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Sahara Education Society, Sector-3, Urban estate, Kurukshetra, vs CIT (Exemption), Chandigarh
August, 22nd 2018

Subject: AR submitted that the matter may be sent back to the CIT

Referred Sections:
Section 72
Section 2(15) of I.T. Act,
section 12AA of the Act.

Referred Cases / Judgments
CIT vs. National Institute of Aeronautical Engg. Educational Society
Dawn Educational Charitable Trust vs. CIT
Rajah Sir Annamalai Chettiar Foundation vs. DIT
CIT vs. A.R. Trust

                  In the Income-Tax Appellate Tribunal,
                        Delhi Bench `G', New Delhi

            Before : Shri Bhavnesh Saini, Judicial Member And
                     Shri L.P. Sahu, Accountant Member

                          ITA No. 3969/Del/2016

       Sahara Education Society, Sector-3,    vs. CIT (Exemption),
       Urban estate, Kurukshetra,                 Chandigarh
       Haryana. PAN ­ AACAS2507H
       (Appellant)                                 (Respondent)

                Assessee by      Sh. K.S. Sampath &
                                 Sh. V. Raj Kumar, Advocates
                Revenue by

               Date of Hearing                    20.08.2018
               Date of Pronouncement              21.08.2018

Per L.P. Sahu, A.M.:
     This is an appeal filed by the assessee against the order of the ld. CIT(E),
Chandigarh dated 31.05.2016 on the following ground :

      "That on the facts and in the circumstances of the case and in law, the
action of the learned Commissioner of Income Tax (Exemptions) in refusing to
grant registration u/s. 12AA of the Income tax Act, 1961 is most arbitrary,
palpably erroneous and grossly unjust. It is prayed that this action must be
quashed with directions to grant the registration as sought."

2.   The brief facts of the case are that the assessee society is registered
under the Registrar of Societies Act, 1860 vide registration No. 2489/2002-03
                                                     ITA No. 3969/Del/2016         2

dated 19.12.2002. Later on, the registration of society was revised on 31st day
of October, 2013 and the aims and objects of the assessee society were
amended. The assessee society filed an application in form No. 10A seeking
registration u/s. 12AA. The CBSE also granted provisional affiliation
certificate bearing No. CBSE/Aff/SL-01436-1314/531079/2013/530150
dated 27.02.2013. Show cause notice was issued to the assessee on
06.05.2016 by the CIT(Exemption). Reply was also furnished by the assessee.
After considering the submissions of the assessee, the ld. CIT(E) observed that
the assessee was filing return in ITR-5 instead of ITR-7 and losses were being
carried forward as per section 72 and the Society started profit from
assessment year 2014-15 and 2015-16. Thereafter, he applied registration
u/s. 12AA. The ld. CIT(E) has observed as under :

       "The above clearly leads one to conclude that an entity unabashedly
following commercial principles could not turn charitable overnight. Admittedly,
charitable purpose as per section 2(15) of I.T. Act, 1961 includes education but
there is no denying that charitable purpose has to be seen to be redeemed in the
activities of the society. Had the intent of the society been charitable it would
have sought registration at the time of starting its activities and not when in the
final analysis its finances have come out of the red. The applicant has no cogent
answer to a specific query directed in that direction. Its finances are also not
above board when a predominant source of expenditure namely salaries is
examined. The applicant's disbursements of salary are not covered by TDS
provision it has been claimed. This is in spite of the affiliation granted by the
CBSE which insists on salaries to be disbursed through banking channels.
Despite asking for corroboration of the salaries being through bank accounts
the same has not been furnished. In light of all of the above it is difficult to arrive
at a conclusion that an entity being run on commercial principles hitherto has
charitable purposes in its mind. The application for registration under section
12A is accordingly rejected."
                                                   ITA No. 3969/Del/2016     3

Accordingly, the ld. CIT(A) rejected the application of assessee society for
registration u/s. 12AA. Aggrieved, the assessee is in appeal before the

3.    The ld. AR submitted that the assessee society is running educational
Institution since its inception and no any commercial activity has been carried
out by the society. No any surplus fund has been distributed amongst the
members. He also submitted that for granting registration, only aims and
objects of the society are to be seen. The ld. AR also submitted a paper book
containing 134 pages. It is submitted that filing of return in the preceding
years either in ITR-5 or ITR-7 would not have any bearing on the charitable
activities of the society. The ld. AR submitted that the matter may be sent back
to the CIT(E) to examine the genuineness of the activities carried out by the
assessee society and also urged that the registration may be granted to the
assessee society w.e.f. the date of application.

4.    On the other hand, the ld. DR relied on the order of the CIT(E) and
submitted that the assessee society was filing ITR-5. He has not deducted any
TDS from the salary payment and applied registration only when he started
generating profit. Therefore, he requested that the order of the ld. CIT(E)
should be affirmed. He has placed reliance on the following decisions :

      (i). CIT vs. National Institute of Aeronautical Engg. Educational
      Society, 181 Tazman 205(Uttaranchal)
                                                ITA No. 3969/Del/2016        4

      (ii). Dawn Educational Charitable Trust vs. CIT, 73 61
      (iii). Rajah Sir Annamalai Chettiar Foundation vs. DIT, 15
      313 (Chennai)
      (iv). CIT vs. A.R. Trust, 86 6 (Allahabad)

5.    After hearing both the parties and perusing the material available on
record, we observe that the ld. CIT(E) has rejected the registration application
without complete examination of the activities of the assessee society as per
section 12AA of the Act. While going through the audit report submitted by
the Chartered Accountant in Form No. 3CD for assessment years 2013-14,
2014-15 and 2015-16, we find that the assessee-society is running computer
training/educational and coaching Institutes. We also noted from the income
and expenditure account that the society has received discount in all the three
years. The AR was asked to explain the nature of discounts, which he failed to
explain. We also observe from the financial statement that no membership fee
has been received from the ordinary members as per rules and regulations of
the Society. The ld. CIT(E) has also alleged that the society is running for
commercial purpose without examining the activities of the assessee society
and its income & expenditure with respect thereto. Looking to the above facts
and circumstances, we think it fit to send the matter back to the file of CIT(E)
to examine the activities of the assessee de novo as per provisions of section
12AA r.w.s. 2(15) to ascertain whether the activities of the assessee society
are within the objects of the society and whether the activities carried out by
the assessee are charitable in nature or not. If the assessee's activities are
found charitable and commensurate to the objects of the assessee society then
                                                   ITA No. 3969/Del/2016                5

the assessee may be granted registration w.e.f. the date of application as
prayed for. Accordingly, the appeal of the assessee deserves to be allowed for
statistical purposes.

6.     In the result, the appeal is allowed for statistical purposes.

       Order pronounced in the open court on 21st August, 2018.

              Sd/-                                            Sd/-

       (Bhavnesh Saini)                                (L.P. Sahu)
       Judicial member                              Accountant Member

Dated: 21st August, 2018
Copy of order forwarded to:
(1)     The appellant                  (2)   The respondent
(3)     Commissioner                   (4)   CIT(A)
(5)     Departmental Representative    (6)   Guard File
                                                                                   By order

                                                                         Assistant Registrar
                                                              Income Tax Appellate Tribunal
                                                                   Delhi Benches, New Delhi
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