C I T JAIPUR vs. M/S TAGORE CHILDREN ACADEMY SOCIETY

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 641 / 2009 C I T Jaipur ----Appellant Versus M/S Tagore Children Academy Society ----Respondent Connected With D.B. Income Tax Appeal No. 48 / 2011 C I T Jaipur ----Appellant Versus Eminent International School Shikha Sami ----Respondent D.B. Income Tax Appeal No. 74 / 2011 C I T Jaipur ----Appellant Versus R N Tagore Public School Sansthan ----Respondent D.B. Income Tax Appeal No. 650 / 2011 C I T Alwar ----Appellant Versus Public Rose Shiksha Samiti Alwar ----Respondent

_____________________________________________________ For Appellant(s) : Mr. Sameer Jain with Ms. Mahi Yadav For Respondent(s) : Mr. Sanjay Jhanwar with Ms. Archana _____________________________________________________

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HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 29/05/2017 1. In all these appeals, identical questions of law and facts are involved, hence they were heard together and are decided by this common judgment. 1.1. By way of these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has allowed the appeals preferred by the assessee. 2. While admitting the appeals, this Court framed the following substantial questions of law: Appeal No. 641 / 2009: “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in issuing the direction to the CIT to grant registration u/s 12A of the IT Act inspite of the fact that on the basis of survey proceedings it was held that the society was working for the purpose of profit?” Appeal No. 48 / 2011: “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in issuing the direction to the CIT to grant registration u/s. 12A of the IT Act inspite of the fact that on the basis of survey proceedings it was held that the society was working for the purpose of profit?” Appeal No. 74 / 2011: “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT was justified in issuing the direction to the CIT to grant registration u/s. 12A of the IT Act inspite of the fact that on the basis of survey proceedings it was held that the society was working for the purpose of profit?” Appeal No. 650 / 2011 “(i) Whether the Tribunal was legally justified in granting the registration u/S. 12A with retrospective effect w.e.f. 1.4.2000, on the basis of the photo copy

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of application dt. 19.3.2001 being without justification as it was submitted at the office of Commissioner of Income Tax, Bikaner?”

3 Heard learned counsel for the parties. 4. Counsel for the appellant has taken us to the order of CIT (A) and contended that CIT (A) while considering the case has considered the advances which are made contrary to the provisions of Trust Act after taking into consideration the provision of Section 13 rightly cancelled the Registration. The observations of the CIT (A) read as under: “Being satisfied on the facts mentioned above, I hold that the institution was granted registration u/s 12A read with section 12AA of the IT Act under complete ignorance of the facts and it is required to be cancelled as per provisions of 12AA(3) of the IT Act because on the basis of information received subsequently through the various reports of the AO and submission made by the assessee I am satisfied that the activities of the institution are not genuine and are not being carried out in accordance with the objects of the institution and the society has violated the provisions of section 13(1)(c) & 13(2)(a&b) of IT Act as mentioned above. I am, therefore, cancelling the registration granted to the institution u/s 12AA(1)(b) of the IT Act by order dated 26.9.2008 read with order dated 10.11.2008 u/s 154 of the IT Act. It shall be treated as cancelled with effect from 01.4.2007.” 5. Counsel for the appellant further contended that Tribunal has seriously committed an error in observing against the department though specifically observations were made in para 4 and 5 which reads as under: “4.On the contrary we find substance in the contentions of the Ld. AR that for granting of registration u/s 12A commissioner is to satisfy himself about the object of the institution and the genuineness of its activities as prescribed u/s12AA. In

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present case there is no dispute about the object of the institution which is to impart education. There is also no dispute that assessee is running the educational institution at Surajgarh, Distt. Jhunjhunu, where it imparts education upto 12th standard and is affiliated with Rajasthan Board of Senior Secondary Education. In these circumstances the observation of CIT that activities of the institution are not genuine is without basis & the cancellation of registration on that ground is misconceived. 5. We also concur with the submissions of the Ld. AR that the commissioner has not properly appreciated provisions of S.13. Section 13 is not meant for allowing registration u/s 12A. It only carves out the exceptions, where benefits of S.11 & 13 are not to be allowed to an institution and not for grant of registration u/s 12A. Even section 13(1) provides that provision of S. 11 & 12 shall not operate to exclude from the total income, any part of the income which is used or applied directly or indirectly for the benefit of specified persons or any part of income or property is lent to such persons without adequate security or without adequate interest or both as provided u/s 13(1)(c) & 13(2)(a). Thus application of this section is for assessment & not for registration. 6. In that view of the matter, she contended that the view taken by the Tribunal is required to be reversed. 7. Counsel for the respondent has contended that in view of the decision of this Court in the case of Jhunjhunu Academy Sammittee Vs. Income Tax Officer Jhunjhunu, D.B. Income Tax Appeal No. 123/2006, decided on 8th February, 2017, this Court while considering the identical question observed as under: “15. Before coming to the basic contentions, it is not in dispute that the appellant is as by name itself suggests that it is an academic Samiti carrying on activities of educational purpose for establishing any educational institution. There is need of infrastructure and expansion of every activity whether it is a residential accommodation or physical or competitive requirement or other requirement and also the maintenance of the institution is a mandatory for which one has to collect the funds.

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whether such income should be excluded from the total income of the trust in terms of section 11 of the Act. Insofar as section 12AA of the Act is concerned, the Commissioner had to take a decision if the trust fulfilled necessary requirements of registration as provided under section 12A of the Act. A Division Bench of this Court in the case of Shantagauri Ramniklal Trust and others v. Commissioner of Income Tax and another, (1999) 239 ITR 528, in this context, observed as under : “While considering an application for registration of a trust, the Commissioner must also make a clear distinction between the requirement of registration and the requirement for claiming tax benefit. The latter question falls squarely to be considered by the Assessing Officer. Section 12A neither makes registration of trust as condition precedent for claiming benefit under sections 11 and 12 read with section 13, nor registration obviates enquiry into the conditions envisaged under section 13 by the Assessing Officer before the tax benefit can be allowed. Mere filing of application for registration of the trust is enough to claim benefit of its income under sections 11 and 12 and jurisdiction to the Assessing Officer to enquire into that claim, which also includes question as to who are the beneficiaries of trust. On other conditions being fulfilled, the exemption must follow whether registration is accorded or not.” 9.1. He further relied on decision of this Court in Commissioner of Income-tax, Bikaner Vs. Gopi Ram Goyal Charitable Trust, (2016) 70 taxmann.com 403 (Rajasthan), wherein it has been observed as under: “6. A bare perusal of the order passed by the CIT makes it abundantly clear that it has transgressed its jurisdiction while considering the application preferred by the assessee under Section 12A of the Act. The CIT has proceeded to record the finding without any reasonable basis that it is not proved that the assessee has applied 85% of its income during the year 2002-03 towards the objects of the trust and the same have been accumulated or set apart. The ITAT has rightly observed that it was nowhere found by the CIT that the objects mentioned in the trust deed are not charitable or non-genuine. It is pertinent to note that on the application of the assessee, the CIT had received a

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report from the Income Tax Officer concerned through Joint Commissioner of Income Tax concerned, but did not pass any order on the application of the assessee for the registration and therefore, the assessee had to approach this court for appropriate relief and after the directions being issued by this court, the application of the assessee was considered by the CIT. It is a matter of record that after perusing the report of the Income Tax Officer, documents and information filed by the assessee, the JCIT being satisfied about the genuineness of the objects and the activities of the assessee, forwarded the report to CIT, Bikaner vide letter dated 19.6.2003, however, the CIT did not choose to pass any order accepting or rejecting the application for registration within the stipulated period and during the pendency of the application, a notice under Section 148 for the assessment year 2004-05 was issued to the assessee. When the assessee reminded CIT about the pendency of the application, the CIT again directed for report to JCIT vide letter dated 1.8.2007, which was responded to by the JCIT vide letter dated 13.8.2007 stating that the requisite report has already been sent to the office of CIT, Bikaner. The said letter was accompanied by copy of the report dated 19.6.2003. Strangely enough, while deciding the application of the assessee under Section 12A, the CIT has not even cared to take into consideration the report submitted by the JCIT as aforesaid. Thus, the IT AT has rightly arrived at the finding that the CIT was bent upon to dispose of the application of the assessee for registration without considering such report. 7. A bare perusal of the order passed by the IT AT reveals that entire factual and legal position has been examined by the ITAT threadbare. After due examination of material on record, having been satisfied about the genuineness of the objects and activities of the assessee trust, the ITAT has committed no error in granting the application for registration preferred by the appellant under Section 12A of the Act.” 10. In our considered opinion, in view of the observations made in the case of Jhunjhunu Academy Sammittee (supra) the finding recorded by the Tribunal more particularly in paragraph 7 is

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required to be accepted. 11. Thus, the issue is answered in favour of the assessee and against the department. 12. All these appeals are dismissed. 13. A copy of this judgment be placed in each of the file. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. B.M. Gandhi/41-44