×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal, filed by assessee, being ITA No. 4342/Mum/2018, is directed against order bearing no. CIT(E)/u/s.12A/50000/2018-19 dated 30.05.2018, passed by learned Commissioner of Income Tax (Exemptions), Mumbai (hereinafter called “the CIT(E)”) u/s. 12AA(1)(b)(ii) read with Section 12A of the Income-tax Act,1961 (hereinafter called “the Act”).
2. The grounds of appeal raised by assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called “the tribunal”) read as under:-
“1. On facts and circumstances of the case and in law, the learned Commissioner (Exemptions) erred in passing his order u/s 12AA (1) (b) (ii) of the Income Tax Act, 1961 rejecting the Appellant's application for registration u/s 12AA without considering properly the explanations and evidences submitted by the Appellant in support of its application.
2. On facts and circumstances of the case and in law, the learned Commissioner (Exemptions) also erred in passing his aforesaid order without granting Your Appellant an adequate opportunity of being heard. The orders passed by him is in contravention of the principles of natural justice and hence, bad in law.
3. The Appellant reserves the right to add to, alter or delete any of the above grounds with permission of Hon'ble Tribunal.”
3. This appeal is filed by the assessee challenging decision of Ld. CIT(Exemption) rejecting registration of the assessee u/s. 12A of the Act. The assessee filed application in Form No. 10A on 15.11.2017 with learned CIT(E) for grant of registration u/s 12A. The assessee was registered as public trust with office of Assistant Charity Commissioner, Mumbai on 18.10.1972, having registration No. F2392, Mumbai. The assessee was asked by Ld. CIT(E) to submit documentary evidences and note on its activities to prove genuineness of its activities and objectives. The assessee submitted details before learned CIT(E) wherein it claimed that the assessee was running its school namely “New Model English School”. This school was being run by Late Mrs. Sushila Khairajani ( who was trustee of the trust) . The books of accounts and income-tax returns were filed in her personal capacity. The assessee was constituted on 27.09.1967 as society under Societies Registration Act and registered with Charity Commissioner on 18.01.1972 as public trust . After the death of founder trustees ( namely Mr C.K.Khairajani, Mrs. Jamuna Khairanjani and Mrs. Sushila Khairajani) , the heirs approached the charity commissioner and were appointed as trustees to take charge of the running and administration of the Trust.
The learned CIT(E) observed that now since assessee wanted to conduct the affairs of the school instead of being earlier run by Mrs. Sushil Khairajani , there appears to be prima facie transfer of school . The assessee was asked to furnish further details as are mentioned in the order of learned CIT(E) in para 4 and 5 . The assessee submitted details before learned CIT(E) . However, the learned CIT(E) not being satisfied by the submissions filed by the assessee, declined to grant registration u/s 12A vide orders date 30.05.2018 passed u/s 12AA(1)(b)(ii) read with Section 12A of the 1961 Act as in the opinion of learned CIT(E) there were various lapses committed by the assessee in the past and hence consequently genuineness of the activities and satisfaction of the objects could not be proved by the assessee , wherein learned CIT(E) held as under:-
“5. In response to above, Ms. Shetal Shah, CA, authorized representative, alongwith Shri Rajesh Khairajani Trustee and Mrs. Mamta Khairajani Trustee attended and submitted the details. To he surprise of the undersigned it was found that the permission for running this school was granted to the trust and not to Mrs. Sushila Khairajani, filing return of income as the proprietor of the school, who incidentally was also a trustee. Therefore vide letter dated 25.04.2018, the assessee was asked to furnish some more clarification and chronology of entire events. On examination of assessee's reply and all other documents, following facts/issues raised serious doubts over the genuineness over the activities and objects of the trust;
A) Although the trust was formed in 1968 and registered with Charity Commissioner on 18.01.1972, with permission from the Education Department on 22.04.1969 to run the affairs of the school, yet the school was run in the individual capacity that too by one of the trustee.
B) There was no compliance with the Charity Commissioner.
No regular books of account maintained for the trust, though as per the The Bombay Public Trusts Act, 1950, also following records are to be maintained regularly.
(a) As per Section 32 r.w.r.17 of the BPT Act, the trust is expected to maintain regular accounts of
i. All receipts of movable and immovable property,
ii. All encumbrances created on trust property.
iii.All payments made and alienations made on behalf of the public trust.
iv.All other particulars that will facilitate preparation of Balance sheet and Income and Expenditure in prescribed form (i.e. Schedule VIII and income liable to contribution in Schedule IX-C).
No books of accounts as mentioned were maintained by the applicant trust.
(b) As per section 33 and 34 of the BPT, accounts to be audited and audit report to be submitted to the Charity Commissioner.
As the books of account were not ma ntained no audit report was not prepared by the applicant trust.
(c) As per section 36B of the BPT Act, there has to be register of movable and immovable property of the trust, which is never maintained by he trust.
No Such register of movable and immovable property was maintained by the applicant trust.
(d) As per sec ion 36A(1) of the BPT Act, Powers and duties and restrictions of trustees:
A trust e of every public trust shall administer the affairs of the trust and apply the funds and properties thereof for the purpose and objects of the trust in accordance with the terms of the trust, usage of the institution and lawful directions which the Charity Commissioner of Court may issue in respect thereof, and exercise the same care as a man of ordinary prudence does when dealing with such affairs, funds, or property, if they were his own.
However, in all these years none of the above records, which are required to be maintained statutorily, were maintained.
There is no record to show that the trust was running properly and in accordance with the objects.
C) There is no separate bank account in the name of the trust.