Assessing Officer can disallow Society’s claim for Exemption, No Power to Withdraw the Registration: ITAT [Read Order]

In the case of Shiv Public School Managing Committee, Delhi bench of Income Tax Appellate Tribunal (ITAT) recently ruled that the Assessing Officer (AO) can disallow a society’s claim for exemption towards funds for extra-curricular activities of its students, but the AO does not have the power to withdraw the society’s registration.

The assessee in the present case is a society has been running a school in the name of Shiv Public School. During the financial year, the Assessee society filed an application for getting registration under section 12AA of the Income Tax Act 1961 with consequent approval under Section 80G of the Income Tax Act and also claimed exemption towards funds for extra-curricular activities of its students under Section 10(23C)(iiiad) of the Income Tax Act.

However, during the year the CIT(Exemptions) rejected the claim of the Assessee and denied the registration under section 12AA of the Income Tax Act by holding that gross receipts of the Assessee society in all the five years are far in excess of one crore. The authority further noticed that last year the school is collecting money from the students in the name of sports funds, maintenance fund, teacher’s welfare fund etc. which appears to have been excluded from the gross receipt. Hence he was of the view that the Assessee society wrongly claimed exemption under the said section.

Aggrieved by the order of the authority the Assessee society approached the Tribunal on appeal.

The Tribunal bench comprising of President G.D.Agarwal and Judicial Member Kuldip Singh observed that “when the Assessee society is admittedly into imparting education for the general public utility, the registration cannot be declined on the ground that the Assessee has been collecting money from the students in the name of various funds. In case collecting of such funds are found to be not in consonance with aims and objects of the society, the AO can disallow the same while making an assessment from year to year basis. The bench further analyzed that on that basis the Assessee had wrongly claimed exemption under the said section and same has rightly rejected by the AO, but the registration cannot be declined”.

The bench also held that the order passed by the  CIT (E) firstly declining registration under section 12AA of the Act and consequently, declining the permission under section 80G(5)(vi) of the Act is not sustainable in the eyes of law. Therefore the Tribunal directed the authority to grant registration to the assessee society forthwith also with consequent approval under section 80G of the Income Tax Act.