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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA& SHRI SIDDHARTHA NAUTIYAL
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER& SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. Nos. 2310&2311/Ahd/2017 (Assessment Year: N.A.) Tapovan Education Trust, Vs. Commissioner of Income At & PO : Timbi, Tal: Dabhoi, Tax-1, Vadodara Dist: Vadodara-391110 [PAN No.AABTT6383Q] (Appellant) .. (Respondent) I.T.A. No. 2349/Ahd/2017 (Assessment Year: 2013-14) Tapovan Education Trust, Vs. The Assistant Commissioner At & PO : Timbi, Tal: Dabhoi, of Income Tax, Dist: Vadodara-391110 CPC, Bangalore [PAN No.AABTT6383Q] (Appellant) .. (Respondent) Appellant by : Shri M. K. Patel, Advocate Respondent by: Dr. Darsi Suman Ratnam, CIT D.R. & Shri M. Anand Kumar, Sr. D.R. 13.05.2024 Date of Hearing Date of Pronouncement 20.05.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM:
These three appeals have been filed by the Assessee against the orders passed by the Ld. Commissioner of Income Tax (Appeals)-5 & I, (in short “Ld. CIT(A)”), Vadodara vide orders dated 20.10.2016 & 10.04.2013 & 30.04.2013 passed for A.Y. 2013-14. Since common facts and issues are involved for all the appeals under consideration, all appeals are being taken up together.
The first appeal (in ITA No. 2311/Ahd/2017) pertains to non- granting of registration under Section 12A of the Act. The second
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 2 - appeal (in ITA No. 2310/Ahd/2017) pertains to non-grant of registration under Section 80G of the Act and the third appeal (in ITA No. 2349/Ahd/2017) for A.Y. 2013-14 pertains to quantum addition made by the Assessing Officer on account of denial of exemption under Section 11 of the Act, on the ground that the assessee did not have the requisite registration under Section 12A of the Act.
We shall first deal with assessee’s appeal in ITA No. 2311/Ahd/2017, which is against denial of registration to the assessee under Section 12AA of the Act.
At the outset, we observe that the appeal of the assessee in these two appeals against order denying registration under Section 12A of the Act and denial of registration under Section 80G of the Act is time barred by approximately 4½ years. The assessee filed application for condonation of delay, in which it was submitted that the delay in filing appeal against the order denying registration to the assessee / applicant trust was on account of delay by the accountant of the assessee. Before us, the Counsel for the assessee submitted that the first time the assessee / applicant trust realized that the registration under Section 12AA of the Act had been denied to the assessee was when the assessment for A.Y. 2013-14 was concluded and the assessee was in receipt of demand notice from the Income Tax Department. Further, the Counsel for the assessee submitted that on identical set of facts, the assessee / applicant trust had also been granted provisional registration for A.Y. 2022-23 to A.Y. 2024-25. In the Affidavit filed by the assessee, it was submitted that the assessee is operating in a remote village and has only a part-time accountant, who works for the assessee on job to job case basis. The accountant visits the premises of the assessee only once in a week for
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 3 - about three hours. In the Affidavit, the accountant of the assessee submitted that in the year 2013, in the month of May and June, an order under Section 12AA of the Act and order under Section 80G of the Act was received from the office of Commissioner of Income Tax, Vadodara, by the accountant. However, the accountant submitted that he forgot to inform the assessee as well as the auditors regarding the denial of registration by CIT, Vadodara. Then later in the month of December, 2016 the accountant received an order from CIT (Appeals)-5, Vadodara which pertained to A.Y. 2013-14. However, the accountant again got pre-occupied in certain administrative matters of the Trust and it was only the last week of September, 2017 that the accountant caught hold on old papers of Income Tax Department pertaining to order under Section 12AA of the Act and order under Section 80G of the Act. It was then that the accountant immediately informed the assessee / applicant trust as well as the auditors of the Trust about the receipt of orders denying registration under Section 12AA of the Act and under Section 80G of the Act. Vide his Affidavit, the accountant of the assessee / applicant trust submitted that the delay in filing of appeal against order denying grant of registration under Section 12AA of the Act and 80G of the Act was purely on account of mistake on his part and there was no mala fide intention in delay in filing of appeal against the order denying grant of registration under Section 12A and under Section 80G of the Act.
In response, the Ld. D.R. opposed the application for condonation of delay on the ground that since the assessee has been running an educational institution, and it is also getting accounts audited, there is no reasonable cause for the delay in filing of the appeal against the order denying grant of registration under Section 12AA of the Act and under Section 80G of the Act.
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 4 - 5. We have heard the rival contentions and perused the material on record.
We observe that the assessee is a Trust carrying out educational activities on residential basis in remote part of villages. The assessee has been registered with the Charity Commissioner on 01.11.2004 the assessee has been granted provisional registration on the identical set of facts for A.Y. 2022-23 and A.Y. 2024-25 as well. Further, from the contents of the Affidavit filed by the accountant, it is seen that the assessee was operating in remote part of the village with only one accountant, who was working on a part time basis. In the case of Collector Land Acquisition, Anantnag vs. MST Katiji and others, 1987 SCR (2) 387 the Supreme Court held that it is well established that rules of procedure are handmaid of justice. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred. Accordingly, we are of the considered view that looking into the instant facts there is no mala fide intention in filing appeal against the order denying grant of registration under Section 12AA of the Act r.w.s. 80G of the Act. Accordingly, in the interest of justice, we are hereby condoning the delay in filing of the present appeal against under denying grant of registration under Section 12AA of the Act and under Section 80G of the Act.
In the result, application for grant of condonation of delay in respect of present appeal is hereby being condoned.
ITA No. 2311/Ahd/2017 8. The assessee has raised the following grounds of appeal:-
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 5 - “(1) That on facts, and in law, the learned CIT (Exemptions) Ahmedabad has grievously erred in not granting sufficient and reasonable opportunity to the appellant. (2) That on facts, and in law, the learned CIT – I, Baroda has grievously erred in rejecting the application for registration u/s. 12A of the Act. (3) That on facts, and in law, the registration ought to have been granted u/s 12AA of the Act as prayed for. (4) The appellant craves leave to add, alter, amend any ground of appeal.” 9. The brief facts of the case are that the assessee / applicant trust had filed an application in Form No. 10A on 10.10.2012 for registration under Section 12AA of the Act.
On going through the contents of the application and other documents filed by the assessee / applicant trust, CIT observed that though the assessee is an educational trust, but it is collecting substantial amounts from it’s students towards meal and hostel fees, registration fees, admission fees etc. The CIT also analyzed the expenses of the assessee / applicant trust and observed that majority of the expenses were towards meal expenses and canteen and staff salary etc. Accordingly, the CIT was of the view that the assessee is primarily running a profitable business and not doing any charitable activity. The assessee is collecting amounts from students under various heads, which amounts to collecting capitation fees. Accordingly, looking into the instant facts, CIT rejected the application for registration of trust by holding that the education institution has been established with a view to make profits and no activity of charity is involved in running the school.
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT rejecting the application for the assessee trust. Before us, the Counsel for the assessee submitted that the Ld. CIT has not been
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 6 - able to truly appreciate the facts about the assessee’s model of imparting education. The Counsel for the assessee submitted that the assessee is operating educational institution in remote villages on residential (Hostel) basis. It was for this reason that the assessee was collecting fees towards hostel expenses and corresponding expenditure was also incurred by the assessee / applicant trust towards running and providing meals in this hostel. The location of the trust is 35 km. away from Baroda and is in the village near Taluka – Karjan, District : Vadodara. As a matter of policy the school only admits only male students and therefore, the registration / admission of students is on the lower side. As the very basic name of the trust (Tapovan Education Trust) suggests, the trust is formed with the object to educate the students who will stay at the premises for 7 years, and along with life oriented education, they will also get degree oriented education. The trust is running Government approved education classes from standard 4th to standard 10th and for that purpose it is running a non-subsidized Government approved education and residential school and with keeping that object in mind, the assessee trust only admits residential students i.e. the students who will live / stay within the residential campus during their educational years. The Counsel for the assessee submitted that the fees per students are inclusive of educational fees / lodging and boarding expenses, medical expenses, annual educational and tour expenses etc. and looking into the quantum of expenses, the average price charged from per students is only Rs. 1,700/- to Rs. 2,000/- per month i.e. Rs. 66.66 per day, which is quite nominal considering the fact that the assessee is running a residential educational institution with lodging and boarding facilities, aimed at providing and uplifting the status of rural people. The Counsel for the assessee further submitted that the assessee / applicant trust is following
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 7 - a cash system of accounting (and not mercantile system of accounting) and the trust accounts for only those fees which are received during the financial year, irrespective of whether it pertains to any financial year. However, all the students are not regular in depositing the fees in the same financial year. The class of students are mostly from agricultural sector and middle class service sector. The income of the farmers is not certain and regular and payment of fees is dependent upon whether the parents are able to earn income from agricultural activities during the year under consideration. Similarly, the middle class families also have a problem of fixed monthly earning and payment of such student fee is also at times, uncertain. The trust has a problem of collecting arrear fees and sometimes fees are also received in advance because of the accounting financial year ending on 31st March each year and the educational term normally ends by 30th April. Therefore, any fees received in April, though falling in the same standard, but is taken as a receipt of the next financial year. It is because of the above situation that there are outstanding arrears towards fees which are though not accounted for, but are received later in subsequent financial year. There are also instances where the outstanding fees is never received and also there are students who get the admission by paying fees and shortly within a period of 10-15 days, they leave the school by getting the refund of the fees. Accordingly, the Counsel for the assessee submitted that the Ld. CIT has somehow not been able to appreciate the model of education which is being followed by applicant trust and therefore the application for grant of registration has been denied on an incorrect presumption of facts. The Counsel for the assessee submitted that in respect of identical set of facts the assessee / applicant trust has also been granted provisional registration from A.Y. 2022-23 to 2024-25. The Counsel for
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 8 - the assessee submitted that if given an opportunity, the assessee would be able to fully explain the model of education being followed by the assessee / applicant trust and it is hopeful that the assessee would not be denied registration under Section 12A of the Act.
