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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per:Anikesh Banerjee, JM The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Exemption) Chandigarh,[in brevity the ‘CIT (E)’]
order passed u/s 12AA (1) (b) (ii) of the Income Tax Act 1961[in brevity ‘the Act’] order dated 21.09.2020.
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The assessee has taken the following grounds: “1. That the Learned CIT (Exemptions), Chandigarh erred in rejecting the application for registration Under Section 12AA of the Income tax Act, 1961 merely on assumptions, presumptions and apprehensions, without appreciating the factual, legal and statutory position for grant of registration.
That the Learned CIT (Exemptions), Chandigarh failed to appreciate that activities of the Appellant, inter alia, include the main activity of 'providing skill development' in various programme of Government of India to create skilled development in the country and is covered under both 'education', and advancement of any other object of general public utility as provided in Section 2(15) of the Income tax Act, 1961.
That the Learned CIT (Exemptions) erred in rejecting the application u/s 12AA on the ground that skill development is not part of educational activity.
That the Learned CIT (Exemptions) erred in rejecting the application u/s 12AA on the ground that the appellant company has been formed specifically to carry out the welfare schemes
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of the government with the funds of the State government agencies.
That the Learned CIT (Exemptions) has not considered completely the information/ evidence brought on record in correct perspectives while denying the registration u/s 12AA of the Income tax Act, 1961.
That on the facts and circumstances of the case and in the law, the Ld. CIT(Exemption) has grossly erred in denying registration to the appellant company u/s 12AA of the Income tax Act as claimed. At the stage of grant of registration u/s 12AA of the Act, the Ld. CIT (Exemption) is supposed to examine only the objects of the Trust and is not appropriate on his part to examine the other aspects like surplus made by the company which is to be examined by the Assessing Officer on year to year basis at the time of claiming exemption u/s 11 of the Income tax Act.
That the order of the Ld. CIT (Exemption) is perverse as the only requirement for granting the registration is that the object of the appellant company should be charitable in nature and its activities were genuine. The Hon'ble Supreme Court in the case of M/s Anand Social and Educational Trust v/s CIT in
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Civil appeal No.5437-5438/2012 vide order dated 19/02/2020 has laid down the basic principles for allowability of registration.
That the Ld. CIT(Exemption) has failed to carry out the mandatory requirement of satisfying himself about the objects and genuineness of the activities of the appellant but instead going beyond his mandate by looking into the purposes of creation of the appellant company and declining the registration primarily for same reason.”
Brief fact of the case is that the assessee is a corporation and established by the Jammu & Kashmir Government (UT) and registered u/s 8(5) and 13(1) of the
Companies Act, 2013. The assessee-corporation assist the Government of India as well as government of Jammu & Kashmir in implementation of various women welfare project/schemes. The assessee creates awareness amongst the women and
educates them about their rights, duties and availability of schemes meant for their development and overall socio-economic empowerment. The Govt. Of Jammu &Kashmir Civil Secretariat vide its Cabinet decision No.18/3 dated 16.02.2008 Govt. Order No. 73-F of 2008 dated 10.03.2008 has mentioned that the assessee
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corporation are not engaged in any commercial activity as such have no means to generate their own resources. The assessee filed an application in Form No.10A and seeking registration u/s 12AA before the ld. CIT(E), Chandigarh. But the ld. CIT(E) considering the order of Hon’ble Apex Court in the case of Sole Trustee Sansthan vs. CIT 101 ITR 234 (SC) had rejected the application of the assessee. Being aggrieved assessee filed an appeal before us. 4. The ld. AR for assessee filed written submissions which are kept in the record. The ld. AR first argued that the ld. CIT(E) had rejected the application on basis of the order of Hon’ble Apex Court in the case of Sole Trustee Sansthan (supra) which has interpreted the word “education” used in section 2(15) is systemic instruction, schooling or training given to the young in preparation for the work of life. But the assessee has difference work in policy, and it is only related to skill enhancement merely and no systemic education is involved. The ld. AR further argued and placed that the ld. CIT(E) has also applied judgment of the Hon’ble Kerala High Court in the case of CIT, Kottayam Vs. Annandan Trust (2018) 96 Taxman.com 207 held that implementation of welfare scheme of the Govt. with the funds of the State is not charity as the assessee is only an implementing agency and the Hon’ble Court further that the activity of the
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assessee confined to such sub contract would not be deemed to be charity activity hence the trust is not entitled in registration u/s 12AA of the Act.
4.1 The ld. AR further argued and relied on the CBDT Circular No. 11/2008 dated 19.12.2008 related to section 2(15) which clearly permits any association which is carrying on or any one of the activities reliefsof the poor, education,
medical relief, and the advancement of any other object of general public utility, simultaneously carry on the commercial activity also. As per the said Circular para 2.2 defines which is reproduced as below: “Relief of the poor" encompasses a wide range of objects for the welfare of the economically and socially disadvantaged or needy. It will, therefore, include within its ambit purposes such as relief to destitute, orphans or the handicapped, disadvantaged women or children, small and marginal farmers, indigent artisans or senior citizens in need of aid. Entities who have these objects will continue to be eligible for exemption even if they incidentally carry on a commercial activity, subject, however, to the conditions stipulated under section ll(AA) or the seventh proviso to section 10(23C) which are that: (i) The business should be incidental to the attainment of the objectives of the entity and (ii) Separate books of account should be maintained in respect of such business.
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Similarly, entities whose object is education or medical relief would also continue to be eligible for exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above.”
4.2 The ld. AR further relied on the following judgment which are reproduced as
below:- Dy Director of Income Tax (E) vs Escorts Skill Development and Young Women’s Christian Association of India, ITA N0-2408/Del/2013 date of pronouncement 29/02/2016.The relevant paragraph is extracted as below: - “16. It is seen that the opening line of Para 3 is clearly stating that Proviso to Section 2(15) will apply ONLY to entities whose purposes is advancement of any other object of general public utility. We have already held that the activities of the assessee association fall within the ambit of the first three limbs viz. relief to the poor, education or medical relief and it will not be hit by the newly inserted proviso to section 2(15). Accordingly, the benefit of this circular should also accrue to the assessee and, therefore, the benefit of exemption claimed by the assessee u/s 11 cannot be rightfully denied. We, accordingly, refuse interfere with the order passed by the Ld. CIT (A) and uphold the same.”
NIIT Foundation vs. CIT (E), New Delhi, ITA No. 4868/Del/2019, date of
pronouncement 27/05/2020
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“26. Further honourable Gujarat High court in 195 ITR 279 has analyzed and interpreted the decision of the Honourable supreme court of Sole Trustee Lok shiskshan sansthan ( Supra) as under :- “It appears to us that the decision of the Tribunal which seeks to rest it on the observations made by the Supreme Court in LokaShikshana Trust's case [1975] 101 ITR 234, for holding that, the assessee is not entitled to exemption under section 10(22) of the Act is based on a complete misreading of the observations of the Supreme Court. In LokaShikshana Trust's case [1975] 101 ITR 234, the Supreme Court, while dealing with the provisions of section 11 read with section 2(15) of the Act which defines "charitable purpose" observed as under (at page 241) : "The sense in which the word 'education' has been used in section 2(15) in the systematic instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received. The word 'education' has not been used in that wide and extended sense, according to which every acquisition of further knowledge constitutes education. According to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh knowledge.......But that is not the sense in which the word 'education' is used in clause (15) of section 2. What 'education' connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling." The Supreme Court, in the above observations, by referring to the systematic instruction, schooling or training given to the young has only cited an instance in
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order to indicate as to what the word "education" appearing in section 2(15) of the Act which Page | 35 defines "charitable purposes" is intended to mean. We are certain that these observations were not intended to keep out of the meaning of the word "education", persons other than "young". The expression "schooling" also means "that schools, instructs or educates" (The Oxford English Dictionary, Vol. IX, page 217). The Supreme Court has observed that the word "education" also connotes the whole course of scholastic instruction which a person has received. This clearly indicates that the observations of the Supreme Court were not intended to give a narrow or pedantic sense to the word "education". By giving further illustrations of a traveller gaining knowledge, victims of swindlers and thieves becoming wiser, the visitors to night clubs adding to their knowledge the hidden mysteries of life, the Supreme Court has indicated that the word "education" is not used in a loose sense so as to include acquisition of even such knowledge. The observations of the Supreme Court only indicate the proper confines of the word "education" in the context of the provisions of section 2(15) of the Act. It will not be proper to construe these observations in a manner in which they are construed by the Tribunal when it infers from these observations, in para 17 of its judgment, that the word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions, but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing or educating. It, therefore, cannot be said that the word "education" has been given an unduly restricted meaning by the Supreme Court in
