The Commissioner Of Income Tax, Bathinda v. M/S Baba Deep Singh Educational Society, Scf

Income-tax Appeal No. 881 of 2010-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH 1.Income-tax Appeal No. 881of 2010Date of decision: 13.10.2011 The Commissioner of Income Tax, Bathinda ...Appellant Versus M/s Baba Deep Singh Educational Society, SCF 23, Bharat Nagar,Bathinda...Respondent 2.Income-tax Appeal No. 882of 2010 The Commissioner of Income Tax, Bathinda ...Appellant Versus Aklia Educational & Research Society...Respondent 3.Income-tax Appeal No. 883of 2010 The Commissioner of Income Tax, Bathinda ...Appellant Versus M/s Saint Kabir Educational Trust, Punjab...Respondent4.Income-tax Appeal No. 884of 2010 The Commissioner of Income Tax, Bathinda ...Appellant Versus M/s Amravati Educational Society, Bathinda ...Respondent CORAM: HON'BLE MR.JUSTICE HEMANT GUPTA HON'BLE MR.JUSTICE G.S.SANDHAWALIA Present: Mr. G.S.Hooda, Advocate for the appellant. **** G.S.SANDHAWALIA, J. This order will dispose of four Income Tax Appeals No. 881,882, 883 and 884 of 2010 as questions of law involved in these appeals **** are common. However, the facts are being taken from ITA No.881 of 2010. The respondent-society applied for registration under Section12AA of the Income Tax Act, 1961 ( hereinafter referred to as “the Act”) on31.3.2009. The said application was declined by the Commissioner ofIncome Tax, Bathinda (for short “the CIT”) vide order dated 25.9.2009.The CIT came to the conclusion after examining the income andexpenditure account and the balance sheet for the period ending on31.3.2006, 31.3.2007 and 31.3.2008 that the society had receiveddonations and the capacity of donors and genuineness of the transactionshave not been explained. The CIT while noticing that the society wasrunning a Polytechnic College further took into consideration that thesociety was earning profits for the last two years and had claimedexemption under Section 10(23C) of the Act. The reasons to switch overto Section 11 of the Act remained unexplained for claiming exemptionunder Section 12AA of the Act and while taking into consideration Section2 (15) of the Act the CIT came to the conclusion that since the society wascharging building fund, development fund, sports fund and transportationcosts etc., the same could not be termed as charitable activity by anydefinition. The society preferred an appeal before the Income TaxAppellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as“the Tribunal”) which has allowed the appeal of the society and has setaside the order passed by the CIT and directed that registration applied forby the appellant under Section 12AA of the Act be granted. The presentappeal is directed against the said order and the following questions of lawhave been formulated by the revenue:- “1.Whether, in the facts and circumstances of the case, theld. ITAT was right in law to restrict the powers of the CIT for **** making the enquiries u/s 12AA(a) of the Act despite the factthat the said section provides that the CIT can make suchenquiries as he may deem necessary in this behalf. 2.Whether, in the facts and circumstances of the case theld. ITAT was right in law in granting registration to theassessee Trust when no work of relief to the poor in the field ofeducation was done as per definition of “Charitable Purposes”provided u/s 2(15) of the Act.” “1.Whether, in the facts and circumstances of the case, theld. ITAT was right in law to restrict the powers of the CIT for **** making the enquiries u/s 12AA(a) of the Act despite the factthat the said section provides that the CIT can make suchenquiries as he may deem necessary in this behalf. 2.Whether, in the facts and circumstances of the case theld. ITAT was right in law in granting registration to theassessee Trust when no work of relief to the poor in the field ofeducation was done as per definition of “Charitable Purposes”provided u/s 2(15) of the Act.” The Tribunal while allowing the appeal has noticed that theMemorandum of Association and the objects of the society was to docharitable work, projects and activities relating to education which havenot been considered while declining the application under Section 12AA ofthe Act. It was further held that the CIT should have only seen thegenuineness of the activities of the society and circular No.11/2008 dated19.12.2008 was also referred that the provisions of Section 2(15) of the Actare not applicable to a society. Accordingly, it was held that nature andscope at the stage of grant of registration under Section 12AA of the Act isto only regarding the objects of the society. The Tribunal alsodistinguished the provisions of Sections 10(23C) and 12AA of the Act andscope of the said sections and held that it was open to the revenueauthorities while processing the return of the income of those assessees toexamine their claim under Sections 11 and 13 of the Act and give suchtreatment to those societies as warranted by the facts of the case. Thepower of the revenue authorities to cancel registration under Section 12AA(3) of the Act was also taken into consideration on the ground that samecan be resorted to if the Commissioner is satisfied that the activity of suchsociety or institution are not genuine or are not being carried out inaccordance with the objects of the society/institution. **** The power of the CIT regarding the scope of Section 12AA ofthe Act has been considered by this Court in the order dated 5.10.2011passed in ITA No.701 of 2010 (Commissioner of Income Tax-II,Chandigarh Vs. M/s Surya Educational & Charitable Trust) and it hasbeen held that Section 12AA of the Act, requires satisfaction in respect ofthe genuineness of the activities of the Trust, which includes the activitieswhich the Trust was undertaking at present and also which it maycontemplate to undertake. The insertion of Sub Section 3 to Section 12AAof the Act regarding the powers of the Commissioner to cancel theregistration if the activities of the trust are not carried out in accordancewith such objects was also noticed. The Allahabad High Court inCommissioner of Income Tax Vs, Red Rose School 2007 (163) TAXMAN 19 has held that thejurisdiction of the Commissioner at the stage of processing applicationunder Section 12AA of the Act is limited regarding whether the activitiesare genuine and in consonance with the objects of the trust or institutionand where education is being imparted as per the rules and the factum ofthe establishment and running of schools is not disputed the same was agenuine activity and the enquiry regarding genuineness of the activitiescannot be stretched beyond this. In view of above facts and circumstances, it would be clearthat respondent-society which was admittedly running a PolytechnicCollege and the activities were interwoven for furthering the projects andactivities pertaining to education, the Tribunal rightly directed thatregistration should be granted to the respondent-society with the rider thatthe same could always be cancelled if it came to the notice of the CIT thatthe society was not carrying on the activities as per its objects. TheCommissioner while processing the application under Section 12AA of the **** In view of above facts and circumstances, it would be clearthat respondent-society which was admittedly running a PolytechnicCollege and the activities were interwoven for furthering the projects andactivities pertaining to education, the Tribunal rightly directed thatregistration should be granted to the respondent-society with the rider thatthe same could always be cancelled if it came to the notice of the CIT thatthe society was not carrying on the activities as per its objects. TheCommissioner while processing the application under Section 12AA of the **** Act was not to act as an Assessing Authority and thus, the Tribunal hasrightly allowed the appeal filed by the society in the facts andcircumstances of the present case. Accordingly, no substantial question of law as contended in thepresent appeal arises for determination by this Court and the order dated31.3.2010 passed by the Tribunal is upheld. Consequently, the appeal isdismissed. (G.S.SANDHAWALIA) Judge October 13, 2011Pka (HEMANT GUPTA) Judge