M/s. B.S. Public Education Society, Sonepat V. CIT, Rohtak

ITA 4610/DEL/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7034 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-02-2016
• Assessment Year: misc
• Appeal Filed On: 21-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S L ANURAGI; RAVI JAIN CAITDR
• Keywords: Charitable institution; Benefit of exemption
• Section: 12A; 12AA; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA: JUDICIAL MEMBER ITA NOS. 4610 & 4611/DEL/2014 B.S. PUBLIC EDUCATION SOCIETY VS. COMMISSIONER OF INCOME-TAX, C/0 B.S. SENIOR SECONDARY ROHTAK. SCHOOL, VPO THANA KALAN, KHARKHODA, DISTT. SONEPAT, HARYANA. PAN: AAAAB 5753 C ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI TARUN ROHTAGI CA ASSESSEE BY : SHRI RAVI JAIN CAIT(DR) & SHRI S.L. ANURAGI DR DATE OF HEARING : 15/02/2016. DATE OF ORDER : 17/02/2016. O R D E R PER S.V. MEHROTRA, A.M: THE CAPTIONED APPEALS, PREFERRED BY THE ASSESSEE, ARE DIRECTED AGAINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX R OHTAK, PASSED U/S 12AA(1)(B)(II) AND 80(G) OF THE INCOME-TAX ACT, 196 1. BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO. 4610/DEL/2014 (U/S 12AA(1)(B)(II): 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE SOCIET Y MOVED APPLICATION U/S 12A(1)(AA) OF THE I.T. ACT FOR REGISTRATION OF THE SOCIETY ALONG WITH NECESSARY DOCUMENTS. 3. LD. CIT WHILE REJECTING THE ASSESSEES APPLICATI ON FOR REGISTRATION HAS OBSERVED AS UNDER: 4. THE APPLICANT'S REPLY DOES NOT SATISFY THE VER Y ESSENCE OF CHARITY WHICH IS NECESSARY FOR EARNING THE STATUS O F BEING CHARITABLE AS IS REQUIRED IN VIEW OF SECTION 2( 15) READ WITH SECTION 12AA OF THE INCOME TAX ACT, 1961.L.!HE PROV ISIONS OF SEC 11 AND 12 DO NOT ENVISAGE THAT A CHARITABLE INS TITUTION SHALL PROVIDE CHARITY BY CHARGING HEFTY AND INDISCRIMINAT E AMOUNT OF FEES FROM PUBLIC AT LARGE. THE FEES RECEIVED ARE OU TSIDE THE SCOPE OF SEC 11 AND 12 - AND SHALL, THEREFORE, BE T AXABLE. FEES IMPLY DIRECT INVOLVEMENT OF CONSIDERATION FOR THE S ERVICES RENDERED. FEES CANNOT BE VOLUNTARY AND ARE, THEREFO RE, TAXABLE UNDER THE HEAD PROFIT AND GAINS OF THE BUSINESS OR PROFESSION. IN FACT, THE FACT IS THAT THE EDUCATIONAL INSTITUTIONS RUN BY THE SOCIETY IN QUESTION CHARGE WHOOPING FEES AND EARN S YSTEMATIC PROFIT YEAR TO YEAR TO ENHANCE ITS EARNING CAPACITY THROUGH THE ACQUISITION OF BUILDINGS & OTHER FIXED ASSETS . 