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the said decision. Though, in the context of the provision of section 10(22), the concept of education need not be given any wide or Page | 36 extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing times and the ever- widening horizons of knowledge may bring in changes in the methodology of teaching and a shift for the better in the institutional setup. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary method of sitting in a classroom may remain ideal for most of the initial education, it may become necessary to have a different outlook for further education. It is not necessary to nail down the concept of education to a particular formula or to flow it only through a defined channel. Its progress lies in the acceptance of new ideas and development of appropriate means to reach them to the recipients.” 5. The ld. DR vehemently argued and relied on the order of the revenue authorities. The ld. DR invited our attention in relevant paragraph of the order of
the ld. CIT(E) which is reproduced as below: “1. Issue of skill development is not part of educational activity: As submitted by applicant that it is working for up gradation of skill and mere gaining skill don’t qualify for the label education in the sense of the term explained by the Apex Court in the case of Sole Trustee Sansthan (101 ITR 234). The sense in which the word “education” has been used in section 2(15)
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as interpreted by the Apex Court is systemic instruction, schooling or training given to the young in preparation for the work of life. It is a case of skill enhancement merely and no systematic education is involved in the present case. Hence, applicant is not qualified for grant of registration under this head. 2. Issue of implementation of welfare scheme of the government with the funds of the State is not charity: Applicant itself has submitted that, it is acting as State Channelizing agency for NMDFC,NBCFDC and NHFDC and receiving huge Grant in Aid from government agencies. It is clear that activities being undertaken by the applicant are already reimbursed /subsidized by the Government of India. There is no rationale for seeking further exemption on the basis of the same activities. Conducting skill development training laid down by aforesaid agencies do not partake the character of “Charitable Purposes” and does not fall even under the advancement of any other object c : general public utility leave alone education. The Hon’ble High Court of Kerala in the case of ‘CIT, Kottayam Vs Annadan Trust [2018] 96 taxmann.com 207 (Kerala)’ held that implementation of welfare scheme of the government with the funds of the Slate is not charity as the assessee is only an implementing agency, the Hon’ble High Court further held that the activity of the
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assessee confined to such subcontracts of the assessee could not be deemed to be charitable activity and, hence, the trust was not entitled to registration u/s 12AA. In view of above discussion, the applicant has earned huge surplus over the period of time. Applicant has also not paid tax on these receipts and surplus earned which is evasion of tax and a non-genuine activity. Moreover, applicant is also engaged in skill development which does not qualify for the label education as discussed above. Applicant is also implementing welfare schemes of the government with the funds of the State which is not charity. Considering the facts and circumstances of the case, I have no option but to proceed on merits and deny the Registration to the applicant' u/s 12AA of the Income Tax Act, 1961.”
We heard the rival submission and relied on the documents available in the record. The assessee is implementing the Govt. Scheme duly funded by the State and Central Govt. But in any case, the assessee is executing the relief to poor and
to work for the privilege people. The order of the Hon’ble Apex Court in Sole Trustee Sansthan is duly mentioned systemic instruction and schooling and training is not covered u/s 2(15). But the assessee is doing systematic instruction
and associate economic power empowerment. Further related to registration of the
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assessee, the Hon’ble Apex Court in the case of Anand Social and Economic Trust vs. CIT, Civil Appeal No. 5437-5438/2012 vide order dated 19.02.2020 was duly laid down the basic principle for allowability of registration related to object activity of the trust and identity of the trust. But in the order of the ld. CIT(E) had not pointed our any deficiency in the activity related to object of the trust. We further relied in the order of Escorts Skill Development and Young Women’s ChristianAssociation of India (supra). The assessee is carrying on educational activities which are covered by the provisions of section 2 (15) of the income tax act and it is neither business nor profession of the assessee. It definitely constitutes a charitable activity as it does not charge the fees at the level of market rate and even otherwise the surplus generated is also used for charitable activities of education. The assessee is bound to get the benefit of the CBDT Instruction 11/2008 dated 19.12.2008which defines the scope of section 2(15) of the Act. The scope of section 2(15) is duly expanded. The development of skill women empowerment and education related to right, and duties and availability of the scheme is also a part of social activity to development a person to ensure its right. We observed with high regards the order of Hon’ble Apex Cort, Sole Trustee Sansthan, (supra) which is factually not similar in case
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of assessee. We set aside the order of the ld. CIT(E) and direct to issue registration to consider the issue a fresh in terms indicated above. Needless to say, the assessee
should get a reasonable opportunity of hearing in setting aside proceeding. 7. In the result, the appeal of the assessee bearing ITA No. 164/Asr/2020 is allowed.
Order pronounced in the open court on 01.08.2023 Sd/- Sd/ (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order