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Before: Shri Laliet Kumar & Dr. Mitha Lal Meena
In the Income-Tax Appellate Tribunal, Amritsar Bench, Amritsar Before : Shri Laliet Kumar, Judicial Member And Dr. Mitha Lal Meena, Accountant Member ITA Nos.596/Amr/2016 Assessment Year2015-16
M/s. Step By Step Junior School V.S. CIT Exmp. Society Chandigarh 8,R.B. rattan Chand Road, The Mall Amritsar – 143001 (Punjab) PAN:AAMTS9930K (Respondent) (Appellant)
Appellant by Sh. P.S. Arora, Adv. Respondent by Sh. Anupam Kant Garg, DR
Date of Hearing 09.07.2021 16.08.2021 Date of Pronouncement
ORDER Per Laliet Kumar, J.M.
The present appeal was filed by the assessee feeling aggrieved by the order passed by the ld. CIT(E) on 30.09.2016 denying the approval sought by the assessee u/s 10 (23C)(vi) of the IT Act on the following grounds:
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That the order of the Ld CIT (Exemptions) are both against the facts of the case and untenable in law.
That the Ld CIT (Exemptions) has miserably failed to apply his mind and has done grave injustice by rejecting the application made by M/s Step by Step Junior School Society for the ·grant of approval u/ s 10(23C)(vi) of the Income Tax Act, 1961. 3. That the Ld CIT (Exemptions) did not acknowledge that the necessary material for grant of approval was furnished before them from time to time and also failed to appreciate the same and without applying the mind the authority has done grave injustice by rejecting the application for approval. 4. That the Ld. CIT (Exemptions) has passed the order of rejection without giving proper show cause notice of the grounds of rejection whereas the short coming in the Society's By-laws could be easily corrected to the satisfaction of the law. 5. That the Ld. CIT (Exemptions) has grossly erred by refusing the application, as such the order of Ld. CIT (Exemptions) is liable to be cancelled/annulled. 6. That all the facts, material and evidence furnished before the worthy CIT (Exemptions) have been wrongly interpreted while deciding the application for grant of approval. As such it is prayed that the appeal of the appellant may kindly be allowed and approval be granted u/ s 10(23C)(vi). 7. Any other ground of appeal which may be urged at the time of hearing of the appeal
Brief facts
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The assessee is a registered society registered under societies registration Act has been claiming exemption u/s 10(23C) (iiiad) for the past many years. For the financial year 2014-15 the assessee has claimed exemption u/s 10(23C)(vi) of the IT Act. The assessee has filed the application for grant of exemption in the requisite form no. 56D along with the annexures with the respondent. 2. Along with the application the assessee has enclosed the following documents i. copy of the certificate of registration. ii. Objects of the educational institution iii. Copy of the audit accounts and balance sheet.
The CIT(E) had issued the show cause noticed dated 01.03.2016 calling upon the certain information from the assessee. (PB-35).
The assessee has replied the show cause notice and had provided the information sought by the CIT(E). In the reply the assessee has submitted in respect to notes on act ivies as under: “Receipts are purely on account of educational activities. Activities of the society are as under:- The society is running and maintaining the school and play grounds for children. Running and maintaining computer centre, Library and book bank for children. Conducting educational tours and debates for increasing knowledge and betterment of students. In respect to main object it was submitted as under:- The main object of the society is to impart education to the students, society is being run solely for educational purpose and not for the purpose of profit that is why the exemption is being sought under section 10(23C).”
The assessee filed another reply giving the break up of the advance receipt during the financial year 2014-15 relating to the financial year 2015-16 in the reply dated 23.05.2016.
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The CIT(E) was not satisfied with the replies and had issued another show cause notice on 26.08.2016 and sought various information including the copies of bank account maintain by the society for the last three years . The following more informations were sought: - “x) In case the main object is running of a school, please furnish the details of total no. of students, fee structure and note on Right to Education Act, and its affiliation evidence”. xi In case you are running a college, please produce documentary evidence regarding its affiliation with the university. For structure, semester-wise and class- wise. If any concession is given to students details thereof may be produced. xii. Please give name of school institute its PAN for which exemption u/s 10(23C) as been asked for.
The assessee had duly complied with the show cause notice and provide the requisite information vide the reply dated 09.08.2016. In response to question no. ix to xii it was submitted as under: -
ix Copies of Bank Statements for 3 years are attached, school is affiliated to CBSE (Photocopy of the CBSE letter for affiliation is enclosed). x Yes society has made applicable Right to Education Act in the school. We are enclosing copies of information submitted to District Education Officer Amritsar and its consent letter. xi The society is not running any college. Fee Structure of the school is attached. xii The name of the school is step by step High School and it is a part of the society PAN of the society is AAMTS9930K (Photocopy of the PAN is attached).
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The CIT(E) was not satisfied with the replies and the documents submitted by the assessee and therefore rejected the application for approval vide the impugn order.
Now the feeling aggrieved by the order passed by the CIT exemption the assessee is in appeal before us for the grounds stated hereinabove.
The ld. AR had submitted that the CIT exemption has wrongly mentioned that the assessee is running the school in the name and style of “Step-By-Step Kindergarten”.In this regard it was submitted that the assessee was only running school affiliated to CBSE in the name and style of “Step-By-Step High School. The above said information was duly supplied by the assessee while filing the reply to the notice dated 26.08.2016 however despite that the CIT(E) had wrongly observed in paragra 6.1 that the assessee is running the kindergarten.
The ld. AR had further submitted that the observation made by the CIT(E) paragraph 6.2 that the Step-By-Step High School has not been registrered as society and is therefore not entitled to exemption u/s 10(23C)(vi). He has also submitted that the CIT(E) was wrong in concluding that there was no evidence showing the running of the high school by the applicant assessee.
The ld. AR had submitted that the adequate evidences were filed before the Commissioner exemption whereby it was shown to the commission mentioned that the assessee was running the high school in the name and style of step-by-step high school further the assessee has also provided the supporting certificate issued by the central board of secondary education affiliating the high school with it. The ld. AR had also submitted that the kindergarten was the propriety concern of Smt. GunitaGrewal who is separately filing return of income. Even computation of income, income and expenditure
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account and balance sheet of Smt. Sunita Grewal are placed on the paper book of the tribunal, which clearly shows that the kindergarten has nothing to do with the functioning of the high school or that of the society running the high school.
The ld. AR had drawn our attention to para 9 of the CIT(E) which was to the following effect:- “9. Notwithstanding the above reply to queries by the applicant such as copies of lease deed of the premise of school, copy of fee structure and copy of salary register were examined in light of contents of para 6.1 & 6.2 supra. All the three deed agreements have been done between Smt. Gunita Grewal (lessor) and her husband Sh. Harjot Grewal (lessee) both being members of the society. The details are as under:- Lease deed date Area of Land Period of Lease Lease Money 08.12.2014 300 sq. yard 40 years Rs. 8400/- p.a. 29.05.2014 1905.75 sq. yard 40 years Rs. 25,000/- p.a. 18.06.2013 7683 sq. yard 40 years Rs. 80,000/- p.a.
Financial statement reveals that an addition of Rs. 72,19,181/- has been done during F.Y. 2014- 15 under the head building (New) and no addition under this head has been done by the applicant since inception. Addition in the shape of building on leased premises when it pertains to members of the Society leads one to suspect the fate of such additions to assets particularly in the case of a Society whose bye-laws are marred by the absence of a 'dissolution clause'.”
The ld. AR had submitted that the resolution clause was duly placed on record at page 109 to 111 which shows that after resolution the assets of the assessee would devolve upon the society with the similar and same objective. (page 111 of PB). Further it was submitted that the lease money paid by the assessee to Smt. Gunita Grewal and her husband was reasonable amount considering the prevailing the market rate of the property and the adjoining areas. It was further submitted that the stage for consideration
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of approval only 2 things are were required to be seen namely that this institution exists solely for the purpose of education and not for profit and the institution is genuine. The ld. AR relied upon the judgement of the coordinate bench in the matter of “Tara Educational and Charitable Trust, Mumbai vs. Director of Income Tax (Exemption), Mumbai in ITA No. 1247/Mum/2013, order dated 18/07/2014 A.Y. 2012- 13. And in the case of CIT(Exemption) vs. Sadguru Narendra Maharaj Sansthan, 92 taxmann.com 405 (Bombay).
The ld. AR had further submitted that the observation given by the CIT(E) in para 10 was also required to be ignored at the stage of approval. It was submitted that the assessee is affiliated with the CBSE and the Fees charge by the assessee cannot be held to be high merely on the basis of conjecture and surmises. It was submitted that the fees is charged by the assessee in accordance with law and also in conformity with the infrastructure, quality of teacher etc. The ld. AR had again repeated that the reasons given in para 10 of the order cannot be the reasons for denying the approval under 10(23C)(vi) of the Act. The ld. AR had submitted that the incorrect fining was recorded by the CIT(E) wherein it was submitted that the assessee is not complying the Right to Education Act 2009. That the ld. AR had further submitted that the conclusion of the CIT exemption that the assessee was not paying the details of the salary paid to the teachers, was factually incorrect as the assessee has provided the requisite information during the course of proceedings before the CIT exemption.
The ld. AR on the basis of the above said submissions and also on the basis of the written submission filed before us had submitted that the order rejecting the application for approval of the assessee was without any basis. It is relevant to point out that at the time of granting approval the Ld CIT(E) needs to satisfy himself only about two things
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that the society exists solely for education purpose and not for the purpose of profit and reliance was placed on the following case laws:-
Decision of Punjab & Haryana High Court in the case of CIT(Exemptions) Chandigarh vs. Shri Shirdi Sai Darbar Charitable Trust ( Dharamshala), Barnala, in ITA No.38 of 2017, order dated 27/03/2017. 2. Decision of P&H High Court in the case of CIT vs. B.K.K. Memorial Trust reported in 29 Taxmann.Com 286.
Decision of P&H High Court in the case of CIT vs. Surya Educational & Charitable Trust reported in 15 Taxmann.Com 123.
Decision of ITAT, Amritsar Bench in the case of Divine Health Services vs. CIT-II, Amritsar in ITA No. 417(ASR)/2010, order dated 07/06/2012 relating to AY 2010-11.
Decision of ITAT, Amritsar Bench in the case of D.N. Memorial Trust vs. CIT in ITA No. 617(ASR)/2011, order dated 11/07/2012.
Decision of ITAT, Amritsar Bench in the case of Dream Land Educational Trust vs. CIT reported in 109 TTJ 850.
Decision of ITAT, Amritsar Bench, Amritsar in the case of The Managing Committee, Arya High School, Mansa vs. CIT(E) Chandigarh in ITA No. 469(ASR)/2016, order dated 11/08/2017 relating to AY 2015-16. [Refer Page No.135 to 142 of compilation of judgments].
Decision of ITAT Amritsar Bench Amritsar in the case of Sant Ishwar Shiksha Samiti vs. CIT(E) Chandigarh in ITA No. 670(ASR)/2015 order dated 30/08/2017 relating to AY 2015-16.
Decision of Punjab & Haryana High Court in the case of Pinegrove International Charitable Trust and Ors vs Union of India and Ors reported in 327 ITR 73.
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Decision of Punjab & Haryana High Court in the case of CIT(E) Chandigarh vs. Shree Mahavir Jain Society (Regd.) in Appeal No. 231 of 2016 order dated 11/09/2017.
On the contrary, the learned D.R. for the revenue had submitted that Section 10 (23C) (vi) of the Act would only be applicable if the assessee is running the institution solely for the purpose of education. He had laid much emphasis on the word solely used in the statute. He had further submitted that the assessee was running various institution in the same name and therefore the assessee is not entitled to the approval under section 10 (23C) (vi) of the Act. He had relied upon the order passed by the CIT exemption for that purposes.
We have heard the rival contentions of the parties and perused the material on record. Section 10 (23C) (vi) of the Act provides as under:
[(vi) any university or other educational institution existing53 solely for educational purposes53 and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved54 by the prescribed authority55; or
Provided that the fund or trust or institution 58[or any university or other educational institution or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) 58[or sub-clause (vi) or sub-clause (via)] shall make an application in the prescribed form59 and manner to the prescribed authority60 for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) 61[or sub-clause (vi) or sub-clause (via)] : 62[Provided further that the prescribed authority, before approving any fund or trust or institution or any university or other educational institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:] Provided also that the fund or trust or institution 63[or any university or other educational institution64 or any hospital or other medical institution] referred to in sub-clause (iv) or sub-
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clause (v) 63[or sub-clause (vi) or sub-clause (via)]— 65[(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and] 66[(b) does not invest or deposit its funds, other than— (i) any assets held by the fund, trust or institution 67[or any university or other educational institution68 or any hospital or other medical institution] where such assets form part of the corpus of the fund, trust or institution 69[or any university or other educational institution or any hospital or other medical institution] as on the 1st day of June, 1973; 70[(ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998;] (ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution 71[or any university or other educational institution72 or any hospital or other medical institution] before the 1st day of March, 1983; (iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) 73[and sub-clause (ia)], by way of bonus shares allotted to the fund, trust or institution 74[or any university or other educational institution or any hospital or other medical institution] ; (iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify, for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:] Provided also that the exemption under sub-clause (iv) or sub-clause (v) shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 75[1993] : 76[Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied in relation to any funds invested or deposited before the 1st day of June, 1998, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 2001:] 77[Provided also that the exemption under sub-clause (iv) or sub-clause (v) 76[or sub-clause (vi) or sub-clause (via)] shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this sub-clause, subject to the condition that such voluntary contribution is not held by the trust or institution 78[or any university or other educational institution or any hospital or other medical institution], otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the
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previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:] Provided also that nothing contained in sub-clause (iv) or sub-clause (v) 79[or sub-clause (vi) or sub-clause (via)] shall apply in relation to any income of the fund or trust or institution 79[or any university or other educational institution or any hospital or other medical institution], being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business: Provided also that any 80[notification issued by the Central Government under sub-clause (iv) or sub-clause (v), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President*, shall, at any one time81, have effect for such assessment year or years, not exceeding three assessment years] (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:] 82[Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President,* every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under 83[sub- clause (iv) or sub-clause (v) or] sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received: Provided also that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or any university or other educational institution or any hospital or other medical institution shall get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income for the relevant assessment year, the report of such audit in the prescribed form84 duly signed and verified by such accountant and setting forth such particulars as may be prescribed:] 85[Provided also that any amount of donation received by the fund or institution in terms of clause (d) of sub-section (2) of section 80G86[in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, 87[2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax:] 88[***] 89[Provided also that where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AA or to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational
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institution or hospital or other medical institution, as the case may be, is established : Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government 90[or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that— (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not— (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution— (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer:] 91[Provided also that in case the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be 92[made on or before the 30th day of September of the relevant assessment year] from which the exemption is sought :] 93[Provided also that any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of the said section shall be included in the total income :] 94[Provided also that all pending applications, on which no notification has been issued under sub-clause (iv) or sub-clause (v) before the 1st day of June, 2007, shall stand transferred on that day to the prescribed authority and the prescribed authority may proceed with such applications under those sub-clauses from the stage at which they were on that day:] 95[Provided also that the income of a trust or institution referred to in sub-clause (iv) or sub- clause (v) shall be included in its total income of the previous year if the provisions of the first proviso to clause (15) of section 2 become applicable to such trust or institution in the said previous year, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded :] 96[Provided also that where the fund or institution referred to in sub-clause (iv) or the trust or institution referred to in sub-clause (v) has been notified by the Central Government or approved by the prescribed authority, as the case may be, or any university or other
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educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), has been approved by the prescribed authority, and the notification or the approval is in force for any previous year, then, nothing contained in any other provision of this section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year. Explanation.—In this clause, where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year;]
From the reading of Section 10(23C) (vi), it is amply clear that the university and educational institution that are solely for educational purposes and not for profit must accorded approval by the exemption by the Commissioner. In fact, the educational institution is not defined under the Act or any other law. In our understanding, an educational institution which is imparting the systematic education through a fixed syllabus having the proper Curriculum and is governed by State or Central Board.
In the present case the assessee society is running the higher School duly affiliated with the Central Board Of Secondary Education. No other activities of the assessee has been shown by the Commissioner exemption after examining the books of account of the assessee, Profit and Loss account and balance-sheet, which shows that the assessee was into profit making. The sole activities undertaken by the assessee society was running the high school in the name and style of “Step-By-Step High School”. In the matter of Council for Indian School Certificate Examinations vs. DGIT€ 362 ITR 436the similar view was taken by the Hon’ble High Court.
Undoubtedly, the Step By Step High School is an educational institution run by the assessee Society and is, therefore, entitled to approval under Section 10(23C) of the
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Act. Moreover the CIT , himself para 2 reproduced the aim and objects as under :-
“2. The stated Aim and objects of the society are:
i. to make students intellectually rich, mentally mature, aesthetically vibrant, physically fit and emotionally stable. ii. The curriculum should aim at self evaluating making the student know himself, his capacities and drown curiosity of the child needs to be encouraged in order to pave the way to creativity and excellence. iii. The activities are designed to provide the children with a good foundation. Every effort is made to provide rich experience of activities within the school and in relation to the community as a whole
The other observation given by the CIT (Exemption) with respect to allegedly paying higher lease rent by Smt. Gunita Grewal and her husband (para 9) and the fee structure of the school, in our view, cannot be a ground to deny the approval to the assessee. Admittedly, at the stage of assessment, the Assessing Officer will examine, whether the assessee has violated any provision of law including Section 11 and 13. We may refer here the decision of the Jurisdictional High Court in the matter of ‘Shirdi Sai Darbar Charitable (Dharamshala) Trust, Barnala, in ITA No. 38 of 2017’.[2017] 81 taxmann.com 49 (Punjab & Haryana) wherein it was held as under
The matter has been examined by the Tribunal after perusing the relevant statutory provisions. It has been categorically recorded by the Tribunal that the CIT (E) has to satisfy two conditions while granting registration under Section 12AA of the Act. Firstly, whether the objects of the assessee are charitable in nature and thus, the activities are genuine. It cannot be concluded on the basis that the assessee has not filed its income tax returns in earlier years that the activities of the assessee are not genuine. It has been
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further recorded that Section 13 of the Act comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12AA of the Act. No adverse remarks have been recorded by the CIT (E) with regard to the objects contained in the memorandum of the assessee-trust to come to the conclusion that its activities are not genuine. Thus, it has been rightly directed by the Tribunal to the CIT (E) to grant registration under Section 12AA of the Act. The relevant observations recorded by the Tribunal read thus:— "We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The first reason on the basis of which the Commissioner of Income Tax (Exemptions) has refused to grant registration to the assessee is that the assessee has not been filing its income-tax returns in the earlier years. We do not find that it is a good reason to reject the application for registration since the two conditions which the Commissioner of Income Tax (Exemptions) has to satisfy while granting the registration under Section 12A of the Act, are that the objects of the assessee are charitable in nature and the activities are genuine. Just because the assessee has not filed its income tax returns in earlier years, it cannot be said that the activities of the assessee are not genuine. Reliance placed by the learned counsel for the assessee on the judgment of the Allahabad High Court as well as the order of the Chennai Bench of the Tribunal are not out of place, whereby it has been held that non-filing of return cannot be one of the reasons for denying registration under Section 12A of the Act. With regard to the second objection raised by the Commissioner of Income Tax (Exemptions) that as per clause-12 of the Memorandum of trust, the trustees have been given absolute powers to manage the property. We have perused the clause-12 of the Memorandum of the trust, whereby the trustees are authorized to demise the immovable property or properties of the trust either from year to year or for any fixed term or for any term of years or on monthly basis at such rent and subject to such conditions as they deem fit and proper and also accept surrender of lease and may manage the property as they think proper. From the perusal of this clause, we observe that the trustees have been given powers to give property of the trust on lease or on rent. We do not find anything wrong in this clause so as to deny the assessee the registration under Section 12A of the Act. As regards the apprehension of the Commissioner of Income Tax (Exemptions) that his clause may attract the provisions of Section 13 (1)(c) of the Act, we are of the view that the conditions as provided in Section 13 or elsewhere are to be seen by the Assessing Officer at the time of assessment proceedings on yearly basis and not by the CIT (Appeals) while granting registration under Section 12A of the Act. 8. Sections 13 comes into play at the time of granting exemption under Section 11 of the Act and not at the time of granting registration under Section 12A of the Act. The only two requirements as stated hereinabove while granting registration under Section 12A of the Act, are with respect to the charitable nature of the objects of the assessee and genuineness of the activities. Since we observe that no adverse remarks have been made by the Commissioner of Income Tax (Exemptions) with regard to the objects contained in Memorandum and as stated hereinabove that the observations of the Commissioner of Income Tax (Exemptions) do not lead to the conclusion that the activities of the assessee
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are not genuine, we hereby direct the Commissioner of Income Tax (Exemptions) to grant registration under Section 12A of the Act to the assessee." 5. Learned counsel for the appellant-revenue has not been able to show that the findings recorded by the Tribunal are in any way illegal or perverse warranting interference by this Court. Consequently, no substantial question of law arises and the appeal stands dismissed.
In the matter of ‘Nangali Educational Society, BSF Road, Gurdaspur vs. 23. Commissioner of Income Tax (Exemptions), the coordinate Bench in ITA No. 624/2016 had held as under:
“As regards the objection of Ld. CIT(E) that the name of school in the MOA is not mentioned, we find that this objection of Ld. CIT(E) is absurd as Memorandum of Association is a document wherein main objects of society are mentioned and to carry out these objects, the assessee started school to fulfill the main objects. We further find that at the time of registration u/s 10(23C)(vi), the Ld. CIT(E) has to examine the objects and the genuineness of activities. The Hon'ble Punjab & Haryana High Court in the case of Pinegrove International Charitable Trust and Assessment Year: Ors reported in 327 ITR 73 vide its judgment dated 29 Jan., 2010 has held as under: "Exemption under s. 10(23C)(vi)--Educational institution--Profit motive--At the initial stage when the application for exemption is filed by an educational institution the scope of inquiry is restricted only to ascertain the genuineness of the activities of such institution--Once approval is granted for exemption, the monitoring provisions come into play and the AO has to examine whether the conditions on which the approval has been given are fulfilled or not--Fact that an institution has earned profit would not be deciding factor to conclude that the educational institution exists for profit--Even if there remains a surplus at the hands of the educational institution, it would be entitled to exemption under s. 10 (23C)(vi) provided the educational institution solely exists for educational purposes--Capital expenditure has to be deducted from the gross income of the educational institution in determining whether 85 per cent of the income has been applied for its objects--Words 'not for the purposes of profit' accompanying the words 'existing solely for educational purposes' have to be read and interpreted in view of the third proviso to s. 10(23C)(vi) which prescribes the methodology for the utilization and accumulation of income at the hands of the educational institutions--Even otherwise, unlike the provisions of ss. 36(l)(xii) and 37, the words 'not being in the nature of capital expenditure' do not find place in the third proviso to s. 10(23C)(vi) preceding the words 'wholly and exclusively' which clearly demonstrates that the capital expenditure is to be deducted whenever the institution applies its income for the achievement of its object-- This view is further fortified by cl. 11 of Form No. 56D which specifies that the amount
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of income of an university or other educational institution which is to be deemed to be utilized wholly and exclusively for its objects shall have the meaning assigned to it in sub- ss. (1) and (1A) of s. 11--In every case of an educational institution there is bound to be a profit--Provision of s. 10(23C)(vi) would be rendered otiose if the interpretation adopted by the Chief CIT is accepted--Admittedly, in the instant case, the application of income is more than 100 per cent for the attainment and achievement of the objects of the petitioner-society in the last three years--Thus, it could not be held to be an educational institution existing for the purpose of making profit so as to be disentitled to exemption under s. 10(23C)(vi) for the reason that it is earning substantial profits year after year--Further, the contention of the Revenue that the petitioners being societies registered under the Societies Registration Act, 1860, do not fall within the ambit of the expression 'other educational institutions' and, therefore, exemption under s. 10(23C)(vi) has been rightly withdrawn cannot be accepted as the Chief CIT did not make the aforesaid ground as the basis for withdrawal of exemption after the petitioners filed reply to the notice asserting that such a ground was not tenable--Therefore, the impugned orders passed by the Chief CIT withdrawing the exemption granted under s. 10 (23C)(vi) are quashed." We further find that Amritsar Bench in the case of Arya High School under similar facts and circumstances has allowed registration u/s 10(23C)(vi) by holding as under: "6. We have gone through with the facts and circumstances of the case specially the documents filed and from the details of assets as on 31st March, 2013 it shows that the assessee has incurred expenses on the purchase of land which goes to show that the assessee was earlier utilized the fund for the development of institution and of its extension. Further according to the judgment passed by the Hon'ble Apex Court in the case of Chief Commissioner vs. St. Peter's Educational Society, 385 ITR 66 (SC) as relied upon by the assessee society whereby it was held that the institution makes profit does not necessarily mean it exists for profit and an overall view in year in question object was to make profit as opposed to educating persons to be seen.
Further, the Hon'ble Apex Court in the case of Visvesvaraya Technological University vs. ACIT, 384 ITR 37 (SC), whereby it was held that there could be no manner of doubt that the surplus accumulated over the years had been ploughed back for educational purposes and in the said case the Hon'ble Apex Court reminded the conditions of principle laid down in Queen's Education Society vs. CIT [2015] 372 ITR 699 (SC) which for the sake of brevity and convenience are reproduced herein below.
"11. Thus, the law common to section 10(23C)(iiiad) and (vi) may be summed up as follows. (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it
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ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. (2) The predominant object test must be applied--the purpose of education should not be submerged by a profit making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on 'for profit'. No inference arises ' that merely because imparting education results in making profit, it becomes an activity for profit. (4) If after meeting the expenditure, a surplus arises incidentally from the activity carried only the educational institution, it will not; cease, to be one existing solely for educational purposes. Assessment Year: (5) The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons."
The observation of the CIT(E) is not correct to the extent that the assessee is a society and not university or other educational institution and to that extent not covered by the provisions of Sec.10(23C)(iv) because the ITAT, "A" Bench, Chennai in the case of Senguthat Matriculation Higher Secondary School Vs. CIT in ITA No.2008/Mads/2015 dealt with the same issue by observing as under:
"The primary condition u/s.10(23C)(vi), the assessee shall exist solely for educational purposes and not for purposes of profit. The Chief Commissioner of Income Tax without observing that the assessee not solely existing for educational purpose, he went on proposition that the assessee is not having Memorandum of Association or Trust deed so as to carry on the function of the assessee. But the fact brought on record suggests that the assessee is an "AOP", managed by Sengunther Education Board which is a registered body under the Society Registration Act in the year 1946 vide Registration No.S/8/1946. The above education board is managing the assessee school with the committee Members of the said Education Board and constituted the office Bearers of the institution and duly filing the return of income. It is to be observed that there is no expressed definition for "Institution" under the Income Tax Act. Hence, we have to consider the General meaning defined in the Webster's New Dictionary, the word "Institution" means an established or organized Society or Corporation, an establishment, especially one of Public Character, or one effecting a community; a Foundation. Further, this Tribunal, Delhi Bench 'G' Bench in I.T.A.NO:3360(DEL) of 2008 dated 30.04.20 10 in deciding the Appeal in the case St.Thomas Girls Senior Secondary School, New Delhi Vs. Director of Income Tax(Exemption), New Delhi have held that the word Institution is wide enough to include a school, which has been established for imparting Education. Merely because the Assessee School does not have power to purchase, acquire, or sell the property, does not mean that the school will cease to exist as an Institution. Thus the 'status' of the Assessee could be A.O.P. in the absence of any Memorandum of Association or Trust Deed. Considering the above decision of the I.T.A.T, Delhi Bench,
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in the present case also the above Matriculation School which is managed by Education Board and granted permission by the Director of School Education as early as 07.10.1997 is an "Institution" qualifying for exemption U/s. 10(23C)(vi) of the I.T. Act. Hence, the exemption sough for the above "Institution" is to be granted. Accordingly, we direct the CCIT to grant exemption U/s 10(23C) (vi) of the Act." Now, coming to the instant case, as it reflects from the details of four assessment years i.e. of 2012-13, 2013,14, 2014-15 & 2015-16, that the amount of receipt has been exceeded more than 1 Crore, therefore, the assessee preferred the registration u/s 10(23C)(iv) and in the previous year as it reflects from the balance sheet, the assessee utilized the amount for the purchase of land for further extension of the School Building etc. that certainly goes to prove that the same is being utilized for the educational purposes only because the Ld. CIT(E) failed to bring on record any contrary material to the fact. Further as discussed above, the assessee is also covered within the provisions of Sec.10(23C)(vi) of the Act for grant of registration because in the Act, the institution has not been categorized and it has to be given a general meaning as specified in the dictionary as observed by the ITAT, Bench at Madsras (supra). In overall consideration of the facts and material and judgments relied upon by the parties, we also found support by the judgments passed by the Hon'ble Jurisdictional High Court as relied upon by the Ld. DR because excess accumulation in the instant case has certainly applied for the objects of the society itself, therefore, we do not find any hesitation to allow the registration to the assessee society U/s 10 (23C)(vi) of the Act. Hence, we direct the Ld. CIT(E) to grant exemption U/s 10(23C) (vi) of the Act from the date of application."
With respect to the objection of dissolution clause, we are of the opinion that the copy of the Memorandum of association at page 111 clearly shows that there was a dissolution clause which provides that in the case of dissolution, the assets of the society would be handed over to any other society having similar aims and objects as that of the assessee. Therefore, this objection of the CIT (Exemptions) cannot be sustained. We are further supported by the decision of Mumbai Tribunal in the matter ‘Tara of Education and Charitable Trust vs. DIT (Exemptions), ITA 1247/Mumbai/2013 and decision of High Court of Bombay in the matter of ‘CIT vs.Sadguru Narendra Maharaj Sansthan, (92) Taxman.com 405’
The last objection raised by the CIT (Exemptions) was with respect to non compliance
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of Right to Education Act, 2009. In this regard, the assessee has provided the evidence of compliance made under the Right To Education Act, the certificate from the officer was also provided to the CIT exemption during the course of proceedings along with the reply. In our view the sufficient compliance with made by the assessee during the course of the proceedings for grant of approval however the approval was wrongly withhold by the Commissioner exemption. In our opinion the compliance of right to education act, cannot be a ground to reject the application for approval under section 1023 is C of the Act. This is so held by the honourable jurisdictional High Court in the matter of Kids-R-Kids International Education & Social Welfare Trust*[2018] 99 taxmann.com 384 (Punjab & Haryana), wherein it was held as under:-
A perusal of the above provision shows that the recognition is given to an institution which exists solely for educational purposes provided it is not running for the purpose of profit. Secondly, it has to be approved by the prescribed authority. The only requirement for granting registration under this section is the satisfaction of the prescribed authority with regard to the genuineness of the activities of the assessee. It has been categorically recorded by the Tribunal that the assessee is a trust registered under section 12AA of the Act which makes it quite clear that the assessee is pursuing the charitable activities. It was further observed that the provisions of the Right of Children to Free and Compulsory Education Act, 2009, are not applicable to the assessee being an unaided society. Since the Principal Chief Commissioner of Income-tax had not doubted the genuineness of the activities of the society, the Tribunal directed the Principal Chief Commissioner of Income-tax to grant registration under section 10(23C) of the Act. The relevant findings recorded by the Tribunal read thus : "The provisions of section 10(23C)(vi) of the Act is quite clear to the fact that the only reason for denial of said exemption can be the case where the officer is not satisfied as to the genuineness of the activities of the assessee. By not applying the provisions of the Right to Education Act, it cannot be said that the assessee is not doing any genuine educational activities. For non-compliance of Right to Education Act, 2009 there is a specific appropriate authority which may take action against the assessee. Otherwise also, as stated by us earlier, the RTE provisions are not applicable to the assessee being an unaided society. It is not open to the Income-tax Department to take any such step. There may be some provisions in the relevant Act for the consequences of such non- compliance but it can certainly not be in the form of not granting approval to the assessee under the Income-tax Act.
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Since the Principal Chief Commissioner of Income-tax has not doubted the genuineness of the activities of the society, we hereby direct him to grant registration under section 10(23C) of the Act." 5. Learned senior standing counsel for the appellant-Revenue has not been able to point out any error in the order passed by the Tribunal. Reference was made to the judgment of this court in, Amrawati Welfare Society v. CBDT [2017] 82 taxmann.com 217/390 ITR 471 (P&H), wherein it was held that if the company had granted an interest-free loan to the assessee for the purpose of establishing and running the educational institution, the exemption could not be refused. The mere receipt of an interest-free loan was not indicative of a commercial activity for profit. The position in the present case being different, the Revenue cannot derive any advantage from the said decision.
In the light of the above, we found that the order passed by the Commissioner exemption was without any basis and the assessee was wrongly denied the approval under the Act. In the light of the above said facts and circumstances we hereby direct the Commissioner exemption to grant the approval from the date of application to the assessee.
Sd/- Sd/- (Dr. Mitha Lal Meena) (Laliet Kumar) Accountant Member Judicial member
Copy of order forwarded to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order
Sr. Private Secretary Income Tax Appellate Tribunal Agra Bench, Agra