Loading judgment…
Facts
The assessee, a society running a school, applied for registration under section 80G. The CIT(E) rejected the application, stating that the assessee receives fees from students, which are not donations eligible under section 80G.
Held
The Tribunal held that receiving fees for educational services does not disqualify an institution registered under section 12AB from seeking 80G approval, as long as its activities are charitable and genuine. The CIT(E)'s interpretation was found to be flawed.
Key Issues
Whether charging fees for educational services disqualifies a charitable institution from obtaining registration under section 80G of the Income Tax Act.
Sections Cited
80G, 12AA, 12AB, 2(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K
PER WASEEM AHMED, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed by the ld. CIT(E), Bangalore dated 03/12/2024 in DIN No. ITBA/EXM/F/ EXM45/2024-25/1070853492(1) for the assessment year 2024-25.
The only issue raised by the assessee is that the learned CIT(E) erred in not granting the registration under section 80G of the Act.
The relevant facts are that the assessee is a society and running a School. The assessee filed application for registration under section 80G of the Act in Form 10AB as on 29th June 2024. However, the application for registration under section 80G of the Act was rejected by the learned CIT(E). While dismissing the application of the assessee learned CIT(E) found that the assessee is receiving fee from the student in the form of “School Fee”, “School Bus Fee” and “Books and Uniform Fee” whereas section 80G of the Act applies on the donation.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted that the learned CIT (E) has not pointed out any infirmity in the objects and bylaws of the institution. As such, the objects and the bylaws of the institutions have been accepted while granting the registration under section 12AA of the Act. Thus, the learned AR contended that the registration under section 80 G of the Act cannot be denied in the given facts and circumstances.
On the other hand, the learned DR before us vehemently supported the order of the authority below.
We have heard the rival contentions of both the parties and perused the materials available on record. The only issue involved in the present appeal pertains to the denial of registration under section 80G of the Act. From the preceding discussion, we note that the assessee, is engaged in running a School, with the stated objective of promoting education. The assessee made an application in Form 10AB seeking registration under section 12AB and section 80G of the Act which was denied by the learned CIT(E). In the rejection order, the learned CIT(E) observed that the assessee collects fees from students and concluded . that since section 80G of the Act pertains to donations made to charitable institutions, and not fee-based receipts, the assessee does not qualify for such registration. This interpretation, however, is found to be flawed and inconsistent with the established legal principles governing eligibility under section 80G of the Act.
7.1 In our considered opinion, the receipt of fees for educational services by a charitable institution registered under section 12AB of the Act does not disqualify it from seeking approval under section 80G of the Act, provided the institution's activities are genuine and fall within the purview of charitable purposes as defined under section 2(15) of the Act. Running a school for the advancement of education is recognized as a charitable purpose, and merely charging fees from students to sustain the functioning of the institution does not vitiate its charitable character, especially where no profit motive is evident, and the institution operates in accordance with its stated charitable objectives.
7.2 Accordingly, we hold that the rejection of the application under section 80G of the Act by the learned CIT(E) is not justified and is liable to be set aside. The matter is restored to the file of the learned CIT(E) to examine the application afresh in accordance with law, after affording the assessee a reasonable opportunity of being heard and without being influenced solely by the ground of fee receipts. The CIT(E) shall evaluate whether the donations, if any, are applied towards charitable purposes and whether all statutory conditions for approval under section 80G of the Act are met. Hence, the ground of appeal raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in court on 24th day of April, 2025