The Commissioner Of Income Tax (Exemptions), Chandigarh v. M/S M.r. Educational Trust

ITA-534-2017 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-534-2017 (O&M) Date of Decision: 28.3.2019 The Commissioner of Income Tax (Exemptions), Chandigarh Versus ....Appellant. M/s M.R. Educational Trust ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Denesh Goyal, Senior Standing Counsel,for the appellant.for the appellant. Mr. Brij Mohan Monga, Advocate and Mr. Rohit Kaura, Advocate for the respondent. *** AJAY KUMAR MITTAL, J. 1.Delay of 117 days in filing the appeal is condoned. 2.This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated23.5.2016 (Annexure A-2) passed by the Income Tax Appellate Tribunal,Chandigarh Bench, Chandigarh (hereinafter referred to as “the Tribunal”) inITA No. 841/Chd/2014, for the assessment year 2011-12, claiming thefollowing substantial questions of law:- I.Whether on the facts and circumstances of thecase, the Hon'ble ITAT was right in directing theregistration to be accorded instead of reverting itback for re-examination without itself commentingcase, the Hon'ble ITAT was right in directing theregistration to be accorded instead of reverting itback for re-examination without itself commenting upon the genuineness of activities and their co-relation with the objects of the assessee-society?II.Whether on the facts and circumstances of thecase, the Hon'ble ITAT was right in holding thatthe CIT had not doubted the objects andgenuineness of the activity of the trust whereas theCIT in her order had expressly concluded that shewas not satisfied about the genuineness ofactivities towards its objects? III.Whether on the facts and circumstances of thecase, Hon'ble ITAT was right in holding thatcompliance with RTE Act is not a relevant factorfor the grant of registration whereas the CIT wasfully empowered by the provisions of Section12AA to call for any 'information' before grantingsuch registration and examine whether infractionof relevant laws impinges on the claims ofadvancing education?case, Hon'ble ITAT was right in holding thatcompliance with RTE Act is not a relevant factorfor the grant of registration whereas the CIT wasfully empowered by the provisions of Section12AA to call for any 'information' before grantingsuch registration and examine whether infractionof relevant laws impinges on the claims ofadvancing education? IV.Whether on the facts and circumstances of the casethe Hon'ble ITAT was right in ignoring CIT'sfindings about the restrictive composition of thesociety and the lack of dissolution clause bothseverely impinging on the character of an entityclaiming to be amenable for public charity?the Hon'ble ITAT was right in ignoring CIT'sfindings about the restrictive composition of thesociety and the lack of dissolution clause bothseverely impinging on the character of an entityclaiming to be amenable for public charity? 3.Briefly stated, the facts necessary for adjudication of the instantappeal as narrated therein may be noticed. The assessee moved an ITA-534-2017 application in Form 10A seeking registration under Section 12AA of theAct in the office of Commissioner of Income Tax, Panchkula (for brevity“the CIT”) on 27.3.2014. The CIT rejected the application of the assesseefor grant of approval under Section 12AA of the Act vide order dated11.8.2014 (Annexure A-1), with the following objections:- a)That the trust deed had not provided fordissolution clause for use of net assets of the trustfor its objects in case of dissolution and bar onreversion of net assets to founder, members,directors etc.;dissolution clause for use of net assets of the trustfor its objects in case of dissolution and bar onreversion of net assets to founder, members,directors etc.; ITA-534-2017 application in Form 10A seeking registration under Section 12AA of theAct in the office of Commissioner of Income Tax, Panchkula (for brevity“the CIT”) on 27.3.2014. The CIT rejected the application of the assesseefor grant of approval under Section 12AA of the Act vide order dated11.8.2014 (Annexure A-1), with the following objections:- a)That the trust deed had not provided fordissolution clause for use of net assets of the trustfor its objects in case of dissolution and bar onreversion of net assets to founder, members,directors etc.;dissolution clause for use of net assets of the trustfor its objects in case of dissolution and bar onreversion of net assets to founder, members,directors etc.; b)That the School is run by one family headed byfather as 'Settlor'-cum-President and two sons astrustees. Having regard to the surplus as perreceipt expenditure statement for the years endingon 31.3.2011, 31.3.2012 and 31.3.2013, profit wasthe main motive of the trust;father as 'Settlor'-cum-President and two sons astrustees. Having regard to the surplus as perreceipt expenditure statement for the years endingon 31.3.2011, 31.3.2012 and 31.3.2013, profit wasthe main motive of the trust; c)That the assessee trust was not registered under theNew Haryana Registration & Regulation ofSocieties Registration Act, 2012; and New Haryana Registration & Regulation ofSocieties Registration Act, 2012; and e)That the Right to Education Act, 2010 was notimplemented by the School.implemented by the School. 4.Feeling aggrieved by the order, Annexure P-1, the assesseefiled an appeal before the Tribunal. The Tribunal vide order dated23.5.2016 (Annexure A-2) allowed the appeal and directed the CIT to grantregistration to the assessee under Section 12AA of the Act. Hence, thepresent appeal by the revenue. ITA-534-2017 -4- 5.After hearing learned counsel for the revenue, we do not findany merit in the appeal. 6.The Tribunal while dealing with objection (a) put by the CIT,had noticed that as per clause 14 of the Trust Deed, the mandate of the saidclause was to transfer the remaining assets and liabilities of the assessee to asimilar trust at the time of dissolution. There was no intention of givingbenefit to a specific person out of whatever remains in the hands of theassessee. Regarding objection (b), the Tribunal had recorded that even if atrust was run by only one family, there was no bar on such trust to beregistered under Section 12AA of the Act. The CIT had only to see that theobjects of the trust were charitable in nature and the activities of the samewere genuine at the time of granting registration. Regarding the fact thatthe benefit directly or indirectly diverted to one family, can be taken care ofby the Assessing Officer at the time of making the assessment and grantingexemption under Section 11 of the Act. While dealing with objection (c),the Tribunal had observed that the assessee is a trust formed under theIndian Trust Act, 1882 and had been duly registered with the Sub Registrar,Bilaspur. There was no bar under the Act to give registration under Section12AA of the Act to a trust and that no provision provided that only societiescan be registered under Section 12AA of the Act. The Tribunal whilemeeting out objection (d) regarding Right to Education Act, 2010 (in short“2010 Act”) had concluded that the issue was covered by the order of theTribunal in the case of Kids-R-Kids International Educational & Social ITA-534-2017-5- ITA-534-2017-5- Act. It may be mentioned that this decision of the Tribunal was affirmed inITA No. 6 of 2017 [Commissioner of Income Tax (Exemptions),Chandigarh v. M/s Kids-R-Kids International Education and SocialWelfare Trust, Chandigarh] dated July 14, 2017. Even Special LeavePetition No. 22665 of 2018 was dismissed by the Apex Court on23.07.2018. The Tribunal while holding that the CIT had not doubted aboutthe charitable nature of the objects of the Trust as well as the genuineness ofthe activity, directed the CIT to grant registration to the assessee underSection 12AA of the Act. 7.No error could be pointed out by learned counsel for therevenue in the findings recorded by the Tribunal warranting interference bythis Court. In view of the above, accordingly, no question of law, muchless, substantial question of law arises in the appeal. Consequently, findingno merit in the appeal, the same is hereby dismissed. Needless to say, itshall be open for the revenue to initiate action under sub-section (3) toSection 12AA of the Act for withdrawal/cancellation of the registrationgranted hereinabove, in case it comes to the notice of the revenue that theactivities undertaken by the assessee are not genuine or are not being carriedout in accordance with the objects of the trust or Institution or are notcharitable in nature in terms of the provisions of the Act. (AJAY KUMAR MITTAL) JUDGE March 28, 2019 gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/ReasonedYesWhether ReportableYes