4. LD. COMMISSIONER FURTHER REFERRED TO THE DECISIO N OF HONBLE UTTRAKHAND HIGH COURT IN THE CASE OF NATIONAL INSTI TUTE OF AERONAUTICAL ENGINEERING & EDUCATIONAL SOCIETY 226 CTR 82, WHERE IN IT HAS BEEN HELD THAT MERE IMPARTING EDUCATION FOR PRIMARY PURPOSE O F EARNING PROFITS CANNOT BE SAID TO BE A CHARITABLE ACTIVITY. ACCORDINGLY, L D. COMMISSIONER CONCLUDED 3 THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM THAT TRUSTS AIMS/ OBJECTS AND TERMS OF MEMORANDUM WERE OF CHARITABLE NATURE AND ALSO COULD NOT PRODUCE ANY CONCRETE EVIDENCE TO PROVE THE GENUINENESS OF T HE ACTIVITIES OF THE TRUST. HE, ACCORDINGLY, REJECTED THE ASSESSEES APPLICATIO N FOR GRANT OF REGISTRATION U/S 12AA. 5. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AT T HE TIME OF REGISTRATION, LD. COMMISSIONER IS ONLY REQUIRED TO LOOK INTO THE OBJECTS OF TRUST AND CANNOT GO BEYOND THE SAME. IN THIS REGARD HE RELIED ON FOLLOWING DECISIONS: - SASWAT CHETNA EDUCATIONAL SOCIAL DEVELOPMENT RESEAR CH SOCIETY VS. CIT ITA 5376/DEL/2012 - SHIVAJI VIDYA PEETH EDUCATION SOCIETY VS. CIT ITA NO. 5377/DEL/2012 - SHRI GIAN GANGA VOCATIONAL & EDUCATIONAL SOCIETY VS . CIT 143 ITD 297 - MERITTA WELFARE TRUST V. CIT ITA NO. 5481/DEL/201 3. 6. LD. COUNSEL FURTHER REFERRED TO PAGE 17 OF THE P B WHEREIN THE OBJECTS OF SOCIETY ARE ENUMERATED WHICH READS AS UNDER: 4. AIM AND OBJECTIVES OF THE SOCIETY: THE AIM AND OBJECTIVES OF THE SOCIETY SHALL BE PURELY FOR CHARITABLE PURPO SES I.E. TO SERVE THE PEOPLE BY PROVIDING EDUCATION. 1. TO OPEN PUBLIC SCHOOLS, COLLEGES AND PARA-MEDICA L COLLEGES 2. TO OPEN COMPUTER CENTRES TO PROVIDE COMPUTER EDUCATION. 4 3. TO ACCEPT THE DONATION / GRANTS FROM THE GOVERNM ENT / SEMI- GOVERNMENT AND TO START THE PROJECTS ON PUBLI C WELFARES . ' 4. TO CREATE AWARENESS ABOUT THE SOCIAL EVILS. ' 5. TO OPEN CRUTCHES FOR THE PEOPLE IN RURAL & URBAN AREAS. 6. TO AVAIL LOANS FROM THE FINANCIAL INSTITUTIONS / BANKS TO CONSTRUCT THE BUILDING OF THE SOCIETY . 7. THE SOCIETY WILL PROMOTE THE SCHEMES, POLICIES OF THE GOVERNMENT. 8. TO ENCOURAGE EDUCATION AND LITERACY AND TO START SCHOOLS & COLLEGES. 9. SOCIETY CAN WORK WITH ANY N.G.O.S & GOVERNMENT DEPARTMENTS. 10. TO RECEIVE DONATIONS IN CASH OR IMMOVABLE PROPE RTY FROM THE PUBLIC LOCAL BODY AS WELL AS ABROAD TOO. 11. SOCIETY CAN TAKE LOAN FROM ANY BANK OR BY DONAT IONS TO FULFILL THE AIMS AND OBJECTIVES OF THE SOCIETY & CO NSTRUCTION OF BUILDING. 12. SOCIETY CAN HAVE PROPERTY ANYWHERE IN ITS OPERA TIONAL AREA FOR THE PURPOSE OF THE SOCIETY ON LEASE OR PUR CHASE IN THE NAME OF SOCIETY. 13. THE SOCIETY SHALL NOT BE USED FOR THE POLITICAL PURPOSE OR ANY OTHER ANTI NATIONAL ACTIVITIES. 14. THE SOCIETY BY ITS CONSTITUTION IS REQUIRED TO APPLY ITS SURPLUS IF ANY OR OTHER INCOME FOR CHARITABLE PURPO SES ONLY. 7. LD. COUNSEL FURTHER REFERRED TO PAGE 36 OF THE P B, WHEREIN CLAUSE RELATING TO DISSOLUTION OF THE SOCIETY IS CONTAINED IN WHICH IT IS, INTER ALIA, STATED THAT NO ASSETS OF ANY OF THE SOCIETY SHALL DEVOLVE ON OR DISTRIBUTED AMONG THE MEMBERS OF THE SOCIETY ON DISSOLUTION. 5 8. LD. COUNSEL FURTHER REFERRED TO PAGE 47 OF THE P B, WHEREIN THE ASSESSEE HAS BEEN RECOGNIZED BY CENTRAL BOARD OF SECONDARY E DUCATION. 9. LD. DR RELIED ON THE ORDER OF COMMISSIONER. 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. IT IS NOW WELL SETTLED THAT AT THE TIME OF GRANT OF REGISTRATION U/S 12AA, THE LD. COMMISSIONER IS REQU IRED ONLY TO EXAMINE THE OBJECTS OF THE SOCIETY. A BARE PERUSAL OF THE OBJE CTS OF SOCIETY MAKES IT CLEAR THAT THE PRE-DOMINANT OBJECT OF THE SOCIETY IS TO I MPART EDUCATION. WE FIND THAT THE TRIBUNAL IN THE CASE OF SASWAT CHETNA EDUC ATIONAL SOCIAL DEVELOPMENT RESEARCH SOCIETY (SUPRA), AFTER CONSIDE RING THE DECISION OF HONBLE HIGH COURT OF UTTRAKHAND IN THE CASE OF NAT IONAL INSTITUTE OF AERONAUTICAL ENGINEERING & EDUCATIONAL SOCIETY (SUP RA), HAS OBSERVED IN PARA 4 AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRIE F ARE THAT THE ASSESSEE SOCIETY MOVED APPLICATION U/S 12A (1)(AA) OF THE ACT IN FORM NO. 10A ACCOMPANIED BY THE ACTIVITY OF THE ASSESSEE SOCIETY, COPY OF MEMORANDUM OF ASSOCIATION, RULES A ND REGULATIONS OF GOVERNING THE SOCIETY ALONG WITH COP Y OF THE REGISTRATION CERTIFICATE DATED 24-12-2003 ISSUED BY REGISTRAR OF FIRMS & SOCIETIES, HARYANA AND ALSO THE LIST OF OFF ICE BEARERS OF THE ASSESSEE SOCIETY. THE INCOME AND EXPENDITURE AC COUNT AND THE BALANCE SHEET OF THE FINANCIAL YEAR 2010-11 WER E ALSO FURNISHED. THE LD. COMMISSIONER IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE AND ALSO THE ACTIVITIES OF THE ASSESSE E ENTERTAINED THE SUBMISSIONS OF THE ASSESSEE. THE LD. COMMISSION ER DENIED REGISTRATION TO THE ASSESSEE ON THE GROUND THAT AS PER RULE 17A(A) OF THE INCOME-TAX RULES, 1962 THE ASSESSEE WAS TO S UBMIT THE ORIGINAL INSTRUMENT OF ITS ESTABLISHMENT TOGETHER W ITH THE COPY THEREOF AND SINCE THE ASSESSEE HAS SUBMITTED ONLY T HE PHOTO COPY/ CERTIFIED COPY OF THE INSTRUMENT THEREFORE TH E APPLICATION 6 WAS NOT COMPLETE AND THUS THE APPLICATION ITSELF IS NOT WORTH CONSIDERATION FOR REGISTRATION U/S 12AA OF THE ACT. WE FIND THAT THE LD. COMMISSIONER HAS GONE INTO TOO MUCH TECHNIC ALITIES MORE SPECIFICALLY WHEN CERTIFIED COPY OF THE ORIGIN AL INSTRUMENT WAS DULY FILED BY THE ASSESSEE. IF THIS WAS THE SOL E CRITERIA THEN NOTHING PREVENTED THE LD. COMMISSIONER TO DIRECT TH E ASSESSEE TO FILE THE ORIGINAL INSTRUMENT. THE SECOND GROUND ON WHICH THE ASSESSEE WAS DENIED REGISTRATION, WAS THAT THE ASSE SSEE IS NOT DOING CHARITABLE ACTIVITY. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS WE ARE SATISFIED THAT THE ASS ESSEE IS RUNNING A SENIOR SECONDARY SCHOOL, DULY REGISTERED WITH CBSE AND BOARD OF SCHOOL EDUCATION, HARYANA. WE HAVE SPE CIFICALLY PERUSED THE OBJECTS OF THE SOCIETY, WHEREIN THE PRE DOMINANT OBJECT IS IMPARTING EDUCATION. THEREFORE, WE ARE NO T SATISFIED WITH THE OBSERVATION OF THE LD. COMMISSIONER THAT T HE ASSESSEE SOCIETY IS NOT DOING ANY CHARITABLE ACTIVITY. THE A NOTHER REASON FOR DENYING THE REGISTRATION BY THE LD. COMMISSIONE R IS THE RELIANCE PLACED UPON THE DECISION FROM HONBLE UTTR AKHAND HIGH COURT IN THE CASE OF CIT VS. NATIONAL INSTITUT E OF AERONAUTICAL ENGINEERING AND EDUCATIONAL SOCIETY (2 009) 226 CTR 82. WE HAVE PERUSED THIS ORDER AND ARE OF THE V IEW THAT THE FACTS AND THE SURROUNDING CIRCUMSTANCES IN THAT CASE ARE DIFFERENT AND MAY NOT BE THE SOLE CRITERIA FOR DENY ING REGISTRATION TO THE ASSESSEE. 4.1. WHILE CONSIDERING THE APPLICATION OF THE ASSES SEE FOR GRANT OF REGISTRATION U/S 12A OF THE ACT, ALL THAT THE LD. COMMISSIONER MAY EXAMINE IS WHETHER THE APPLICATION IS MADE BY THE ASSESSEE IN ACCORDANCE WITH THE REQUIREMENT OF THE SECTION READ WITH RULE 17A AND ALSO WHETHER FORM NO . 10A HAS BEEN PROPERLY FILLED UP. HE MAY ALSO SEE WHETHER O BJECTS OF THE ASSESSEE SOCIETY ARE CHARITABLE OR NOT AS WAS HELD BY THE HONBLE HIGH COURT IN THE CASE OF FIFTH GENERATION EDUCATION SOCIETY VS. CIT 185 ITR 634 (ALL.). SO LONG AS THE TRUST HAS EDUCATION AS ONE OF ITS OBJECTS IT HAS TO BE ACCEPT ED THAT THE TRUST IS HAVING A CHARITABLE PURPOSE AS ITS OBJECTS AND M AY QUALIFY FOR CLAIMING EXEMPTION IN TERMS OF SECTION 11 & 12 OF T HE ACT, SUBJECT TO FULFILLING THE CONDITIONS ENUMERATED THE REIN. THE MANNER OF APPLICATION OF FUNDS AND AS TO WHETHER AS SESSEE CAN 7 CLAIM BENEFIT OF EXEMPTION IN TERMS OF SECTION 11 & 12 ARE THE QUESTIONS WHICH HAVE TO BE EXAMINED BY THE ASSESSIN G OFFICER AT THE STAGE WHEN SAME ARE URGED AND NOT BY THE COMMIS SIONER WHILE CONSIDERING THE APPLICATION FOR GRANT OF REGI STRATION U/S 12A. OUR VIEW IS FORTIFIED BY THE DECISION FROM HON BLE KARNATAKA HIGH COURT IN THE CASE OF DIT VS. GARDEN CITY EDUCATION TRUST 191 TAXMAN 238 (KAR.). EVEN OTHER W ISE REGISTRATION U/S 12AA DOES NOT NECESSARILY ENTITLE THE ASSESSEE TO GET THE INCOME EXCLUDED FROM THE INCOME OF THE P REVIOUS YEAR FOR THE PURPOSES OF DETERMINATION OF TAX LIABI LITY, BUT IT ONLY ENTITLE THE ASSESSEE TO CLAIM SUCH EXEMPTION, WHICH OTHERWISE COULD NOT BE CLAIMED IN THE ABSENCE OF TH E REGISTRATION. THE CASE OF THE LD. COMMISSIONER WOUL D HAVE BEEN ON MORE SOUND FOOTING IF THE ASSESSEE WOULD NOT HAV E CARRIED OUT ANY CHARITABLE ACTIVITY IN CONSONANCE WITH ITS OBJECTS FOR WHICH IT WAS CREATED, WHEREAS IN THE PRESENT FACTS AVAILABLE ON RECORD, WE NOTE THAT FROM THE INCEPTION ITSELF THE ASSESSEE SOCIETY IS RUNNING A SCHOOL IN THE RURAL AREA OF TH E STATE OF HARYANA. WE HAVE ALSO PERUSED THE RELEVANT RECORD A ND ARE SATISFIED ABOUT THE GENUINENESS OF THE ASSESSEE SOC IETY WHILE IMPARTING EDUCATION. IF FOR FUTURE THE ASSESSEE HAS ADDED OTHER OBJECTS WHICH ARE OTHERWISE OF CHARITABLE NATURE, T HE ASSESSEE CANNOT BE DENIED REGISTRATION UNLESS AND UNTIL ANY ACTIVITY OF THE ASSESSEE IS FOUND TO BE ACTIVITY OF NON CHARITABLE NATURE OR CONTRARY TO THE OBJECTS OF THE ASSESSEE SOCIETY. IN THE ABSENCE OF SUCH FINDING THE DENIAL OF REGISTRATION IS NOT JUST IFIED. WE HAVE ALSO PERUSED THE RECEIPTS OF FUNDS AND THEIR APPLIC ATION AND ARE SATISFIED THAT THE RECEIPTS ARE FROM FEE ETC. AND T HE INCOME HAS BEEN APPLIED MERELY FOR CHARITABLE PURPOSES. NOT A SINGLE INSTANCE HAS BEEN QUOTED BY THE LD. COMMISSIONER EI THER THE ASSESSEE MISUSED THE INCOME OR USED FOR NON CHARITA BLE PURPOSES. IN VIEW OF THESE FACTS WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD HAVE BEEN GRANTED REGISTRATION BY T HE LD. COMMISSIONER. CONSEQUENTLY, THE LD. COMMISSIONER IS DIRECTED TO GRANT REGISTRATION TO THE ASSESSEE SOCIETY, SUBJ ECT TO THE CONDITION THAT THE ASSESSEE SHALL SUBMIT THE ORIGIN AL COPY OF INSTRUMENT OF ITS ESTABLISHMENT ALONG WITH ONE PHOT O COPY THEREOF BEFORE THE LD. COMMISSIONER WITHIN 20 DAYS ON RECEIPT OF THIS ORDER. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8 11. FACTS OF THE PRESENT CASE BEING IDENTICAL, RESP ECTFULLY FOLLOWING THE TRIBUNALS ORDER IN THE CASE OF SASWAT CHETNA EDUCA TIONAL SOCIAL DEVELOPMENT RESEARCH SOCIETY (SUPRA), THE ASSESSEE S APPEAL IS ALLOWED IN TERMS OF TRIBUNALS DIRECTION NOTED IN PARA 4 ABOVE . ITA NO. 4611/DEL/2014 (U/S 80G(5)(VI) : 12. LD. COMMISSIONER HAD REJECTED THE ASSESSEES AP PLICATION U/S 80G(5)(VI) ON THE GROUND THAT THE SOCIETY WAS NOT R EGISTERED U/S 12AA OF THE I.T. ACT. AS WE HAVE DIRECTED FOR REGISTRATION OF S OCIETY U/S 12AA IN TERMS OF OBSERVATIONS MADE IN ITA NO. 4610/DEL/2014, THE ASS ESSEES CLAIM FOR APPROVAL U/S 80G(5)(VI) IS ALLOWED. ASSESSEES APPE AL STANDS ALLOWED ACCORDINGLY. 13. IN THE RESULT, BOTH THE ASSESSEES APPEALS STAN D ALLOWED. ORDER PRONOUNCEMENT IN OPEN COURT ON 17/02/2016. SD/- SD/- (SUDHANSHU SRIVASTAVA ) (S.V. MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: ______/02/2016. *MP* COPY OF ORDER TO: 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI.