Miles2smile Foundation vs CIT(Exemptions)

ITA No. 4969/Del/2024:

'1. That on the facts and circumstances of the case and in law, order dated 29.08.2024 in Form No.10AD passed by Commissioner of Income Tax (Exemption), Delhi, ['CIT(E)'] under section 12AB(1)(b)(ii)(B) rejecting/ dismissing application for registration under section 12A(1)(ac)(ii) of the Income tax Act, 1961 ('the Act') is illegal and bad in law.

1.1

That on the facts and circumstances of the case and in law, rejection of application for registration by the CIT(E) is beyond the scope of section 12AB of the Act inasmuch as the - (i) activities carried on by the assessee are genuine; and (ii) the assessee has undisputedly complied with all other laws which are material for achieving the objects, and thus impugned order is beyond jurisdiction and bad in law.

1.2

That the CIT(E) erred on facts and in law in passing the impugned order rejecting the registration without issuance of any prior show cause notice confronting the appellant with reasons for proposed rejection of registration, which is not only violative of the provisions of the Act but also the principles of natural justice.

1.3

That the CIT(E) erred on facts and in law in rejecting the application for registration without affording adequate opportunity of being heard and without judiciously considering the submissions/ documents furnished by the appellant.

2.

That the CIT(E) erred on facts and in law in rejecting the application for registration based on various factually incorrect, bald and/ or irrelevant allegations and on the basis of mere conjectures and surmises, holding that the applicant failed to satisfy the genuineness of the activities carried out.

2.1

That the CIT(E) erred on facts and in law in observing that takeover of Sunrise Public School by the appellant from Sunrise SikshaSamiti (society) in financial year 2020-21 is an informal arrangement and there is no proper taking over of the school, without appreciating the correct factual position.

2.2

That the CIT(E) erred on facts and in law in drawing adverse inference from payment of honorarium of Rs.6,30,000 in financial year 2022-23 alleging the same to be direct benefit given to Director.

2.3

That the CIT(E) erred on facts and in law in incorrectly alleging that that there has been increase of 874% in salary cost for year ending 31.3.2023 vis-s-vis year ending 31.3.2022 and in any case without appreciating that whatever is the increase in salary cost is attributable to organizational restructuring and new hiring.

2.4

That the CIT(E) erred on facts and in law in alleging that there is misreporting in financial statements qua reporting of depreciation for year ending 31.03.2022, and financial statements are not prepared on the basis of genuine data.

2.5

That the CIT(E) erred on facts and in law in drawing adverse inference from donations received by the appellant from/ through Razor pay Software Private Limited and Ketto Online Ventures Pvt. Ltd. alleging the same to be anonymous donations.

2.6

That the CIT(E) erred on facts and in law in alleging that - (i) the appellant has made incorrect accounting of amount for which land is required in Aligarh, (ii) details of school bus is not provided, (iii) appellant has failed to provide narration of credit/ debit entries in bank account, and (iv) satisfactory document regarding map approval for school from competent authority is not provided, without affording adequate opportunity to the appellant.

3.

That the CIT(E) erred on facts and in law in cancelling the provisional registration/ approval granted vide order dated 31.12.2021 for assessment year 2022-23 to 2024-25, impliedly resulting in revocation/ cancellation of registration retrospectively, which action is beyond jurisdiction, bad and impermissible in law."

ITA No. 4970/Del/2024:

'1. Thai on the facts and circumstances of the ease and in law. order dated 29.08.2024 in Form No.10AD passed by Commissioner of Income Tax (Exemption), Delhi, ['CIT(E)'] under clause (ii)(b)(B) of second proviso to section 80G(5) rejecting/dismissing application for registration under section 80G(5)(iii) of the Income Tax Act, 1961 (The Act') is illegal and bad in law.

1.1

That on the facts and circumstances of the ease and in law, rejection of application for registration by the CIT(E) is beyond the scope of section 80G of the Act inasmuch as the - (i) activities carried on by the assessee arc genuine; and (ii) the assessee has undisputedly complied with all other laws which arc material for achieving the objects, and thus impugned order is beyond jurisdiction and bad in law.

1.2

That the CIT(E) erred on facts and in law in passing the impugned order rejecting the registration without issuance of any prior show cause notice confronting the appellant with reasons for proposed rejection of registration, which is not only violative of the provisions of the Act but also the principles of natural justice.

1.3

That the CIT(E) erred on facts and in law in rejecting the application for registration without affording adequate opportunity of being heard and without judiciously considering the submissions/ documents furnished by the appellant.

2.

That the CIT(E) erred on facts and in law in rejecting the application for registration based on various factually incorrect, bald and/ or irrelevant allegations and on the basis of mere conjectures and surmises, holding that the applicant failed to satisfy the genuineness of the activities carried out.

2.1

That the CIT(E) erred on facts and in law in observing that takeover of Sunrise Public School by the appellant from Sunrise SikshaSamiti (society) in financial year 2020-21 is an informal arrangement and there is no proper taking over of the school, without appreciating the correct factual position.

2.2

That the CIT(E) erred on facts and in law in drawing adverse inference from payment of honorarium of Rs.6,30.000 in financial year 2022-23 alleging the same to be direct benefit given to Director.

2.3

That the CIT(E) erred on facts and in law in incorrectly alleging that that there has been increase of 874% in salary cost for year ending 31.3.2023 vis-s-vis year ending 31.3.2022 and in any ease without appreciating that whatever is the increase in salary cost is attributable to organizational restructuring and new hiring.

2.4

That the CIT(E) erred on facts and in law in alleging that there is misreporting in financial statements qua reporting of depreciation for year ending 31.03.2022, and financial statements are not prepared on the basis of genuine data.

2.5

That the CIT(E) erred on facts and in law in drawing adverse inference from donations received by the appellant from/ through Razor pay Software Private Limited and Ketto Online Ventures Pvt. Ltd. alleging the same to be anonymous donations.

2.6

That the CIT(E) erred on facts and in law in alleging that - (i) the appellant has made incorrect accounting of amount for which land is required in Aligarh, (ii) details of school bus is not provided, (iii) appellant has failed to provide narration of credit/ debit entries in bank account, and (iv) satisfactory' document regarding map approval for school from competent authority is not provided, without affording adequate opportunity to the appellant.

3.

That the CIT(E) erred on facts and in law in cancelling the provisional registration/ approval granted vide order dated 31.12.2021 for assessment year 2022-23 to 2024-25, impliedly resulting in revocation/ cancellation of registration retrospectively, which action is beyond jurisdiction, bad and impermissible in law."

'250(2) The following shall have the right to be heard at the hearing of the appeal-

(a)

the appellant, either in person or by an authorized representative;"

'4. On perusal of the submission dated 09.08.2024, it is noted that the applicant has taken over a school namely, "Sunrise Public School" through an MOU dated 01.10.2020 with 'Sunrise Shiksha Samiti', Loni, Ghaziabad, on a Rs.50/- stamp paper, for a period of five years. As per the MOU, the applicant will manage and run "Sunrise Public School" and will also undertake the running expenses of the school. It is also seen from the submission of the applicant that "Sunrise Public School" was being run by a society, namely, Sunrise Siksha Samiti, which was approved from Society of Registrar, Uttar Pradesh on 14.10.2016 for a period of five years w.e.f. 26.09.2016. The period of the five years has lapsed on 25.09.2021. However, the applicant failed to file any documentary evidence regarding the renewal of the Society. It is also noted from the submissions dated 14.03.2024 of the applicant that it has submitted copy of approval letter/permission from the District Minority Welfare officer, Ghaziabad, wherein permission has been granted to "Sunrise Fokania Junior Madarsa", Jamalpura, Loni, Ghaziabad. However, the applicant, as per MOU dated 01.10.2020, as mentioned above, has shown that it has taken over the management and running of "Sunrise Public School", Rashid Ali Gate, LoniDehat, Ghaziabad, Uttar Pradesh.

4.1

It is also noted that the applicant company has taken over "Sunrise Public School" in F.Y. 2020-21. Therefore, the financial statements of the old entity should be shown as merged or reflected in the financial statement of the applicant, M/s Mile 2 Smile Foundation. However, no such merger or reflection in the financial statement of the applicant, M/s Miles 2 Smile Foundation as on 31.03.2021 is seen, which implies that the MOU dated 01.10.2020 was only an informal arrangement and there was no proper taking over between M/s Miles 2 Smile Foundation and M/s Sunrise Siksha Samiti.

4.2

The applicant was also asked to explain the Honorarium(Salary) paid to Director in F.Y. 2022-23 amounting Rs 6,30,000/-. The applicant has submitted that an honorarium of Rs.6,30,000/- was granted to the Director in the financial year 2022-23 due to substantial increase in responsibilities and performance during this period. The honorarium reflects the Director's commitment to dedicating their full time to the NGO which was formalized through a Board resolution. The contention of the applicant is not acceptable on merits as it is a direct benefit given to the Director. As per Para 64 of the MOA of the applicant, it is stated as under:-

"Any director of the Company shall not be paid any remuneration in his/her capacity as director, However the directors may be reimbursed for expenses incurred by them in connection with the furtherance of objectives of the company provided they produce reasonable evidence for the same".

4.3

The applicant was also asked to explain salary paid to managers as on 31.03.2023 amounting Rs. 13,00,586/- and explain the enhancement of salary in one year of about 874% as compared to Rs. 1,33,500/-, as on 31.03.2022. In response, the applicant has submitted that in financial year 2021-22, an amount of Rs.5,42,491/- which was meant for teacher salaries, was incorrectly recorded under the head of educational expenses instead of the salary head. As a result, the reported salary for managers in F.Y. 2021-22 was inaccurately shown as Rs.1,33,500/-. The increase in salaries for employees in subsequent periods is attributed to organizational restructuring and new hiring. To provide clarity, detailed documentation supporting these changes, including joining letters and salary sheets, is attached. The contention of the applicant is not sufficient to justify the huge increase in salaries paid, and the detailed documentation supporting these changes, including joining letters and salary sheets are not helpful to verify the same.

4.4

On perusal of the financial statement as on 31.03.2022, applicant has shown expenses on account of depreciation and amortization amounting to Rs.1,82,340/-, reflecting as Note 18. However, in the explanation to Note 18, applicant has not shown any amount relating to depreciation and amortization expenses, which shows misreporting or incorrect financial statement as on 31.03.2022.

4.5

It can be seen from Para 4.1 to 4.3, that the applicant has prepared financial statements not on the basis of genuine data and it has also been misreported.

5.

From the submissions of the applicant, it is also seen that the applicant has shown donations received through Razorpay Software Private Limited and Ketto Online Ventures Pvt. Ltd. These organizations, namely, Razorpay Software Private Limited and Ketto Online Ventures Pvt. Ltd. are platforms for online payment and the donation received from these platform are mostly anonymous donations wherein identities of the donors are difficult to identify and come under the purview of being suspicious transactions as per provisions of section 115BBC of the Income-tax Act, 1961 wherein it is clearly stated asunder:

"Anonymous donation" means any voluntary contribution referred to in sub-clause(iia) of clause(24) of section2, where a person receiving contribution does not maintain a record of identity indicating the name and address of the person making such contribution and such particulars as may be prescribed." From the details submitted by the applicant, with regard to donations received from Razorpay Software Private Limited, it is seen that the applicant has only furnished the name of the donors and failed to file the address of the donors. Therefore, these donations come under the purview of anonymous donations.

6.

Further, the applicant was asked to furnish the details of donors in the prescribed format as under:-

S.No.	Name of the Donor	Address of Donor	PAN of Donor	Date of Donation	Amount	Mode of donation (by cash/transfer/ cheque etc.)	Corpus/Non corpus (in case of corpus please provide confirmation of donor)

From the perusal of the submissions dated 14.03.2024 of the applicant on the above issue, it is seen that the applicant has failed to file complete address of donors as well as PAN of the donors. Further, the applicant has also furnished the names of Razorpay Software Private Limited and Ketto Online Ventures Pvt. Ltd. in the column of donor's name. However, as discussed in Para 5 above, these are not actually donors but online platforms for transfer of the fund from one party to other party on commission basis.

7.

From the financial statements submitted by the applicant, it is seen that the applicant has shown investment in purchasing of land in Aligarh, Uttar Pradesh in F.Y. 2022-23 amounting to Rs.31,29,500/-, as per purchase deeds provided by the applicant. However, the applicant is showing an amount of Rs.35,69,160/- as investment made for purchasing of land in Aligarh as on 31.03.2023, which also reflects incorrect accounting of the financial statement or furnishing incorrect information. Further, the applicant has failed to file the annexure of investment claimed as on 31.03.2024.

8.

The applicant has also shown fixed assets in the form of school bus as on 31.03.2022 amounting to Rs.3,45,000/-. However, no documentary evidence has been filed which were called for vide notice dated 01.03.2024 wherein asked to submit the details of vehicles owned by the Trust/society/company alongwith ownership proof etc.

9.

The applicant was asked to submit the narration of debit/credit entry in the bank account amounting Rs. 10,000/- and above vide notice dated 01.08.024. However, the applicant failed to file the same.

10.

The applicant was also asked to submit the prospectus of the Smile International School alongwith status of affiliation certificate from the competent authority. In this connection, applicant has submitted only "General Layout of the School" and failed to file the satisfactory document regarding Map approval for School layout from competent authority despite more than one year having lapsed after acquiring of land for School at Aligarh.

11.

In view of the above discussion, the applicant failed to satisfy the genuineness of the activities carried out, the application filed in Form 10AB for grant of approval u/s 80G(5)(iii) is hereby rejected."