Professional Education and Research Foundation, CHENNAI V. DIT, CHENNAI

ITA 289/CHNY/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7430 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-03-2012
• Assessment Year: 2010-2011
• Appeal Filed On: 21-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Charitable institution
• Section: 80G; 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.288, 289, 290 & 291(MDS)/2011 M/S.PROFESSIONAL EDUCATION AND RESEARCH FOUNDATION, NEW NO.10, K.B.DASAN RD., CHENNAI-600 018. PAN AABTP5730H. VS. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR.QUADIR HOSEYN, ADVOCATE RESPONDENT BY: SHRI ANIRUDH RAI, IRS, COMMIS SIONER OF IT DATE OF HEARING : 22 ND MARCH, 2012 DATE OF PRONOUNCEMENT : 28 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: ALL THESE FOUR APPEALS ARE FILED BY THE ASSESSEE. TWO APPEALS ARE FILED AGAINST THE ORDERS OF THE DIRECTO R OF INCOME-TAX (EXEMPTIONS) REJECTING THE APPLICATIONS FILED BY TH E ASSESSEE FOR - - ITA NOS.288 TO 291 OF 2011 2 OBTAINING REGISTRATION UNDER SECTION 12AA OF THE IN COME-TAX ACT, 1961. THE OTHER TWO APPEALS ARE FILED BY THE ASSESS EE AGAINST THE ORDERS OF THE DIRECTOR OF INCOME-TAX(EXEMPTIONS ) REJECTING THE PETITIONS FILED BY THE ASSESSEE FOR APPROVAL UN DER SECTION 80G OF THE INCOME-TAX ACT, 1961. 2. THE FIRST SET OF APPEALS IN ITA NOS.289 AND 290(MDS)/2011 ARE DIRECTED AGAINST THE ORDERS OF TH E DIRECTOR OF INCOME-TAX (EXEMPTIONS) AT CHENNAI, DATED 29-1-2010 . IN THESE ORDERS THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) HAS REJECTED THE APPLICATION OF THE ASSESSEE FOR REGISTRATION UNDER SECTION 12AA AND PETITION FOR APPROVAL UNDER SECTION 80G ON THE GROUND THAT THE ASSESSEE IS RAISING ITS FUNDS BY BRINGING OUT P UBLICATIONS, WHICH FALLS WITHIN THE AMENDED PROVISIONS OF SECTIO N 2(15) AND SO ALSO RAISING FUNDS BY OTHER WAYS IS TOO VAGUE AND WIDE EXPRESSION. THE OTHER SET OF APPEALS IN ITA NOS. 2 88 AND 291(MDS)/2011 ARISE OUT OF THE ORDERS OF THE DIRECT OR OF INCOME- TAX (EXEMPTIONS) PASSED ON 29-10-2010 REJECTING THE APPLICATION AND PETITION FILED BY THE ASSESSEE FOR THE SECOND T IME AFTER MAKING GOOD CERTAIN OBJECTIONS RAISED BY THE DIRECT OR OF INCOME- - - ITA NOS.288 TO 291 OF 2011 3 TAX (EXEMPTIONS) AT THE FIRST INSTANCE. AS THE CON TENTIONS OF THE ASSESSEE ARE TO BE EXAMINED IN APPEALS IN ITA NOS.2 88 AND 291(MDS)/2011, THE FIRST SET OF APPEALS IN ITA NOS. 289 AND 290(MDS)/2011 ARE IN FACT INFRUCTUOUS AND THEREFORE TO BE DISMISSED. THEY ARE ACCORDINGLY DISMISSED. 3. NOW, COMING TO THE CONTENTIONS OF THE ASSESSEE ON THEIR MERITS, WE HAVE TO CONSIDER THE APPEALS IN IT A NOS.288 AND 291(MDS)/2011, WHICH ARE THE APPEALS DIRECTED AGAIN ST THE ORDERS OF THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), DATED 29-10-2010. 4. THE ASSESSEE TRUST BY NAME PROFESSIONAL EDUCATION AND RESEARCH FOUNDATION IS RUNNING AN IN STITUTION CALLED PRESTON INTERNATIONAL COLLEGE. THE SAID C OLLEGE IS A STUDY CENTRE, APPROVED BY THE DIRECTORATE OF DISTAN CE AND CONTINUING EDUCATION, MANONMANIAM SUNDARANAR UNIVER SITY, TIRUNELVELI. IT IS ALSO A RECOGNIZED CENTRE FOR PA RTICIPATORY ONLINE PROGRAMME OF THE SCHOOL OF DISTANCE EDUCATION, BHAR ATHIYAR UNIVERSITY, COIMBATORE. IN THE CASE OF MANONMANIAM - - ITA NOS.288 TO 291 OF 2011 4 SUNDARANAR UNIVERSITY, THE ASSESSEE IS COLLECTING F EES INCLUDING THE UNIVERSITY AFFILIATION FEES AND REMITTING THE S AME TO THE UNIVERSITY, WHICH ULTIMATELY DIVIDES THE FEES INTO TWO PORTIONS, ONE PORTION FOR THE UNIVERSITY AND THE OTHER PORTIO N TO BE GIVEN TO THE ASSESSEE TRUST. IN THE CASE OF NON COMPUTER CO URSES, MANONMANIAM SUNDARANAR UNIVERSITY GIVES 35% OF THE COLLECTION TO THE ASSESSEE TRUST AND TAKES AWAY 65% OF THE COLLECTION FOR ITSELF. IN THE CASE OF COMPUTER COU RSES, THE ASSESSEE GETS 57.5% OF THE COLLECTION AND THE UNIVE RSITY APPROPRIATES 42.5% OF THE COLLECTION. 5. IN THE CASE OF BHARATHIAR UNIVERSITY, THE ASSES SEE GETS 40% AND THE UNIVERSITY GETS 60%. 6. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) FOUND T HAT CONDUCTING COURSES AND PROGRAMMES OF THE DIRECTORAT E OF DISTANCE AND CONTINUING EDUCATION AND RUNNING STUDY CENTRES FOR AND ON BEHALF OF THE UNIVERSITY AND SHARING THE FEES COLLECTED FROM THE STUDENTS ARE IN THE NATURE OF COMMERCIAL A CTIVITIES AND CANNOT BE CONSIDERED AS CHARITABLE IN NATURE. THE DIRECTOR OF - - ITA NOS.288 TO 291 OF 2011 5 INCOME-TAX (EXEMPTIONS) HELD THAT THE ASSESSEES CO LLEGE IS FUNCTIONING AS A COACHING INSTITUTE RUN ON COMMERCI AL LINES. 7. THE ASSESSEE ALSO RUNS A SCHOOL IN THE NAME OF AL- FAJR INTERNATIONAL SCHOOL WHICH IS NOT AFFILIATED T O ANY BOARD WHICH REGULATES EDUCATION IN INDIA. THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) OBSERVED THAT FOR ALL THESE MATTERS, T HE TRUST IS RUNNING ITS EDUCATIONAL CENTRES ON COMMERCIAL LINES AND THEREFORE THE ASSESSEE IS NOT ENTITLED FOR REGISTRA TION UNDER SECTION 12AA OF THE ACT. HE ACCORDINGLY REJECTED T HE APPLICATION FOR REGISTRATION UNDER SECTION 12AA AND CONSEQUENTL Y THE PETITION FOR APPROVAL UNDER SECTION 80G. 8. IT IS AGAINST THE ABOVE THAT THE ASSESSEE HAS C OME IN APPEALS BEFORE US. 9. THE GROUNDS RAISED BY THE ASSESSEE READ AS BELOW:- - - ITA NOS.288 TO 291 OF 2011 6 1. THE ORDER OF THE DIRECTOR OF INCOME TAX (EXEMPTIONS) DATED 29.10.2010 REJECTING THE APPLICA TION FOR REGISTRATION U/S 12AA AND APPROVAL U/S 80G IS CONTRARY TO LAW, ERRONEOUS AND UNSUSTAINABLE ON THE FACTS OF THE CASE. 2. THE DIRECTOR OF INCOME TAX (EXEMPTIONS) ERRED IN HIS CONCLUSION THAT ASSESSEES ACTIVITIES FALL OUTS IDE THE PURVIEW OF THE CHARITABLE PURPOSE AS DEFINED U/S 2( 15) OF THE INCOME TAX ACT. 3. THE DIRECTOR FAILED TO APPRECIATE THAT THE ASSES SEE IS RUNNING THE INSTITUTION BY ENTERING INTO MEMORAN DUM OF UNDERSTANDING (MOU) WITH THE UNIVERSITIES IN QUEST ION CREATED BY STATUTES AND TO HOLD THAT THEY ARE RUNNI NG ON COMMERCIAL LINES IS UNSUSTAINABLE IN LAW AS WELL AS ON FACTS. 4. THE DIRECTOR FURTHER FAILED TO APPRECIATE THAT T HE ASSESSEE-TRUST IS RUNNING SCHOOLS WHICH IS WITHIN T HE SCOPE AND SWEEP OF THE OBJECTS OF THE TRUST AND HEN CE DENYING REGISTRATION U/S 12AA AND APPROVAL FOR 80G IS UNJUSTIFIABLE. - - ITA NOS.288 TO 291 OF 2011 7 5. THE DIRECTOR FURTHER FAILED TO APPRECIATE THE ENQUIRIES MADE BY HIM WAS RELATABLE TO THE REALM OF ASSESSMENT, THAT HIS ENQUIRY OUGHT TO HAVE BEEN ADDRESSED TO THE ACTUAL EXISTENCE OF THE INSTITUTIO N AND THE ACTIVITIES CONDUCTED THEREIN AND THE THRESHOLD CONDITION HAVING BEEN SATISFIED IN THIS GIVEN CASE, HE OUGHT TO HAVE GRANTED REGISTRATION AND APPROVAL. 6. THE DIRECTOR FURTHER FAILED TO APPRECIATE THE ACTIVITIES OF THE ASSESSEE-TRUST FALLS NOT ONLY WIT HIN THE MEANING OF CHARITABLE PURPOSE AS DEFINED U/S 2(15 ) BUT ALSO WITHIN THE OBJECTS OF THE TRUST AND HENCE DENY ING REGISTRATION AND APPROVAL WAS UNJUSTIFIABLE ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE. 7. THE DIRECTOR FURTHER FAILED TO APPRECIATE THAT N O PROFIT ELEMENT WAS INVOLVED IN THE ACTIVITIES OF TH E TRUST AND HENCE THE DIRECTOR OUGHT TO HAVE GRANTED REGISTRATION AND APPROVAL. 8. THE DIRECTOR, HAVING NOT DISPUTED THAT THE ACTIV ITIES OF THE TRUST ARE IN LINE WITH THE OBJECTS OF THE TR UST, THE DENIAL OF REGISTRATION AND APPROVAL WAS UNTENABLE I N LAW. - - ITA NOS.288 TO 291 OF 2011 8 9. THE DIRECTOR, IN ANY VIEW OF THE MATTER, OUGHT T O HAVE GRANTED THE REGISTRATION U/S 12AA AND APPROVAL U/S 80G OF THE ACT. 10. WE HEARD SHRI N.QUADIR HOSEYN, THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE AND SHRI ANIRUDH RAI, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FOR TH E REVENUE. 11. SECTION 2(15) DEFINES CHARITABLE PURPOSE IN AN INCLUSIVE MANNER. IT READS THAT CHARITABLE PURPOS E INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, ETC. AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHE R CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION. 12. A CAREFUL READING OF THE DEFINITION OF CHARIT ABLE PURPOSE DOES NOT STATE THAT RELIEF OF THE POOR OR EDUCATION OR MEDICAL RELIEF IS A CHARITABLE PURPOSE PER SE. IT ONLY STATES THAT CHARITABLE PURPOSE INCLUDES THOSE ACTIVITIES AS WEL L. IT FOLLOWS - - ITA NOS.288 TO 291 OF 2011 9 THAT EDUCATION PER SE WILL NOT BE A CHARITABLE ACTI VITY UNLESS THE ACTIVITIES ARE CARRIED OUT AS A CHARITABLE ENDEAVOR . AN ASSESSEE CARRYING ON EDUCATION ON COMMERCIAL LINES CANNOT CL AIM THE STATUS OF A CHARITABLE INSTITUTION ONLY FOR THE REA SON THAT THE ASSESSEE IS ENGAGED IN EDUCATIONAL ACTIVITIES. THE LITMUS TEST OF A CHARITABLE INSTITUTION ENGAGED IN ANY OF THE FIEL DS LIKE EDUCATION OR MEDICAL RELIEF IS THAT THE ASSESSEE IS BASICALLY CARRYING ON ITS ACTIVITIES AS A CHARITABLE DEDICATION. THE BENEVOL ENCE OF CHARITY MUST REFLECT IN THE ACTIVITIES CARRIED ON BY AN ASS ESSEE AND WHAT IS BASICALLY CHARITY? CHARITY IS SO EXHAUSTIVE TO BE DEFINED, BUT ONE OF THE BASIC CHARACTERS IS THAT IT SHOULD SUBSE RVE THE ESSENTIAL REQUIREMENTS OF THE NEEDY AND THE DESTITU TE. RENDERING EDUCATION AND MEDICAL CARE TO A MILLIONAI RE IS NOT CHARITY. CHARITY REFLECTS THE CONCERN OF A SOCIETY IN THE UPLIFTMENT AND WELL BEING OF THE DOWNTRODDEN. 13. IN THE PRESENT CASE, AS ALREADY POINTED OUT BY THE DIRECTOR OF INCOME-TAX (EXEMPTIONS), THE ASSESSEE I S RUNNING COACHING CENTRES RECOGNIZED BY UNIVERSITIES TO CATE R THEIR DISTANCE EDUCATION PROGRAMMES. THE ASSESSEE IS COL LECTING - - ITA NOS.288 TO 291 OF 2011 10 FEES FROM THE STUDENTS. THE FEES ARE SHARED BETWEE N THE ASSESSEE AND THE UNIVERSITIES ON COMMERCIAL LINES. THE ASSESSEE HAS NOT PLACED BEFORE THE DIRECTOR OF INCO ME-TAX (EXEMPTIONS) OR BEFORE US THE DETAILS OF ANY CHARIT ABLE SERVICES RENDERED BY IT IN THE CONTEXT OF RUNNING SUCH COACH ING CENTRES. 14. IN FACT, AS RIGHTLY OBSERVED BY THE DIRECTOR O F INCOME-TAX (EXEMPTIONS), THE ASSESSEE IS CARRYING O N REMUNERATIVE OBJECT BY COLLECTING FEES FROM THE STU DENTS TO RUN RECOGNIZED CENTRES FOR UNIVERSITIES IN THE FIELD OF DISTANCE AND CONTINUING EDUCATION. 15. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HE CASE, THE DIRECTOR OF INCOME-TAX (EXEMPTIONS) IS JU STIFIED IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR THE B ENEFIT OF SECTIONS 11 AND 80G. HE HAS RIGHTLY REJECTED THE P RAYERS OF THE ASSESSEE IN THIS REGARD. 16. IN RESULT, THESE APPEALS FILED BY THE ASSESSEE ARE DISMISSED. - - ITA NOS.288 TO 291 OF 2011 11 ORDER PRONOUNCED ON WEDNESDAY, THE 28 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 28 TH MARCH, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.