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IN THE HIGH COURT OF DELHI
Manmohan, Manmeet Pritam Singh Arora, JJ.
Commissioner of Income Tax (Exemptions), Delhi - Appellant
Versus
Mata Parvati Educational & Innovative Society - Respondent
ITA 119 of 2020 & CM Appl. 6637 of 2020
Decided On : 03-11-2022
The court affirmed that the CIT(E) must register a trust under Section 12AA based only on the genuineness of its objectives, not on income application or unproduced records.
Headnote:(A) Income Tax Act, 1961 - Section 12AA - Registration of Trust - The ITAT directed the CIT(E) to register the Respondent Society despite doubts raised regarding cash deposits of Rs. 17,00,000/- and the absence of recognition from the Department of Education. The appeal posed questions on genuine activities and the interpretation of charitable objectives as defined under Section 2(15). (Paras 2-4, 6-12)
(B) Legal Principles - The court reiterated that at the registration stage under Section 12AA, the CIT(E) does not examine income application, focusing instead on the genuineness of objectives and charitable nature. Non-production of books does not discredit claimed activities.
(C) Findings of Court - ITAT's findings on the charity nature of the society's activities were upheld.
(D) Issues - The critical issues included examining the genuineness of the society's objectives and the implications of cash deposits not being supported by corresponding documents. (E) Ratio Decidendi - The court concluded that the aims of the society fulfill charitable purposes and no adverse findings were made against the society's activities. (F) Result - Appeal dismissed.
| Table of Content |
|---|
| 1. examination of registration under section 12aa. (Para 1 , 2 , 3 , 4 , 6) |
| 2. cit(e) must assess the genuineness of charitable objects. (Para 7 , 8) |
| 3. no substantial question of law; appeal dismissed. (Para 9) |
JUDGMENT
Manmeet Pritam Singh Arora, J. (Oral)
CM APPL. 6637/2020 (for condonation of delay)
Keeping in view the averments in the application, the delay of 130 days in re-filing the present appeal is condoned.
ITA 119/2020
1. The present appeal has been filed challenging the order dated 29th March, 2019 passed by the Income Tax Appellate Tribunal (`ITAT') in ITA No. 2296/DEL/2018 and to restore the order passed by Commissioner of Income Tax (Exemptions) [`CIT(E)'].
2. Learned senior standing counsel for Revenue, states that the ITAT erred in directing the CIT(E) to register the Assessee Society under Section 12AA of the Income Tax Act, 1961, (`Act') considering that, there were doubts with respect to the genuineness of the activities of the Respondent. He states that the ITAT failed to consider the fact that cash deposits to the tune of Rs.17,00,000/- were made in the bank account of the Assessee during the Financial Year (`FY') 2016-17, which raises questions with respect to the genuineness of the objectives of the society.
3. He states that the ITAT failed to appreciate that the school run by the Assessee is not recognised by the Department of Education, Government of NCT of Delhi, and therefore, in the absence of formal recognition of the school by the competent authority, the claim of the Assessee that it was running the school cannot be accepted.
4. He states that the ITAT erred in holding that at the time of the registration of the trust, no enquiry with respect to the actual activities or application of funds of the Applicant, Assessee, is to be examined by the CIT(E). He lastly states, that the ITAT erred in holding that the CIT(E) was examining the `application of income' of the Assessee whereas in fact, the CIT(E) was only limiting its exercise to call for documents/information to satisfy himself about the genuineness of the activities of the Respondent.
5. We have perused the paper book.
6. The ITAT has recorded that the Respondent society is engaged in the activity of imparting education by running a school, the Rainbow Kids Valley School, which fact is not in dispute. The Respondent filed an application on 23rd August, 2017 in Form No. 10A seeking registration under Section 12AA of the Act. The Authorised Representative (`AR') of the Respondent appeared before the CIT(E) and filed certain documents. The CIT(E) observed that there were cash deposits in the bank account during the Financial Year (FY) 2016-17 which were not found supported by the corresponding documentations. He observed that the school run by the Petitioner is not recognised by the Department of Education, Government of NCT of Delhi (GNCTD) and in the absence of formal recognition the functioning of the school cannot be validly claimed. The CIT(E) concluded that the Assessee was not able to satisfactorily establish the genuineness of the conduct of the charitable activity as defined in Section 2 (15) of the Act and required under Section 12AA of the Act. In view of the said finding, the CIT(E) rejected the application of the Assessee under Section 12AA of the Act.
7. The ITAT allowed the appeal by holding that at the stage of considering an application under Section 12AA of the Act, the CIT(E) is not to examine the `application of income' of the Applicant Assessee, which is an exercise to be undertaken by the Assessing Officer on a year-to-year basis at the time of assessment of income. The relevant findings of the ITAT are as under:
"6. Undisputedly, the conjoint reading of the aims and objects of the assessee society goes to prove that it has been set up to open and run educational and vocational school or institutions in order to bring education within the reach of poor and backward children in the National Capi
