Loading judgment…
Facts
The assessee, Aanya Learning Foundation, applied for registration under Section 10(23C) of the Income Tax Act. The Commissioner of Income Tax (Exemptions) rejected the application, citing a lack of sufficient material regarding educational activities and alleging that the assessee was not provided a reasonable opportunity of being heard. The assessee appealed, arguing it was the first year of incorporation and sufficient opportunity was not given.
Held
The Tribunal held that the CIT(E) erred in rejecting the application without bringing material to show that the assessee's activities were not in accordance with its educational objects or were not genuine. Relying on Supreme Court and Delhi High Court judgments, the Tribunal emphasized that 'proposed activities' are relevant for registration and that the assessee was not afforded adequate opportunity. The impugned order was set aside, and the application was restored to the CIT(E) for fresh adjudication.
Key Issues
Whether the CIT(E) was justified in rejecting an application for registration under Section 10(23C) without providing reasonable opportunity and without proving that the proposed educational activities were not genuine, especially when it was the first year of operation.
Sections Cited
10(23C), 12AA
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “A”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee is directed against the order of the Learned Commissioner of Income-tax (Exemptions), Lucknow dated 16.07.2018. The assessee has raised the following grounds of appeal: -
1. The impugned order is both against facts and erroneous in law.
2. On the facts and circumstances of the case the Ld. CIT(Exemptions) has erred in having not provided reasonable opportunity of being heard and thus violated the principle of Natural Justice.
3. On the facts and circumstances of the case the Ld. Commissioner of Income Tax (Exemptions) has erred in having rejected the application for approval u/s 10(23)(vi) of the Income Tax Act in routine manner.
4. On the facts and circumstances of the case the Ld. CIT(Exemptions) has erred in having held that sufficient material required for satisfaction regarding educational purpose of the society in this case, has not been made available by the applicant.”
The facts giving rise to the present appeal are that the assessee foundation had filed an application for registration u/s 10(23C) of the Income Tax Act, 1961 (hereinafter referred as to Page 2 of 5 the “Act”) with the Commissioner of Income Tax (Exemptions). As per the Ld. CIT(E), the assessee foundation was afforded an opportunity. He further observed that relevant evidences regarding activity carried out for educational purposes was not made available by the applicant foundation. Therefore, the application of the assessee was rejected. Aggrieved against this, the assessee is in appeal before this Tribunal.
The Ld. Counsel for the assessee vehemently argued that the action of the Ld. CIT(E) is arbitrary and against the facts of the case. Ld. Counsel further reiterated the submissions as made by way of brief synopsis. He further contended that the foundation was incorporated on 09.03.2018, Registrar of companies issued licence on 21.03.2018, the certificate of incorporation was issued on 06.04.2018. An application u/s 10(23C) in form no. 56D of the Act was made on 16.04.2018.The report of JCIT was made on 23.05.2018. Date of notice of hearing was issued on 16.07.2018. On 16.07.2018, it is stated that the assessee had sought adjournment, the adjournment was not granted and the impugned order was passed. It is further stated that only one opportunity was given by Ld. CIT(E). He further contended that at several places the Ld. CIT(E) has mentioned that the assessee foundation is a ‘trust’ or a ‘society’. The Ld. CIT(E) has not even looked into the facts of the case. He further submitted that there is nothing on record to suggest that the foundation was not established solely for the educational purposes. He submitted that the facts recorded by the Ld. CIT(E) are incorrect. Further, the reliance was placed on the judgment of the Hon'ble Apex Court in the case of Ananda Social and Educational Trust vs CIT and Anr., Civil Appeal Nos. 5437- 5438/2012. Reliance was also placed on the decision rendered in the case of Sai Ashish Charitable Trust vs DIT (Exemptions) in Page 3 of 5 order dated 09.11.2010 and the decision in the case of Director of Income Tax vs. Foundation of Ophthalmic & Optometry Research Educational Centre in ITA. No.1687/2010. To buttress the contention that the Ld. CIT(E) failed to appreciate that it was the first year of the activity and there is no finding on facts that the assessee was not carrying out its activity in accordance with the objects. Therefore, he prayed that the order of the Ld. CIT(E) may be set aside and the Ld. CIT(E) be directed to grant registration u/s 10(23C) of the Act.
On the other hand, the Ld. CIT-DR supported the order of lower authorities and submitted that there is no infirmity in the order of the Ld. CIT(E). At the time of granting registration, the Ld. CIT(E) is under statutory obligation to satisfy himself about the activity of the foundation. She contended that merely that there is some typographically error in the impugned order cannot be the reason for setting aside the order. She therefore, prayed that the impugned order may be sustained.
We have heard rival submissions and perused the material available on record. It is not in dispute that the application was dismissed on the basis that the assessee failed to furnish the sufficient material required for formation of satisfaction that the assessee was carrying out its activity for educational purposes. It is stated by the Ld. Counsel for assessee that this was being the first year of its incorporation and the assessee was not afforded sufficient opportunity. It is further stated that the allegation that huge profit was made by running an commercial institute on commercial lines and channelizing the profits earned for augmenting the business without giving any element of charity is without any basis since the activities were yet to be commenced. It is not in dispute that the assessee foundation was incorporated Page 4 of 5 on 06.04.2018 and an application for registration was made 16.04.2018.
The Hon'ble Supreme Court in the case of Ananda Social and Educational Trust (supra) held as under: - “Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision includes ‘proposed activities’. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub- section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. We therefore find that the view of the Delhi High Court in the impugned judgment is correct and liable to be upheld.”
Further, the Hon'ble Delhi High Court in the case of Foundation of Ophthalmic & Optometry Research Educational Centre (supra) held as under: - “11. If the Revenue's contentions are correct then, necessarily, a condition would have to be read in to the provision that the Commissioner should be satisfied that the Trust is in fact engaged in charitable activities which would in turn inject considerable deal of subjectivity. It is quite possible that if such flexibility is introduced, it would be susceptible to varied interpretation by the different authorities, in that some would be satisfied with activity of few months, while others may wish to examine the activities of the organization for longer time. In this view of the matter, this Court is persuaded to follow the interpretation given to Section-12AA by the Karnataka High Court in Director of Income Tax (Exemptions) v. Meenakshi Amma Endowment Trust (supra).
For the above reasons, the Court answers the question of law in favour of the assessee and against the Revenue. The Appeal is accordingly dismissed.”
In the light of the judgment of Hon'ble Supreme Court and the Hon'ble Delhi High Court, we are of the considered view that the Ld. CIT(E) erred in rejecting the application without bringing any material suggesting that the assessee was not carrying out its activity in accordance with its objects. Moreover, it is not the Page 5 of 5 case of Revenue that the proposed activities are not genuine and such activities are not for educational purposes. Ld. CIT(E) ought to have recorded specific finding in this regard. Therefore, the impugned order is hereby set aside and the application is restored to the Ld. CIT(E) to decide it afresh, after verifying the correctness of claim that in the subsequent years, the assessee was granted registration u/s 10(23C) of the Act. Grounds of appeal of the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 06/02/2025.