AI Structured Summary
Not yet generated for this judgment
Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
The instant appeal filed by the assessee is directed against the order dated 10.03.2026 passed by the ld. Commissioner of Income-tax (Exemptions)-Chandigarh [hereinafter referred to as the Ld. CIT(E)] for seeking registration of trust under Section 12A(1)(ac)(ii) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Assessee filed the following grounds of appeal as under:
1.Wrongful interpretation of Unsecured Loans taken by the society as an advance paid by the assessee society.
The Ld. AO gravely erred in law and on facts in rejecting the application for renewal of registration u/s 12A(1)(ac)(ii) of The Income Tax Act, 1961 by stating that the assessee has made advances to certain members of the society which is completely false and wrong since no amount has been furnished by the assessee to its members.
On the contrary, the members have furnished advances to the society for the furtherance of the society.
The Ld. CIT(E) wrongly considered the unsecured loans received by the assessee from its members as advances paid to the members which is completely unjustified as reasons for rejection of application.
The Financial statements submitted along with application of renewal already proves such fact.
2.Non consideration of evidences submitted by the assessee
Advances are paid to educational institutions only which are not objected by the Ld. CIT(E)
Evidences for reason of both of the two advances are submitted before the Ld. CIT(E).
i)Agreement dated for purchase of bus for Rs.8,00,000/- was submitted which is outstanding as on the date of balance sheet.
ii) Notarized agreement dated 21/11/2021 before making the payment for Rs.28,00,000/- for acquisition of operation was submitted which is outstanding as on the date of balance sheet.
Your honour,
Both the proofs are duly verified and notarized wherever necessary and are dated originally at the time of such payments and are not generated during the course of this proceeding; and Both of the two advances are well within the purpose of furtherance of objects and their proofs.
Therefore, stating that the documentation is not proper is not valid since both the documents are duly signed and notarized and are as available as to any person in general course of operations and therefore the statement of the Ld. CIT(E) is properly refuted. Hence, all the objections of the Ld. CIT(E) are wrong and unjustified, where all the relevant proofs and evidences are already submitted.
The rejection of application of the assessee society is wrong and thus the registration u/s 12A(1)(ac)(ii) of the Act may kindly be granted to the assessee.
Therefore, we pray before your honour that the registration u/s 12A(1)(ac)(ii) of the Income Tax Act, 1961 be granted to us and oblige.”
The assessee is running a senior secondary school and applied for renewal of registration u/s 12A(1)(ac)(ii), in Form 10AB of the Act before due date. The application was rejected stating that the society has advanced loan to its members.
The ld AR of the assessee submitted that no amount has ever been advanced to any member of the society. Further, it is submitted that the advance of Rs 28 lakh given to Naveen Shiksha Samiti has been fully accepted by the department but the Ld. CIT(Exemptions) stated that the agreement submitted was not registered which is immaterial since all the payments were made through banking channel and has never been considered as application of income.
Further, the advance of Rs 8 lakh given to Cambridge Convent School was for purchase of school bus and was supported by a declaration from Cambridge Convent School confirming the transaction, together with the complete ledger account for the relevant period. The assessee has never claimed this advance as any application of income for the purpose of claiming exemption u/s 11. It is submitted that non-transfer of the vehicle's registration certificate into the Assessee's name before end of financial year is, at best, an administrative or procedural lapse of a kind not uncommon in inter-institutional arrangements of this nature between two educational societies, and does not, by itself, establish that the payment was not genuinely made or that it was diverted for a non-charitable purpose.
Per contra, the ld DR supported the order of CIT(E).
We have heard the rival submissions and have perused the materials on record. We find that the CIT(E) sole objection is that the funds have been advanced by the assessee without proper documentations and unenforceable agreements and has questioned the financial prudence of the assessee. First of all, we find that the CIT(E) has failed to support his findings that the advance has been made any advance to members of the assessee. Secondly, we agree with the assessee that the agreement with Naveen Shiksha Samiti being not registered, has no adverse inference in so far as the registration of the Trust is concerned since genuineness of the advance were not doubted. We also note that the one of the objectives of the Trust is to take up formal and informal educational programme as per National Education Policy, and the CIT(E) has not pointed out as to how the advance for purchase of school bus or acquisition of another educational institute, has no nexus with charitable activities of the Trust. In such factual matrix, we are of the considered view that the assessee is eligible for grant of registration under section 12AB of the Income-tax Act, 1961. We direct accordingly.
In the result, the appeal in ITA 3356/Del/2026 is allowed.