Mahindra Educational Institutions, Hyderabad V. D.I.T. (Exemptions), Hyderabad

ITA 1338/HYD/2014

• Counselvise Citation: 133822514 RSA 2014
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 31-10-2016
• Assessment Year: misc
• Appeal Filed On: 23-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G APARNA RAO
• Assessee Lawyers: T S AJAI
• Section: 12; 11; 12A; 12AA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 1338/HYD/2014 ASSESSMENT YEAR N.A. M/S. MAHINDRA EDUCATIO NAL INSTITUTIONS, HYDERABAD PAN: AAICM5632K VS THE DIRECTOR OF INCOME - TAX (EXEMPTIONS) HYDERABAD APPLICANT RESPONDENT APPELLANT BY: SRI T.S. AJAI RESPONDENT BY: SMT. G. APARNA RAO DATE OF HEARING: 26.11.2014 DATE OF PRONOUNCEMENT: 28.11.2014 ORDER PER ASHA VIJAYARAGHAVAN, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) [DIT(E)], HYDER ABAD DATED 30.5.2014. 2. THE ASSESSEE IS A COMPANY INCORPORATED U/S. 25 OF T HE COMPANIES ACT, 1956 AND THE ASSESSEE-COMPANY IS 'PR IVATE LIMITED'. THE COMPANY APPLIED FOR REGISTRATION U/S. 12AA OF I NCOME-TAX ACT, 1961 VIDE APPLICATION IN FORM 10A ON 8.11.2013. TH E DIT(E) VIDE LETTER DATED 5.3.2014 CALLED FOR VARIOUS INFORMATIONS REGA RDING THE ACTIVITIES OF THE ASSESSEE, THE OBJECTS OF THE ASSESSEE-COMPAN Y, MINUTES AND RECORDS OF THE COMPANY, THE CHARITABLE NATURE OF CO MPANY AND THE DETAILS OF BENEFICIARIES. IN RESPONSE, THE ASSESSEE COMPANY FILED DETAILED INFORMATION AND EXPLANATIONS VIDE ITS REPL Y LETTERS DT. ZO' MARCH 2014, 15 TH APRIL 2014 AND 12TH MAY 2014 FURNISHING ALL THE INFORMATION CALLED FOR BY THE DIT(E) AND CLARIFYING AMONG OTHER THINGS THAT THE ASSESSEE COMPANY IS A CHARITABLE IN STITUTION FORMED WITH THE SOLE OBJECTIVE OF PROMOTING QUALITY OF PRI MARY AND HIGHER EDUCATION IN INDIA. THE ASSESSEE ALSO RESUBMITTED I TS MEMORANDUM OF 2 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= ASSOCIATION AND ARTICLE OF ASSOCIATION AFTER OMITTI NG RELEVANT CLAUSES PERMITTING ACTIVITIES 'ABROAD', WHICH AMENDMENTS WE RE PASSED AS SPECIAL RESOLUTION IN ITS EGM HELD ON 25 TH MARCH 2014. THE DIT(E) ALSO ASKED THE MANAGEMENT OF THE COMPANY TO BE PRESENT, IN RESPONSE TO WHICH SRI RAKESH SONI, DIRECTOR OF THE COMPANY, RAH UL BHUMAN, CEO AND MRS. MADHU SARMA, REGISTRAR OF THE INSTITUT ION APPEARED ON 23.04.2014 AND CLARIFIED THAT THE COMPANY HAS BE EN INCORPORATED WITH THE SOLE CHARITABLE OBJECTIVE OF PROMOTING QUA LITY OF PRIMARY AND HIGHER EDUCATION IN INDIA. 3. HOWEVER, THE DIT(E) VIDE LETTER DT. 15.05.2014 REFE RRED TO THE NAME OF THE ASSESSEE-COMPANY I.E. 