Bhagwan Mahavir Vidyapeeth, Rewari V. CIT, Rohtak

ITA 2285/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77685 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-03-2014
• Assessment Year: 2012-2013
• Appeal Filed On: 14-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Retrospective amendment
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI: JUDICIAL MEMBER AND SHRI SHAMIM YAHYA : ACCOUNTANT MEMBER ITA NO. 2285/DEL/2012 ASSTT. YR: 2012-13 BHAGWAN MAHAVIR VIDYAPEETH, VS. COMMISSIONER OF IN COME-TAX, REWARI (HARYANA) ROHTAK. PAN: AAATB 8166 G APPELLANT ) ( RESPONDENT ) APPELLANT : SHRI GUREET SINGH ADV. RESPONDENT BY : SHRI VIVEK WADWAN CIT (DR) DATE OF HEARING: 10-03-2014. DATE OF ORDER : 25-04-2014. O R D E R PER R.P. TOLANI, J.M: : THIS IS ASSESSEES APPEAL AGAINST ORDER DATED 9-4-2 012PASSED BY THE CIT, ROHTAK U/S 12AA(1)(B)(II) OF THE I.T. ACT, 196 1 PERTAINING TO A.Y. 2012-13. SOLE GROUND RAISED IS AS UNDER: BECAUSE THE ACTION IS BEING CHALLENGED ON FACTS AN D LAW FOR HAVING DECLINED THE GRANTING OF THE REGISTRATION U/ S 12AA OF THE ACT WHICH ACTION IS PERVERSE, OVERLOOKING & IGNORIN G THE FACTS, MATERIAL ON RECORD, PRINCIPLES OF LAW, PROVISIONS O F ACT AND EVEN FURTHER IN PATENT VIOLATION OF PRINCIPLES OF J USTICE. 2. BRIEF FACTS ARE: THE ASSESSEE IS A REGISTERED SO CIETY, RUNNING TWO EDUCATIONAL INSTITUTIONS KNOWN AS ANKUR JAIN PUBLIC SCHOOL, HAVING STUDENTS ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 2 OF PLAY SCHOOL UPTO UKG; AND ANOTHER IN THE NAME OF JAIN PUBLIC SCHOOL FROM CLASS 1 UPTO CLASS 10+2. THE OBJECTS OF THE TR UST ARE MAINLY TO IMPART EDUCATION AND ARE CLAIMED TO BE IN CONFORMITY WITH SEC. 2(15). APART FROM REGULAR EDUCATIONAL IMPARTING, THE SOCIETY GRANTS S CHOLARSHIP AND FEE CONCESSION TO THE ELIGIBLE STUDENTS. THERE IS NO AL LEGATION ABOUT ANY NON EDUCATIONAL OBJECT OR ACTIVITY AND BENEFIT GIVEN TO ANY RELATIVE OR MEMBER OF THE SOCIETY. THUS, THE OBJECTS AND ACTIVITIES ARE E DUCATIONAL AND IN CONFORMITY WITH SEC. 2(15). 2.1. THE ASSESSEE SOCIETY APPLIED FOR REGISTRATION U/S 12A(1)(AA) ON 11-10- 2011 ALONG WITH REQUISITE DOCUMENTS. LD. CIT CALLE D FOR A REMAND REPORT FROM THE ADDL. CIT ROHTAK, WHO DID NOT RECOMMEND RE GISTRATION ON IRRELEVANT FOLLOWING ISSUES: (1) THE TRUST FAILED TO FILE ORIGINAL MEMORANDUM OF ITS ESTABLISHMENT AND ONLY SUBMITTED A PHOTO COPY. (2) THE ADDL. CIT HAD REPORTED THAT THE SURPLUS OF THE SOCIETY IS AT VERY HIGHER SIDE AND ALSO VIOLATE THE PROVISIONS OF SEC. 11 OF THE I.T. ACT, 1961. (3) THE SOCIETY WAS REGISTERED ON 17-5-2004 WHEREAS THE APPLICATION U/S 12A WAS MADE AFTER A SPAN OF 7 YEARS. (4) THE P&L A/C FOR THE LAST THREE YEARS I.E. F.Y. 2008 -09, 2009-10 & 2010-11 REVEALED THAT THE TRUST HAS SHOWN ITS INCO ME OVER EXPENDITURE AT RS. 54,31,248/-, RS. 71,20,986/- & R S. 52,86,769/- RESPECTIVELY WHICH ARE MORE THAN 15% OF THE GROSS R ECEIPTS OF ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 3 CONCERNED FINANCIAL YEAR AND WITHOUT DEPRECIATION T HE SURPLUS OF THE TRUST COMES TO RS. 82,08,687/-, RS. 1,08,98,939 /- AND RS. 95,28,212/- RESPECTIVELY WHICH IS REALLY TOO HIGH. 2.2. THE CIT FURTHER OBSERVED THAT: (I) THE ASSESSEE IN LAST THREE FINANCIAL YEARS HAD ACC UMULATED INCOME WITHOUT THE PERMISSION OF THE AO AND HAD MAD E EXPENDITURE ON ADVERTISEMENT IN EVERY YEAR. (II) THE ASSESSEE WAS KEENLY INTERESTED TO ASK MORE AND MORE STUDENTS TO MAXIMIZE ITS PROFITS. (III) ACCOUNTS REVEALED THAT ASSESSEE HAD PURCHASED LAND AT SECTOR 4 HUDA, REWARI FOR RS. 5,58,00,000/- OUT OF WHICH PAYMENT OF RS. 1,39,50,000/- HAD BEEN MADE OUT OF S URPLUS OF PREVIOUS YEARS. THE LAND IS PURCHASED FOR BUILDI NG IN FUTURE, BUT THE ASSESSEE TRUST FAILED TO ESTABLISH ANY NEXUS THAT THE LAND WOULD BE USED FOR ANY CHARITY PURPOSE S. 2.3. THE CIT REJECTED THE APPLICATION FOR REGISTRAT ION BY FOLLOWING OBSERVATIONS: ACCUMULATION OF INCOME IS NOT THE MOTTO OF THE ACT HERE. THE CHARITABLE SOCIETY COULD HAVE AT THE MOST ACCUMULAT ED 15% OF ITS INCOME HELD UNDER TRUST. THE AVERAGE OF 15% HAS BEEN GIVEN TO TAKE CARE OF THE PRACTICAL DIFFICULTIES. 85% OF ITS INCOME HAS TO BE APPLIED YEAR TO YEAR AND THUS AN EMPIRE CANNO T BE BUILT BY RUNNING A CHARITABLE INSTITUTION. THE AMOUNT OF HUG E DEPRECIATION AS ABOVE CLEARLY SHOWS THAT THE SOCIET Y IS ACCUMULATING ASSETS AND GENERATING WEALTH. THE LEGI SLATURE DOES NOT WANT THAT CHARITABLE INSTITUTIONS SHOULD G ET FULLY PAID FOR THE BENEFITS PROVIDED BY THEM, AS THIS WOULD BE MERE OSTENSIBLE CHARITY. IF THE CHARITABLE INSTITUTIONS ARE EARNING PROFITS, THEY ARE MISUSING THE BENEFITS GIVEN BY TH ESE PROVISIONS. IF AN INSTITUTION FULFILLING CHARITABLE PURPOSE UND ERTAKES ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 4 ACTIVITIES FOR PROFIT, IT HOODWINKS THE STATUTE. (I NDIAN CHAMBER OF COMMERCE 101 ITR 796). KEEPING IN VIE THE AFORESAID FACTS AND CIRCUMSTANCE S, IT IS CLEAR THAT THE APPLICANT FAILED TO SUBSTANTIATE HIS CLAIM THAT TRUSTS AIMS/ OBJECTS AND TERMS OF MEMORANDUM ARE OF THE CH ARITABLE NATURE AND ALSO COULD NOT PRODUCE ANY CONCRETE EVID ENCE TO PROVE THE GENUINENESS OF THE ACTIVITIES OF THE TRUS T IN SPITE OF REPEATED OPPORTUNITIES ACCORDED. MOREOVER, CONTENTS OF DISSOLUTION CLAUSE IN ITS TRUST DEED DISCUSSED SUPR A ALSO DISQUALIFIES THE TRUST FOR REGISTRATION U/S 12AA. C ONSEQUENTLY, THE REQUEST OF THE APPLICANT TRUST FOR REGISTRATION U/S 12AA OF THE INCOME TAX ACT CANNOT BE ACCEDED TO AND THE APP LICATION IN FORM 10A IS, THEREFORE, REJECTED ACCORDINGLY U/S 12 AA(1)(B)(II) OF THE INCOME TAX ACT, 1961. 2.4. AGGRIEVED, ASSESSEE IS BEFORE US. 3. LD. COUNSEL FOR THE ASSESSEE CONTENDS, THE OBJEC TIONS OF THE ADDL. CIT ARE IRRELEVANT TO ISSUE OF REGISTRATION U/S 12AA, A S: (I) WHILE GRANTING REGISTRATION WHAT IS TO BE LOOKED IN TO BY THE CIT IS WHETHER THE AIMS AND OBJECTIVES OF THE TRUST ARE CH ARITABLE OR NOT. THERE IS NO DISPUTE THAT THE ASSESSEE IS RUNNING TW O EDUCATIONAL INSTITUTIONS AND THE MAIN OBJECT OF THE SOCIETY IS IMPARTING EDUCATION. (II) A PROPER CERTIFIED COPY OF THE MEMORANDUM OF SOCIET Y AND ITS REGISTRATION CERTIFICATE WAS FILED. (III) THE REPORT OF THE AO ITSELF PROVED THAT THE SURPLU S OF THE SOCIETY HAD NOT BEEN SQUANDERED BUT IT HAS BEEN SAFELY KEP T IN FDRS AND UTILIZED FOR THE PURPOSE OF PURCHASE OF LAND FOR TH E SCHOOL AT REWARI. THERE IS NO BASIS TO HOLD THAT THERE WAS NO NEXUS BETWEEN THE LAND PURCHASED AND THE AIMS AND OBJECTS OF THE SOCIETY. THE AIMS AND OBJECTS OF THE SOCIETY PROVIDE TO ACQUIRE LAND FOR ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 5 CONSTRUCTION OF SCHOOL. THEREFORE, THE ADVERSE INFE RENCE DRAWN ON THIS COUNT IS BASELESS. (IV) THE FACT THAT ADDL. CIT HAS REPORTEDLY RECOURSED T O ACCOUNTS ITSELF PROVE THAT ASSESSEE IS MAINTAINING PROPER BOOKS OF A/CS IN WHICH NO DEFECT WHAT SO EVER HAS BEEN FOUND. THEREFORE, FROM THE OBSERVATIONS OF ADDL. CIT AND CIT ITSELF IT EMERGES THAT ASSESSEES OBJECTS ARE FOR IMPARTING EDUCATION, BOOKS OF A/CS ARE PROPERLY MAINTAINED AND AUDITED. (V) MERELY BECAUSE THE SOCIETY HAS APPLIED FOR REGISTRA TION U/S 12A AFTER 7 YEARS CANNOT BE A GROUND FOR REJECTION OF T HE REGISTRATION, IN AS MUCH AS THE REGISTRATION WILL BE APPLICABLE FROM PROSPECTIVE DATE AND NOT FROM THE RETROSPECTIVE EFFECT. 3.1. RELIANCE IS PLACED BY ASSESSEE ON ITAT CHANDI GARH BENCH ORDER DATED 13-8-2010 IN THE CASE OF SPRING DALE EDUCATI ONAL SOCIETY, LUDHIANA VS. CIT (ITA NO. 975/CHD/2009), HOLDING AS UNDER: IN CONCLUSION, WE HOLD THAT THE APPLICANT DEMONSTR ATED BEFORE THE COMMISSIONER THAT IT WAS IMPARTING EDUCATION AN D THAT SUCH AN ACTIVITY WAS ONE OF THE MAIN OBJECTS OF THE SOCI ETY. IT IS NOT DISPUTED BY THE COMMISSIONER THAT THE SOCIETY WAS I MPARTING EDUCATION AND NOR IS THERE ANY MATERIAL TO SUGGEST THAT ANY ACTIVITY WHICH IS NOT IN THE NATURE OF EDUCATION IS SOUGHT TO BE CARRIED ON BY THE ASSESSEE IN THE NAME OF EDUCATION . AS A RESULT, EDUCATION, BEING ONE OF THE OBJECTS ENUMERATED IN THE DEFINITION OF CHARITABLE PURPOSE U/S 2(15) OF THE ACT, THE ASSESSEE SOCIETY IS ELIGIBLE FOR REGISTRATION U/S 1 2AA OF THE ACT. OTHER OBJECTIONS, BY THE COMMISSIONER ARE NOT RELEV ANT AS HELD BY US IN THE EARLIER PARAGRAPHS. ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 6 3.2. FURTHER RELIANCE IS PLACED ON ITAT DELHI BENCH ORDER DATED 18-1- 2013 IN THE CASE OF SHRI GIAN GANGA VOCATIONAL & E DUCATIONAL SOCIETY VS. CIT (ITA NOS. 5706 & 5707/DEL/2012), INTER ALIA, HO LDING AS UNDER: 7. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE LD. CIT HAS NOT RAISED ANY OBJECTION AGAINST THE OBJECTS OF THE ASSESSEE SOCIETY. THE MA IN OBJECT OF THE ASSESSEE SOCIETY IS EDUCATION, WHICH, UNDENIABL Y, IS OF CHARITABLE NATURE, IN LINE WITH THE PROVISIONS OF S ECTION 2(15) OF THE ACT. FURTHER, THE LD. CIT HAS TAKEN RECOURSE TO THE RTE ACT TO REJECT THE ASSESSEES APPLICATION. NOW, AS CORRE CTLY CONTENDED, IT IS NOT WITHIN THE CITS PURVIEW TO DO SO. UNDER SECTION 12AA, WHAT IS REQUIRED TO BE SEEN BY THE LD . CIT WHILE CONSIDERING AN APPLICATION FOR GRANT OF REGISTRATIO N, IS AS TO WHETHER THE OBJECT OF THE APPLICANT IS CHARITABLE A ND AS TO WHETHER ITS ACTIVITIES ARE GENUINE ANY FURTHER. THE JURISDICTION AND COMPETENCE TO EXAMINE AN ISSUE UNDER THE RTE AC T OBVIOUSLY LIES WITH THE AUTHORITIES MENTIONED THERE IN. THE, THE CBDT CIRCULAR NO. 11 OF 2008 (SUPRA) CLEARLY STATES , INTER ALIA, THAT THE PROVISION TO SECTION 2(15) DOES NOT APPLY IN THE CASE OF EDUCATION AND WHERE THE PURPOSE OF A TRUST OR INSTI TUTION IS EDUCATION, IT WILL CONSTITUTE CHARITABLE PURPOSE EVEN IF IT INCIDENTALLY INVOLVES IN CARRYING ON OF COMMERCIAL ACTIVITIES. .. . 15. IN VIEW OF THE ABOVE, THE ORDER PASSED BY THE L D. CIT IS HEREBY CANCELLED. WE DIRECT THE LD. CIT TO GRANT RE GISTRATION TO THE SOCIETY ON VERIFYING THE ORIGINAL DOCUMENT OF E STABLISHMENT OF THE ASSESSEE TRUST, WHICH HAS BEEN SHOWN TO US. 3.3. THE ITAT IN ARRIVING SUCH CONCLUSION FURTHER R ELIED ON FOLLOWING CASE LAWS: - SHRI SAIN JI DHARMARTH TRUST VS. CIT 8 SOT 446(DEL) ; - ST. DON BOSCO EDUCATIONAL SOCIETY VS. CIT 40 ITD 47 7 (LUCK.); - CIT VS. SURYA EDUCATIONAL & CHARITABLE TRUST 203 TA XMAN 53 (P&H) ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 7 - BABA GANDHA SINGH EDUCATION TRUST VS. CIT 138 TTJ ( CHD)(UO)1. - RELIABLE EDUCATIONAL ALLIANCE SOCIETY VS. CIT 31 DT R 239 (DEL.); - DREAM LAND EDUCATIONAL TRUST VS. CIT 109 TTJ (ASR) 850. 3.4. IN ALL THESE JUDGMENTS IT IS CLEARLY HELD THAT WHAT IS TO BE SEEN AT THE TIME OF REGISTRATION IS WHETHER THE , OBJECTS OF THE TRUST ARE CHARITABLE IN NATURE AND THE ACTIVITIES ARE GENUINE. NO ADVERSE O BSERVATION IN THIS REGARD HAS BEEN POINTED OUT. THE ISSUES WHICH ARE STRESSED UPON BY THE ADDL. CIT HAVE NO BEARING ON REGISTRATION, BESIDES THEY ARE I SSUE RELEVANT FOR ASSESSMENT PROCEEDINGS. IT IS PLEADED THAT ASSESSE E HAVING FULFILLED RELEVANT AND VALID CONDITIONS THE REGISTRATION U/S 12A MAY B E ALLOWED. 4. LD. DR SUPPORTS THE ORDER OF LOWER AUTHORITIES. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. NO ADVERSE FINDING HAS BEEN GIVEN TO THE EF FECT THAT THE ASSESSEE SOCIETYS AIMS AND OBJECTS ARE NOT CHARITABLE IN NA TURE. BOOKS OF A/CS ARE PROPERLY MAINTAINED ON WHICH THERE ARE NO ADVERSE COMMENTS. A CERTIFIED COPY OF MEMORANDUM IS PROPER COMPLIANCE TO FURNISH THE DOCUMENTS. THE ASSESSEE HAVING ACCUMULATED SURPLUS IN PAST HAS NO EFFECT ON THE REGISTRATION IN AS MUCH AS THE SURPLUS HAS BEEN KEPT BY THE ASSE SSEE EITHER IN FDRS OR INVESTMENT IN PURCHASE OF LAND. WE FIND NO MERIT IN THE OBSERVATION THAT THE ASSESS EE HAS NOT DEMONSTRATED ANY NEXUS BETWEEN THE PURCHASE OF LAND AND OBJECTS. FOR A SOCIETY RUNNING ITA 2285/DEL/12 BHAGWAN MAHAVIR VIDYAPEETH 8 SCHOOLS, THE BUILDING CONSTRUCTION BECOME INTEGRAL PART OF THE ACTIVITY FOR WHICH PURCHASE OF LAND BECOMES AN ESSENTIAL FEATURE . THUS, THE ADVERSE INFERENCE ON NEXUS IS MISCONCEIVED IN ANY CASE THE ISSUES ABOUT SURPLUS OR CLAIMING DEPRECIATION BECOME ISSUES RELEVANT FOR TH E ASSESSMENT PROCEEDINGS AND HAVE NO BEARING AT THE TIME OF INITIAL REGISTR ATION U/S 12A. OUR VIEW IS SUPPORTED BY ABOVE ITAT ORDERS INCLUDING ITAT DELHI BENCH ORDER IN THE CASE OF SHRI GIAN GANGA VOCATIONAL & EDUCATIONAL SO CIETY (SUPRA). IN VIEW THEREOF, WE HOLD THAT THE ASSESSEE SOCIETY IS ELIGI BLE FOR REGISTRATION U/S 12AA WHICH SHOULD BE GRANTED. WE ORDER ACCORDINGLY. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 25-04-2014. SD/- SD/- ( SHAMIM YAHYA) ( R.P. TOLANI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25-04-2014. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR