Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 4841 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 25 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-06-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
20-06-2011
Assessment Year
2010-2011
Appeal Filed On
26-10-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A.NO. 1817/MDS/2010 M/S. RAJAH SIR ANNAMALAI CHETTIAR FOUNDATION, NO.603, ANNA SALAI, CHENNAI 600 006. PAN AABTR 4450 L VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI J. PRABHAKAR, CA RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL I S DIRECTED AGAINST THE ORDER OF THE DIRECTOR OF INCOM E-TAX (EXEMPTIONS) AT CHENNAI DATED 30.08.2010 IN WHICH T HE APPLICATION PUT IN BY THE ASSESSEE SEEKING REGISTRA TION UNDER SEC.12AA HAS BEEN REJECTED. ITA 1817/10 :- 2 -: 2. THE ASSESSEE IS A TRUST REGISTERED BEFORE THE DI STRICT REGISTRAR, CHENNAI PURSUANT TO THE DEED OF DECLARAT ION OF TRUST EXECUTED ON 11.2.2009. THE OBJECT OF THE ASSESSEE TRUST IS TO RUN EDUCATIONAL INSTITUTIONS WITH MODERN METHODS TO IMP ROVE THE EDUCATION. 3. BUT THE APPLICATION WAS REJECTED BY THE DIRECTOR OF INCOME- TAX (EXEMPTIONS) ON THE GROUND THAT THE PROBABLE FE ES TO BE COLLECTED FROM THE STUDENTS IS HAVING A COMPONENT F OR THE FUTURE EXPANSION OF THE INSTITUTIONS AND THIS COMPONENT IS IN THE NATURE OF PROFIT AND THEREFORE, THE OBJECTS OF THE TRUST W ILL ALSO INCLUDE PROFIT MOTIVE, AS FOUND IN CLAUSE 11 OF THE TRUST D EED. THE ASSESSING AUTHORITY HAS ALSO OBSERVED THAT THE ASSE SSEE-TRUST WANTS TO ESTABLISH 100 SCHOOLS BEFORE 2014 AND FEES FOR PRIMARY LEVEL EDUCATION IS NOT GOVERNED BY ANY REGULATIONS AND THEREFORE, THE FEES COULD BE FIXED AT THE INTEREST OF THE ASSE SSEE-TRUST WHICH ALSO POSTULATES A MOTIVE FOR PROFIT. 4. IT IS AGAINST THE ABOVE THAT THE ASSESSEE HAS CO ME IN APPEAL BEFORE US. ITA 1817/10 :- 3 -: 5. WE HEARD SHRI J. PRABHAKAR, THE LEARNED CHARTERE D ACCOUNTANT, APPEARING FOR THE ASSESSEE AND SHRI K.E.B.RENGARAJAN, THE LEARNED JUNIOR STANDING COUNS EL APPEARING FOR THE REVENUE. 6. IN CLAUSE 11 OF THE TRUST DEED, THE TRUSTEES ARE AUTHORIZED TO FIX THE FEES OR CHARGES FROM THE STUDENTS. IN DECI DING SUCH AMOUNTS TO BE COLLECTED, THE ASSESSEE IS SUPPOSED T O CONSIDER THE COST OF RUNNING OF THE INSTITUTIONS AND ALSO FU NDS NECESSARY FOR FUTURE DEVELOPMENT. EVEN THOUGH IT IS STATED IN TH E TRUST DEED THAT FIXING OF THE FEES WILL NOT INCLUDE ANY AMOUNT OF P ROFIT, THIS FREEDOM ON COSTING AND PRICE FIXATION GRANTED TO THE TRUSTE ES OF THE ASSESSEE-TRUST CAN BE USED IN SUCH A MANNER TO SUBS ERVE THE EXPANSION OF THE SCHOOLS ESTABLISHED BY THE ASSESSE E-TRUST RATHER THAN CONCENTRATING ON THE OBJECTS OF THE EDUCATIONA L ACTIVITIES MENTIONED IN THE DEED OF TRUST. AS RIGHTLY POINTED OUT BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), THE ASSESSEE H AS ALREADY SET A TARGET OF 100 SCHOOLS TO BE STARTED BEFORE 20 14 FOR WHICH A MAJOR CONTRIBUTION WOULD BE FEES COLLECTED FROM THE STUDENTS, MAINLY FOR THE REASON THAT FEES FOR PRIMARY EDUCATI ON IS NOT REGULATED BY ANY ORDERS OF THE GOVERNMENT. ITA 1817/10 :- 4 -: 7. WE ARE IN AGREEMENT WITH THE VIEW OF THE DIRECTO R OF INCOME-TAX (EXEMPTIONS) THAT THE FEE STRUCTURE OF T HE ASSESSEE- TRUST ITSELF CONTEMPLATES ELEMENT OF PROFIT IN THE ACTIVITIES TO BE CARRIED ON BY THE ASSESSEE. 8. AT THE TIME OF HEARING OF THIS APPEAL, A CLARIFI CATION WAS SOUGHT FROM THE LEARNED COUNSEL APPEARING FOR THE A SSESSEE, WHETHER THE ASSESSEE IS IMPARTING FREE EDUCATION TO THE POOR SECTION OF THE PUBLIC AND WHETHER THE ASSESSEE HAS PROVIDED ANY FEE CONCESSION TO DESERVING STUDENTS. IT WAS SUBMI TTED BEFORE US THAT THE ONLY CONCESSION GIVEN BY THE SCHOOLS RUN B Y THE ASSESSEE-TRUST IS IN RESPECT OF FEES COLLECTED FROM THE WARDS OF THE TEACHERS OF THE INSTITUTIONS. IT SHOWS THAT TH E ASSESSEE IS COLLECTING FEES FROM ALL CHILDREN AND NO FREE EDUCA TION IS IMPARTED/CONCESSION GRANTED, EVEN TO THE DOWNTRODDE N OF THE SOCIETY OR ANY OTHER DESERVING SECTION OF THE SOCIE TY. THE ONLY CONCESSION GIVEN BY THE ASSESSEE IS A REDUCTION IN THE FEES PAYABLE BY THE TEACHERS OF THE INSTITUTIONS FOR THE IR WARDS STUDYING IN THE INSTITUTIONS RUN BY THE ASSESSEE-TRUST. SEC .2(15) DEFINES CHARITABLE PURPOSE FOR AVAILING THE BENEFITS OF S ECTIONS 11 & 12 OF ITA 1817/10 :- 5 -: THE INCOME-TAX ACT, 1961, THAT AN ASSESSEE MUST BE CARRYING ON CHARITABLE ACTIVITIES. THE INCLUSIVE DEFINITION OF CHARITABLE PURPOSE STATES AMONG OTHER THINGS, RELIEF OF THE POOR, EDUC ATION, MEDICAL RELIEF ETC. AS IN THE NATURE OF CHARITABLE PURPOSE. THE DEFINITION CLEARLY SHOWS THAT CARRYING ON EDUCATION ACTIVITIES BY ITSELF IS NOT A CHARITABLE PURPOSE. THE CONCEPT OF CHARITABLE PURP OSE MAY BE MANIFESTED IN DIFFERENT FORMS LIKE RELIEF OF THE PO OR, EDUCATION, MEDICAL RELIEF ETC; BUT A CHARITABLE PURPOSE SHOULD ALWAYS TAKE CARE OF THE WELFARE AND INTEREST OF THE PUBLIC AND ESPECIALLY THE POOR SECTION OF THE PUBLIC. RUNNING SCHOOLS BY COL LECTING HUGE AMOUNTS OF FEES WITH FIVE STAR FACILITIES CANNOT BE TREATED AS A CHARITABLE ACTIVITY ONLY ON THE GROUND THAT THE BUS INESS CARRIED ON BY SUCH INSTITUTIONS IS THE BUSINESS OF EDUCATION. IF RUNNING OF EDUCATIONAL INSTITUTION BY ITSELF IS A CHARITABLE I NSTITUTION AND THAT SHOULD APPLY TO HOSPITALS ALSO. A PRIVATE HOSPITAL GIVING MEDICAL RELIEF BY CHARGING THE PATIENTS CAN ALSO CLAIM THAT IT IS A CHARITABLE INSTITUTION AS IT IS PROVIDING MEDICAL RELIEF. IT IS TO BE SEEN THAT RUNNING OF EDUCATIONAL INSTITUTIONS OR DELIVERING M EDICAL SERVICES BY THEMSELVES ARE NOT THE MODELS OF CHARITABLE ACTI VITIES. THOSE ACTIVITIES SHOULD ALSO BE IN THE NATURE OF RELIEF T O THE POOR. THE PRINCIPLE THAT THE INSTITUTIONS RUN BY THE CHARITAB LE SOCIETIES MAY ITA 1817/10 :- 6 -: COLLECT FEES AND SERVICE CHARGES DOES NOT MEAN THAT THE INSTITUTIONS CAN CHARGE FEES ETC. AT COMMERCIAL RAT ES FROM ALL THE PEOPLE WITHOUT GIVING ANY ELEMENT OF CHARITY TO NEE DY PEOPLE. THE CHARITABLE PURPOSE DEFINED AND MANIFESTED AS IN CLUDING RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF ETC. IS TO P ROTECT THE BASIC CONCEPT OF CHARITY. PRESENCE OF REAL CHARITY CANNO T BE DILUTED. CHARITY ALWAYS MEANS HELPING THE NEEDY, SUPPORTING THE POOR, WORKING WITH COMPASSION AND DEDICATION FOR THE SOCI ETY. RUNNING OF AN INSTITUTION WITHOUT ANY OF THE ABOVE VIRTUES CANNOT BE CONSIDERED AS A CHARITABLE INSTITUTION. THE OBJECT OF THE ASSESSEE-TRUST IS TO ESTABLISH A NUMBER OF EDUCATIO NAL INSTITUTIONS IN A BRAND NAME AND RUN IT ON COMMERCIAL LINES. TH IS CANNOT BE A CHARITABLE ACTIVITY. 9. THEREFORE, WE FIND THAT THE DIRECTOR OF INCOME-T AX (EXEMPTIONS) HAS RIGHTLY REJECTED THE APPLICATION F ILED BY THE ASSESSEE FOR REGISTRATION UNDER SEC.12AA. 10. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. ITA 1817/10 :- 7 -: ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING, ON MONDAY, THE 20 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 20 TH JUNE, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR
