M/s. Angels Educational Trust, Namakkal V. CIT, Salem

ITA 1707/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4963 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-06-2011
• Assessment Year: misc
• Appeal Filed On: 03-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: T BANUSEKAR
• Keywords: Charitable institution
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. I.T.A. NO.1707(MDS)/2009 M/S.ANGELS EDUCATIONAL TRUST, COMMIS SIONER OF INCOME- ANIYAPURAM MAIN ROAD, INCOM E-TAX, ANIYAPURAM POST, VS. SA LEM. NAMAKKAL. PAN-AAATA5310M. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.BANUSEKAR RESPONDENT BY: SHRI ANIRUDH RAI O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX AT SALEM PASSED UNDER SECTION 12AA OF THE INCOME-TAX A CT, 1961 THROUGH HIS PROCEEDINGS DATED 25-8-2009, REJECTING THE APPLICATION OF IT A NO.1707(MDS)/2009 2 THE ASSESSEE FOR GRANT OF REGISTRATION UNDER THE IN COME-TAX ACT, 1961 AS A CHARITABLE INSTITUTION. 2. THE ASSESSEE TRUST IS RUNNING A MATRICULATION S CHOOL, BOTH IN ENGLISH AND TAMIL MEDIUM AND ALSO RUNNING A TEAC HERS TRAINING COLLEGE. THE ASSESSEE IS CARRYING ON ITS EDUCATION AL ACTIVITIES IN A FAR AWAY VILLAGE BY NAME ANIYAPURAM IN NAMAKKAL TALUK A ND DISTRICT. 3. THE MOST IMPORTANT REASON POINTED OUT BY THE COMMISSIONER OF INCOME-TAX TO DENY REGISTRATION TO THE ASSESSEE TRUST IS THAT THE ASSESSEE IS CARRYING ON THE ACTIV ITIES WITH THE MOTIVE OF EARNING PROFITS. FOR THIS FINDING THE COMMISSIO NER OF INCOME-TAX HAS RELIED ON THE JUDGMENT OF THE HONBLE UTTARANCH AL HIGH COURT IN THE CASE OF CIT VS. M/S.QUEEN EDUCATIONAL SOCIETY, 223 CTR 395. THE COMMISSIONER OF INCOME-TAX HAS ALSO RELIED ON T HE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ADITANAR E DUCATIONAL INSTITUTION VS. ADDITIONAL COMMISSIONER OF INCOME-T AX, 224 ITR 310. 4. THE MAIN REASON FOR COMING TO THE CONCLUSION TH AT THE ASSESSEE TRUST IS INTERESTED IN MAKING PROFITS IS T HAT THE ASSESSEE HAD PROVIDED FREE BUS SERVICE TO STUDENTS STUDYING IN T AMIL MEDIUM TO ATTRACT MORE STUDENTS AND THEREBY COLLECTING MORE I NCOME. HE ALSO IT A NO.1707(MDS)/2009 3 POINTED OUT THAT THE ASSESSEE HAS ESTABLISHED A TEA CHERS TRAINING INSTITUTE, AGAIN FOR MAKING PROFIT OUT OF THE SAID ACTIVITY. 5. EXCEPT MAKING SUCH GENERAL OBSERVATIONS, THE COMMISSIONER OF INCOME-TAX HAS NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE TRUST WAS IN FACT MOTIVATED BY EARNING PROFIT. THE ASSESSEE IS RUNNING A MATRICUL ATION SCHOOL BOTH IN ENGLISH AND TAMIL MEDIUM. IT IS A COMMON KNOWLEDGE THAT NOW-A- DAYS MORE AND MORE STUDENTS ARE OPTING FOR ENGLISH MEDIUM SCHOOLS. IN SUCH CIRCUMSTANCES TO RUN SCHOOLS IN THE MEDIUM OF VERNACULAR LANGUAGES IS DIFFICULT. EVEN THE OBJECT OF RUNNING A SCHOOL WITH THE MEDIUM OF INSTRUCTION AS MOTHER TONGUE IS HIGHLY LA UDABLE. IN THAT WAY RUNNING OF A TAMIL MEDIUM SCHOOL ITSELF IS A GR EAT CHARITABLE ACTIVITY CARRIED ON BY THE ASSESSEE. BY PROVIDING FREE BUS SERVICE MORE STUDENTS JOINED TAMIL MEDIUM COURSE. NATURALL Y MORE FEES WERE COLLECTED. THAT DOES NOT MEAN THAT THE BUS SE RVICES WERE PROVIDED BY THE ASSESSEE FOR THE PURPOSE OF MAKING PROFIT. ACTUALLY THE ASSESSEE HAS PROVIDED FREE BUS SERVICE TO SUSTA IN THE TAMIL MEDIUM SCHOOL, AS OTHERWISE STUDENTS WILL NOT COME FORWARD TO JOIN THE SCHOOL. LIKEWISE THE ASSESSEE HAS STARTED ANOT HER INSTITUTION OF TEACHERS TRAINING INSTITUTE WHICH IS ALSO ESSENTIAL LY A PART OF IT A NO.1707(MDS)/2009 4 EDUCATIONAL ACTIVITY. THERE IS NOTHING ON RECORD T O SHOW THAT THE SAID TRAINING INSTITUTE HAS BEEN ESTABLISHED FOR MAKING PROFIT. 6. THE COMMISSIONER OF INCOME-TAX IS MOVED BY THE EXCESS OF INCOME REFLECTED IN THE ACCOUNTS FOR THE ASSESSMENT YEARS 2007-08 AND 2008-09 TO COME TO THE CONCLUSION THAT THE ASSESSEE TRUST IS MAKING PROFIT. EXCESS OF INCOME OVER EXPE NDITURE BY ITSELF IS NOT A REASON TO SHOW THAT AN ASSESSEE IS NOT ENGAGE D IN CHARITABLE ACTIVITIES. AS FAR AS THE PRESENT CASE IS CONCERNE D THERE IS NO COMPLAINT THAT THE TRUSTEES HAVE APPLIED MONEY OF T HE TRUST FOR THE PERSONAL BENEFIT OF ANY INTERESTED PERSON OR FOR AN Y PURPOSE OTHER THAN EDUCATIONAL ACTIVITIES. MOREOVER THE ASSESSEE HAS TO SET UP BUILDINGS AND OTHER FACILITIES TO MAKE RUNNING OF T HE SCHOOLS MORE CONDUCIVE, FOR WHICH IT IS NECESSARY FOR THE ASSESS EE TRUST TO ACCUMULATE SURPLUS INCOME. 7. THEREFORE, WE DO NOT FIND ANY BASIS TO SUPPORT THE FINDING OF THE COMMISSIONER OF INCOME-TAX THAT THE ASSESSEE TRUST HAS BEEN ESTABLISHED WITH THE MOTIVE OF EARNING PROFIT. 8. ANOTHER REASON POINTED OUT BY THE COMMISSIONER OF INCOME-TAX IS THAT OUT OF 14 TRUSTEES, ONLY TWO TRU STEES ARE AUTHORIZED TO RUN THE ADMINISTRATION OF THE ASSESSEE TRUST INC LUDING THE IT A NO.1707(MDS)/2009 5 MANAGEMENT OF FINANCIAL MATTERS. THIS IS QUITE COM MON EVERYWHERE. ALL THE TRUSTEES CANNOT SIMULTANEOUSLY ENGAGE IN TH E DAY-TO-DAY ADMINISTRATION OF THE TRUST ACTIVITIES. IF ALL THE 14 TRUSTEES ARE SIMULTANEOUSLY PARTICIPATING IN THE ADMINISTRATION OF THE TRUST, THE RESULT WOULD BE UTTER CHAOS. THEREFORE IT IS NATUR AL THAT THE GENERAL BODY ENTRUSTS A SELECTED FEW TO RUN THE INSTITUTION , WHICH HAS THE RESPONSIBILITY OF REPORTING TO THE GENERAL BODY. T HERE IS NOTHING WRONG IN THE ARRANGEMENT MADE BY THE ASSESSEE. 9. IF AT ALL SOMETHING IS GOING WRONG IN ANY PARTI CULAR ASSESSMENT YEAR, THE ASSESSING OFFICER IS FREE TO E XAMINE THE CASE AND DECIDE WHETHER THE ASSESSEE IS ENTITLED FOR THE BENEFIT OF SECTION 11 FOR A PARTICULAR ASSESSMENT YEAR OR NOT. 10. IN SHORT, WE FIND THAT THE REASONS STATED BY T HE COMMISSIONER OF INCOME-TAX TO DENY REGISTRATION TO THE ASSESSEE TRUST IS NOT SUSTAINABLE IN LAW. 11. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE DIRECT THE COMMISSIONER OF INCOME-TAX TO GRANT REGISTRATION TO THE ASSESSEE TRUST UNDER SECTION 12AA. 12. IN RESULT THIS APPEAL FILED BY THE ASSESSEE IS ALLOWED. IT A NO.1707(MDS)/2009 6 ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 9 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 9 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.