The Raipur Bench of the Income Tax Appellate Tribunal ( ITAT ) observed that as the assessee institute had remained divested of sufficient opportunity to put forth its case and furnish the requisite details in the course of the proceedings before the CIT( Exemption ), the matter need re-adjudication.
Institute of Driving and Traffic Research, the assessee institute challenged the respective orders passed by the Commissioner of Income-Tax (Exemption), wherein the latter had declined assessee’s application filed in Form 10AB under section 12AB & 80G(5) of the Income-tax Act, 1961 ( ‘the Act’ ), respectively.
It was alleged that the rejection of the application Form No. 10AB under Section 12AB is incorrect and unlawful and argued that the CIT ( Exemption ) has erred in interpretation of the provisions governing the society not limited to Section 12AB, Section 11 etc.
The assessee Society is subject to Chhattisgarh Government policy and levies modest fees under that policy rather than for commercial purposes. A copy of the Assessee Society’s fee structure and the Transport Department of the Government of Chhattisgarh’s fee structure are attached for your reference. Because of this, the Appellant’s nature of activities is charity and cannot be categorized as commercial.
Also, in the case of Association of State Road Transport Undertakings vs. Commissioner of Income Tax, ITAT Delhi (2015),155 ITD 1177, it was held that “where the main object of the state transport undertaking of improving public transport in the country, merely because the Assessee received revenue from testing automobile parts and consultancy services, the same could not be held for earing profits.” The activities of the Appellant cannot be held to be Commercial in nature and are not in violation of the proviso to Section 2(15) of the Income Tax Act.
The CIT did not consider the following comparable institutes that have been registered and are listed as Exemption Institutions with the Income Tax Department.
It was stated that the assessee is a CSR funded institute under the aegis of Maruti Suzuki India Ltd. and State Transport authority, i.e. a non-profit organization set up under the guidelines of scheme for setting up Institutes of Driving Training and Research (IDTRs), Regional Driver Training Centre. The CIT(Exemption) had issued “Show Cause Notice” ( SCN )calling upon it to put forth an explanation as to why the aforesaid application for registration/approval in light of certain infirmities may not be rejected.
It was found that the society is imparting various training courses and charging fees with GST on services rendered. It was evident that the activities carried out by the assessee is not for charitable purposes as define in Section 2(15) of the Act and the receipt from commercial activities exceeds 20% of total receipts in violation to proviso to section 2(15) of the Act.
On perusal of list of donation provided by the assessee, it is observed that the society has received various CSR donations on 15.11.2021 from Maruti Suzuki India Ltd. However, the society has obtained CSR registration on 18.10.2022. Hence, it is evident that the society has received the CSR donation without CSR registration certificate in violation to the CSR rules as per MCA Notification dated 22nd January, 2021 which also attracts violation of section 12AB(1)(b)(i)(B) of the Income Tax Act by not following the any other law time being in the force and which is also material for the purpose of the assessee.
the assessee institute failed to comply with the aforesaid notice, therefore, the CIT(Exemption), Bhopal rejected the assessee’s application for grant of registration/approval under section12AB of the Act. Also, provisional registration /approval granted under section12AB of the Act in Form 10AC vide URN No. AABAI9525QF20214 dated 28.05.2021 that was granted by the CPC, Bengaluru was cancelled as per the provisions of Section 12AB(1)(b)(ii)(B) of the Act.
The appellant submitted that the CIT( Exemption ), Bhopal had most arbitrarily without affording any reasonable opportunity to the assessee institute to submit its reply to the queries that were raised by him rejected the assessee’s application for registration under section 12AB of the Act. It was contended that as the assessee institute had remained divested of sufficient opportunity to put forth its case before the CIT(Exemption), Bhopal, therefore, the matter in all fairness be restored to his file with a direction to re-adjudicate the same. Per contra, the Departmental Representative (‘DR’) relied on the orders of the lower authorities.
A two member bench of Shri Ravish Sood, Judicial Member and Shri Arun Khodpia, Accountant Member observed that as the assessee institute had remained divested of sufficient opportunity to put forth its case and furnish the requisite details in the course of the proceedings before the CIT( Exemption ), the matter need re adjudication.
The ITAT restored the matter to the file of the CIT( Exemption ), Bhopal with a direction to re-adjudicate the same. Shri Ameya Agasti appeared for the appellant and Shri S.L Anuragi appeared for the respondent.
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