Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI BENCH “A” NEW DELHI
Before: SHRI S.V. MEHROTRA : & SHRI SUDHANSHU SRIVASTAVA:
Date of hearing : 15/02/2016. Date of order : 17/02/2016. O R D E R PER S.V. MEHROTRA, A.M:
The captioned appeals, preferred by the assessee, are directed against separate orders of the Commissioner of Income-tax Rohtak, passed u/s 12AA(1)(b)(ii) and 80(G) of the Income-tax Act, 1961. Both the appeals were heard together and are being disposed of by a common order for the sake of convenience.
ITA no. 4610/Del/2014 (U/s 12AA(1)(b)(ii):
Brief facts of the case are that assessee society moved application u/s 12A(1)(aa) of the I.T. Act for registration of the society along with necessary documents.
3. Ld. CIT while rejecting the assessee’s application for registration has observed as under:
4. The applicant's reply does not satisfy the very essence of charity which is necessary for earning the status of being charitable as is required in view of section 2( 15) read with section 12AA of the Income Tax Act, 1961.l.!he provisions of sec 11 and 12 do not envisage that a charitable institution shall provide charity by charging hefty and indiscriminate amount of fees from public at large. The fees received are outside the scope of sec 11 and 12 - and shall, therefore, be taxable. Fees imply direct involvement of consideration for the services rendered. Fees cannot be voluntary and are, therefore, taxable under the head profit and gains of the business or profession. In fact, the fact is that the educational institutions run by the society in question charge whooping fees and earn systematic profit year to year to enhance its earning capacity through the acquisition of buildings & other fixed assets.
4. Ld. Commissioner further referred to the decision of Hon’ble Uttrakhand High court in the case of National Institute of Aeronautical Engineering & Educational Society 226 CTR 82, wherein it has been held that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity. Accordingly, ld. Commissioner concluded that the assessee failed to substantiate its claim that trust’s aims/ objects and terms of memorandum were of charitable nature and also could not produce any concrete evidence to prove the genuineness of the activities of the trust. He, accordingly, rejected the assessee’s application for grant of registration u/s 12AA.
Ld. counsel for the assessee submitted that at the time of registration, ld. Commissioner is only required to look into the objects of trust and cannot go beyond the same. In this regard he relied on following decisions: - Saswat Chetna Educational Social Development Research Society Vs. CIT – ITA 5376/Del/2012 - Shivaji Vidya Peeth Education Society Vs. CIT – - Shri Gian Ganga Vocational & Educational Society vs. CIT – 143 ITD 297 - Meritta Welfare Trust v. CIT – ITA no. 5481/Del/2013.
Ld. counsel further referred to page 17 of the PB wherein the objects of Society are enumerated which reads as under:
“4. Aim and objectives of the Society: The aim and objectives of the society shall be purely for Charitable Purposes i.e. to serve the people by providing education. 1. To open public schools, colleges and Para-medical colleges 2. To open computer centres to provide computer education.
To accept the donation / grants from the Government / semi- Government and to start the projects on public welfares . "
4. To create awareness about the social evils. " 5. To open crutches for the people in rural & urban areas. 6. To avail loans from the financial institutions / banks to construct the building of the Society . 7. The Society will promote the schemes, policies of the Government. 8. To encourage Education and Literacy and to start schools & colleges. 9. Society can work with any N.G.O.s & Government departments. 10. To receive donations in cash or immovable property from the public local body as well as abroad too. 11. Society can take loan from any Bank or by donations to fulfill the aims and objectives of the Society & construction of building. 12. Society can have property anywhere in its operational area for the purpose of the Society on lease or purchase in the name of Society. 13. The society shall not be used for the political purpose or any other anti – national activities. 14. The society by its constitution is required to apply its surplus if any or other income for charitable purposes only. 7. Ld. counsel further referred to page 36 of the PB, wherein clause relating to dissolution of the society is contained in which it is, inter alia, stated that no assets of any of the society shall devolve on or distributed among the members of the society on dissolution.
Ld. counsel further referred to page 47 of the PB, wherein the assessee has been recognized by Central Board of Secondary Education.
Ld. DR relied on the order of Commissioner.
We have considered rival submissions and perused the material available on record. It is now well settled that at the time of grant of registration u/s 12AA, the ld. Commissioner is required only to examine the objects of the society. A bare perusal of the objects of society makes it clear that the pre-dominant object of the society is to impart education. We find that the Tribunal in the case of Saswat Chetna Educational Social Development Research Society (supra), after considering the decision of Hon’ble High Court of Uttrakhand in the case of National Institute of Aeronautical Engineering & Educational Society (supra), has observed in para 4 as under:
We have considered the rival submissions and perused the material available on record. The facts in brief are that the assessee society moved application u/s 12A (1)(aa) of the Act in form no. 10A accompanied by the activity of the assessee society, copy of memorandum of association, rules and regulations of governing the society along with copy of the registration certificate dated 24-12-2003 issued by Registrar of firms & Societies, Haryana and also the list of office bearers of the assessee society. The income and expenditure account and the balance sheet of the financial year 2010-11 were also furnished. The ld. Commissioner in order to verify the claim of the assessee and also the activities of the assessee entertained the submissions of the assessee. The ld. Commissioner denied registration to the assessee on the ground that as per rule 17A(a) of the Income-tax Rules, 1962 the assessee was to submit the original instrument of its establishment together with the copy thereof and since the assessee has submitted only the photo copy/ certified copy of the instrument therefore the application
was not complete and thus the application itself is not worth consideration for registration u/s 12AA of the Act. We find that the ld. Commissioner has gone into too much technicalities more specifically when certified copy of the original instrument was duly filed by the assessee. If this was the sole criteria then nothing prevented the ld. Commissioner to direct the assessee to file the original instrument. The second ground on which the assessee was denied registration, was that the assessee is not doing charitable activity. On perusal of record and after hearing the rival submissions we are satisfied that the assessee is running a senior Secondary school, duly registered with CBSE and Board of School Education, Haryana. We have specifically perused the objects of the society, wherein the predominant object is imparting education. Therefore, we are not satisfied with the observation of the ld. Commissioner that the assessee society is not doing any charitable activity. The another reason for denying the registration by the ld. Commissioner is the reliance placed upon the decision from Hon’ble Uttrakhand High Court in the case of CIT Vs. National Institute of Aeronautical Engineering and Educational Society (2009) 226 CTR 82. We have perused this order and are of the view that the facts and the surrounding circumstances in that case are different and may not be the sole criteria for denying registration to the assessee. 4.1. While considering the application of the assessee for grant of registration u/s 12A of the Act, all that the ld. Commissioner may examine is whether the application is made by the assessee in accordance with the requirement of the section read with Rule 17A and also whether form no. 10A has been properly filled up. He may also see whether objects of the assessee society are charitable or not as was held by the Hon’ble High Court in the case of Fifth Generation Education Society vs. CIT 185 ITR 634 (All.). So long as the trust has education as one of its objects it has to be accepted that the trust is having a charitable purpose as its objects and may qualify for claiming exemption in terms of section 11 & 12 of the Act, subject to fulfilling the conditions enumerated therein. The manner of application of funds and as to whether assessee can claim benefit of exemption in terms of section 11 & 12 are the questions which have to be examined by the assessing officer at the stage when same are urged and not by the Commissioner while considering the application for grant of registration u/s 12A. Our view is fortified by the decision from Hon’ble Karnataka High court in the case of DIT Vs. Garden City Education Trust 191 Taxman 238 (Kar.). Even other wise registration u/s 12AA does not necessarily entitle the assessee to get the income excluded from the income of the previous year for the purposes of determination of tax liability, but it only entitle the assessee to claim such exemption, which otherwise could not be claimed in the absence of the registration. The case of the ld. Commissioner would have been on more sound footing if the assessee would not have carried out any charitable activity in consonance with its objects for which it was created, whereas in the present facts available on record, we note that from the inception itself the assessee society is running a school in the rural area of the State of Haryana. We have also perused the relevant record and are satisfied about the genuineness of the assessee society while imparting education. If for future the assessee has added other objects which are otherwise of charitable nature, the assessee cannot be denied registration unless and until any activity of the assessee is found to be activity of non charitable nature or contrary to the objects of the assessee society. In the absence of such finding the denial of registration is not justified. We have also perused the receipts of funds and their application and are satisfied that the receipts are from fee etc. and the income has been applied merely for charitable purposes. Not a single instance has been quoted by the ld. Commissioner either the assessee misused the income or used for non charitable purposes. In view of these facts we are of the view that the assessee should have been granted registration by the ld. Commissioner. Consequently, the ld. Commissioner is directed to grant registration to the assessee society, subject to the condition that the assessee shall submit the original copy of instrument of its establishment along with one photo copy thereof before the ld. Commissioner within 20 days on receipt of this order. Finally, the appeal of the assessee is allowed.
Facts of the present case being identical, respectfully following the Tribunal’s order in the case of Saswat Chetna Educational Social Development Research Society (supra), the assessee’s appeal is allowed in terms of Tribunal’s direction noted in para 4 above.
ITA no. 4611/Del/2014 (U/s 80G(5)(vi): 12. Ld. Commissioner had rejected the assessee’s application u/s 80G(5)(vi) on the ground that the society was not registered u/s 12AA of the I.T. Act. As we have directed for registration of society u/s 12AA in terms of observations made in the assessee’s claim for approval u/s 80G(5)(vi) is allowed. Assessee’s appeal stands allowed accordingly. 13. In the result, both the assessee’s appeals stand allowed.
Order pronouncement in open court on 17/02/2016.