'ble ITAT is right in disregarding the fact that theassessee society has received advance rent ofRs.13,87,000/- and the same is not shown in the incomeand expenditure account?Hon'ble ITAT is right in disregarding the fact that theassessee society has received advance rent ofRs.13,87,000/- and the same is not shown in the incomeand expenditure account? IV. Whether on the facts and circumstances of the case, thHon'ble ITAT has erred in holding that whether theadditional land was purchased for educational purpose ornot is irrelevant.Hon'ble ITAT has erred in holding that whether theadditional land was purchased for educational purpose ornot is irrelevant. V. Whether on the facts and circumstances of the case, thorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,2%$3%$&%CGorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,2%$3%$&%CG On 28.3.2018, an application was filed by the society claimingregistration under Section 12AA of the Act. The CIT rejected the same on28.9.2018 taking into consideration following grounds: 9+:There was advance rent received by the society from ITA No. 429 of 2019}3]] Shri Rajiv Jain and Shri Raj Kumar Nayyar in thefinancil year 2015-16 and the same should have beenrouted through income and expenditure account. Furtherthat the advance rent received was not in comparison tothe rental value. 95:The Society had purchased additional land and it was notclear that what necessitated purchase of the said land.clear that what necessitated purchase of the said land. On 28.3.2018, an application was filed by the society claimingregistration under Section 12AA of the Act. The CIT rejected the same on28.9.2018 taking into consideration following grounds: 9+:There was advance rent received by the society from ITA No. 429 of 2019}3]] Shri Rajiv Jain and Shri Raj Kumar Nayyar in thefinancil year 2015-16 and the same should have beenrouted through income and expenditure account. Furtherthat the advance rent received was not in comparison tothe rental value. 95:The Society had purchased additional land and it was notclear that what necessitated purchase of the said land.clear that what necessitated purchase of the said land. 96:The advance fee received was not shown in income andexpenditure account.expenditure account. 9/:The society was having surplus income over expenditure,ranging from 20% to 30% and the same was notreasonable.ranging from 20% to 30% and the same was notreasonable. Aggrieved of the order, an appeal was filed. The Tribunalaccepted the appeal on 5.4.2019. It was held that while considering theapplication for claiming registration under Section 12AA of the Act, thescope will not be to consider that the income was being applied inconformity with the aims and objects. The stage would be when the return isfiled and in case of any violation, recourse could be taken to sub-section (3)of Section 12AA of the Act. Further, the advance fees having been shown ascurrent liabilities and not part of total income had no bearing ongenuineness of the activities. The Tribunal observed that the securitydeposit received from the tenant was not to be part of total income. Vis-a-vis the additional land purchased by the society the same had no bearing onthe genuineness of the activities of the society and in case of use of land forany other purpose, the same would entitle the CIT to exercise power underSection 12AA(3) of the Act. A specific finding was recorded that surplus ITA No. 429 of 20194] Which ranged trom 15% to 23% was ploughed back by the society forfurtherance of its object. Aggrieved of the order, the present appeal is filed, Learned counsel for the revenue argued that there was nocomparison between the rent received and the security deposit. It iscontended that it was not clear that the additional land purchased was foreducational purposes. Further the challenge is that the surplus incomegenerated was not reasonable, The contentions raised by learned counsel for the revenue are rejected. section 12AA of the Act (at the relevant assessment year) isquoted below: *12AA. Procedure for registration.-(1) The PrincipalCommissioner or Commissioner, on receipt of an applicationfor registration of a trust or institution made under clause (a)or clause (aa) [or clause (ab)] of sub-section (1)] of Section12A, shall-- (a) call for such documents or information from the trust orinstitution as he thinks necessary in order to satisfy himselfabout the genuineness of activities of the trust or institutionand may also make such inquiries as he may deem necessaryin this behalf; and (b) after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he;-- (i) shall ass an order in writing registering the trust orinstitution; ITA No. 429 of 20195 ]| (11) shall, if he is not so satisfied, pass an order in writingrefusing to register the trust or institution, and a coy of such order shall be sent to the applicant:” (a) call for such documents or information from the trust orinstitution as he thinks necessary in order to satisfy himselfabout the genuineness of activities of the trust or institutionand may also make such inquiries as he may deem necessaryin this behalf; and (b) after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he;-- (i) shall ass an order in writing registering the trust orinstitution; ITA No. 429 of 20195 ]| (11) shall, if he is not so satisfied, pass an order in writingrefusing to register the trust or institution, and a coy of such order shall be sent to the applicant:” From a perusal of the provision quoted above, it is evident thatthe CIT while processing the application for registration has to look into thegenuineness of the activities of the trust and satisfy himself about thegenuineness of the activities. The issues raised with regard to the securitydeposit being not in comparison vis-a-vis the rent received will not haveimpact on the genuineness of the activities. It is an admitted case that thesecurity received was duly reflected in the books of account. Similarly, theenrouting of advance fee is also an issue with regard to the accounting.These having been shown in the books can be dealt with in detail by theAssessing Officer while framing the assessment and allowing exemptionunder Section 11 of the Act. The present stage would not be appropriate forthe same. As regards the additional land purchased, the Tribunal rightlyobserved that CIT has a power under Section 12AA(3) of the Act in case ofutilisation of the said land against the aims and objects of the society. The grievance against the surplus income not being reasonableis baseless in absence of any challenge to the finding recorded by theTribunal that excess income has been ploughed back by the society forfurtherance of its object. There is no illegality in the order of the Tribunal directing grantof registration to the society. However, it would be needless to state that incase the revenue subsequently comes to the conclusion that the activities ofthe society are not for charitable purposes, it would always be at liberty to ITA No. 429 of 2019160] initiate action in accordance with law including invoking of sub-section (3) of Section 1ZAA of the Act. No substantial question of law arises in the present appeal. No interference is called for in the order of the Tribunal. The appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARIT)JUDGE JUDGE 20.1.20207@ Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No