'MAHINDRA EDUCATI ONAL INSTITUTIONS' AND HAVING REGARD TO SUCH NAME ASKED THE ASSESSEE TO CLARIFY AS TO WHY IT SHOULD NOT BE CONSTRUED AS 'SE VERAL INSTITUTIONS/ENTITIES' AND HOW THE SAME CAN BE GRAN TED REGISTRATION U/S 12AA OF THE INCOME-TAX ACT, 1961. THE OPERATING PORTION OF THE LETTER DT. 15.05.2014 OF THE DIT(E) IS REPRODUCED B ELOW FOR REFERENCE: 'AFTER CONSIDERING THE SUBMISSIONS MADE DURING THE PROCEEDINGS AND YOUR SAID APPLICATION IN FORM NO. 10A FILED ON 8-11-2013, IT IS POINTED OUT THAT THE NAME OF THE APPLICANT IN YOUR CASE IS SHOWN AS 'MAHINDRA EDUCATIONAL INSTITUTIONS' MENTIONED IN THAT APPLICATION IN FORM NO. 10A. FROM SUCH VERY NAME, IT INDICATES PLURALITY OF INSTITUTION. IN OTHER WORDS , THAT NAME SUGGESTS SEVERAL INSTITUTIONS. HOWEVER, IN SE CTION 11 OF THE INCOME TAX ACT, 1961, WHICH DEALS WITH EXEMPTION OF INCOME AND SECTION 12A & SECTION 12AA WHICH PERTAIN TO REGISTRATION AND THE PROCEDURE FOR THE SAME, THERE IS REFERENCE TO ONLY 'INSTITUTION'. IN OTHER WORDS, THE SAID TERM 'INSTITUTION' IS USED IN SINGULAR SENSE. UNDER THE CIRCUMSTANCE AND IN VIEW OF SUCH NAME USED AND ALSO MENTIONED IN YOUR APPLICATION, PLEASE EXPLAIN AS TO WHY IT SHOULD NOT BE CONSTRUED AS SEVERAL INSTITUTIONS J ENTITIES AND HA VING REGARD TO THE SPECIFIC WORD USED IN SECTION 12A AND 12AA OF THE INCOME TAX ACT, 1961 HOW THE SAME CAN B E GRANTED REGISTRATION UJS 12AA OF THE INCOME TAX ACT , 1961. YOU ARE REQUESTED TO FURNISH YOUR REPLY ON 22.05.2014 AT 11.30 AM, WHEN YOUR CASE IS FIXED FOR HEARING. ' 3 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= 4. THE ASSESSEE VIDE LETTER DT. 21.05.2014 CLARIFIED T HE ISSUE AND SUBMITTED THAT THE ASSESSEE IS A SINGLE LEGAL ENTIT Y AND MERE USE OF THE NAME IN PLURAL DOES NOT MAKE IT MULTIPLE ENTITI ES, THAT THE NAME, 'MAHINDRA EDUCATIONAL INSTITUTIONS' IS IN FACT SING ULAR IN AS MUCH AS THE NAME IS NOUN IN ENGLISH LANGUAGE AND AS PER THE CONSTRUCTION OF ENGLISH GRAMMAR IS ALWAYS SINGULAR. ALSO THAT THE COMPANY IS REGISTERED WITH ONE CORPORATE NUMBER AND ONE SINGLE PERMANENT ACCOUNT NUMBER. THE ASSESSEE ALSO CLARIFIED THAT TH E WORD 'INSTITUTIONS' WAS PLACED IN THE NAME ONLY TO IDENT IFY DIFFERENT COLLEGES OPERATING IN DIFFERENT LOCATIONS FORMING P ART OF ONE ENTITY. THE ASSESSEE THEREFORE SUBMITTED THAT THE REGISTRAT ION U/S 12AA MAY BE GRANTED TO IT. THE GIST OF THE REPLIES FURNISHED BY THE ASSESSEE IS AS BELOW: 1) THE COMPANY WAS INCORPORATED WITH THE OBJECT OF SETTING UP AND OPERATING MANY COLLEGES IN DIFFERENT FACULTIES VIZ., ENGINEERING, COMMERCE, CIVIL, COMPUTERS, ETC. FURTHER, THOSE COLLEGES ARE TO BE SET UP ACROSS INDIA AT DIF FERENT LOCATIONS. ALL THESE COLLEGES ARE 'INSTITUTIONS' FO RMING PART OF ONE ENTITY. THE PUBLIC SHOULD BE ABLE TO IDENTIFY E ACH AND EVERY COLLEGE / INSTITUTION AS PART OF ONE ENTITY, VIZ., MAHINDRA EDUCATION. THE PROMOTERS FELT IT APPROPRIATE TO NAM E COMPANY AS 'MAHINDRA EDUCATIONAL INSTITUTIONS' AS T HEY PROPOSE TO SET UP AND OPERATE MANY COLLEGES AND INS TITUTIONS UNDER ONE UMBRELLA. 2) HOWEVER, IT MAY BE NOTED THAT THE USE OF 'S' AFT ER THE INSTITUTION IS NOT TO BRING PLURALITY AS PER THE CO NSTRUCTION OF ENGLISH GRAMMAR. IT IS MORE TO SERVE AS PART OF THE NAME OF NOUN AS IN THE ENGLISH LANGUAGE. FURTHER, THE NAMES OF COMPANIES AND ORGANIZATIONS ARE USUALLY REGARDED AS SINGULAR REGARDLESS OF THEIR ENDING. 3) WE PRAY YOU HONOUR TO APPRECIATE THAT THE REGISTRATION U/S 12A IS FOR THE LEGAL ENTITY. THE L EGAL ENTITY IN 4 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= THIS CASE IS ONE AND ONLY ONE CALLED 'MAHINDRA EDUC ATION INSTITUTIONS'. UNDER THE UMBRELLA OF THE LEGAL ENTI TY, THERE COULD BE SEVERAL COLLEGES OR EDUCATIONAL INSTITUTIO NS. THE REGISTRATION ENVISAGED UNDER THE INCOME TAX LAW IS FOR THE LEGAL ENTITY AND HENCE, THE USE WORD INSTITUTIONS W ILL NOT CAUSE ANY CONFLICT WITH SECTION 12AA. 5. THE DIT(E), HOWEVER, VIDE LETTER DATED 30.5.2014 RE JECTED CONTENTIONS OF THE ASSESSEE AND REFUSED REGISTRATIO N SOUGHT U/S. 12AA OF THE ACT FOR THE FOLLOWING REASONS: A) IT IS NOT POSSIBLE TO ACCEPT SUCH CONTENTION FOR TREATING THE APPLICANT AS A SINGLE ENTITY WITH THAT NAME MAH INDRA EDUCATIONAL INSTITUTIONS' AS MENTIONED IN THE APPLI CATION IN FORM NO. 10A. B) SO FAR AS REFERENCE MADE BY ASSESSEE TO THE NAME S OF SOME COMPANIES, INCORPORATING WORDS ENTERPRISES, IN DUSTRIES, MILLS, ETC., ARE CONCERNED, IT MAY BE STATED THAT S UCH NAMES ARE ENDING WITH THE WORD 'LIMITED', THEREBY, SIGNIF YING ONLY ONE COMPANY. HOWEVER, IN THE INSTANT CASE, THE NAME ITSELF WHICH ENDS WITH THE WORD 'INSTITUTIONS', SIGNIFIES EXISTENCE OF MULTIPLE INSTITUTIONS I.E. MULTIPLE ENTITIES. C) IT IS STATED BY THE APPLICANT THAT, IT HAS BEEN REGISTERED WITH THAT NAME UNDER THE COMPANIES ACT, 1956. HOWEV ER, SUCH NAME WHICH CLEARLY INDICATES CLUSTER OF INSTIT UTIONS HAS TO BE KEPT IN VIEW, HAVING REGARD TO THE PROVISIONS CO NTAINED IN SECTION 11, 12A & 12AA OF THE ACT, WHERE THERE IS R EFERENCE TO THE WORD 'INSTITUTION' I.E USED AS SINGULAR TERM. D) THUS, AS MAY BE NOTICED, IN ALL THOSE SECTIONS I N THE ACT, WHICH ARE IMPORTANT IN THE CONTEXT OF REGISTRATION U/S 12AA OF THE ACT, THE SPECIFIC WORD USED IS 'INSTITUTION' I. E., IN A SINGULAR TERM. FURTHER IT MAY BE MENTIONED THAT, THE COLUMN NO. 1 OF THE STATUTORY FORM NO. LOA PERTAINS TO INFORMATION, 'NAME OF 5 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= THE TRUST/INSTITUTION IN FULL'. APART FROM THIS, IN OTHER PARTS OF THAT STATUTORY FORM, THE WORD USED IS 'INSTITUTION' I.E., IN A SINGULAR TERM. THUS, THE NAME OF THE APPLICANT IS S IGNIFICANT, WHILE CONSIDERING AN APPLICATION IN FORM NO. LOA FO R REGISTRATION U/S 12AA. E) THE APPLICANT SHOULD BE A SINGLE ENTITY. F) THE NAME 'MAHINDRA EDUCATIONAL INSTITUTIONS' CLE ARLY INDICATES A CLUSTER OF SUCH INSTITUTIONS I.E, SEVER AL ENTITIES EXISTING AT THE SAME TIME. G) AS PER THE STATUTORY FORM NO. 10A, CONTAINED IN THE INCOME TAX RULES, 1962, THE APPLICANT HAS TO BE SIN GLE INSTITUTION I.E, SINGLE ENTITY AND ALSO U/S 12A & 1 2AA OF THE ACT, THE APPLICANT HAS TO BE SINGLE INSTITUTION OR SINGL E ENTITY. H) IN VIEW OF SUCH LEGAL PROVISIONS, THE MULTIPLE INSTITUTIONS, IN THIS CASE, AS PER THAT NAME SHOWN IN THE APPLICATION FILED IN FORM NO. 10A, IN MY VIEW, CANN OT BE GRANTED REGISTRATION U/S 12AA OF THE ACT. I) TO PUT IT DIFFERENTLY, TO MY MIND, WITH SUCH NAM E, 'MAHINDRA EDUCATIONAL INSTITUTIONS', WHICH CLEARLY INDICATES CLUSTER OF INSTITUTIONS LE, MULTIPLE ENTITIES AT TH E SAME TIME, IT MAY NOT BE PERMISSIBLE TO GRANT REGISTRATION U/S 12 AA OF THE ACT WITH THE NAME. 6. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL SRI AJAY REITERATED THE ARGUMEN TS PUT FORTH BEFORE THE DIT(E) BEFORE US. 8. HEARD BOTH PARTIES. WE ARE OF THE OPINION THAT THE WORD 'INSTITUTIONS' WAS PLACED IN THE NAME ONLY TO IDENT IFY DIFFERENT COLLEGES IN DIFFERENT LOCATIONS AS FORMING PART OF ONE ENTITY. THE NAME IS INDICATIVE TO THE PUBLIC THAT THERE WAS ONL Y SINGLE ENTITY BUT 6 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= IT CONSISTS OF DIFFERENT COLLEGES/INSTITUTIONS FORM ING PART AND OPERATING UNDER SUCH SINGLE ENTITY. FURTHER, PLURALITY IS CO MMON INDIAN PRACTICE IN NAMES SUCH AS 'ENTERPRISES', 'INDUSTRIES', 'FIRM S', 'PROJECTS', ETC., WHICH ARE USED AS SINGULAR NOUN RATHER THAN TO BRING MORE THAN ONE ENTITY. THE COMPANY HAD APPLIED TO THE ROC FOR GRANT OF NAM E AND THEN PROCEEDED WITH INCORPORATION OF THE COMPANY UNDER T HE COMPANY'S ACT, 1956. AS SUBMITTED BY THE LEARNED COUNSEL EVE N SECTION 25 COMPANIES WHICH ARE LIMITED BY SHARES AND FUNCTION NOT FOR PROFIT HAVE SUCH PLURAL NAMES LIKE SAMANA EDUCATIONAL INST ITUTIONS, AL- AZHAR EDUCATIONAL INSTITUTIONS. WE ALSO FIND THAT UNDER THE COMPANIES ACT, 1956 ONLY ONE CORPORATE IDENTITY NO. IS ALLOTTED TO THE ENTITY AND THERE IS ONLY SINGLE PERMANENT ACCOUNT N UMBER. THEREFORE, THERE IS NO POSSIBILITY OF CLAIMING REGI STRATION GRANTED U/S. 12AA FOR A SINGLE ENTITY, BY DIFFERENT ENTITIES SIM ULTANEOUSLY. 9. FURTHER, THE DIT(E) HAS NOT EXPRESSED ADVERSE FINDI NGS AGAINST THE CHARITABLE NATURE OF THE ASSESSEE-COMPANY OR GE NUINENESS OF ITS ACTIVITIES . 10. THE LEARNED COUNSEL BROUGHT OUR ATTENTION TO PAGES 6 AND 7 OF THE PAPER BOOK WHERE ALL THE DETAILS HAVE BEEN D ISCUSSED THREADBARE BY THE ITO (HQ), ATTACHED TO THE DIT(E). WE FIND MERIT IN THE ARGUMENT OF THE LEARNED COUNSEL THAT ONCE TH E COMMISSIONER IS SATISFIED ABOUT THE GENUINENESS OF THE ACTIVITIES O F THE TRUST AND OBJECTS OF THE TRUST, HE SHALL GRANT REGISTRATION. ONLY IF THE COMMISSIONER IS NOT SATISFIED WITH THE OBJECTS OF T HE TRUST AND GENUINENESS OF THE ACTIVITIES, HE SHALL PASS AN ORD ER IN WRITING REFUSING REGISTRATION OF THE TRUST. ON THIS ISSUE, RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF MANOCKJEE COWASJEE PETIT CH ARITIES VS. DIT(E), 21 TAXMANN.COM 456 (MUM) (TM). 11. HENCE THE IN THE PRESENT CASE SINCE THE ASSESSEE HA S COMPLIED WITH ALL THE CONDITIONS WHICH ARE NECESSARY FOR GRA NT OF REGISTRATION U/S. 12AA AND SINCE WE ARE OF THE OPINION THAT 'INS TITUTIONS' IS USED AS SINGULAR NOUN RATHER THAN TO BRING MORE THAN ONE EN TITY AND ALSO 7 ITA NO. 1338/HYD/2014 M/S. MAHINDRA EDUCATIONAL INSTITUTIONS ============================= THAT MAHINDRA EDUCATIONAL INSTITUTIONS IS ONLY A SI NGLE ENTITY BUT CONSISTS OF DIFFERENT COLLEGES/INSTITUTIONS OPERATI NG UNDER SUCH SINGLE ENTITY, WE DIRECT THE DIT(E) TO GRANT REGISTRATION TO THE ASSESSEE- COMPANY U/S. 12AA OF THE INCOME-TAX ACT, 1961. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2014 SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER HYDERABAD, DATED THE 28 TH NOVEMBER, 2014 TPRAO COPY TO: 1. M/S. MAHINDRA EDUCATIONAL INSTITUTIONS, TECH MAHIND RA LTD., SURVEY NO. 62/1A, BAHADURPALLY, JEEDIMETLA, HYDERAB AD-43. 2. THE DIRECTOR OF INCOME - TAX (EXEMPTIONS), 3 RD FLOOR ANNEXE, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 3. THE DDIT(E) - II, HYDERABAD. 4 . THE DR, A - BENCH, ITAT, HYDERABAD.