CAREER EDUCOM ACADEMY, RAIPUR V. COMMISSIONER OF INCOME TAX (EXEMPTION), BHOPAL

ITA 204/RPR/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4832 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 18-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Competent authority; Benefit of exemption; Set aside
• Section: 11; 80G; 12AA; 13

Judgement Text

आयकर अऩीऱीय अधधकरण, रायऩ ु र न्यायऩीठ, रायऩ ु र IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR श्री रविश स ू द, न्याययक सदस्य एवं श्री अरुण खोड़वऩया, ऱेखा सदस्य के समक्ष । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अऩीऱ सं./ITA No.204/RPR/2018 (ननधाारण वषा / Assessment Year :NA) Career Educom Academy, Jalvihar Colony, Raipur-492001 Vs CIT(Exemption), Bhopal PAN No. : AAECC 3374 J (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) ननधााररती की ओर से /Assessee by : Shri R.B.Doshi, CA राजस्व की ओर से /Revenue by : Shri Sanjay Kumar, Sr. DR स ु निाई की तारीख / Date of Hearing : 29/07/2022 घोषणा की तारीख/Date of Pronouncement : 21/09/2022 आदेश / O R D E R Per Arun Khodpia, AM : This appeal is filed by the assessee against the order passed by the CIT(E), Bhopal, dated 209.2018, on the following ground :- 1. In the facts and circumstances of the case and in law, Ld. CIT (Exemption) was not justified in holding that the appellant is not entitled to grant of approval u/ds.80G and he erred in rejecting the application of approval u/s.80G. The appellant is entitled for approval u/s.80G, 2. Facts in brief are that the assessee applied for exemption u/s.80G of the Act in form No.10G, which has been rejected by the CIT(E) observing that the activities of the assessee company are commercial in nature and the company has also not specified or explained for requirement of 80G approval for the company. It was also observed by the CIT(E) that the assessee has not provided any justification for its approval u/s.80G of the Act. ITA No.204/RPR/2018 2 3. Against the rejection of application of the assessee filed u/s.80G of the Act, the assessee is in appeal before the Tribunal. 4. Ld. AR before us submitted that the assessee is involved in charitable activities and no part of the income or property of the trust was ever used or applied for the benefit of any person specified in Section 13(1)(c) of the Act. It was also submitted by the ld. AR that the assessee- institution is affiliated to run the educational institution. The assessee has neither received any donations nor made any donations during the last three years. Ld. AR further submitted that all the required details have been submitted before the CIT(E), however, without considering the same, the CIT(E) rejected the application of the assessee for approval u/s.80G of the Act, which is arbitrary and, therefore, he submitted that the CIT(E) may be directed to grant approval u/s.80G of the Act. Ld AR drew our attention to page 08-09 of the paper book showing the order for registration u/s 12AA dated 21/10/2016 granted to the assessee company, establishing the fact that the objects of assessee company are considered coming within the compass of charity being relief to poor’s, Medical relief, Advancement of any other object of public utility. Further, Ld AR relied on the judicial pronouncement by the Coordinate Bench of ITAT Raipur in the case of Dignity Education Society Vs CIT(E) in ITA No.31/RPR/2019 vide order dated 09.06.2022, wherein under similar facts and circumstances a view has been taken holding that the assessee is eligible for approval u/s 80G, being having granted registration u/s 12AA ITA No.204/RPR/2018 3 and the same is continuing. Decision of the Hon’ble Punjab and Hariyana High Court in the case of CIT Vs. Rajmata Education Society (65 DTTR 307) was also referred where in it is held that merely because there are some surplus with the respondent, this should not be a ground to deny the registration under section 80G(5)(vi) of the Act. It is prayed that rejection of application of the assessee for grant of approval u/s 80G under such circumstances holding the assessee is not entitle for the same was not justified and uncalled for, thus needs to be set aside. 5. The ld. Sr. DR relied on the order of CIT(E), wherein the application of the assessee company for grant of registration u/s 80G was rejected, with the observations that (a) The Activities of the assessee company are commercial in nature (b) Company has not specified or explained for requirement of 80G (c) Company is charging fee for education and service provided, having generating surplus, thus no justification for its approval u/s 80G, (d) JCIT and AO have also not recommended the case for exemption u/s 80G(5), reporting companies activity are not charitable since the assessee company is involved in selling of books/college bags/ etc apart from generating income from tuition fee/hostel fee/bus fee etc. JICT/AO also denied the exemption on the ground that company do not have any indulgence with respect to their object “relief to poor”. Thus, requested to upheld the order of Ld CIT(E). 6. We have heard rival submissions, perused the available records carefully and also have gone through the judicial pronouncement relied upon. Admittedly, the company was granted registration u/s 12AA and is ITA No.204/RPR/2018 4 still enjoying the same, in such a situation, finding of the authorities below that the activities of the trust are not charitable, holds no ground and are liable to be held erroneous. Another ground for rejection of the approval u/s 80G was that the company is involved in commercial activities selling of books/college bags/ etc apart from generating income from tuition fee/hostel fee/bus fee. On this aspect we are of the view that these are the activities incidental to the main and predominant object of the assessee company, which are for survival and fulfilment of the main objects, thus approval u/s 80G cannot be denied on this argument. This view of ours is find support from the finding of the coordinate bench of ITAT Mumbai in the case of Green Education Trust Vs. DCIT reported in (2016) 159 ITD 0671 (Mumbai), wherein it is held that: 3.10. Whether charging of fee and retaining surplus amounts to commercial activity, disentitling an assessee from the benefit of exemption u/s 11 and 12: It has been mentioned by the Ld. DIT that since the school is charging fee for issue of prospectus , school uniforms, kits and admission fees etc., and thus, the pre-school is being run like a commercial activity and therefore, the assessee should be refused the benefit of registration. We find that here also, Ld. DIT has gone wrong on law as well as on facts. It has not been stipulated under the statute that for the purpose of getting the benefit of exemption u/s 11 and 12 by the educational institutions, the assessee must carry out all its activities free of cost i.e. without charging anything from anyone. Rather ' as per section 2(15), the term 'charitable purpose' includes inter- alia 'education'. Thus the intention of the legislature is unambiguously clear that carrying out the activity of 'education' itself is charitable....” 7. Regarding generating surplus, we take guidance from the principle laid down by the Apex Court in the case of Queens Education Society of India Vs CIT, 372 ITR 699(SC), wherein Apex Court has held that “Merely because an educational institution happens to earn surplus then by the ITA No.204/RPR/2018 5 facts itself it would not be held that education institution is not charitable and will not lose the benefit of exemption under the law by that fact alone.‟ 8. It is further relevant to refer to the decision of coordinate bench of the ITAT Amritsar in the case of Adesh Foundation (Regd.) Vs CIT(E), [2019] 105 taxmann.com 13 (Amritsar – Trib.), where in issues raised in this instant appeal are dealt with in detail and held as under: Registration in a particular case may have been granted even without commencement of any activities. An examination of these activities, commenced subsequently, and a finding as to they being genuine, is, a pre-requisite for an approval under section 80G(5)(vi) read with rule 11AA(3). The onus to show as to why, inspite of registration under section 12AA, or without initiating steps for its‟ withdrawal, if not actually withdrawing it, it yet considers it as not a fit case for grant approval under section 80G, is on the revenue. [Para 3.1] The competent authority, while considering an application for approval under section 80G(5)(vi), is to examine it from the standpoint of rule 11AA read with section 80G(5) in-as-much as only a positive satisfaction of the conditions stipulated therein would qualify for the said approval. [Para 3.2] The only basis cited is the absence of any demonstrated need for donations, which the assessee-society shall have a better access to in view of a tax advantage for the donors on being granted approval under section 80G(5)(vi), and the concomitant possibility of its‟ „misuse‟. The genuineness of the activities is essentially a matter of fact. The same no doubt has to be regarded in a broader perspective, having regard to the socio-economic context and conditions in which the assessee-society operates. Both the registration under section 12AA as well as approval under section 80G(5)(vi) are a part of the regulatory framework instituted to screen applications, and accord sanction. A larger play in the joints, which is also a characteristic of the interpretation of fiscal statutes, particularly where laying down conditionalities, is accordingly to be allowed. However, „genuineness‟ of activities should ordinarily imply activities as undertaken and not that may possibly be in future. Yes, the same may be included under the umbrella where falling within the objects and projected to be undertaken. However, whether the same could include those vehemently denied to the pursued, but could possibly be, is the question. However, it is not suggested that the competent authority is not empowered to enquire about the need for donations by the assessee-society, considering the deluge of funds it finds itself in, and which aspect it has miserably failed to explain, including the list of the prospective donors, who it considers ITA No.204/RPR/2018 6 as espousing its‟ cause or otherwise willing to donate, i.e., but for the section 80G benefit, or would be more likely to in case the same enures. However, firstly, „donations‟ would mean just that, i.e., without any quid pro quo, or any „value‟ parted with in exchange, while what the competent authority apprehends is not „donation‟ per se, but payments in the guise of donations, being consideration for grant of admission to various professional courses being provided by the schools/colleges being run and managed by the assessee- society. Two, the enquiry has its limitations. What, if the stated donations do not follow? What, if the stated project, i.e., where so, does not materialize? In either situation, the section 80G approval cannot be withdrawn. Again, it is not impermissible for the competent authority to place the assessee‟s activities in the field of higher education in the socio-economic context in which it operates, and factor in the same in his findings. Granting admission, particularly to medical courses to candidates in lieu of money (or money‟s worth), is a fact of public life in India, a scourge. However, alluding thereto, without in any manner corroborating it with the assessee‟s conduct, or with that of the persons managing it, in the past, would render it as no more than a surmise, a conjecture, liable to be struck down as arbitrary. It is in this context that the denial of any such intent, made equally vehemently by the assessee, becomes relevant. In other words, though there is possibility of a misuse of the section 80G benefit, unless there is a firm basis to regard it as a distinct possibility, in which case it would fall within the scope of the term „genuineness of activities‟, enquiry into which and a positive satisfaction qua which, is a pre-condition for an approval under section 80G. It may here be pertinent to draw attention to the observations of the jurisdictional High Court in CIT v. Sonepat Hindu Educational & Charitable Society [2005] 278 ITR 262/147 Taxman 1 (Punj. & Har.), requiring the competent authority to enquire into the „real purpose‟ of the applicant, i.e., distinct and apart from that stated in the memorandum of objects, as well as that in CIT v. Sant Girdhar Paramhans Sant Ashram [IT Appeal No. 50 of 2018, dated 16-5- 2018], also read out during hearing, that a mere possibility of misuse cannot result in denial of approval.. The need to ascertain the „real purpose‟, as against the „ostensible purpose‟, while granting approval under section 80-G(5)(vi) by the competent authority, is therefore to be weighed against, and ought not to denigrate to ousting applications on a mere possibility of misuse. That is, while the revenue is empowered to, nay, duty bound to, ascertain the „real purpose‟, as opposed to an „ostensible purpose‟, a mere possibility of misuse (of donations) cannot have the sanction of law. Stated differently, the said possibility, for the same to result in a valid denial of approval in law, must be something more than, what has been referred to as a „distinct possibility‟. The same would be a finding of fact, open to challenge, and where found as based not on a surmise, but the surrounding facts and circumstances, of which the assessee‟s conduct is an integral part, in our view, liable to be upheld. [Para 3.3] ITA No.204/RPR/2018 7 9. On perusal of the facts and based on findings in the various judicial pronouncements referred to supra, we find that the Ld CIT(E) has took a wrong stand in rejecting the application of the assessee in granting approval u/s 80G. Contrary to our view supported by the decisions of the various judicial forums, the revenue has not brought before us any binding judgment under the court of law which can distinguish the our aforesaid observation, we therefore of the view that the order of the Ld CIT(E) deserves to be set aside with a direction to grant approval u/s 80G to the assessee, as sought vide its application in form 10G. Consequently, the sole ground of the appeal of the assessee is allowed. 10. In the result, the appeal of assessee is allowed. Order pronounced in pursuance to Rule 34(4) of ITAT Rules, 1943 on 21/09/ 2022. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER रायऩ ु र/Raipur; ददनाांक Dated 21/09/2022 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : आदेशान ु सार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, रायऩ ु र/ITAT, Raipur 1. अऩीऱाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. विभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, रायऩ ु र/ DR, ITAT, Raipur 6. गार्ड पाईऱ / Guard file. सत्यावऩत प्रयत //True Copy//