In response, the Ld. D.R. placed reliance on the observations made by the CIT in the order denying grant of registration under Section 12A of the Act.
We have heard the rival contention and perused the material on record.
On going through the facts of the instant case, considering the model of education, being residential boarding and hostel facility, followed by the assessee / applicant trust, the fact that on identical set of facts the assessee / applicant trust has also been granted provisional registration from A.Y. 2022-23 to A.Y. 2024-25, we are of the considered view that it is a fit case where the matter should be restored to the file of Ld. CIT for de-novo consideration of assessee’s claim for registration under Section 12A of the Act, after giving due opportunity of hearing to the assessee. Accordingly, in the interest of justice, looking into the facts of the instant case, we are hereby restoring the matter to the file of Ld. CIT for de-novo consideration and to pass appropriate orders, in accordance with law, after giving due opportunity of hearing to the assessee to present it’s case on merits.
In the result, the appeal of the assessee is allowed for statistical purposes.
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 9 - Now we shall deal with ITA No. 2310/Ahd/2017 16. The assessee has raised the following grounds of appeal:- “(1) That on facts, and in law, the learned CIT(Exemptions) Ahmedabad has grievously erred in not granting sufficient and reasonable opportunity to the appellant. (2) That on facts, and in law, the learned CIT- I, Baroda has grievously erred in rejecting the application for approval u/s 80G(5)(vi) of the I.T. Act. (3) That on facts, and in law, the approval ought to have been granted u/s 80G(5)(vi) of the Act as prayed for. (4) The appellant craves leave to add, alter, amend any ground of appeal.” 17. For the reasons mentioned in the foregoing the delay in filing of present appeal is hereby condoned, in the interest of justice.
In this case, we observe that the Ld. CIT-I, Baroda dismissed the application for grant of registration under Section 80G of the Act on the ground that since the application for registration of trust under Section 12A of the Act has been declined, and since one of the requirements for approval under Section 80G of the Act is that the trust must be registered under Section 12A of the Act, the trust is not liable to be registered under Section 80G of the Act. While dismissing the application for grant of registration under Section 80G of the Act, the Ld. CIT(A) observed as under:-
“The trust vide its application in Form No. 10G dated nil, received in this office on 12.10.2012, has applied for approval U/s. 80G(5)(vi) of the I.T. Act in parallel with application for registration u/s. 12A in Form No. 10A dated 10.10.2012. Since one of the requirement for approval u/s. 80G, the trust must be registered u/s. 12A of the I.T. Act. As such, the trust do not fulfill the above condition. Therefore, the trust vide letter dated 26.03.2013 received in this office on 04.04.2013 has withdrawn its application. In view of the above, the application of the trust is treated as rejected for statistical purposes.”
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 10 - 19. Since, in the appeal filed by the assessee against the order passed by CIT denying registration under Section 12A of the Act, we have restored the matter to the file of Ld. CIT for de-novo consideration, accordingly, the present appeal filed by the assessee is also restored to the file of Ld. CIT as well for de-novo consideration.
In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No. 2349/Ahd/2017 21. The assessee has raised the following grounds of appeal:
“1. That on facts, and in law, the learned CIT(A) has grievously erred in not granting sufficient and reasonable opportunity to the appellant and in deciding the appeal ex-parte. 2. That on facts, and in law, the learned CIT(A) has grievously erred in confirming the disallowance of Rs. 33,84,990/- claimed u/s 11 of the Act as application of income of the appellant Trust. 3. That on facts, and in law, the deduction ought to have been allowed as prayed for. 4. The appellant craves leave to add, alter, amend any ground of appeal.”
The present appeal arises out of additions made by the Assessing Officer (and confirmed by Ld. CIT(A)) resulting from disallowance of exemption under Section 11 of the Act. The reasons for the additions and denial of exemption under Section 11 of the Act were that the assessee was unable to enter the details of registration granted to the assessee under Section 12A / 12AA of the Act.
Since we have already restored the issue regarding grant of registration under Section 12A of the Act to the file of CIT for de-novo consideration, accordingly, the present issue also is directed being
ITA Nos. 2310&2311/Ahd/2017 & 2349/Ahd/2017 Tapovan Education Trust vs. ACIT Asst. Year –2013-14 - 11 - restored to the file of Assessing Officer with a direction to pass appropriate orders in light of disposal of application of the assessee for grant of registration under Section 12A of the Act, in the set-aside proceedings.
In the result, the appeal of the assessee is allowed for statistical purposes.
In the combined result, all the appeals filed by the assessee are allowed for statistical purposes. This Order pronounced in Open Court on 20/05/2024
Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 20/05/2024 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��यथ� / The Respondent. 2. 3. संबं�धत आयकर आयु�त / Concerned CIT आयकर आयु�त(अपील) / The CIT(A)- 4. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad