M/s. Yadavar Kalvi Nithi, CHENNAI V. CIT, Madurai

ITA 35/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5087 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-05-2011
• Assessment Year: misc
• Appeal Filed On: 11-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: G STANLY
• Keywords: Charitable institution
• Section: 80G; 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B CHENNAI (BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER) .. I.T.A. NOS. 35 & 36/MDS/2011 M/S YADAVAR KALVI NITHI, YADAVAR COLLEGE, GOVINDARAJAN CAMPUS, THIRUPPALAI, MADURAI 625 014. PAN : AAAAY1452D (APPELLANT) V. THE INCOME TAX OFFICER, WARD II(4), MADURAI. (RESPONDENT) APPELLANT BY : SHRI G. STANLY RESPONDENT BY : SHRI P.B. SEKARAN O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST OR DERS DATED 1.11.2010 OF THE COMMISSIONER OF INCOME TAX-I, MADU RAI, DENYING IT THE REGISTRATION SOUGHT FOR UNDER SECTION 12AA OF I NCOME-TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) AND APPROVAL SO UGHT FOR UNDER SECTION 80G(5) OF THE ACT. I.T.A. NOS. 35 & 36/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE-SOCIETY WA S CREATED ON 30.11.1962 AND IT FILED AN APPLICATION BEFORE LD. C IT FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT AND FOR A CERTIFICATE OF APPROVAL UNDER SECTION 80G(5) OF THE ACT ON 31.5.20 10. THE SOCIETY WAS REQUIRED BY THE CIT TO FURNISH DETAILS OF ITS O BJECTS AND ACTIVITIES. ASSESSEE IN ITS REPLY STATED THAT ITS OBJECT CLAUSE 3 CLEARLY SHOWED THAT IT WAS FORMED FOR UPLIFTMENT OF STUDENTS OF YA DAVA COMMUNITY AND DEVELOPING THEIR EDUCATIONAL STATUS. AS PER TH E ASSESSEE, IT WAS ENGAGED IN PROVIDING EDUCATIONAL FACILITIES TO ALL STUDENTS WITHOUT ANY DISCRIMINATION BASED ON CASTE, CREED AND RELIGION A ND THE INSTITUTIONS RUN BY IT WERE AFFILIATED TO MADURAI KAMARAJ UNIVER SITY AND RECOGNIZED BY GOVERNMENT OF TAMIL NADU AS WELL AS UGC. AS PER THE ASSESSEE, IT WAS ACTIVELY PROPAGATING EDUCATION THROUGH ITS I NSTITUTIONS AND SUCH PROPAGATION OF EDUCATION WAS A CHARITABLE ACTIVITY. ASSESSEE ALSO BROUGHT TO THE ATTENTION OF CIT THAT ITS OBJECT WAS ESSENTIALLY EDUCATIONAL IN NATURE AND THEREFORE, IT WAS VERY VE RY ELIGIBLE FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT AND A CERTIFICATE OF APPROVAL UNDER SECTION 80G OF THE ACT. I.T.A. NOS. 35 & 36/MDS/11 3 3. LD. CIT AFTER MAKING A STUDY OF SECTIONS 11 TO 1 3 OF THE ACT WITH PARTICULAR REFERENCE TO SECTION 2(15) OF THE ACT, W AS OF THE OPINION THAT IN ORDER TO SATISFY THE CONDITIONS LAID DOWN I N SECTIONS 11 TO 13 OF THE ACT, AN ASSESSEE SHOULD PREPARE ITS INCOME AND EXPENDITURE ACCOUNT, WHICH REFLECTED APPLICATION OF INCOME TOWA RDS CHARITABLE PURPOSES AND UNLESS SURPLUS WAS UTILIZED FOR CHARIT Y AND ONLY IF IT COULD ESTABLISH THAT THERE WAS NO VIOLATION OF SECT ION 13(1)(C) AND (D) COULD IT BE GRANTED A REGISTRATION UNDER SECTION 12 AA OF THE ACT. AS PER LD. CIT, THE ACCOUNTS FOR THREE YEARS FURNISHED BY THE ASSESSEE SHOWED THAT IT HAD COLLECTED FEES FOR ` 1.41 CRORES, 2.01 CRORES, AND ` 3.01 CRORES RESPECTIVELY AND ON THE EXPENDITURE SI DE, ALL WERE FOR RUNNING EDUCATIONAL INSTITUTIONS. AS PER LD. CIT, THERE WAS A SURPLUS OF ` 76.40 LAKHS, ` 1.28 CRORES AND ` 2.12 CRORES IN THE THREE EARLIER YEARS AND IT CLEARLY SHOWED THAT THE ASSESSEE WAS N OT CARRYING ON ANY ACTIVITY FOR CHARITABLE PURPOSE. ACCORDING TO THE CIT, BASIC ELEMENT OF CHARITY WAS NOT VISIBLE IN THESE ACTIVIT IES AND EDUCATIONAL ACTIVITIES CARRIED ON BY ASSESSEE WERE ONLY OF COMM ERCIAL NATURE, COLLECTING SUBSTANTIAL AMOUNT OF FEES. LD. CIT ALS O NOTED THAT ASSESSEE HAD NOT UTILIZED THE SURPLUS OF THREE YEAR S, FOR ANY GENUINE I.T.A. NOS. 35 & 36/MDS/11 4 CHARITABLE ACTIVITIES. RELYING ON CIRCULAR NO.762 DATED 18.2.1998 OF CBDT, CIT WAS OF THE OPINION THAT COMMISSIONER WAS DUTY BOUND TO CONDUCT ENQUIRIES REGARDING THE GENUINENESS OF TRUS T OR INSTITUTION BEING CONSIDERED FOR REGISTRATION UNDER SECTION 12A A OF THE ACT. AS PER THE LD. CIT, DESPITE OPPORTUNITIES GIVEN, THE A SSESSEE-SOCIETY HAD NOT PRODUCED REQUISITE DOCUMENTS TO HIS SATISFACTIO N. HE, THEREFORE, REJECTED REGISTRATION UNDER SECTION 12AA OF THE ACT . HE ALSO REJECTED THE APPROVAL SOUGHT FOR UNDER SECTION 80G OF THE AC T AND FOR THIS HE CITED HIS ORDER REFUSING REGISTRATION UNDER SECTION 12AA OF THE ACT AS THE REASON. 4. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDER OF LD. CIT, SUBMITTED THAT ASSESSEE-SOCIETY WAS ENGAGED IN EDUCATIONAL ACTIVITIES SINCE 48 YEARS BUT DUE TO IGNORANCE, IT DID NOT SEEK FOR REGISTRATION UNDER SECTION 12AA OF THE ACT EARLIER. NEVERTHELESS, ACCORDING TO HIM, CIT WENT OFF-TANGENT, AND HELD TH AT EDUCATION WAS NOT A CHARITABLE ACTIVITY FALLING WITH THE PROVISIO NS OF SECTION 2(15) OF THE ACT. ACCORDING TO HIM, JUST BECAUSE ASSESSEE H AD SURPLUS IN VARIOUS YEARS OUT OF EDUCATIONAL ACTIVITIES, IT COU LD NOT BE CONSIDERED THAT EDUCATION ITSELF WAS NOT CHARITABLE. AS PER LEARNED A.R., THERE I.T.A. NOS. 35 & 36/MDS/11 5 WAS NO DIVERSION OF ANY INCOME OF THE VARIOUS INSTI TUTIONS RUN BY THE ASSESSEE-SOCIETY AND NO VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT WAS AT ANY TIME SHOWN BY THE REVENUE. ACCORDIN G TO HIM, ALL THE SURPLUS WERE AGAIN UTILIZED FOR EDUCATIONAL ACTIVIT Y BY INVESTING IN BUILDING AND INFRASTRUCTURE NECESSARY FOR PURSUING THE EDUCATION. LEARNED A.R. BROUGHT TO OUR ATTENTION THAT ALL THE INSTITUTIONS RUN BY THE ASSESSEE WERE AFFILIATED TO MADURAI KAMARAJ UNI VERSITY AND RECOGNIZED BY UGC. ACCORDING TO HIM, ASSESSEES RE PRESENTATIVE HAD APPEARED BEFORE CIT ON 25.10.2010 AND GAVE ALL EXPLANATIONS BUT DESPITE THIS, CIT CAME TO A CONCLUSION THAT ASS ESSEE DID NOT GIVE EXPLANATION DESPITE OPPORTUNITY GIVEN TO IT. HENCE , ACCORDING TO LEARNED A.R., ASSESSEE WAS NOT ONLY ELIGIBLE FOR RE GISTRATION UNDER SECTION 12AA OF THE ACT BUT ALSO FOR CERTIFICATE OF APPROVAL UNDER SECTION 80G OF THE ACT. 5. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTING THE ORDER OF THE LD. CIT SUBMITTED THAT CHARITY WAS NOT PROVED BY ASSESS EE TO HAVE BEEN PART OF ITS OBJECT OR ACTIVITY. THEREFORE, ACCORDI NG TO HIM, APPLICATIONS OF THE ASSESSEE WERE RIGHTLY DENIED BY THE CIT. I.T.A. NOS. 35 & 36/MDS/11 6 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. ASSESSEE IS UNDISPUTEDLY A SOCIETY AND WAS RUNNING EDUCATIONAL INSTITUTIONS FOR UPLIFTMENT OF STUDENTS OF YADAVA C OMMUNITY AND ALSO STUDENTS OF ALL CASTES AND CREEDS AND THIS IS A POS ITION ADMITTED BY THE CIT IN HIS ORDER ITSELF. ASSESSEE-SOCIETY WAS FORMED LONG BACK ON 30.11.1962. THE COLLEGES AND INSTITUTIONS RUN BY T HE ASSESSEE- SOCIETY WERE ALL AFFILIATED TO MADURAI KAMARAJ UNIV ERSITY AND RECOGNIZED BY UGC. LD. CIT HAS NOT BROUGHT OUT ANY OBJECT OF THE ASSESSEE WHICH WAS NOT EDUCATIONAL OR NOT CHARITABL E IN NATURE. LD. CIT HAS HELD THAT THERE WERE CONSIDERABLE SURPLUS A RISING OUT OF THE EDUCATIONAL ACTIVITY OF THE ASSESSEE IN VARIOUS FIN ANCIAL YEARS STARTING FROM 1.4.2007 TO 31.3.2009 VIZ. FINANCIAL YEARS 200 6-07, 2007-08 AND 2008-09. AS PER LD. CIT, THERE WERE SURPLUS OF ` 76.40 LAKHS, ` 1.28 CRORES AND ` 2.12 CRORES RESPECTIVELY IN THESE YEARS. BUT, CON TENTION OF THE ASSESSEE WAS THAT ALL SUCH SURPLUS WERE AGAI N UTILIZED FOR CAPITAL PURPOSES, I.E. FOR CONSTRUCTION AND PROVIDI NG INFRASTRUCTURE FACILITIES FOR PURSUING THE EDUCATIONAL OBJECTS. T HIS HAS NOT BEEN REBUTTED BY THE CIT ANYWHERE. JUST BECAUSE AN ASSE SSEE WAS HAVING SURPLUS FROM EDUCATIONAL ACTIVITIES, IT CANN OT BE CONSIDERED AS I.T.A. NOS. 35 & 36/MDS/11 7 DOING SOMETHING OTHER THAN CHARITY. EVEN THOUGH AS SESSEE RECEIVED FEES IN IMPARTING EDUCATION, EDUCATION ITSELF IS CO NSIDERED TO BE CHARITABLE VIDE SECTION 2(15) OF THE ACT. THERE IS NO CONDITION UNDER SECTION 2(15) OF THE ACT THAT INCOME ARISING OUT OF EDUCATION PROMOTED AS PART OF CHARITABLE ACTIVITY WOULD HAVE TO BE USED FOR ANY PURPOSE OTHER THAN EDUCATIONAL PURPOSE. AS MENTION ED BY US, EDUCATION PER SE IS A CHARITABLE PURPOSE AS DEFINED IN SECTION 2(15) OF THE ACT. THE SAME WOULD REMAIN CHARITABLE, IRRE SPECTIVE OF THE FACT THAT SURPLUS WAS BEING GENERATED WHILE IMPARTING ED UCATION. THERE IS NO CONDITION IN THE STATUTE TO HOLD THAT THE EDUCAT ION SHOULD BE PROVIDED FREE AND WITHOUT CHARGING FEES. NO DOUBT, ASSESSEE WAS PURSUING EDUCATIONAL ACTIVITIES CONSIDERING A CLAUS E IN ITS BYELAWS THAT ITS OBJECT WAS FOR UPLIFTING OF STUDENTS OF YA DAVA COMMUNITY AND DEVELOPING THEIR EDUCATIONAL STATUS. NEVERTHELESS, UNDENIABLY, THE ASSESSEE-SOCIETY WAS ADMITTING STUDENTS FROM VARIOU S STRATA OF THE SOCIETY IRRESPECTIVE OF ANY CONSIDERATION REGARDING CASTE OR CREED. THE TRUST OR ANYONE WHICH IMPARTS EDUCATION WITHOUT CHARGING FEES IS DOING CHARITY AND CAN DEFINITELY CLAIM EXEMPTION UN DER SECTION 11 OF THE ACT. BUT THIS DOES NOT MEAN THAT A TRUST IMPAR TING EDUCATION ON I.T.A. NOS. 35 & 36/MDS/11 8 RECEIPT OF FEES, WOULD HAVE TO BE CONSIDERED AS NOT DOING A CHARITABLE ACTIVITY. THE ACT ITSELF CONTEMPLATES EXEMPTION TO INCOME OF THESE INSTITUTIONS IMPARTING EDUCATION. THIS, IN OTHER W ORDS, MEANS THAT THE ACT ENVISAGES RECEIPT OF INCOME BY A TRUST OR INSTI TUTION BY WAY OF SURPLUS, SO AS TO GRANT EXEMPTION UNDER SECTIONS 11 AND 12 OF THE ACT, SUBJECT TO CONDITION PRESCRIBED IN SECTION 11 AND SECTION 13 OF THE ACT. IF THERE IS NO SURPLUS GENERATED BY A CH ARITABLE TRUST OR INSTITUTION, THERE WOULD NOT BE ANY NEED FOR CLAIMI NG AN EXEMPTION. MERELY BECAUSE WHILE PURSUING ACTIVITIES WHICH ARE ESSENTIALLY IN THE NATURE OF CHARITY, ASSESSEE EARNS A SURPLUS, IT CAN NOT BE A GROUND TO HOLD THAT IT COULD NOT BE CONSIDERED FOR A REGISTRA TION UNDER SECTION 12AA OF THE ACT. IN TAKING THIS VIEW, WE ARE FORTI FIED BY THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF N.N. DESAI CHARIT ABLE TRUST V. CIT (246 ITR 452). WE ARE OF THE OPINION THAT ASSESSEE -SOCIETY IS ELIGIBLE FOR REGISTRATION UNDER SECTION 12AA OF THE ACT AS A LSO APPROVAL SOUGHT FOR UNDER SECTION 80G OF THE ACT. THE ORDER S OF CIT ARE QUASHED AND WE DIRECT THE CIT TO GRANT THE ASSESSEE , REGISTRATION UNDER SECTION 12AA OF THE ACT AS WELL AS APPROVAL S OUGHT FOR UNDER SECTION 80G OF THE ACT. I.T.A. NOS. 35 & 36/MDS/11 9 7. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE STAN D ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON THE NINETEENTH DAY OF MAY, 2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 19 TH MAY, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT-I, MADURAI (4) D.R. (5) GUARD FILE