The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S Brahmanand Shiksha Prasar Samiti

ITA No. 355 of 2018}1] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 355 of 2018Date of decision: 13.1.2020 The Commissioner of Income Tax (Exemptions), Chandigarh .. Appellant V. M/s Brahmanand Shiksha Prasar Samiti .. Respondent CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGAN Present:Mr. Denesh Goyal, Advocate for the appellant. AVNEESH JHINGAN, J. The revenue is in appeal under Section 260A of the Income TaxAct, 1961 (for short, ‘the Act’) against the order dated 12.10.2017 passed bythe Income Tax Appellate Tribunal, Delhi Bench “A’, New Delhi (for short,‘the Tribunal’) claiming following substantial questions of law: >94:Whether on the facts and circumstances of the casethe Hon'ble ITAT has erred in directing the registration to beaccorded instead of reverting it back for re-examination inthe light of judgment of the Hon'ble Allahabad High Courtin apeal No. 112 of 2013 in the case of CIT, Meerut v. M/sA. R. Trust, Meerut, wherein it was held that the Tribunalcould have ordered for setting aside the order of RegisteringAuthority refusing registration but it could not have directedfor registration straight away in as much as there has to be ITA No. 355 of 2018A Satisfaction recorded by the Registering Authority whichwas lacking?was lacking? (ii) Whether on the facts and circumstances of the case theHon'ble ITAT has disregarded the facts that Smt. Sunita andSmt. Sangeeta, being members of the trust, were shown ashouses wife in MOA, whereas they were receiving salary as)&,1*&%'EHon'ble ITAT has disregarded the facts that Smt. Sunita andSmt. Sangeeta, being members of the trust, were shown ashouses wife in MOA, whereas they were receiving salary as)&,1*&%'E (i411) Whether on the facts and circumstances of the case thHon'ble ITAT was justified in not upholding the facts thatthe activities of the assessee society were not in accordancewith the objects as per its aims and objectives in theMemorandum of Association, merely by stating that itwould be seen at the time of assessment?Hon'ble ITAT was justified in not upholding the facts thatthe activities of the assessee society were not in accordancewith the objects as per its aims and objectives in theMemorandum of Association, merely by stating that itwould be seen at the time of assessment? (iv) Whether on the facts and circumstances of the case theHon'ble ITAT was justified in holding that the provisions ofSection 13(1)(c) comes into play at the time of grantingexemption u/s 11 whereas section 12AA(4) empowers theCIT to cancel registration u/s 12AA(4) where violation ofsection 13(1)(c) is noticed?Hon'ble ITAT was justified in holding that the provisions ofSection 13(1)(c) comes into play at the time of grantingexemption u/s 11 whereas section 12AA(4) empowers theCIT to cancel registration u/s 12AA(4) where violation ofsection 13(1)(c) is noticed? (v) Whether on the facts and circumstances of the case, theorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,2&%0&%'&EGorder of the Appellate Tribunal is contrary to the evidenceand material on the record of the case and therefore,2&%0&%'&EG The facts relevant for decision of the controversy involved arethat the assessee is a society registered under the Haryana Registration &Regulation of Societies Act, 2012. On 20.1.2014, the assessee filed an ITA No. 355 of 2018}3] application for registration under Section I2ZAA of the Act. TheCommissioner of Income Tax, Karnal (for short, ‘the CIT") during theproceedings asked for certain information which was provided by theassessee. On analysing the information received, the CIT opined that thesalary paid to the members working as Teachers was higher vis-a-vis theprevalent rate. The objection was that Smt. Sunita and Smt. Sangeeta wereshown as housewives in Memorandum of Association, however they werebeing paid salary as Teachers, hence there is violation of Section 13(1)(c)of the Act. The facts relevant for decision of the controversy involved arethat the assessee is a society registered under the Haryana Registration &Regulation of Societies Act, 2012. On 20.1.2014, the assessee filed an ITA No. 355 of 2018}3] application for registration under Section I2ZAA of the Act. TheCommissioner of Income Tax, Karnal (for short, ‘the CIT") during theproceedings asked for certain information which was provided by theassessee. On analysing the information received, the CIT opined that thesalary paid to the members working as Teachers was higher vis-a-vis theprevalent rate. The objection was that Smt. Sunita and Smt. Sangeeta wereshown as housewives in Memorandum of Association, however they werebeing paid salary as Teachers, hence there is violation of Section 13(1)(c)of the Act. A report was asked for from the Assessing Officer, whoobserved that there were payments made to single party in cash and Section40A(3) of the Act was violated. Further, for the assessment year 2011-12,the income claimed as exempted under Section 11 of the Act was treated asbusiness and professional income. Lastly that the assessee had claimedcorpus fund donations of43,41,000/- for construction of building, whereasthe donations were regular donations. Accepting the report, CIT vide orderdated 27.10.2014 refused registration under Section 12AA of the Act. Aggrieved of the order, appeal was preferred. The Tribunalrecorded a specific finding that salary paid to Smt. Sunita and Smt,Sangeeta was much less than the salary fixed by the Government for PGTTeachers. It was further held that Smt. Sunita was M.Com., B.Ed. and Smt.Sangeeta was M.A. in Hindi and B.Ed. The Tribunal allowed the appeal on12.10.2017 holding that the issue with regard to violation of Section 40A(3)of the Act and with regard to donations being regular donations and notcorpus donations can be taken care of at the time of assessment, the samecannot be ground for refusal to register under Section 12AA of the Act. ITA No. 355 of 2018|4] Learned counsel for the revenue argued that the Tribunal erredin allowing the appeal and setting aside the order of rejection of registrationunder Section 12AA of the Act. It is submitted that by paying salary to Smt.Sunita and Smt. Sangeeta, a direct or indirect benefit was being given to themembers of the assessee. [t 1s contended that both the ladies were shown ashousewives at the time of registration but subsequently they were beingpaid as Teachers. The contentions raised by learned counsel for the revenue arenot well-founded. The relevant provisions of Sections 12AA and 13(1)(c) of theAct are quoted below; ITZAA,(1) The Principal Commissioner or Commissioner,on receipt of an application for registration of a trust orinstitution made under clause (a) or clause (aa) of sub-section (1) of Section 12A, shall--institution made under clause (a) or clause (aa) of sub-section (1) of Section 12A, shall-- (a) call for such documents or information from the trustor institution as he thinks necessary in order to satisfyhimself about the genuineness of activities of the trustor institution and may also make such inquiries as hemay deem necessary in this behalf; andor institution as he thinks necessary in order to satisfyhimself about the genuineness of activities of the trustor institution and may also make such inquiries as hemay deem necessary in this behalf; and (b) after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he--institution and the genuineness of its activities, he-- (i)Shall pass an order in writing registering the trustor institution;or institution; (11)Shall, if he is not so satisfied, pass an order inwriting refusing to register the trust or institution,writing refusing to register the trust or institution, ITA No. 355 of 2018}>] and a copy of such order shall be sent to the applicant: XX xX X XX 13.(1) Nothing contained in section 11 or Section 12 shallOperate so as to exclude from the total income of theprevious year of the erson in receipt thereof-- (b) after satisfying himself about the objects of the trust orinstitution and the genuineness of its activities, he--institution and the genuineness of its activities, he-- (i)Shall pass an order in writing registering the trustor institution;or institution; (11)Shall, if he is not so satisfied, pass an order inwriting refusing to register the trust or institution,writing refusing to register the trust or institution, ITA No. 355 of 2018}>] and a copy of such order shall be sent to the applicant: XX xX X XX 13.(1) Nothing contained in section 11 or Section 12 shallOperate so as to exclude from the total income of theprevious year of the erson in receipt thereof-- XX xX X XX (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any incomethereof--thereof-- (i) if such trust or institution has been created orestablished after the commencement of this Act andunder the terms of the trust or the rules governing theinstitution, any part of such income enures, orestablished after the commencement of this Act andunder the terms of the trust or the rules governing theinstitution, any part of such income enures, or (41) if any part of such income or any property of the trust or the institution (whenever created ofestablished) is during the previous year used of,22-4&/.established) is during the previous year used of,22-4&/. directly or indirectly for the benefit of any person referredto in sub-section (3).” The finding recorded by the Tribunal that Smt. Sunita and Smt. Sangeeta were possessing qualifications for being Teachers has notbeen controverted. There is no challenge to the fact that during the relevanttime as per the circular issued by the Government, salary of PGT Teacherwas fixed as431,240/-, whereas both the teachers were receiving salary ofL20,000/- andL18,000/- respectively. In such circumstances, there is noviolation of Section 13(1)(c) of the Act. It is pertinent to mention here that ITA No. 355 of 2018Ke the salary paid is much less than the prevailing salary. There is no direct orindirect benefit given to the members, rather they were being paidconsideration for the services rendered. The scope at the time of processing the application undersection 12AA of the Act is to satisfy with regard to the objects of the trustor the institution and the genuineness of its activities. Apart from theobjections mentioned above, the CIT had not recorded any dissatisfactionwith regard to the objects of the assessee or with regard to the genuinenessof its activities. The Tribunal rightly concluded that the issue with regard toviolation of Section 40A(3) of the Act and the nature of donations receivedcan be duly considered while finalising the assessment for the relevantperiod. There is no illegality or error in the view taken by the Tribunal.However, we may hasten to add that subsequently if the revenue is satisfiedthat the activities of the assessee are not for charitable purpose, it canalways initiate action for cancellation of registration under sub-section (3)ot Section 1ZAA of the Act. No interference is warranted in the order of the Tribunal. Nosubstantial question of law arises, The appeal is dismissed. © (AVNEESH JHINGAN) (AJAY TEWARIT)JUDGE JUDGE 13.1.20206A Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No