S.D. College Educational Society, Barnala V. ITO, Patiala

ITA 403/CHANDI/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8439 (ITAT-CHANDIGARH)
• Duration Of Justice: 40 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2010
• Appeal Filed By: Assessee
• Assessment Year: misc
• Appeal Filed On: 01-01-1970
• Court: TRIBUNAL
• Department Lawyers: S S KENWAL
• Assessee Lawyers: PANKAJ JAIN; D K GOYAL
• Keywords: Capital asset; Charitable institution; Cancellation of registration
• Section: 12A; 12AA; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 403/CHD/2010 U/S 12 AA(3) S.D. COLLEGE EDUCATIONAL SOCIETY, VS. THE ITO, BARNALA, PUNJAB HQ.(TECH), PATIALA. PAN NO. AAFTS8184A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ JAIN & SHRI D.K.GOYAL RESPONDENT BY: SHRI S.S. KENWAL ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT, PATIALA DATED 5.3.2010 AGAINST THE ORDER PASSED UNDER SECTION 12A A(3) OF THE I.T. ACT. 2. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T THE CANCELLATION OF REGISTRATION BY THE COMMISSIONER U/S 12AA(3) OF THE ACT EARLIER GRANTED TO THE ASSESSEE U/S 12AA OF THE ACT VIDE ORDER DATE D 7.8.2003. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SOCIETY WAS ENGAGED IN PROVIDING EDUCATION BY RUNNING INSTITUTES FOR IM PARTING EDUCATION IN THREE YEARS DEGREE AND PROFESSIONAL COURSE FOR WHIC H REGULAR CLASSES WERE HELD. THE REGISTRATION U/S 12 A OF THE ACT WAS GRAN TED TO THE ASSESSEE VIDE ORDER DATED 7.8.2007. SUBSEQUENTLY, THE CIT(A) NOT ED FROM THE COPIES OF ACCOUNTS FILED RELATING TO ASSESSMENT YEARS TO 2009 -10 THAT THE ASSESSEE SOCIETY HAD SYSTEMATICALLY GENERATED HUGE SURPLUSES YEAR AFTER YEAR. THE 2 CIT(A) WAS OF THE VIEW THAT THE ASSESSEE WAS NOT CA RRYING ON ITS ACTIVITIES AS PER THE OBJECTS BUT WAS ENGAGED IN PROFIT MAKING AS THE DOMINANT OBJECTIVE UNDER THE GARB OF EDUCATION. THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE REGISTRATION GRANTED U/S 12AA O F THE ACT BE NOT CANCELLED. THE ASSESSEE IN REPLY POINTED OUT THAT IT WAS IMPARTING EDUCATION AND THE SURPLUS GENERATED WAS PLOUGHED BA CK BY WAY OF INVESTMENT IN CAPITAL ASSETS IN FURTHERANCE OF ITS STATED OBJECTS AND HENCE WAS ENTITLED TO THE SAID EXEMPTION. RELIANCE WAS P LACED ON SERIES OF CASE LAWS INCLUDING M/S PINEGROVE INTERNATIONAL CHARITAB LE TRUST VS. UNION OF INDIA & OTHERS [(2010) 37 DTR (P&H) 105]. THE CIT CANCELLED THE REGISTRATION VIDE ORDER DATED 5.3.2010. THE OBJECT IONS OF THE CIT WERE TWOFOLD. ACCORDING TO THE COMMISSIONER, ACTIVITY O F EDUCATION DOES NOT AMOUNT TO CHARITABLE PURPOSE IN VIEW OF THE JUDGMEN T OF THE HON'BLE SUPREME COURT IN MCD VS. CHILDREN BOOK TRUST [(1992 ) 3 SC 390]. THE SECOND OBJECTION OF THE COMMISSIONER WAS THAT THE S OCIETY HAD BEEN EARNING SYSTEMATIC PROFITS AND AS SUCH THE RATIO OF THE DECISION OF THE HON'BLE UTTRAKHAND HON'BLE COURT IN ITA NOS. 103 & 104 OF 2000 IN THE CASE OF CIT VS. QUEENSS EDUCATIONAL SOCIETY, HALDW ANI, APPLIED TO THE FACTS OF THE CASE. THE COMMISSIONER THUS CONCLUDED THAT THE ACTIVITIES OF THE ASSESSEE TRUST WERE NOT CARRIED OUT IN ACCORDAN CE WITH THE OBJECTS OF THE TRUST, AS ALSO IT WAS NOT CARRYING EDUCATION AS CHARITY BUT WAS DOING TRADE AND COMMENCE IN THE NAME OF EDUCATION AND AS SUCH REGISTRATION U/S 12AA OF THE INCOME TAX ACT GRANTED TO THE ASSESSEE SOCIETY WAS CANCELLED. 4. SHRI PANKAJ JAIN ALONGWITH SHRI D.K.GOYAL APPEAR ED FOR THE ASSESSEE AND SHRI S.S.KEMWAL APPEARED FOR THE REVEN UE AND PUT FORWARD THEIR CONTENTIONS. 3 5. WE FIND THAT IDENTICAL ISSUE OF CANCELLATION OF REGISTRATION U/S 12AA(3) OF THE ACT, WHICH WAS EARLIER GRANTED TO TH E ASSESSEE TRUST U/S 12AA OF THE ACT, ON SIMILAR GROUNDS OF ACTIVITIES OF THE TRUST BEING ENGAGED IN THE PROFIT MAKING UNDER THE GARB OF EDUC ATION AND RELYING ON THE RATIO LAID DOWN BY THE HON'BLE UTTRAKHANAD HON 'BLE COURT AND ALSO THE ACTIVITY OF THE ASSESSEE BEING NOT REGARDED FOR CHARITABLE PURPOSE IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT I N THE CASE OF MCD VS. CHILDREN BOOK TRUST (SUPRA), AROSE BEFORE THE TRIBUNAL IN ITA NO.357/CHANDI/2010 IN THE CASE OF BABA GANDHA SINGH EDUCATIONAL TRUST, BARNALA VS. CIT, PATIALA. THE TRIBUNAL VIDE ORDER DATED 29.9.2010 AFTER ELABORATE CONSIDERATION OF THE ISSUE HELD THAT IN V IEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN PINE GROVE INTERNATIONAL CHARITABLE TRUST (SUPRA), THE CONCLUS ION OF THE COMMISSIONER CANNOT BE UPHELD THAT THE ACTIVITIES OF THE ASSESSE E ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH ITS OBJECTS MERELY BECAUSE I T WAS GENERATING PROFITS FROM SUCH ACTIVITY. THE TRIBUNAL HELD THAT THE IN VOCATION OF SECTION 12AA (3) OF THE ACT BY THE COMMISSIONER IN THIS ASP ECT HAD TO FAIL. IT WAS FURTHER HELD BY THE TRIBUNAL THAT THE JUDGMENT IN T HE CASE OF MCD VS. CHILDREN BOOK TRUST CAN BE SAID TO BE INAPPLICABLE TO A CASE OF SECTIONS 11 & 12 OF THE ACT, IN TURN RELYING ON THE RATIO LAID DOWN BY THE TRIBUNAL IN H.P. GOVT. ENERGY DEVELOPMENT AGENCY, SHIMLA (ITA N O. 889/CHANDI/2009) DATED 15.9.2010. THE TRIBUNAL HELD THE SECOND REASON TAKEN BY THE COMMISSIONER TO BE UNFOUNDED. THUS IN THE FINAL ANALYSIS THE IMPUGNED ORDER OF COMMISSIONER WAS SET ASIDE AN D REGISTRATION GRANTED TO THE ASSESSEE VIDE ORDER DATED 29.8.2007 WAS RESTORED. 6. WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS IDENTICAL TO THE ISSUE RAISED BEFORE THE TRIBUNAL IN BABA GANDHA SINGH EDU CATIONAL TRUST, 4 BARNALA VS. CIT, PATIALA (SUPRA). FOLLOWING THE PA RITY OF REASONING AS IN THE SAID ORDER OF THE TRIBUNAL, WE SET ASIDE THE IM PUGNED ORDER OF THE COMMISSIONER U/S 12AA(3) OF THE ACT AND THE REGISTR ATION GRANTED TO THE ASSESSEE VIDE ORDER DATED 7.8.2007 IS RESTORED. W E DIRECT THE REGISTRY TO ANNEX THE COPY OF THE ORDER DATED 29.9.2010 IN ITA NO. 357/CHANDI/2010 IN THE CASE OF BABA GANDHA SINGH EDUCATIONAL TRUST, BARNALA VS. CIT PATIALA TO ORDER FOR READY REFERENCE. THUS, THE G ROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF OCTOBER 2010, SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 19 TH OCTOBER, 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR