THE DIRECTOR OF INCOME TAX V. M/S CHILDREN EDUCATION SOCIETY

ITA/1003/2008

AI Insights

The case involves two appeals by the revenue against M/s.Children Education Society concerning the grant of registration under Section 12AA of the Income Tax Act, 1961. The appeals challenged the ITAT's decision which favored the respondent, the educational trust. The revenue's primary contention was the improper maintenance of accounts and the presence of unaccounted cash by the trust. However, the court referenced a precedent (DIRECTOR OF INCOME-TAX VS. GARDEN CITY EDUCATIONAL TRUST) which established that the educational purpose qualifies as a charitable purpose, and issues in account maintenance do not justify the denial of registration under Section 12AA.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 728959 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-09-2014
• Assessment Year: misc
• Other Referred Cases: DIRECTOR OF INCOME-TAX VS. GARDEN CITY EDUCATIONAL TRUST [2011] 330 ITR 480 (KARN)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: JEEVAN NEERALGI
• Keywords: Account Maintenance; Charitable purpose; Educational institution; Income Tax; Registration; Unaccounted cash
• Section: 11; 12AA; 260-A

Judgement Text

" : : 1 IN THE HIGH COURT OF KARNATAKA, BANGALORE DATED THIS THE 22ND DAY OF SEPTEMBER 2014 PRESENT: THE HON'BLE MR.JUSTICE N.KUMAR AND THE HON'BLE MRS.JUSTICE RATHNAKALA ITA NO.1003 OF 2008 C/W. ITA NO.1128 OF 2008 BETWEEN: The Director of Income Tax, Exemptions, C.R.Building, Queens Road, Bangalore. …APPELLANT IN ITA 1003/2008 1. The Commissioner of Income Tax, Central Circle, C.R.Building, Queens Road, Bangalore. 2. The Commissioner of Income Tax, Karnataka (Central), C.R.Building, Queens Road, Bangalore. …APPELLANTS IN ITA 1128/2008 (By Sri.Jeevan Neeralgi, Advocate) : : 2 AND: M/s.Children Education Society, No.40, I Phase, J.P.Nagar, Bangalore. ...COMMON RESPONDENT (By Sriyuths.A.shankar and M.Lava, Advocates) ITA 1003/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 26.05.2008 passed in MP No.16/Bang/2008 (in ITA No.915/Bang/2006) praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the orders passed by the ITAT, Bangalore, in MP No.16/Bang/2008 (in ITA No.915/Bang/2006) dated 26.05.2008, confirming the order of the Appellate Commissioner and the order passed by the Director of Income Tax, Exemptions, Bangalore. ITA 1128/2008 is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 11.07.2008 passed in ITA No.1145/BNG/2007 praying to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the Income Tax Appellate Tribunal, Bangalore, in ITA No.1145/BNG/2007 dated 11.07.2008, confirming the order of the Commissioner of Income Tax, Karnataka (Central), Bangalore. These Appeals coming on for Hearing, this day, N.KUMAR, J., delivered the following: : : 3 J U D G M E N T Both these appeals are preferred by the revenue challenging the order passed by the Tribunal directing the Commissioner to grant registration under Section 12AA of the Income Tax Act, 1961 to the assessee. 2. The impugned orders discloses that it is not in dispute that the assessee is running an educational institution imparting education in terms of the objects of the trust. The grievance is that they have not maintained the account properly and there is some unaccounted cash and there is irregularity and the explanation offered by the assessee is not acceptable. 3. In the case of DIRECTOR OF INCOME-TAX VS. GARDEN CITY EDUCATIONAL TRUST reported in [2011] 330 ITR 480 (KARN) wherein it was held that so long as the trust has education as one of its objects which is : : 4 one of the enumerated heads which qualify and come within the scope of charitable purpose as enumerated in clause (15) of section 2, it has to be accepted that the trust is having a charitable purpose as its object and may qualify for claiming exemptions in terms of sections 11 and 12 subject to fulfilling the conditions enumerated therein and if so, grant of registration, so long as the procedural requirements are complied is inevitable. Therefore, if the trust after obtaining registration commits irregularity in maintenance of accounts or do not reflect in the accounts the amount received or receives the amount illegally, they would not be entitled to the benefit of Section 11 of the Act in regular assessment proceedings. But that cannot be a ground to refuse registration under Section 12AA of the Act. 4. In that view of the matter, substantial question of law framed in these appeals are answered in favour of : : 5 the assessee and against the revenue. No merits. Appeals are dismissed. Sd/- JUDGE Sd/- JUDGE Prs* "