THE DIRECTOR OF INCOME-TAX [EXEMPTIONS], V. SAHASRA EDUNL SOCY,

ITTA/31/2014

AI Insights

The case revolves around the appeal by the Director of Income Tax (Exemptions) against the decision of the Tribunal, which granted registration under Section 12AA of the Income Tax Act to Sahasra Educational Society. The primary contention was whether the society, which operated on a profit basis, could still be considered for registration as a charitable institution. The Tribunal had found that the DIT(E) improperly assessed the society's activities before registration, leading to the appeal. The High Court dismissed the appeal, supporting the Tribunal's view that the society's activities fell under the purview of Section 2(15) of the Act, which pertains to charitable activities.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 718987 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 07-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: PRASAD
• Keywords: Charitable institution; Educational Activities; Exemption; Profit; Registration
• Section: 11; 12AA; 2(15)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.31 of 2014 Date: 07.02.2014 Between: The Director of Income Tax (Exemptions) Hyderabad. … Appellant And Sahasra Educational Society, Warangal. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. No.31 of 2014 JUDGMENT: (Per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be preferred and admitted against the judgment and order dated 18.07.2013 of the learned Tribunal in relation to the assessment year 2012-13 on the following suggested questions of law. “1. Whether on the facts and in the circumstances of the case and when the assessee society is running those colleges with the sole intention of earning profit, thereby disentitling it to be treated as a charitable institution and hence registration u/s. 12AA of the Income Tax Act, the observations of the Tribunal that where education is imparted by an institution with the purpose of profit, i.e., by running the schools/colleges purely on commercial basis, such case may be considered for exemption u/s. 11 of the Income Tax Act, are not perverse? 2. Whether on the facts and circumstances of the case, the Tribunal is right in law in holding that where education is imparted by an institution with the purpose of profit, i.e., by running the schools/colleges purely on commercial basis, such case may be considered for exemption u/s. 11 of the Income Tax Act, 1961? 3. Whether on the facts and circumstances of the case, the Tribunal is correct in law in holding that once the assessee is considered as carrying on the educational activities that fall under the purview of Section 2(15) of the Act, the DIT(E) cannot deny registration u/s. 12AA and he is duty bound to grant the registration? While looking at the aforesaid questions, we find that they are absolutely not the questions of law. However, ignoring the aforesaid questions, as they are merely suggested questions of law, the Court may formulate the questions of law. We have heard Mr. Prasad, learned counsel for the appellant and gone through the impugned judgment and order of the learned Tribunal. The assessee has applied for registration under Section 12AA of the Income Tax Act, 1961 (hereinafter referred to “the Act”). The Director of Income Tax (Exemptions) (for short, “DIT(E)”), who is the authority to grant registration, has refused to do so. Hence, the present appeal has been preferred. To grant registration pre-conditions mentioned in Section 12AA of the Act have to be satisfied upon relevant documents being placed showing charitable activity. The Tribunal found that DIT(E) has exceeded his power and has made a roving enquiry as to the factual activities of the assessee before registration being granted. We think while granting registration the officer concerned must be satisfied about object of the trust or institution and genuineness of its activity. To put it differently there shall be satisfaction from the relevant document that object is charitable and genuineness of charitable activity irrespective or earning profit. If the profit earned is utilized for charitable activity still registration cannot be denied. The learned Tribunal, in our view, has correctly observed that once the assessee is considered as carrying on the educational activities and that activities fall under the purview of Section 2(15) of the Act, the DIT(E) cannot deny the registration. We are also in agreement with the learned Tribunal that if there is any violation of the object of the trust or institution, then the benefit of exemption, as provided under the Act, can be withdrawn later on. Therefore, we do not find any element of law in this matter. The appeal is accordingly dismissed. No costs. ___________________ K.J. SENGUPTA, CJ ___________________ SANJAY KUMAR, J Date: 07.02.2014 ES "