TMI Blog2015 (8) TMI 912X X X X Extracts X X X X X X X X Extracts X X X X ..... morandum of association (object clause) or its conduct, sanctions a presumption that it is established for the benefit of the minority (Muslim) community, solely on the basis of it being granted the status of minority educational institution – the only restriction in its charter being toward its membership extending only to the members of the said community. If the institution has, by admitting 90% non-minority (non-muslim) students, violated any specific provision or guideline in the matter and, accordingly, stands to lose its minority status, of which we have no clue, so be it. And which again does not help the Revenue’s case in any manner; rather, only goes against it. Though, therefore, appearing anomalous in-as-much as the minority status implies an inherent right to serve the minority interest, a finding to it being set up or established for the benefit of a particular (Muslim) community cannot be a matter of presumption and rendered de hors any material on record. Notwithstanding, therefore, a minority status being accorded to its educational institutions, we are, both on the facts and in law, unable to regard it as being established for the benefit of a particular relig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons or the disallowances made), as he had quashed the assessment, which decision by him stands hereby reversed by us. The matter, accordingly, shall travel back to his file to decide the assessee’s grounds of appeal. - Decided in favour of assessee by way of remand. - I.T.A. Nos.72 & 99/Pat/2011&12, I.T.A. No.119/Pat/2011, C.O.No.01/Pat/2012 - - - Dated:- 20-7-2015 - SHRI A.D. JAIN AND SHRI SANJAY ARORA, JJ. For The Appellant : Shri N. K. Lal, Adv. For The Respondent : Smt. Archana Sinha, Sr.S.C. ORDER Per Bench: This is a set of three Appeals, i.e., two by the Assessee, directed against the denial of registration u/s.12AA of the Income Tax Act, 1961 ( the Act hereinafter) by the Commissioner of Income Tax-I, Patna ( CIT for short) vide orders dated 27.03.2012 and 30.03.2011, i.e., pursuant to the assessee s separate applications therefor dated 30.09.2011 and 30.09.2010 respectively. The third appeal is by the Revenue, challenging the quashing of the assessment for assessment year (A.Y.) 2005- 06 by the Commissioner of Income Tax (Appeals), Dhanbad ( CIT(A) for short) vide his order dated 07.09.2011, qua which the assessee has filed a cross objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated therein, and for which purpose it can call for the records of the MEI to verify if it had admitted students belonging to the minority (non-minority) community as per the Rules, i.e., has adhered to the percentage prescribed for admission of such students. In fact, section 12C(b) of the MEI Act, 2004 empowers the State Governments to prescribe the percentage governing admission to a MEI; c) the educational institutions established by the assessee-society are being run on commercial lines; and d) the assessee-society has advanced loan/s to the landlord, being its founding member/s, and to their family members, on interest free basis. Even considering that the same is toward construction of a building to be let to the assesseesociety, the arrangement results in augmenting their wealth, both in terms of accretion in the value of the property as well as increase in the rental base, creating, rather, a source of income. The provision of section 13(1)(c) r/w s. 13(3) is therefore attracted. Reliance stands also placed on the decision by the tribunal (single member constitution) in the assessee s own case (in ITA No. 98/Pat/2010 dated 31.08.2010). 4. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions of the students in an MEI in accordance with the principles of law enunciated by the Apex Court per its decisions in the case of T. M. Pai Foundation (supra) and P A Inamdar (supra) (refer page 8 of his order). In other words, an exception is drawn for unaided MEIs (up to the undergraduate level), as the assessee s two schools. The Revenue states that the same is not acceptable, i.e., for an institution to admit students of other than minority, non-minority (a particular religious) community while at the same time retaining its minority status, which thus become a fa ade for money making (refer para 9 of the impugned order). How, it does not specify ? We have already found the admission of non-minority students to be not violative of the guidelines framed by the Apex Court, which reflect the law of the land and, as far as we are able to gather, are being scrupulously followed by all the authorities charged with the administration of the relevant enactments, including the State Governments. When the institution is unaided, for which an exception is drawn by the Apex Court (up to the undergraduate level), how we wonder could that by itself be held against it and made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hool may be put to on account of any action or non-action by a student, and is refundable. With regard to the Building Fund, the same is, without doubt, not understandable. This is as the school is run in a tenanted premises, which arrangement is intended to be continued, so that the said money could not possibly be utilized toward the Institution s building/s. However, that by itself, without anything more, is not sufficient to impute commerciality to the operations. The only import of the same would be that the said sum cannot be regarded as toward corpus, which gets excluded u/s.11(1)(d). As explained by the Apex Court in American Hotel Lodging Association Educational Institute vs. Central Board of Direct Taxes [2008] 301 ITR 86 (SC), the genuineness of the activities of a trust/institution cannot be doubted where it applies its entire income wholly and exclusively to the objects for which it is established. In fact, as it appears, the building fund is refundable, so that it represents a liability and not a receipt (income) of the institution. No specific case is made out by the Revenue to infer either commerciality or to impugn the genuineness of the activities of the socie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the regular course of its business by, the Society. Its implication would, in any case, only be limited to as provided u/s.13(1)(c). In Conclusion 5. Without doubt, as explained by the Apex Court in A. P. Christian Medical Association vs. State of Andhra Pradesh AIR 1986 SC 1490, it is important and imperative that there must exist some real positive index to enable the institution to be identified as an educational institution of the minorities. That is, there should be a nexus between the institution and the particular minority to which it claims to be belonging. How could, otherwise, one may ask, it claim to be established for the benefit of the minority community, entitled to the protection guaranteed under Article 30(1) of the Constitution, seeking to enshrine the right to serve and promote minority interest ? A prescription of a standard or uniform percentage governing admissions may not, however, necessarily serve the purpose, which is to seek non-minority representation to a reasonable extent, while at the same time ensuring that the minority character of the institution is not annihilated, and the right engrafted under Article 29(2) not subverted. What is, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon ble Apex Court. Why, NCMEI, on similar facts, i.e., a low percentage of minority/s students in an educational institution established by the minorities, granted minority status to a school, holding that the criterion of fixation of a percentage governing admission of a minority community in a MEI cannot be included in the indicia for determining the minority status of such an Institution ( Buckley Primary School vs. The Principal Secretary, Government of Orissa in Case No. 1320 of 2009 dated 06.07.2010/APB-I pgs. 103-129). Further, even where reserving such a right, the same may not necessarily translate into a high ratio of minority (muslim) students, for which other practical considerations may be responsible. That no such right stands reserved in the present case only fortifies the assessee s case. Why, yet, it stands granted a minority status, we wonder, which may or may not be the Revenue s concern. There is no claim by it of such status having been granted on account of any mis-representation, or as to the assessee having derived any benefit through misrepresentation. The same may be relevant in-as-much as the genuineness of the activities is a parameter which is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing exemption under which provision on its entire income it had returned nil income, as no approval from the prescribed authority u/s. 10(23C)(vi) had been obtained by it. The matter travelled to the tribunal, which quashed the assessment on the ground that notice u/s.143(2), leading to assumption of jurisdiction to frame an assessment u/s.143(3), had not been served on the assessee, i.e., on the jurisdictional issue, upholding the appellate order dated 16.01.2009 by the first appellate authority. A fresh notice u/s.148 was issued to the assessee on 16.04.2009, and the assessment framed after issuing notice u/s.143(2) on 27.05.2009, at an income of ₹ 49,03,850/-, vide order u/s.144 r/w sec. 147 dated 29.12.2010. On appeal before the ld. CIT(A), he upheld the assessee s legal plea qua initiation of proceedings u/s.147 being bad in law (Gd.# 1). The reasons recorded qua escapement of income were substantially the same as that recorded in the first instance, i.e., vide notice u/s.148 dated 08.01.2007. The Revenue cannot be allowed a second innings qua the same set of reasons as to escapement of income required to be recorded u/s. 148(2). The initiation of the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tribunal at the relevant time, i.e., at the time of notice u/s.148(1) on 16.04.2009. However, the scope of the said appeal, and which therefore upon adjudication would stand merged therewith, was only the aspect of the validity of assessment in view of the non-service of notice u/s.143(2). Why, even the order by the tribunal could not be said to have conferred finality to the matter, as either party had - the issue being legal, a right to appeal there-against. As such, the outstanding of the assessee s appeal before the tribunal would be of little consequence in the facts and circumstances of the case. The ld. CIT(A) has not decided the assessee s other grounds, on the merits of the assessment (i.e., the additions or the disallowances made), as he had quashed the assessment, which decision by him stands hereby reversed by us. The matter, accordingly, shall travel back to his file to decide the assessee s grounds of appeal nos. 2 to 19 before him. The assessee having filed a supportive cross objection, the restoration of the assessment to the first appellate stage would thus be in part agreement of the assessee s case. The Revenue s appeal is disposed of accordingly. 10. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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